Financial support mechanisms can be argued to be of value as a short term measure to offset perceived imbalances in markets, to reward genuine, but otherwise unrecognised values for as long as those market failures persist, but also as a short term expedient to stimulate the market for a promising technology in the expectation that this will more effectively add scale and consequently drive down prices to a sustainable level.

The economics of microgeneration are almost invariably assessed on a rather simplistic assessment of end-user payback, which considers the recovery of the initial capital investment from the net income generated by the microgeneration technology offset by additional operation and maintenance costs, but takes no account whatsoever of the benefits or costs, nor indeed of any disbenefits, which accrue to the wider energy system.  Clearly, in order to optimise utilisation of our constrained resources and encourage cost effective investment in a sustainable energy system we need to be able to attribute both costs and benefits of any given measure appropriately.

This paper identifies a range of energy system values which are not currently attributed to microgeneration and in particular examines the value of heat led micro CHP in supporting the emerging energy system characterised by high levels of intermittent renewable generation.

It is argued that the apparently generous FiT (Feed in Tariff), whilst a pragmatic proxy for these as yet unrewarded values, not only fails to adequately represent those values for micro CHP, but also fails to incentivise system optimisation.

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