COGEN Europe’s annual conference highlighted the issues and opportunities facing the industry today, reports Diarmaid Williams
The European combined heat and power sector has yet to fully experience a boost from recent legislation on energy efficiency.
That was just one of the takeaways from the annual gathering of Europe’s decentralized energy industries, which also explored the compelling opportunities materializing for the industry in the present landscape. COGEN Europe’s ‘The Power of Heat’ conference in Brussels (22-23 March) heard that growth in installed capacity was relatively modest although Managing Director Roberto Francia said ‘key pockets are expected to grow significantly over the next few years’.
Despite recent, well-publicized announcements on the energy efficiency directive, as well as COP21, legislative impact is not yet visible in practical terms.
Francia’s comments came as part of an introduction to the industry’s Snapshot Survey, which entailed analysis gleaned from 19 countries in the EU along with Turkey, capturing trends from 90% of CHP installed capacity. The organization noted the disparity between member states with stable policy frameworks for CHP, which have seen positive growth in the sector’s installed capacity and energy generation, and those without.
‘Where unstable frameworks and unpredictable and fragmented policies exist they are eroding investor confidence in already unfavourable energy markets,’ Francia said.
New enactments in Brussels have yet to be adopted into workable national policies that encourage further CHP market activity. But he said the follow-up to the new cooling and heating strategy ‘was likely to strengthen the role of CHP over the next five years,’ with it being ‘up to members to enhance the dialogue with decision makers at national level to make the most out of an evolving business environment.’ He pledged that COGEN Europe would continue to advocate for high-efficiency CHP at the EU level, promoting an ever stronger role for advanced cogeneration technologies in the energy system.
Twelve per cent of electricity production and 15% of heat production come from cogeneration within Europe with CODE 2 recently identifying a potential for those figures to be raised to 20% and 25% respectively.
The survey highlighted that segments of the CHP market are expected to grow significantly in the coming years, including the commercial and renewable CHP sectors which are showing strong growth potential in the short-to-medium term.
One of the main findings by analysts was that installed CHP capacity was stable over the past five years, as growth reported in countries representing 39% of installed capacity was offset by flat trends or even decline in the rest of the countries surveyed.
The analysis found that generated electricity trends declined in most countries due to the economic downturn, decreased demand for industrial goods and energy and also quite unfavourable market conditions in terms of spark spreads and policy.
‘While across nations policy instability has arisen most frequently,’ COGEN Europe’s Alexandra Tudoroiu-Lakavice told the audience, ‘looking deeper, commercial CHP has proven quite strong in the last four to five years – light industry commercial CHP has grown in a positive direction despite poor spreads, particularly in Belgium, the Czech Republic, Ireland, Poland and the UK.’ Lakavice referred to a renaissance in district heating in the Czech Republic, France, Italy and the UK and the general improvement of micro-CHP across the bloc, but overall she said performance is ‘patchy’.
Delegate Kees Den Blanken of COGEN Nederland questioned if the industry could make any real progress if it continues to rely on policy stars being aligned in the industry’s favour.
‘EU CHP has remained stable at 12% over the last five years, and so we have failed,’ he said. CHP can ‘reduce greenhouse gas emissions by 10% to 12% – that type of bigger picture is what is missing. That is the drama of the big numbers we play with. If we continue to rely on pressing for stable policy measures we will be at 12% and not fulfilling promises for another five years.’
In terms of policy implementation, namely the European Energy Efficiency Directive (EED), only 15% of member states surveyed were on target, with 17% reporting no progress and the majority of member states still in the middle of progressing projects, therefore the potential impact of that legislation on CHP remains unclear. The EED implementation deadline was December 2015 so it may be later in the year before more solid signs of progress are evident.
The Italian experience
This year’s conference saw the spotlight on Italy with Marco Baresi of Italcogen highlighting the challenges facing operators in what is the third largest market for CHP in Europe. The most recent information to date revealed that the country’s capacity rate had fallen back to 2004 levels. On the positive side, growth is being recorded in renewable CHP.
Baresi told the audience that the industry had a difficult task at the moment thanks to the negative impact of government intervention.
‘The main barrier in Italy is the lower cost of electricity for energy-intensive industries due to special discounts on energy bills and special incentives. It has a bearing whether you include CHP or waste heat recovery in your business plan. There is no link between the incentive they receive directly and energy efficiency legislation. In Italy we are working on linking that up.’
He added that the present situation wasn’t ideal, as it could lead to ‘retrograde steps, with guerrilla plants – hiding the plants to avoid the charges.’
CHP and the hospitality industry
There is a growing awareness of the suitability of combined heat and power as a solution for the hospitality sector, and this theme was explored by Chris Marsland, Technical Director at UK-based ENER-G, in a session entitled ‘Emerging Opportunities for the CHP sector’.
‘With the national living wage going up, pressure on wafer thin margins is getting worse in the hospitality business. Energy efficiency is a top issue for the hospitality sector as it ranks in the top five for carbon emissions with annual energy costs of à‚£1.5 billion ($2.2 billion),’ Marsland told the audience in the Belgian capital.
He pointed to a growing awareness by potential customers about their green credentials, adding that increasing energy prices ‘are only going to grow this market.’
As a starting point, CHP makes sense for hotels due to their 24/7 demand for heat and electricity. But it is in the area of behavioural change that much potential can be seen, not just on the part of the hotels but also their prospective customers.
‘Behaviour change doesn’t always resonate well with leisure and hotel customers – but with little or no capital investment, behavioural change alone can save 20% off energy bills.’ He added that evidence was growing that people were choosing holiday accommodation based on hotels’ green credentials.
‘There is still the low hanging fruit, with LED lighting and so on, but there is only so much you can do with bulbs before you start thinking about capital investment. The EU has a 20% energy saving target by 2020 – the targets become even stricter after 2020 when the commitments made on the global deal on climate change kick in.’
By way of example, Marsland demonstrated the benefits accrued by the ownership of the London-based Imperial Group’s Royal, National, President and Tavistock hotels. The flexibility (to match the load better) associated with a small heating scheme via two shared plant rooms saved €51,000 per year in electricity costs, as well as 75 tonnes of carbon.
Dr Christian Friebe, energy policy expert with German group Thuga AG, spoke on EU and member state policy currently impacting the progress of cogeneration, with his home country as an example.
Friebe acknowledged that legislation governing new generations of buildings is strong on efficiency regulation, with the rules tightening every year. ‘While that, for us, is a good job the challenge is the existing buildings – two-thirds of those buildings were built before energy efficiency requirements but the renovation rate in the EU is relatively low. The real policy challenge is to make these buildings energy efficient and reduce their carbon emissions, and that’s not an easy task to focus on.
‘The options are to reduce demand by wrapping up buildings to reduce energy demand, the cogeneration option – use of efficient heating technologies like CHP, boilers or local renewable energy such as solar thermal. However it all depends on the financial conditions of the owner. If financial capability is limited he must make the choice either to do high relative investment through wrapping up buildings or whether he chooses to go for energy-efficient heating technologies.’
Oil and gas boilers are still numerous in Germany and one third of those heating systems are over 20 years old, providing the possibility of landlords upgrading, according to Friebe, who added that legislation will eventually facilitate more service uptake.
‘What we know is that not more than one third of gas heating systems are efficient, so the potential for upgrading of old traditional boilers is incredibly high. It’s tricky to leverage because consumers make choices that are sometimes rational and sometimes not – in theory they can all be connected to CHP.
‘For policymakers the COP21 agreement advocates speed, affordability in reducing emissions and the upgrade of heating systems,’ Friebe pointed out, adding that the subsequent German CHP Act further complements that strategy.
‘The new framework policy gives the consumer the choice while facilitating higher shares of decarbonized energy in existing infrastructures. It represents great opportunity for simple heating systems with low maintenance costs.’
Tackling heat should be ‘a cornerstone’
In an earlier discussion, the head of the UK’s Association for Decentralised Energy, Dr Tim Rotheray, warned on the pitfalls of setting up a conflict between renewables and non-renewables in creating Europe’s energy future. He argued that policymakers ought to pay more attention to heat loss.
‘The whole idea of renewables versus non renewables has become a focus – the thing for me that Europe has got to do is be very strongly focused in delivering an energy system for all of our energy users in a way that is affordable.
‘Fifty per cent of the energy lost in our system is heat from thermo-generation – we are throwing away as much heat as we are using. It’s bad for the economy and climate. We appear to be relaxed about that when we should be embarrassed.
‘This should be a cornerstone for a future integrated system.’
Note: This year’s COGEN Europe meeting was overshadowed by the tragic circumstances of terrorist bombings in the host city of Brussels. COGEN Europe officials, sponsors and various industry speakers offered condolences to the victims of the incidents and the people of Belgium on the day.
Diarmaid Williams is International Digital Editor of Decentralized Energy This article is available on-line. Please visit www.decentralized-energy.com