Support measures are encouraging CHP, including tech developments, but these hard-fought wins must be protected Credit: Siemens

 

Despite the support it enjoys region-wide and at Member State level, CHP in the European Union (EU) may not necessarily see continued momentum, says Dr Fiona Riddoch. Industry should help cement cogeneration’s achievements across the continent.

With Europe’s economic crisis lingering, there is now an added focus on the pressing need to stimulate economic recovery. CHP can help here. It has a clear role to play in the region because these near-term economic imperatives must be reconciled with long-term climate and energy objectives.

CHP installations wherever they exist operate at very high overall energy efficiency, and with proper market and policy design they can contribute to the competitiveness of their hosts, the installed base of whom contributes around 15 million tonnes of oil equivalent (Mtoe) of primary energy savings to the EU economy and releases money that would otherwise mainly go to buy imported fuel to circulate and be invested elsewhere.

The underlying challenge for the CHP sector at this time in several Member States is to maintain the existing investments in CHP while at the same time helping the industries that host cogen to continue its use at a time when the the downturn has put the electricity market into a state of over-supply in several territories.

When Member States with constrained budgets review their policy approaches towards the electricity sector in particular, CHP does not always get the appropriate attention. Cogeneration is the best available technology in the paper, chemicals, refinery and food sectors but is a challenge for national policy makers, who often are not fully aware of its role and operation in industry. There is also a tendency to turn the troubles in the electricity sector into troubles in industry as a whole. This is a challenge for the cogeneration sector.

Adapt and respond

Support measures for renewables have recently been revised in many EU Member States. Germany provides a good example of how CHP legislation can adapt and respond appropriately to negative market conditions and promote energy efficiency and significant emissions reductions.

CHP is well supported in Germany, where the original scheme has seen at least three revisions in the past six years, all aimed at refining the support so as to trigger a budgeted and desired change.

To overcome an unfavourable spark spread, the nation’s CHP law offers a subsidy that tops up the market price for electricity. In this way investors face an acceptable time period before seeing a return on investment.

For some German businesses that have installed CHP this has fallen from seven years to four because of the new measures. In addition, given the disadvantage of CHP installations covered by the EU ETS over heat-only producing installations, the German law offers a bonus to these classes of cogeneration units on top of the subsidy.

However, it is not easy to make good legislation. Gradually and increasingly EU Member States are realising that policies will need fine tuning once introduced. European nations are presenting policies in which revision and adjustment processes are transparent and follow a clear procedure.

Industry and business also has a role in ensuring that nations draft good legislation. They must be active and present right at the beginning, when new laws are proposed. They must work in the early days, often unseen and without great acclaim, to propose, comment and caution governments as their policymakers devise new legislation for a specific sector.

Policy devised for one sector can unintentionally impact another sector. Unfortunately as CHP straddles the heat and electricity markets, it tends to experience such negative outcomes more often than desirable ones. Legislation concerning fuel or aimed at the electricity utility sector will also impact cogeneration. The CHP industry, business and the wider stakeholder group must recognise this and be prepared to contribute to the evolution of legislation to lower the risk of unintended consequences.

Strong support

Despite the long shadow of the economic crisis, the EU has re-committed itself to improvements in energy efficiency. The European Parliament has passed Energy Efficiency Directive (EED) 2012/27/EC, which is major energy-related legislation that aims to close the gap emerging between its energy savings target and progress on energy savings in the 27 Member States.

While the EED is written specifically with CHP in mind, the details of how it is implemented will dictate whether it is successfully translated into national action without unintended consequences.

The promotion of CHP as a clear energy efficiency technique with measureable results has also been re-emphasised by the Directive, which all Member States must now transpose by 2014. In that process they must assess cogeneration and use the results to find suitable support measures for it. Those short and near-term actions triggered by the current over-capacity in the electricity sector, which tend not to strengthen CHP, will inevitably have to come under scrutiny during the implementation of the EED.

It would be wise for the 27 national governments of the EU to consider, how the EED will impact on their policies that affect CHP. In this context, the Commission indicated in its communication of November 2012 Making the internal energy market work that in the future Brussels will take up more vigorously what it calls the enforcement challenge around the internal energy market. This tendency is widely expected across energy policy.

Near-term response

The main challenge for the sector is to ensure that the efficiency benefits already achieved by CHP and the decarbonising of industry are maintained even at a time of restricted resources. There is no doubt that cogenerators will have to make difficult changes but these should be proportionate to the role of CHP in providing vital heat to its customers and not just power to the grid. CHP is at the heart of best available technology for several industries. It will play a vital role in maintaining these industries through the economic challenges they currently face.

A risk exists that despite the support of the EED, the current adjustments of policy will mean that CHP plants will receive less than equal treatment and that the unintended consequences of such policy will hit cogen’s host industries and the citizens they employ. Should this materialise the existing CHP base could begin to erode, meaning that the energy savings gap in Europe’s energy efficiency target to 2020 opens wider and that hard-won gains would have to be won again.

Manufacturers of CHP equipment and industrial CHP users have a clear role to play in achieving a high-efficiency low-carbon society in Europe.

Key manufacturers will present their views on how the industry is adjusting to the rapidly changing energy policy demands at the COGEN Europe Annual Conference, on 18-19 April in Brussels. Industrial users will also explain their business reasons for choosing CHP and how this has helped to reduce energy bills. For more information, visit www.cogeneurope.eu.

Dr. Fiona Riddoch is Managing Director of COGEN Europe.cogeneurope.eu

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