Communication from the Commission to the European Parliament and the Council - Europe can save more energy by combined heat and power generation
Date: 2008-11-13
Institutions: European Commission
Subjects: electrical energy, energy production, energy technology, heating, intermediate technology, thermal energy

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 13.11.2008 
COM(2008) 771 final 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT AND THE COUNCIL 

Europe can save more energy by combined heat and power generation 

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COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT AND THE COUNCIL 

Europe can save more energy by combined heat and power generation 

1. 

INTRODUCTION  

The main objectives of this Communication are to report on the current status of the combined 
heat  and  power  generation  (CHP  or  cogeneration),  and  to  present  possibilities  for  its 
development. In doing so, the Commission also meets the reporting obligations of Directive 
2004/8/EC1 on cogeneration, notably on cogeneration potential and progress in realising these 
potentials in the Member States. However, the reporting is only partial because of delays in 
the implementation of the Directive and the small number of national reports available2 at this 
stage. The Communication presents the way forward to speed up the process in the future and 
enhance CHP potential in Europe.  

2. 

WHAT IS CHP AND ITS ROLE IN EU'S ENERGY PORTFOLIO? 

Many  electricity  production  technologies  generate  heat  in  parallel  that  is  wasted,  often  in 
cooling  towers  and  to  the  detriment  of  the  environment.  The  current  average  electricity 
generation efficiency from conventional thermal power plants is about 40%3 in the European 
Union. If the heat generated in parallel could be used, the overall efficiency of the combined 
production plant could almost be doubled.  

A limiting factor may be the availability of the parallel heat demand, heat load. A sufficiently 
big heat load can normally be found in a district heating network or in an industrial process.  

Combined heat and power generation is a very efficient energy technology which can provide 
energy  savings  compared  to  other  technologies.  In  addition,  as  CHP  plants  should  be 
relatively  close  to  the  final  consumers,  whether  communities  or  the  industry,  the  energy 
transmission  and  distribution  losses  remain  small.  Many  energy  sources  can  be  used  in 
cogeneration,  from  coal  to  natural  gas  as  well  as  renewable  energy  sources4.  CHP  may  be 
used in a wide range of capacities, from one kilowatt micro-cogeneration in private houses to 
hundreds of megawatts in district heating and industrial plants.  

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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;  also  called 
CHP Directive. 
Only  8  Member  States  have  provided  reports  covering  all  items  required  (progress  report,  national 
potential, guarantees of origin and barriers): BE, DK, DE, EE, PL, SI, SK and UK.  
If not otherwise stated, the data used in the document are derived from Eurostat. 
Energy  sources  in  EU27  (2006):  38%  gas,  34%  solid  fuels,  12%  renewable  energy,  6%  oil  and  10% 
others. 

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Of the EU final energy consumption (FEC)5 in 2006, CHP represented 13.1%, a level that has 
not  shown  significant  improvement6.  The  variation  between  countries  is  significant  from 
nearly zero to more than 40% in Denmark and Finland (See Figure 1). 

Share of CHP energy in relation to FEC (2006)

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Figure 1: Share of CHP energy output in relation to FEC by Member States (Eurostat – 2006) 

The CHP electricity capacity in EU27 is about 100 GW, representing 13.6% of the total EU27 
electricity  capacity.  The  production  of  CHP  electricity  in  EU27  amounts  to  366  TWh,  i.e. 
10.9% of the total electricity generation in 20067. The level of production varies very much 
between Member States, from 0.3% in Cyprus to more than 40% in Latvia and in Denmark. 

The benefits in terms of energy saving from cogeneration are today estimated to be around 35 
Mtoe per annum in EU27, equivalent to Austria's gross inland consumption. The CO2 savings 
are about 100 Mt per annum8. 

CHP  is  an  energy  saving  technology  which  today  contributes  about  2%  towards  the  20% 
annual primary energy savings objective for 2020. 

3. 

CHP IN THE EU ENERGY POLICY TOOLBOX  

The EU has taken ambitious energy and climate policy objectives to reduce greenhouse gas 
emissions  by  20%,  to  increase  the  share  of  renewable  energies  to  20%  and  to  save  20%  of 
energy  by  the  year  2020.  Europe’s  Energy  Policy  aims  to  promote  security  of  supply, 
sustainable  development  and  competitiveness.  CHP  can  play  an  important  role  in  fulfilling 
these  policy  objectives  by  contributing  to  energy  security,  sustainable  energy,  a  better 

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Excluding energy consumed in transport sector. 
The share of CHP energy was 12.0% in 2004 (EU25) and 13.2% in 2002 (EU-15). 
The share of CHP electricity was 10.2% in 2004 (EU25) and 14.1% in 2002 (EU-15). 
Consumption of 1 Mtoe fuel generates approximately 3 MtCO2 emissions. 

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environment  and  combating  climate  change.  In  addition,  cogeneration  constitutes  European 
export  possibilities,  promoting  European 
technology  know-how  with  growing 
competitiveness  and  offering  opportunities  for  economic  development,  also  at  regional  and 
local  level.  For  these  reasons  a  specific  legal  framework  to  promote  high  efficiency 
cogeneration has been introduced, the cogeneration Directive.  

The  cogeneration  Directive  recognises  the  benefits  of  this  technology  and  establishes  the 
principles as to how the Member States could support it. The support schemes, for instance 
financial  support,  and  the  electricity  grid  access  and  tariffs,  as  well  as,  administrative 
procedures to facilitate cogeneration market penetration are without prejudice to the necessary 
respect  of  the  rules  on  state  aid  covered  by  this  Directive.  To  ensure  the  energy  efficiency 
merit  of  the  promoted  technology,  the  Directive  has  defined  the  term  "useful  heat".  In 
practice,  this  definition  has  been  established  to  ensure  energy  saving  and  not  to  promote  a 
particular technology.  

An  important  tool  of  the  Directive  is  Guarantee  of  Origin  (GO).  As  has  happened  in  the 
renewables sector, GOs were created to provide transparent information to energy consumers 
about  where  their  electricity  comes  from  and  enable  producers  to  demonstrate  that  the 
electricity they sell is produced from high-efficiency cogeneration. These GOs will be issued 
by the competent body of each Member State. They should be mutually recognizable between 
countries.  Harmonisation  of  GOs  still  requires  further  efforts  but  their  format  and 
responsibilities for issuing them still need to be defined.  

GOs specify the amount of electricity from high efficiency cogeneration. So as to be able to 
identify this amount of electricity, the Commission has developed detailed guidelines9 for the 
calculation of the electricity produced by cogeneration. 

The Directive also defines reporting obligations for the Commission and Member States. This 
Communication responds to some of these tasks as discussed below. 

4. 

WHERE ARE WE IN CHP PROMOTION?  

EU measures 

The cogeneration Directive was adopted in 2004. Its implementation has progressed but more 
slowly  than  originally  expected.  A  major  challenge  has  been  the  adoption  of  detailed 
guidelines  for  the  cogeneration  electricity  calculation.  These  guidelines  have  now  been 
developed following thorough discussions between Member States and the Commission. An 
indispensable  element  of  the  guidelines  was  a  Decision  adopted  in  2006  on  harmonised 
efficiency reference values for separate production of electricity and heat10. 

To  date,  22  Member  States  have  transposed  parts  of  the  CHP  Directive  and  the  related 
Commission Decision on reference values. Where this is not yet the case, it often due to the 
particular legal system of the country which requires a complete transposition of the Directive 
and  all  related  secondary  legislation  in  one  legislative  process.  This  process  could  not  take 
place before the adoption of the detailed guidelines in November 2008.  

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Commission Decision [to be adopted in November 2008]. 
Commission Decision 2007/74/EC. 

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Other  Community  legislation  will  also  have  an  impact  on  combined  heat  and  power 
production in the EU. Among the current policy tools, the following should be noted:  

•  The  Energy  Services  Directive11  includes  provisions  that  may  support  the 
development  of  micro-cogeneration,  for  example  by  the  promotion  of  advanced 
metering12.  The  National  Energy  Efficiency  Plans,  under  this  Directive,  should 
also include cogeneration as an energy saving measure.  

•  The Buildings Directive13 – in the case of new buildings with a total useful floor 
area  over  1000  m2  -  calls  for  ensuring  technical,  environmental  and  economic 
feasibility  of  CHP  or  district  or  block  heating  or  cooling  systems  ("alternative 
systems"). A recast of this Directive proposes to eliminate this threshold of 1000 
m2 for new buildings.  

for 

•  The  Community  Guidelines  on  State  aid  for  environmental  protection14  allow 
the 
financial  support 
implementation  and  running  of  high-efficiency  cogeneration  plants,  as  well  for 
investment  aid  for  high-efficiency  district  heating.  A  core  principle  is  that  there 
should  be  primary  energy  savings  resulting  in  less  CO2  emissions.  Currently, 
Member States are adapting their support schemes to the new provisions.  

investment  and  operational  costs 

related 

to 

•  The  proposed  Renewable  Energy  Directive  provides  for  European  legislation 
covering  heating  and  cooling  from  renewable  sources  for  the  first  time.  The 
National Action Plans under this Directive should include targets for the shares of 
energy from renewable sources in heating and cooling in 2020. Cogeneration from 
renewable  sources  should  be  included  in  Member  States  strategies  to  achieve 
these targets. 

Member States reporting 

The CHP Directive requires the Member States to report on the cogeneration potential and 
the  established  administrative  structures  to  promote  combined  heat  and  power.  In  addition, 
they have to report on the progress of cogeneration and provide relevant statistics every four 
years. Only 11 Member States have submitted their analysis of the national potential so far. 
These  reports  generally  follow  the  analysis  guidelines  as  endorsed  by  the  Committee  of  the 
Directive.  

The existing reports do not give much clear information or figures that can be meaningfully 
compared. It is therefore difficult to have a complete overview of the cogeneration potential in 
the  whole  of  the  EU.  However,  it  is  clear  that  cogeneration  capacity  can  be  considerably 
increased, but this requires that some Member States pay more attention to policy and fulfil 
their obligations stipulated in the CHP Directive. 

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Directive 2006/32/EC of the European parliament and of the Council of 5 April 2006 on energy end-use 
efficiency and energy services and repealing Council Directive 93/76/EEC. 
Article 13 of the Directive 2006/32/EC. 
Directive  2002/91/EC  of  the  European  Parliament  and  of  the  Council  of  16  December  2002  on  the 
energy performance of buildings. 
OJ C 82, 1.4.2008, p. 1. 

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Currently,  the  countries  with  relatively  high  shares  of  CHP  capacity  have  a  relatively  high 
share  of  district  heating.  As  district  heating  is  not  growing  fast  in  Europe,  promoting  CHP 
may help to boost district heating in Member States where it is not developed yet. Industrial 
applications  of  CHP  represent  a  further  opportunity  to  develop  this  technology.  The  future 
CHP potential in a country's energy mix is mainly dependent on these developments in district 
heating and industrial applications.  

Concerning the CHP share15 in electricity and heat sectors, it appears that Member States can 
be classified into four groups or categories, based on their relative position with respect to the 
EU27 average as a whole. The ideal situation for Member States concerning cogeneration is 
to have both a high level of heat and electricity generation, corresponding to area I of figure 2. 

Share of CHP Heat and Electricity

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Figure 2: Share of CHP concerning heat and electricity  

The reports from the Member States underline some inherent difficulties in the development 
of the cogeneration sector (related to the weak and/or declining demand for CHP and the lack 
of economic attractiveness of this technology). For instance: 

•  CHP requires an appropriate useful heat demand nearby; 

•  high  investment  and  fixed  costs  for  CHP  induce  low  profitability  and  long  pay-

back period; 

•  decreasing heat demand in buildings affects the use of CHP in district heating. 

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ESTAT – data 2006. 

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The  Member  States  reports  on  the  national  potential  also  point  to  barriers.  These  are  not 
present in all countries that reported so far, but they include: 

•  unclear  long-term  prospects  of  government  support;  complex  legal  frameworks 
(federal/regional levels); complex and time-consuming administrative procedures; 
effects of other legislation; and 

•  availability  of  grid  connection  at  a  reasonable  price  and  timeframe  and  costs  to 
update  the  grid  to  accommodate  CHP  electricity;  unfavourable  conditions  for 
back-up electricity supplies from the grid; 

The  CHP  Directive  addresses  several  of  these  barriers  and  its  full  transposition  could 
therefore lead to a higher CHP potential than indicated by Member States.  

Although more interest is being shown in district cooling, using heat from CHP installations 
for  this  purpose  is  rarely  the  preferred  option.  Even  if  technically  possible,  it  is  not  an 
efficient process. District cooling is therefore not expected to contribute much to the further 
development of combined heat and power production.  

Despite the lack of comprehensive data, there are indications that micro- and small scale CHP 
applications are penetrating the market, for example in the residential sector. However, most 
Member States' reports include only limited information on the micro-CHP's potential in the 
coming decades. 

•  The Commission developed secondary legislation to ensure full implementation of the 

Directive  

•  Member States work on transposition of the CHP Directive but are slow in reporting 

•  More potential could be harnessed but administrative and other barriers persist  

5. 

THE WAY FORWARD 

Combined  heat  and  power  production  is  important  to  enhance  energy  efficiency  and 
contribute to all common EU energy and climate policy objectives. For this reason, the legal 
framework to promote high efficiency cogeneration has been established. The implementation 
of  this  legal  framework,  notably  the  CHP  Directive,  has  not  advanced  as  quickly  as  was 
planned. The Member States should take urgent measures to implement the legislation now as 
all the principal conditions are set by the two Commission Decisions  already referred  to  on 
harmonised efficiency reference values for separate production of electricity and heat16 and on 
detailed  guidelines  for  the  calculation  of  the  electricity  from  cogeneration17.  Also,  it  is  of 
paramount  importance  that  all  countries  report  on  the  cogeneration  potential  and  the 
administrative  structures  put  in  place,  as  defined  in  this  legislation.  Further  reporting  on 
progress and data should follow.  

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Commission Decision 2007/74/EC. 
Commission Decision [to be adopted in November 2008]. 

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The Commission will continue to fulfil its share of the responsibilities in the follow-up of the 
Directive. The permanent monitoring of implementation continues. The Commission will 
launch infringement procedures as necessary in order to ensure the correct implementation of 
this  legislation.  In  addition,  other  support  measures  could  be  envisaged  to  assist  Member 
States.  The  concerted  action  model  has  proved  to  be  useful  in  many  Directives.  It  provides 
Member  States  with  the  possibility  to  address  implementation  problems  of  legislation  with 
other Member States and the Commission. This could also be applied here to support Member 
States.  

The  developments  in  other  related  energy  measures  will  also  have  impact  on  CHP.  For 
micro  CHP:  the  energy  labelling  and  the  implementing  measures  for  boilers  under  the  Eco-
design Directive in 2009. For large scale CHP: the proposal for amending the ETS Directive18 
and  the  proposal  for  a  RES  Directive19  which  will  regulate  the  preferential  calculation  of 
emission savings of CHP plants using fuels from renewable sources.  

The  Energy  Efficiency  Action  Plan  (EEAP)  of  2006  included  some  measures  to  support 
cogeneration. The European Commission  launched several studies in 2008. The outcome of 
these  studies  -  the  development  of  a  system  for  a  harmonised  electronic  CHP  guarantee  of 
origin,  the  preparation  of  minimum  efficiency  requirements  for  district  heating  and  cooling 
systems  and  the  definition  of  minimum  efficiency  requirements  for  micro-cogeneration  - 
could help to identify the policy measures where further efforts are required. 

The  Commission  will  evaluate  the  Energy  Efficiency  Action  Plan  in  2009  with  a  view  to 
producing an update. Possible new proposals and ideas related to combined heat and power 
could  be  assessed  in  that  context.  The  crucial  role  of  towns  and  cities  in  the  European  and 
worldwide  energy  policy  picture  will  be  considered  at  that  stage.  By  2030  some  80%  of 
European citizens will live and work in urban areas. Large urban areas – consuming much of 
the energy – provide some of the best opportunities for emerging European energy efficiency 
investments.  In  these  urban  areas,  the  presence  of  large  district  heating  systems  and  the 
existence of an important electricity demand associated with the proximity of numerous end-
users increase the viability and feasibility of cogeneration. In addition to legislation, it is also 
necessary to further support activities such as the initiative of Covenant of Mayors which will 
help CHP development in urban areas.  

Moreover,  cogeneration  as  a  decentralised  technology  encourages  local  and  regional 
development  and  the  promotion  of  local  employment.  In  rural  and  isolated  areas,  CHP 
particularly  using  renewable  energy  sources  offers  opportunities  for  economic  development 
and job creation. 

The EEAP update may also consider the further role of the National Energy Efficiency Action 
Plans.  These  plans  should  be  a  leading  policy  tool  encompassing  all  activities  on  energy 
efficiency, including cogeneration. They should provide the general policy framework in the 
country-  and  be  the  single  reporting  instrument  to  the  Commission.  This  should  lighten  the 
administrative burden on the Governments of the Member States.  

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Proposal for a Directive of the European Parliament and of the Council amending Directive 2003/87/EC 
so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community - 
COM(2008) 16. 
Proposal for a Directive of the European Parliament and of the Council on the promotion of the use of 
energy from renewable sources - COM(2008) 19. 

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The  CHP  country  reports  revealed  some  persistent  barriers  to  the  wider  uptake  of 
cogeneration.  The  Member  States  could  address  many  of  these  without  delay.  For  instance, 
smooth administrative processes and transparent support schemes, when applied, are essential 
to stimulate energy efficiency, also cogeneration. A common framework of grid access rules 
should  be  of  help  to  all  stakeholders.  Naturally,  the  public  authorities  have  powers  on  the 
urban planning framework which is a starting point for district heating networks. Inadequate 
grid  access  and  interconnection  limit  the  increase  of  CHP  technologies,  especially  in  those 
Member  States  where  stricter  operational  rules  have  recently  been  passed  because  of  grid 
security principles. 

•  Member States need to finalise the implementation of the CHP Directive  

•  Commission monitors the implementation and provides support 

•  Energy Efficiency Action Plan update will consider possible new measures 

6. 

CONCLUSION  

The  Commission  sees  the  CHP  Directive  as  a  significant  tool  in  contributing  to  Europe's 
answers to the energy challenges. As monitoring of the implementation continues, despite the 
absence  of  or  late  reporting  by  Member  States,  the  Commission  acknowledges  the 
administrative  and  non-administrative  barriers  hampering  the  development  of  cogeneration. 
Some of these barriers have been already addressed by the Commission, such as the set-up of 
harmonised  efficiency  reference  values  and  the  adoption  of  Community  detailed  guidelines 
for  the  calculation  of  electricity  produced  from  cogeneration,  as  previously  mentioned. 
However,  the  Member  States  could  also  enhance  their  efforts  to  ensure  development  of 
cogeneration. 

The  Commission  will  continue  to  monitor  the  process  and  will  present  further  proposals  if 
appropriate to foster cogeneration. As a first step, the Commission will evaluate the Energy 
Efficiency Action Plan in 2009 with a view to producing an update. 

Cogeneration takes the European Union closer to its' energy-related goals. It is a proven tool 
to  increase  energy  efficiency  and  achieve  savings.  At  the  same  time,  it  reinforces  efforts  to 
fight climate change by reducing CO2 emissions and decreasing network losses. Furthermore, 
CHP  can  enhance  competitiveness  through  development  of  high  efficiency  cogeneration 
technologies with export potential and contribute to economic development, creating growth 
and  jobs.  Ensuring  and  exploiting  CHP’s  full  potential  throughout  the  Member  States  is 
therefore important for the EU.  

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