National Allocation Plans and Cogeneration Dr Simon Minett, Managing Director, COGEN Europe...
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Transcript of National Allocation Plans and Cogeneration Dr Simon Minett, Managing Director, COGEN Europe...
National Allocation Plans and Cogeneration
Dr Simon Minett, Managing Director, COGEN Europe
Emissions Trading and Cogeneration, Milanoenergia 2005, 5 October 2005
CogenerationClean, Clever, Competitive
• About COGEN Europe• Principles of the emissions trading scheme• NAP 1 (2005 – 2007)• NAP 2 (2008 – 2012)• NAP 3 (2012 – 2016)• The treatment of cogeneration in NAPs• CHP Directive• Final remarks
COGEN Europe
European Trade Association for the Promotion of Cogeneration
• Representing the cogeneration sector• Setting the agenda• Resource and information source for policy
makers
Vision• COGEN Europe working towards the wider use
of cogeneration in Europe for a sustainable energy future
Structure• National Members
– National Promotional Organisations - 21• Company Members - 120
– Gas and Electricity Utilities– Equipment Manufacturers and Suppliers– Consultancies– Banks, Insurance and End Users
About COGEN Europe
• Secretariat with seven staff members based in Brussels
• One focus on studies and information campaigns• Advocates the interests of the CHP sector• Working group on emissions trading looks at
NAPs and cogeneration• Key to cogeneration’s success is the CHP
Directive (will set the references and thus the allocation too)
Four Important Directives
2002 2003 2004 2005 2006 2007 2008
Preparation Transposition In force in MS
CogenerationDirective
Energy Services Directive
Energy performanceof buildings Directive
Emissions Trading Directive
SOLUTIONS
• Cogeneration is the most efficient energy conversion technique
• Saves around 280 million tonnes CO2 EU25
• Reduces energy dependence by 1500 PJ/a
• Modernising existing stock and achieving modest growth will yield the same again
Source: OECD 1999
Conversion losses from
thermal production: 4712.1
Transport losses and energy sector consumption: 368.5
Own use Power plant: 156.7
Coal: 2597.3
Oil: 523.5
Gas: 1104.0
Nuclear: 2833.4
Hydro: 513.8
Net imports: 23.6
Renewable fuels & waste: 199.5
Gross ElectricityProduction:
3119.7
Total primaryenergy input for
electricityproduction:
7831.8
Net ElectricityProduction: 2963
Electricity deliveredto customers:
2601.1
Industry: 1086.5
Residential: 756.1
Commerce, Public Services: 613.6
Other: 145.4
33% total efficiency of the electricity supply system
Electricity Generation in European OECD countries(in TWh)
Not acceptable!
• About COGEN Europe• Principles of the emissions trading scheme• NAP 1 (2005 – 2007)• NAP 2 (2008 – 2012)• NAP 3 (2012 – 2016)• The treatment of cogeneration in NAPs• CHP Directive• Final remarks
Principles of the ETS
• Covering 12,000 installations, the European emissions trading scheme (ETS) is the largest of its kind in the world
• The ETS gives emissions reductions a value and extra emissions a cost
• The ETS is the main European policy instrument for fulfilling its Kyoto obligations
• The ETS is designed to promote low-carbon technologies such as cogeneration (IN PRINCIPLE!)
• About COGEN Europe• Principles of the emissions trading scheme• NAP 1 (2005 – 2007)• NAP 2 (2008 – 2012)• NAP 3 (2012 – 2016)• The treatment of cogeneration in NAPs• CHP Directive• Final remarks
NAP 1 (2005 – 2007)
• The first trading period is in effect since 1 January 2005
• All 25 national allocation plans (NAP) are accepted by the European Commission
• No harmonisation across EU25• Due to the Commission scrutiny the amount of
total emissions allowances has been cut by 290 million
• For the NAP 1 period, there are 2.2 billion allowances issued per year
NAP 1 (2005 – 2007)
DISTRIBUTION OF ALLOWANCES ACROSS EU-25
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
GE UK PO IT ES FR CZ NL GR BE FI PT DK AT HU SK SW IE EE LI SI CY LT LX MA
Number of Installations Millions of Allowances
The “Electricity Price Effect”
Effect of CO2 cost on marginal electricity production cost Based on efficiency ratings of 36% and 50% net HHV efficiency respectively. Source: ICF Consulting
cogen
Carbon Price Effect
€ 0,00
€ 10,00
€ 20,00
€ 30,00
€ 40,00
€ 50,00
€ 60,00
€ 70,00
€ 80,00
06/0
4/20
04
06/0
5/20
04
06/0
6/20
04
06/0
7/20
04
06/0
8/20
04
06/0
9/20
04
06/1
0/20
04
06/1
1/20
04
06/1
2/20
04
06/0
1/20
05
06/0
2/20
05
06/0
3/20
05
06/0
4/20
05
06/0
5/20
05
06/0
6/20
05
06/0
7/20
05
06/0
8/20
05
06/0
9/20
05
06/1
0/20
05
06/1
1/20
05
06/1
2/20
05
Carbon Price Conti PI UKPX
NAP 1 (2005 – 2007)
ELECTRICITY PRICE AND THE MERIT ORDER PRINCIPLE
• About COGEN Europe• Principles of the emissions trading scheme• NAP 1 (2005 – 2007)• NAP 2 (2008 – 2012)• NAP 3 (2012 – 2016)• The treatment of cogeneration in NAPs• CHP Directive• Final remarks
NAP 2 (2008 – 2012)
• Time frame synchronised with the first Kyoto commitment period
• European legal basis for NAP 2 equal to NAP 1, as quick amendment of the ETS Directive impossible
• Individual Member States are free to change national allocation methods
• European Commission discusses inclusion of aviation sector in the middle of NAP 2
NAP 2 (2008 – 2012)
• Accession of Bulgaria and Romania• Bilateral discussions with Canada, Norway and
others
TIMING
ENLARGEMENT
• By 01/07/06: Decision on total number of allowances by each Member State
• By 01/10/06: European Commission approves/rejects these numbers
• By 01/01/07: Members States publish allocation to individual installations
• About COGEN Europe• Principles of the emissions trading scheme• NAP 1 (2005 – 2007)• NAP 2 (2008 – 2012)• NAP 3 (2012 – 2016)• The treatment of cogeneration in NAPs• CHP Directive• Final remarks
NAP 3 (2012 – 2016)
• To run from January 2012 to December 2016• European Commission will “if appropriate”
propose changes to the European legislation in summer 2006
• Currently, the Commission carries out a review on the ETS
• Emphasis on:– Stable baseline years– Longer allocation periods– Deriving future allocation from past allocation– Expansion to further sectors and gases
NAP 3 (2012 – 2016)
FOCUS OF COGEN Europe
• Level of harmonisation of allocation methods
• Level of harmonisation of CHP treatment
• Role and design of auctioning
• Favourable treatment for “new entrants”
• Definition of combustion installations
• Role of flexible mechanisms (JI/CDM)
• Role of other sectors and gases
• About COGEN Europe• Principles of the emissions trading scheme• NAP 1 (2005 – 2007)• NAP 2 (2008 – 2012)• NAP 3 (2012 – 2016)• The treatment of cogeneration in NAPs• CHP Directive• Final remarks
The treatment of cogeneration in NAPS
• COGEN Europe is the only organisation carrying out a European-wide best practice review
• Working Group on emission trading deals with this matter
• Today (5 October 2005), meeting with the European Commission
• Final results expected by the end of 2005• Focus on ten biggest EU countries, which
represent more then 80% of allocated allowance
The treatment of cogeneration in NAPS
• Art. 11(2) or the Austrian emissions trading law foresees:
“The allocation takes the climate-friendly effects of efficient cogeneration and efficient district heating into account, as well as the promotion of these technologies as foreseen in the framework of climate change policies”
• The so-called “CHP premium” halves the sector-specific CO2 reduction requirements for cogeneration plants
THE EXAMPLE OF AUSTRIA (1. part)
The treatment of cogeneration in NAPS
Allocation basis x specific factor without CHP premium = number of allowances
THE EXAMPLE OF AUSTRIA (2. part)
10,000 t CO2 x 0.94* = 9,400 allowances
Allocation basis x specific factor with CHP premium = number of allowances
10,000 t CO2 x 0.97* = 9,700 allowances
* equals 6% reduction obligation for the sector
• About COGEN Europe• Principles of the emissions trading scheme• NAP 1 (2005 – 2007)• NAP 2 (2008 – 2012)• NAP 3 (2012 – 2016)• The treatment of cogeneration in NAPs• CHP Directive• Final remarks
Cogeneration Directive
Background• Adopted in February 2004• Implementation deadline February 2006• Article 1: “Creating a framework for promotion and
development of high efficiency cogeneration”• Member States must report by February 2007 their
progress towards increasing the share of high efficiency cogeneration
• European Commission can by February 2008 propose new measures, “if appropriate”
• Informal EU target of 18% of electricity from cogeneration by 2010 (currently 11%)
Cogeneration Directive
Definition of high efficiency cogeneration• All CHP plants up to 1MWe, which provide any primary
energy savings (PES)• Larger plants, which provide PES of at least 10%• PES is normally calculated for each individual CHP
plant with following formula
• Other PES calculation formula possible
Primary energy savings
73 32
Ref.BoilerY%
Ref. Elect.X%cogen
installation100
48
32 =
Z
48 =
Savings > 10%
Comparison of energy consumption for cogeneration and for separate production of electricity and heat
Primary energy savings
73 32
Ref.Boiler85%
Ref. Elect.51%cogen
installation100
48
32 =
125
48 =
Savings = 125-100 = 25 = 20%
Comparison of energy consumption for cogeneration and for separate production of electricity and heat
32 = 35 – 3 (including grid losses)
CHP Directive Conclusions
• Next months are very important• References are too strict = No new CHP and
at least 50% reduction of existing CHP• Get references right = stimulation of CHP,
quality assurance and new state aid possible• COGEN Europe needs your help!
• About COGEN Europe• Principles of the emissions trading scheme• NAP 1 (2005 – 2007)• NAP 2 (2008 – 2012)• NAP 3 (2012 – 2016)• The treatment of cogeneration in NAPs• CHP Directive• Final remarks
Final remarks
• The Working Group on emissions trading is open to all COGEN Europe members
• Permanent representation of an Italian member not secured yet
• Italy ranks second (number of installations) respectively fourth (number of allowances) in the ETS
• If you want to present your concerns to the Commission, please contact the Working Group co-ordinator:[email protected]
Thank you for your attention!
www.cogen.org