|The oldest CHP installation in Flanders, which has been operating since 1958|
Over a period of 20 years, CHP in Flanders has evolved from a marginal technology, primarily serving the process industry, to an important contributor to the Flemish energy system. Erwin Cornelis and Kaat Jespers look back at its history and ponder what the future may hold.
Within 20 years, combined heat and power (CHP) in Flanders, the northern part of Belgium, has been transformed from a marginal technology, primarily used in the process industry, into a significant contributor to the Flemish energy system, currently covering about 20% of the gross inland power demand. However, although CHP gained prominence in some sectors, its potential has hardly been exploited in others. By looking at data on the CHP development in the Flemish region over the last two decades we can understand its drivers and the barriers. We can also look to the future to see whether CHP will achieve a foothold in new sectors.
For more than a decade, VITO, the Flemish Institute of Technological Research, has conducted surveys on cogeneration/CHP in Flanders on behalf of the Flemish government.
The annual CHP inventory, based on the finding of these surveys, shows how CHP has evolved in Flanders from 1990 onwards. The inventory itself has also evolved over the two last decades as new indicators were added. Now, the VITO CHP inventory is recognised as the book of reference for whoever is interested in learn about CHP in the Flemish region.
|The gas turbine driven CHP installation at the Zeebrugge LNG terminal: in operation since 1998 Credit: Fluxys – E. Manderlier|
Based on this inventory, we describe the history of CHP development in the region.
Before 1990: The era of the steam turbine
In 1990, the installed power capacity of all CHP installations in Flanders totalled 200 MW – very small when compared to the total capacity of 8500 MW in the region.
The steam turbine was the dominant technology, both back-pressure and condensing turbines. They were primarily used by the region’s energy-intensive industries. For example Antwerp is home to the fourth biggest petrochemical cluster in the world.
|CHP power capacity in Flanders, divided by technology, 1990″11|
The steam turbines were installed to optimize the energy costs of the plants. In addition to heat, they delivered power ” three quarter (152 MW) as electricity, with the remainder (40 MW) used to drive compressors and other machinery directly.
From 1990 until today, the installed capacity of CHP steam turbines has in relative terms hardly changed. Some installations have been taken out of operation with a few new ones installed, but the vast majority continue to operate. The oldest has been in operation since 1958.
In 2007, the installed capacity rose modestly to 240 MW, and since then steam turbines in CHP mode have gained some popularity, with today’s capacity at 333 MW. Interest in that CHP technology was renewed as a result of incentives to utilise CHP, which will be explained in more detail later.
1990″2000: The era of the gas turbines
Although steam turbines were the dominant technology driving CHP installations up to 1990, they were not the only ones. In 29 CHP installations the prime mover was an internal combustion engine (ICE). Their power capacity was rather limited and did not exceed 250 kW. Their total power capacity was 8 MW, with the majority (7 MW) installed to heat greenhouses. The remaining 1 MW was installed in sewage treatment plants.
During the final decade of the 20th century, the use of ICE-driven CHP installations grew, especially in horticulture and, to a lesser extent, in industry. By 1995 the installed capacity had tripled to 27 MW and quadrupled to 116 MW in 2000, supported by the success of the early movers. These CHP installations also became more powerful, especially from 1995 onwards when machines with a power output of 1+ MW were installed.
Unlike the steady deployment of CHP in horticulture and industry, it did not develop consistently in every industry sector. For example, in the service sector, its development has been poor. However, inspired by success stories from the UK and the Netherlands, standard CHP packages, with a small ICE at their core, began to be commercialised in this sector. However, these proved technically unreliable, with only about 10% of the packages still in operation after one year.
Although ICE-driven CHP undoubtedly took off after 1990, they did not benchmark the development of the sector between 1990 and 2000. That honour belongs to gas turbine-driven plants and combined-cycles in CHP mode.
In the early 1990s, power prices rose sharply. Many energy-intensive companies, the backbone of the Flemish economy, considered to install gas oil-fuelled generators as an alternative to the purchase of power at soaring prices. The national power provider, having a monopoly over the power market at the time, riposted by proposing natural gas fuelled gas turbines of which the heat could be integrated in their processes. Abroad, both the GE Frame 6 and ABB GT 10 demonstrated technical reliablility, which helped the industry to consider the integration of this technology within their processes.
In 1993, the first three gas turbine-driven CHP installations were put into operation, representing 125 MW of power capacity. By 2000, their number had risen to 13, representing a power capacity to 673 MW. Altogether they represented 72% of the total CHP power capacity and 40% of the total thermal capacity.
All the gas turbines were installed in a joint venture with the national power provider, except one combined-cycle plant feeding a district heating system. Also in 2000, 60% of the ICE-driven CHP installations were also operated in partnership with the power corporation.
2000″04: CHP’s ice age
Suddenly, in 2000, Flanders’ installed CHP capacity essentially stopped growing. Between 2000 and 2004 just 47 new installations came on line ” an increase in power capacity of less than 5% in four years. Forty-five of the installations were ICE-driven (41 MW); with the remaining two steam turbine-driven (14 MW). A similar trends was observed in other European countries.
There are many reaons behind this dramatic trend shift. The most important one was the decline in the spark spread, i.e. the difference between the power price and the natural gas price, the dominant fuel for CHP installations.
Between 1995 and 2005, power prices remained relatively stable, while natural gas prices decreased, first in 1999 by about 15% compared to 1995″98 levels, which gave a boost to CHP investment
However, the latter started to increase and peaked at the beginning of 2001 at about 55% higher than the 1995″98 levels. From 2002 onwards, the gas prices stabilized again, but at a level which was about 25% higher than 1995-98 levels
Thus, this declining spread between fuel and power prices had a detrimental effect on the economic feasibility of CHP installations.
At the same time, the European power and gas markets were being liberalised. Monopolistic power and gas companies had to restructure and unbundle their transport activities from their energy provider activities. The newly created grid operators had to accept new entrants in their traditional home markets. Both energy market players and energy consumers were left in a situation of uncertainty as the liberalised markets developed.
A third reason, which is specific to the Flemish region, is that in 2000, the Flemish authorities began to acknowledge CHP’s greenhouse gas-avoiding potential. An objective of the Flemish government at the time was to have a power capacity of 1200 MW by 2005, a 25% increase in the installed capacity in 2000 (930 MW). This objective corresponded to 75% of the CHP potential, which was estimated at 1600 MW in 1997 by VITO.
In order to achieve this objective, the Flemish authorities started to prepare a support mechanism to stimulate investment in CHP. The downside was that investors decided to postpone their cogeneration investment plans until more clarity on the support was provided.
2005″12: The era of the CHP certificate
In 2006, the CHP support scheme came into force. The Flemish authorities chose a market-based support scheme, based on certificates. It is a dedicated certificate scheme for cogeneration and works in parallel with the green certificate scheme for renewable electricity, which had been introduced a few years earlier.
Within the scheme, the regulator issues to the operator of a CHP installation one CHP certificate per 1 MWh of primary energy saved, compared to the separated generation of power and heat at predefined reference efficiencies. After four years in operation, the number of CHP certificates issued is restricted year by year at a rate that is disproportional to the primary energy savings, so that every year new installations are needed to guarantee a sufficient supply of CHP certificates.
In order to create a demand for these CHP certificates, power retailers have an obligation to submit annually a number of CHP certificates to the regulator as a function of the power supplied the year before and a predefined factor, which increases year by year.
The market responded well to this incentive. By 2010, the installed CHP capacity had doubled compared to 2004 levels ” from 1028 MW to 2086 MW. Two major CHP installations contributed half of this new power capacity ” a 395 MW combined-cycle plant, in operation since 2005, and a second 133 MW facility, in operation since 2006, both integrated in large chemical companies.
An additional 300 MW came from ICE-driven CHP plants, with the lion’s share installed to heat greenhouses. Injecting the purified exhaust gases to feed the plants with CO2 is acknowledged as an additional environmental benefit and is granted supplementary certificates, helping to make CHP in the horticultural sector more viable than traditional heating.
Five new gas turbine-driven CHP installations, totalling 130 MW, and two new steam turbine-driven installations (80 MW) were also brought into operation.
At the end of the decade, a new type of CHP configuration took foot: machines fuelled by biogas from manure digestion. Within the densely-populated Flanders region, the intensive agricultural sector faced very strict limitations on the disposing of manure on the land. In many cases, the only feasible way of disposing of it was to digest it, together with other biodegradable waste and maize, before drying and exporting the digestate. In 2010, 17 such CHP installations were in operation, their power range varied from 500 kW to 4 MW, and had a total power capacity of 29 MW.
As a result of all these investments, all the 428 CHP installations together represent in 2010 a power capacity of 2086 MW and a thermal capacity of 2618 MW. In 2010, they produced 12 TWh of electricity, which is 19% of the total gross inland power consumption. They are fuelled for 94% by natural gas, the remaining part is mainly fuelled by biogas or other renewable fuels. Altogether, with an average electrical efficiency of 29% and a average thermal efficiency of 53%, they saved 5.3 TWh of primary energy compared to the separate generation of heat and power. CHP clearly had evolved into a significant part of the Flemish energy system.
2010 onwards: The era of what?
What are the prospects of CHP in Flanders beyond 2010? There are signs of both hope and despair.
In 2011-12, despair dominated. In 2011, the growth in CHP capacity again appeared to falter as it had done ten years ago. Only 51 MW of electrical power capacity was added, which is less than halve of the average increase in the 2005″10 period.
Of course one cannot neglect the influence of the banking crisis, which has had a negative impact on many investment plans, including those related to CHP projects. To illustrate, the increase in cogeneration capacity in 2009 was a modest 36 MW, even less than in 2011.
Another determining factor is the re-emergence of the deviation between gas prices and power prices. As a result of the massive investment in renewable electricity in Belgium, as well as in its surrounding countries, wind turbines became the marginal production unit instead of gas-fired power plants, keeping the power price down. The resulting declining or even negative spark spread, mean that the operating hours of both gas-fuelled conventional power plants and gas-fuelled CHP installations are being reduced.
The last cause is, as in the period 2000″05, related to the support mechanism and the uncertainty about the levels of CHP support. The Flemish support scheme was so effective that the envisioned capacity objective was achieved three years ahead of schedule. As a result, more CHP certificates were issued than needed to be redeemed. In early 2012, 3.3 million CHP certificates had to be redeemed, whereas almost 9.4 million were available. As a result, many of the CHP certificates were sold at the rock-bottom price of €27 (US$35) per certificate, whereas the market price was €41 until 2009.
In order to address this oversupply, the Flemish authorities increased the obligations on the power retailers so that they have to redeem a higher number of certificates for the same quantity of power delivered before. On the other hand however, a substantial part of the power delivered to the energy intensive industry is exempt from this obligation, reducing the net effect of the obligation increase.
Added to that, Flanders’ CHP support scheme has been drastically reformed after questions were raised about the support levels to some renewable power technologies in the green certificate scheme. In order to avoid over-subsidy, support levels are now no longer proportional to the renewable energy produced, or the primary energy saved for CHP. Instead it is also dependent on the economic feasibility of the technology used.
|The evolution of industrial gas and power prices, 1991″2011 (1991 = 100%) Credit: Eurostat|
This means that, if the feasibility calculation for a given type of technology, for example a CHP installations with an ICE within the power range of 1″5 MW, reveals that if one CHP certificate per 2 MWh primary energy saved instead of 1 MWh will suffice to obtain a predefined internal rate of return, the number of CHP certificates for that type of installation will be halved.
Less viable types of technologies can be issued more than one CHP certificate per MWh primary energy saved, although a maximum is set at 1.25.
This reform of the support scheme was seen as so drastic, that it took a year before clarity on the support mechanism and support levels under the new regime could be given. In the interim, CHP investment plans were once again postponed.
However, it is not all doom and gloom, and this decade may bring new hope for the CHP sector in Belgium.
The new EU Energy Efficiency Directive forces national and regional authorities to examine the better utilization of heat. This could potentially lead to a renaissance of district heating in both Belgium and the Flanders region, where it is under-developed.
Today, only one minor power plant of 54 MW and a couple of municipal waste incineration plants feed their residual heat into a district heating grid. Expansion of district heating networks could allow more power stations to become a CHP plant.
However, as the investment costs of a district heating network are substantial, financial support from the government will be necessary. The Flemish government is elaborating a support scheme for residual heat valorisation, but the suggested support levels so far appear modest.
Hope might also come from micro-CHP technologies. Their number is steadily growing, with the first one installed in 2000. By 2005, five micro-CHP installations were operating in Flanders and by 2010 their number had risen to 18. The majority are equipped with an ICE and have a power capacity of 5 kW.
In 2011, their number doubled, with another 24 micro-CHP installations added. However, the majority are equipped with a stirling engine and have a power capacity of 1 kW. Could this technology herald a new CHP era?
What does this CHP history teach us?
From this 20 years of history of CHP in Flanders, there are several observations that one can make.
The first one is that the price difference between fuel, gas mainly, and electricity is the main determinant of the development of cogeneration. Rising power prices allowed gas turbine-driven CHP installations to bloom in 1990″95, while increasing gas prices, in combination with stable electricity prices, in 2000″04 and from 2008 onwards hamper CHP investments.
A second important determinant is an effective support scheme. They should be designed to influence the economic feasibility in a positive way, for example, counterbalance the impact of a negative energy price difference.
However, Flanders shows that setting up a sound support scheme for a family of technologies, which is characterised by variations in power capacity and concepts, is a challenge. Nonetheless, stability in support scheme and levels are vital to maintain the confidence of the stakeholders.
Thirdly, one can see that the different kinds of CHP installations or applications do not develop equally over time. Gas turbine-driven CHP installations, for instance, were mainly installed between 1993 and 2000; many of the CHP-installations delivering heat to greenhouses stem from 2007″10, as well as biogas-fuelled CHP installation in manure digestion, and so forth.
Last, but not least, this story of CHP in Flanders demonstrates the importance of sound, reliable and continuously maintained data on CHP within a particular region. Without these data, this story could not have been written.
Erwin Cornelis is an energy policy expert and Kaat Jespers is a researcher at VITO NV, Belgium. www.vito.be