Step 4: CHP Procurement

Goal:          Build an operational CHP system according to specifications, on  schedule and within budget.
3 to 30 months, depending on system size and complexity
Typical Costs:          £500 - £4,000/ kilowatt (kW) installed
Effort required:
Varies depending on procurement approach, similar to any construction project
Questions to answer:
Is the system fully commissioned and running as designed? Will operations and maintenance be performed by site staff or will it be outsourced? If in-house, have employees been trained to perform these functions? If outsourced, have service contracts been procured for equipment or system maintenance, equipment overhaul or replacement, system availability, or monitoring and control.

Procurement is designed to help the CHP Champion navigate the project development and implementation steps of contract negotiation, project engineering and construction, and final commissioning—a process similar to many central plant construction projects.

CHP Procurement Guide

For in-depth information to help streamline the CHP procurement process, refer to the following three sections of the CHP Procurement Guide: Selecting a Contractor/Project Developer, CHP Financing, and CHP Siting and Permitting Requirements.

Contractor Selection

The process of developing and installing a CHP system will require a multidisciplinary team of professionals to successfully complete the project. CHP project development requires the services of mechanical, electrical, and structural engineers and contractors; equipment suppliers; a project manager; environmental consultants; and financiers.

Information and considerations for selecting a contractor/project developer and structuring the development of a CHP project are available within the contact page. Specific topics include:

  • Making the final decision to develop a CHP project
  • Selecting contractors/consultants and the role of the project developer
  • Choosing a turnkey developer
  • Selecting other types of project partners
  • Preparing a request for proposals
  • Creating a contract/elements of an effective project development contract

Alfagy provides Level 2 Feasibility Analyses.



The decision of whether and how to finance a CHP system is a critical step in the development of any CHP project. CHP systems require an initial investment to cover the cost of equipment, installation, and regulatory/permitting costs; these costs are then recovered through lower energy costs over the life of the equipment. The structure of financing can impact project costs, control, and flexibility, as well as affect a company's long-term return on investment.

Information and considerations for evaluating various financing methods for CHP (PDF) and some advantages and disadvantages of each are available within the financing section of the CHP Procurement Guide. Specific topics include:

  • Understanding what lenders and investors are looking for in CHP projects
  • Identifying CHP project risks and mitigation measures
  • Weighing the advantages and disadvantages of various CHP project financing options


Obtaining the required utility interconnection, environmental compliance, and construction permits are critical components in the CHP project development process. The number of permits and approvals will vary depending on project characteristics, such as: project size and complexity; geographic location of the selected site; extent of additional infrastructure modifications (e.g., gas pipeline, distribution); and potential environmental impacts of the construction and operational phases of the project. Permit conditions often affect project design and neither construction nor operation may begin until all permits are in the process stage or officially approved. The Carbon Trust or DECC can provide a letter outlining the emission reduction benefits of a CHP project, which can help inform permitting offices about the benefits of CHP. Please contact Alfagy for more information.

More information and considerations for siting and permitting a CHP facility (PDF) are available within the permitting section of the CHP Procurement Guide. Specific topics include:

  • Understanding the overall permitting process
  • Preparing for utility interconnection requirements
  • Anticipating local zoning/planning requirements
  • Understanding local air quality requirements
  • Estimating permitting costs