1 Heating/Cooling and Combined Heat & Power technologies: Current state of the sector and anticipated developments

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1 EUROPEAN COMMISSION JOINT RESEARCH CENTER DIRECTORATE-GENERAL Institute for Energy Energy Systems Evaluation Petten, 26 June, 2007 Subject: Report on the Workshop on Heating/Cooling and Combined Heat & Power European Commission: SCHMITZ B. (Chair), NAEGELE E., DE WILT G., STARR F., FULLI G., BOELMAN E. Sector Stakeholders: RASKIN M., VYNCKE D., COENEN J., FRONING S., DAOUD I., REIJALT M., DE BELDER H., CONSTANTINESCU N., RIDDOCH F. Venue and Date: Square de Meeus 8, SDME 3E, Brussels, May 8, 2007 (16:30-18:30) 1 Heating/Cooling and Combined Heat & Power technologies: Current state of the sector and anticipated developments Cogeneration is the production of electricity from a primary fuel source (such as fossil fuel, biomass or nuclear energy), in which the heat that would normally have to be rejected to the environment is used for space heating or in an industrial process. Since the heat that is produced replaces that which would otherwise need to come from a primary fuel, an overall saving in energy results. Because of the simultaneous production of heat and electricity, cogeneration is also referred to by the acronym CHP (Combined Heat and Power). Other types of cogeneration are also used, these including the production of cooling and mechanical energy. Moreover, so-called trigeneration (or polygeneration) systems are under development to allow the efficient production of three (or more) energy outputs. Cogeneration units are based on a number of fuels. Whilst solid, liquid or gaseous fossil fuels dominate currently, biomass fuel is becoming increasingly important. Combustible wastes from industry, agriculture and forestry are also used. CHP supplies 10-13% of electricity and 10-15% of the heat market. Installed electrical capacity amounts to some 81 GW e. However the potential of CHP is not fully exploited throughout Europe and the proportion of electricity supplied by CHP varies between the different Member States. Take-up of CHP has so far been hindered by: administrative barriers and lack of coherent policies in some Member States, low degree of harmonisation of regulations, barriers to grid access and system integration, market uncertainties and relatively high start-up costs. CHP plants can be classified according to their installed electrical capacity. They range from micro- and small- size CHP (up to 50KW e and 1 MW e, respectively) for single dwellings and apartment blocks, to medium-large size CHP from 1 up to several hundreds MW e, for District Heating (DH) and industrial use. Over the last years significant technological progress has been made to develop reliable and efficient medium-large sized CHP plants, mainly based on compression and ignition reciprocating internal combustion (IC) engines, steam turbines and gas turbines. These CHP units are an established technology, with a combination of heat and electrical efficiencies that can reach 90%. The industry view is that to ensure profitability and maximise overall efficiency, cogeneration systems should be designed and operated according to the 1/5

2 heat demand. Ideally CHP operators use the electrical power themselves on site or try to sell it to their consumers of heat. Obviously access to the grid is always needed, either to transmit power, or where the CHP unit fails or does not produce enough electricity, to import power. In terms of larger sized units, the DH market in Europe is a major user of CHP, with some 70% of the heat distributed in this way in Europe being supplied by cogeneration. But there is still the potential for further expansion in this important market. It should be noted that DH in Europe has reached a 10% contribution to the total heat demand, with an annual turnover of approximately 20 billion. District Cooling is still in its early stages of growth, having a market share around 1-2% (2 to 3 TWh cooling) in Europe. District cooling does not necessarily utilise cogeneration, as cooling schemes can also utilise electrically driven heat pumps, or river or seawater at low temperature or recover cooling from re-gasification of LNG. Cooling systems which can utilise waste heat from cogeneration are based on absorption chillers. With regards to micro small sized CHP units, installations above 20 kw e represent a steadily growing market and they have features similar to conventional larger scale CHP. On the other hand, micro-chp units below 20 kw e (based upon Stirling engines, Organic Rankine Cycle (ORC) engines, internal combustion engines, fuel cells, micro-turbines) have not had much impact on the market. The proponents claim that technical problems in micro-chp equipment have been solved or nearly solved. A major issue with all of these micro-chp technologies is the need for mass production manufacturing technologies, otherwise the unit costs will be excessive. 2 Technology penetration targets and the expected impact on energy policy goals Cogeneration can make a significant contribution to the EU energy priorities, given the potential benefits in terms of primary energy savings, reduction of losses from the electricity network, and the cutback in emissions of greenhouse gases. CHP technologies are expected to double the current share of cogenerated electricity in Europe by roughly reaching a 20% share of the market. The expectation is that newer CHP systems will utilise biomass and waste, or where natural gas is used, will be based on fuel cells rather than IC engines or gas turbines. Cogeneration in Europe has the potential to exceed 200 GW e of installed capacity by The micro-chp market is expected to go on evolving from the technological point of view. It may consequently gain larger market shares, on condition that an adequate regulatory and R&D support is provided. District Heating systems can create synergies between energy efficiency, renewable and CO 2 mitigation, as they can serve as hubs for surplus heat which otherwise would be wasted - from electricity production (CHP), from fuel - and biofuel-refining, from different industrial processes - and for heat from all kinds of renewables (biomass, geothermal, solar thermal). In 2020 the share covered by DH is expected to reach 20% of the heat demand, with an 80% contribution from CHP units (mainly thanks to a power-to-heat ratio augmentation). A considerable rise is expected in the use of the following sources: biomass, geothermal, solar thermal, industrial waste heat. District Cooling is an alternative to conventional electricity or gas driven air conditioning systems. The resources can be: natural cooling from deep sea, lakes, rivers or aquifers and conversion of surplus heat from industry, CHP, waste incineration with absorption chillers or residual cooling from re-gasification of LNG. District Cooling systems can greatly contribute to avoid electricity peak loads during summer. 2/5

3 3 Interactions with other competing or synergetic technologies and community policies and initiatives Storage Since the most efficient operation of CHP systems is led by the heat demand, which does not necessarily harmonise with the demand for electrical power, sophisticated storage equipment for heat and/or electricity is needed, so that the two forms of energy consumption are brought into balance on the whole system. The experts claim the present lack of a thorough review on the portfolio of storage technologies which may match the operational needs of CHP installations. Grid integration Electricity grid access and connection issues are still regarded as a difficult issue in this sector, especially for micro CHP units, due to a lack of regulatory provisions and a certain resistance of distribution system operators in connecting such sort of plants. The export of power from micro-chp systems is considered to be a major technical problem. Related to this is how micro-chp should pay for its use of the grid, both now and in the future, when distributed power sources have led to changes in grid infrastructure and control. Biomass fuels Liquid biomass fuels (particularly rapeseed oil) have much potential for IC engine type CHP, since they do not need the kind of nation-wide gasoline-station type of distribution needed by the automotive sector. At this time this is not in harmony with EU policies. RES Micro-CHP technologies have to compete for funding with other renewables-based micro generation technologies (such as small scale wind, and roof-top PV). Solar thermal, biomass, geothermal and other emerging technologies may be used in connection with District Heating & Cooling (DHC). Synergies may be envisaged between DHC and biomass, geothermal and solar thermal initiatives. Hydrogen and fuel cells Synergy is envisaged between hydrogen, fuel cell and cogeneration, with possible combination of excess heat from CHP units and excess electricity from fuel cells. 4 The role of innovation The manufacturers of larger CHP units for DH are steadily improving the efficiency and reliability of prime movers and it is difficult to identify a general need for development. Some manufacturers had units which were not completely burning all of the methane in natural gas, and it was pointed out that methane when released to the atmosphere was more harmful than CO 2. But for these large systems more emphasis is needed, however, on reducing the cost of heat distribution, heat metering and heat storage and optimising the efficiency of heat transport/distribution. In addition, the possible interactions with other parts of the energy supply system merit further attention (i.e. interrelations between electricity and heat demands, operation of the respective grids: intelligent DH substations able to produce electricity during power failures, absorption of electricity in DH system at times of surplus production from renewables/wind) For micro-chp, efficiency levels are only just acceptable, even at the design point and improvements are needed with the off-design capability. Rapid start up and shut down is also a critical issue with some types of micro-chp. Stirling and Rankine cycle engines have real problems in this respect. Gas micro-turbines can be less polluting than some internal combustion engines, but the prospects for efficiency improvements with these seem very 3/5

4 limited, unless any new proposals relied on more sophisticated cycles (i.e. more complex than that of recuperated gas turbines). Additional needs for micro-chp relate to using R&D measures to help support commercialisation of the technology. This is to ensure that when micro-chp is offered to the public it will be essential to guarantee that the equipment and the concept are fully proven. This will require the production of several hundreds, if not thousands of CHP units for development testing. Evaluation will help identify the major manufacturing issues, and problems with installation and operation. In addition such programmes will help with the training of the workforce needed to install and maintain micro-chp properly. A need for integrated research on different technologies strongly voiced as well during the workshop. Much work has to be carried out on electrical and electronic systems. Practical work needs to be done on the impact of integrating tens of thousands of micro-chp units with the grid, since recent experimental work has shown that existing models of the grid are suggesting that there are problems when there are not. The use of large scale wireless networks needs to be evaluated as a means of using micro-chp to form virtual power stations. This is being done with larger scale IC engine based CHP, but clearly the issues are of a different magnitude. Noise pollution and particles emissions (e.g. methane) are two sensitive points for micro-chp technology, especially if one considers the wide scale use and the proximity to the customers of such units. Cooling requires developments since trigeneration results in more CO 2 than plants using electrical driven cooling units. As far as the absorption cooling is concerned, the efforts should be directed towards running the plants at lower temperatures and downsizing the installations. Free (district) cooling is an emerging technology with a high potential for replication. Research is required on biomass-fed cogeneration plants, running both on first and second generation fuels. There is a view that LCA (Life Cycle Assessment) analyses are necessary, to look at the overall energy cost of CHP compared with more established forms of power generation and to identify the total CO 2 emissions associated with its construction and operation. There seems to be room for efficiency gains in the biomass drying, digestion and gasification phases. Additionally, the domestic potential of biomass resources in Europe should be fully exploited: overseas countries already supply large biomass stocks and such quantities are expected to increase. Research on biomass should be focused on making available feedstock closer to the points of utilisation, hence avoiding long-haul shipments. Cost reductions for infrastructures components and new design efforts are priorities of the district heating sector. The options at stake basically are: more delocalised/dispersed heating systems (isolated heat demand islands); more centralised/interacting district heating systems (interconnected heat demand islands). For example, East European countries are recently moving towards the second architecture and operation model. 5 Sector recommendations for Actions to be considered in the SET-Plan A strategic deployment plan is called for by the experts, in order to create a regulatory and financial level playing field for investments in the coming 10 years in the cogeneration and district heating/cooling sectors. Further efforts on the regulatory harmonization of primary resources definition are also expected at European level: in particular biomass and waste are differently defined in the several Member countries. There is a need for a shared view on the most suitable and efficient way to use biomass resources among the several available alternatives within the sector (electricity, heating, cooling production); a global approach on pollution assessment which takes into account at the same time NO x /SO x emissions and GHG emissions may help in defining priorities in using biomasses for energy production. 4/5

5 Since efficiency tends to be defined in different ways for different technologies (especially with regards to district heating and cooling), an integrated approach could lead to better results than looking at the single component/technology. CHP efficiency is defined in the CHP Directive. Joint research programs for research and suppliers are therefore needed, with focus also on end-use applications. The proposed way forward for large-scale deployment is testing together more technologies, also to attract large financial support (e.g. EIB) that is presently not granted to small-scale projects by certain institutions. Research funds should be more directed to equipment development than desktop studies and reports. It was suggested that smaller scale cogeneration units should receive temporary financial support to bring the technology up and running as discussed above. Reliability can be accurately proven only with wide-scale installations. The real problems are those related to economies of scale and ensuring that equipment works reliably under different conditions. This is an issue especially for small scale pollution abatement equipment. If micro-chp is to succeed a system wide approach is needed. As part of this, ways of educating and training of installers and technician must be found, as a precursor to the building up skilled workforce. Siting of cogeneration facilities in buildings needs to be streamlined - CHP installations are often restrained by lack of space - by means of more coordinated design efforts. Furthermore, since presently cooling techniques are not that efficient, improvements in construction insulation may at least reduce some chilling needs. Dissemination of CHP technologies advantages should be made also at local level, since many small-medium companies are looking at local business opportunities where they better take advantage of their production cycle and capacity. This report includes only a summary of the information exchanged between the technology sector experts and the Commission panel during the workshop. 5/5