Delivering an Efficient EU Energy System to Benefit Industry, Commerce and Homes

By Fiona Riddoch, COGEN Europe
Winter 2014

As winter approaches, EU policymakers are focusing their attention on ensuring Europe's heat and power amid current geopolitical concerns over the security of the EU's energy supplies from the East. In the discussions around securing the supply of energy, European policymakers are becoming more interested in how the imported energy is actually used and how efficient that use is. Hence the European Commission has begun to talk more consistently about the role of heat in Europe’s overall energy demand. The efficiency of supply and use of both heat and electricity will be themes of upcoming energy debates.

Embracing CHP delivers energy savings to the power system, boosts asset utilisation and supports the EU's overall climate and energy objectives to 2030. Today, cogeneration is already providing 11% of Europe's electricity (amounting to 109 GW electrical capacity) and 15% of its heat, and it could do more. Significant energy wastage through heat venting continues across the electricity network today, while high heat demand in all sectors is still largely provided by local heat-only sources.

Moreover, as the most efficient form of schedulable generation on the networks, a wider role for CHP in the various services and balancing markets improves the overall grid efficiency. CHP is used across the economy in a diverse range of applications. The smallest capacity of under 100kW meets the heat needs of local smaller commercial or public buildings and smaller heat demands, while at the other end of the capacity range the larger (above 10 MW) plants are providing heat for larger industrial processes and some very large industrial complexes. In between are universities, hospitals, smaller processing and manufacturing industries and local area heat networks, which all use cogeneration to provide high efficiency heat and power for their customers and clients.

Moreover, there is enormous potential for new investments in CHP to help boost the efficiency of existing heat networks in Central and Eastern EU member states. Cogeneration plants generate almost ¾ of the thermal energy needed in district heating and cooling networks (DHCNs). The growth potential of DHCNs in urban areas is significant, while in less dense zones, microcogeneration devices are ideal low carbon and energy efficient solutions.

The European Union has limited energy resources and its labour costs are reflective of a developed economy. The health and competitiveness of Europe's economy in the global market therefore requires Europe to use its resources effectively. Energy is a key resource across the whole economy.

Economic benefits can accrue from combining heat generation and electricity generation. Increasing the CHP base in European industry can improve a company's competitiveness and thus contributes to the industrial renaissance powering Europe's economic recovery. It can also improve the efficiency and reduce the total cost of the whole electricity system.

Industry uses large amounts of high temperature heat in industrial processes, making it an attractive location for highefficiency cogeneration. Instead of simply burning energy to produce heat, an industry can decide to use combined heat and power on site to gain greater control over its energy costs, boost productivity, and demonstrably reduce its carbon footprint. Economy-wide, Europe’s SMEs - which form an essential part of the industrial supply chain - can also benefit considerably from making appropriate use of CHP.

Of the 106 GWe of cumulative CHP electrical capacity in the EU, around half is embedded in industry - saving the EU 15 Mtoe of fuel imports per annum and delivering 38 Mt of CO2 emission savings every year. Industry uses 2,500 TWh of energy, which is 43% of Europe’s heat demand. Member states themselves have estimated that a doubling of the overall CHP sector out to 2030 is economically possible (100 GW electrical capacity), and would translate into additional reductions of fuel imports by 25 Mtoe and a further CO2 reduction of 55 Mt.

Wider adoption of cogeneration in a suitable policy framework can therefore boost the productivity and competitiveness of European industrial sites and improve the overall efficiency of the electricity system. Cogeneration is the most efficient use of fuel for heat and power. The EU framework in which it operates must clearly recognise its advantages in terms of energy efficiency, CO2 reduction and economic advantages, both now and in the 2030 time horizon.

Policymakers must design EU energy, climate and industrial policies that work in harmony to harness the potential of cogeneration to deliver the energy that industry needs. However, there are pressing issues in a number of countries where industrial CHPs deserve immediate attention. The implementation of the Energy Efficiency Directive provides a valuable legislative tool for member states to make the policy framework changes necessary for industrial CHP to grow. The removal of barriers to existing CHPs taking part in the new services market is also centrally important.

Within a suitable energy services market, industries that adopt CHP have much to offer electricity networks as they incorporate new higher levels of renewables on the power system. CHP plants offer firm capacity and their supply of electricity is predictable and reliably available. On average, the size of CHP plants is modest compared to central generation plants, allowing industrial CHP plants to offer a range of services through the aggregation of their capabilities. This trend, based on new modular CHP designs featuring heat buffers, is emerging against the backdrop of increased demand for more flexibility in the energy system.

EU policymakers must pay greater attention to reducing primary energy consumption through increased efficiency across the EU energy networks. Swift and forward-thinking implementation of the Energy Efficiency Directive - and particularly its supply side chapter - has the potential to significantly improve the energy security records of many industrial and commercial sites, and thereby of the EU as a whole. We urge the EU institutions to look more closely at measures to address ongoing losses in the energy supply sector, including the potential for cogeneration to play a greater role in the 2030 timeframe.