By Steve Hodgson, Contributing Editor, COSPP:
Three things are holding back the development and modernisation of cogeneration and district heating and cooling (DHC) around the world: poor strategic planning for heating and cooling infrastructure; local energy market conditions that fail to ensure that energy prices reflect generation costs; and a lack of long-term energy policies.
It’s complicated – says the International Energy Agency (IEA), in an ambitious report released in May: Linking Heat and Electricity Systems, that attempts to analyze the barriers to cogeneration and DHC, and point to policy solutions. The report is backed-up by accounts of six existing systems: industrial cogeneration schemes in Spain, Mexico and Scotland; and district energy schemes in Denmark, France and Saudi Arabia.
Going back to basics for a moment, we know that well-designed and sited cogeneration and DHC schemes offer considerable economic and emissions benefits, and can also provide generation flexibility and energy security advantages. So why has deployment world-wide been ‘relatively stagnant’, at a level of around 10% of global electricity generation capacity since 2000, according to the IEA report?
Well, there has been a major recession, and much attention policy has been concentrated on large-scale solar and wind energy in the last 15 years, perhaps to the detriment of cogeneration and district energy. But large cogeneration and district energy schemes can both present complex development issues. CHP can sometimes be said to inhabit a no-man’s land somewhere between mainstream utilities and energy users. It needs to work within the economic and regulatory environments of both the electricity and heat industries, particularly where power is exported to the electricity grid. Meanwhile, the development of new DHC schemes has high capital costs and often requires considerable cooperation and investment from local government organisations.
Yet some regions of the world are showing a renewed interest in the technology, says the IEA. The 2012 Energy Efficiency Directive calls for an assessment of the potential across EU countries; a 2012 Executive Order in the US aims to achieve 40 GW of new capacity by 2020; and China aims to reach 50 GW of cogeneration by the same date.
The IEA is certain that these barriers can be overcome, and points to the necessary policy strategies: develop local and national heating and cooling strategies to encourage DHC; ensure that market conditions promote transparent fuel prices; guarantee clear grid interconnection standards – that sort of thing. Finally, ensure long-term stability of energy policies and market regulation to secure investment in high efficiency heat and power generation. Otherwise cogeneration will remain at a stagnant 10% for much longer.