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EU Cogeneration Directive The European Union has developed a cogeneration directive intended to promote and develop high-efficiency CHP. The directive includes feed-in tariffs, grants and loans, tax incentives, and provisions for national CHP market potential assessments . The directive acknowledges industrial CHP and district energy systems. The governments of some European countries have encouraged their businesses and utilities to expand capacity for clean energy generation.33 Germany, for example, has reduced its CO2 emissions by 18.5 percent compared to 1990, and is on track for a 40 percent reduction by 2020.34 This type of progress comes from a combination of finding the right technological solutions and creating a policy environment that allows the solutions to be implemented. Feed-In Tariffs Feed-in tariffs have been used in Europe to encourage alternative energy development and CHP. A feed-in tariff is part of an agreement between an electricity generator and a local distribution company whereby the former is paid an agreed-upon rate (generally higher than wholesale) for electricity that is fed back onto the grid. These agreements are typically put in place for 15–20 years. Any increased savings or costs to the utility are passed on to consumers. In Germany, this has resulted in a cost increase of $3 per month for the average homeowner. This type of arrangement is attractive to CHP users because it guarantees a long-term revenue stream for excess electricity produced from sizing the system to meet thermal demand, ensuring maximum performance and efficiency. A procedure for assessment of net system and potential societal benefits of CHP would be valuable to make sure feed-in tariffs in the US are designed to be equitable for non-participants (i.e., other rate payers besides the CHP users). Greenhouse Gas Policy Mechanisms One market-based approach to limiting greenhouse gas (GHG) emissions is called a cap-and-trade system. This system sets a limit on GHG emissions such as CO2 for a region or a country as a whole. Tradable permits are issued to designated sources, and the total number of permits is equal to the emissions cap. It will be important that CHP is recognized as a valuable GHG reduction option in any GHG trading system that might be implemented in the US. The main challenge facing CHP is that, with CHP, on-site emissions may increase even though overall regional emissions decrease. Care must be taken by trading system designers to ensure that CHP’s regional GHG benefits can be captured in the program’s allowance structure and eligibility requirements. Another approach for valuing carbon emissions is carbon taxes. This has been implemented on a limited basis in several Scandinavian countries and the Netherlands.35 Again, any system involving carbon taxes needs to acknowledge the benefits of CHP in reducing overall GHG emissions even though on-site emissions may increase. 33 Directive 2004/8/EC of the European Parliament and of the Council of 11 February 2004 on the promotion of cogeneration based on a useful heat demand in the internal energy market and amending Directive 92/42/EEC. 34 Barber, Lois. May/June 2008. Feed-In Tariffs. EnergyBiz. 35 Bryner, Gary. 2007. The Idea of a Carbon Tax. Utah Climate Policy Symposium. “Feed-In Tariffs.” EnergyBiz. Combined Heat & Power: Effective Energy Solutions for a Sustainable Future 27 If we could achieve 20 percent of generation capacity from CHP by 2030, we could save more than 5 quadrillion Btu of fuel annually, the equivalent of nearly half the total energy currently consumed by US households.PDF Image | COMBINED HEAT AND POWER
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