Opinion of the Committee of the Regions on the 'Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions on a Community strategy to promote combined heat and power (CHP) and to dismantle barriers to its development` (98/C 180/06)

THE COMMITTEE OF THE REGIONS,

having regard to the Communication from the Commission on a Community strategy to promote combined heat and power (CHP) and to dismantle barriers to its development ();

having regard to the Commission's decision of 17 October 1997 to consult it on this matter, in accordance with the first paragraph of Article 198c of the Treaty establishing the European Community;

having regard to its bureau's decision of 11 June 1997, in view of the imminent referral, to direct Commission 5 for Land-use Planning, Environment and Energy to draw up the relevant opinion;

having regard to the draft opinion (CdR 382/97 rev.) adopted by Commission 5 on 12 December 1997 (rapporteur: Mr Grafé),

unanimously adopted the following opinion at its 22nd plenary session on 12 and 13 March 1998 (meeting of 13 March).

1. Introduction

1.1. On 15 October 1997 the European Commission adopted a communication on a Community strategy to promote combined heat and power (CHP) and to dismantle barriers to its development.

1.2. The purpose of the communication is to propose a strategy, in the context of EU energy policy, which will facilitate the development of CHP in Europe and its penetration in the European energy market as an energy-saving and environmentally-friendly system of heat and power production.

1.3. The aim of the Commission document is to:

a) set out the general principles of CHP and make an economic analysis of cogeneration;

b) identify the current state of Community action to promote CHP and the obstacles to its development;

c) define a Community strategy to promote CHP.

1.4. The communication is pursuant to the commitment made by the Commission, in its White Paper on an energy policy for the European Union, to propose a strategy for the coherent promotion of combined production in the EU.

1.5. CHP - i.e. power production that at the same time uses the heat that is given off - can convert as much as 85-90 % of the energy content of the fuel used.

CHP encourages the rational use of energy resources and thus significantly reduces greenhouse gas emissions.

1.6. The power generation industry, manufacturing industry (chemicals, the paper industry, iron and steel, ceramics, engines, food, textiles, timber, bricks, heavy clays, and so on) and the service sector (hospitals, sports centres, hotels, etc.) are areas where CHP systems are an option for investors.

1.7. The Commission takes the view that this strategy needs to be founded on an appropriate combination of mutually reinforcing measures at both EU and Member State level. It also needs to be consistent with and take into account the various Community policies that it will potentially affect.

1.8. The communication also describes the current position of total gross electricity generation in the Union.

% of total gross electricity generation by CHP in the EU

1.9. Once the Commission has received the opinions it has requested - including that of the Committee of the Regions - and in the light of the outcome of the Kyoto conference in December 1997, it plans to propose and implement an action programme to promote CHP in the EU.

1.10. The Community's overall strategy, as proposed by the Commission, aims to make better use of the advantages of CHP at EU level in the areas of:

- energy saving;

- improving the environment by reducing greenhouse gas emissions;

- cost-effectiveness;

- sustainable development;

- EU security of supply.

The main initiatives and policies proposed by the Commission prompt the following comments:

2. General comments

2.1. To take account of global climate change and the aim of reducing pollutants and greenhouse gases, all countries - and especially the most industrialized - must adopt a highly pro-active policy of rational, sparing energy use. CHP is a very important means of achieving the desired objectives, provided that plant is of the correct size and is properly run. Promoting CHP is only worthwhile if it genuinely saves energy and produces lower emissions than separate production would.

It should be noted that local and regional authorities are responsible for CHP generation in a number of Member States, and set up and maintain the grids.

2.2. While some industry sources take the view that the share of CHP in gross electricity generation in the EU could rise to 30 % by 2010, the Commission considers that doubling the share of CHP from 9 to 18 % between 1994 and 2010 is a realistic Community objective. Each Member State would be called on to adjust its contribution according to the progress it has already made (cf. the chart in point 4 of the Commission communication).

2.3. For example, the present situation as regards CHP in Belgium is:

on 1.1.1996: 880 MW;

in 1996: +73 MW;

in 1997/1998: +155 MW (current estimate).

Estimated energy potential [5 % energy saving compared to GSTs (53 % efficiency)]:

Industry: 2 200 to 2 800 MW;

Greenhouses: 370 to 580 MW;

Service sector: 490 to 780 MW;

Residential sector: 110 to 150 MW;

Total: 3 170 to 4 310 MW.

2.4. One of the Union's tasks should be to draw up principles for comparing the two methods of generation (combined and separate) so that each potential operator is able to ascertain quickly whether his plant will really be efficient in securing the set objectives (energy savings, reducing greenhouse gas emissions, cost effectiveness, and so on).

2.5. Although their respective situations vary widely, the Member States must, in cooperation with their regions, work out their own clear, national-level strategies and objectives. The Commission's role is to provide coordination with a view to achieving the set Community objective.

2.6. It is vital to reduce the gap between the potential of CHP that is technically feasible and the potential that is economically feasible. There are several ways of doing this, mainly connected with research and development, the use of appropriate financial resources and the implementation of suitable partnership arrangements.

2.7. The Committee of the Regions welcomes the Commission's commitment to make use of existing Community programmes such as Joule-Thermie, Save II, Altener, Phare, Tacis, Synergy and MEDA with a view to increasing the role of CHP in the Community's drive to reduce greenhouse gas emissions (see points 33 to 38 of the communication).

2.8. Production systems are becoming more efficient, particularly in the case of electricity. As CHP systems should follow the same pattern, research and development in this area should be encouraged. CHP plant performance is proportionally better when the temperature of the heat required is low.

Community research and development programmes in the CHP field should focus on:

- improving machine efficiency;

- extending use-time (benefiting from, for instance, heat storage and cooling using absorption chillers);

- developing lower-temperature heat uses;

- greater incorporation of CHP in industrial processes.

- developing high-efficiency heat storage units that are suitable for incorporation into CHP installations;

- developing high-efficiency cold storage units that are suitable for incorporation into CHP installations.

2.9. There are still a lot of uncertainties regarding the impact of the liberalization of the electricity and gas markets on CHP development. It is essential that the Commission closely monitors the transposition of Directive 96/92/CE on common rules for the internal market in electricity, and the future directive on the market in gas. The Commission should exert influence on national policies, reminding the Member States of the freedom that the directive gives them to establish their own procurement arrangements for generating installations. Article 8(3) of Directive 96/92/CE explicitly mentions the possibility of giving priority to CHP installations.

2.10. Internalizing external environmental costs could be an effective incentive to promote CHP development. As part of the Joule II programme, the Commission is funding a very extensive project to develop a methodology for evaluating the external costs associated with fuel cycles. This project, entitled ExternE - External costs of Energy, will apply the resulting methodology in a number of economic sectors, including electricity generation. The area of CHP should be specifically addressed.

2.11. The Committee of the Regions takes the view that it is vital to establish selective - based on greenhouse gas emissions - and harmonized taxation at Community level. This would be an effective way of integrating CHP's energy-related and environmental advantages.

2.12. In addition to internalizing external costs and restructuring taxation, the following should be promoted:

- a better mechanism for incorporating costs for sales to the grid and emergency purchases;

- investment financing arrangements that provide a basis for developing cogeneration (the payback period for CHP investments required by industry is far too short) and, among other things, the system of third-party investors and the granting of loans by the European Investment Bank; and

- efforts made by local and regional authorities to give financial support to CHP investment.

2.13. As the Commission states in point 20 of the communication, clear and mutually beneficial partnership arrangements between cogenerators and electricity production utilities need to be decided as a matter of urgency.

2.14. A useful way of promoting CHP development would be to encourage the signing of voluntary agreements with the industrial or service sectors. This method has already been used extensively in the Netherlands, and draft agreements are currently being drawn up in Belgium, where the regions are the main force behind voluntary agreements with industry.

2.15. Local and regional authorities do not have the Member States' tax resources. On the other hand, they are able to encourage the use of CHP in infrastructure for which they have responsibility (e.g. swimming pools, hospitals and large office buildings).

3. Specific comments

3.1. The common methodology (point 31) should target:

- the fixing of national CHP development objectives, in cooperation with the regional and local authorities;

- the posting of specific projects within the framework of voluntary agreements in industry (in terms of saving energy and reducing greenhouse gas emissions) (point 40);

- the presentation of coherent and harmonized statistics (Eurostat) (point 47).

3.2. The Commission should see to it that the most is made of CHP potential with the overall Community strategy in mind, even if the particular situation of a given Member State does not lend itself to this (point 30).

3.3. Point 26: More details need to be given regarding the employment aspect, analysing the impact of CHP development on net job creation.

3.4. The list of research and development activities to be carried out (point 35) mentions both 'CHP for use in the high temperature industries` and 'low temperature DH systems`. While the second of the two suggestions is sound, the first appears oblivious to the principles of thermodynamics. The Commission should clarify this point.

3.5. The last of the proposals listed in point 35 is 'solutions of the environmental problem caused by the smooth water technology`. The French-language translation is incorrect. In order to avoid any misunderstanding the Committee would therefore suggest the following translation: 'solutions to the environmental problem caused by (the leakage of) additives to reduce falls in pressure in DH network pipelines`.

3.6. The Commission takes the view that the use of biomass in CHP should be extended. Although the Committee recognizes the validity of this proposal, it considers that electricity generation technologies using aerated biomass must first be consolidated (as regards reliability, economic efficiency and control over the entire sector); recovering residual heat is no more problematic with biomass than it is without.

3.7. The Committee would also draw attention to the scope for taking advantage of the substantial energy potential inherent in waste, which can suitably be exploited under an established waste management programme. Considerable possibilities also exist for efficient, balanced use of waste energy installations as part of a forward-looking energy policy. The Committee would point out that this form of energy is CO2 neutral and hence does not aggravate the greenhouse effect.

4. Conclusions

4.1. The Committee of the Regions thanks the Commission for drawing up this communication on a Community strategy to develop CHP. It provides an accurate picture of the situation.

4.2. The Committee agrees with the Commission's view of the importance of CHP in combating greenhouse gas emissions, provided that plant is of the correct size and is operated accordingly.

The Committee considers it imperative that the Commission provides potential operators with a clear methodology to compare combined and separate generation.

4.3. The Committee endorses the Community objective of doubling CHP's share of electricity generation between now and 2010. It urges the Commission to find the appropriate instruments for harnessing CHP potential in support of the EU drive to reduce greenhouse gas emissions. Programme controllers in all Member States should keep this objective in mind.

4.4. The Committee calls for more action to be taken to harmonize taxation so that it incorporates environmental costs, in order to promote the most efficient energy use.

4.5. The Committee calls on the Commission to remove the institutional obstacles to the development of CHP, with due respect for the subsidiarity principle. It supports the Commission's moves to involve energy programmes in the cause of promoting both research, development and demonstration projects, and practical, high-performance CHP applications.

Brussels, 13 March 1998.

The Chairman of the Committee of the Regions

Manfred DAMMEYER

() COM(97) 514 final.