Combined Heat and Power (CHP) has significant potential for the more efficient use of fossil fuels and the reduction of CO2 and other polluting emissions. It also offers the possibility of reduced infrastructure requirements, (and consequent environmental impact) both in terms of large scale generators and the associated transmission and distribution facilities, by the nature of "embedded" generation. Indeed, the evolution from central generating plant to distributed generation is seen by many as a natural response to environmental demands and to the commercial pressures imposed by an increasingly competitive market.

In the UK, economic considerations limit existing CHP technologies to the size range of 30kWe and above, although tax advantages make 15kWe (and even smaller) viable in some countries. This is primarily due to the high unit maintenance and capital costs of equipment. The internal combustion engines generally applied are of limited durability, reliability and efficiency and produce relatively high levels of noise and air pollution.

Stirling Engines offer better energy efficiency and reliability, lower exhaust emissions and noise levels. They also permit a greater flexibility than internal combustion engines in the choice of fossil fuels and alternative renewable energy sources. Stirling engines are potentially prime movers in CHP systems on the micro scale, operating effectively at outputs as low as 800We.

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