COGEN Europe. Micro CHP: Empowering people today for a smarter future tomorrow. 17 December 2010

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1 COGEN Europe Micro CHP: Empowering people today for a smarter future tomorrow 17 December 2010 Europe s energy infrastructure is facing important challenges. As outlined in the recent Commission Communication on Energy Infrastructure priorities, the risk and cost of disruptions and wastage will become much higher unless the EU invests as a matter of urgency in smart, effective and competitive energy networks, and exploits its potential for energy efficiency improvements. It is commonly agreed that Europe needs to embark on a transition toward a more decentralised power system relying to a larger extent on smallscale (sometimes intermittent) generation from renewable energy sources and Combined Heat and Power units 1. Micro CHP is part of the solution to relieve the pressure on the electricity grid, while allowing greater active participation of consumers in the management of their energy consumption. To achieve its target of 20% energy savings by 2020, the EU needs to step up its efforts on energy efficiency, in particular with regard to the residential sector, which accounts for 27% of total EU energy consumption. New properties can be designed and built to integrate a range of low-energy technologies, but for existing properties heat demand remains high and the ability to retro-fit many renewable technologies is physically limited. For much of the existing housing stock micro CHP is therefore the next generation solution. It is a high efficiency solution for a market with a current annual potential of around a million units a year across Europe. What is micro CHP? Micro or mini CHP refers to the small-scale production of heat and power for commercial and public buildings, apartments and individual houses. These units meet the demand for both space heating and hot water whilst providing electricity to supplement or replace the grid supply. What are the main benefits of micro CHP? Micro CHP provides the following key benefits: Micro-CHP allows the supply of both heat and electricity from a single energy source. Carbon emissions are reduced by generating electricity at the point of use avoiding the system losses associated with central power production. 1 Decentralized Energy Systems, study commissioned by the European Parliament s ITRE Committee, September

2 Economic savings are generated for the user, by reducing imported electricity and by selling surplus electricity back to the grid. Concretely this means lower energy bills for energy customers. Security of supply is greatly enhanced by reducing reliance on centralised power production Micro-CHP also allows gas to be used more efficiently. Micro CHP can therefore be a key enabler for the EU to deliver on its energy objectives of competitiveness, sustainability and security of energy supply. Figure 1 Savings of primary energy in per cent An available technology with substantial benefits A range of micro CHP appliances are now commercially available and are delivering energy savings, emission reductions, and financial savings to thousands of businesses and residences, particularly in Germany, Netherlands and UK. These units have saved million of tonnes of CO 2 and saved billions of kilowatt hours of energy. Europe is a global leader in micro CHP engine and product technology, with innovation and manufacturing centres in Germany, the Netherlands and the UK. The initial success has been based on the deployment of internal combustion technology, with most appliances running on natural gas. Micro CHP appliances based on Stirling Engine technology are now being commercialised in Europe, and the next two years will also see the commercialisation of fuel cell heating appliances. Whilst most of these micro CHP appliances are designed to run on natural gas, the availability of LPG-fuelled appliances provides flexibility in rural off-gas areas. In addition, micro CHP delivers renewable heat and electricity when fuelled by bionatural gas and other bio-fuel options. 2

3 On a global scale, Europe can take inspiration from Japan, which has made unrivalled investments in micro CHP, particularly in fuel cell development. Figure 2 Electricity demand throughout the day Micro CHP meets the needs of new or existing buildings, where it can integrate with legacy heating systems and is a simple means of upgrading the existing stock of inefficient residential boilers in the EU. Micro CHP is a non-disruptive renewable or low carbon technology, as installation and servicing relies largely on the current skills base available for heating installation. Figure 3 Market opportunity for micro CHP in Europe Heat-led micro-chp generates at the time of day and time of year when heat demand is at its greatest, thereby coinciding with the times when demand on the electricity grid is at its peak where demand is currently met by high carbon fossil fuel plants. Micro CHP uses energy more efficiently by supplying both heat and power. 3

4 Therefore citizens who use micro CHP are saving energy, reducing pressure and energy losses on the local electricity network. In the end they are helping balance the intermittency of renewable electricity. Within the EU s installed heating park there are millions of boilers that are operating at low efficiency. Whilst within the EU high efficiency boilers are being adopted at varying rates, a shift to micro CHP can accelerate the improvement of emissions of the current installed heating park by delivering savings typically in the range of 1 to 2 tonnes of CO 2 per annum. Installation of micro CHP appliances can therefore bring forward a generation of energy, CO 2 and financial savings to consumers and to society. Figure 4 Energy Consumed Source, by use in Energy residential and Transport sector, Energy Trends and transport DGTREN Trends Source, DGTREN Energy and Transport Trends DGTREN Over the next decade Europe s electricity grids will experience a substantial increase in power produced from renewable, intermittent sources. When the sun stops shining or when the wind stops blowing, renewable can be supplemented with a diverse range of decentralised low- and zero-carbon generating technologies operating on a micro level. Operating with a smart grid micro CHP enables a flexible response to the intermittency of large-scale renewables by smoothing the demand on central power and balancing the inherent intermittency of some renewable sources. Figure 5 Micro CHP in the Home 4

5 The right policy framework to enable mass market deployment Micro CHP products are now available on the European market. They have the potential to generate a new sector of highly efficient energy technologies. Today micro CHP faces several hurdles impeding its mass market deployment. The EU policy framework should therefore set the appropriate conditions to assist its development. Figure 6 Illustration from European Smart Grids Technology Platform Vision and Strategy for Europe s Electricity Networks of the Future The mass-market deployment of micro CHP can only happen if the right conditions are in place. Manufacturers, fuel providers, installers and utilities have a crucial role to play in this respect. At EU level, policy makers should also set the right framework in different areas: Smart Grid, Smart meters Encourage harmonisation of grid access for micro CHP, based on the rules that ensure reasonable grid access for micro CHP units within the UK, Germany and Netherlands. Require that the rapid implementation of metering incorporates provision for both two way recording of electricity flows and heat produced and are ready for remote input (under the smart grid initiative). Revised Energy Efficiency Action Plan A recognition of the potential of micro CHP technologies in the revised Energy Efficiency Action to come out in March A commitment to the revision of the 2004 CHP Directive. 5

6 Revised CHP Directive As part of the revision of the CHP Directive, encourage Member States to support micro CHP through its volume ramp up period. There are strong precedents for this in the support given to other climate change reduction technologies such as wind and photovoltaic. ( bonus concept for the avoided network losses, feed-in tariff, VAT reduction). Revised Energy Services Directive Include micro CHP as a technology for energy efficiency improvement in existing building stock through a revision of the Energy Services Directive. Research & incentives Support research into micro CHP and fuel cell development, efficiency and environmental operation technologies in SET Plan, FP7 and FP8. Fair tariffs for electricity generation and export, consistent with the carbon and energy saving potential of micro CHP, whilst recognising the cost-effectiveness of the technology from both a consumer and government perspective. Other incentives that help overcome the current initial high capital costs, whilst providing stability for investors industry and end-users. 6