The barriers to CHP development result primarily from a conflict of interests in the electricity sector. Since plants have to be located close to centres of heat demand, CHP production is necessarily decentralized and thus reduces the demand for electricity produced in large, centralized power plants that are predominantly operated by the major public utilities. Historically, many of these utilities have applied strategies to prevent investment in CHP plants, which they considered as competitors in the electricity market. But there were also exceptions to this rule. Indeed, the differing strategies of dominant utilities towards potential CHP competition were mainly responsible for the enormous differences in the development of CHP within the EU. Whereas the share of CHP electricity has reached about 50% in Denmark and the Netherlands and 35% in Finland, it remains below 10% in most of the 15 established members of the EU and below 3% in France.

The removal of such barriers may result in a rapid development of CHP, as has been demonstrated by the Netherlands and Finland. In the Netherlands, the electrical generating capacity of installed CHP plants almost tripled in the decade 1987-97 as a result of a political decision to actively develop CHP and to reorganize the electricity industry accordingly. In Finland, the production of CHP electricity doubled in the industrial sector and tripled in the district heating sector during the period 1983-97. This was a result not of political intervention, but of a changing strategy within the electricity industry. The then-dominant utility, Imatran Voima, decided in 1983 to co-operate with industry and municipalities in the development of CHP. Since then, it has expanded its electrical capacity by only installing decentralized CHP plants instead of large central power stations.

At the onset of liberalization, it was argued that barriers to CHP might disappear since CHP operators could sell surplus power, or buy additional and reserve power, on the market instead of being forced to contract with the local electricity monopoly. But, in practice, only a few large CHP operators profit from these opportunities and the attitude towards CHP of most of the large utilities did not change much. Due to pressure from Member States, the new CHP Directive does not oblige them to actively support CHP. The Parliament had proposed to establish a target of at least an 18% CHP share in the total electricity output of each Member State to be achieved by 2012. But the final version of the Directive does not mention targets – in contrast to the Directive on electricity from renewable energy sources of September 2001.

Next-generation architecture for the new energy landscape

Microgrid technology is reasonably familiar as a way of distributing power around campuses or military bases. Now, Northern Power Systems is developing the concept further, to incorporate distributed generation, energy storage and load management sub-systems into a highly reliable ‘MicroGrid’ system. The first system will serve several commercial and industrial facilities, including Northern’s own headquarters building, writes Jonathan Lynch.

The summer 2003 blackout in North America that affected tens of millions of people was the eighth such area-wide outage in seven years and the worst in the United States’ history. More than a wake-up call, the blackout was a telling statement on the widely acknowledged weaknesses in the US national electric power grid.

Not surprisingly, the blackout prompted, among other things, calls for massive investment in the grid infrastructure. Avoiding such catastrophes in the US and elsewhere around the world will certainly require substantial investment to improve the hardware, software and human elements of transmission and distribution systems. But it will also take a willingness to embrace new solutions – including cutting demand through energy efficiency and increasing the use of innovative distributed generation strategies – to ease electrical system strain.


In peak load periods, when electricity supplies are tight and the system is at the greatest risk of failure, demand reductions can help the system absorb an unexpected shock from equipment failure, maintenance mistake, or an intentional disruption of power supply.

Over the last two decades, demand-side management programmes administered by hundreds of utilities have delivered tens of thousands of megawatts of demand reduction through more efficient lighting, heating, cooling, pumps, motors, appliances, etc. These reductions have been achieved at an average cost of US 2-3 cents/kWh saved, highly competitive when compared to the cost of new generation.

Reciprocating engine (Northern Power Systems)

For example, in the US during 2001, energy efficiency measures helped the State of California cut overall electricity consumption by 6% and summer peak load by more than 10% in response to the rolling brownouts and price spikes. The State of New York has aggressive programmes to cut peak demand, including its ‘keep cool’ air conditioner rebate programme. Efficiency Vermont, the state’s efficiency utility, is cutting projected electricity growth by 50% over the next decade through modest annual investments.