New boilers offer an escape from soaring fuel bills

By Michael Szabo

LONDON (Reuters) - For the domestic energy consumer facing ever higher bills, one of the most efficient ways to stay warm and keep the lights on has been a pipe dream so far, but record high fuel prices have focused minds on making it reality.

Large-scale combined heat and power plants are widely used across Europe to supply residential areas with warmth, hot water and electricity.

Now, a scaled-down version of the technology is becoming more attractive for use in individual households as gas and power costs soar in line with record oil prices.

Although micro combined heat and power (mCHP) mean homeowners have to invest new boilers, it allows them to sell any extra power they make back to the national grid and eventually make a profit.

At the same time, the increased efficiency cuts carbon emissions and could enable households to become entirely energy independent.

The technology has been commercially available in Britain since 2006 but is gaining popularity as oil prices drive up energy bills and public concern over global warming intensifies.

"It's part of a whole suite of solutions, which we should be developing," said Robin Oakley of environmental group Greenpeace.

"The underlying principle of getting more energy out of the same fuel is a very good one ... Realistically, at the domestic level people make a decision about a boiler when the old one breaks, but high prices are focusing everyone's minds."

mCHP appliances work like a conventional household boiler in that they provide heat and hot water, but they also produce electricity for use in the home.

"It walks like a boiler and it talks like a boiler, but it's an improvement over a conventional boiler," said Brian Longpre, a director at British-based Disenco Energy plc, one of the pioneers in the development of mCHP technology.

"One of our mCHP appliances can cut an average British home's carbon footprint by up to two-thirds while making homeowners a bit of money on the side."

The electricity generated from an mCHP boiler can cut household bills by up to 80 percent, mCHP developers say.

Taking less power from the national network also means homes cut their carbon footprints by between 2.5 and five tonnes annually, since much of Britain's energy comes from power plants that emit climate-warming carbon dioxide.

Excess electricity generated through mCHP boilers during off-peak hours can also be sold back to the power grid, under so-called 'feed-in tariffs'.

Germany has Europe's highest feed-in tariffs, allowing consumers to earn around 40 euro cents ($0.62) per kWh compared to paying retail rates of 18 euro cents per kWh after taxes and support fees.

In Britain, renewable energy feed-in tariffs range from four to six pence ($0.08-0.12) per kilowatt hour (kWh), roughly double the utility's wholesale rates.

Retail rates are around 10 pence per kWh, so households can sell power back to the grid for half of the cost of buying it.

ENERGY NIRVANA

The ultimate is to become entirely independent of the national grid.

"Coupled with other energy saving initiatives, including a reduced use in home appliances, our (mCHP boiler) can help you reach Energy Nirvana," Longpre said.

Another company developing mCHP is Ceres Power, which signed a major distribution deal in January with Centrica, the parent company of British Gas.

Centrica paid 20 million pounds ($39.28 million) for a 10 percent stake in Ceres Power, giving it exclusive rights to Ceres' boilers in Britain.

Centrica has bought some 40,000 units in advance for distribution starting in 2011.

mCHP boilers cost around 500-1,000 pounds more than a conventional boiler but consumers should still start generating a profit after five years, said Bob Flint, commercial director for Ceres Power.

"Our mCHP boilers will save the average household around 250 pounds ($489) a year," he said.

(Reporting by Michael Szabo; Editing by Barbara Lewis/Daniel Fineren)