The use of a heat engine or a power station to simultaneously generate both electricity and useful heat is known as combined heat and power (CHP), or cogeneration. Generally, a conventional power plant emits the heat created as a by-product of electricity generation into the environment through cooling towers, as flue gas, or by other means. CHP or a bottoming cycle captures the by-product heat for domestic or industrial heating purposes, either very close to the plant, or for distribution through pipes to heat local housing.

In Europe, the use of CHP presents a substantial potential for increased energy efficiency and reduced environmental impacts. It is considered to be a priority area for many Member States. The efficient use of fuel, in simultaneous production of heat and power, can offer energy savings and avoid CO2 emissions compared with separate production of heat and power. In addition, development in the use of fuels used in CHP applications show a trend toward cleaner fuels. Nearly 40% of the electricity produced from cogeneration is produced for public supply purposes, often in connection with district heating (DH) networks. Almost 60% of the electricity produced from cogeneration is generated by auto producers, normally for industrial processes.

In recent years, CHP has suffered from adverse market conditions in many EU Member States. The problems encountered by CHP include increasing natural gas prices that have reduced the cost competitiveness of CHP, falling electricity prices resulting from market liberalization and increased competition, barriers to accessing national electricity grids to sell surplus electricity, and relatively high start-up costs. Until the external costs of energy are internalized in its price, cogeneration may require government support, for example, by providing investment support or giving tax exemptions.

The CHP Directive on the promotion of high-efficiency cogeneration is expected to start having an effect. It encourages Member States to promote CHP uptake and helps them to overcome the current barriers hindering progress. It does not set targets, but instead requires Member States to carry out analyses of their potential for high-efficiency cogeneration. A number of EU Member States have introduced laws or other support mechanisms to promote new CHP. Despite these measures, there remain substantial differences in the level of CHP across the EU. Countries with a high market penetration of CHP electricity include Denmark and the Netherlands, while poor infrastructure for natural gas and less demand for heat has historically hindered CHP development in countries like Portugal and Ireland. The future CHP production capacity in Europe will largely be based on natural gas combined cycle gas turbines (CCGTs) and small gas turbines. In the longer term, market penetration of CHP in the many EU Member States is predicted to accelerate out to 2030.


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Pages: 79
Publication Date: October 2007
Publisher: Energy Business Reports