# EUR-Lex - 52013SC0449 - EN

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# 52013SC0449

**COMMISSION STAFF WORKING DOCUMENT Guidance note on Directive 2012/27/EU on energy efficiency, amending Directives 2009/125/EC and 2010/30/EC, and repealing Directives 2004/8/EC and 2006/32/EC Article 14: Promotion of efficiency in heating and cooling Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Implementing the Energy Efficiency Directive – Commission Guidance /* SWD/2013/0449 final */**

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Table
of contents

A.    Introduction.. 3

B.    The comprehensive assessment.. 5

C.    The Country-level cost-benefit analysis. 10

D.    The Installation-level cost-benefit analysis. 16

E.    Authorisation and equivalent permit procedures
for installations  17

F.    Exemptions
from the cost-benefit analysis for installations. 21

G.    relationship between comprehensive assessment
and installation-level obligations. 23

Article 14: Promotion of Efficiency in Heating and
Cooling

A. Introduction

1. 
Article
14 of the Energy Efficiency Directive[1]
(hereafter 'the EED' or 'the Directive') extends the scope and replaces the
substantive provisions of Directive 2004/8/EC[2]
on the promotion of cogeneration (hereafter 'the CHP Directive'). This document
therefore covers the new provisions and will only address provisions of the CHP
Directive as necessary to facilitate the understanding of the new Directive.

2. 
The
overall objective of Article 14 is to encourage the identification of cost
effective potential for delivering energy efficiency, principally through the
use of cogeneration, efficient district heating and cooling and the recovery of
industrial waste heat or, when these are not cost-effective, through other
efficient heating and cooling supply options, and the delivery of this
potential. Member States are required to identify the potential for
high-efficiency cogeneration and efficient district heating and cooling and to
analyse the costs and benefits of the opportunities that may exist. Article
14(4) then requires Member States to take adequate measures to ensure these are
developed if there is cost-effective potential.

3. 
The
Directive defines high-efficiency cogeneration, efficient district heating and
cooling and efficient individual heating and cooling supply options. These
definitions are found in Article 2(34), (41) and (43) respectively. These
together represent all the types of efficient heating and cooling that Article
14 seeks to promote. The concept of efficient heating and cooling is defined in
Article 2(42).

4. 
Efficient
heating and cooling encompasses principally the use of heat from cogeneration
and renewable energy sources[3],
the recovery of waste heat from industrial processes to meet demand for heating
and cooling[4],
and in general all those heating and cooling options that achieve primary
energy savings compared to a baseline scenario[5].
It is therefore a comprehensive concept that covers all heating and cooling
options[6]
in line with the general definition of energy efficiency provided in the
Directive[7].

5. 
Article
14 requires Member States to comply with the following main obligations:

· 
Carry
out and notify by 31 December 2015 to the Commission a
comprehensive assessment of the potential for the application of high
efficiency cogeneration and efficient district heating and cooling based on
a country-wide cost-benefit analysis following the methodology set out in
Part 1 of Annex IX and containing the information set out in Annex VIII. The
assessment should be updated every five years, if the Commission asks for this
at least one year before the due date.

· 
Take
adequate measures for efficient district heating and cooling
infrastructure to be developed and/or to accommodate the development of
high-efficiency cogeneration and the use of heating and cooling from waste heat
and renewable energy sources, where the comprehensive assessment identifies
a potential whose benefits exceed the costs for the application of
high efficiency cogeneration and efficient district heating and cooling.

· 
Adopt
policies in relation to local and regional levels that encourage the due
taking into account of the potential of using efficient heating and cooling
systems, including the potential identified in the comprehensive assessment.

· 
Adopt
authorisation or permit criteria and procedures for operators of
electricity generation installations, industrial installations and district
heating and cooling installations ensuring that they carry out an
installation-level cost-benefit analysis on the use of high-efficiency
cogeneration and/or the utilisation of waste heat and/or connection to a
district heating and cooling network when they plan to build or refurbish
capacities above 20 MW thermal input or when they plan a new district heating
and cooling network. The procedure and criteria must also lay out the
conditions for exemption from the obligation to prepare a cost-benefit
analysis, if the Member State decides to use the exemptions allowed under
paragraph 6 (see Section F, points 70-74).

The
adopted procedure may specify exemptions based on the comprehensive assessment
(and country-wide cost-benefit analysis), if applicable (see section F, point
76).

The
procedure should in any case specify how ad hoc exemptions from
implementing the outcome of the cost-benefit analyses will be granted under
paragraph 8 of Article 14, if a Member States decides to permit those
exemptions.

Accordingly,
the procedure and criteria should at least include the following:

i. 
A
requirement to prepare a cost-benefit analysis when a new installation with a
total thermal input of 20 MW is planned or is substantially refurbished or when
a new district heating and cooling network is planned (specifying exemption
conditions under paragraphs 4, and 6, if applicable);

ii. 
The
methodology, including the assumptions and time horizons, and the procedure for
the cost-benefit analysis to be carried out for installations, on the basis of
the methodology set out in Annex IX, 2;

iii. 
A
definition of how the results of the comprehensive assessment and the
country-level cost-benefit analysis should be taken into account in the
authorisation or permit criteria.

6. 
In
terms of chronological order, the legal transposition measures should be
accomplished by the following dates:

a. Notify
exemptions
from the cost-benefit analysis for installations as referred to in Article
14(6) by 31 December 2013;

b. Require installations
referred to in Article 14(5) to carry out a cost-benefit analysis
each time a new installation is planned or an existing installation is
refurbished starting from 5 June 2014;

c. Notify the
comprehensive assessment referred to in Article 14(1) by 31 December
2015;

d. Notify the
update of the comprehensive assessment every five years at the
request of the Commission made at least one year before the due date.

7. 
Member
States should notify their legal provisions transposing the Directive into
national law using the 'NIF' database. To ensure an efficient transfer of
information Member States are also encouraged to use the 'NIF' database for the
notifications mentioned above.

8. 
The
note presents the Commission's services' understanding of how the relevant
provisions of the EED are to be interpreted. It aims to enhance legal certainty
but does not create any new rules. In any event, giving binding interpretation
of European Union law is ultimately the role of the European Court of Justice.
The present note is not legally binding.

9. 
This
note aims to provide guidance to Member States on how to apply Article 14 of
the EED. The note states the views of the Commission, does not alter the legal
effects of the Directive and is without prejudice to the binding interpretation
of Article 14 as provided by the Court of Justice.

B. The comprehensive assessment

10. According to Article
14(1), 'By 31 December 2015, Member States shall carry out and notify to the
Commission a comprehensive assessment of the potential for the application of
high-efficiency cogeneration and efficient district heating and cooling,
containing the information set out in Annex VIII.'

11. The comprehensive
assessment must be based on a cost-benefit analysis covering the Member State's territory and taking into account climate conditions, economic feasibility
and technical suitability in accordance with Part 1 of Annex IX[8].

12. This section addresses
the purpose of the comprehensive assessment and the information it must
contain. It also provides elements of guidance on how to carry it out.

13. The purpose of the
comprehensive assessment is to produce clear results to deliver energy
efficiency in heating and cooling. These results should be reflected in the
information notified to the Commission. They can be divided into mandatory and
optional elements.

14. The mandatory
information to be provided relates to the potential for high-efficiency
cogeneration and efficient district heating and cooling identified on the basis
of the country-level cost-benefit analysis and on the measures Member States
intend to take to achieve that potential (Article 14(2) and (4))[9]. In
addition, Member States may include, as optional elements, information on the
potential for other efficient heating and cooling systems, such as efficient
individual heating and cooling supply options identified as positive
alternative scenarios when conducting the country-level cost benefit analysis[10].

15. Member States are free
to decide the form in which they express the potential. A logical way of
presenting it would be to indicate at least the following: additional expected
demand for heat and cooling by sectors; the potential for additional new and
refurbished production capacities in MW; additional production of heat and
electricity in MWh. For district heating and cooling this capacity and
production data would be mutatis mutandis presented and complemented
with the following indicators: the additional length of pipelines; the new area
covered; the number of new connected consumers and the quantity of heat or
cooling to be delivered in MWh from  cogeneration, renewable energy, waste heat
and other supply source categories[11]. To allow
for assessment of the size of the potential, the figures mentioned above would
also logically be expressed in relative terms, i.e. in percentages
comparing the additional capacities, production and consumption, pipelines
length and area covered to the base year, indicating an increase or decrease.

16. 
Member
States must adopt policies which encourage the due taking into account at local
and regional levels of the potential of using efficient heating and cooling
systems, taking account of the potential for developing local and regional heat
markets (Article 14(2))[12]. They may
use the comprehensive assessment to define this potential in addition to those
for high-efficiency cogeneration and efficient district heating and cooling.

17. The comprehensive
assessment must cover the information listed in points (a) to (j) of Annex
VIII. It must describe a Member State's heating and cooling demand[13]. It must
provide a forecast of how this demand will evolve in the next 10 years[14]. It must
include a heat map that identifies significant demand and supply points for
heating and cooling[15] and existing
and planned district heating and cooling infrastructures[16]. The assessment
must identify the heating and cooling demand that could be satisfied by
high-efficiency cogeneration, residential micro-cogeneration and district
heating and cooling[17]. Taking the
heating and cooling demand as a starting point, it should then identify the
potential for additional high-efficiency cogeneration, i.e. from
building new capacities; from refurbishing existing electricity generation and
industrial installations; and from other facilities generating waste heat[18]; as well as
the potential for developing efficient district heating and cooling
infrastructures to accommodate the development of high-efficiency cogeneration
and the use of heating and cooling from waste heat and renewable energy sources[19].

Based on the identified potential, the assessment
should provide information on the measures, strategies and policies that may be
adopted to achieve the potentials up to 2020 and 2030[20]. The
adoption of measures is only mandatory if the assessment identifies a potential
whose benefits exceeds the costs.

The assessment should also give estimates of the
value of public support measures to heating and cooling broken down by annual
earmarked budget, if such support is planned, and an estimate of the primary
energy to be saved by those measures[21].

Finally,
the assessment must include an explanation and comparison of how the potentials
and measures identified under the comprehensive assessment relate to the
potentials and progress achieved under the CHP Directive.

18. Member States are free
to decide how to prepare the comprehensive assessment and can draw on
assessments or cost-benefit analysis already prepared under other European or
national initiatives. A logical approach would be as follows:

· 
First, establish
the heat and cooling demand of the country[22].
The description of the heat demand should relate to real, i.e. measured
and verified, consumption information as provided in national and European
energy statistics and national energy balances. It should be provided in a
detailed sectoral and geographical break-down, and in any case not less
detailed than in relevant European energy statistics. It should provide
information about the consumption of the industrial, services, agricultural and
household sectors.  The description of heat demand should be based on the
latest available data. Since official statistical information at the time of
the notification deadline of 31 December 2015 will probably be available only
for 2013, this can be used as the default base year for the projections made
for the purpose of the comprehensive assessment.

· 
Second, prepare a
forecast of how this demand will evolve in the next 10 years. This forecast
should take into account the trends in the major sectors of the economy. It
should analyse the likely evolution of heat demand in industrial sectors,
taking into account longer term structural trends (such as de-industrialisation
or re-industrialisation or efficiency improvements and the impact of new
production technologies) as well as shorter term cyclical changes. The evolution
of heat demand in buildings should be given specific consideration, including
an analysis of the impact of energy efficiency improvements in buildings, such
as those required under the Energy Performance of Buildings Directive
(2010/31/EU)[23]
and the EED.

· 
Third, prepare a
map of the national territory that identifies at least the main supply and
demand points above certain consumption or production thresholds, and the
existing and planned district heating and cooling infrastructures. The
thresholds are listed in points (i) and (iii) of Annex VIII.1(c). For heating
demand, municipalities and conurbations with a plot ratio of at least 0.3[24] and
industrial zones with a total annual heating and cooling consumption of more
than 20 GWh should be shown in the map. For production, electricity generation
installations with a total annual electricity production of more than 20 GWh,
waste incineration plants and cogeneration plants of all technology types
should be shown. Both existing and planned demand and supply points should be
presented on the map.

· 
Fourth, based on
the identified heat demand and heat demand forecast, Member States will have to
identify those elements of the heat demand that technically could be satisfied
by high-efficiency cogeneration, micro-cogeneration and efficient
district-heating and cooling. This means establishing the maximum or technical
potential.

· 
Fifth, Member
States will have to identify those parts of the technical potential that can
economically be met by high-efficiency cogeneration, including residential
micro-cogeneration, by the refurbishment of existing and the construction of
new generation and industrial installations, by utilising waste heat, and by
refurbishing and building district-heating and cooling infrastructures meeting
the efficient district heating definition of the Directive[25]. This is the
potential whose benefits exceed the costs. It is the only potential that needs
to be achieved (see especially Article 14(3) and Annex IX). This potential can
be called the economic potential.

Establishing
the economic potential will not be possible without cost-benefit analysis.
Article 14(3) therefore requires Member States to carry out a cost-benefit
analysis for the purposes of the comprehensive assessment. The cost-benefit analysis
is covered in section C below. The requirement for establishing the
infrastructure potential is expressed in point (f) of Annex VIII.1, which
states that [the potential to be identified by Member States under Article
14(1) also includes the] 'energy efficiency potentials of district heating
and cooling infrastructure'.

· 
Sixth, based on
the economic potential, Member States will have to define strategies, policies
and measures that may be adopted up to 2020 and up to 2030.

When doing
so, Member States will have to bear in mind their
obligation, in the event that a cost beneficial potential is identified in
their comprehensive assessment, to take adequate measures for efficient
district heating and cooling infrastructure to be developed and/or to accommodate
the development of high efficiency cogeneration and the use of heating and
cooling from waste heat and renewable energy sources, as required by Article
14(4). In the event that potential with a cost-benefit surplus is not
identified in the comprehensive assessment, Member States have no obligation to
take measures in the sense of Article 14(4). When the cost-benefit surplus is
not sufficient to cover the administrative costs of carrying out the
cost-benefit analysis for an installation referred to in Article 14(5), Member
States are not required to take measures in relation to that installation; they
may however still need to take other types of measures that are adequate to
ensure the achievement of the identified potential.

Member States
should also adopt policies which encourage the due taking into account at local
and regional levels of the potential of using efficient heating and cooling
systems, in particular high-efficiency cogeneration and taking into account the
potential for developing local and regional heat markets, as required under
Article 14(2).

19. In addition, and further
to the second sub-paragraph of Article 14(4), should a Member State find and
indicate to the Commission that the comprehensive assessment has not found
cost-effective potential in some or all regions of its territory, then an
exemption from the requirements of Article 14(5) may be applied to
installations situated in those regions.

20. According to the last
sentence of Article 14(3), Member States may use cost-benefit analyses carried
out under Directive 2001/42/EC. This is to ease the administrative burden. If
an environmental impact assessment conducted under Directive 2001/42/EC
provides equivalent analysis to that required under Annex VIII and IX, it can
be used for the purposes of the comprehensive assessment.

C. 
The Country-level cost-benefit analysis

21. The comprehensive
assessment cannot be prepared without carrying out cost-benefit analysis. This
is necessary in order to identify the economic potential, that is to say cost-efficient
solutions for meeting heating and cooling demand.

22. According to Article
14(3) and the first paragraph of Annex IX.1, the country-level cost-benefit
analysis conducted as part of the comprehensive assessment must be capable of
facilitating the identification of the most resource- and cost-efficient
solutions to meeting heating and cooling needs[26], and in general of
helping promote efficiency in heating and cooling[27]. It
must help decision making and provide a decision base for prioritisation of limited
resources[28]. 
It must provide an instrument to establish the most cost-effective and
beneficial heating and cooling options in a given geographical area for the
purpose of heat planning[29].

23. 
Article
14(4) and Part 1 of Annex IX establish the purpose and the scope of the
cost-benefit analysis. They set out the range of heat and cooling options that
need to be examined and lay down methodological principles to ensure the
quality of the analysis.

24. The country-level
cost-benefit analysis is an economic analysis that must cover all relevant
social, economic and environmental factors[30].
It should be based on the analysis of a comprehensive inventory of effects[31].

25. The principle of
comprehensiveness is reflected in the requirements that the total long-term
costs and benefits of a heating and cooling option should be assessed[32]. Therefore,
geographical and system boundaries[33]
and the time horizons[34]
of projects or groups of projects must be set in such a way that all relevant
costs and benefits are included in the analysis.

26. The cost-benefit
analysis should cover the entire territory of a Member States[35]. It could –
in practical terms – be carried out by a series of cost-benefit analyses for
projects or groups of projects in the framework of local/regional assessments[36]. It should
take into account climate conditions, economic feasibility and technical
suitability[37].

27. The cost-benefit
analysis should be used to establish the potential of high-efficiency
cogeneration and efficient district heating and cooling. However, to arrive at
sound results, the analysis should consider and compare alternative scenarios
covering the full range of efficient heating and cooling supply options. This
follows from the requirement that only high-efficiency cogeneration, efficient
district heating and cooling and efficient individual heating and cooling
supply options should be assessed as alternative to the baseline situation[38] and from the
more general requirement that the analysis must be capable of facilitating the
identification of the most resource and cost-efficient solutions to meeting
heating and cooling needs[39].

28. Part 1 of Annex IX
requires Member States to establish and make public the procedure for the
cost-benefit analysis. This means that they need to define by whom, how and on
the basis of which assumptions the cost-benefit analysis will be carried out. Member State must designate the competent authorities responsible for carrying out the
cost-benefit analyses. They must ensure that the analysis has both an economic
and a financial analysis included. They can assign these tasks to local,
regional and national authorities and even to operators of individual
installations or distribute the tasks among different actors. They must provide
detailed methodologies, and assumptions on the prices of major input and output
factors and on the discount rate – for use in establishing the baseline (i.e.
reference) and alternative scenarios[40].

29. These requirements are
defined in the last paragraph of Annex IX. Part 1 as follows: 'Member States
shall designate the competent authorities responsible for carrying out the
cost-benefit analyses under Article 14. Member States may require competent
local, regional and national authorities or operators of individual
installations to carry out the economic and financial analysis. They shall
provide the detailed methodologies and assumptions in accordance with this
Annex and establish and make public the procedures for the economic analysis.'

30. As regards the
methodology for preparing the cost-benefit analysis, the steps to be taken are
described in Part 1 of Annex IX.

31. The first step is
to identify the system and geographical boundary for a given project or
group of projects, which defines the scope of the analysis.

32. Within a given
geographical boundary all relevant supply resources and characteristics and
trends in heat and cooling demand need to be taken into account, including the
current situation and future trends in the selected time frame. This means that
not only existing heating and cooling supply should be looked at, but other
energy flows within the geographical boundary, i.e. electricity
production and distribution facilities, gas networks and other primary energy
supply sources, including renewable energy, industrial energy production and
waste (surplus) heat from industrial processes. Only when all supply and heat
and cooling demand sources are identified and their possible evolution forecast
can there be an assessment of how these energy flows can be optimised and made
more efficient, looking first at the possibility of using (additional)
high-efficiency cogeneration and efficient district heating and cooling, then
if these would not yield cost-benefit surplus under a socio-economic analysis,
then at other efficient heating and cooling supply options, such as efficient
individual heating and cooling. This is because the fundamental purpose of the
cost-benefit analysis is to identify 'the most cost-effective and beneficial
heating or cooling option for a given geographical area for the purpose of heat
planning'[41].
The cost-benefit analysis should therefore be understood as comprehensive
energy system planning that covers all relevant technical and economic options.
This is expressed in point (b) of Annex IX. Part1.

33. 
The
second step is to construct a baseline scenario. The baseline
scenario should describe the existing situation and its likely evolution in the
selected timeframe, if no parameters of the existing situation are changed, i.e.
the business-as-usual or reference scenario. A critical element of the baseline
scenario, and a key to a successful cost-benefit analysis, is to describe the
heat and cooling demand within the geographical boundary as precisely as
possible. The collection of accurate, reliable and comprehensive heat and
cooling data may be a challenge but is necessary if a Member State is to ensure high quality cost-benefit analyses and a sound decision base for the
comprehensive assessment. If the data gathered for the purposes of the
cost-benefit analysis are also used for the information required under points
(a)-(c) of Annex VIII, no disclosure is needed beyond the level of detail
required in the heat map and taking into account the need of preserving
commercially sensitive information[42].

34. 
The third
step is to identify alternative scenarios. When doing so, Member
States have to consider the relevant possibilities for how heating and cooling
can be made more efficient.[43]
The Directive provides guidance on what should be considered 'relevant'
possibilities, i.e. 'relevant alternatives to the baseline'.
Member States must examine cogeneration and district heating and cooling first.
Only when and to the extent that these are not technically or economically
feasible, taking into account long-term costs and benefits within a given
geographical boundary, should Member States proceed with examining other
efficient heating and cooling solutions, such as efficient individual heating
and cooling[44].
For the purpose of the comprehensive assessment’s cost-benefit analysis, Member
States can only take into account alternative scenarios that satisfy the
definitions of high-efficiency cogeneration, efficient district heating and
cooling and efficient individual heating in particular and the general concept
of efficient heating and cooling in general[45].

35. 
The definition
of high-efficiency cogeneration is the same as under the CHP Directive.
High-efficiency cogeneration must achieve at least 10% primary energy savings
compared to separate heat and electricity production[46].

The calculation methodologies required to establish which
cogeneration can be considered high-efficiency, including the related
calculation of when electricity can be considered as being produced from
cogeneration, are set out in Annexes I and II of the EED, which incorporate
entirely Annexes II and III of the CHP Directive. Commission Decision
2008/952/EC, establishing detailed guidelines on the calculation methodology of
the quantity of electricity from cogeneration set out in Annex II of the
Cogeneration Directive, also remains in force and applicable under the
Directive[47].
For the purposes of comparison with separate heat and electricity production,
the reference values established in Commission Implementing Decision
2011/877/EU are to be used[48].

36. 
Only
realistic scenarios need to be examined. Scenarios can be excluded if they are
not feasible due to technical reasons, financial reasons or time constraints or
because they conflict with national law[49]. Financial
and time constraint reasons should be in line with the general principles of
the country-level cost-benefit analysis in Part 1 of Annex IX. Accordingly,
scenarios that would likely produce a cost-benefit surplus under the broad
socio-economic and environmental analysis (economic analysis) should not be
excluded for financial or time constraint reasons, even if those would likely
produce a negative cost-benefit balance under the financial analysis.

37. 
Once
the baseline and alternative scenarios are constructed, Member States must set
an appropriate time horizon to ensure that no relevant cost to society is
omitted when balancing the costs and benefits. This follows from the
requirement of comprehensiveness, i.e. that the economic analyses must
take into account all relevant economic effects[50] and from the
requirement that the total long-term costs and benefits of heat and cooling
supply options must be assessed and analysed when calculating the cost-benefit
surplus[51]. This can be
achieved only if a sufficiently long time horizon is chosen, which
typically will be the lifetime of an item of infrastructure
or equipment. The time horizon will be specific to each project or group of
projects, but Member States can set typical or standard lifetimes for similar
projects for the sake of simplicity.

38. 
The
Directive provides some examples, such as the likely appropriate
time horizon for
a
gas-fired power
plant,
a district
heating system and heating equipment[52]. Member
States could set other, longer or shorter, lifetimes if this is justifiable on
technical and economic grounds or needed to cover all relevant costs and
benefits to
society.

The examples given in point (iii) of Annex
IX.1(e) show that the appropriate time horizon should not be confused with the
payback time.

When examining scenarios for efficient heating
and cooling,
including efficient
individual heating and cooling, the costs of energy required for extraction,
conversion, transport and distribution should be factored into the cost-benefit
calculation, as required by the definitions in Article 2(42) and (43)[53].

39. The valuation criterion
must be the net present value (NPV)[54].
That does not mean that Member States cannot use other valuation methods.
However all assessed projects and scenarios have to be assessed and compared at
least under the NPV criterion.

40. NPV analysis requires as
input a list of costs and benefits expressed in monetary units. These costs and
benefits will have to be discounted at an appropriate discount rate. NPV above
zero indicates a cost benefit analysis with a positive result or a surplus in
excess of costs, while project with a negative NPV would generate costs in
excess of benefits.

41. For the economic
analysis, Member States must establish a comprehensive list of input and output
factors and costs and benefits to be taken into account in the calculations. A
non-exhaustive inventory is provided in Annex IX, Part 1, point (g). Member
States must use actual price information for the calculations. They must
forecast how these prices would evolve over the selected timeframe and provide
price assumptions[55].
Since the cost-benefit analysis is an economic analysis, all relevant long-term
impacts of the project, including externalities, should be included to the
extent possible. This is expressed in Annex IX, Part 1, point (f)(iv) which
reads: 'The prices used in the economic analysis shall reflect the true
socio economic costs and benefits and should include external costs, such as
environmental and health effects, to the extent possible, i.e. when a
market price exists or when it is already included in European or national
regulation.' There will be costs and benefits for which either no market
exists or the market is incomplete and therefore the price does not reflect the
true social value[56].
Where no market price is available and European or national regulation do not
give guidance on that external cost Member States should to the extent
possible, but are not required to, provide estimates assigning a value for the
costs or benefits to society. These estimations can be based on relevant and
accepted economic theories, expressing explicitly the trade-offs associated
with the different uses of the economic and natural resources at a societal
level. As an example, the social benefits can be estimated on the basis of the generally well accepted methods of revealed or stated
preferences, whereas the costs may be defined as the opportunity costs, i.e.
the value that the resources used would have received in the best alternative
use. When there is a market price, but it does not reflect the true social
costs, Member States may use correction factors, such as taxation, as far as
these have an impact on market actors' decisions and are not only internal
transfers.

42. The Directive
specifically mentions network impacts as factors that may be included in the
cost-benefit analysis.[57]
For example, a refurbished power plant converted to cogeneration for the
purpose of district heating and supplying both heat and electricity to nearby
consumers, while also providing balancing services to grid operators, may
reduce operational and investment costs in electricity networks and generation
through less power grid congestion, less need to expand the network and reduced
need for peak load and back-up generation capacities, etc.; an alternative
green field investment in an electricity-only plant may have additional costs to
build or reinforce electricity networks, from higher network losses due to
longer transport distances, and higher costs of producing the same amount of
heat separately that would otherwise have been available as a by-product of
electricity generation. Potential higher network losses from higher grid loads,
even if seasonal in nature, ensuing from certain individual heating solutions
(e.g. increase in electric heating or air source heat pumps) should also be
taken into account. Electricity and other network impacts therefore need to be
considered in the baseline and alternative scenarios in accordance with the
requirements of Article 15 on network efficiency.

43. Member States must also
define the discount rate to be used in the calculation[58]. When they
choose the discount rate for the calculation, they must use European and
national guidelines and take into account data provided by the European Central
Bank[59].

44. The analysis should also
include a sensitivity analysis to gauge the impact of possible variations in
the most important factors, such as different scenarios for development of
heating and cooling demand, different discount rates, different energy prices
and changes in other major input and output prices[60].

D. The Installation-level cost-benefit analysis

45. 
A
core requirement under Article 14 is for Member States to ensure that operators
of electricity generation, industrial installations and district heating and
cooling installations listed in point (a) to (d) of paragraph (5) carry out a
cost-benefit analysis when they plan building new or substantially refurbishing
energy production capacities above 20 MW thermal input to assess the
cost-effectiveness of using high-efficiency cogeneration, recovering waste heat
and connecting to a district heating and cooling network. The results of the
cost-benefit analysis must be taken into account in authorisation or permit
criteria issued to those installations in accordance with Article 14(7). Part 2
of Annex IX sets out the principles for the installation-level cost-benefit
analyses that will provide information for measures required under Article
14(5) and (7).

46. 
The
cost-benefit analysis under Article 14(5) for installations 'shall include
an economic analysis covering a financial analysis reflecting actual cash flow
transactions'[61].
In contrast to the country-level cost-benefit analysis described in Part 1 of
Annex IX, where the emphasis is on the economic analysis with a well-defined
methodology and accent on socio-economic and environmental factors, the
installation-level analysis described in Part 2 of Annex IX places more weight
on the financial analysis. This analysis must reflect actual cash flows from
investing in and operating individual installations. This is because the
outcome of this analysis should be reflected in authorisation/permitting
decisions impacting on the economic activity of the installations.

47. 
However,
the installation-level analysis has to be embedded in the context of a broader
economic analysis. The economic analysis may be provided either from the
cost-benefit analysis conducted under the comprehensive assessment or by the
operators of the installations. Part 2 of Annex IX requires Member States to
set out guiding principles for the methodology, assumptions and time horizons
for the economic analysis.

48. 
Annex
IX Part 2 indicates that both 'existing and potential heat demand points
that could be supplied' should be considered in the cost benefit
assessment. Clearly, potential heat load points may still not exist at the time
the installation is commissioned. The cost benefit assessment and authorisation
may therefore need to be made on the basis that the installation is equipped to
operate as cogeneration/waste heat recovery (rather than actually operating as
such at the time of commissioning) and capable of supplying the potential heat
loads once they exist. This case arises when based on the comprehensive
assessment there are clear perspectives, i.e. measures, policies or
strategies, that the heat load will come to existence, e.g. the district heating
or cooling network or the missing equipment will be realised and the connection
with the heat consumer(s) will be made as part of a project or groups of
projects whose benefits exceeded the costs under country-level cost-benefit
analysis conducted according to Part 1 of Annex IX.

49. 
It
is recommended that Member States adopt detailed guidance on the cost-benefit
assessments to ensure consistent application of this requirement across sites.
In addition to the criteria mentioned in Article 14(6) it is recommended that
the guidance establish common assumptions on payback periods, required rates of
return on investment, projected fuel and electricity prices, policy costs and
support levels. These assumptions should be used in the economic analysis
unless the applicant can provide evidence to demonstrate that alternative
assumptions are appropriate in the case of their installation. In line with the
requirements of Part 2 of Annex IX these assumptions should realistically
reflect actual investment terms for projects.

50. 
The
Directive does not specify who should be responsible for overseeing and for
conducting the cost-benefit analysis. A common sense solution would be to
assign the task of carrying out the analysis to the operators of installations,
while Member States would designate competent authorities responsible for
providing the common methodology, assumptions and timeframes for at least the
economic analysis and would also ensure that the assessments are well-founded.

51. 
As
regards the participants in the cost-benefit analysis, the third sub-paragraph
of Article 14(5) provides that Member States may require the cost-benefit
analysis conducted under points (c) and (d) of Article 14(5) to be carried out
in cooperation with the companies responsible for the operation of the district
heating and cooling networks. This provision aims to ensure coordination
between district heating companies and industrial installations when assessing
options of cogeneration and of recovering waste heat.

52. 
Member
States may also choose to be more involved, for example by helping coordinate
with interested parties, such as consumers and district heat companies, or data
gathering[62].
This would have the benefit of creating possibilities of synergies between the
Annex IX Part 1 and Part 2 cost-benefit analyses.

E.  Authorisation
and equivalent permit procedures for installations

53. Article 14(7) requires
Member States to adopt authorisation criteria or equivalent permit criteria
ensuring that installations referred to in points (a)-(c) of Article 14(5)
carry out a cost-benefit analysis and that the outcome of that cost-benefit
analysis together with the outcome of the comprehensive assessment is taken
into account in authorisations and permit criteria.

54. 'Authorisation and
equivalent permit criteria' means criteria setting conditions for the
construction and/or operation of a power generation or industrial installation.
Authorisation and permitting criteria are therefore conditions the competent
authorities should define in a legally binding decision (i.e. an
authorisation, permit or license decision) on the conditions under which a new
or existing installation is allowed to be built, operate and/or modified
(refurbished). Member States are free to decide in which permitting or
authorisation procedure they integrate the criteria listed in points (a) to (c)
of Article 14(7). This can be an existing authorisation procedure under
Directive 2009/72/EC or a permitting procedure under Directive 2010/75/EU[63] or any other
equivalent procedure, including a newly established one, if some categories of
electricity generation or industrial installations under Article 14(5) would
not otherwise be covered by an obligation to obtain an authorisation or permit
when they are built or substantially refurbished[64].

55. For the following
installations their respective authorisation or permit criteria must reflect
the requirements of Article 14(7):

1. New thermal
electricity generation installation, when planned;

2. Existing
thermal electricity generation installation, when substantially refurbished;

3. Industrial
installation generating waste heat at a useful temperature level, when planned;

4. Industrial
installation generating waste heat at a useful temperature level, when
substantially refurbished;

5. New district
heating and cooling network, when planned;

6. New energy
production installation, when planned in an existing district heating or
cooling network;

7. Existing
energy production installation, when substantially refurbished in an existing
district heating or cooling network.

56. Substantial
refurbishment is defined both in a positive and a negative way. According to
Article 2(44), 'substantial refurbishment' means a refurbishment whose
cost exceeds 50% of the investment cost for a new comparable unit[65].
However, refurbishment that is related to the fitting of equipment to capture
carbon dioxide produced by a combustion installation with a view to its being
geologically stored as provided for in Directive 2009/31/EC does not qualify as
refurbishment and therefore does not trigger the cost-benefit analysis
obligation under Article 14(5) of the Directive[66].

57. As regards the
definition of the concept of 'installation with a total thermal input
exceeding 20 MW thermal input', Member States are free to follow their
national definitions taking into account their definitions established under
relevant European law, in particular the Industrial Emissions Directive
(2010/75/EU), the EU Emissions Trading Directive (2003/87/EC)[67] and the
Electricity Directive (2009/72/EC)[68].
Under the EED this concept covers all combustion installations. When
calculating the total thermal input of an installation the rated thermal inputs
of all technical units which are part of it and in which fuels are combusted
within the installation should be added together.

58. As regards new
installations, the cost-benefit analysis obligation should be integrated in the
authorisation or permit criteria when an installation is planned. The concept
of 'planned' should be interpreted in the light of the purpose of the
Directive, which is to make energy production and consumption more efficient
and save energy through improving energy efficiency. An installation is in the
'planned' stage, when an operational decision is considered which has an
impact on its design and operational parameters and thus the energy efficiency
performance. The planned stage is therefore the decision making phase where the
authorisation or equivalent permit on the building or the operation of an
installation is under consideration and decided by the competent authorities.
Such an authorisation or permitting decision has to take into account the
results of the cost-benefit analysis. The cost-benefit analysis is therefore
part of the authorisation and equivalent permitting procedure[69].

59. As regards existing
installations, the cost-benefit analysis obligation should be integrated in the
authorisation or permit criteria when there is a substantial refurbishment.
Such a refurbishment should be subject to the installation's authorisation and
permits being modified to take into account the new construction and the
changes in operation. The authorisation and permits should reflect the outcome
of the cost-benefit analysis conducted under Article 14(5).

60. It follows from Article
14(7) that authorisation and permit procedures must include the following
requirements:

1. An obligation
to prepare a cost-benefit analysis for installations covered under points
(a)-(d) of Article 14(5);

2. An
explanation of how the outcome of cost-benefit analysis of installations is to
be taken into account in the authorisation and permit criteria;

3. An
explanation of how the outcome of the comprehensive assessment is to be taken
into account in the authorisation and permit criteria;

4. Specification
of the conditions for granting installations the exemptions from the
cost-benefit analysis obligation that may be available under Article 14(6)
(nuclear installations, installations that need to be located close to
geological storage site approved under Directive 2009/31/EC, peak load/back-up
electricity generating installations and based on thresholds of available waste
heat, heat demand and distance from district heating networks), if a Member
State decides to allow such exemptions;

5. Specification
of the exemption conditions, including the imperative reasons of law, ownership
or finance, for those cases where an installation level cost-benefit analysis
is carried out and shows a positive outcome but the authority decides to waive
the obligation of implementing that outcome.

61. Member States may also
choose to specify the conditions for granting installations the exemptions from
the cost-benefit analysis obligation available under the second sub-paragraph
of Article 14(4) (on the basis of the comprehensive assessment) in their
authorisation or permit procedures, if a Member States decides to allow such
exemptions.

62. The Directive requires
that installations must carry out the cost-benefit analysis referred to in
Article 14(5) after 5 June 2014. The authorisation and permit procedures that
include the cost-benefit analysis obligation for installations must therefore
be in place by 5 June 2014, i.e. the transposition date of the
Directive. This cost-benefit analysis obligation applies to installations with
an authorisation or permit decision pending after 5 June 2014, with the exemption
of those installations that fall under an exemption granted according to
paragraph 4 or 6 of Article 14.

63. Authorisation and
equivalent permit decisions will meet the requirements of Article 14(7) only
when the outcome of both the comprehensive assessment and the
installation level cost-benefit analysis is fully reflected. However, the
outcome of the comprehensive assessment may not be available and thus reflected
in the authorisation/permit decisions before 31 December 2015 (the deadline of
its notification to the Commission, reflecting the substantial time that may be
needed to prepare the comprehensive assessment in a proper way), while Member
States must oblige installations to carry out a cost-benefit analysis under
Article 14(5) already after 5 June 2014.  Furthermore, exemptions from the
cost-benefit analysis for installations that Member States may grant on the
basis of the comprehensive assessment may also not be available and thus
included in the authorisation/permit procedures until the comprehensive
assessment is completed.

Member States may, but are not required to,
issue authorisations or permits that are in full conformity with Article 14(7)
before 31 December 2015.

After 5 June 2014, Member States must consider
the installation-level cost-benefit analysis when issuing an authorisation or
permit for an installation, even if the national comprehensive assessment is
not yet available.

64. As the authorisations
and permits should reflect the outcome of the installation-level cost-benefit
analysis under Article 14(5) already from 5 June 2014, when the results of the
comprehensive assessment are not yet available, Member States may overcome the
time lag between the date of the installation-level cost-benefit analysis
obligation and the comprehensive assessment by bringing forward the date by
which the comprehensive assessment is completed and notified to the Commission.

65. Article 14(9) states
that the installations' cost-benefit analysis obligation and the related
exemptions under paragraph 6, the permit criteria under paragraph 7 and the
related exemptions under paragraph 8 are to apply without prejudice to the
requirements of Directive 2010/75/EU on industrial emissions. Directive
2012/27/EU and Directive 2010/75/EU both aim at promoting the energy efficiency
of industrial installations, in particular through promoting cogeneration, the
recovery of waste heat and district heating and cooling, which are recognised
as Best Available Techniques (BAT) under Article 13 of Directive 2010/75/EU.
Directive 2012/27/EU provides an implementation mechanism for these specific
BAT.  Furthermore, permitting procedures under Directive 2012/27/EU can be
integrated with permitting procedures under Directive 2010/75/EU. Authorisation
and permit criteria under Article 14(7) of Directive 2012/27/EU may be included
in the permit conditions of installations that are required under Article 14 of
Directive 2010/75/EU. However, the implementation of Article 14 of Directive
2012/27/EU does not require or depend upon the implementation of the provisions
of Directive 2010/75/EU.  In case of conflict, the provisions of Directive
2010/75/EU should apply.

66. The purpose of the
cost-benefit analysis (CBA) for installations is to establish whether using
high-efficiency cogeneration and/or recovering waste heat in district heating
and cooling networks would be cost-effective[70].

67. Waste heat is the heat
that results from an industrial or power generation process before it is
transformed into useful heat. The Directive defines useful heat in relation to
cogeneration in point 32 of Article 2. Only the recovery of waste heat at
useful temperature level needs to be considered for the purposes of the
cost-benefit analysis[71].

68. 
Where,
under the cost-benefit assessment, there are options for developing an
installation in a way which provides for cogeneration, waste heat recovery and
connection to a district heating and cooling network that yield a positive
outcome, such options should be reflected in the authorisation and permit. An
application for a power-only or new heat-only installation should not therefore
be authorised/ permitted, subject to the exemptions discussed below.

69. 
Positive
cost-benefit outcomes of the installation-level cost-benefit analysis are those
where the sum of discounted benefits in the economic and financial analysis
exceeds the sum of discounted costs[72].
Based on the comprehensive analysis, Member States may have identified that the
economic analysis yields a positive result, while installation level financial
analyses may be negative. If the Member States then adopt measures in the sense
of Article 14(4) and Annex VIII.1.(g), the financial value of these measures
may be included in the cost-benefit analysis for the purposes of installations
under Part 2 of Annex IX.

F. Exemptions from the cost-benefit analysis for installations

70. Member States may exempt
installations covered by Article 14(5) from undertaking the installation-level
cost-benefit analysis under certain conditions. There are two exemption paths:
one according to Article 14(6) and one according to Article 14(4).

71. Under Article 14(6)
Member States may exempt four types of installations:

· 
Peak
load and back-up electricity generating installations planned to operate under
1500 operating hours per year as a rolling average over a period of five years[73];

· 
Nuclear
power installations[74];

· 
Installations
that need to be located close to a geological storage site approved under
Directive 2009/31/EC[75];

· 
Industrial
installation and district heating installations covered by points (c) and (d)
of Article 14(5)[76].

If
Member States decide to use one or more of these exemptions they must notify
them to the Commission by 31 December 2013. They must also notify any
subsequent changes to them thereafter[77].

72. The exemption of nuclear
installations does not require further justification beyond showing that they
are what they are.

73. The exemption of 'installations
that need to be located close to a geological storage site' may only be
applied to installations that have set aside space for the equipment necessary
to capture and compress CO2, in order to feed the CO2
into a geological storage site with a valid storage permit granted under
Directive 2009/31/EC and are located close to this geological storage site[78].

74. Peak load and back-up
electricity generating installations planned to operate under 1500 operating
hours per year as a rolling average over a period of five years can only be
exempted if a Member State provides together with the exemption notification
the verification procedure that ensures that the exemption conditions are met.
The verification procedure must be able to justify that the limit of 1500
operation hours per year as a 5-year rolling average will be observed.

75. The second sub-paragraph
of Article 14(6) states that Member States may lay down thresholds – expressed
in terms of the amount of available useful waste heat, the demand for heat or
the distances between industrial installations and district heating networks –
for exempting industrial and district heating installations under Article
14(5)(c) or (d) from the cost-benefit analysis obligation. For this exemption
to be available, Member States must lay down the thresholds that justify the
use of the exemption and notify them to the Commission[79].

76. 
The
Commission should be capable of reviewing the continued need for the exemptions
under Article 14(6) based on the Member States' notifications, as provided for
in Article 24(5)[80].

77. Under Article 14(4)
there is an additional possibility for Member States to exempt
installations from the cost-benefit analysis. This should be based on the
comprehensive assessment and justified through the country-level cost-benefit
analyses. If the comprehensive assessment shows that e.g. in a given region
there is no potential whose benefits exceed the costs, including administrative
cost, they may exempt installations from doing the cost-benefit analysis.

G. relationship between comprehensive assessment and installation-level
obligations

78. Article 14 creates
several links between the comprehensive assessment and the obligations of the
operators of installations. One link, established in the second sub-paragraph
of Article 14(4), is that the comprehensive assessment can be the basis to give
exemption for installations from the cost-benefit analysis obligation, where
there is no positive cost-benefit outcome.

79. The cost-benefit
analyses carried out under Article 14(5), and the consideration of the results
of those in authorising or permitting new or refurbished installations under
Article 14(7), may follow on from or complement the comprehensive assessment
referred to in Article 14(4) and must contribute to its delivery - i.e.
they are part of the 'adequate measures' that Member States are required
to take.

80. 
The second
link, established in the first paragraph of Article 14(4), requires that the
adequate measures taken on the basis of the comprehensive assessment must be in
accordance with the installation-level obligations under Article 14(5) and
14(7). Accordingly, if there is a potential whose benefit exceeds the costs,
the adequate measures should also cover installations under Article 14(5). The
concept of adequate measure therefore also includes issuing authorisation and
permit criteria or decisions for new or refurbished installations using
cogeneration or recovering waste heat via district heating and cooling
networks. The same link is contained in Article 14(7), which requires that
Member States must adopt authorisation and equivalent permit criteria that take
into account both the outcome of the comprehensive assessment and the outcome
of the installation-level cost-benefit analysis.

81. 
In
addition, Member States may create synergies between the country-level cost
benefit analysis conducted under the comprehensive assessment and the
installation-level cost-benefit analysis. For example a common set of
assumptions or common basic calculation methodologies could be used while
putting the focus on different considerations, e.g. the cash flow analysis in
the case of installations or the wider economic analysis in the case of the
country-level analysis. The economic analysis under the comprehensive
assessment can waive the need for an economic analysis for the purposes of the
installation-level cost-benefit analysis or provide a context or a background.

[1] Directive 2012/27/EU of the European Parliament and of the Council
of 25 October 2012 on energy efficiency, amending Directives 2009/125/EC and
2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC, OJ L 315,
14.11.2012, p. 1.

[2] Directive 2004/8/EC of the European Parliament and of the Council
of 11 February 2004 on the promotion of cogeneration based on a useful heat
demand in the internal energy market and amending Directive 92/42/EEC

OJ L 52,
21.2.2004, p. 50–60

[3] See points 41, 42 and 43, the first sub-paragraph of Article 14(4)
and Annex IX.1(b).

[4] The recovery of waste heat from industrial processes can be
implemented with cogeneration or through feeding the heat to a district heating
and cooling network or through using the waste heat on site to meet en
economically justifiable demand for heating and cooling.

[5] The definition of 'efficient heating and cooling' in Article
2(42) sets primary energy saving, i.e. the reduction of primary energy
input needed to supply one unit of delivered energy, as the main criterion of
efficiency.

[6] Article 2(42): 'efficient heating and cooling’ means a heating
and cooling option that, compared to a baseline scenario reflecting a
business-as-usual situation, measurably reduces the input of primary energy
needed to supply one unit of delivered energy within a relevant system boundary
in a cost- effective way [... ]'.

[7] The definition of energy efficiency in Article
2(2) is the following: 'energy efficiency' means the ratio of output of
performance, service, goods or energy, to input of energy'.

[8] Article
14(3): 'For the purpose of the assessment referred to in paragraph 1, Member
States shall carry out a cost-benefit analysis covering their territory based
on climate conditions, economic feasibility and technical suitability in
accordance with Part 1 of Annex IX.'

[9] Article 14(1): '... a comprehensive
assessment of the potential for the application of high-efficiency cogeneration
and efficient district heating and cooling, containing the information set out
in Annex VIII'.

Article 14(4): 'Where the assessment referred
to in paragraph 1 and the analysis referred to in paragraph 3 identify a
potential for the application of high-efficiency cogeneration and/or efficient
district heating and cooling whose benefits exceed the costs, Member States
shall take adequate measures for efficient district heating and cooling
infrastructure to be developed and/or to accommodate the development of
high-efficiency cogeneration and the use of heating and cooling from waste heat
and renewable energy sources [...].'

[10] The country-level cost benefit analysis
should be 'capable of facilitating the identification of the most resource
/and cost-efficient solutions to meeting heating and cooling needs and in
general to help promote efficiency in heating and cooling, including efficient
individual heating and cooling' (Article 14(3), first and second paragraph
and point (d) of Annex IX.1).

[11] The capacity should be expressed in MWe for electricity
and MWth for heat. The production of heat and electricity and the
quantity of supplied heat and cooling should be expressed in MWhe
for electricity and MWhth for heating and cooling. Member States can
additionally provide heat production and supply quantities in GJ.

[12] Article 14(2): 'Member States shall adopt policies which
encourage the due taking into account at local and regional levels of the
potential of using efficient heating and cooling systems, in particular those
using high-efficiency cogeneration. Account shall be taken of the potential for
developing local and regional heat markets.'

[13] See point (a) of Annex VIII.1.

[14] See point (b) of Annex VIII.1.

[15] See point 1 (c)(i) and (ii) of Annex VIII.

[16] See point 1 (c)(ii) of Annex VIII.

[17] See point 1 (d) of Annex VIII.

[18] See point 1 (e) of Annex VIII.

[19] See point 1 (f) of Annex VIII.

[20]             See point 1(g) of Annex VIII and Article 14(4).

[21]             See point 1 (i) and (j) of Annex VIII.

[22] A reference to heat and heating should normally be understood as a
reference to heating and cooling.

[23] Directive 2010/31/EU on the energy performance of
buildings, OJ L 153, 18.6.2010, p. 13.

[24] An area with a plot ratio of 0.3 currently
corresponds to a linear heat density of 2.5 MWh/m, since the current specific
heat demand is about 130 kWh/m2. This is a threshold indicating areas where
expert literature considers district heating directly feasible. In France, there were some 176 city districts in 31 cities with a plot ratio higher than 0.3
in 2001. At the same time 82 city districts had a higher than 0.3 plot ratio in
  Paris. (Linear heat density is the quota of heat annually sold and the total
trench length of the district heating pipe system.)

[25] See Article 2(41)

[26] Article 14(3): 'The cost-benefit
analysis shall be capable of facilitating the identification of the most
resource-and cost-efficient solutions to meeting heating and cooling needs'.

[27] This more general mandate is reflected in the purpose of
the cost-benefit analysis that should support the comprehensive assessment. The
first paragraph of Annex IX.1 reads: 'The purpose of preparing cost-benefit
analyses in relation to measures for promoting efficiency in heating and
cooling as referred to in Article 14(3) is to provide a decision base for
qualified prioritisation of limited resources at society level.'

[28] Annex IX,Part 1, first sentence.

[29] Annex IX, Part 1, second paragraph.

[30]'Cost-benefit analyses for the purposes of
Article 14(3) shall include an economic analysis covering socio-economic and
environmental factors.' (Third paragraph of Annex IX, Part 1);

[31] 'The economic analyses shall take into account all relevant
economic effects.' (Point (g) of Annex
IX.1)

[32] 'The total long-term costs and
benefits of heat or cooling supply options shall be assessed and compared.' (Point (e) (i) of Annex IX, Part 1).

[33] 'The cost-benefit analysis shall take
into account all relevant supply resources available within the system and
geographical boundary, using the data available, including waste heat from
electricity generation and industrial installations and renewable energy, and
the characteristics of, and trends in heat and cooling demand.' (Point (b) of Annex IX.1) See also the second sentence
of point (a) of Annex IX.1: 'The geographical boundary shall cover a
suitable well-defined geographical area, e.g. a given region or metropolitan
area, to avoid selecting sub- optimised solutions on a project by project
basis.'

[34] 'The time horizon shall be chosen such that all relevant
costs and benefits of the scenarios are included. For example, for a gas-fired
power plant an appropriate time horizon could be 25 years, for a district
heating system, 30 years, or for heating equipment such as boilers 20 years' (Point (e) (iii) of Annex IX.1).

[35] Article 14(3): 'For the purpose of the comprehensive assessment
[...] Member States shall carry out a cost-benefit analysis covering their
territory based on climate conditions, economic feasibility and technical
suitability [...].'

[36] 'The cost-benefit analysis may either
cover a project assessment or a group of projects for a broader local, regional
or national assessment in order to establish the most cost-effective and
beneficial heating or cooling option for a given geographical area for the
purpose of heat planning.'(Second
paragraph of Annex IX.1).

[37] Article
14(3), see above.

[38] Annex IX.Part 1.(d).

[39] Article 14(3), second sentence.

[40] Annex IX, Part 1, last paragraph.

[41] Annex IX.1, second paragraph.

[42] Annex VIII., point (c).

[43] Annex IX.1, point (d),
first sentence: 'All relevant alternatives to the baseline shall be
considered.'

[44] This follows from the
mandatory content of the comprehensive assessment as set in Article 14(1).

[45]
Annex
IX, Part 1, point (d), second paragraph: 'Only
high-efficiency cogeneration, efficient district heating and cooling or
efficient individual heating and cooling supply options should be taken into
account in the cost-benefit analysis as alternative scenarios compared to the
baseline.' See also the definitions in
points (31), (41), (42) and (43) of Article 2 of Directive 2012/27/EU.

[46] Annex III, point (a),
second intend of Directive 2004/8/EC and Annex II, point (a), second intend of
Directive 2012/27/EU.

[47] Commission
Decision 2008/952/EC establishing detailed guidelines for the implementation
and application of Annex II to Directive 2004/8/EC of the European Parliament
and of the Council, OJ L 338, 17.12.2008, p.55

[48] Commission
Implementing Decision 2011/877/EU establishing harmonised efficiency reference
values for separate production of electricity and heat in application of
Directive 2004/8/EC of the European Parliament and of the Council and repealing
Commission Decision 2007/74/EC, OJ L 343, 23.12.2011, p. 91.

[49] Annex IX,Part 1, point (d): 'All
relevant alternatives to the baseline shall be considered. Scenarios that are
not feasible due to technical reasons, financial reasons, national regulation
or time constraints may be excluded at an early stage of the cost-benefit
analysis if justified based on careful, explicit and well-documented
considerations.'

[50] Annex IX,Part 1 point (g).

[51] Annex IX, Part 1, points (e) and (i).

[52] Annex IX, Part 1, point (e)(iii).

[53] The definition of efficient heating and
cooling’ in Article 2(42) reads: '‘efficient heating and cooling’ means
a heating and cooling option that, compared to a baseline scenario reflecting a
business-as-usual situation, measurably reduces the input of primary energy
needed to supply one unit of delivered energy within a relevant system boundary
in a cost-effective way, as assessed in the cost-benefit analysis referred to
in this Directive, taking into account the energy required for extraction,
conversion, transport and distribution.'

The definition of efficient individual
heating and cooling in Article 2(43) reads : '‘efficient individual heating
and cooling’ means an individual heating and cooling supply option that,
compared to efficient district heating and cooling, measurably reduces the
input of non-renewable primary energy needed to supply one unit of delivered
energy within a relevant system boundary or requires the same input of
non-renewable primary energy but at a lower cost, taking into account the
energy required for extraction, conversion, transport and distribution.'

[54] Annex IX, Part 1, point (e) (ii).

[55] 'Member States shall provide
assumptions, for the purpose of the cost-benefit analyses, on the prices of
major input and output factors and the discount rate.' (Annex IX, Part 1, points (f) and (i)).

[56] 'The prices used in the economic
analysis shall reflect the true socio economic costs and benefits and should
include external costs, such as environmental and health effects, to the extent
possible, i.e. when a market price exists or when it is already included in
European or national regulation.' (Annex
IX, Part 1, point 1 (e) (iv)).

[57] 'Member States may assess and take
into account in decision making costs and energy savings from the increased
flexibility in energy supply and from a more optimal operation of the
electricity networks, including avoided costs and savings from reduced
infrastructure investment, in the analysed scenarios.' (Annex IX, Part 1, point (g), second paragraph).

[58] 'Member States shall provide
assumptions, for the purpose of the cost-benefit analyses, on the prices of
major input and output factors and the discount rate.' (Annex IX, Part 1,points (f) (i)).

[59] Annex IX, Part 1, point (f) (ii).

[60] Annex IX, Part 1, point (h).

[61] Annex IX.2, eighth paragraph.

[62] Annex IX.2, last paragraph.

[63] Directive 2010/75/EU of the European Parliament and of the Council
of 24 November 2010 on industrial emissions (integrated pollution prevention
and control), OJ L 334, 17.12.2010

[64] The words 'authorisation' and 'permit' are used interchangeably.
They are synonym with each other and with the word licence', as long as
they mean a decision by a competent authority on the technical, design and
operation conditions of a new or substantially refurbished installation.

[65] Article 2(44).

[66] 'The fitting of equipment to capture
carbon dioxide produced by a combustion installation with a view to its being
geologically stored as provided for in Directive 2009/31/EC shall not be
considered as refurbishment for the purpose of points (b), (c) and (d) of this
paragraph.' (Article 14(5), second
sub-paragraph)

[67] Directive 2003/87/EC of the European Parliament and of the Council
of 13 October 2003 establishing a scheme for greenhouse gas emission allowance
trading within the Community and amending Council Directive 96/61/EC, OJ L 275,
25.10.2003, p. 32–46

[68] Directive 2009/72/EC of the European Parliament and of the Council
of 13 July 2009 concerning common rules for the internal market in electricity
and repealing Directive 2003/54/EC, OJ L 211, 14.8.2009, p. 55–93

[69]For the concept of authorisation and permit see footnote 63.

[70]The cost-benefit analysis' objective is defined specifically for
each type of installation under Article 14(5). This for new planned power
plants is '... to assess the cost and benefits of
providing for the operation of the installation as a high-efficiency
cogeneration installation'; for power when
refurbished is '... to assess the cost and benefits of converting it to
high-efficiency cogeneration''', for industrial installations planned or
under refurbishment is '...to assess the cost and benefits of utilising the
waste heat to satisfy economically justified demand, including through
cogeneration, and of the connection of that installation to a district heating
and cooling network'; for district heating networks and new or refurbished
energy generation plants is '... to assess the cost and benefits of utilising
the waste heat from nearby industrial installations'.

[71] The reference to useful temperature level means that heat that does
not have sufficient energy content to enable its utilisation does not need to
be considered. The concept of useful temperature level is however not a static
concepts and depends, inter alia, on the range of available technologies
for recovery, their costs and the price of the heat to be supplied. It is for
the cost-benefit analysis to define what the useful temperature level in light
of these technical and economic parameters is.

[72]
Annex IX.2, ninth paragraph.

[73] See point (a) of Article 14(6).

[74] See point (b) of Article 14(6).

[75] See point (c) of Article 14(6).

[76] See second sub-paragraph of Article 14(6).

[77] Article 14(6), last sub-paragraph.

[78] See Article 33 of Directive 2009/31/EC for the requirement to perform
CCS-readiness assessment and, if appropriate, to set aside a suitable space for
carbon capture and compressing equipment; see Chapter 3 of Directive 2009/31/EC
for the details on storage permits.

[79] In the case of exemptions granted on the ground of the second
sub-paragraph of paragraph 6 for installations covered under points (c) and (d)
of paragraph 5, Member States should provide the thresholds (quantity of
available useful heat, size of the heat demand and the distances) with an
explanation on how those were arrived at and why those thresholds justify the
granting of the exemption.

[80] The notification by Member States of the exemptions under Article
14(6) must be sufficiently detailed and specific to allow the Commission to
review the continued need for the possibility of those exemptions already in
the assessment of the first National Energy Efficiency Action Plans due by 30
April 2014, and every three years thereafter, as required by Article 24(5).