Combined heat and power generation (CHP)


Cogeneration was first promoted at EU level in a Green Paper on security of energy supply published in November 2000. The paper argued that if the EU's share of cogeneration, which only accounted for 11% of total electricity production in the EU in 1998, were to be increased to 18% by 2010, the ensuing savings could amount to 3-4% of total gross consumption in the EU 15.

Cogeneration was first promoted at EU level in a Green Paper on security of energy supply published in November 2000. The paper argued that if the EU's share of cogeneration, which only accounted for 11% of total electricity production in the EU in 1998, were to be increased to 18% by 2010, the ensuing savings could amount to 3-4% of total gross consumption in the EU 15.

In February 2004, the EU adopted the CHP Directive to promote cogeneration in the EU by addressing several problems, including lack of awareness, unclear provisions related to electricity network access, inadequate support from local and regional authorities, disparate rules for qualifying CHP as highly efficient. Most notably, this directive, repealed since the entry into force of the Energy Efficiency Directive 2012/27/EU, established a common and harmonized methodology for calculating the efficiency of cogeneration plants and requires member states to carry out an analysis of their national cogeneration potentials. According to EU legislation, support can only be granted to cogeneration plants that save at least 10% of primary energy fuel compared to separated means of heat and electricity production, those cogeneration plants are then labeled as high efficiency cogeneration plants.

Few years later, the EU's 2006 Action Plan on 'Energy Efficiency for 2007-2012' proposed further measures to promote cogeneration in the future, acknowledging that it accounted for only 13% of EU electricity consumption in 2006 (see EURACTIV LinksDossier).

The technology was once again put on the table on 13 November 2008, when the Commission launched its Second Strategic Energy Review. As implementation of the Cogeneration Directive had progressed more slowly than expected, the EU executive asked member states to further work on removing barriers and facilitating electricity grid access.

In 2011, the EC adopted the ‘Energy Efficiency Plan 2011’ aimed at exploring the most effective measures to close the gap to reaching the 20% energy efficiency target by 2020. CHP is mentioned as one of the sectors that can deliver up to 15-20 Mtoe/year of primary energy savings and 35-50Mt/year of CO2 emissions reductions, based on an additional economic potential of around 350 TWh electricity output from cogeneration.

To ensure that this potential is met, the Energy Efficiency Directive (EED) adopted in 2012 addresses CHP in Article 14 ‘Promotion of efficiency in heating and cooling’ and Article 15 ‘Energy transformation, transmission and distribution’. The EED can be viewed as a small step ahead compared to the first CHP Directive, nevertheless member states are required to take clear actions in promoting CHP wherever it makes an economic sense for developers. However, each capital holds the key to a good and progressive implementation of the CHP related provisions contained in the EED.

The EED includes the following measures supporting the development of cogeneration:

  • Comprehensive assessments of CHP potential by the end of 2015 need to be carried out, with requirements to take action in promoting CHP;
  • High efficiency CHP gets guaranteed transmission and distribution, priority or guaranteed access to the grid and priority of dispatch. However, when ranking different types of generators, CHP cannot take priority over variable RES-E, but it can be on a parity level;
  • Positive provisions on micro-CHP;
  • Opportunities at national level for supply-side energy efficiency measures to count toward the achievement of Article 7 energy savings obligation on end-users.

Cogeneration - or combined heat and power (CHP) - involves the simultaneous production of electricity and heat. This unique technique is implemented through various technologies such as gas turbine, internal combustion engine, fuel cell etc, from micro-stations integrated into private houses up to large industrial plants.

In addition, the cogeneration process can draw upon a wide range of energy sources, from traditional fossil fuels to renewable energies (combustion-based units with biomass, biogases or bioliquids, or steam-based plant connected to geothermal or concentrated solar panel installations). In 2009, gas was the most commonly used in the EU by far, with a share of 39.4%, while renewables took up 11%.

The European Commission regards cogeneration as a "proven and cost effective tool" helping to achieve Europe's energy and climate goals, which include reducing dependence on imported energy. Moreover, it believes that the technology promotes European competitiveness and job creation, as well as increasing export opportunities.

Combined heat and power stations are considerably more efficient than conventional thermal power plants, which currently operate at the level of 40% electricity-generation efficiency in the EU due to the considerable amount of heat wasted.

By contrast, cogeneration plants convert up to 90% of their fuel into useful energy. CHP installations are either heat or electricity-led plant. In the case of heat-led plant, the heat stream could come from a process during which waste heat is generated or from a heat generator. Heat could be produced in the form of low grade heat – hot water - or high grade heat–steam. Heat could then feed into district heating systems or used in industrial processes. The heat can also be used to power cooling systems for cities or industries.

Moreover, cogeneration generally takes place in the vicinity of industrial users and city centres, minimising transmission and distribution losses.

Untapped potential

The European Commission recognizes CHP as one of the sectors that can deliver up to 15-20 Mtoe/year of primary energy savings and 35-50Mt/year of CO2 emissions reductions, based on an additional economic potential of around 350 TWh electricity output from cogeneration. In the next 20 years, the Energy Roadmap 2050 Impact Assessment indicates that up to 22% of electricity production could be generated by CHP plants. A significant potential still lie in industrial, district heating, buildings and agricultural applications. Micro-CHP, biomass-fired CHP and new technologies, such as cooling, polygeneration and fuel cells are areas where important progresses have to be achieved.

It is important to note that less than half of the identified economic potential of CHP in Europe has been realized (as part of their obligation under the 2004 CHP Directive, Member States have assessed their CHP potential).

While the original EU's Cogeneration Directive has not been implemented as quickly or as widely as had initially been hoped for, some member states have put in place policy frameworks to promote the technology. Germany and Belgium in particular have passed substantial cogeneration legislation, establishing favourable financial incentives for the industry.

The share of total EU electricity produced by cogeneration has hovered around the 11% mark in recent years, without any sign of significant improvement to date. It currently contributes to approximately 2% of the Union's goal of 20% annual energy savings by 2020.

However, there are huge disparities between member states. Denmark and Finland produce over 40% of their energy via cogeneration, while Cyprus only achieves 0.3%.

Grid access difficulties

According to the national reports published in the framework of the implementation of the first, CHP investors and operators have difficulties to access electricity grids due to complex national legal frameworks, considerable amount of red tape surrounding administrative procedures and discriminatory fees. Those grid related difficulties often lead projects to be delayed or even cancelled. For instance, paperwork can amount to filling in hundreds of pages of forms over several steps, and applicants/investors are subsequently required to wait a long time before receiving a response.

Since the entry into force of the Energy Efficiency Directive 2012/27/EU,  member states have now to ensure that transmission and distribution system operators "guarantee the transmission and distribution of electricity from high efficiency cogeneration" by providing guaranteed access to the grid and priority of dispatch of high efficiency CHP”. The legislation also clarifies that electricity from highly efficient CHP can be granted equivalent privileges compared to  electricity from intermittent renewable energy sources. It is important to recall that renewable electricity sources encounter similar grid related problems and that the RED Directive 2009/28 introduced legislative provisions to improve the situation (see EURACTIV LinksDossier on 'EU renewable energy policy').

Image and financing problems

The growth of the cogeneration market has been suffering from on the one hand a lack of awareness and on the other hand a misconstrued image (because the technology has been around for decades, some believes that it belongs to the “business as usual” array of solutions, in opposition to newer technologies, such as solar panels). Further to the above arguments, the current fuel portfolio of the European cogeneration fleet, relying mainly on fossil fuels, is considered by some stakeholders as not future proof. This obviously disregards the potential uses of biomass, biogas and so one in existing or upgraded installations (EURACTIV 10/05/07).

Due to the higher upfront cost and higher operating cost of CHP plants, finding the right partners and securing the financing of such installation represent significant hurdles compared to building a power or heat only installation.

Responding to cities' climate woes

While CHP has long been employed successfully in large industrial installations, technological advancements have made it an increasingly attractive option for householders for reducing their energy bills.

Urban areas are home to 80% of EU citizens and 70% of greenhouse gases, meaning that the fight against climate change will eventually be won or lost in cities (see EURACTIV LinksDossier on 'Cities and climate change'). in addition,  as buildings are responsible for over 40% of total EU energy consumption (see EURACTIV LinksDossier on 'Green buildings'), improving the energy efficiency of the building sector is therefore a particularly pressing issue.

Efforts to build smart, self-sustainable cities are now flourishing around Europe and decentralised means of energy generation are instrumental to build that future.

Cogeneration is usually considered more suitable for certain types of buildings that use a lot of energy and operate around the clock, such as hospitals and hotels. However, cogeneration units can now be integrated into existing buildings to convert some of the burnt fuel into electricity. This can then be used either in the building or fed back to the local electricity grid. Emerging micro-cogeneration technologies like fuel cell based are being launched into the market, offering both high fuel efficiencies and a higher power to heat ratio.

Potential in district heating and renewables

The new EU Renewable Energy Directive agreed in December 2008 represents the first European legislation covering heating and cooling from renewable sources. It promotes district heating and cooling as a way for member states to establish minimum levels for the use of energy from renewable sources in buildings.

According to the Commission, the best opportunities for energy efficiency investments lie in large urban areas. Therefore the EU executive promotes the uptake of district heating systems supplied by cogeneration plants.

District heating networks are already offering significant energy savings in Scandinavian countries most notably. In some those countries, some industrial plants are channeling their waste heat to district heating networks, which are serving towns and urban areas. District heating is also particularly widespread in Central and Eastern Europe due to the continued use of Communist-era facilities. It total, it satisfies 10% of the EU's total heat demand.

There remains a considerable potential for using renewable energy sources, industrial waste and surplus industrial heat in existing and new district-heating facilities.

CHP – a low-carbon solution for industry

A large share of the heat demand in industries cannot be supplied by electricity from the grid, no matter what the carbon footprint of that electricity is, as electrical appliances simply cannot do the job. Today, CHP is one of the best and only available solutions to generate low carbon heat. However, due to pressure from the wider power agenda developments, industrial CHP operators have difficulties to maintain high running hour and be competitive. It is estimated that industrial CHP already saves Europe 15 Mtoe per annum of fuel imports through its high efficiency.

Reducing landfill

Renewable energy-powered CHP can also help communities to reduce their landfill considerably. As waste-to-energy power plants are compatible with cogeneration, they offer significant benefits over landfilling, which is still the dominant method of municipal waste treatment.

Biogas produced from waste in landfills or sewage plants is an interesting fuel option for city-based cogeneration plants as they seek to promote renewable energies in an economic manner. Aalborg in northern Denmark, for example, has a biogas plant which uses a combination of manure, industrial waste and organic household waste. The end product then serves a nearby cogeneration unit.

According to the European Commission, cogeneration takes the European Union "closer to its energy-related goals". "Increasing security of supply [and] promoting energy efficiency are challenges of utmost importance for the European Union. Combined heat and power generation is an important tool to meet them, meanwhile offering many other direct and indirect advantages for the European citizens," it argues, adding that CHP also reduces the burden on the environment.

Green MEP Claude Turmes (Luxembourg) promotes cogeneration alongside renewables and energy efficiency as a priority for Europe's technology investments. "The high efficiency of CHP makes it a key strategy to reach the EU's climate and energy goals," he said. Turmes is critical of the European Commission for failing to support CHP investments in the EU recovery plan, while "throwing billions" at the construction of carbon capture and storage (CCS) plants with higher CO2 emissions.

Many industries are increasingly turning to cogeneration as a way of reducing their emissions in a cost-effective manner.

According to the European Association for the Promotion of Cogeneration (COGEN Europe), "CHP helps Europe in three key ways: Firstly High efficiency CHP saves at least 10% of primary energy (and with modern installations up to 25%) compared to separate production of heat and power. Secondly, assessing the opportunities for high efficiency at local, regional levels would lead to a truly integrated energy system approach (encompassing electricity, heating, cooling supply and demand dimensions…). this integrated approach to energy planning would be instrumental to achieving Europe’s 2050 goals. Thirdly Europe is arguably the centre of global expertise, engineering and knowledge on CHP. At a time where Europe aspires to sustainable growth and competitiveness revival, Europe should foster the development of the CHP sector" said Fiona Riddoch, managing director of COGEN Europe.

The European Chemical Industry Council (Cefic) argues that energy-efficiency gains have already been reached for many industrial processes, advocating cogeneration as a way of pushing back barriers.

Veolia, an environmental services company, believes the EU's potential to develop cogeneration is significant, despite the slow progress made so far. "The case of France provides a good illustration of this situation: while the actual potential for cogeneration is at least double of what is currently installed, the authorities foresee a reduction of installed power," it said.

Eurelectric, the European association of large electricity companies, welcomed the objective of the EU's Second Strategic Energy Review to speed up implementation of energy-efficiency policies. It said in a statement that CHP can provide "major efficiency benefits in the right applications" and welcomed the Commission's focus on high-efficiency CHP. "CHP is a mature technology which can often compete without subsidy and policy should therefore concentrate on the removal of any barriers to CHP investment," it stated.

Euroheat & Power, the European association for district heating, cooling and cogeneration companies, argues that renewable fuels and energies could replace fossil fuels in heating and cooling if energy production were centralised. "Centralised use of renewable fuels in heat production or CHP, solar heaters, geothermal sources or practically anything reduces the investment needs for production capacity and greatly improves the possibility for emissions control and reductions [for fuels]," it stated.

Oil firms such as ExxonMobil are using cogeneration to run equipment while producing steam for refining processes. "Cogeneration is a good example of how business needs and the market encourage investments to reduce costs, generate income and achieve significant environmental gains," said Tom Schiano, power projects manager for ExxonMobil Gas and Power Marketing.

Environmental NGOs have favoured the efficiency gains of cogeneration over traditional power installations.

Greenpeace UK argues that if the use of fossil fuel is to continue, then it must take place "as efficiently as possible to minimise CO2 emissions". The NGO claims that industrial, large-scale, gas-fired CHP can reduce UK fuel consumption and decrease supply concerns. "Most crucially of all, industrial CHP will reduce CO2 emissions while providing a solid stepping stone towards a more decentralised and increasingly renewable energy system," it stated.

WWF promotes cogeneration as a more sustainable and efficient means that nuclear power of achieving the emissions cuts required under EU climate legislation. "Nuclear energy only produces electricity, but modern societies need a significant share of their energy in the form of heat [and cold]," it said. "Nuclear power loses its greenhouse-gas emission advantage over highly efficient natural gas-fired cogeneration plants and has significantly higher emissions than renewable biomass cogeneration plants," it added.

  • December 2015: Member States due to publish “Comprehensive assessments” on the potential for the application of high efficiency CHP and efficient district heating
  • April 2014: First National Energy Efficiency Action Plans to be submitted
  • 25 October 2012: Publication of the Energy Efficiency Directive in the Official Journal of the European Union
  • 8 March 2011: European Commission adopts the Communication "Energy Efficiency Plan 2011"
  • 6 Apr. 2009: EU Council of Ministers formally adopt energy and climate package (EURACTIV 07/04/09).
  • 19 Oct. 2006: EU Action Plan for Energy Efficiency published.
  • 26 Jan. 2004: EU Foreign Affairs ministers formally adopt cogeneration directive (EURACTIV 05/02/04).
  • Nov. 2000: Commission Green Paper on security of energy supply.

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