Splintering heat

Germany dreams of cogeneration and may assign a bit part, reports Vera Eckert

Germany wants to double the use of highly-efficient combined heat and power plants by 2020 to help fight climate change, although its energy industry is divided.

Legislators aim to pass by this summer a bill to allow cogeneration – power stations that capture and recycle heat from burning fuels to make electricity – to double its share to 25 percent of power supply within 12 years.

The proposal is close to the heart of Chancellor Angela Merkel, a scientist who has made battling global warming a centrepiece of her administration, as most power generation wastes primary energy by releasing heat.
This means more than 50 percent of the energy from gas or coal is wasted when burnt to make electricity, while cogeneration puts up to 85 percent of the energy to good use.

"Under effiency considerations, combined heat and power (CHP) technologies can hardly be topped," said Klaus Kraemer, head of the German section of energy traders lobby Efet.

"But you have to find markets for the heat. With a Greenfield 800 megawatts plant, that is difficult and if you cut back on the heat, you inevitably lose electricity," he said.

The bill is just one of a 30-point catalogue of measures that are being thrashed out in Berlin to help Germany cut its energy use, improve its energy efficiency and reduce its emissions of climate-harming carbon dioxide.

The plans earmark €750m per year for the CHP sector, possibly from 2009 onwards – €600m each year to help renew and build generation units and 150 million for heat networks.

Sticking points
Helped by the start-up finance, some 7,000 to 10,000 MW of new CHP capacity might be built, costing between €5bn and €10bn at today's rates, experts estimate.

The government would forward the aid and recover it via above-market power prices to be paid by consumers.
There are questions left open in the draft that may prevent the full realisation of the CHP plans, the experts say.
But if the money does not flow into CHP support, Germany's future bill from carbon emissions rights for conventional power plants might be far higher, or power suppliers may turn to expensive imports, especially if nuclear power is abandoned.

There is also competition for subsidies. Local utilities want them to build new plants for their municipalities, while heavy industry needs on-site power and would like to receive some handouts while they are available.

If they can settle the infighting, German politicians hope to emulate Denmark and the Netherlands, where cogeneration has been boosted to allow market penetration rates of now 25 and nearly 50 percent, respectively in the power sector.
Finland and Austria have also built up CHP industries.

Cogeneration is used in industry by burning coal or gas at units with several hundred megawatts, while smaller units may burn biomass to sell decentralised power to homes or farms.

Substitution?
Manuel Frondel, an energy analyst at the Essen-based RWI institute, said the proposals could make power too expensive.

"People already baulk at high power prices but the need to spend money on new heat pipe networks could be horrendously expensive. People are not drawing up the right sums," he said.

"Besides, forcing homebuilders into heat-buying obligations would run counter to the idea of free supplier choice."
Established energy industries like that argument as they fear too much new technology too soon would upset their existing production and distribution infrastructures.

Germany's 40 million households absorb 40 percent of all power and heat so potentially big shifts in market shares worry established utility companies such as E.ON, RWE, Vattenfall Europe and EnBW.

National targets to curb conventional energies require energy use to be cut by 19 percent and the share of renewables in heat and water provision to be doubled by 2020.

Deutsche Bank Research suggests the established players should not fight new CHP players at a time of record oil.
"Old conflicts of interest stemming from monopoly supplier times must be overcome," said DBR analyst Josef Auer.