Article 1 Purpose
The purpose of this Directive is to increase energy efficiency and improve security of supply by creating a framework for promotion and development of high efficiency cogeneration of heat and power based on useful heat demand and primary energy savings in the internal energy market, taking into account the specific national circumstances especially concerning climatic and economic conditions.
Article 2 Scope
This Directive shall apply to cogeneration as defined in Article 3 and cogeneration technologies listed in Annex I.
Article 3 Definitions
For the purpose of this Directive, the following definitions shall apply: (a) ‘cogeneration’ shall mean the simultaneous generation in one process of thermal energy and electrical and/or mechanical energy; (b) ‘useful heat’ shall mean heat produced in a cogeneration process to satisfy an economically justifiable demand for heat or cooling; (c) ‘economically justifiable demand’ shall mean the demand that does not exceed the needs for heat or cooling and which would otherwise be satisfied at market conditions by energy generation processes other than cogeneration; (d) ‘electricity from cogeneration’ shall mean electricity generated in a process linked to the production of useful heat and calculated in accordance with the methodology laid down in Annex II; (e) ‘back-up electricity’ shall mean the electricity supplied through the electricity grid whenever the cogeneration process is disrupted, including maintenance periods, or out of order; (f) ‘top-up electricity’ shall mean the electricity supplied through the electricity grid in cases where the electricity demand is greater than the electrical output of the cogeneration process; (g) ‘overall efficiency’ shall mean the annual sum of electricity and mechanical energy production and useful heat output divided by the fuel input used for heat produced in a cogeneration process and gross electricity and mechanical energy production; (h) ‘efficiency’ shall mean efficiency calculated on the basis of ‘net calorific values’ of fuels (also referred to as ‘lower calorific values’); (i) ‘high efficiency cogeneration’ shall mean cogeneration meeting the criteria of Annex III; (j) ‘efficiency reference value for separate production’ shall mean efficiency of the alternative separate productions of heat and electricity that the cogeneration process is intended to substitute; (k) ‘power to heat ratio’ shall mean the ratio between electricity from cogeneration and useful heat when operating in full cogeneration mode using operational data of the specific unit; (l) ‘cogeneration unit’ shall mean a unit that can operate in cogeneration mode; (m) ‘micro-cogeneration unit’ shall mean a cogeneration unit with a maximum capacity below 50 kW e ; (n) ‘small scale cogeneration’ shall mean cogeneration units with an installed capacity below 1 MW e ; (o) ‘cogeneration production’ shall mean the sum of electricity and mechanical energy and useful heat from cogeneration. In addition, the relevant definitions in Directive 2003/54/EC, and in Directive 2001/77/EC shall apply.
Article 4 Efficiency criteria of cogeneration
1. For the purpose of determining the efficiency of cogeneration in accordance with Annex III, the Commission shall, in accordance with the procedure referred to in Article 14(2), not later than 21 February 2006, establish harmonised efficiency reference values for separate production of electricity and heat. These harmonised efficiency reference values shall consist of a matrix of values differentiated by relevant factors, including year of construction and types of fuel, and must be based on a well-documented analysis taking, inter alia , into account data from operational use under realistic conditions, cross-border exchange of electricity, fuel mix and climate conditions as well as applied cogeneration technologies in accordance with the principles in Annex III. 2. The Commission shall examine the harmonised efficiency reference values for separate production of electricity and heat referred to in paragraph 1, for the first time on 21 February 2011, and every four years thereafter, to take account of technological developments and changes in the distribution of energy sources. Any measures resulting from this examination, designed to amend the non-essential elements of this Directive, shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 14(2). 3. Member States implementing this Directive before the establishment by the Commission of harmonised efficiency reference values for separate production of electricity and heat referred to in paragraph 1, should, until the date referred to in paragraph 1, adopt their national efficiency reference values for separate production of heat and electricity to be used for the calculation of primary energy savings from cogeneration in accordance with the methodology set out in Annex III.
Article 5 Guarantee of origin of electricity from high-efficiency cogeneration
1. On the basis of the harmonised efficiency reference values referred to in Article 4(1), Member States shall, not later than six months after adoption of these values, ensure that the origin of electricity produced from high-efficiency cogeneration can be guaranteed according to objective, transparent and non-discriminatory criteria laid down by each Member State. They shall ensure that this guarantee of origin of the electricity enable producers to demonstrate that the electricity they sell is produced from high efficiency cogeneration and is issued to this effect in response to a request from the producer. 2. Member States may designate one or more competent bodies, independent of generation and distribution activities, to supervise the issue of the guarantee of origin referred to in paragraph 1. 3. Member States or the competent bodies shall put in place appropriate mechanisms to ensure that the guarantee of origin are both accurate and reliable and they shall outline in the report referred to in Article 10(1) the measures taken to ensure the reliability of the guarantee system. 4. Schemes for the guarantee of origin do not by themselves imply a right to benefit from national support mechanisms. 5. A guarantee of origin shall: — specify the lower calorific value of the fuel source from which the electricity was produced, specify the use of the heat generated together with the electricity and finally specify the dates and places of production, — specify the quantity of electricity from high efficiency cogeneration in accordance with Annex II that the guarantee represents, — specify the primary energy savings calculated in accordance with Annex III based on harmonised efficiency reference values established by the Commission as referred to in Article 4(1). Member States may include additional information on the guarantee of origin. 6. Such guarantees of origin, issued according to paragraph 1, should be mutually recognised by the Member States, exclusively as proof of the elements referred in paragraph 5. Any refusal to recognise a guarantee of origin as such proof, in particular for reasons relating to the prevention of fraud, must be based on objective, transparent and non-discriminatory criteria. In the event of refusal to recognise a guarantee of origin, the Commission may compel the refusing party to recognise it, particularly with regard to objective, transparent and non-discriminatory criteria on which such recognition is based.
Article 6 National potentials for high-efficiency cogeneration
1. Member States shall establish an analysis of the national potential for the application of high-efficiency cogeneration, including high-efficiency micro-cogeneration. 2. The analysis shall: — be based on well-documented scientific data and comply with the criteria listed in Annex IV, — identify all potential for useful heating and cooling demands, suitable for application of high-efficiency cogeneration, as well as the availability of fuels and other energy resources to be utilised in cogeneration, — include a separate analysis of barriers, which may prevent the realisation of the national potential for high-efficiency cogeneration. In particular, this analysis shall consider barriers relating to the prices and costs of and access to fuels, barriers in relation to grid system issues, barriers in relation to administrative procedures, and barriers relating to the lack of internalisation of the external costs in energy prices. 3. Member States shall for the first time not later than 21 February 2007 and thereafter every four years, following a request by the Commission at least six months before the due date, evaluate progress towards increasing the share of high-efficiency cogeneration.
Article 7 Support schemes
1. Member States shall ensure that support for cogeneration — existing and future units — is based on the useful heat demand and primary energy savings, in the light of opportunities available for reducing energy demand through other economically feasible or environmental advantageous measures like other energy efficiency measures. 2. Without prejudice to Articles 87 and 88 of the Treaty, the Commission shall evaluate the application of support mechanisms used in Member States according to which a producer of cogeneration receives, on the basis of regulations issued by public authorities, direct or indirect support, which could have the effect of restricting trade. The Commission shall consider whether those mechanisms contribute to the pursuit of the objectives set out in Articles 6 and 174(1) of the Treaty. 3. The Commission shall in the report referred to in Article 11 present a well-documented analysis on experience gained with the application and coexistence of the different support mechanisms referred to in paragraph 2 of this Article. The report shall assess the success, including cost-effectiveness, of the support systems in promoting the use of high-efficiency cogeneration in conformity with the national potentials referred to in Article 6. The report shall further review to what extent the support schemes have contributed to the creation of stable conditions for investments in cogeneration.
Article 8 Electricity grid system and tariff issues
1. For the purpose of ensuring the transmission and distribution of electricity produced from high-efficiency cogeneration the provisions of Article 7(1), (2) and (5) of Directive 2001/77/EC as well as the relevant provisions of Directive 2003/54/EC shall apply. 2. Until the cogeneration producer is an eligible customer under national legislation within the meaning of Article 21(1) of Directive 2003/54/EC, Member States should take the necessary measures to ensure that the tariffs for the purchase of electricity to back-up or top-up electricity generation are set on the basis of published tariffs and terms and conditions. 3. Subject to notification to the Commission, Member States may particularly facilitate access to the grid system of electricity produced from high-efficiency cogeneration from small scale and micro cogeneration units.
Article 9 Administrative procedures
1. Member States or the competent bodies appointed by the Member States shall evaluate the existing legislative and regulatory framework with regard to authorisation procedures or the other procedures laid down in Article 6 of Directive 2003/54/EC, which are applicable to high-efficiency cogeneration units. Such evaluation shall be made with a view to: (a) encouraging the design of cogeneration units to match economically justifiable demands for useful heat output and avoiding production of more heat than useful heat; (b) reducing the regulatory and non-regulatory barriers to an increase in cogeneration; (c) streamlining and expediting procedures at the appropriate administrative level; and (d) ensuring that the rules are objective, transparent and non-discriminatory, and take fully into account the particularities of the various cogeneration technologies. 2. Member States shall — where this is appropriate in the context of national legislation — provide an indication of the stage reached specifically in: (a) coordination between the different administrative bodies as regards deadlines, reception and treatment of applications for authorisations; (b) the drawing up of possible guidelines for the activities referred to in paragraph 1, and the feasibility of a fast-track planning procedure for cogeneration producers; and (c) the designation of authorities to act as mediators in disputes between authorities responsible for issuing authorisations and applicants for authorisations.
Article 10 Member States' reporting
1. Member States shall, not later than 21 February 2006, publish a report with the results of the analysis and evaluations carried out in accordance with Articles 5(3), 6(1), 9(1) and 9(2). 2. Member States shall not later than 21 February 2007 and thereafter every four years, following a request by the Commission at least six months before the due date, publish a report with the result of the evaluation referred to in Article 6(3). 3. Member States shall submit to the Commission, for the first time before the end of December 2004 covering data for the year 2003, and thereafter on an annual basis, statistics on national electricity and heat production from cogeneration, in accordance with the methodology shown in Annex II. They shall also submit annual statistics on cogeneration capacities and fuels used for cogeneration. Member States may also submit statistics on primary energy savings achieved by application of cogeneration, in accordance with the methodology shown in Annex III.
Article 11 Commission reporting
1. On the basis of the reports submitted pursuant to Article 10, the Commission shall review the application of this Directive and submit to the European Parliament and to the Council not later than 21 February 2008 and thereafter every four years, a progress report on the implementation of this Directive. In particular, the report shall: (a) consider progress towards realising national potentials for high-efficiency cogeneration referred to in Article 6; (b) assess the extent to which rules and procedures defining the framework conditions for cogeneration in the internal energy market are set on the basis of objective, transparent and non-discriminatory criteria taking due account of the benefits of cogeneration; (c) examine the experiences gained with the application and coexistence of different support mechanisms for cogeneration; (d) review efficiency reference values for separate production on the basis of the current technologies. If appropriate, the Commission shall submit with the report further proposals to the European Parliament and the Council. 2. When evaluating the progress referred to in paragraph 1(a), the Commission shall consider to what extent the national potentials for high-efficiency cogeneration, referred to in Article 6, have been or are foreseen to be realised taking into account Member State measures, conditions, including climate conditions, and impacts of the internal energy market and implications of other Community initiatives such as 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 ( 19 ). If appropriate, the Commission shall submit further proposals to the European Parliament and Council, notably aiming at the establishment of an action plan for the development of high efficiency cogeneration in the Community. 3. When evaluating the scope for further harmonisation of calculation methods as referred to in Article 4(1), the Commission shall consider the impact of the coexistence of calculations as referred to in Article 12, Annex II and Annex III, on the internal energy market also taking into account the experiences gained from national support mechanisms. If appropriate, the Commission shall submit further proposals to the European Parliament and Council aiming at further harmonisation of the calculation methods.
Article 12 Alternative calculations
1. Until the end of 2010 and subject to prior approval by the Commission, Member States may use other methods than the one provided for in Annex II(b) to subtract possible electricity production not produced in a cogeneration process from the reported figures. However, for the purposes referred to in Article 5(1) and in Article 10(3), the quantity of electricity from cogeneration shall be determined in accordance with Annex II. 2. Member States may calculate primary energy savings from a production of heat and electricity and mechanical energy according to Annex III(c), without using Annex II to exclude the non-cogenerated heat and electricity parts of the same process. Such a production can be regarded as high-efficiency cogeneration provided it fulfils the efficiency criteria in Annex III(a) and, for cogeneration units with an electrical capacity larger than 25 MW, the overall efficiency is above 70 %. However, specification of the quantity of electricity from cogeneration produced in such a production, for issuing a guarantee of origin and for statistical purposes, shall be determined in accordance with Annex II. 3. Until the end of 2010, Member States may, using an alternative methodology, define a cogeneration as high-efficiency cogeneration without verifying that the cogeneration production fulfils the criteria in Annex III(a), if it is proved on national level that the cogeneration production identified by such an alternative calculation methodology on average fulfils the criteria in Annex III(a). If a guarantee of origin is issued for such production then the efficiency of the cogeneration production specified on the guarantee shall not exceed the threshold values of the criteria in Annex III(a) unless calculations in accordance with Annex III prove otherwise. However, specification of the quantity of electricity from cogeneration produced in such a production, for issuing a guarantee of origin and for statistical purposes, shall be determined in accordance with Annex II.
Article 13 
Adaptation to technical progress 1. The Commission shall adapt the threshold values used for the calculation of electricity from cogeneration referred to in Annex II(a) to technical progress. Those measures, designed to amend non-essential elements of this Directive, shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 14(2). 2. The Commission shall adapt the threshold values used for the calculation of efficiency of cogeneration production and primary energy savings referred to in Annex III(a) to technical progress. Those measures, designed to amend non-essential elements of this Directive, shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 14(2). 3. The Commission shall adapt the guidelines for determining the power to heat ratio referred to in Annex II(d) to technical progress. Those measures, designed to amend non-essential elements of this Directive, shall be adopted in accordance with the regulatory procedure with scrutiny referred to in Article 14(2).
Article 14 
Committee procedure 1. The Commission shall be assisted by a committee. 2. Where reference is made to this paragraph, Article 5a(1) to (4) and Article 7 of Decision 1999/468/EC shall apply, having regard to the provisions of Article 8 thereof.
Article 15 Transposition
Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive not later than 21 February 2006. They shall forthwith inform the Commission thereof. When Member States adopt these measures, they shall contain a reference to this Directive or shall be accompanied by such a reference on the occasion of their official publication. The Member States shall lay down the methods of making such reference.
Article 16 Amendment to Directive 92/42/EEC
The following indent shall be added to Article 3(1) of Directive 92/42/EEC: ‘— cogeneration units as defined in Directive 2004/8/EC of the European Parliament and of the Council of 11 February 2004 on the promotion of cogeneration based on useful heat demand in the internal energy market ( 20 ).’
Article 17 Entry into force
This Directive shall enter into force on the day of its publication in the Official Journal of the European Union .
Article 18 Addressees
This Directive is addressed to the Member States.