National Report on State of Small Scale CHP Policy and Sector Situation

Transcription

1 OPET CHP/DH Cluster Work package 2: Small and micro scale CHP National Report on State of Small Scale CHP Policy and Sector Situation Deliverable no. 2a Tallinn University of Technology, Estonia May 2004 European Commission (Directorate-General for Energy and Transport) Contract no. NNE5/2002/52: OPET CHP/DH Cluster

2 OPET CHP/DH Cluster Work package 2: Small and micro scale CHP National Report on State of Small Scale CHP Policy and Sector Situation Deliverable no. 2a Author(s): Sulev Soosaar Organisation: Tallinn University of Technology Address: Kopli 116; Tallinn 11712; Estonia Tel.: (+372) Fax: (+372) Web: The project "OPET CHP/DH Cluster" has obtained financial support from the European Commission (Directorate-General for Energy and Transport) under the contract no. NNE5/2002/52 for Community Activities in the Field of the specific programme for RTD and demonstration on "Energy, Environment and Sustainable Development - Part B: Energy programme" The responsibility for the content on this publication lies solely with the authors. The content does not necessarily represent the opinion of the European Community and the Community is not responsible for any use that might be made of data appearing herein. 2

3 Table of Contents 0 Summary 4 1 Surveys A brief survey of the Estonian energy sector Electricity sector Natural gas sector Existing CHP plants Technology sector Potential suppliers and maintenance/service companies Local research and development Small and micro scale CHP related policies and measures 10 2 Developing Tools and Measures Evaluation of present and potential policy measures Overview of barriers to deployment of CHP in Estonia Other aspects of CHP promotion 13 3 Conclusion 15 4 References 16 3

4 0 Summary The present situation of Estonian energy sector with regards to wider introduction of small scale CHP is described. The impact of positive and negative factors to deployment of small and micro scale CHP in Estonia is analysed. Regarding small or micro scale CHP, there is no legislation, other regulations or standards at present in Estonia. Due to the small size of Estonian power system, present overcapacity in generation and some structural features of the market organisation the introduction of small-scale CHP technology, including new innovative mini and micro scale technologies face several barriers, a brief overview of which is presented. At present, in Estonia the majority of electricity is generated firing oil shale, which is a low-grade domestic fuel with the high carbon emission coefficient. Nevertheless, the high level of specific emissions does not cause national environmental problems, as the obligation for Estonia taken with the Kyoto Protocol is 8% reduction while the actual reduction is more than 50%. Therefore, only stricter environmental restrictions would limit the use of oil shale and force to introduce updated combustion technology or replace at least some oil shale based electricity with the electricity generated using other fuels. Only these factors may give a stimulus to develop and promote the distributed energy concept in Estonia. As assessed today, the only potential in Estonia, at least for mid-term future, for micro CHP seems to be in new or renovated recreational, sporting, holiday, etc. centres located far from electricity networks. Regarding higher generation capacities, i.e. small scale CHP, the wood based technology may have some perspective due to the available support to electricity generated using renewable resources feed-in tariff and purchase obligation of renewable electricity for network companies. It is interesting to point out that in Estonia comprehensive research is carried out in the field of application of fuel cells in stationary energy supply. The system that is being developed is a scalable power generation plant based on 1 kw SOFC fuel cell stack operated on natural gas. Finding an equipment supplier or maintenance company should be relatively easy, as there are quite many suppliers and maintenance companies active in energy field in Estonia. At least two or three successful pilot projects may give essential help for the new technology in entering the energy supply market in Estonia. 4

5 1 Surveys 1.1 A brief survey of the Estonian energy sector Estonia is a small country (45.2 thousand km 2 ) with the population of 1.36 million. The uniqueness of Estonian energy sector is its reliance on oil shale as the primary source of energy. Mainly due to indigenous resources of oil shale the self-sufficiency of primary energy supply in Estonia is ca 60%. In addition to oil shale, wood fuels and peat have a percentage over 10% in the total primary energy supply. The share of indigenous fuels in total production of heat and electricity is even higher ca 80% Electricity sector The electricity sector can be characterized with very centralised generation in % of electricity was generated in two power plants. These plants are world s largest oil shale fired condense/chp power plants. At present, the Estonian network is not interconnected to any EU Member State. Instead, it is still part of the ex-soviet Union s UPS/IPS system and is interconnected with Latvian and Russian (St. Petersburg and Pskov) electricity systems. Estonia has been a net electricity exporter for a long period. Export goes mainly to Russia and Latvia, although in limited quantities, as Russia s solvency is insufficient and Latvia s demand has been quite low during last years. In 2002, Estonia s electricity net export was only 690 GWh. There exists a plan to interconnect Estonia s electricity system with the Scandinavian one The construction of a under sea cable to Finland (project Estlink) with capacity of 315 MW has been under discussion for some years already, final decision may be taken in near future. Currently there is enough electrical capacity in Estonia to fulfil its own needs and to export, but when EU s Large Combustion Plants Directive (2001/80/EC) will come into force then additional generation capacity will be needed to cover Estonian consumption. In the EU accession negotiation Estonia obtained a transition period until 2016 for full implementation of the LCP Directive. At present, the whole electricity sector in Estonia is dominated by public limited company Eesti Energia AS. There are only some private-owned companies dealing with generation (mini hydro, small-scale and some industrial CHP plants) and with distribution of electricity. Eesti Energia AS is a 100 per cent state-owned vertically integrated public limited company, engaged in power production, transmission, distribution and sales as well as other power-related services. Estonia s power system consists of the national grid (five thousand km of transmission lines over 110 kv, 131 substations), distribution networks (59.1 thousand km of lines17 thousand substations) and the following power plants: Narva oil shale fired power plants (Eesti PP installed electrical capacity 1610 MW and Balti PP 1290 MW), the Iru CHP Plant (190 MW), some industrial CHP-s (about 120 MW), wind generators (2,2 MW) and hydro power plants (about 2.5 MW). 5

6 Table 1. Electricity generation capacities and production by type of plant (2002) Type Capacity (MW) Gross production installed available GWh share Thermal % Hydro and wind % TOTAL % In 2002 more than 90% of electricity was produced in oil shale based power plants. Oil shale is a costly and polluting source of energy that could jeopardize Estonia s competitiveness in a future liberalized market. However, the social implications of decreasing electricity production from oil shale would translate into massive job cuts. Therefore, Estonia is seeking for more efficient and environmentally friendlier oil shale applications instead. Today, the reconstruction of two old units (215 MW each) in Balti PP (Narva Power Plants) is under way. According to plans, the new projected oil-shale fired Atmospheric Circulating Fluidised Bed Boilers (ACFB) will meet all the limitations imposed by the EU directives and Estonian authorities Natural gas sector All natural gas used in Estonia is imported from Russia only. In Estonia there are more than 2100 km of natural gas pipelines (incl. more than 820 km at high pressure), 27 high pressure regulation stations and 517 gas distribution stations. All natural gas is supplied by Gazprom (Russia) by two main pipelines coming via Latvia and two smaller pipelines of minor importance coming directly from Russia. Location of gas pipelines on the territory of Estonia is presented in Figure 1. Natural gas is supplied in 16 cities of Estonia. The list of these cities together with smaller settlements, where natural gas supply has been introduced, is given in Table 2. The data on population is given to indicate the size of cities. Table 2. Cities and smaller settlements with natural gas supply County Cities and smaller settlements (*) Population, thousands Harju Kehra 3.2 Kuusalu* 4.6 Saku* 7.2 Saue 4.9 Tallinn Ida-Viru Aseri* 2.3 Jõhvi 12.3 Kiviõli 7.3 Kohtla-Järve 47.9 Narva 68.4 Narva-Jõesuu 3.2 6

7 Sillamäe 17.0 Jõgeva Jõgeva 6.4 Lääne-Viru Kunda 3.9 Rakke* 2.0 Rakvere 17.0 Põlva Põlva 6.5 Räpina 3.0 Värska* 1.5 Rapla Järvakandi* 1.7 Kohila 3.4 Tartu Tartu Viljandi Viljandi 20.5 * in case of small settlements the population is given for the whole rural municipality The rough estimation indicates that approximately half of population in Estonia lives in cities and towns where the supply of natural gas is available. At present, natural gas is supplied to: more than 120 thousand dwellings (apartments, flats, family houses); more than 900 clients in commercial and public sector; 224 industrial companies; 60 DH utilities; 6 CHP plants. The present capacity of gas pipelines in Estonia can guarantee significantly larger consumption than that of today. Due to economic restructuring, recession and related price increases the consumption of natural gas dropped in two years from the peak in million m 3 down to 442 million m 3 in Since 1994 the gradual increase has taken place: in 2002 the consumption of natural gas was 743 million m 3. 7

8 Figure 1. The natural gas system in Estonia The introduction of CHP plants firing natural gas may be potential development option in some locations where the gas supply is present already. At present, the economic feasibility may be in industry higher than in DH sector. It may be stated that in locations close to existing pipelines the supply of natural gas needed for a small-scale CHP plant is guaranteed. Of course, the conditions of connection are an object for negotiations with the gas company AS Eesti Gaas and depend mainly on the distance of the new consumer from the pipeline as well as on the annual gas demand of the new customer Existing CHP plants Historically, independent CHP plants were installed in several enterprises, where technology needed both steam and electricity, for example pulp and paper (AS Horizon) and peat briquette manufacturing plants (Tootsi, Sangla). These plants had backpressure steam turbines and were installed already in 1940-s and 50-s. In the second half of 1990-ies some new CHP installations have been commissioned in industrial and commercial enterprises, waterworks and wastewater treatment plants. Table 3. Cogeneration plants in Estonia CHP plant Installed capacity, MW Year of construction Fuel Electrical Thermal Plants owned and operated by national power company Eesti Energia AS: Balti EJ Oil shale Iru SEJ Oil/natural gas Kohtla-Järve EJ Oil shale Ahtme EJ Oil shale IPPs (industrial and commercial): AS Viru Energia Oil shale AS Horizon 6? Black liquor Tootsi Turvas AS 5 14? Peat AS Silmet Oil shale AS Kunda Nordic Cement Natural gas Sangla Turvas AS (renov.) Peat AS Balti Laevaremonditehas Natural gas AS Grüne Fee Natural gas AS Terts Landfill gas AS Põlva Soojus Natural gas AS Narva Vesi Natural gas AS Kristiine Kaubanduskeskus Natural gas As a rule, owners of CHP plants self-consume the generated electricity or sell it through the own network or direct line to customers and accordingly have reduced the purchases from the grid. Heat is also self-consumed or sold directly to end-users or to DH enterprise (e.g. in Kunda City) for reselling. It has to be pointed out that only in Põlva CHP plant the excess of generated electrical energy was initially sold to outside consumers through network of Eesti Energia AS. After a year of operation, 8

9 the acceptable for both sides (i.e. for owner of the CHP plant and the grid owner Eesti Energia AS) purchase price of CHP generated electricity could not be agreed on and therefore the CHP has been completely out of operation for a couple of years already! Installed during last years new CHP units are typically of gas engine type, except in Viru Energia, where a steam turbine was installed because of local conditions: unused potential of steam boilers and need for steam in technology. In almost all cases (except Põlva which was a demo project) the installation of CHP unit has been economically motivated. The specific investment cost (EEK/MW e ) has varied quite considerably for different engine-type units (as much as a factor of 1.5). 1.2 Technology sector Potential suppliers and maintenance/service companies Due to the small size of Estonian market, but first of all due to the situation in the energy sector there are no direct representatives of CHP equipment manufacturers in Estonia. Nevertheless, equipment of companies like Caterpillar, Jenbacher and Wärtsilä are represented via some Estonian energy equipment suppliers. In Estonia there are quite many firms operating in the field of maintenance and monitoring of energy equipment. As the territory of Estonia is small, the distances are not a problem especially if the service companies are located in larger cities like Tallinn, Tartu or Pärnu. However, the small number of units to be monitored and maintained may result in high costs. Design, procurement, project management in these fields there are several companies as well capable for carrying out CHP projects. There are also some consultancy companies capable for preparing relevant pre-feasibility and feasibility studies as well as for consulting the clients in the field of cogeneration Local research and development In Estonia, comprehensive research and development work is conducted in the field of application of fuel cells in stationary energy supply. An Estonian private capital based R&D company Elcogen Ltd. was founded in 2001 with the goal to develop technological solutions for a solid oxide fuel cells (SOFC) system application. The concrete objective is to develop proprietary technology for intermediate temperature SOFC to form a basis for a modular SOFC system. In 2001 Elcogen Ltd. launched the fuel cell program with the major goal to lower the operative temperature of solid oxide fuel cells 1. It would enable to reduce the cost of small-scale CHP systems. The system that is being developed by Elcogen is a scalable power generation plant based on 1 kw fuel cell stack operated on natural gas. 1 Elcogen's fuel cell is based on porous tubular anode. The load-carrying anode tube is coated with a thin dense electrolyte layer and a porous cathode layer. The fuel cell operates on hydrocarbon fuels and uses air as the source of oxygen. 9

10 For developing fuel cell technology, Elcogen has signed agreements with Estonia's two leading research institutions, the National Institute of Chemical Physics and Biophysics and the Institute of Physical Chemistry of Tartu University. At present more than twenty Estonian top scientists are involved in fuel cell research in these institutions. Elcogen's target is the market of kw stationary applications, such as grid parallel residential, commercial, industrial and off-grid remote applications. For the market of stationary applications, SOFC is the most suitable type of fuel cell. SOFC has several advantages over other fuel cell technologies: SOFC can use a wide range of different fuels like natural gas, liquefied petroleum gas, biogas etc in addition to pure hydrogen. SOFC has particularly high efficiency. Electrical efficiency of up to 70% is achievable. Utilization of process heat in heating or cooling systems increases the total efficiency of the system to over 90%. SOFC is made from commonly available materials and does not require expensive precious metals as catalysts. 1.3 Small and micro scale CHP related policies and measures The National Energy Conservation [Energy Efficiency] Target Programme for years was approved by the Government in January In the Programme it is pointed out that an important way of increasing primary energy (fuels) efficiency at the macroeconomic level is deployment of heat and power co-generation. According to expert opinions given in the Programme, CHP can be implemented in district heating systems of towns and settlements by ca 200 MW e (ca 300 MW th ), enabling to generate about TWh e and 1.5 TWh th. The Programme describes that according to the preliminary estimations conducted in industrial enterprises so far, it is possible to create the combined generation powers in the range of ca 25 MW e on the basis of the heat intensity, which enables to generate 0,12-0,15 TWh e and 0.2 TWh th. There are no estimations presented about the possible share of small or micro scale CHP in these estimations of the total CHP potential. As an important principle, it is emphasized in the Programme, that in order to realise the possibilities for development of CHP, it is necessary to maintain the district heating systems. The potential possibilities or feasibility aspects of mini or micro scale CHP projects are not even mentioned in any of official energy policy documents or projections made for the energy sector of Estonia. The analysis of legislation indicates that the general targets mentioned above are very poorly supported by legal acts. In the Energy Act, which was in force from 1 January 1998 to 1 July 2003, there was provided only one minor indirect supportive measure ( 18(6)): If the electric capacity of energy equipment installed by an energy producer does not exceed 10 MW per energy producer and if electric power is produced in the process of combined heat and power production or using renewable energy sources, the energy producer has the right to sell electric power directly or, within the limits of the network's technical possibilities, through a network to every user on the basis of a contract entered into with the user. 10

11 In current legislation, similar provision is missing. The Energy Act was repealed by the new Electricity Market Act, which was enforced on 1 July The new Act does not give any priority or support to cogeneration. Even more, the term cogeneration is used only once in whole Act, stipulating the need for accounting level separation of heat and electricity production costs: 55 (4) A producer who is an undertaking in a dominant position as defined in the Competition Act and who generates electricity in the combined heat and power production regime shall, at the request of the Energy Market Inspectorate, submit information on the allocation of revenue and expenses separately for the generation of electricity and for heat production together with the relevant reasons. Nevertheless, some provisions in The Electricity Market Act for indirect support to small producers can be treated as supporting also CHP. According to ( 7(2) of the Act: A small producer is a producer the net capacity of whose generating installations located in Estonia together with the net capacity of generating installations located in Estonia and owned by producers belonging to the same group with the producer does not exceed 10 MW. In 75 (3) of the Act it is provided that a network operator or the seller designated by it shall, in order to cover the network operator s network losses and for sale to the non-eligible consumers, purchase electricity generated by a producer possessing generating installations with the total net capacity of at least 500 MW located in Estonia from oil shale mined in Estonia or by a small producer. The Act stipulates a new general principle of feed-in purchase tariff for market dominating network operators on electricity produced using renewable energy sources. The obligatory purchase tariff on renewable electricity is tied to the minimum price for the electricity generated in the oil shale firing power plants in Narva. The principle is simply a fixed multiplication of 1.8 times the Narva production price (at present approximately 440 EEK/MWh (28.12 EUR/MWh)), which provides a level of 792 EEK/MWh (50.61 EUR/MWh; excl. VAT). Therefore, in case the CHP plant fires renewable energy source (e.g. wood chips, biogas, landfill gas, etc.) it is eligible to sell its electricity surplus to the network operator who dominates the market. For biomass using plants this provision will be in force seven years, but not for longer than until 31 December For micro (and partially for mini) scale CHP it is also important that the market activity licence is not required ( 22) if the generating installations have total net capacity of less than 100 kw. Even more, the provisions of the Electricity Market Act are not applicable at all for the generating installations with the total net capacity of 100 kw or less, provided that such generating installations are not connected to the system ( 3 24). The only other legal act, which could be related to promotion of CHP was the Government regulation (No. 370) on Conditions of State Aid Targeted to Protection of Environment, which was issued in December There was provided that the process of cogeneration is eligible for applying for state aid, both for investments and operations. On 1 May 2004 the Regulation was repealed as in Member States the granting of state aid can be authorized only by the European Commission only. Up to present, in Estonia there have been no cases of granting state aid to the DH/CHP sector, but this option should be considered if renewable sources of energy (here: biomass) would be used in DH systems and in cases of introduction the cogeneration of heat and electricity. 11

12 2 Developing Tools and Measures 2.1 Evaluation of present and potential policy measures In the Danish Energy Authority financed a project Support for Development of National Strategy for Utilisation of Combined Heat and Power in Estonia. The project was carried out by Energy Consulting Network, Dansk Energy Management (both Denmark) together with EnPro Engineers Bureau and Tallinn Technical University as local consultants. In the conclusions of the project it was emphasized that current legislation in Estonia does not favour CHP as such. Estonia as a acceding EU member state has to comply with the green electricity directive (2001/77/EC), which suggest that increased emphasis must be placed on RES based electricity production in the future. Therefore, in the project report it was concluded that biomass based CHP may provide a powerful tool to meet the demand, and at the same time make the first attempts to tune in to the probable demands of the proposed CHP directive, when it becomes adopted in the EU. In view of the existing legislation, which includes electricity purchase obligation and fixed principle for feed-in tariff from electricity produced from RES, it would seem logical to focus on RES/biomass based CHP as the main element in the strategy. Regarding tariffs it was concluded that the Electricity Market Act provides a new general principle for pricing of RE based electricity sold to the network, connecting the minimum price for electricity produced on renewable energy sources to the electricity production price in the oil shale based large power plants. For CHP (only for the biomass based one) the price level is guaranteed for seven years. After this period, the IPP must be able to operate on normal market conditions. The opinion of the consultants in frames of the abovementioned project was that the expansion of the period of support from seven to 12 years is absolutely necessary to develop and maintain an attractive and stable long-term investment framework for potential investors. Regarding the financial support it was stated that the basic economic viability of gas or biomass based CHP plant is presently not solid enough to attract investors. A supportive element is necessary. Direct and indirect measures by state to promote the use of CHP should be considered. Environmental taxation at its present level has only minor effect on the CHP economics. However, if the environmental taxes were increased significantly it would provide a direct incentive, and would also create an in-direct incentive in terms of tax revenue, which could be earmarked for supportive investments in the CHP sector. A fuel tax may have much more significant impact. It should be considered to establish a differentiated fuel tax with the purpose of creating an incentive for changing fuel use. This fuel tax would, however, risk having a significant distortion element with regard to employment and to the trade balance. A direct injection of capital in terms of grant support will have the most significant effect. Capital grants could come from the Estonian state, from Green Funds or from international financing institutions, donor programs, EU structural funds or via the Kyoto flexible mechanisms (Joint Implementation). Direct bilateral aid should however not be seen as the major part of these capital 12

13 injection measures, but the opportunities to be involved in the elaboration of Joint Implementation projects should be actively used. The studies from Estonia indicate that the JI mechanism can and should be included as an active financial instrument, and may contribute significantly to the viability of the biomass based CHP projects Overview of barriers to deployment of CHP in Estonia In Estonia, during public debates on deployment of CHP and distributed (decentralised) electricity in general the following barriers have been pointed out most frequently: the taxation system and principles of pollution charges do not take into account high efficiency of CHP process; the pace of the electricity market liberalisation process is not fixed up to the full opening of the market; there are many uncertainties in future development of the fuel prices, as well as, and even more, in future level of oil shale based electricity price; the gas supply system does not cover the whole territory of Estonia; there is a need for officially accepted methodology of cost distribution between heat and electricity produced in CHP plants; small CHP plants (with one generation unit only) have to conclude the contract on reserve capacity with the national electricity company; there is no favourable tariff system for purchasing of reserve and peak energy for companies (IPPs) who generate the base load electricity themselves; the tariff system for selling surplus electricity into national grid is not flexible; the fees and technical requirements for connection into national grid are too high; the system for applying market licenses is complicated; the costs for improving the relay protection and control systems in distribution networks are quite high. The trend in the EU is to move towards increasing utilisation of high-efficient energy generation, which includes utilisation of CHP. Estonia will need to start the necessary analysis regarding compliance and definition of high efficiency CHP. Estonia will have to consider various support schemes. Among the criteria in the support schemes it should be included that only CHP plant, which can meet required efficiency and has possibility to sell the heat to a DH system (for residential, pubic or industrial use) should be included in a strategy of support. Estonia will need to initiate a systematic data collection, which will fulfill the EU requirements for establishing details and monitoring the national potential for CHP Other aspects of CHP promotion Important players in the heat market such as installation contractors could play decisive role in the dissemination of new heating technologies. Therefore, they need to be well prepared through 13

14 information dissemination and professional training in order to play an active role in the introduction process of new technology (e.g. fuel cells). The easiness of grid connection is a key factor for every CHP solution, but the connection may be even more difficult for small units. At present, the current electricity distribution networks, at least in Estonia, are not designed for large-scale integration of distributed power generators. Therefore, there are indications that problems may arise not only with connection fees, but also with restrictive conditions as well as with safety and reliability issues (e.g. stand-by and back-up power); and even with procedures like determination of the connection point, etc. In a normally functioning system, non-discriminatory rules for the allocation of connection costs should take into account possible positive effects of distributed generation on network investments as well as on transmission and distribution losses. There are still quite many factors of uncertain character surrounding the long-term development of the energy sector in Estonia. Setting clear long-term targets by the EU in terms of distributed energy concept would increase the reliability of market projections and investor confidence also in Estonia. Considering possibilities of micro scale CHP introduction in existing multi-family apartment houses, at least two organisational problems arouse. At first, the disconnection from the existing DH (or central heating) network would be not acceptable. Secondly, if in some cases the disconnection is acceptable the introduction of apartment-based metering of heat supply must be solved. At present, the configuration of internal heating systems in multi storey residential houses in Estonia does not allow this type of heat metering. In Estonia, only hot tap water consumption is metered at apartment level, as a rule. Regarding positive aspects, the factor of the investment taxation should be mentioned. According to the income tax legislation entered into force in 2000 in Estonia the corporate entities are exempt from income tax on undistributed profits, regardless of whether these are reinvested or merely retained. Since there are no taxes on corporate income per se, there is also no need for depreciation allowances. 14

15 3 Conclusion The analysis of the current situation in Estonia indicates, that at present and in near future, it would be difficult to introduce new distributed energy generation concept, including the small (and minimicro) scale CHP technology in Estonian electricity market, as there is overcapacity in electricity generation. The whole electricity market is dominated by the national electricity company Eesti Energia AS, which has a control over generation, transmission and distribution as well as over sales activities. The distribution networks are rather old causing sometimes blackouts, but investments are being made to improve the situation. The price of electricity is relatively low, while district heating is considered as rather expensive. The share of district heating in heat supply in Estonia is very high, especially in towns. The connection fees to electricity grid are quite high. Availability of natural gas is relatively good due to wide system of pipelines owned and operated by Eesti Gaas AS, a private-owned vertically integrated company importing the gas only from Russia. Gas prices are differentiated according to annual consumption quantities. Connection fees for new consumers are relatively high. The cost of converting the existing energy supply system to new generation methods would be rather high for a consumer, therefore the main potential for introduction of micro CHP units seems to be in new (or renovated) recreation and sporting centres, commercial buildings and dwelling houses, may-be also in farms which are located out of large cities (incl. the smaller islands) outside the existing heat (and electricity, in some cases) systems. In such cases the availability of gas might cause problems, but if the CHP units in question would use biofuels (e.g. wood chips or biogas), the potential can be larger. Mini and micro scale cogeneration is completely new technology in Estonia, there is no related legislation or other regulations/standards in force. Nevertheless, there seems to exist some political willingness to promote cogeneration in general (not especially small-mini-micro scale) due to environmental benefits, but up to now no concrete measures have been taken by authorities. The only support what can be related to CHP is the purchase obligation with certain feed-in tariff for electricity generated using renewable energy sources. Therefore, the higher end of small-scale CHP may be developed with less difficulty, especially the steam-cycle solutions using biomass as fuel may turn to be feasible in some circumstances. Nevertheless, the organisational problems, like connection costs and technical interface requirements are quite complicated to overcome. Finding a company for maintenance and monitoring of CHP equipment is possible, as there are several companies, which have the relevant potential. It is also clear that in order to keep the maintenance costs down, the company should have active in other than CHP business as well, at least until the number of units in Estonia has grown big enough. Due to the low investment capability of potential clients and high price of the equipment offered, the units should be marketed with a flexible payment policy (once payment, leasing, loan, etc.) tailored according to the needs of a concrete client. At least two or three successful pilot projects would give essential help for the new CHP technology in entering the energy supply market in Estonia. 15

16 4 References District Heating Act. RT I 2003, 25, 154. (in Estonian). Electricity Market Act. RT I 2003, 25, 153. (in Estonian). Energiabilanss Energy Balance Statistical Office of Estonia. Tallinn Energy Act. RT I 1997, 52, 833. (in Estonian). Energy Conservation Target Programme (approved by Government on 4 January 2000). (in Estonian). Implementation Plan of the Energy Conservation Target Programme (approved by Government on 6 March 2001). (in Estonian). (in Estonian). In-depth Review of Energy Efficiency Policies and Programmes of Estonia. Energy Charter Protocol on Energy Efficiency and Related Environmental Aspects (PEEREA). Energy Charter Secretariat in co-operation with BASREC. Brussels Long-term National Development Plan for the Fuel and Energy Sector. RT I 1998, 19, 295. (in Estonian). Perspective CHP technologies in Estonia. OPET Estonia. Tallinn (in Estonian). Promotion of Small-scale Co-generation Solutions in CEECs. Estonia. Brief Country Study. PHARE Multi-country Energy Programme. WS Atkins, EnPro Engineers Bureau Ltd. Tallinn. February Support for Development of National Strategy for Utilisation of Combined Heat and Power. Reports (volumes 1 6). Energy Consulting Network, Dansk Energi Management A/S, EnPro Engineers Bureau, Tallinn Technical University. Tallinn