Changing conditions for cogeneration in Europe

There is little doubt that burning fossil fuels, the main source of greenhouse gases, will remain Europe’s principle energy source for at least the next 30 years

Low investment levels are not the only problem. The transformation of the European energy sector requires investment in more efficient and less carbon-intensive ways of generating energy. The EU is firmly committed to meeting its Kyoto target of reducing greenhouse gas emissions by 8% compared to 1990 levels by 2008-12. In the medium term this means that, by 2020, the overall goal of preventing or at least reducing damaging climate change is likely to mean far more significant cuts of 20%-40%. The power generation sector emits roughly one third of greenhouse gases in Europe and it offers significant low-cost potential for reducing these emissions. However, there is little doubt that burning fossil fuels, the main source of greenhouse gases, will remain Europe’s principle energy source for at least the next 30 years. Despite growth in absolute terms, renewable energy is not expected to raise its share significantly, while the contribution of nuclear power is projected to decline. The transition to a more sustainable energy supply will thus require substantial increases in energy efficiency and renewable energy production across all sectors.3 The wider use of cogeneration is, without doubt, one of the key elements in the move to a sustainable energy system.

The creation of a competitive open market, security of energy supply and the threat of climate change have underpinned the EU’s policy objectives in the energy field for some time. But recent events, such as major blackouts in Europe and the US, and the heat wave last summer, have made them more concrete and added a sense of urgency. At the same time, the EU’s legal framework and geographical reach have undergone important changes which, in principle, should allow these issues to be tackled on a broader front. The last eight years have witnessed an unprecedented avalanche of EU legislative measures in the energy and related fields. The EU’s regulatory architecture now includes a wide range of new laws which determine, directly or indirectly, the development of energy policies and their implementation in Member States. To date, there are existing or envisaged EU laws on the internal electricity and gas markets, emissions trading, cogeneration, taxation of energy products and electricity, electricity from renewables, heat from renewables, air emissions from large combustion plant, integrated pollution prevention and control, energy performance of buildings, access to gas transmission networks, trans-European energy networks, energy end-use efficiency and energy services, and security of supply and infrastructure investment, to name but a few of the most important.

How to bring them into the mainstream?

What are the prospects for cogeneration and decentralized energy in Europe, and how can they be improved? What about the US, or across other parts of the world? John Jimison, Michael Brown and Simon Minett spend their time assessing and influencing just these matters, as directors of the US CHPA, World Alliance for Decentralized Energy (WADE) and COGEN Europe respectively. We asked them to discuss these issues, and several more questions, on climate change policies, network resilience and gas prices.

John Jimison,
Michael Brown,
Simon Minett,
COGEN Europe

What are the market prospects for cogeneration and decentralized energy (DE) in the US, Europe and the rest of world? What are the main drivers and challenges in a five-year timeframe, and why?

John Jimison:

The market prospects for distributed energy and cogeneration (or CHP) in the US are being viewed with more optimism by the emerging industry that creates equipment and develops projects for onsite power generation. This is a sector that has always tended to lag behind the rest of the economy, but the ongoing recovery is now beginning to filter through in terms of new equipment orders and announced projects. Around 31 GW of CHP capacity were added between 1998 and 2002 despite the downturn, and the identified potential for CHP is in excess of 200 GW, with straight DE opportunities on top of that, so the problem is not lack of opportunity.

Last summer’s north-east regional blackout, and the dire warnings of potential repeats if this summer is hot and dry, have focused users’ attention on options to be self-sufficient. As the extraordinary costs and delays of significant grid enhancement become known, the relatively painless siting and lead-times of DE/cogen should draw more attention as well. But key regulatory and institutional obstacles remain, along with a general level of ignorance among potential users.

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