Proposal for a Directive on the Promotion of Cogeneration (Combined Heat and Power) based on Useful Heat Demand in the Internal Energy Market - Consultation

Analysis of UK responses to the EC Directive on the promotion of cogeneration based on a useful heat demand in the internal energy market

Background

On 22 July 2002, the European Commission published a proposal for a Directive to create a framework to facilitate and support the installation and proper functioning of cogeneration where a useful heat demand exists or is foreseen. The Directive aims to reduce energy demand as a means to achieve security of energy supply, and to contribute towards the EU's carbon-saving targets

The UK Government's Public Consultation on the proposed Directive was launched on the 25 September 2002 and closed on 21 December 2002.

Responses

The Government received 30 responses to the consultation. The list of the respondents is shown in the Annex. The respondents include 6 public organisations, 7 sectoral trade associations, 2 consultants, the rest of the respondents being companies from the sectors of energy generation, energy supply and services, energy equipment manufacturing, chemical industry and horticulture.

Conclusions

Development of a Directive on CHP was generally supported but not without amendment. There were real concerns that as currently drafted the proposed Directive could damage the CHP sector in the UK.

Twenty of the respondents stated that they favoured the principle of a European Directive for promoting CHP. However, all but one of the respondents expressed their concerns on the content of the Directive and would like to see amendments. A number of general and specific issues were raised.

Overall impressions varied, as several respondents described the draft Directive as lacking ambition in its goals and being overly complex, whereas others welcomed the objectives of the Directive and the simplicity of its approach.

Specific issues raised by most respondents were the definition of high efficiency CHP, the 50MWe limit for public support and Article 8 on connection to the electricity supply and transmission system.

Analysis of comments

Definition of CHP electricity and high efficiency CHP

Annex II of the draft Directive defines electricity from cogeneration. It requires that if the cogeneration units have an overall efficiency less than threshold values of 75% and 85%, dependent on the technology, the electricity counted as cogeneration electricity is reduced. Annex III of the draft Directive provides a methodology for determining the efficiency of cogeneration production. It states that new and existing cogeneration should provide primary energy savings of 10% and 5% respectively compared to separate production of heat and power.

Six respondents agreed in principle with the definition but had specific comments on the threshold values used. In particular, different efficiency thresholds were suggested for new and emerging technologies like micro-CHP. Concern was raised that an overly simplistic definition would stifle new technologies.

Six respondents supported a definition similar to that used in the CHP Quality Assurance programme (CHPQA), in particular to include supplementary firing and top-up boilers. One respondent suggested CHPQA be promoted as a model for other Member States.

Four respondents suggested that the definition should be decided by the Member States according to a common set of principles.

One respondent supported the proposed definition and reference values.

50MWe limit

The proposed Directive states that "direct support for production should in principle be focused on the share of cogenerated electricity produced either in installations with a capacity below a threshold value that should be set at 50MW(e) or lower or in larger installations but then only the amount of electricity produced by the capacity below such a threshold value."

Sixteen respondents notified their opposition to this threshold with just one respondent expressing support for it. The opponents argue that such a limit is arbitrary and illogical.

Another respondent agreed in principle to the limit but suggested that existing support for schemes greater than 50MWe should continue.

There was agreement from some respondents that the UK CHP target (10 GWe by 2010) would be more difficult to attain with this threshold, as much of the potential for CHP development comes from CHP projects that are larger than 50MW.

Grid connection access and use

Article 8 includes provisions laying down the principles for the interaction between cogeneration producers and the electricity grid and for the facilitation of grid access for cogeneration units using renewable energy sources and micro-cogeneration plants below 1 MW. It requires Member States to take measures to "ensure that transmission system operators and distribution system operators in their territory guarantee the transmission and distribution of electricity produced from cogeneration".

Ten respondents made specific comments on this Article. These comments were of two main types:

• comments from respondents associated with electricity generation and supply who objected to some of the provisions on providing access. They state that the wording is ambiguous and could result in unfair costs to the industry. Suggestions are made by them for amendments to ensure that fair consideration of the costs is given.
• comments from respondents associated with micro-CHP and fuel cells who ask that provisions be put in place to ensure that access to the network for these types of unit is facilitated.

Other comments

Several respondents were worried about the potential loss of public support for CHP should the Directive be agreed as currently drafted and suggested that the proposed Directive would undermine the prospects for CHP in the UK.

It was suggested by two respondents that the use of CHP to provide cooling should be recognised in the draft Directive.

A small number of respondents identified the Emissions Trading Scheme as a mechanism for putting a price on carbon, thus helping the competitive position of CHP.

The micro-CHP and fuel cell organisations identified several issues particular to small scale CHP. These included the need for a type-tested certification system to reduce administrative burdens.

Two respondents wanted mandatory capacity targets for CHP and two opposed targets.

Summary of suggestions for amendment

The summary below is of the main suggestions for amendments:

50 MWe limit for public support

• Remove any limit for CHP support
• Leave it optional, to the discretion of each Member State

Definitions of CHP electricity and high efficiency CHP

• Use similar approach to CHPQA
• Agree common set of principles and let Member States decide definitions
• Amend existing definitions e.g. add lower threshold for new and emerging technologies

Grid connection access and use

• Amend article 8 to take account of costs to transmission operators and remove "requirement" to provide connection
• Give responsibility to setting the regulations on grid access to Member States

LIST OF RESPONDENTS TO THE UK CONSULTATION