CHPQA guidance note 26: Determination of CHP qualifying power output
Summary
DESNZ updated guidance on calculating qualifying power output for CHP schemes that fail to meet minimum quality index thresholds. Schemes must achieve QI of 100 (or 95 for new schemes) for all power output to qualify as Good Quality CHP. Those below threshold must calculate reduced qualifying output using heat-to-power ratios and efficiency formulas.
Why it matters
This is technical guidance for an existing regulatory framework rather than new policy. CHP schemes remain subject to complex administrative calculations that determine their eligibility for various support mechanisms, preserving the current system of engineering oversight rather than market pricing of combined heat and power benefits.
Key facts
- •Quality Index threshold: 100 for existing schemes, 95 for new schemes in initial period
- •Two calculation methods depending on presence of condensing steam turbines
- •Adjustment factors apply for heat output measurement uncertainty
- •References to guidance notes GN10, GN13, GN16, GN19, GN28
Areas affected
Memo
What this is about
DESNZ has updated technical guidance on calculating qualifying power output for CHP schemes that fail to meet minimum quality index requirements. Under CHPQA rules, CHP schemes must achieve a quality index of 100 (or 95 for new schemes in their initial operating period) for all power output to qualify as Good Quality CHP. Schemes falling short of these thresholds can only count a portion of their power generation as qualifying output, calculated using specific heat-to-power ratios and efficiency formulas.
This matters because CHP Qualifying Power Output (CHPQPO) determines eligibility for various support mechanisms including business rates relief, enhanced capital allowances, and exemptions from the Climate Change Levy. The calculations are administratively complex but financially material - schemes with lower quality indices see their qualifying power output scaled back proportionally, reducing the value they can extract from CHP support policies.
Key points
Quality index thresholds remain unchanged: CHP schemes must achieve QI of 100, or 95 for new schemes during initial operations. These thresholds determine whether all power output qualifies as Good Quality CHP or requires pro-rated calculation.
Two distinct calculation methods: The guidance splits CHP schemes into those with and without condensing steam turbines, applying different mathematical approaches to each category.
For schemes without condensing steam turbines, the calculation assumes fixed power efficiency for given fuel input. The only way to improve QI is increasing useful heat output, raising the heat-to-power ratio. The process: - Calculate required heat efficiency to achieve threshold QI using: New Heat = (QIth – (X x Power)) / Y - Derive equivalent heat-to-power ratio: New Heat / Power - Scale back power output: CHPQPO = CHPQHO / Equivalent Heat-to-Power ratio
For schemes with condensing steam turbines (fully or partially condensing), calculations account for operational flexibility to trade power output for heat output by adjusting steam flows. This introduces the Z ratio factor, representing the heat-power trade-off relationship. The five-step calculation determines new heat and power efficiencies needed for threshold QI, then scales qualifying power output accordingly.
Heat output uncertainty adjustments: Where heat output measurements exceed acceptable uncertainty levels defined in GN13.10, schemes must apply an overall adjustment factor (FOH) derived per GN19. This multiplies the CHP Qualifying Heat Output before calculating qualifying power, potentially reducing the final CHPQPO further.
Administrative complexity preserved: The guidance maintains the current system of engineering calculations rather than moving toward market-based pricing of CHP benefits. Schemes must navigate multiple guidance notes (GN10 for QI criteria, GN19 for adjustment factors, GN28 for Z ratios) to determine their qualifying output.
What happens next
This is updated technical guidance for existing regulations rather than new policy, so no consultation or implementation timeline applies. CHP schemes already operating under CHPQA must apply these calculation methods immediately when determining their qualifying power output for regulatory and support mechanism purposes.
Schemes currently below QI thresholds should review their calculations against the updated formulas, particularly those with condensing steam turbines where the multi-step process has been clarified. The guidance references several other technical notes that may also require review to ensure consistent application of adjustment factors and efficiency calculations.
The publication signals DESNZ's continued commitment to the current administrative framework for CHP quality assessment. Rather than simplifying the regime or moving toward market mechanisms, the department has refined the existing calculation methodology. This suggests the complex CHPQA system will persist, requiring ongoing engineering expertise and regulatory compliance resources from CHP operators.
For schemes considering upgrades or operational changes to improve their quality indices, the updated guidance provides clearer pathways for calculating the impact of heat output increases or steam turbine modifications on qualifying power output. However, the underlying policy framework remains unchanged - CHP benefits continue to depend on meeting centrally-determined technical thresholds rather than market-demonstrated efficiency gains.
Source text
A CHP scheme must achieve a minimum (threshold) quality index ( QI ) of 100 (or 95 for a new CHP Scheme during its initial period of operation) for all of its power outputs to be considered an output of Good Quality CHP . Schemes that fail to achieve the QI Threshold must calculate CHP Qualifying Power Output ( CHP QPO ). This guidance explains how to determine the qualifying power output. CHPQA Guidance Note 26 v2 Page 1 © Crown Copyright 2026 GUIDANCE NOTE 26 DETERMINATION OF CHP QUALIFYING POWER OUTPUT QUALIFYING POWER OUTPUT (CHPQPO) GN26.1 A Scheme must achieve a minimum (threshold) QI of 100 (or 95 for a new CHP Scheme during its initial period of operation) for all of its power outputs to be considered an output of Good Quality CHP. ➢ Refer to GN10 for guidance on QI Criterion. GN26.2 Schemes that fail to achieve the QI Threshold must calculate CHP Qualifying Power Output (CHPQPO). For Schemes with a QI below the relevant threshold the CHPQPO is annual power generation from a CHP Scheme that would have achieved the relevant QI Threshold of 100 or 95 given the actual annual heat supply. The balance of power is not considered to be generated in Good Quality CHP. CALCULATING QUALIFYING POWER OUTPUT GN26.3 The procedure for calculating CHPQPO differs depending on whether the CHP Scheme includes condensing steam turbine(s). These may be either fully condensing or partially condensing (i.e. pass-out) steam turbines. GN26.4 For CHP Schemes without condensing steam turbines, the basic assumption of the calculation is that for a given fuel input the power output, and hence the Power Efficiency, is fixed. In such cases the only way to improve the QI is to increase the useful heat outputs and hence the Heat-to-Power ratio. The calculation determines the Heat-to-Power ratio that would be necessary to achieve the threshold QI and the CHPQPO is the scaled back power output based on the actual annual heat output and this Equivalent Heat-to-Power ratio. GN26.5 To determine the CHPQPO where a CHP Scheme does not include a condensing steam turbine, the calculation is as follows: Step 1 Calculate the new Heat Efficiency required to achieve the threshold (QIth): New Heat = (QIth – (X x Power)) / Y Where: Power = Power Efficiency Heat = Heat Efficiency Step 2 Calculate the Equivalent Heat-to-Power ratio. Equivalent Heat-to-Power ratio = New Heat / Power CHPQA Guidance Note 26 v2 Page 2 © Crown Copyright 2026 Step 3 Calculate the Qualifying Power Output CHPQPO = CHPQHO / Equivalent Heat-to-Power ratio Where any component of the heat outputs from a Scheme has an uncertainty in excess of the acceptable level of uncertainty that is deemed ‘best practice’ as set out in GN13.10, the CHPQHO must be multiplied by the overall adjustment factor FOH for the purpose of deriving the CHPQPO. FOH must be derived as set out in GN19. In such cases CHPQPO becomes: CHPQPO = CHPQHO x FOH / Equivalent Heat-to-Power ratio GN26.6 For CHP Schemes that include either fully or partially condensing (pass-out) steam turbine(s), the overall logic is identical but the calculation takes account of the fact that there is flexibility to increase the output Heat-to-Power ratio, and hence the QI, for a given fuel input. This may be achieved by reducing the steam flow to the condensing section of the steam turbine and instead supplying this steam as a heat output. As the heat output increases, the power generated reduces and for CHPQA this trade-off is represented by the introduction of a factor called the Z ratio. GN28 provides details of Z ratio. As for other CHP Schemes, the Heat-to-Power ratio that would be necessary to achieve the QI Threshold is determined and the CHPQPO is the scaled back power output based on the actual heat inputs and this Equivalent Heat-to-Power ratio. GN26.7 To determine the CHPQPO where a CHP Scheme includes a condensing steam turbine, the calculation is as follows: Step 1 Determine the Z ratio for the CHP Scheme (refer to GN28). Step 2 Calculate the new Heat Efficiency required to achieve the QI Threshold. Change in Heat = Change in QI /(Y - (X / Z ratio)) New Heat = Change in Heat + Heat Step 3 Calculate the new Power Efficiency required to achieve QI=100. Change in Power = Change in Heat / Z ratio New Power = Power - Change in Power Step 4 Calculate Equivalent Heat-to-Power ratio. Equivalent Heat-to-Power ratio = New Heat / New Power Step 5 Calculate the Qualifying Power Output. CHPQPO = CHPQHO / Equivalent Heat-to-Power ratio Where any component of the heat outputs from a Scheme has an uncertainty in excess of the acceptable level of uncertainty that is deemed ‘best practice’ as set out in GN16.10 - GN16.13, the CHPQHO must be multiplied by the overall adjustment factor FOH for the purpose of deriving the CHPQPO. FOH must be derived as set out in GN19. In such cases CHPQPO becomes: CHPQPO = CHPQHO x FOH / Equivalent Heat-to-Power ratio