Combined heat and power

Combined heat and power (CHP) refers to the simultaneous generation of electricity and useful heat from a single energy source in a single plant. Compared to separate electricity and heat generation, CHP plants achieve significantly higher overall efficiencies of 80 to over 90 percent. In the real estate sector, combined heat and power plants (CHP) are primarily used as the CHP variant-in apartment buildings, residential complexes, and commercial properties.

Operating Principle and Plant Types

At its core, a combined heat and power plant consists of an engine or a turbine that drives a generator and generates waste heat in the process. This heat is utilized via a heat exchanger for heating and hot water. Common plant types are:

• Internal combustion engine CHP: Operates on natural gas, biogas, or heating oil; widely used, proven technology
• Micro-CHP (< 50 kW electrical): suitable for single-family homes and apartment buildings
• Stirling engine CHP: low-noise, low-maintenance, for smaller properties
• Fuel cell CHP: high efficiency, eligible for subsidies, particularly suitable for high-efficiency buildings

The choice of system type depends on the building’s heat and electricity requirements as well as the available gas connection. Fuel cell CHP systems have gained significant importance in recent years because they operate particularly quietly, require almost no maintenance, and are compatible with hydrogen-making them future-proof. Funding from KfW (Program 433) specifically supports fuel cell systems.

Funding under the KWKG and EEG

The Combined Heat and Power Act (KWKG) grants a surcharge per kilowatt-hour for CHP electricity fed into the public grid. Self-consumption of CHP electricity is partially exempt from the EEG surcharge. Additionally, KfW provides investment grants through the “Renewable Energies - Premium” program (Program 271/281) as well as the BAFA. Separate funding pathways apply to residential buildings with district heating networks.

The subsidy structure has changed several times in recent years and is complex. Anyone planning a CHP plant should check the current subsidy conditions with BAFA and KfW before investing-and always submit the subsidy application before signing a contract, as retroactive applications are not accepted.

Economic Viability and Operation

The economic viability of a CHP plant depends on three factors: heat demand (as high and consistent as possible), gas price, and electricity feed-in tariff. As a rule of thumb, a plant should achieve at least 4,000 operating hours per year. Managers and owners of multi-family buildings should also carefully structure the maintenance contract, as downtime can quickly undermine the economic viability calculation.

The rise in gas prices since 2022 has significantly impacted the economic viability of natural gas CHP plants. Anyone investing in a CHP plant today should run simulations with different gas price scenarios and assess whether a biogas tariff or the ability to convert to hydrogen improves long-term profitability. The payback period for a typical gas CHP plant for an apartment building is currently eight to fourteen years.

Tenant Electricity and CHP

An attractive complement to traditional grid feed-in is the tenant electricity model: The electricity generated in the CHP plant is supplied directly to the building’s tenants, who thus purchase it at a lower cost than they would from the grid. The CHP Act (KWKG) and the Metering Point Operation Act (MsbG) regulate the requirements for this direct supply. Billing requires individual meters for each residential unit and registration as an energy supplier-an administrative burden that can, however, be justified by attractive margins.

Practical Tip for Property Owners in Nuremberg and Franconia

N-ERGIE, the regional energy supplier in Nuremberg, offers both contracting models (operated by the supplier) and consulting services for investing in your own CHP plant. CHP is particularly attractive for owners of multi-family buildings with four or more residential units, as well as for condominium complexes with a shared heating system. We recommend obtaining an independent energy assessment before investing-many Nuremberg energy consultants are certified through the federal government’s list of energy efficiency experts and are familiar with both the technical aspects and the funding opportunities available in the region.

Frequently Asked Questions

Is a CHP unit also worthwhile for a single-family home?

Generally yes, but only if there is sufficient heat demand (starting at approx. 15,000 kWh/year of heating energy). Micro-CHP units are now compact enough for single-family homes, but the payback periods are usually eight to twelve years.

Do I need a permit for a CHP unit?

CHP systems with an electrical output of up to 20 kW are generally exempt from permits in Bavaria, but must be registered with the grid operator. Larger systems are subject to the Federal Immission Control Act (BImSchG) and require a permit.

Can I pass on CHP electricity to tenants?

Yes, under certain conditions. As a landlord, you can supply the CHP electricity you generate directly to tenants (tenant electricity), which can be cheaper for both parties than purchasing electricity from the grid. However, the requirements of the Metering Point Operation Act and the CHP Act must be observed.

What is the difference between a CHP unit and a heat pump?

Both generate heat, but in different ways: The CHP unit burns a fuel (usually natural gas) and generates both electricity and heat in the process. The heat pump, on the other hand, uses electricity to raise ambient heat (from the air, ground, or water) to a usable temperature level. In climate protection policy, heat pumps are increasingly preferred because they can be operated in a CO₂-neutral manner using renewable electricity; CHP units remain a viable option as long as green hydrogen is not available.

District Heating Networks and CHP in Residential Complexes

CHP is particularly interesting when combined with a district heating network within a residential complex or a new development. Instead of equipping each residential unit with its own heating system, a central CHP plant supplies the entire building or multiple buildings with heat and electricity via an internal pipeline network. In Nuremberg, there are several apartment buildings and condominium complexes that rely on this model. As a regional utility, N-ERGIE offers both contracting models and consulting services for self-investment.

For property managers and homeowners’ associations in Nuremberg looking to replace an outdated central heating system, it is worth comparing a modern gas condensing boiler, a heat pump system, and a CHP unit. Cost-effectiveness depends heavily on annual heating demand, building insulation, and local energy prices. We recommend an independent energy consultation-certified energy efficiency experts in the metropolitan region can be found via the expert list of the Federal Office of Economics and Export Control (BAFA). A solid consultation is a prerequisite before applying for subsidies and making investment decisions.

What tax obligations arise from operating a CHP unit?

Anyone who operates a CHP plant and feeds electricity into the public grid or supplies it to tenants is treated as a business operator for tax purposes: This entails obligations regarding value-added tax (if revenue thresholds are exceeded), corporate or income tax on the electricity revenue generated, and business tax. Since 2022, there has been a tax exemption for small PV systems; different rules apply to CHP plants. Revenue from electricity generation is generally taxable. We recommend consulting a tax advisor before investing to assess the tax implications specific to CHP plants.

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