Heat and power: Better together?

Combined heat and power offers many advantages over traditional methods of power generation. Here, IFandP assesses recent developments within the European market and the challenges ahead.

If a stranger were to visit our planet, they might notice something rather odd. Today, we throw away as much heat as we require, due to a combination of inefficient power generation and the lack of infrastructure such as distribution networks. Typically around two-thirds of the energy generated during power generation is wasted in the form of unused heat.

However, it doesn’t have to be like this. Combined heat and power (CHP) is a tried-and-tested technology, which is currently making an appreciable difference and has a great deal of room for expansion. Put simply, it involves the simultaneous generation of heat and electricity, but unlike conventional systems, the heat is channelled to where it can be productively used, for example, in industrial processes or to warm residential housing. The utilisation of what would otherwise be waste heat means that CHP can offer efficiencies much higher than that of conventional power generation.

CHP use is now widespread in Denmark, Finland and The Netherlands. Generally, CHP systems fall into three main categories. The first includes systems that effectively deliver heat and power to a single large facility, be it a factory or a hotel. Another application involves distributing the generated heat to a large number of locations. This includes the use of a heat pipeline network to warm residential complexes. Finally, there is the concept of micro-CHP in which a small-scale CHP boiler is used to satisfy the power and heating demand of an individual home.

A matter of policy

In Germany, the regulatory environment has recently become more favourable to CHP, with the enactment of the laws for the support of cogeneration (KWKG) and an amendment to the Renewable Energies Law. In combination, the changes mean that the country is committed to doubling the proportion of CHP in its energy mix to 25 per cent by 2020. Even if this target is reached, there will be still be significant room for improvement as estimates indicate that the potential figure is over 50 per cent. The CHP sector stands to gain €750m (US1.16bn) a year in benefits and incentives from the new proposals, possibly starting as early as next year. The funding will be split into €600m for new generation and €150m for the construction of piped heat networks.

Siemens is currently leading a consortium to build a large coal-fired CHP plant in Mainz, Germany, to be completed by 2013. The 800MW plant will provide 200MW of district heating for up to 40,000 households and will supply around 30MW of process steam for use by the city’s industrial facilities. Michael Suss, the CEO of fossil power generation at Siemens AG, has said that as a consequence, he expects the plant to reach “an optimum fuel efficiency of 60 per cent” (Datamonitor).

Back in April, Norway announced that it will also increase its use of CHP to 7.5TWh by 2020. In addition, the Norwegian government is seeking to raise the tariffs for power plant grid connections from 2009 and onwards, with the goal of making online biomass CHP plants more competitive. Currently the country generates only 2.6TWh from such facilities.

Britain is throwing its weight behind small and micro-CHP systems, but seems to be ignoring the potential of city-wide, piped heat networks, presumably due to cost considerations. This is despite official estimates from DEFRA, which believes that such systems could save nearly 160TWh of energy a year, enough for the country to meet its CO₂ targets and at the same time eliminate the need for new nuclear build.

District heating systems offer several advantages. From the perspective of residents, they mean lower heating bills and independence from the price of gas, which in countries such as Britain, holds a virtual monopoly in the residential heating sector. For example, in the Danish city of Odense, the installation of a piped heat system has led to the mothballing of the city’s gas network. Of course, this kind of outcome is undesirable from the perspective of gas and electrical utilities for obvious reasons.

The amount of energy wasted by traditional centralised electricity generation
is extremely high. Most of it is in the form of heat, which could be used by
industry and residential areas via district piped heating systems.

One incentive that CHP lobbyists in Britain are keen to win is an extension of the Climate Change Levy exemption for CHP, which is worth around GBP4.41/MWh – roughly 10 per cent of the wholesale power price. Currently the exemption is set to end in 2012 and industry advocates are keen to seen an extension to 2017 or 2022.

A recent report commissioned by Greenpeace and written by Pöyry Energy Consulting, has indicated that there are nine industrial sites within the UK where CHP plants could be used to meet the energy and heating needs of local industry and potentially deliver electricity to the grid. Together, their total capacity could be as much as 13GW. All of these sites already have cogeneration facilities and the report claims that additional plants could be built.

Some of this promised capacity is already being realised. E.ON is currently building one of the world’s largest gas-fired CHP power stations at the Isle of Grain in Kent. The 1275MW plant is being built at a cost of around GBP500m. One possible flash-point, flagged by British MEP Fiona Hall, is how CHP fits into the EU’s emission trading scheme (ETS). The problem is that while CHP systems result in a net decrease in greenhouse gas emissions, they increase on-site emissions. This means less carbon credits are generated, as a business’s emissions are calculated for the production site alone. The absence of a general allocation for heat from the scheme is thought to be due to fears that such a provision could distort competition with the electricity market. Ms Hall is confident that the matter will be resolved before a final agreement on the third phase of the ETS is reached, and has promised, in conjunction with other MEPs, to table amendments seeking free allocation for CHP and microgeneration projects. Environmental policy makers have had a difficult time determining how to fit CHP into their GHG emissions trading schemes. There is also the problem that CHP projects in Europe are not currently eligible for the region’s Enhanced Capital Allowances, which have the potential to meet five per cent of the capital costs associated with newbuild. Another issue is the nature of the European energy market, with full liberalisation still some way off. Kees den Blanken, the chairman of Cogen Europe, recently said: “You sometimes get the impression that every country is drafting its own special policies on CHP. But how much are they looking at what is happening in other countries?” (Europolitics).

Compared to conventional electricity generation, CHP is significantly
more efficient, as it makes use of the heat generated by fossil fuel
combustion, which would otherwise be wasted.

Biomass-powered CHP

Due to the high efficiency of CHP systems, they already offer substantial savings in terms of fuel and carbon emissions. This can be increased by the use of biomass as a fuel. A good example is the proposed 5MW CHP plant to be built at Tesco’s Goole distribution centre in the UK. The project has already received approval and will burn straw using a steam turbine. The company expects the plant to cost GBP12m and estimates that it will have recouped its investment within six years, thanks to a combination of lower bills and the ability to sell any excess electricity to the grid.

CRE, the French electricity sector regulator, has launched a tender for three biomass-fired CHP power plants with a total capacity of 44MW. Elyo, an energy services provider has won the tender and is expected to obtain €1.15bn in revenue over a 20-year concession period, after investing some €230m. The plants will use hay and timber as feedstock.

Such CHP systems are becoming increasingly sophisticated. Wärtsilä is now offering modular, fully automated units, which operate a closed steam-feed water system, which is separate from the district heating system. Two of these BioPower plants are to be installed at breweries owned by Scottish and Newcastle in Manchester and Tadfield, UK. They are expected to come into operation in the first half of next year and will use spent grain in addition to wood chips as fuel. Spent grain is a waste product derived from the brewing process.

In a further sign that the brewing industry is starting to embrace CHP with a vengeance, a consortium of whisky distillers is looking to build a 7.2MW plant in Scotland, in the town of Rothes, at an estimated cost of GBP24m. Finally, RWE npower Cogen, has announced that it will build a 45MW biomass CHP plant at Markinch in Scotland, to supply steam and electricity to the Tullis Russel paper mill, replacing a coal-fired plant.

MicroCHP

As far as the residential market is concerned, microCHP boilers now offer a compelling case to home-owners. Although they currently cost GBP500-1000 more than a conventional boiler, according to Bob Flint of Ceres Power, a microCHP developer, “Our mCHP boilers will save the average household around 250 pounds ($489) a year,” (Dow Jones). This means that within five years, they can start generating a profit for their owners, thanks to lower energy bills and the ability to sell electricity on the national grid. The latter is particularly profitable in Germany, which commands Europe’s highest feed-in-tariffs, allowing micro-electricity producers to earn approximately €0.4/KWh, compared to retail rates of €0.18/KWh (after taxes and support fees). In addition to saving consumers money, the additional efficiency means that MicroCHP boilers can reduce a British home’s carbon footprint by 2.5-5tpa.

Energetix Genlec is in the process of developing its own MicroCHP system, which utilises an Organic Rankine Cycle, to obtain around 90 per cent efficiency. The testing and evaluation of the system was funded by E.ON’s sustainable energy solutions team, as part of an agreement between the two companies. The process is now undergoing field trials, prior to large deployment and integration within E.ON’s microgeneration portfolio.

The sums at stake are considerable. Back in 2003, the EU domestic boiler market was valued at GBP8.1bn and in 2004, Cambridge consultants estimated that sales of microCHP boilers within the EU could amount to GBP1.5bn per annum by 2010. MicroCHP systems could well be only the beginning. A biofuel-power micro-trigeneration system is in development, which will include a cryogenic-based energy storage device, allowing the system to cool the home and keep food refrigerated. In addition, the presence of an energy storage device will allow homes with solar panels or micro-wind turbines to overcome the problem of intermittency, typically associated with such renewables. The system is being developed by a collaboration between British and Chinese universities. The researchers hope to have a prototype up and running by 2011. Although aimed for home use, they believe it could be scaled up for industry.

Huge potential, but will it be realised?

It is clear that CHP offers the EU a huge opportunity to reduce its energy needs and carbon emissions. However, there are a number of barriers that may well conspire to prevent it from reaching its full potential. The most significant of which, with the possible exception of finance, appear to be psychological. Until the energy and heating sectors learn to work closer together and while governments continue to prefer large, highly-visible projects as opposed to smaller, more locally-distributed forms of generation, CHP will continue to struggle in its efforts to reach the same footing as conventional power generation.

For more information, consider visiting the following websites:
http://www.chpa.co.uk/

http://www.energetixgroup.com/