The Department of Public Enterprise is considering a report which describes how to promote energy use based on combined heat and power (CHP). Any change in policy could lead to commercial incentives to encourage companies to install CHP units as a way to save on energy costs.

The Irish Energy Centre put together a report on CHP and submitted it to the Department last month. A separate report assessing the electricity industries in the Republic and Northern Ireland by British consultants is also expected to advocate greater use of CHP.

CHP saves energy by capturing the "waste" heat produced during electricity generation. This means that far more of the energy locked in fossil fuels can be captured both as electricity and useable heat.

Burning fuel to make electricity is about 40 per cent efficient whereas CHP boosts efficiency to about 60 per cent. Using the heat represents a saving to any company that can utilise it or sell it on to a district heating system, like the one in the west end of Temple Bar, Dublin.

"There are no real incentives for CHP here at the moment," says Mr Frank Daly, business development engineer with BG Cogen, a division of Bord Gais Eireann. "CHP could make significant inroads into meeting our commitments under the Kyoto Protocol. We are hopeful that the Department of Public Enterprise will come up with incentives for CHP."

UK companies using CHP can avoid a levy of 0.15 pence per kilowatt hour (kWh) applied to natural gas and 0.43 pence per kWh for electricity, he said, an incentive that helps encourage firms into installing CHP systems. No such incentives exist here.

About 1.5 per cent to 2 per cent of our energy demand is met by CHP units compared to 10 per cent in Britain and a staggering 60 per cent in Denmark, Mr Daly says. "We are pretty much bottom of the league."

The energy savings produced by a CHP unit are significant mainly because electricity generation produces more heat than electricity. A typical CHP unit produces 1,200 watts of heat energy for every 1,000 watts of electricity it generates.

This heat energy can be used by a company as process heat in manufacturing. It can also be used to heat homes, offices and hotels but making this energy available via a district heating system only works when there is a large "energy load" close to the generating plant. For this reason the massive heat produced by the ESB's Poolbeg electricity plant is simply pumped into Dublin Bay and the heat from Moneypoint is run into the Shannon Estuary.

CHP provides a way to increase electricity capacity, cut fossil fuel burning and save energy costs, but it was dealt a blow in the 1999 Electricity Regulation Act. CHP was excluded from the renewable and alternative energy bracket in the Act, a decision that has greatly limited its commercial appeal.

Institutions or companies that can produce electricity from renewable or alternative sources are "unrestricted", able to sell this power to any comer and at an economic rate. The same is not true for companies that install CHP units.

The appeal of CHP is that a large electricity consumer might consider installing a CHP plant rather than just a back-up generator and a link to the ESB. No planning is required, provided the output isn't excessive and major savings could be achieved by making one's own power, then selling any excess to neighbours or the ESB, and selling the waste heat into a district heating system.

The Act, however, effectively blocked this opportunity. The ESB must buy electricity produced by alternative or renewable sources at a commercial rate. CHP producers may sell to the ESB, but at a fraction of the commercial rate, making this part of the equation uneconomic for potential suppliers. A company using CHP also still has to negotiate a back-up and top-up service from the ESB for when their CHP system is down for maintenance.

It is a question then of whether supporting a district heating system using an energy useage billing system might produce sufficient income to justify the installation costs of a CHP unit. In the main, the answer is no, unless the company has a great need for heat energy itself, for example in a manufacturing process.

Yet the CHP/district heating system installed at the Civic Offices on Wood Quay does operate economically.

The CHP unit there, commissioned in December 1996 at a cost of £1.2 million (#1.524m), provides the electricity and heating needs of the Civic Offices complex, also heating many new developments in Temple Bar's west end.

All the new apartments in the west end use this heat as do the Harding Hotel, Handel Hotel, Parliament Hotel and Kinlay House. The Smock Alley social housing units are also on the district heating network as is Jury's Christ Church Inn and Christ Church Cathedral itself.

The estimated annual saving in energy costs is about £187,000 (#237,500), giving a system payback period of just 6.4 years. The actual payback will be somewhat slower however, because energy users enjoy handsome discounts ranging from 5 per cent to 25 per cent of the cost of securing the same heat energy from conventional sources.