ORGANISATION FOR THE PROMOTION OF ENERGY TECHNOLOGIES

Combined Heat & Power/ District HeatingResults of activities 2003-2005

C o n t e n t s

Context 3

Eight reasons to promote Combined Heat & Power/District

Heating(CHP/DH) 4

OPET CHP 5

Legislative context 6

CHP/DH in Central/Eastern European Countries (CEEC) 7-11

1 Organisational framework

2 Price regulation and taxation

3 Support and promotion mechanisms

4 Legislative and regulatory measures

5 Energy planning

6 Benchmarking

7 Financial options for CHP/DH investments

Micro and small-scale CHP (M/SSCHP) 12-15

1 CHP Directive

2 Technology

3 Financial incentives

4 Market potential

Biomass CHP 16-17

1 Present use

2 Actions to overcome market barriers

China: CHP and trigeneration 18-19

Further information:

http://www.opet-chp.net

C o n t e x t

Ever-increasing energy consumption is one of the greatest challenges facing Europe andthe world today. Most consumption is derived from fossil fuels - much of it imported fromoutside Europe, depleting natural resources and contributing to global climate change,through increased greenhouse gas emissions. When the EU signed the Kyoto Protocol, itpromised to reduce these emissions by 2012, by 8% in comparison to 1990 levels. To meetthis commitment, significant changes of behaviour are required now, both in terms ofenergy supply and demand management.

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The Organisation for the Promotion of EnergyTechnologies (OPET) Network, established by the European Commission, seeks to enhance sustainable energy production, distribution and consumption (excluding nuclear energy) by promoting the use and exchange of information onnew technology in the marketplace. The resultingefficient knowledge transfer benefits all Europeancitizens, supporting and implementing European policy priorities at EU, Member State and regionallevels, accelerating innovation of renewable energy sources (RES) and the rational use of energy(RUE).

The OPET Network was restructured in 2002 around a series of Thematic Consortia to provide an integrated and comprehensive view of on-goingresearch and to further innovative technologiesdeployment. The CO-OPET partners in cooperationwith each Thematic Consortium have issued aConsortium brochure, which provides a summary of the promotion and dissemination actions undertaken betwen 2003 and 2005 in emerging sustainable energy technologies, aimed at the valorisation and integration of R&D results, pointingthe way towards more intelligent energy use inEurope.

The OPET Thematic Consortia:

• Buildings• Electricity generation from renewable energy

sources (RES-e)• Combined heat and power / District Heating(CHP/DH)

• Clean fossil fuels (CFF)• Energy issues in transport• New energy technologies in the

Mediterranean region (MEDNET)• Modern and clean energy and transport

technologies in Latin America and theCaribbean (OLA)

• Early market introduction of new energytechnologies (EMINENT)

and• CO-OPET, support to the OPET Network

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Conformity with European energy policy

CHP is one of the primary means for the EU toachieve its energy policy objective of improvingenergy efficiency and its environmental policyobjective of reducing greenhouse gas emissions.The Commission estimates that doubling the amountof CHP electricity will allow the EU to meet half ofits CO2 reduction commitment. (The Kyoto Protocolrequires an EU greenhouse gas emission reductionby 8% by 2008-2012 from1990 levels, equivalent to300 million tonnes CO2 per annum). Increasing DHuse is essential for moving from the present 9% to18% of EU electricity generated by CHP. Plants areoften local, small in size and processes can utilise awide variety of fuels.

Reliability

CHP is a proven and reliable technology, dispersedEU wide, and a cost-effective energy source, supplying around 10% of electricity generated andheat demand. Systems can operate for at least 20-40 years.

High thermal efficiency

Plants achieve a total efficiency between 80 and90%, 30-40% higher than separate production ofheat and electricity. Primary energy consumption inCHP is lowered by approximately one third. In conventional condensing power plants the effi-ciency remains at around 40%. Fuel cells offer theopportunity for higher levels of power-to-heat ratios.

Lower environmental impact

The high efficiency of the CHP plant leads to lowerfuel consumption, which consequently reduces theburden of energy production on the environment,not only from carbon dioxide but also from sulphurand nitrogen oxide emissions.

Fuel flexibility

A wide variety of fuels can be used, including thosewith a low calorific value and high moisture content,such as industrial wastes and biofuels. The mostcommonly used fuels are coal, natural gas, industrialwaste, wood and peat. Oil is used sparingly, usuallyonly as a supplement. Traditionally, biomass fuelshave been used in CHP generation, mainly in connection with forest industry processes. Formany reasons, CHP applications are an ideal use forbiofuels. Biofuels transport is costly given their lowcalorific value, so use tends to be local whichmatches CHP's local nature. The fuel mix used inCHP plants will change considerably. Natural gasand biofuels can largely be used as substitutes forcoal and oil.

High availability

CHP plants have high availability levels enablinguninterrupted energy production. Local CHP generation can reduce the risk of power and/orheating outages. CHP plants are better maintainedand operated than in-building systems. They can beswitched to a reserve fuel source as needed.

Supply security and market benefits

By substantial fuel savings and the wide range ofdifferent fuels utilised, CHP significantly contributesto reducing the dependency on foreign energy supplies (50% now and 70% in 2030 based on current trends). Heating consumes more energythan any other use.

Economic benefits

CHP facilitates through generation plant diversification, competition in generation and liberalisation of energy markets in general.

The project Consortium consisted of thirty-two partners from twenty-two EU and Central andEastern European countries and China. The coordinating partner was the DanishTechnological Institute. The 14-month project included a large range ofactivities at national and international level as wellas specific national partner actions.

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Eight reasons to promote Combined Heat & Power/District Heating (CHP/DH)

The activities were organised in Work Packagesaddressing specific objectives:

• EU CHP Directive information provision and knowledge transfer

• Support to CHP development in Central andEastern European countries

• Support for market uptake of small scale CHP• Promotion of further use of biomass for CHP• Promotion and support of Chinese market

penetration by EU clean, efficient and renewableenergy technologies

• Improvement of industrial energy efficiency

The project results are presented on the projectwebsite www.opet-chp.net

The OPET CHP Consortium aimed at promoting technical improvements and market development tools and thereby supports further use of efficient CHP/DH technologieswithin the EU policy framework.

OPET CHP

EU Member States have two years to implement theEU Directive on the promotion of cogenerationbased on a useful heat demand in the internal energy market (2004/8/EC ) into national legislationfollowing its publication in February 2004. TheDirective seeks enhanced energy efficiency andimproved supply security by creating a promotionand development framework of high efficiencycogeneration of heat and power based on usefulheat demand and primary energy savings in theinternal energy market. Specific national circumstances, especially climatic and economicare taken into account.

The Directive in the short-term supports existingCHP installations and creates a level playing field inthe market. The Directive specifies:

• Harmonisation of CHP definitions• Establishment of EU wide efficiency values • Micro and small scale CHP (M/SSCHP)• A Guaranty of Origin of CHP Electricity scheme

framework • An obligation for Member States to ensure

objective, transparent and non-discriminatoryprocedures for grid access, tariff criteria andadministration.

The medium and long term intention is to ensurethat high efficiency CHP is considered whenevernew capacity is planned. A number of criteria areset for an obligatory analysis of the national potentialfor high efficiency CHP (including M/SSCHP).Support schemes based on useful heat demand andprimary energy savings may be continued or established in the Member States to support therealisation of the potential. Annex 2 implementationguidelines for the calculation of CHP electricity,including harmonised reference values for separateproduction have been issued. Each Member Statemust report to the EU regularly about the progressin achieving CHP potential and CHP promotionalactions.

Cogeneration Directive - COM 415 (2002)Emissions Trading Directive - COM 581 (2001)New Electricity and Gas Directive - COM 304 (2002)Energy Performance of Buildings Directive - 91 (2002)Taxation of Energy Products Directive - COM 30 (1997)

CHP Directive1

Other relevant legislation2

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Legis lat ive context

District heating has a long tradition in Central and Eastern European Countries and has alarge share in the heating market. In the residential heat market (population related) it represents about 38%, significantlyhigher than in the EU-15 countries (7%). The DH market share varies from 16% in Hungary up to 70% in Latvia. In cities, DH has thehighest market share - in some cases exceeding 75%.

CHP/DH in Central/Eastern European Countries (CEEC)

In most CEEC, local government plays a key role inthe DH and CHP sectors through ownership. InBulgaria, most DH companies are state owned.Leasing, privatisation and public and private partnerships are becoming more common in mostCEEC to attract financial resources for systemreform and refurbishment. In most countries, sectoral associations are quiteactive at national and European level. In somecountries, homeowner interests are also nationallyrepresented. In Estonia, the homeowner associations have an important role whereas in Bulgaria the representation is through the consumers' association.

Organisational framework1Independent regulatory bodies have been established in all CEEC. The regulatory body thatapproves DH tariffs acts at national level, for example, in Bulgaria, Romania and Lithuania.However, in some countries, (Latvia, Estonia,Poland) municipal regulatory bodies exist alongsidestate bodies.Tariff setting has moved towards full cost reflection,away from a cost basis derived from operationalcosts alone. In Poland, the price covers the development, modernisation and, to some extent,environmental protection costs. Price setting and subsidy still face some challenges.

Price regulation and taxation2

The work focused on supporting developmenttowards improvement of the economic and environmental performance of the district heating andcogeneration sectors in the CEEC partner countriescovering Bulgaria, Czech Republic, Estonia, Latvia,Lithuania, Poland, Romania and Slovakia . The objectives were to develop and further promote appropriate tools and measures to overcome barriersfor improvements in these sectors and to provide keymarket actors with increased understanding of theproblems related with upgrading and modernisationof the existing systems and the possible solutions tothese problems.

The activities included studying the policy frameworkconditions and the current sector situation.Furthermore, a series of pilot projects were initiatedand case studies were investigated to show the application of the tools and measures in practice.

National surveys on the current CHP/DH situationfrom a policy, sector and company perspective inCEEC provide a comprehensive overview of the existing framework and conditions and highlight theimportant barriers to development and improvements.Necessary steps for further development of theCHP/DH sector were identified and investigated.

Recommended tools and measures for CHP/DH sector improvement inCentral and Eastern Europe

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Legislative initiatives of the European Union presentcertain requirements for the development of theenergy sector in the CEEC. The Directive on Emission Trading encourages the use of more energy efficient technologies, including combinedheat and power. The Directive on the Promotion ofCogeneration creates the framework for the supportand promotion of CHP based on useful heat demandand primary energy savings. Other Directives influencing energy sector development are theDirective on Energy Performance of Buildings andthe Energy Service Directive.

The legislative framework focuses on:

• Energy market organisation and rule formulationdefining energy sector business activities

• Energy sector restructuring• Reorganisation and privatisation• Increased energy efficiency through

technological innovation

Legislative and regulatory measures4

Energy planning is a focal instrument to enable thedevelopment and operation of the energy sectorwith minimum expenses, and at the same time highreliability of energy supply and a minimum impacton the environment. Efficient planning allows bothoptimisation of expenses at the national level andintroduction of competition between different energy utilities at the planning level.

Energy planning5

Generally, the CEEC have developed a relativelyextensive energy legislation framework with a sectoral approach. Most countries passed an overall Energy Act providing for sectoral legislation.However, Estonia replaced the overall Energy Actby sector specific Acts, and Poland has just oneoverall Energy Act.The CEEC, except Bulgaria, have started electricitymarket liberalisation in line with EU Directives. Theliberalisation degree varies, averaging about 30%.In the gas market, the process lags behind due tosector specificities and monopoly structures. Most countries strongly support CHP generationdevelopment. To this end, feed-in tariffs are used inBulgaria, Estonia, Latvia and Hungary.

CHP/DH in Central/Eastern European Countries (CEEC)

One of the barriers to CHP/DH market developmentis lack of knowledge and awareness. Potentialusers and investors are not aware of CHP advantages. Other barriers to overcome are underestimation of the need for qualified assistanceand proper project development and costs.

Promotional activities

Benchmarking permits the comparison of any DH company's technical and economic parameters with other companies. Benchmarkingimplementation requires cooperation between thecompanies, and coordination by a DH association or third-party organisation. This can be in differentcountries.

Benchmarking6

A cross-national review of financing opportunitieshas been made to facilitate future energy efficiencyand CHP project implementation in the CEEC.Financing issues are of common concern but thespecific problems vary depending on the size of thecompany and the national location. Energy efficiency projects in DH companies can bedivided by type (retrofitting of production site, introduction of CHP unit, upgrade and refurbishmentof DH networks (pipelines and substations)), and bysize. Most commonly retrofitting of existing large DHnetworks with big capacity needs substantialinvestment. Usually a joint financing model is used.Financing of energy efficiency and CHP projects inDH companies is dependent on legislative and regulatory frameworks developed in different CEEC.In particular, price and tariff incentives and preferences for CHP can influence the profitabilityof CHP introduction projects, since in most casesthe issue of rate of return is critical for obtainingfinance from commercial banks and privateinvestors (the two major sources of funds). Differentsupport schemes are usually used as complementarysources of funding. In many cases, the national support schemes have benefited from internationalfinance. For example, the Energy Efficiency Funds inBulgaria and Romania have been established withWorld Bank and European Bank for Reconstructionand Development (EBRD) financing.

Financial options for CHP/DH investments7

R&D activities have been limited. The activities havebeen focused on strategy development, introductionof CHP plants, DH system rehabilitation and in EUproject participation. Research financial resourcesare limited and the resources from donor countriesare used for DH system development and refurbishment.

The DH rehabilitation and modernisation financingmechanisms range from direct government supportto third-party financing and capacity leasing.Private sector investments have an increasingimportance, being often associated with the privatisation process. In some cases, internationalfinancing bodies have played a catalytic role.

Support and promotion mechanisms3

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The project contained stakeholder analysis, toolboxelaboration and energy planning in selected municipalities. Main issues for all three componentswere training, knowledge transfer relating to planning as well as managerial know-how and experience dissemination. Three municipalities wereselected as model municipalities: • Bytow in northern Poland• Legionowo, a suburb close to Warsaw• Myszkow in southern Poland.

Energy planning was demonstrated as a means tobalance both short-term and long-term developmentgoals of reliability of supply, environmental sustainability and economic efficiency. This can beachieved by efficiency, diversification and flexibilityat less cost. The following conclusions were drawn:• At the local level, there are problems related to the

experience in preparing development plans regarding gas and heat supply

• Absence of time limits and sanctions results in lowbudgetary priority for executing planning and implementing improvement measures

• Data collection was very time consuming.

The following was recommended for the three model municipalities:• the planning processes initiated during the

project should be continued • DH master plans should be prepared in each

municipality• An energy audit of the Myszkow paper mill should

be carried out

Energy planning in Poland at municipal levelThe Energy planning at municipal level - support todecision-makers project's main aim was to supportcommunity energy planning implementationaccording to the Polish Energy Act. The specificproject goals were to explain political, social andtechnical issues at the local level and to prepare aset of materials helping the authorities make decisions concerning these processes.

The Government of Denmark financed the projectunder an agreement between the Danish Ministryof Environment and Energy and the Polish Bureaufor Housing and Urban Development. The main contractor was the Danish company, COWI(Consulting Engineers and Planners AS), subcontractors being PEPRC (Power andEnvironment Protection Research Centre of theWarsaw University of Technology) and COWIPolska. At the same time, KAPE (Polish NationalEnergy Conservation Agency) set up an EnergyPlanning Secretariat (EPS) whose main aim is todevelop conditions for the implementation of anational energy planning training scheme and dissemination of methodology and experiencegained during the main project. The project wascoordinated by a Steering Committee with repre-sentation from the Danish Energy Agency, thePolish Bureau for Housing and Urban Developmentand the Polish Ministry of Economy, EnergyDepartment.

Project example

CHP/DH in Central/Eastern European Countries (CEEC)

Legionowo CHP plant: the project comprised master plan preparation for the Legionowo DH system including a more detailed analysis of thepossibilities of a major natural gas fired CHP plant.An important element of the feasibility study is aPolish electricity market analysis. The possibilitiesof joint implementation financing were investigated.A status report for the DH system was preparedincluding hydraulic analyses of the network. Ananalysis of the CHP option was elaborated.

Myszkow energy audit project: the project comprised a detailed energy audit of the paper millto investigate the optimisation of paper productionand a more energy efficient electricity and heat production. The need for re-engineering the majorheat consuming processes at the factory was iden-tified in order to improve the future CHP schemes.

Analyses will be made on the consequences ofincreasing the heat supply from the mill to thegreatest extent (meeting up to 90-95% of the district heating demand in Myszkow).

The initial project and the two follow-up projects in Legionowo and Myszkow haveresulted in creating a group of Polish municipalities experienced in implementing the planning procedure and a replicabletoolbox useful for energy planning by othermunicipalities.

More information:www.kape.gov.pl/EN/Programmes/Programmes_Bilateral/SPE/index.phtml

Follow-up project

Almost all European countries have enacted specificlegislation for energy efficiency, cogeneration ordecentralised energy. Some legislation includesquantitative targets for cogeneration.

Nevertheless, there are no specific targets for microand small-scale CHP in national energy policies.Most policies and legislation do not even mentionsmall-scale CHP and its promotion. An exception isGermany, where the extension of small-scale CHPinstallations and the introduction of fuel cells arelisted among the objectives of the Conservation,Modernisation and Development of Combined Heatand Power Act.

Basically the same support mechanisms as formedium and large scale cogeneration apply in allcountries. Legislative support measures comprisethe obligation of the grid operator to purchasecogenerated electricity, bonus payments for cogenerated electricity as well as subsidies/ preferable tax treatment for CHP fuels.

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Legislative support1

In addition to the legislative support, in many countries investment for M/SSCHP is supportedunder international, national or regional financialsupport schemes. Objectives of these schemes areusually promotion of climate and environmental protection or SME development. Support is offeredin the form of soft loans. Often, investment costs forM/SSCHP units are subsidised by grants, for instanceunder the Greek operational Programme forCompetitiveness. In some countries, there are support schemes addressing M/SSCHP in particular,such as the Austrian Kommunalkredit under theEnvironmental Support Scheme. Austria subsidises30 % of the costs for M/SSCHP equipment - turbines, engines, fuel cells and exhaust gas purification systems.

Very few countries have introduced mechanisms forthe internalisation of external costs. In Flanders(Belgium), M/SSCHP owners profit by the trade ingreen and cogeneration certificates. Similar systems will be introduced in Bulgaria in 2007 withthe new Energy Regulation which is currently under preparation. In Slovenia, where in 1997 a CO2 tax onfossil fuels was introduced, M/SSCHP owners benefit from the higher efficiency and thus reducedtax burden in comparison to separate production.

Financial incentives3

Micro and sma l l - sca le CHP (M/SSCHP)

Promising small scale power generation concepts are under development to ensure efficiency and environmental performance. Stirling engines, fuel cells and microturbines provide CHP packages for individual homes. In order to promote M/SSCHP, fourteen partners of the OPET CHP/DH cluster focused on compilation and exchange of information on the status quo and framework conditions for the use of M/SSCHP, and information dissemination to support M/SSCHP project development.

Apart from a promotional energy policy, technologyavailability is an important condition for M/SSCHP promotion. The biggest market is Germany with almostfifty companies offering M/SSCHP services such asoperation, maintenance, financing, installation, planning, consultancy and turn-key installations.

Gas engines are most common. Innovative technologysuch as Stirling engines, fuel cells or micro-turbinesare available only in a few countries such as Germany,Belgium and Austria. Estonia has a fuel cell researchcentre.

Although the M/SSCHP technology is available, thereare only a few cogeneration units with a capacity of 1MW and less in most of the European countries. The spectrum ranges from countries like Bulgaria,Greece and Estonia, where SSCHP as a decentralisedsolution for heat and electricity production is just starting to beimplemented to Austria, Belgium, Germany and Spainwhere M/SSCHP technology is widely applied.

Technology2

M/SSCHP offers solutions for a wide range of applications. Nevertheless, in most of the countriesonly very few units have been installed due to a variety of legislative, economic and technical barriers.

Most countries support cogeneration by obligatingthe grid operator to purchase cogenerated electricityand some type of remuneration model. Investmentcost support schemes exist in most countries.However, there are hardly any targets and only afew support mechanisms specifically for M/SSCHP.Sometimes regulations support centralised CHPsolutions excluding M/SSCHP. Only some countriespromote fuels for cogeneration, which increasesM/SSCHP profitability remarkably. Given higherinvestment costs per kW installed capacity, in manycountries M/SSCHP is thus not considered profitable under this legislative framework.

Market potential 4The energy sector structure is far from beneficialfor M/SSCHP in most countries with vertically integrated energy companies, declining heatdemand and low prices for electricity produced inamortised big power plants.

M/SSCHP needs further promotion at the legislativelevel with special regulations and schemes for smallappliances. Measures like CO2 tax and green andcogeneration certificates could also increaseM/SSCHP profitability. M/SSCHP should be consideredas a cost-effective solution for replacing obsoleteand often oversized large-scale heat and powerplants. Last but not least, existing promotion measuresand technical know-how need to be communicatedto potential users.

Total installed M/SSCHP capacity in selected countries Promising M/SSCHP applications

* especially in combination with cooling applications* approximation / estimation

Source: CHP/DH Cluster: Work Package 2, Micro and small Scale CHP, Cross-National Report by berliner Energiagentur (www.opet-chp.net)

With the advantage of turning waste into usableenergy and decreasing greenhouse gas emission,landfill sites are an M/SSCHP application with addedecological value. The examples of the SSCHP installations in the Pääsküla (EE), Tagarades (GR)and Liosa (GR) landfill sites show, how nearby municipalities can be supplied with heat whereasthe cogenerated electricity is fed into the grid. Thelatter can be particularly profitable if electricity produced by landfill gas-fired cogeneration plants isremunerated according to special green electricitytariffs as it is in Estonia, where there is no feed-intariff for cogeneration in general but only for electricity produced on the basis of renewable energy sources. Apart from all these decentralised applications,M/SSCHP is also used for district heating. During the transition in the early nineteen-nineties,the Municipality of Adazi (LV) experienced an industrial and agricultural decline. Given the outdated technology and over capacity, theMunicipality decided to outsource heat production.

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Essent Balitic started to run a SSCHP heat supplysystem and the cogenerated electricity is deliveredto the grid. The better performance of the technology, the reduced consumer cost for hotwater and electricity and the municipal budget benefit due to third-party installation financing areonly a few of the advantages.

Innovative technologies such as micro turbines,Stirling engines and fuel cells are not yet used inmost countries. In Germany, there are innovativetechnologies in the test stage. For example, a Stirlingengine is being tested by the district heat and electricity provider of the City of Kiel, in order toprove that long maintenance intervals and less emission make this technology an attractive alternative.

Another example of innovative technology use is twofuel cells developed for multi-family houses in theGerman cities of Brake and Oldenburg which coverthe major part of the electricity, hot water and spaceheating requirements of the two building complexes.

Best practice applications

The OPET CHP partners have reviewed existingM/SSCHP units in their countries and compiled bestpractice descriptions of typical M/SSCHP applications: hotels, hospitals, commercial and office buildings, residential buildings, industry, landfill sites,agriculture, greenhouses and district heating.

Case studies are available at www.opet-chp.net .

The Hotel Almesberger (A) and Hotel Bankya Palace(BG) cases show that hotels are a profitable application of M/SSCHP units. Apart from heatdemand for hot water and space heating, particularneeds such as spa treatments, swimming pools,laundry, sauna landscapes and hot water for catering services lead to an increased heat demandeven in summer. Similarly, good examples of profitable M/SSCHP applications are sanatoriumssuch as the hospital rehabilitation centre in Palanga(LT) and the San Eloy Hospital (E) and sport centressuch as Zumaia (E) with a high demand for heatingand hot water throughout the year.

The examples of small co/trigeneration in shoppingcentres in Berlin (D) and Celje (SLO) demonstrateM/SSCHP in commercial and office building centres.Both are also examples of third-party financing models: it is not the centre owner, but an energyservice company which has planned and financedand now operates the small cogeneration units attheir own risk. The residential sector M/SSCHP use is not yet developed in most countries. One of the few examples is the micro-CHP in social housing blockswith nineteen dwellings in Herenthout (B). To reduceenergy consumption for space heating and hotwater, thermal collectors, condensing boilers and theM/SSCHP plants were set up in an energy efficiencyproject framework. The cogenerated electricity is fedin to the power grid of two housing blocks.

Due to constant heat demand for space heating andproduction processes, industry offers another interesting application. An example is a furniture factory in Azpeitia (E), where heat is used for dryingwood and cogenerated electricity covers part of thefactory's consumption. Other examples of industrialM/SSCHP use are the small scale CHP use in aBulgarian textile factory as well as in Slovenian poultry processing and sport equipment plants.

Micro and sma l l - sca le CHP (M/SSCHP)

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The partners compiled an up-to-date summary of themajor barriers and existing policy and financial measures used in partner countries relevant to thedevelopment of biomass CHP/DH technologies' furthermarket penetration. The work then concentrated onexchanging experiences and latest innovative technologies in biomass district heat and CHP includingthe whole production-utilisation chain. New membercountries have DH and CHP but mainly using fossil fuels.Some partners have only limited biomass DH and CHPexperience.

The goal was to bring different stakeholders together toexchange information and experience with study tours,seminars, training, case project descriptions, articles,advice and reports. Study tours and training actionshave been successful. The whole biomass utilisationchain has been the subject of study tours in Finland,Austria and Sweden. Finland concentrated on largescale and woody biomass, whereas Sweden andAustria concentrated on small-scale biomass and bio-gas technologies. Study tours included visits to biomasssupply sites and plants and were supported by trainingactions and descriptions of twenty-nine best practice

case projects. International and national seminars wereorganised in Austria, Finland, Hungary, Lithuania, Poland,Scotland, Slovakia, Sweden and the Netherlands.Around 250 participants attended the study tours, whilstthe seminars gathered more than 1800 participants interested in both biomass DH and CHP. People whoattended the study tours and seminars came fromapproximately twenty-eight countries in Europe, Africa,Asia and South America.

Investors in innovative biomass technologies gavedetails of their experience at these events on:• biomass bundling technology• biogas micro turbines• biomass co-firing in large-scale CHP plants

Website and journal publications also resulted, raising awareness of bioenergy as a commercial andenvironmental opportunity.

Actions to overcome market barriers 2

Biomass CHP/DH technologies implementationvaries significantly among countries involved(Austria, Denmark, Finland, Lithuania, theNetherlands, Poland, Scotland, Slovakia, Sloveniaand Sweden). The CHP share in DH production israther high in most countries, but natural gas is predominantly used as a fuel. Countries producing arather high share of their DH by biomass are FinlandAustria, Lithuania and Sweden whilst, for example,The Netherlands' DH uses 99% fossil fuels andSlovakia and Slovenia do not use biomass.

Present use 1

Biomass and waste input compared to total fuel input for thermal power generation in partner countries (European Communities, 2003)

Biomass CHP

Biomass technologies are considered as one of the options with the highest potential to contribute toreaching the RES targets by 2010 for a number of fundamental agricultural, industrial and economic reasons. OPET CHP/DH Cluster focused on the whole supply chain, and the related technologies, connected with the use of biomass resources for CHP and DH purposes. The key aim was to bring theneeded expertise together in order to exploit possibilities for market penetration.

Strengths• CHP and DH have a long history and so they are well

known and developed

• CHP technologies enable the fuel switch from coal, oil

or natural gas to biomass in existing CHP/DH systems

• Legal framework that promotes CHP and biomass usage

• High potential of Biomass CHP in terms of contribution

to RES targets

Weaknesses• Low acceptance and awareness of DH due to history

and the strong position of fossil fuels

• Low availability of finance

• Lack of standards for definitions and activities

• Centralised energy generation systems

• High costs

• Uncertain prospects on the CHP market development

• Immature biomass market

• Lack of efficient distribution channels

• Dependency on policies

Opportunities• RES promoting national and EU legislation: RES are and

will be continuously promoted

• Increasing price of natural gas, oil and electricity

• Broad category of biomass CHP technologies varying

from micro-scale to large-scale production

• A rather strong position of industrial CHP, opportunities

for fuel switch, i.e. to biomass CHP

Threats• Privilege of natural gas, coal and oil

• The present process of liberalisation of the energy

sector may lead to a (temporary) hesitance towards

new investment projects

• Falling prices of electricity

• Changes in taxation or policies for subsidies

• Spreading the gas networks into areas that have

biomass potential

• Failure of deployment of new technologies

Biomass CHP/DH SWOT analysis

Source: www.opet-chp.net/chpbiomassswot.asp

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With rapid economic development and increasingliving standards particularly in the property sector,the demand for electricity (for heating and air conditioning) has been increasing. China is one ofthe largest coal consumers in the world. Coal is alarge part of the energy mix. There are more than500.000 small coal-fired boilers with less than 50%energy efficiency, leading to heavy air pollution. Inthe context of sustainable energy development andenvironmental protection, the strategic impact ofenergy efficiency is emphasised as is changing theenergy mix through gradual replacement of coal bynatural gas and other clean energies.

Advantages of CHP/trigeneration fuelled with naturalgas are high energy efficiency, pollutant emissionsreduction, a diversified energy supply, the shavingof peak power grid load and balancing of seasonalgas pipeline load .

Up to 2001, there was 32 GW of CHP installedcapacity (6 MW/per unit and beyond), whichaccounted for 13.37% of installed thermal power.60% of central heating in urban areas is producedby CHP. From 1991 to 2001, heating area has grownfive-fold up to 1.2 billion m2, and 12,874,369 TJ (trillion Joule) of heat per year. In recent years,annual average increment of areas heated withinbuildings has been more than 200 million m2.Compared with separate production of electricityand heat, CHP has contributed to energy savings of25 million tce (tonne of coal equivalent), and reduction of 65 million tonnes of CO2 in China.

CHP has been mainly used in industrial sectors and forcentral heating in northern cities. Many self-providedcogeneration plants exist in energy intensive companies, such as petroleum, chemical, metallurgical and light industrial sectors. CHP isused for residential central heating in northerncities, and for commercial buildings and industrialuse in southern municipalities and provinces, suchas Shanghai, Jiangsu, Zhejiang and Anhui along theYangtze River. In industrial parks, cogenerationplants are important for energy providers in southern China, particularly in the Yangtze River andthe Pearl River Deltas among other examples.

The promotion of trigeneration fuelled with naturalgas is at an early stage in China. However, thereare a few pilot projects of gas-fuelled trigenerationcarried out in the regions of Shanghai and Beijing,where natural gas supply is available. Furthermore,in the Pearl River Delta, there are some oil-fuelledinternal combustion engine generators, someequipped with waste heat utilising devices.

Legislation and regulations have been developedto promote CHP development. There are difficulties with grid connection due to lack of specific legislative and regulatory provisions foroperation and poor economic performance as aresult of higher gas prices and environmental cost externalisation, among other factors.

Although the power industry sector is now undergoing reform to liberalise the power market,its monopoly status remains, to a certain extent,unchanged. Another monopoly, that of naturalgas, has been formed in recent years. Hence, barriers on CHP/trigeneration exist: lower publicawareness, incentive policies and instruments,advanced technology and equipment manufacture, relations with networks (power grid and gas pipeline) and energy pricingamong other factors.

At present, Chinese market actors including government decision makers, industrialists,designers and potential users are still not aware ofCHP/trigeneration advantages. CHP/trigeneration isnot easily accepted by the market, particularlypower companies and natural gas companies.

Key potential future markets for natural gas-fuelled CHP/trigeneration are in Beijing andTianjin, in the Pearl River and Yangtze River Deltas,including Shanghai, Jiangsu and ZhejiangProvinces among others, where many cities forbiddirect coal burning. These regions are hot in summer and cold in winter, the period of spaceheating and cooling being six to ten months.

China: CHP and trigeneration

In China, CHP has been developed over five decades. Great success has been achievedwith coal-fired CHP technologies, equipment manufacture and design of CHP systemsamong others. CHP technology enjoys an important role in enhancing energy efficiency,alleviating pollution emissions and improving Chinese urban infrastructure andliving conditions.

Future prospects

• Increased awareness of Chinese energyactors on OPET and EU energy policies, technologies and best practices.

• Established and strengthened networkingamong OPET China partners, dealing withenergy and industry, EU partners as well as Chinese energy organisations and governmental departments, which are significant for completion of existing projectsand development of future collaboration.

• Increased capabilities of China partners toact as bridges for Chinese actors to EU,through exchange and collaboration with EUpartners, in terms of study, events for dissemination etc.

• Extended channels for obtaining and updating EU information and cooperationpotential dedicated to the OPET network.

Other achievements related to OPET projects in China :

For more information, please contact sonja.ewerstein@stem.se

The OPET Thematic Brochures:Resu l t s o f a c t i v i t i e s 2003 -2005

• Energy Technologies in the Building Sector

• Energy Technologies for the Generation of Electricityfrom Renewable Energy Sources

• Combined Heat and Power Generation (CHP) and DHC(District Heating and Cooling) Technologies

• Clean Fossil Technologies Within the Energy Market

• New energy technologies and efficiency measures intransport

• Mediterranean Cooperation for New Energy Technologies

• Modern and Clean Energy and Transport technologies inLatin America and the Caribbean

• Accelerating Market Introduction of Promising EarlyStage Technologies for Transport and Energy

The collection comprises 8 brochures and covers the following technological topics: