Secure, reliable and affordable energy supplies are fundamental to economic stability and development. The threat of disruptive climate change, the erosion of energy security and the growing energy needs of the developing world all pose major challenges for those who make decisions on energy and the environment. Despite important steps taken by government and industry to mitigate air pollutant and greenhouse gas emissions, carbon dioxide emissions have increased by over 20% over the past decade. Last year, the IEA concluded that the carbon intensity of the world’s economy will increase dramatically due to a greater reliance on coal for power generation. As a result, CO2 emissions are forecast to be almost two and a half times the current level by 2050 (Energy Technology Perspectives 2006, IEA).
This world outlook can be changed with a portfolio of existing and emerging technologies. In particular, energy supply efficiency improvements offer tremendous promise. The average global efficiency of fossil-fuelled power generation has remained stagnant for decades at 35%-37% (Energy Technology Perspectives 2006, IEA), and recent gains in natural gas plant efficiency threaten to be overtaken by a return to coal-fired power plants.
The easiest and most attractive strategy for improving energy supply efficiency is to increase investment in highly efficient CHP and district heating and cooling (DHC) systems. These are proven technologies that, when used together, can offer significant efficiency gains. CHP is a suite of highly efficient energy supply technologies, currently concentrated in a few industries. DHC is an important application for CHP because it expands the pool of potential users of recovered thermal energy beyond the industrial sector. National studies confirm that there is enormous cost-effective potential to expand the use of these technologies.
Interest in promoting these technologies is not new. Many countries have adopted CHP goals and challenges, and some have district heating support schemes. The EU has estimated that CHP will provide the EU with energy savings of 40 million tonnes of oil equivalent by 2020. The US has a goal of doubling CHP capacity by 2010. Other countries, such as the Netherlands and Denmark, are often seen as models for CHP and DHC investment. However, despite this attention, global CHP investment has remained stagnant for the past decade (see Figure 1).
Figure 1. Global CHP trends from 1992 to 2003.
Source: IEA data
This is due to a variety of factors that the IEA proposes to investigate, including:
- A broad range of applications. CHP/DHC is in reality a family of technologies and applications that can be applied across a number of end uses and sectors, and that operate in both electricity and heat markets. As a result, data collection or potential estimates are difficult, and there is a lack of understanding of the environmental, grid-support and other benefits of CHP and DHC.
- Myths about cost-effectiveness. Natural-gas fired CHP is not as economically attractive as it once was. Biomass-fuelled CHP is being increasingly explored but is not as cost-competitive. DHC requires governments or other financiers to support the development of new heating or cooling infrastructure, but deregulation-minded governments are not making these types of investments. Despite these important changes, policymakers continue to believe that CHP and DHC are commercially attractive opportunities that do not need additional policy support.
- Myths about a level playing field for new generation. Energy regulators and their regulated entities continue to plan for the future using models that rely heavily on major, centralized investments in large power plants and new transmission and distribution capacity. CHP and DHC offer a different approach that avoids or defers these investments with the potential for significant economic and energy system benefits. These benefits need to be documented and new models need to be advanced with these audiences.
- Lack of understanding of the environmental and other benefits among end users. Industrial CHP and local DHC investors are typically not in the business of energy generation and therefore need objective, reliable information about the costs and benefits of projects.
- Lack of understanding among key countries of the potential (and associated benefits) of CHP/DHC. A number of growing countries are rapidly adding new energy infrastructure and generation and are assessing more efficient (and environmentally preferable) ways to generate and deliver energy. There is a need for country and regional studies to identify CHP/DHC potential and the associated greenhouse gas reductions and grid support benefits.
A first step: improving industrial CHP statistics
Countries have incorporated CHP in various ways in energy statistics, making it difficult to compare trends in capacity and in the production of power and heat. The amount of electricity that is produced globally from CHP has been increasing gradually and has now reached more than 6 EJ per year, more than 10% of total global electricity production (Figure 1). The amount of heat that is cogenerated is not known exactly, but it is in the range of 5-15 EJ per year, which represents an important share of industrial heat supply. If the heat is not sold but used by the producer, part of the fuel use of the cogeneration plant is reported under industrial fuel use rather than as CHP. Half the electricity production from cogeneration is in OECD countries, and the main growth in the past 10 years took place in OECD countries.
Table 1 provides key data on installed CHP capacity for selected countries. It also provides estimates of the total contribution to power generation in those countries. It is evident from Table 1 that the contribution of CHP to capacity and total generation varies widely. Moreover, the share of industrial CHP within the total CHP capacity varies because of differences in a country’s economic structure (for example energy-intensive sectors), climate (for example the role of district heating) and the history of barriers and policies to support the introduction of CHP.
Existing CHP capacity is concentrated in a few industries where there is a high demand for steam and power. While CHP facilities can be found in almost all manufacturing industries, the food, pulp & paper, chemical and petroleum-refining sectors represent more than 80% of the total electrical capacities at existing CHP installations. Figure 2 depicts the distribution of CHP capacity in the EU and US over the various sectors.
While there is a large variation in site electrical capacity at industrial CHP facilities, large systems still account for the vast majority of installations. For example, in the US, over 85% of existing capacity is represented by systems that are 50 MW and greater. Reciprocating engines and small gas turbines dominate in small industrial CHP applications (including food processing, fabrication and equipment industries), while combined cycle and steam turbine systems dominate the larger systems.
Natural gas is the primary fuel used for CHP (40% of CHP-generated electricity in the EU and 72% of capacity in the United States), but coal, wood and process wastes are used extensively in many industries, especially in large cogeneration systems. As a result, combustion turbines are the predominant technology, representing 38% of CHP-generated power in the EU and 67% of installed capacity in the US. Boilers and steam turbines represent 50% of power generated by CHP in the EU, and 32% of installed CHP capacity in the United States.
When calculating energy efficiency gains due to CHP, there are two types of indicators:
- current quantity (capacity) of CHP use, with associated energy savings benefits
- forecasts of additional CHP potential.
Current CHP use can be measured in terms of installed power generation capacity, steam generation capacity, electricity production or heat production. These indicators will provide different insights. Often, data about installed power generation capacity are available. Data regarding actual production are less often available.
In current IEA statistics, total CHP electricity production can be tracked on a country level. However, it is not known which sector uses CHP. Moreover, it is not possible to track the heat that is generated by CHP systems. Therefore it is not possible to calculate average efficiencies of CHP systems.
The energy efficiency benefits of CHP depend on the type and performance of the CHP prime mover and on the characteristics of the reference energy system. The type of CHP technology determines the ratio of electricity and heat that is produced and the quality of the heat that is produced. The heat quality will depend on its anticipated use: low-temperature heat, low, medium or high-temperature steam, or high-temperature off-gases (for example for pre-heated furnace inlet air).
The efficiency gains of introducing CHP are the highest if a process is replaced that uses fossil fuels to generate low-temperature heat (below 100ºC). The energy efficiency gains are limited if high-temperature heat is needed as this allows for less energy for power production (depending on the turbine outlet temperature).
The reference system will consist of a reference heat production and a reference electricity production. The reference electricity production efficiency can vary significantly. Part of this variance depends on the fuel that is used for the reference electricity production. If a gas-fired CHP system replaces a coal-fired boiler and coal-fired power plant, the efficiency gains and CO2 reductions can be substantial. However, if the reference includes an efficient gas-fired combined cycle, then energy savings are smaller.
When the benefits of an existing CHP system are evaluated, there is no ‘true’ reference because it is not known which fuel would have been selected. Typical gains for a gas-fired CHP system are 10% compared with an energy-efficient combined cycle and 30% compared with an existing coal-fired power plant.
The current savings constitute one indicator; countries with high heat demands will also want to estimate the potential for additional CHP. The actual share of CHP in power production is not a good measure of energy efficiency. Instead, finding the gap between actual CHP use and maximum CHP potentials and dividing it by the CHP potentials is a better estimate of the remaining energy efficiency potential from CHP. But undertaking a CHP potential analysis requires detailed, sector-specific data on heat demand as well as assumptions about the technology that will be applied. Typically, data for fuel consumption will be available, but heat demand will need to be estimated. CHP potential analyses should also focus beyond traditional CHP systems (for example a gas turbine with a waste heat recovery boiler) or risk under-estimating future potential. This is because more advanced technologies (or technologies with a higher power-to-heat ratio) are available that lead to additional CHP installation potential, assuming sufficient heat demand remains.
For the calculation of the current savings from CHP, data on CHP energy electricity production in manufacturing industry were used. For each country, an estimate was made regarding the share of back pressure turbines and steam turbines on the one hand and simple-cycle turbines, combined cycles and gas engines on the other hand. The electrical efficiency of the first category was set to be 18%. The electrical efficiency of the second category was set to be 32%. The country average power-to-heat ratio across both categories was set to be 0.31. Assuming an equal share in both categories, the average overall efficiency (for electricity plus heat) is 80%. This was then used to calculate the primary energy use for CHP and the energy production from CHP.
The country average efficiency of the reference electricity production was taken from the IEA energy statistics (average for centralized power production). For stand-alone steam boilers, the efficiency was set to be 78%. This information was used to calculate the amount of fuel needed for a situation where electricity and steam were generated separately. The difference in fuel use for the CHP system and the stand-alone generation is then the resulting energy savings. The world average is 36%, and savings from CHP account for 5.4 EJ. For the calculation of the CO2 benefits, it was assumed that all steam cycles use coal and all gas turbines use natural gas. This simplification was used because of a lack of better data. The average CO2 intensity of the centralized electricity production was used to estimate the savings for electricity. In this approach, CHP accounts for 326 Mtonnes of CO2 savings today.
Expansion potential and CHP trends
Despite the already high share of CHP in some sectors, additional potential for CHP exists in all sectors. These estimates are conservative. Technological advancements (listed below) and the addressing of key barriers outlined earlier will increase the potential for industrial CHP in the future.
The penetration of CHP in the power generation sector varies widely. Countries such as Denmark and the Netherlands already have high rates, but many other countries have significant potential to expand the use of CHP. Global estimates for the potential for CHP do not exist. For selected countries and regions, various studies exist. However, the studies and results may not be comparable due to differences in definitions, methodologies, system boundaries and technology assumptions. Most studies only include conventional CHP systems (in other words, generation of power and steam or hot water) and do not include the more advanced processes. Hence the estimates of CHP potentials discussed below are limited to these conventional applications.
In the United States alone, estimates for CHP potential vary from 48 to 88 GW. The lower estimate only includes large-scale conventional systems. The CHP potential in Europe is about twice the installed CHP capacity, while some studies estimate the maximum potential in 2020 at 252 GW, of which nearly 200 GW is in the EU, including district heating and advanced small-scale technologies. Studies estimate about 150 GW of remaining CHP potential in Europe, half of that (75 GW) in the manufacturing industry. For other regions and countries, only limited studies are available.
The potential for CHP was calculated using an estimate for heat demand by sector (percentage of total fuel use). This was based on estimates of maximum shares of CHP for a variety of sectors for the US industry. The actual power-to-heat ratios by sector were taken from the US experience. The savings were calculated following the approach described above for existing CHP. Using similar assumptions on share of heat demand in key industrial sectors, maximum penetration and technology characteristics (as well as the current global average capacity utilization), global technical potential for new industrial CHP is estimated at nearly 330 GW, or 1100 TWhe. The net energy savings are estimated at 11 EJ. The key countries and regions in which this potential is found are China, the US, the EU and Japan.
Different assumptions on efficiencies, heat-to-power ratio and technology would result in varying estimates of the potential for CHP. So the indicator should be interpreted with care. But it gives a first indication of the differences between countries. There are some additional caveats. First, especially for non-member countries, industrial fuel use data may contain uncertainties, giving uncertainties in the results. For example, data for India suggest that there is no additional potential for CHP, yet other studies suggest there is, beyond currently installed capacity. Second, classification of CHP plants as either industrial or other/public (for example district heating) may affect the results. For example, The Netherlands has a very high degree of CHP installed at industrial sites. But because these sites are owned (or are in joint ventures) with utilities, they are classified as public CHP capacity. This results in a low penetration rate for CHP in The Netherlands. In reality, the current utilization in The Netherlands is much higher than the indicator suggests.
International CHP/DHC collaborative
Future technology developments will help to improve efficiencies and offset rising prices for natural gas, increasing the attractiveness of technologies in industrial applications. These developments include increased gas turbine efficiencies through re-powering; high-temperature CHP; and, for smaller industrial applications, CHP driven by fuel cells or microturbines. However, it is expected that CHP and DHC will need additional government support to realise the full estimated potential. To address the current gap in knowledge about global CHP/DHC data trends, potential (and associated benefits) and lack of knowledge about proven policies and approaches, the IEA launched the International CHP/DHC Collaborative in early 2007.
The objective of this effort is to convene public and private sector officials in an international collaborative process designed to address the issues listed above. The goal is to expand international investment in CHP and DHC as clean energy solutions. The Collaborative will conduct a focused suite of analyses and use the results to engage a broader audience of policymakers, industry and developing countries to raise awareness of the potential benefits of increased CHP/DHC investment. It is expected that this effort will deliver a significantly improved global set of CHP/DHC data and indicators that are regularly updated, including:
- global CHP capacity (key sectors, regions and countries)
- global DHC capacity (key sectors, regions and countries)
- global energy supply efficiency indicators
- CO2 emissions reductions attributable to CHP/DHC.
This effort will also build understanding among climate change and energy policymakers and industry of the potential for greater CHP/DHC investment, along with associated costs and benefits, including:
- global CHP potential (key sectors, regions and countries)
- global DHC potential (key sectors, regions and countries)
- potential CO2 emissions reductions
- potential energy and economic savings, including peak demand reductions, avoided grid investment
- potential for biomass-fired CHP/DHC.
Finally, this effort will communicate the international potential, breaking down potential for key countries and regions. The group will summarize environmental and other benefits associated with this potential and highlight key grid access/planning, environmental, educational and other barriers. It will also identify the most successful national and regional policies/efforts to address these barriers. Expected outcomes include an increased understanding among policymakers and industry of the lessons to be learned from successful government/private sector efforts to advance CHP/DHC, including:
- environmental policies that recognize the efficiency of CHP/DHC
- CHP and DHC as ‘non-wire’ alternatives to traditional energy system investments
- public-private partnerships and financing schemes for DHC and CHP systems
- grid access/interconnection requirements/grid optimization with CHP/DHC
- model language, references for further information.
Tom Kerr is with the IEA Secretariat in Paris, France.
This article is on-line: www.cospp.com
The International Energy Agency is an intergovernmental organization which brings together its member countries’ energy policy authorities to discuss the interaction between energy policy and climate policy in the context of economic development, energy security and environmental protection. Its membership covers North America, most European countries, Japan, Australia and New Zealand, and, recently, Korea.
The IEA collects official international energy statistics at the sector level and is a reference for the research and policy communities on energy consumption and production trends. IEA statistical information includes:
- statistics on energy balances and energy in OECD and non-OECD countries
- information on electricity, coal, natural gas and oil
- information on renewables
- CO2 emissions from fossil fuels
- international heat demand.
These data have provided an essential pillar for global energy analysis, among which the World Energy Outlook and the 2006 Energy Technology Perspectives are examples. The latter in particular includes a thorough analysis of climate change mitigation technologies, both present and at the research and development stage, across regions of the world, including major developing countries. It considers long-term energy development with and without a constraint on CO2 emissions.
Recognizing this analytical leadership, as well as the IEA’s unique ability to convene public and private sector organizations globally, the G8 leaders agreed on a plan of action in Gleneagles, Scotland, in 2005, directed by the IEA, to explore a portfolio of energy analysis related to clean development and climate change mitigation. The IEA has produced several deliverables toward the G8 Plan of Action, including the aforementioned Energy Technology Perspectives publication and a number of energy efficiency reports and workshops.