CHP: Option or Must for Kyoto?

Our guest speaker, Prof. Wolfgang Pfaffenberger, Director of Bremer Energie Institut and one of the main authors of a German study on “pluralistic heat supply”, will outline the potential contribution of CHP in achieving the Kyoto objectives against the background of the new energy market parameters.

The high conversion efficiency and emissions saving potential of CHP plants is generally recognised. The objective of the European Community to double the share of CHP electricity from 9% in 1996 to 18% by the year 2010 can, however, only be achieved if there is an economic interest in operating and building CHP plants.

In the current capacity and price situation in the European energy markets it can not be expected that utilities and investors will initiate the necessary structural changes on their own.

The challenge for energy policy therefore is to build a bridge between the overall interest to reduce greenhouse gas emissions and the individual interests of investors and plant operators.

Professor Wolfgang Pfaffenberger, the Director of the Energy Institute in Bremen outlined the potential contribution of combined heat and power (CHP) to achieving the Kyoto objectives in the light of the parameters of the new energy market.

The high energy yield of combined heat and power and its potential for reducing greenhouse gas emissions was widely recognised.

However, the European Community’s aim of doubling CHP’s share of electricity production from 9 % in 1996 to 18% in 2010 could only be achieved if there were an economic advantage in building and operating CHP plants. Given the current situation as regards installed capacities and prices prevailing on the European energy markets, we could not expect electricity producers and investors to take the initiative for making structural changes on their own.

We should not lose sight of the fact that the figures for Kyoto undertakings were only the first stage in a voluntary process that will become increasingly binding. Regardless of the options concerning types of energy that did not emit CO2 (renewables and nuclear) and which had their specific restrictions (economic or political), energy efficiency was at the heart of any strategy for reducing greenhouse gases.
CHP gained ground as a result of the need to make the most of the difference in temperatures between those required for district heating – the first objective – and those much higher temperatures required for igniting fossil fuels which were suitable for producing electricity. Nevertheless, CHP could use all sorts of technologies such as fuel cells for example and had great scope for modernisation.

At the economic level, CHP had to be competitive on two fronts : heating and electricity. Bearing in mind the uncertainties affecting the price of hydrocarbons, the decision to invest in a CHP plant was not easy, especially if one considered that the markets would henceforth be very volatile and that the price formation mechanisms could not be controlled.

The discussion highlighted the contradiction between the objectives of European policy : encouraging competition and complying with environmental obligations. A joint taxation system could perhaps make it possible to reconcile these objectives. The opening of a greenhouse gas emission licence exchange and the setting up of a strict sanctions mechanism within the framework of the Kyoto protocol could thus make it easier to resolve this contradiction.

N.B. : Euroheat and Eurelectric took advantage of this event to publish a joint statement on a reference methodology for assessing the capacity and electricity production of CHP plants. The European Commission’s statistical office, EUROSTAT, has officially stated that it will adopt this methodology for its future publications.