A large gap between gas and electricity prices can make on-site generation worth investigating. But gas at 7p per kilowatt-hour and electricity at 25p do not leave an 18p saving for every unit you generate. Some fuel becomes electricity, some becomes heat and some is lost. The business case depends on how much of those useful outputs your site can use, and what it costs to deliver them.
Here, 7p gas and 25p electricity are illustrative assumptions, not current market offers or verified Pinion contract prices. They provide a simple way to understand combined heat and power (CHP), before a site-specific assessment puts real numbers around it.
Start with the electricity you can actually generate
The spark spread compares the value of electricity with the cost of the gas needed to generate it. It is a starting point for understanding generation economics, rather than a complete measure of profit. The government’s CHP statistics describe that relationship and distinguish electricity used on site from electricity exported. (UK government: DUKES 2019, CHP chapter)
Suppose a CHP unit delivers 35kWh of electricity from 100kWh of gas: an electrical efficiency of 35%. At 7p per kWh, that gas costs £7. Dividing £7 by 35kWh gives a fuel cost of 20p for each kWh of electricity. If every unit replaces grid electricity costing 25p, the electricity-only benefit is 5p per kWh before other costs.
This is why electrical efficiency matters. A total efficiency figure that includes recovered heat cannot be used as though all that output were electricity. Government technical guidance separates the two and warns that gas bills and manufacturers’ efficiency figures can use different calorific-value bases. A sound calculation brings them onto the same basis. (BEIS: CHP technologies)
Our Technology page introduces how CHP produces those separate outputs. The economic question is how much useful electricity and heat reach the site’s loads.
Useful heat changes the calculation
CHP captures heat from generation for use elsewhere on site. That heat has a financial value when it replaces something you would otherwise pay for, such as boiler fuel. Heat that cannot be used earns no such credit.
For this example, assume the same 100kWh of gas also supplies 45kWh of heat that the site actually uses. Assume the displaced gas boiler is 90% efficient. Delivering 45kWh of heat through that boiler would require 50kWh of gas, costing £3.50 at the illustrative gas price.
All efficiencies here use the same gross calorific value basis. Electrical output is net of the CHP unit’s own electrical consumption, all electricity replaces imports, and the heat figure represents heat actually used. These are teaching assumptions, not a Pinion equipment specification or a measured operating result.
| For each 100kWh of gas supplied to CHP | Illustrative result |
|---|---|
| Gas purchased at 7p/kWh | £7.00 cost |
| 35kWh electricity replacing imports at 25p/kWh | £8.75 avoided cost |
| 45kWh useful heat replacing a 90%-efficient gas boiler | £3.50 avoided cost |
| Combined energy benefit, before all other costs | £5.25 |
The calculation is £8.75 plus £3.50, less £7.00. The £5.25 is a benefit before other costs, not net savings or profit. With no useful heat, it falls to £1.75 for the same gas input.
Together, the electricity and useful heat account for 80% of the fuel input in this scenario. That does not mean 80% electrical efficiency. Allocating the entire £3.50 heat credit against the £7 fuel bill would leave 10p per electricity kWh, but that is a fuel cost after heat credit. It is not a 10p all-in generation cost.
The site’s operating pattern decides what is valuable
Annual energy totals tell only part of the story. Electricity and heat need to be useful when the plant produces them. A site with steady, simultaneous demand presents a different case from one with long shutdowns or a strongly seasonal heating load.
Government finance guidance recommends modelling demand, output, availability, tariffs and maintenance, ideally through an hourly comparison with the alternative of operating without CHP. (BEIS: CHP finance)
The electricity value should reflect charges genuinely avoided. Standing or capacity charges may remain, and exported power needs its own value based on the export agreement. Maintenance, overhauls, installation, connection, financing and applicable taxes also belong in the assessment. Efficiency and availability should reflect the proposed operating conditions.
Cooling can create another use for recovered heat. An absorption chiller can convert heat into cooling, potentially extending useful demand beyond the heating season. Its value depends on the cooling system displaced, the chiller’s performance and the electricity needed by associated equipment. (BEIS: CHP technologies, section 3.6)
Our Cooling page explores that application. In a financial model, heat used for cooling must not also receive credit for replacing boiler heat: the same output cannot be counted twice.
Historical averages provide context, not a quotation
For the second quarter of 2025, DESNZ reported average UK non-domestic electricity prices of 23.8p/kWh and gas prices of 4.93p/kWh, both excluding Climate Change Levy. Including that levy, the figures were 24.3p and 5.25p respectively. These are dated sector averages, not prices offered to an individual business. (DESNZ: Quarterly Energy Prices, September 2025, page 9)
They show why the relationship attracts attention, but they cannot establish a particular project’s return. A proposal needs the site’s own tariff terms and sensitivities for changing gas prices, electricity prices, operating hours and useful heat demand. The historical figures above are separate from the illustrative 7p/25p calculation.
Financial savings also do not automatically establish carbon savings. That assessment needs a comparison delivering the same useful electricity, heat and cooling, with a stated methodology and time horizon. Government modelling has highlighted how a decarbonising grid changes the comparison for natural-gas CHP. (BEIS: CHP pathway to decarbonisation, 2022) Our Sustainability page introduces the wider subject.
Build the decision around your own demand
The useful next step is to assemble electricity and gas bills, interval demand data, operating schedules and evidence of heat or cooling needs. Compare a proposed system with the real alternative, including its installed cost and ongoing costs. Then test how the result changes when prices, availability or demand move against the assumptions.
Use How it works to explore the approach and Deployments to browse the site’s project section. For any example used in an investment decision, ask for evidence of the operating conditions and measured results that make it comparable to your site.
The price gap starts the investigation. Useful output, avoided costs and the cost of owning and operating the system determine whether a project earns its place.