CHPQA guidance note 25: Determination of CHP qualifying fuel input
Summary
DESNZ updates guidance on calculating qualifying fuel input for CHP schemes that fail to meet the 20% power efficiency threshold for Good Quality CHP status. The guidance provides a specific formula: CHPQFI = Annual Power Efficiency × Total Fuel Input ÷ Power Efficiency Threshold. This is version 3 of Guidance Note 25, published March 2026.
Why it matters
This is administrative guidance clarifying existing CHPQA rules rather than changing incentives. The 20% threshold remains unchanged, preserving the binary qualification system that determines whether CHP schemes receive preferential treatment under various government support mechanisms.
Key facts
- •20% minimum power efficiency threshold for Good Quality CHP
- •Formula: CHPQFI = Annual Power Efficiency × CHPTFI ÷ Power Efficiency Threshold
- •Version 3 of guidance published March 2026
Areas affected
Memo
What this is about
DESNZ has issued version 3 of CHPQA Guidance Note 25, clarifying how to calculate qualifying fuel input for CHP schemes that fall short of the 20% power efficiency threshold for Good Quality CHP status. This administrative update provides a specific formula for determining the portion of fuel input that would qualify for preferential treatment under government support mechanisms.
The guidance targets the operational reality that not all CHP schemes achieve the binary 20% threshold consistently. Rather than disqualifying these schemes entirely, the methodology allows partial recognition of fuel input proportional to actual performance against the threshold.
Key points
Formula specification: The guidance establishes a clear calculation for CHP Qualifying Fuel Input (CHPQFI):
``` CHPQFI (MWh) = Annual Power Efficiency (%) × Total Fuel Input (MWh) ÷ Power Efficiency Threshold (%) ```
Where the Power Efficiency Threshold remains fixed at 20%.
Proportional qualification mechanism: Schemes achieving less than 20% power efficiency can qualify a reduced portion of their fuel input. For example, a scheme achieving 15% power efficiency would qualify 75% of its total fuel input (15% ÷ 20% = 0.75).
Annual power efficiency calculation: The guidance references the established formula where Power Efficiency = 100 × (CHP Total Power Output × Fuel Output Period) ÷ (CHP Total Fuel Input × Fuel Output Index). This maintains consistency with existing CHPQA methodology.
Binary threshold preservation: The 20% power efficiency threshold for Good Quality CHP status remains unchanged. Schemes meeting this threshold qualify 100% of their fuel input; those falling short qualify proportionally less.
Support mechanism implications: The calculation directly affects eligibility for various government incentives tied to Good Quality CHP status, including business rate relief, enhanced capital allowances, and exemptions from the Climate Change Levy on qualifying fuel input.
Version control: This marks the third iteration of Guidance Note 25, suggesting ongoing refinement of the methodology based on industry feedback and operational experience.
What happens next
Immediate implementation: The guidance takes effect immediately for CHPQA assessments. Operators of sub-threshold schemes should recalculate their qualifying fuel input using the specified formula for current and future assessment periods.
Assessment timeline alignment: The methodology applies to annual CHPQA assessments, with qualifying fuel input calculations feeding into broader scheme evaluations that determine support mechanism eligibility.
Integration with existing guidance: Operators should read this alongside Guidance Note 10 on Defining Good Quality CHP and other relevant CHPQA documentation to ensure comprehensive compliance with assessment requirements.
No consultation indicated: As administrative guidance clarifying existing rules rather than policy change, no further consultation appears planned. The guidance represents DESNZ's settled position on calculation methodology for sub-threshold schemes.
Industry compliance: CHP operators and their advisers should update internal calculation procedures and assessment documentation to reflect the specified formula. Those previously using alternative methodologies for qualifying fuel input determination may need to revise historical assessments.
Source text
A CHP scheme must achieve a minimum (threshold) power efficiency of 20% for all of its fuel inputs to be considered Good Quality CHP . Schemes that fail to achieve the power efficiency threshold must calculate CHP qualifying fuel input ( CHP QFI). This is the fuel input that would have achieved the power efficiency threshold. CHPQA Guidance Note 25 v3 Page 1 © Crown Copyright 2026 GUIDANCE NOTE 25 DETERMINATION OF CHP QUALIFYING FUEL INPUT Qualifying Fuel Input (CHPQFI) GN25.1 A Scheme must achieve a minimum (threshold) Power Efficiency of 20% for all of its fuel inputs to be considered Good Quality CHP. ➢ Refer to GN10 for guidance on Defining Good Quality CHP. GN25.2 Schemes that fail to achieve the Power Efficiency Threshold must calculate CHP Qualifying Fuel Input (CHPQFI). This is the fuel input that would have achieved the Power Efficiency Threshold. CALCULATING QUALIFYING FUEL INPUT GN25.3 Qualifying Fuel Input (CHPQFI) is a measure of fuel delivering Good Quality CHP. CHPQFI (MWh) = Annual Power Efficiency, % x CHPTFI (MWh) Power Efficiency Threshold, % Annual Power Efficiency is determined according to: Power Efficiency, % = 100 x (CHPTPO x FOP) / (CHPTFI x FOI)