Distributed generation potential in the German residential sector

Estimating the likely growth of decentralized generation requires careful assessment of the various technologies and the characteristics of the buildings they will serve. Here, Christoph Konrad, Elisabeth Obé and Hellmuth Frey summarize the analysis carried out for homes in Germany. Looking ahead, micro CHP plants based on engines and fuel cells seem the likely winners.

Currently, the vast majority of electricity produced in Germany is generated by conventional centralized power stations, mainly fuelled by coal, gas and nuclear energy, see Figure 1. Due to climate change and the price volatility of fossil fuels, measures have to be taken to save energy and reduce emissions.

Figure 1. Gross electricity generation in Germany, 2007
Click here to enlarge image

Decentralized generation (DG) technologies offer possibilities to improve the efficiency, in terms of energy use and greenhouse gas emissions.

A two-year research programme (2006″2008) initiated by the German utility EnBW, analysed the potential of DG in Germany. The study thoroughly examined the residential, tertiary and industrial sectors. In this article, focus is on the technological and economical potentials of DG in just the residential sector.

We start by introducing the input data set of the assessment model, the current state of the investigated technologies, heat demand in the residential sectors, and the regulatory framework. We explain the principles of the calculations, and the main assumptions used to create current and future scenarios will be discussed. At the end we analyse results and draw conclusions.

DG solutions

The DG solutions for individual dwellings are characterized by a low power range i.e. between 1″10 kWe and 2″35 kWth for heat production.

In this research programme, six main DG technologies were examined: internal combustion engines (ICE), Stirling engines (SE), photovoltaics (PV), solar thermal (ST), heat pumps (HP), and fuel cells (FC).

Heat pumps, solar thermal and photovoltaics provide a single type of energy only ” heat in the case of heat pumps and solar thermal, and electricity in the case of photovoltaics. Heat pumps and solar thermal have been developed for a while and are considered to be mature technologies, even if they still need to be supported by incentives. PV is experiencing a strong growth but its prices remain high and new technology breakthroughs are expected for the future.

As far as combined heat and power (CHP) systems are concerned, internal combustion engines are the only products that are currently considered to be a mature technology. However, Stirling engines are now emerging and could soon become a challenge ” if they reach the degree of reliability that is necessary, benefit from efficient distribution and maintenance network, and meet the market demands.

Looking ahead, fuel cells are predicted to have a promising future. The high ratio between electricity and heat is a great advantage for objects with lower heat demands and the ability to modulate the energy production is a further advantage, see Figure 2.

There are only prototypes so far of fuel cells. Germany has launched a major demonstration project testing 800 units up until 2012, which will help speed up the market penetration.

Reference solutions

In order to compare the performance and the economic features of DG solutions, a reference solution has been identified. Traditionally, this solution refers to the best available technology (BAT). For heating and domestic hot water supply, it is a condensing boiler (natural gas) and the supply of electricity comes from the grid.

Both the reference solution and the DG technologies are described in detail by their electrical and thermal efficiencies, the total fixed costs (€/kWth), the variable costs, the lifetime and the fuels used.

HEAT DEMAND ASSESSMENTSegmentation of the residential sector

The German residential sector has five main housing types:

Figure 2. Heat demand curve of a single family house in Germany
Click here to enlarge image

  • single family houses (SFH)
  • rows of houses (RH)
  • multi-family houses (MFH)
  • large multi-family houses (LMFH)
  • high-rise buildings (HRB).
Click here to enlarge image

Each house type is divided into three eras, according to the history of the three main German energy-saving regulatory frameworks. Before 1980, there was no insulation or heating system standards. Between 1981 and 2001, the first energy regulation standards (Wàƒ¤rmeschutzverordnung) and the first heat system regulation (Heizungsanlagenverordnung) came into force. In 2002 the first Energy Saving Regulation (EnEV) appeared and has regularly been reviewed ever since.

Heat demand curves for the various houses

The Association of German Engineers’ guidelines (VDI 07) were used to distribute the yearly thermal energy demand (heating plus domestic hot water) on a load curve for the five types of houses mentioned (with the three different ages, which equates to 15 segments altogether). Figure 2 shows an example of a heat demand curve for a single family house.


The German Integrated Energy and Climate Programme (IKEP), endorsed in 2007 at Meseberg, defined over 25 points which will help reduce carbon dioxide emissions by 40% by 2020, compared with 1990 levels. The development of distributed generation will be further supported and new fields may be subsidized by the government, in order to reach the new cogeneration, renewable and energy saving targets by 2020:

  • 25% power generation with CHP ” twice as much as in 2005
  • 30% power generation with renewables, instead of an estimated 15% by 2008
  • 14% of renewable energies used in total heat consumption
  • 60% increase in energy efficiency of buildings in 2012 compared with 2007.

These targets have been integrated into the review or the creation of laws and action programmes. The concerns for micro-cogeneration are highlighted as follows on the next few pages.

The reviewed cogeneration law (KWKG 09)

For micro/mini CHP (<50 kWe) a premium is further paid and added to the base price of the European Energy Exchange (EEX) market. The premium has a value of 5.11 eurocents/kWh and is paid for 10 years. The base price of the EEX trading place is quite volatile, varying between 30 and 75 €/MWhe in the last four years.

A highlight of the CHP law which came into effect in January 2009, is that the premium will also be paid for self-consumed electricity. So with self-produced electricity, we avoid the current average price of 18 eurocents/kWh, as well as the 19% VAT (approximately 3.42 eurocents), and additionally 5.11 eurocents will be paid as a premium for the next 10 years.

Micro CHPs as well as decentralized generation get a refund for the avoided use of the network ” in the range of 1 eurocent/kWe.

The new micro/mini CHP ” impulse programme

A new programme was launched in June 2008 in order to promote the development of micro and mini CHP installations (<50 kWe) which are heat driven, with primary energy savings over than 10%, and with very good environmental performances.

The installation with power under than 4 kWhe will receive a subsidy of 1550 €/kWe ” limited to a basis of 5000 h/y, or proportional for lower operating hours. The level of subsidies decreases according to the power. See Table 2.

If the emissions of the installation are two times lower than those required by the Air Regulation Act (TA-Luft), a subsidy between 50 and 100 €/kWe (respectively above or below 12 kW) is granted.

The reviewed Renewable Law (EEG 09)

The renewable energy law coming into effect in 2009 sets new fixed feed-in tariffs for electricity generated by renewables, generally over a 20 year period.

Today, photovoltaic energy is the most widely spread renewable technology producing electricity in single houses. Other renewables used for the production of electricity are relevant for the tertiary and the industry sector, but not for the residential sector.

Table 2. Subsidy for the mini CHP appliances source: bmu 08
Click here to enlarge image

The feed-in tariff for PV has been combined with a flexible degressive rate which adapts the level of the tariff to the level of annual installed power.

Table 3. Feed-in tariff for small PV systems source: eeg 09
Click here to enlarge image

Renewable Heat Law (EEWG 09)
From this year onwards, a specific part of the heat consumption of new buildings will have to be covered by renewable energy. As shown in Table 4, this share depends on the kind of renewable energy.

Energy Saving Order (EnEV 09)

This new energy order is due to be signed before summer 2009. It aims at reducing the primary energy needs of buildings. Insulation measures and energy efficient production, like micro CHP systems, are both in competition and complementary to reach the energy saving targets.

Click here to enlarge image

The method used to calculate the needs has been thoroughly reviewed in this proposal and can no longer be compared with that of the previous order. But the global target is still to decrease the energy needs of the buildings and could be understood as a 30% of energy savings from the previous regulation, EnEV 07.

Law on energy taxes (EnSG 06)

This law states that all CHP units with a global efficiency exceeding 70% will be exempt from energy taxes. That means that there is no eco-tax on electricity (2.05 eurocents/kWhe) and no tax on fossil fuels (for instance for natural gas used for heating purposes, the tax is 0.55 eurocents/kWh).

Market Incentive Programme (MAP 09)

This programme supports the development of heating installations including: solar thermal, biomass heating and shallow geothermal applications. The levels of incentives are updated at least once a year, sometimes more according to the market response. The annual budget of this programme has experienced a large growth the last few years and reaches €400 million in 2009.


When the study was carried out, the major targets described above were already known but not all details of the new regulations were known. Moreover, their evolution in the future, the improvement of the technology as well as the changes in the residential sector and in the energy market remained unknown.

Therefore, a lot of assumptions have been made to model the dynamics of the future, and analyses have shown which parameters are the most relevant and should therefore be handled carefully. The model integrates a specific module for performing sensitivity analysis and quantifying its effect on the technological and economic calculation. The analysis has shown that the following parameters have the highest impact on the potential calculation:

  • DG investment costs
  • discount rate
  • prices of fossil fuels
  • CHP law.

Modelling the economic potential

For each type of dwelling, the tool calculates the key parameters of a DG project according to the optimal design of each technology and using the scenarios of energy price evolution and assumptions of the evolution of incentives.

Table 5: Most promising technologies in houses (only the best technology is indicated which does not mean that other solutions are not viable). Technology/thermal capacity (kWth)/heat-to-electricity ratio
Click here to enlarge image

For the calculation, the net present value method is used. This method for capital budgeting is applied in order to estimate if a long-term investment is profitable or not, taking into account all annual cash flows, discounting them to the year of the initial investment and then adding up all payments. These results are then compared with those of the reference solution. The DG solutions which turn out to be more economically interesting in comparison with the reference solution are considered to be viable potential.

The global potential is then assessed according to the market data (the global potential thus includes all the dwellings where DG solutions could be more profitable, even if there is no need to change the current solution).

Figure 3. DG potential assessment model frame
Click here to enlarge image

The calculation of the economic potential for DG in Germany requires the application of a powerful model. Figure 4 shows the methodology used, taking into account all relevant input parameters as well as the regulatory framework.

The information provided by the model calculations of the technological and economic potential of distributed generation in the residential sector, are shown as follows:

  • maximum thermal production from DG
  • maximum electric production from DG
  • use of by-produced electricity ” on-site or feed-in
  • total installed DG capacity ” thermal
  • total installed DG capacity ” electrical
  • CO2 and primary energy emission saving potential.


Potential of the technologies

Today DG is only economically viable in large houses. In 2015, internal combustion engines could start becoming viable in smaller housing units, such as in rows of houses. Furthermore Stirling engines would appear more common and are taking over internal combustion engines in some medium-to-large housing units. 2025 will see a boom in fuel cells penetrating the largest segment in terms of overall heat demand, i.e. small housing units. They would also conquer larger housing units while Stirling engines will remain more profitable in old small-to-medium housing units, due to their higher thermal efficiency and lower investment costs.

Fuel cells will have the specific advantage in the future of a higher electricity-to-heat ratio and are therefore very appropriate in housing units with high insulation standards.

Heat pumps and solar thermal installations are not profitable when compared with the condensing boiler as the best available technology. Heat pumps are hindered by their high investment costs. The absolute investment costs for solar thermal systems are lower, but they are limited by their specific investment costs because these systems only meet a share of the thermal demand (15%”25%).

Table 5 shows the solutions with the best profitability. However, the calculations show that, especially in 2015 and 2025, several technologies could be simultaneously viable.

Theoretical potential for the market

In 2007, the economic potential of micro CHPs which could have been installed, would cover 16% of the thermal demand in the residential sector, instead of twenty times less what was effectively addressed. This equates to 38 TWhe of cogenerated electricity, 52% of which is consumed on-site (30% of the assumed electric demand) and 48% is fed back into the grid.

In 2015 Stirling engines could become more profitable in low insulated houses due to their high heat-to-electricity ratio. Therefore, we estimate that 31% of the thermal demand in the residential sector could economically be covered by micro CHPs. This represents 37 TWhe of cogenerated electricity, 79% of which is consumed on-site (50% of the electrical demand) and 21% of which is fed back into the grid.

In 2025, all housing units could potentially be equipped with economically viable micro CHPs (mainly fuel cells), leading to the coverage of 84% of the thermal demand or 240 TWhe of cogenerated electricity.

In terms of annual carbon dioxide saving, this micro CHP potential would correspond to saving 9 million tons in 2007; 10 million tons in 2015, and 84 million tons in 2025, compared to the reference solution: 200g CO2/kWhth for the condensing boiler and 550g CO2/KWhe for the grid.


The extensive study shows the potential for DG solutions is high, but it is still yet to investigate which part of the potential could be achieved within existing assets.

Currently, the large multi-family houses and high-rise buildings are deemed to be viable for micro CHP solutions, such as internal combustion engines. In the future, Stirling engines would also be considered an interesting choice, as well as fuel cell solutions (mainly for smaller housing units with a lower heat demand).

The predicted results, especially for 2025 when most houses could have a fuel cell installed, could be considered as provocative. In this particular case, the main criteria for deciding between fuel cells and heat pumps, are: the assumed investment costs and the German carbon dioxide content of the electricity mix. Therefore, further studies would be necessary in order to quantify the influence of parameters, such as the initial investment cost, fuel prices and the regulatory framework. An intensified sensitivity analysis is thus one of the next challenges for the on-going research.

When analysing the house as an energy-consuming object, it is often not possible to renew just the heating system. A change in the heating system very often also implies a change in fuel usage and heating installation too, especially in buildings with older insulation standards, where savings can be obtained by upgrading insulation in the faàƒ§ade, windows and the roof. Therefore the energy efficiency of a house should be improved from the outside as well as the inside.

Besides the improvement of the DG solutions, technical support and expertise need to be increased in order to achieve high quality installations and implementation. There is a need to raise awareness and skill development of local installers and maintenance contractors in order to increase their knowledge in the field of DG technologies.

The current German Regulatory framework is quite favourable to small CHP plants (<50 kWhe) but the threat is that this ‘impulse program’ could be stopped at any time ” which would handicap the entry of new micro CHP systems.

In the medium-to-long term, the decrease in heating demand in buildings will provide a larger market for fuel cells, even if Stirling engines continue with niches in old multi-family houses.

Christoph Konrad and Elisabeth Obé are both project managers in the field of decentralized generation at the European Institutefor Energy Research (EIFER), Karlsruhe, Germany.
e-mail : konrad@eifer.org, obe@eifer.org

Hellmuth Frey is head of the group decentralized generation at the research and innovation department of the EnBW, Karlsruhe, Germany.e-mail : h.frey@enbw.com

EIFER is a joint research institute established by EDF and the University of Karlsruhe, located in Karlsruhe (Germany). Its research activities are focused on energy and the environment.

EnBW Energie Baden-Wàƒ¼rttemberg is the third-largest energy company in Germany.

No posts to display