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Cogeneration
COGENERATION AS THE FOUNDATION OF EUROPE’S 2050 LOW CARBON ENERGY POLICY
COGEN Europe Report1 December 2010
2Cogeneration as the foundation of europe’s 2050 low Carbon energy poliCy 3
COGEN Europe, the European Association for the Promotion of Cogeneration
Email: [email protected]
Tel: +32 (0)2 772 82 90
Fax: +32 (0)2 772 50 44
Website: www.cogeneurope.eu
Address: Avenue des Arts 3-4-5, B-1210, Brussels, Belgium
Picture on cover page: courtesy of SIEMENS
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The future role of cogeneration
Introduction
Energy efficiency: Europe’s foundation technology
Europe’s need for integrated thinking on energy
Europe’s need for competitive industrial heat
Cogeneration 2010-2050 in Europe’s high efficiency energy strategy
Conclusions
Advanced scenariosBaseline scenarios
Cogeneration role’s 2010-2020Cogeneration role’s 2020-2030/2035Cogeneration role’s 2030/2035-2050
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contents
T4Cogeneration as the foundation of europe’s 2050 low Carbon energy poliCy 5
The global financial crisis has left Europe with a weakened economy and a significant chal-lenge to recover economic strength and this at the point where Europe’s long term energy and climate strategy will require major mobili-sation of capital if it is to succeed. Combining financial necessity and energy objectives is still possible if the European Union chooses to position energy efficiency improvements at the top of its priorities list from 2010 onwards.
Measures to improve energy efficiency have the fiscal and economic advantage of creating European employment across a diverse range of infrastructure, technology, and innovation projects. Energy efficiency improvements
yield savings in avoided investment in supply side infrastructure at a time of high risk and huge change. They also buy time for neces-sary new and renewable technologies to de-velop and come reliably to market.
If the European Union is to continue to show leadership in progressive energy policy it should put energy efficiency, including co-generation, at the top of Europe’s energy pri-orities. Cogeneration is highly efficient and fuel independent. It supports sustainability goals and there is the opportunity to expand its use in Europe in virtually all sectors of the economy where the simultaneous production of heat and power is desirable.
Introduction
Figure 1: Energy flows in the global electricity systems showing the large thermal conversion losses in the electricity supply system (TWh) (IEA 2007)
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The future role of cogeneration
The cogeneration industry has manufacturing plants in 12 EU Member States and a world-leading indigenous technology, knowledge and skills base, including innovative mi-cro CHP. COGEN Europe estimates that over 100,000 people are employed in the cogen-eration sector today, and the sector continues to create new jobs in the engineering, manu-facturing, services, and SMEs sectors.
Cogeneration is a low carbon, high efficiency solution for electricity and heat supply with thousands of installations across Europe. Cur-rently 11% of Europe’s electricity and a similar amount of its heat is generated in cogenera-tion plants. Cogeneration has allowed Euro-pean industry to be energy competitive with other regions and provides affordable warmth to tens of millions of Europe’s citizens.
The near and long term deployment of co-generation directly supports Europe’s energy and climate strategy for the following three reasons:
• Modern high efficiency cogeneration guarantees an average of 20%-25% pri-
mary energy savings compared to sepa-rate production, with a minimum of 10% savings guaranteed in European law. Suc-cessful promotion of cogeneration is one of the few measures a member state can adopt which guarantees a defined level of primary energy saving.
• Cogeneration is a proven, cost-effective, available technology. The elements of cogeneration projects are commercially available today, create local jobs and con-tribute wealth to the European economy.
• The cogeneration sector has a strong manufacturing and R&D base in Europe. It is driving innovation globally through its ongoing developments on bio-based fuels, its drive to low emissions and high efficiency and its recent introduction of commercial micro CHP technology.
Cogeneration has an ongoing foundation role in European energy strategy.
Energy Efficiency: Europe’s foundation technology
Energy efficiency and energy savings are the foundation of both Europe’s 2020 energy strat-egy and 2050 vision. Opportunities to exploit them exist across the economy and along the full energy supply chain.
In the first months of 2010, several studies have looked at decarbonising the electricity sector 1 and the signs are good that a zero car-bon electricity supply can be achieved both technologically and economically by 2050. A range of fuel and technology approaches are possible. The foundation of all these scenarios and those going back to the Stern review of 2007 and McKinsey report of 2009, is that ur-
gent and effective action is needed on energy efficiency particularly in the electricity supply sector, where overall efficiency is around 40%. Efforts to improve the efficiency in energy dis-tribution networks, buildings, appliances, and space heating complete the picture.
Focusing immediate effort on energy efficien-cy has the dual advantage of covering both Europe’s near and longer term energy and cli-mate aims. All early wins on energy efficiency help reduce overall demand, thus easing the path to higher penetration of renewables and postponing the need for additional invest-ment in infrastructure or generating capacity
1 EREC study: “the Energy [R]evolution scenario”, ECF study: “Roadmap 2050: a practical guide to a prosperous, low-carbon Europe”, Eurelectric study: “Power Choices”.
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Europe’s need for integrated thinking on energy
Many of the studies describing potential de-carbonisation pathways for the European Union fail to capture the dynamics of the total energy market, particularly the heat market. Decarbonising the electricity generation sec-tor and decarbonising the heat sector are two very different exercises, with different con-straints. Studies which concentrate on elec-tricity supply conclude that the solution for heat is the electrification of heating; a poten-tially very damaging environmental approach until the electricity supply system is indeed decarbonised. Moreover it will not work for the large quantity of high temperature heat necessary for industry
Understanding both the supply and the de-mand side of Europe’s energy systems is fun-damental to improving its energy efficiency. Demand for electricity and heat tend to be physically co-located, opening the opportu-nity of using the waste heat from electricity generation for useful industrial or domestic purposes. This has the additional advantage of lessening the stress on the electricity grid and eliminating electrical distribution losses. The European Union and the energy sector in general address energy planning and model-
ling in simple single supply types: renewables, electricity, gas, heat. Any benefits of integrat-ed provision of energy are not captured in this simplistic approach which is inconsistent with the sophistication and complex interrelation-ships of a modern economy.
Best case examples give insights into the po-tential of integrated energy supply:
• Denmark has energy efficiency as a cen-tral element of its energy policy and has a very integrated approach to heat and elec-tricity supply, planning for heat as well as for electricity. CHP feeding District Heat-ing networks supplies 46%2 of the Danish heat market, and 43%3 of total electricity generation. The system efficiency of the electricity system (from production to end consumption) is more than 65%, a clear 20 percentage points better than the Eu-ropean sector on average, reinforcing the idea that an integrated approach greatly improves efficiency.
• At the regional level, in the city of Dunkirk the city’s district heating network cur-rently delivers nearly 140,000 MWh of heat
3 Eurostat Combined heat and power (CHP) in the EU, Turkey, and Norway – 2007 data.2 Heat plan Denmark, Ramboll Denmark A/S, Aalborg University, 2008.
ACTION POINT Europe must put energy efficiency, including cogeneration, at the heart of European energy policy .
at a time of uncertainty and transition energy efficiency presents no technological hurdles. The energy efficiency technologies needed to achieve Europe’s 2020 energy efficiency tar-get and beyond are on the market today with
supported supply chains and an existing Eu-ropean economic base. We can start any time: we are ready.
67 7a year to 15000 housing units. The heat is supplied from a combination of waste heat from the steel works and small CHP units. More than 60% of the heat supplied is recovered from the steel works and would otherwise have been vented to the atmosphere.
The recent UK study ‘Building a Roadmap for Heat: 2050 scenarios and heat delivery in the UK’4 assesses alternative approaches to de-carbonising electricity supply and confirms the benefits of an integrated approach. It es-timates that CHP alone can help reduce the UK’s total final primary energy demand by 5% in 2050.
Picture 1: View of the CHP trigeneration installation at Barajas airport
4 Building a Roadmap for Heat: 2050 scenarios and heat delivery in the UK, University College London and Southampton Univer-sity 2009.
ACTION POINT Europe must quickly move to developing strategies for heat and considering the opportunities of more integrated energy planning.
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Figure 2: Comparison of the Potential of CO2 reduction by CCS technologies compared to CHP (DLR)
Europe’s need for competitive industrial heat
Industrial energy use accounts for 17% of Europe’s primary gross inland energy con-sumption, roughly the same as transport or households, with high grade heat production forming the backbone of Europe’s industrial processes.5
Successful decarbonisation of the sector re-quires a solution for high grade heat, which
could in the long-term be CCS. In the short and near term however CHP offers the most cost effective and reliable solution for the sec-tor. Improving energy efficiency through the wider deployment of cogeneration in industry is an attractive option, especially as low car-bon natural gas is the typical fuel of use in in-dustry.
Modern gas cogeneration produces electricity with very low associated emissions at around the expected emissions levels of coal with CCS in 2030. Industrial CHP is an example of a highly integrated, highly efficient use of pri-mary energy, supplying low carbon electricity to the wider network as a by-product of in-dustrial processes. At the same time, the trend towards using increased quantities of biomass
and biogas within industrial CHP plants will of-fer the advantage of generating zero emission electricity and high grade heat while shifting at a sustainable pace to a more renewable fuel source.
The wider use of CHP in industry would bring low carbon electricity to the grid, thus offset-ting the need for additional investment in
5 Steam is an important energy form in industrial applications and –according to the Commission’s Energy Trends to 2030 – 2007 Update report- its use is projected to increase at 1.22% per year between 2005 and 2030, rising from approximately 75 Mtoe to 100 Mtoe in 2030.
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new conventional plant and reducing overall energy use in the European electricity system. Concepts of green industrial parks are cur-rently being explored by industry, with some installations already implementing such con-cepts with success, such as the sugar indus-try CHP-based bio-liquid plant in Wissington, UK (British Sugar). The natural tendency of
industries to co-locate is used to exploit the advantages of scale allowing one CHP to sup-ply several processes. This also results in a con-centration of CO2 emissions in one location, providing the economies of scale to allow for the commercial deployment of CCS to cover industrial heat production when it becomes available.
ACTION POINT Cogeneration is an effective available route to decarbonising industrial heat and the only near term option in the absence of functioning CCS. Policy focus is needed to encourage the development of the industrial CHP po-tential identified by the Member States in their CHP potentials studies.
Picture 2: RWE Npower cogen CHP plant in the UK
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The EU Member States have reported in 2007/2008 that Europe can at least double CHP heat and electricity generation by 2020. This would provide an additional 1000 TWh of heat and 455 TWh of electricity and would provide 46 TWh of primary energy savings an-nually by 2020.
However there is no sign today of the massive investment which is needed to deliver this
type of penetration of cogeneration and this size of primary energy savings.
COGEN Europe has developed two long term scenarios: a baseline scenario and an ad-vanced scenario, reflecting the influence of several key factors in shaping the outlook, both for CHP and the EU’s energy sector at large.
The baseline scenario describes the future de-velopment of CHP installed capacities by type of application and temperature ranges until 2050. It is based on a number of assumptions:
• Member States put in place policy frame-works aiming to strengthen energy effi-ciency measures throughout the econo-my. While renewable electricity remains a strong focus of policy makers, the heat sector attracts greater attention and in-dustrial heat demand in particular. This is
visible with the adoption of new CHP leg-islation in 2010-2015.
• The current framework for CHP is im-proved, with simpler definitions of what is CHP and Member States are required to promote CHP at the national level, with a focus on cities and industry.
• Optimal use of scarce renewable biomass and waste resources becomes a top pri-ority for the EU and CHP installations are
Cogeneration 2010-2050 in Europe’s high efficiency energy strategy
Baseline scenario Advanced scenario
• CHPpolicyisreinforcedinthe2010-2015timeframe
• Mico-CHPisreadilyavailableby2010-2015
• Districtheatingmodernisationcontinuesatnationallevel
• Industrialheathastomeetstricteref-ficiencystandardsandrenewablefuelsmakeforagreatershare
• LimitedavailabilityofCCS
• EnergyefficiencyandCHPpoliciesarestrengthenedwitheachpassingdecade
• Micro-CHPbecomesastapleofnewandrenovatedhomes
• Districtheatingbenefitsfromcompulsoryurbanplanninglegislation
• IndustrialheatisdecarbonisedthroughmandatoryclusteringwithCHPandCCS
Baseline scenario
1011 11identified as the priority recipients for these fuels, lowering the carbon footprint of industrial and local heat.
• Micro-CHP units become widely available as from 2020, with lower unit costs mak-ing micro-CHP an attractive boiler replace-ment option. Fuel-cell based units make their way into homes, sometimes coupled with heat pumps.
• District Heating remains a strong segment for CHP, which a lot of capacity replace-ment and growth in new and renovated urban areas. However, increased insula-tion and lower spatial heating demands coupled with smaller systems in Eastern Europe will translate into slightly lower in-stalled capacities for CHP/DH as from 2025.
• By 2040-2050 however, the limited avail-ability of renewable fuels acts as the defin-ing factor in the penetration of CHP.
Under the Baseline scenario cogeneration in-stalled capacity rises gradually to 2035/2040 at a slightly higher rate of 2.25% than histori-cally (2004-2008 at 0,5%). The period 2015-2020 is particularly active as new energy effi-ciency legislation drives investment, following several years of constrained outlook, for the technology. Cogeneration growth is driven mainly by industrial heating demand, both for low and high grade heat applications. By 2035 cogeneration has added an additional 80 GWe of power to the European network. From there on, its use stabilises and continues to support the energy structure ongoing.
Figure 3: Baseline scenario – installed CHP capacity (in GWe)
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Advanced scenario
The ‘advanced energy efficiency policy and CCS’ scenario highlights a further increased penetration of cogeneration. It assumes that the EU adopts energy efficiency as the lead-
ing element of its energy strategy and imple-ments over time an integrated planning ap-proach to energy.
From a technological standpoint, compared to the baseline scenario, the advanced sce-nario differs inasmuch as CCS becomes readily available within the 2030-2050 timeframe and enables a near total decarbonisation of indus-trial heat and electricity from large-scale CHP. This offers greater room for the expansion of
CHP, notably for high grade heat applications. The deployment of CCS+CHP installations running on renewable fuels helps offset fur-ther the emissions from older systems operat-ing on natural gas by generating negative CO2 emissions.
The advanced scenario differs also from the baseline scenario with regards to district heat-ing. Under the advanced scenario the EU and national administrations aim to go beyond the refurbishment of DH schemes and limited growth in new and revitalised urban areas to roll out district heating systems in larger city areas.
CHP is actively supported through a combi-nation of promotional measures and stricter energy efficiency requirements. Most notably, industrial activities are covered by strict leg-islation mandating the adoption of BAT and regrouping around smart industrial clusters, while urban planning legislation is introduced along the Danish model, optimising energy infrastructure investment.
Picture 3: Bridgewater CHP plant
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Figure 4: Advanced EE + CCS policy scenario – installed CHP capacity (in GWe)
Cogeneration’s role 2010 -2020
The cogeneration industry is confident it can rapidly respond to the correct stimuli which will bring cogeneration from a marginally at-tractive financial opportunity to a serious business proposition. For this to happen, the policy framework around CHP must be im-proved in Member States to urgently remove the remaining structural and permitting bar-riers to cogeneration and distributed genera-tion and to make cogeneration clearly profit-able.
The following set of enabling policy actions is needed:
• Give cogenerated electricity priority of despatch, and transparent grid access
conditions in recognition of its low carbon nature and its overall supportive role bal-ancing renewables intermittency.
• Require that national energy efficiency action plans under the Energy Services Directive identify the national potentials for both waste heat utilisation and the de-mand for heat.
• Introduce requirements on energy suppli-ers to submit plans to cover a share of their final energy by cogeneration.
The cogeneration industry must also take rel-evant actions to adapt their offerings in this timeframe:
14Cogeneration as the foundation of europe’s 2050 low Carbon energy poliCy 15• Increase the electrical efficiency of bio-
energy based CHP by 3 percentage points.
• Complete existing and new developments on gas engines to improve the overall en-vironmental performance.
• Design improvements in the flexibility of small to medium capacity CHP in electric-ity production.
The CHP sector has undergone marked changes in the share of fuels employed over the past 20 years, with the steep de-cline in solid fossil fuel use and the con-comitant rise of natural gas and more re-cently of biomass. CHP will continue to espouse the energy sector’s green trans-formation and the share of renewable fuel sources will increase significantly, in particular in the years 2020-2040.
Two dynamics are expected to be at play: a drive towards greater use of re-newables and a gradual shift of renew-able CHP applications away from small-scale low grade heat towards medium/large-scale high grade heat (i.e. steam).
This second trend comes from the fact that most low-grade heat application such as sanitary hot water and space heating will be covered by non-com-bustion technologies such as solar ther-mal and geothermal. Current official DG Energy modelling6 however indicates
that even under the reference scenario, RES use if the residential sector will re-main largely dominated by biomass and waste, with solar thermal contribut-ing only about 20 Mtoe out of a total of 315 Mtoe for renewables by 2030. Heat pumps will play another major role in meeting low grade heat demand, but only once COP levels improve and most importantly once electricity production is nearly fully decarbonised and be-comes less resource-intensive .7
At the same time, medium and high grade heat applications will struggle to decarbonise as existing renewable heat production technologies do not hold the potential to generate the required amounts of high temperature heat need-ed by industry.8 As a result, and as envis-aged by the European Climate Founda-tion’s Roadmap 2050 study, natural gas will continue to be in use in 2050, in par-ticular in industry.
Evolution of fuel shares for CHP systems
Cogeneration’s role 2020-2030/2035
Member States have not reported on their na-tional potentials for this period, however the technical potential identified in the Member States for 2020 suggests that there is further
potential for cogeneration if the policy struc-ture is favourable. With emphasis on energy efficiency and a focus on integrated energy planning, COGEN Europe suggests that by
6 EU Energy trends to 2030, 2009 Update. Figure 37: direct use of RES in the residential sector. 7 Carbon-intensity and resource-intensity are two different concepts and we expect that resource efficiency will become a much higher political priority as from 2020/25. By that time grid electricity will be much less carbonated and the impetus will be on lower-ing electricity generation’s impact on resource consumption (such as uranium and biomass). 8The Ecoheatcool study carried out for the EU25, the 4 ACC countries and EFTA identified 5074 PJ of heat demand over 400°C in industry and 3186 PJ of heat demand between 100 and 400°C in industry in 2003.
1415 152030 a doubling of CHP in Europe will have been achieved and sustained growth will be underway.
Smarter use of distributed generation and energy services will have created new oppor-tunities for cogenerators in grid balancing of renewables and energy storage. New building stock energy demand will be met through a high share of renewables while in the exist-ing building stock district heating networks, on-site CHP and micro CHP, will have become preferred solutions to maximise fuel flexibility and efficiency and will provide cogenerated back-up and balancing power to support ef-ficient network generation. Micro CHP will have developed a significant market share in this period replacing less efficient condensing boilers in gas-networked areas.
The prevailing primary energy mix is assumed to contain a majority of natural gas, with bio-energy and non-conventional gases and waste fuels holding an increased share. The expectation is that both light and heavy in-dustry (largely gas based) will favour CHP at this point assuming the liberalised market is fully operational. We do not expect CCS to be commercially viable until 2030 at the earliest.
The following set of enabling policies actions will be needed:
• Establish priority for CHP- CCS combina-tions when technology and economics are feasible.
• Initiate requirements and standard(s) on energy efficiency along the full energy supply chain.
• Prioritise integrated energy planning for heat and electricity.
• Develop new energy tariffs based on en-vironmental externalities (CO2, etc.) and capacity management resulting in CHP receiving value for its efficiency and flex-ibility in the market.
The cogeneration industry must also take rel-evant actions to adapt their offerings in this timeframe:
• Introduce CHP units with higher power to heat ratios for emerging application needs (Fuel cells, low energy buildings, etc.)
• Develop solutions which further enhance CHP operational flexibility (including vari-able power-to-heat ratios) to provide ser-vices to heat and electricity networks in a system operating with a high level of re-newable supply.
• Introduce innovative tri-generation solu-tions for the market.
Picture 4: Valdemingomez Landfill (courtesy GE Jenbacher)
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Demand for low-grade heat used for sanitary hot water and heating applica-tions in the European Union is expected to diminish over time, a direct result of the improved energy efficiency of the building stock, and despite continued growth in floor space (both residential and commercial).
In 2007, households in the EU27 had a total heat demand of about 245 Mtoe. This compares to the 132 Mtoe con-sumed by the commercial sector and to the 178 Mtoe consumed by industry.
Moving forward, total heat demand from households will decrease substan-tially, in particular after 2030, as more stringent building regulations (driven by the EPBD) start to make a sizeable im-pact. The heat demand from households up to 2050 will very much be deter-
mined by the depth of the renovations the building stock undergoes. The total market share of micro-CHP will be con-strained by projected growth of district heating in urban areas.
Work carried out by the Central Europe-an University of Budapest9 distinguishes between a state-of-the-art scenario in which thermal energy demand drops by -68% and a sub-optimal scenario in which major renovations translate into moderate energy savings of 15-20%, re-sulting in energy savings of only -26% by 2050. In other words, the heat demand in the residential sector will be in the range of 78-181 Mtoe in 2050. By 2030, we estimate that 50% of all new micro CHP systems will be renewable-based, a share that will increase to about 75% by 2040
Evolution of the low-grade heat market: the outlook for micro-CHP
Cogeneration role 2030/2035-2050
New cogeneration units using bio-based fuels will provide heat and electricity across the ca-pacity ranges on the new multi-source smart grid. At the same time, green industrial parks - where necessary supported by CCS - will be a key element of industrial competitiveness in a low carbon economy, with natural gas still providing a significant share of the primary energy input.
At this point there will have been a radical re-shaping of Europe’s fuel mix, electricity net-work, gas distribution network, heat networks and generation capacity. Hybrid CHP systems
providing domestic, commercial and industri-al heating and cooling on a mix of fuels will be providing both high efficiency integrated en-ergy to consumers and cost effective grid bal-ancing services to the renewable-rich TSO and DSO networks. Market liberalisation will be complete for gas and electricity. Under an en-ergy efficiency-led strategy a new “integrated energy“ supply approach will have emerged supported by a strong energy service (ESCO) sector. The energy sector as a whole will be re-questing higher efficiencies from the electric-ity and gas networks. All major point source emissions of CO2 will be required to imple-
9 State of the Art Heating and Cooling Energy Use Development in Western Europe”, Diana Urge-Vorstaz
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ment CCS. The availability of CCS technology for natural gas fired plants will together with an integrated approach to meeting energy needs and the challenge of supplying high grade decarbonised steam to industry will fa-vour the development of large-scale CHP.
Effectively, by 2040, most base load electric-ity – balancing intermittent renewables - will be provided by a mix of large hydro, a few nuclear installations and large-scale CHP+CCS installations supplying industry with very low carbon heat, and the electricity network with power and services.
Small and medium-scale CHP installations will still play an important role at the local level by also providing grid stability but this segment will struggle to develop if CCS technology cannot be scaled down and if renewable fu-els are only available in limited quantities. By 2040 many systems will be hybrids, compris-ing of both a CHP plant and another source of renewable/low carbon heat such as geother-mal (where available) and heat pumps. Such solutions are adapted to small and medium-scale heat demand, especially if low and me-dium temperatures are required.
Conclusion
The signs are good that Europe can have a low carbon energy system by 2050. To achieve this Europe needs to put in place a strong founda-tion by 2020, incorporating a more integrated approach to energy along the whole energy supply chain. COGEN Europe believes that an immediate and urgent focus by policy mak-ers on the foundation technologies of energy
efficiency, including CHP, is the first step to achieving Europe’s 2050 goals.
Supporting cogeneration and supporting a strengthened energy efficiency policy have never made more sense for Europe.T
18Cogeneration as the foundation of europe’s 2050 low Carbon energy poliCy
COGEN Europe, the European Association for the Promotion of Cogeneration
Email: [email protected]
Tel: +32 (0)2 772 82 90
Fax: +32 (0)2 772 50 44
Website: www.cogeneurope.eu
Address: Avenue des Arts 3-4-5, B-1210, Brussels, Belgium
