Introduction

Distributed Generation:
Distributed Generations are parallel and stand-alone electric generation units located
within the electric distribution system at or near the end user.

WHY Distributed Generation?

For the past 60 years, electricity production and supply has been performed by
centralized, regulated electric utilities that owned and operated power generation
facilities as well as the transmission and distribution lines.
Investor-owned utilities are regulated by state public utility commissions (PUCs), while
cooperative and municipal utilities are governed by local jurisdictions.
Since the 1970s, federal and state public policy has encouraged the opening of the
electric power system to entities other than the electric utilities. This has created a
1

competitive landscape for power generation and has opened the transmission system to
access. A significant shift in the U.S. regulatory system began with the Energy Policy Act
(EPAct) of 1992, which requires interstate transmission line owners to allow all electric
generators access to their lines. Many states today are at various stages of electric utility
deregulation.
Utility deregulation is one reason for the high level of interest in Distributed Generation.
Other benefits associated with distributed generation
Reliability
Power Quality
Transmission Benefits
Environmental Benefits
Some well known types of Distributed Generation
Fuel Cells
Micro turbines
Wind farm
Photovoltaic Cells
Internal Combustion Engine

Advantages of Distributed Generation

2.1 Reliability:
Power reliability is required for

Life-safety systems, such as emergency lighting or ventilation, which must

operate properly to prevent the loss of human life.

Systems that prevent damage to plant infrastructure (e.g., sump pumps at a

wastewater treatment plant), allow monitoring of other systems (e.g., supervisory
control and data acquisition, or SCADA, systems), or prevent the loss of vital data
during power failures (e.g., at bank data centers) or whose failure to operate could
significantly impact public health.

Processes that would cause sizeable financial losses if power outages occurred.
Power outages cause loss of quality control in batch processesfound at
2

microelectronic component manufacturing, food processing, chemical processing,

and oil refining facilitiesand force owners to discard entire batches. In addition,
power losses to processes that operate 24 hours per day, seven days per week
with no openings to recover lost production timecan lead to cancelled orders.

Equipment and processes for which operation is not time-critical. Operating this
type of equipment, such as a cooling system with a large, cool storage tank, can
be deferred to off-peak times; switched to an alternate source, such as an engine
generator; or switched to an alternate fuel, such as an electric heating system with
fuel-oil backup.

There are many ways to increase the reliability of power. Redundant power supplies do
not always improve reliability. If two redundant feeders supply power to an industrial
facility but originate at the same utility substation and are carried on the same set of
power poles, reliability will be lower than if they originate at separate substations and
travel to the site on different sets of power poles. The problem with redundant feeders
carried on the same set of poles is that a single-point failure (e.g., a weather-related event,
pole fire, or traffic accident) could cause simultaneous outages on both sources.
To improve power reliability by installing standby generation, uninterruptible power
supplies (UPS), flywheels, or fuel cells.
Reliability is the most important feature of electric power distribution system.
Quantification of distribution system indices is the best indices of whether the system
with distributed generation has increased reliability or not.
The following indices are generally used by utilities (IEEE standard 1366, 2001) to
measure the reliability.
System Average Interruption Duration Index (SAIDI):

SAIDI

Customer interruption duration

Total no of customer served

Customer Average Interruption Duration Index (CAIDI):

3

CAIDI

customer interruption duration

Total no of customer interruption

System Average Interruption Frequency Index (SAIFI

SAIFI

Total no of customer interruption

Total no of customer served

Customer Average Interruption Frequency Index (CAIFI)

CAIFI

Total no of customer interruptions

Total no of customer interrupted

The following is a short example taken from [7]. The system is a two 22 KV feeders as
the main incoming feeders in the station, followed by two 10 MVA, 22KV/11KV
transformers. Both the transformers share the total load of about 2 MW with
around15000 customers

Customer 327

Customer 220

System without DG

Customer 327

Customer 220

System with DG

If there is a fault on feeder 1 all 327 customer of society 1 attached to it get affected, if
the fault leads to sustained interruption then there is no alternate feed is for these
customers. In such situations a strategically placed DG will be able to take care of all
these 327 customers of society 1 in the event of fault in feeder 1, the same will be true in
the event of fault in feeder 2 catering to 220 customers of society 2.

The following are datas obtained from TATA POWER COMPANY.

Total no of
customer
interruption
Feb-03
Aug-03
Dec-03

2020
6106
5012

Feb-03
Aug-03
Dec-03

CAIFI
Without
DG
1
1.409
1.02

Sum
of
interruption
duration in
minutes
74537
241012
66983

With DG
1.194
1.523
1.09

No of affected customers

Total no of customers
served

Without
DG
2018
4334
4916

Without
DG
12336
15101
15497

With
DG
12663
15428
15824

SAIDI
Without
DG
6.042
15.96
4.322

With
DG
5.886
15.62
4.233

SAIFI
Without
DG
0.163
0.404
0.323

With DG
1691
4007
4589

With DG
0.159
0.396
0.316

The above results show that by optimally placing DG, the reliability indices have
improved. The improvement may have been significant in the case of DG supplying a
larger part of the network.

Power Quality Power Quality of any power system can be judged by the voltage profile
and line losses. The index VPII and LLRI gives the result of benefits of the system with
DG in comparison to system without DG.

[4]

The above fig shows the single line diagram of 12 bus system used to obtain VPII and
LLRI. The system consists of three conventional generators at bus 1, bus 5 and bus12
with ratings of 1.0, 0.75 and 0.625 respectively. Total load of 2.013 pu located unevenly
on every bus is assumed. The resistance and reactance of all the distribution and
transmission lines are assumed to be 0.000625 pu/km and 0.000375 pu/km. The lengths
of the distribution lines are as below

[4]

Simulations of following four cases were done

Case (1): D.G located at bus 9.
Case (2): D.G located at bus 10.
Case (3): 50% DG located at Bus 9 and 50% DG located at Bus 4.
Case (4): 50% DG located at Bus 9 and remaining 50% located at Bus 10.
6

VPII: Voltage Profile Improvement Index

It is defined as the voltage profile index of the system with DG to the voltage profile of
the system without DG
VPII

VPw / DG
VPwo / DG

VPw / DG Is voltage profile of the system with DG

VPwo / DG Is the voltage profile of the system without DG
N

VP Vi Li ki

With

i 1

k
i 1

Vi Is the voltage magnitude at bus i in per unit.

Li Is the load at bus i in per unit.

ki Is the weighting factor for load bus i.

N Is total number of Load bus.

The weighting factors are chosen based on the importance and criticality of different
Loads

[4]
7

To study the impact four sets of bus weighing factor set 1 through 4 as listed above were
selected. The results thus obtained are shown below.

[4]
The VPII for all the four cases have value greater than 1 showing the improvement of
VPII in comparison to system without DG. The VPII exhibits the highest value under
weighting factor set 1(equal weights). With weighting factor set 4(importance given to
high load buses), VPII has the lowest value, this is due to the fact that voltages at high
load buses before employing DG(base case) are relatively high as compared to low load
buses.
D.G rating plays a significant role in determining VPII. As DG rating increases, so does
VPII

LLRI: Line Loss reduction Index

It is defined as the ratio of total line losses in the system with and without DG
M

LLRI

LLw / DG
LLwo / DG

2
LLw / DG I Ai
Ri Di
i 1

LLwo / DG I Li2 Ri Di
i 1

I Ai

is the per unit line current in distribution line i, with the employment of DG

Ri is the line resistance(pu/km) for line i

Di is the ith distribution line length (km)

M is the number of lines in the distribution system

I Li

is the per unit line current in distribution line I, without the employment of DG.

[4]
The above result of the simulation of the 12 bus system shows that DG significantly
reduces the electrical line losses. The rating location and operating power factor of DG
are all very important contributing factors in determining the amount of line-loss
reduction. However higher DG penetration cannot always guarantee lower line losses

Transmission Benefits/ Substitute of Power Delivery Investments

In some cases, the installation of DG can lower power delivery costs as substitute or
deferral of new transmission and distribution investments. That is one reason why some
utilities are already encouraging such use where economically viable.

Remote areas to which the distribution system cannot reach:

In a number of cases, utilities can save money by installing DG on a customers property
rather than extending a line to the customers remote location.

Areas experiencing load growth:

In some areas experiencing intermittent load growth, it can cost less to install a generator
to serve a neighborhoods load growth than it would to upgrade the power delivery
system to import the same power. When a substantial power delivery investment is
contemplated and load growth is low or uncertain, DG can be the low cost alternative.

New Large Loads:

A utility can save distribution expansion costs if a new large customer is coming up on a
weak circuit. Choosing to build new generation to meet its load, instead of upgrading the
9

transmission line can prove economical to the utility. Utilities are already installing DG
for large stores, factories, Prisons, recreational areas and remotely located resort
complexes. These are usually large internal combustion generators. On the other hand,
the utilities will not get any benefit if a new large customer builds its own generation to
meet its own energy demand but intends to lean on the utility for back up power
especially at time of peak. In that instance, the utility may still have to reinforce its
transmission or distribution facilities to serve the customers peak demand.

Environmental Benefits:
The quantification of environmental benefits of any system with distribution generation
in comparison to the system without distributed generation can be obtained by EIRI

EIRI: Environment Impact Reduction Index

It is the ratio emission of particular pollutant with and without DG

EIRI
i

PE
PE

iw / DG

iwo / DG

PE iwo / DG ( EG ) j ( AE ) ij
j 1

j 1

k 1

PEiw / DG ( EG ) AJ ( AE )ij ( EDG ) ( AE )ik

k

( EG ) AJ & ( EG ) j are the amount of electrical energy generated by the j th conventional

power plant with and without distribution generation respectively.

( AE)ij is the amount of emission of the ith pollutant for the jth conventional plant per

MWh
( AE)ik is the amount of emission of ith pollutant for the kth DG power plant per MWh of

energy generated
In reality, power plants emit many pollutants into atmosphere. Thus, it is useful to define
a composite index to include all the major pollutants. The index can be formulated as
NP

EIRI ( EI ) i ( EIRI ) i
i 1

With 0 ( EI ) i 1

NP

And

( EI )
i 1

Where (EI)i is the weighting factor for the ith pollutant and NP is the total number of
pollutants of interest.

10

[4]
The result of simulation includes only three major ones (CO 2, SO2, NOx). It is assumed
that all the pollutants are equally weighted. The result shows that DG reduces pollutant
emissions. The EIRI also depends on rating and locations of DG.

Proper Planned and operated DG can provide consumers and society a wide variety of
benefits,

including

economic

saving,

reliability

and

improved

environmental

performance. Though it looks wonderful seeing the indices in favor of distributed

generation, but there are many other complicated issues involved.
The interconnection of DG with the electric grid involves safety reliability and economic
risks. For example if a line goes down, the utility will know whether the line is energized
and can respond safely. Consumer ownership and operation of generation can change
that. New generation sources can also change the direction and volume of power flows on
the system, possibly causing some wires to be underutilized while overloading others.
Those changes may require the distribution company to reinforce its system, build new
lines, or install new control equipment. Moreover, because DG could replace or reduce
the demand for traditional utility service, DG could also pose an economic risk to some
utilities too.

11

12

INTRODUCTION
The cogeneration of heat and power (CHP) is a method of production whose use of fuel
has a dual effect: the simultaneous generation of heat and power. Plants of this type are
substantially more efficient than those engaged in the separate production of heat and
power, and have a significantly lower impact on the environment (e.g. greenhouse gas
emissions). Moreover, these generating plants are usually located closer to users, which
reduces losses that occur during electricity transmission. The cogeneration of heat and
power will be an important factor in ensuring reliability of energy supply, reducing
greenhouse gas emissions and meeting requirements for increased energy efficiency.
Despite its clearly defined advantages, cogeneration still requires a certain level of
support, which must be provided by the state, if it is to be competitive on the market. The
proper form and level of support is key to the successful development of cogeneration,
which also has wide multiplying effects on the economy, such as an increase in
competitiveness, reliability of energy supply, the creation of new jobs and the
achievement of more balanced economic development.
Appropriate determination of the reference costs of electricity is the first and most crucial
step in determining the required level of support for cogeneration. The methodology for
determining the reference costs must be as objective and transparent as possible.
PREMISES FOR preparation OF THE METHODOLOGY
In preparing a methodology for calculating the reference costs for the production of
electricity (RCE) through cogeneration, we shall proceed from EU legislation and
documents in the area, the guidelines for the allocation of environmental aid, to which
support for cogeneration and reduction in greenhouse gas emissions belong. The
regulations and guidelines are as follows:

Directive on the promotion of cogeneration based on a useful heat demand in the

internal energy market (2004/8/EC)

Directive 2005/89/EC of the European Parliament and of the Council of 18 January

2006 concerning measures to safeguard security of energy supply and infrastructure
investment

Community Guidelines on State Aid for Environmental Protection (2008/C 82/01)

Guidelines on National Regional Aid for 20072013 (2006/C 54/08).

EU regulations deal separately with high-efficiency cogeneration (CHP), which is

covered by Directive 2004/08/EC, and the generation of electricity from renewable
energy sources (RES), which is covered by Directive 2001/77/EC. It has been decided
that this division will also be retained in relation to support for electricity production.
Owing to the fact that both areas intersect, and to the transparency and benefits of support
13

schemes, we have used similar approaches and the same methodological premises as far
as possible and where appropriate. This will make it easier to compare and implement
both support schemes. The premises of the methodology for determining RCE are the
same for CHP and RES.
The basic principle of the allocation of support to eligible electricity producers is that
support may be allocated only if the costs of electricity production in these generating
plants exceed the price of electricity from these plants on the open electricity market. For
determining the price of electricity from these plants on the market, the costs of
electricity production in individual types and size classes of generating plant must be
calculated.
In compiling the RCE, we shall pay due regard to the following points of departure:

Economic treatment encompasses an analysis of electricity generation in typical

CHP generating plants.

Calculation of RCE must comply with the requirements of the Guidelines on

State Aid for Environmental Protection.

Calculation of RCE must provide a high-quality basis for determination of the

appropriate level of support for CHP (aid may only cover the difference up to the
market energy price).

Determination of RCE must:

o provide suitable objective economic conditions that will be of interest to
investors;
o be a transparent, simple and not-over-extensive system that is
comprehensible to users and not too complex to maintain.

14

Methodology
The methodology for determining RCE is based on a determination of the overall annual
costs of operation of CHP generating plants, which are in turn based on the following
technological and operating parameters, variables, cost categories and revenues:
1.

Main technological and operating parameters of technologies:

installed power (MWel)
electrical efficiency Izkel (%)
heat efficiency Izkt (%)
annual operating hours
2. Investment costs (specific, /kWel), which include the costs of:
land
machinery and electrical equipment
construction works
construction, start-up and tests
connection to the grid
project design and licence acquisition
These costs are taken into account in the calculation in the annuity calculation (a 10year economic period of a project and a 12% discount rate) and otherwise constitute
depreciation and capital costs.
3. Operating costs (/MWhel):
maintenance (/MWhel, % of investment),
operation work (number of employees, /year)
insurance and other costs (% of investment, /year)
4. Fuel costs (/MWhg)
5. Revenues, benefits (/MWhel):
sale of heat (/MWht)
other benefits
RCE represent the overall annual costs of operation of specific typical CHP generating
plants, minus all revenues and benefits of operation (sale of heat, etc) and are expressed
in /MWhel, according to the following equation:
RCE = (COSTS REVENUES) / ELECTRICITY
where:
COSTS = annual investment (annuity)+ operating costs () + fuel costs ()
REVENUES = sale of heat () + other benefits ()
ELECTRICITY

=
annual
electricity
generated
= installed power (MWel) * annual operating hours (h)

(MWh)

15

RCE are divided into two parts:

RCE = FPRC + VPRC
1. FPRC fixed part of RCE (/MWhel):
investment costs (annuity)
operating costs (without fuel costs)
2. VPRC variable part RCE (/MWhel):
fuel costs revenues (heat and other benefits)
The fixed part of RCE is established and determined every 5 years, or more frequently if
there is a substantial change in the investment costs and other investment parameters.
The variable part of RCE is established and determined annually, or more frequently on
the basis of forecast reference market prices of energy compiled by the Energy Agency.
The methodology for determining RCE is based on the annuity method of evaluating
investment costs. The annuity method is a dynamic method that transfers the annual
investment cost to the annual level, where the required return on invested capital is also
taken into account. The annual investment cost of capital is calculated as the annuity
factor multiplied by the investments made in the plant. The annuity factor is calculated
using a formula that takes account of the discount rate and the economic life of the plant.
Technological and operating parameters
CHP generating plants are characterised by a very high degree of diversity in terms of
technologies deployed, plant size and fuel used. We have therefore classified them
according to the following criteria:
1. size of CHP generating plant (size class)
2. type of fuel used (fossil fuels, wood biomass)
3. scope of annual operation
4. technology of the CHP generating plant itself
Size classes of CHP generating plants
Directive 2004/08/EC defines only two size classes of CHP generating plant:

micro cogeneration plants installed power < 50 kWel

small-scale cogeneration plants installed power < 1 MWel

Since the size of a CHP generating plant has an important effect on the method of
operation, and above all on the specific investment costs involved, it makes sense, from
the point of view of determining the level of support, to introduce size classes that are at
least typical and for which typical specific investment and other costs can be determined.
16

CHP generating plants are classified by size/total nominal electrical power into 6 size
classes, as shown in Table.
Size classes of CHP generating plants
Size class
1.
Micro
2.
Small-scale
3.
Medium-sized lower
4.
Medium-sized higher
5.
Large lower
6.
Large higher

Nominal power of plant

less than 50 kW
less than 1,000 kW
15 MW
525 MW
2550 MW
50200 MW

Types of fuel
CHP generating plants are divided into two groups in terms of the fuel source used:
1. fossil fuels (all fuels), where the reference energy product is natural gas
2. wood biomass
The RCE for CHP generating plants using fossil fuels are determined with reference to
the costs of use of natural gas, which is the fossil-based energy product with the lowest
specific emissions of greenhouse gases. The RCE thus obtained are also used for CHP
generating plants using other fossil-based sources if they achieve specific CO 2 emissions
in electricity production of less than 600 kgCO2/MWhel, in accordance with the
methodology presented here.
Only those plants that use wood biomass as their input fuel source are classified as CHP
generating plants using wood biomass; all other CHP generating plants using RES are
dealt with by the RCE methodology for the production of electricity from RES.
Determination of specific emissions of CO2 in electricity production
Specific emissions in the production of electricity by a CHP generating plant are
determined on the basis of the following equation:
SESPTE = 1 / IzkEl * EFg * 3.6 PT/PEl * 200
where:
SESPTE
IzkEl
EFg

are the specific emissions of CO 2 from a CHP generating plant

in the production of electricity (kgCO2/MWhel).
is the electrical efficiency of a CHP generating plant the ratio
between the net electricity generated and the energy input of the
entire fuel in operation in pure cogeneration.
is the emission factor for the fuel used (t CO 2/TJ). The use of
emission factors for an individual fuel stated by the Republic of
Slovenia in its most recent national greenhouse gas records
submitted to the Secretariat of the United Nations Framework
Convention on Climate Change (UNFCCC) published on the
website of the Environmental Agency of the Republic of
17

PT
PEl
200

Slovenia (ARSO). In the event of more than one fuel being

used, the weighted average of the factors with regard to the
respective shares of fuel is used.
is the nominal heat power (useful heat) of a CHP unit (kWt).
is the nominal electrical power of a CHP unit at the highest
useful heat power (kWel).
are the specific emissions in separate production of heat from
natural gas (kgCO2/MWht,).

Scope of annual operation

The seasonal dynamics of useful heat are key to determining the scope of annual
operation of a CHP generating plant and, consequently, have a pronounced impact on its
economy. The annual operating hours of the CHP generating plant are used to determine
the scope of its annual operation.
The operating hours of a CHP generating plant are the ratio between net electricity
generated in cogeneration in the course of one year or the reporting period, and the
nominal electrical power of the CHP generating plant.
In order to achieve a balanced treatment of CHP generating plants with regard to number
of operating hours, we determine the RCE for two groups of CHP generating plant:
1. CHP generating plants with up to 4,000 operating hours a year:
o operation for less than 4,000 operating hours a year
o seasonal nature of operation, primarily linked to the generation of heat for
heating during the heating season
2. CHP generating plants with over 4,000 operating hours a year:
o operation for over 4,000 operating hours a year
o generation of heat throughout the whole year: process heat or heat for
heating and cooling throughout the whole year
RCE for CHP generating plants from the first group are set for an average of 3,500
operating hours (typical duration of the heating season); for the second group, they are set
for 5,500 operating hours (average operating hours of industrial CHP generating plants).1
Owing to the lower number of operating hours of CHP generating plants from the first
group, RCE (and, consequently, support) are higher; this is to ensure appropriate
economic conditions for their operation. However, the upper limit of support is limited
only for a scope of electricity generation up to 4,000 operating hours a year.
The annual production of electricity and useful heat, and annual consumption of fuels, are
determined as input variables in the economic model of determination of RCE on the
basis of the operating hours of CHP generating plants in full cogeneration with regard to
the parameters of the technology.

18

Cogeneration technologies
All technologies referred to in Directive 2004/08/EC are included in the treatment of
high-efficiency cogeneration units:
1. combined cycle gas turbines with heat recovery;
2. steam backpressure turbines;
3. steam-condensing extraction turbines;
4. gas turbines with heat recovery;
5. internal combustion engines;
6. steam engines;
7. microturbines
8. Stirling engines;
9. fuel cells;
10. engines with organic Rankine cycles;
11. any other type of technology in CHP.
For mature market technologies (17), RCE are determined for selected representative
technologies and typical generating plants by individual size class and for both groups
with regard to type of fuel used.
For all other technologies (811), RCE are determined individually, on the basis of
the prescribed application and in accordance with this Methodology.
Representative CHP technologies for CHP generating plants using fossil fuels
Representative technologies have been determined for individual classes with reference
to the current state of cogeneration technology and the data on the most common cases of
use in Slovenia and the EU, and are shown in Table.
The table also gives the nominal electrical power for typical sizes of CHP generating
plant operating in pure cogeneration mode by individual size class for which RCE are
determined.
Representative technologies for CHP generating plants using fossil fuels
Size class
1
.
2
.
3
.
4
.
5
.
6
.

Representative technology

Size of typical plant

(MWel)

less than 50 kW
less than 1,000
internal combustion engine
kW

0.005

15 MW

525 MW
2550 MW
50200 MW

gas turbine with heat recovery

combined cycle gas turbine with
heat recovery

0.5

10
40
150
19

The internal combustion engine is the predominant technology for CHP generating plants
for the first three size classes (up to 5 MW), where small gas turbines appear only
exceptionally (where process steam is required). Available data in Slovenia indicates that
no other technologies are used in newer CHP generating plants (i.e. those less than 10
years old) in this size class, except for gas engines.
In the upper half of the 525 MW size class, there is mainly an overlap between the use
of gas turbines with heat recovery and combined cycle with gas turbine. Plants with a
larger number of gas engines are also possible, and are placed in this group because of
their power. Since the largest number of new CHP generating plants for process purposes
in industry can be expected in this size class in the future, where the gas turbine is the
most suitable technology, this technology was selected as representative.2 Slovenia
currently has only one new CHP generating plant, with four gas engines, classified in this
size class. Several feasibility studies have been drawn up for units with gas turbines and
combined cycles in industry.
Owing to its fairly high efficiency levels, the combined cycle with gas turbine and heat
recovery is a representative and priority technology for both of the largest classes of CHP
generating plant.
Representative CHP technologies for CHP generating plants using wood biomass
Steam technology, which is based on the burning of wood biomass (chips) on grates in
steam boilers, steam engines and steam turbines (steam backpressure or steam
condensing), is still the most common mature and established market technologies for
cogeneration using wood biomass. For this reason, this technology was selected as
representative, as shown in Table.
There is currently no available technology established on the market (the most promising
being the Stirling engine) for micro CHP generating plants; individual treatment is
therefore envisaged for this size class (RCE are not determined).
The volume of heat consumption in Slovenia means that we do not anticipate the arrival
of CHP generating plants using wood biomass with a nominal power of over 50 MWel.
Reference costs for the largest (6th) size class are therefore not determined.3
Representative technologies for CHP generating plants using wood biomass
Size class
1
.
2
.
3
.
4
.
5
.
6
.

/
less than 50 kW
less than 1,000 Steam engine and boiler (gratekW
fired)
15 MW
525 MW

/
1
5

Steam turbine and boiler (gratefired)

2550 MW
50200 MW

Size of typical plant

(MWel)

Representative technology

25
50

2
3

20

Parameters of CHP technologies

The following technological parameters, which determine the use of fuel and the
production of electricity and useful heat by the plant when operating in full cogeneration,
are used to determine the RCE for CHP generating plants:
1. Electrical efficiency (IzkEl) ratio between the nominal electrical power of the
CHP generating plant and the input power of the fuel.
2. Heat efficiency (IzkT) ratio between the nominal output heat power (useful
heat) of the CHP generating plant and the input power of the fuel.
The technological parameters of CHP generating plants using fossil fuels are shown in
Table 4, and of CHP generating plants using wood biomass in Table 5.
The equations below yield the calculation of fuel consumption and useful heat production
by a CHP generating plant:
Fuel consumption (MWh) = Nominal electrical power (MW El) / IzkEl * Operating
hours (h)
Useful heat (MWh) = Nominal electrical power (MWEl)* IzkT / IzkEl * Operating
hours (h)
= Electricity produced (MWh) * IzkT / IzkEl

Technological parameters for CHP generating plants using fossil fuel

Size class

Representative
technology
PEl (MWEl)
IzkEl
IzkT

Gas
engine
0,005
27%
63%

Gas
engine
0,5
38%
47%

Gas
engine
3
40%
42%

Gas
turbine
10
31%
48%

5
Combined
cycle with
gas turbine
40
38%
42%

6
Combined
cycle with
gas turbine
100
42.5%
40.0%

Technological parameters for CHP generating plants using wood biomass

Size class
Representative
technology
PEl (MWEl)
IzkEl

1
/

Steam
engine
0,5
12%

Steam
turbine
5
17%

Steam
turbine
20
27%

Steam
turbine
35
28%

6
/

21

IzkT

71%

66%

58%

56%

Economic parameters and variables

Determination of RCE is based on an economic model that uses established economic
standards for the economic evaluation of projects.
The main input economic parameters and variables used in the economic model for
determining RCE are:
1. Depreciation period: 10 years
2. Discount rate: 12%
3. Investment costs
4. Price of fuel
5. Operating and maintenance costs
6. Revenues and benefits
These are presented in more detail in the sections below.
Because of the dominant legal status of companies operating CHP generating plants, the
economic model does not take account of added value.
Depreciation period
The determination of RCE is based on the economic evaluation of CHP projects over a
10-year period, which accords with the duration of the support scheme and the average
depreciation period of CHP generating plants,4 under current legislation and according to
established practice.
Slovenian legislation currently prescribes only the highest permitted rate of
depreciation and only very generally. The highest rates of depreciation are
prescribed in Article 33 of the Corporate Income Tax Act, as follows:

period)

built facilities: 3% rate (which means a 33-year depreciation period)

machinery and equipment: 20% rate (which means a 5-year depreciation

Companies generally opt for the prescribed or lower calculation rate, since by doing
so they ensure that the calculated depreciation is treated entirely as expenditure for
tax purposes. This does not mean that the company cannot calculate depreciation
under the lower rate; however, in this case, depreciation costs may only form part
of costs for tax purposes at the end of the year up to the level or rate prescribed by
the Act.
The lifetime of most CHP generating plants is around 15 years. The share of the
value of built facilities and land in the entire investment is usually comparatively
small (minimal in the case of installation into existing facilities or compact
containers, which require minimal construction interventions) and usually comprise
4

22

up to 10% of the entire value of the investment. The share of the value of
equipment is between 50 and 70% of the total investment value. Taking into
account the prescribed maximum permitted depreciation rate on the given shares of
investment costs, the average depreciation period of CHP generating plants is
around 10 years.
Discount rate
In determining the RCE, a 12% discount rate is used for evaluation of the annual capital
costs. This rate is based on the following premises:
1. Required return on own invested funds: 20%
This rate of return reflects current conditions in Slovenia, where the returns
demanded by investors on account of the possibility of production being moved to
other countries are relatively high, the cogeneration market itself is not yet fully
developed and, at the same time, the returns achieved from investment in the
basic activity reach the given rate of return.
2. Loan costs: 6.5%
An assessment of capital costs is based on the Euribor interbank interest rate,
which fluctuated around the 4.7% mark in 2008 on the annual level, and the
average margin of 1.8%, which includes all costs of approval, insurance and
intercalary interest prior to the commencement of repayment of a loan with a 10year repayment period. The value of the loan costs used is also in line with the
fixed interest rate which was offered by banks for comparable loans with a
repayment period of 10 years at the end of 2008.
3. Structure of investment funds:
The envisaged structure of funds for investment is shown in Table 6, where the
ratio between own funds and external sources of financing (loans) is 40:60.
Structure of envisaged investment funds and calculation of the discount rate
Funds
Own
Loans
Total discount rate

Return/inter
est
20%
6,5%
12%

Share
40%
60%

Taking into account the required returns on own funds and loan interest rates, the
total required return is 12%, which is used as the discount rate in economic
calculations of cogeneration operations and determination of the level of support.
Calculation of the required return is based on a calculation of the weighted average of
capital costs (WACC), which is calculated using the following equation:
WACC = wLS * rLS + wKR * rKR = 0.4 * 20% + 0.6 * 6.5% = 12%

23

where:
wLS

is share of own funds

wKR

is the loan share

rLS

is the return on own funds

rKR

is the interest rate for the loan

The Community Guidelines on State Aid for Environmental Protection outline the
premises for determining the discount rate; they allow operating aid to cover the
difference that arises between the production costs of electricity from cogeneration and
the market price of electricity. The Guidelines stipulate that production costs also include
investment depreciation costs and normal return on capital. However, they do not explain
what the value of normal return is. In practice, every country should decide itself, when
setting up the support scheme, what the normal return is.
In economic theory, normal return on funds for risk-free investments is between 7 and
10%, while normal return for more risky investments is between 15 and 25%.
Investments in CHP may not be classified either as risk-free investments or investments
with high risk, and we cannot ignore these two facts:
(1) that despite the certain level of security offered by the existence of the scheme
itself, which guarantees investors coverage of the difference between production
costs and market price, the CHP market remains an undeveloped market, and that
market mechanisms (applying to suppliers of equipment and services, as well as
to electricity production itself) do not operate according to the laws characteristic
of developed markets;
(2) CHP technologies are entering a more mature phase in relation to conventional
methods of electricity production, but the gap is still considerable, which presents
comparable additional risks.
Despite the existence of the support scheme for the production of electricity through
CHP, which will significantly reduce the price risk on the energy market, there remains a
large risk in relation to consumption of heat. This is particularly pronounced in industrial
projects, where heat consumption at the location is dependent on the future production
process at the location, which in times of economic uncertainty constitutes a large
uncertainty and risk for investors. If it wishes to ensure a sufficiently high level of
interest in investment on the part of private investors, the state must take this risk into
account when setting the discount rate, which brings investors a normal return on the
funds they have invested and covers the potential risk.
In times of economic crisis, guaranteeing a suitable return on environmental investment
funds is of even greater importance, above all because, by promoting investments in CHP,
the state is actively influencing the restructuring of the economy, indirectly promoting the
use and development of new technologies with high added value, achieving positive
effects on the environment, employment and reliability of energy supply, and reducing
dependence on imports.
Investment costs
Investment costs include the entirety of the investment costs for implementation of a
CHP project. They are defined as typical costs5 for the selected technology and the size
5

24

of the CHP generating plant by size class of technology and expressed as specific
investment costs in relation to installed electrical power (/kWel).
Investment costs include the following costs:
purchase or leasing of land
purchase of machinery and electrical equipment
execution of required construction works
costs of construction, start-up and tests
costs of connection to the grid
costs of project design and licence acquisition
The specific investment costs of CHP generating plants using fossil fuels are shown in
Table 7 and of CHP generating plants using wood biomass in Table 8.
In determining RCE, the annual investment costs (An) are taken into account; these are
determined using the annuity method, where annual investment cost is calculated by
multiplying the annuity factor by the entire investment costs of the CHP generating plant,
using the following equation:
An = I0 * ar,n
where
An
I0
ar,n

is the annual investment cost ()

is the total investment cost ()
is the annuity factor:

where
r
is the discount rate
n
is the economic period of the project (years)

Specific investment costs for CHP generating plants using fossil fuel
Size class

Representative
technology

Gas
engine

Gas
engine

Gas
engine

Gas
turbine

5
6
Combined
cycle with Combined
gas turbine6 cycle with
gas turbine7

25

PEl (MWEl)
Specific
investment
costs (/kWEl)

0.005

0.5

10

40

100

2,900

1,400

1,100

1,000

1,200

1,100

Table 8: Specific investment costs for CHP generating plants using wood biomass
Size class
Representative
technology
PEl (MWEl)
Specific
investment
costs (/kWEl)

Steam
engine
0.5

Steam
turbine
5

Steam
turbine
20

Steam
turbine
35

4,500

3,500

2,500

2,000

Operating and maintenance costs

Operating and maintenance costs (O&M) include all operating and maintenance costs of
CHP generating plants, except fuel costs:

Equipment maintenance costs:

o regular and investment maintenance (/MWhel or % of investment)

Labour costs:
o number of employees required for operation of the CHP generating plant8
o annual cost of employment: 25,000 per employee 9

Costs of insurance and other operating costs

o costs of insurance, leasing and management (% of investment)
o other operating costs: materials and services (% of investment)

The annual operating costs are calculated using the following equation:
Operating costs (EUR) =:
= Electricity
(EUR/MWhEl)

produced

(MWh)

Specific

maintenance

cost

+ Number of employees (n) * 25,000/year

7
8.
9

26

+ Other costs (% of investment) * Total investment value (EUR)

The operating costs of CHP generating plants using fossil fuels are shown in Table 9, and
of CHP generating plants using wood biomass in Table 10.

Operating costs for CHP generating plants using fossil fuel

Size class

4
Gas
turbine
10

5
Combined
cycle with
gas turbine
40

6
Combined
cycle with
gas turbine
100

Representative
technology
PEl (MWEl)
Maintenance
costs
(/MWhel)
No.
of
employees
Insurance and
other costs

Gas
engine
0.005

Gas
engine
0.5

Gas
engine
3

15

0.5

15

40

1.5% of investment

Operating costs for CHP generating plants using wood biomass

Size class

Representative
Steam
technology
/
engine
PEl (MWEl)
0,5
Maintenance
costs (% of
investment)
2%
No.
of
employees
1
Operating
costs
0.8% of investment
Insurance and
other costs
1.2% of investment

Steam
turbine
5

Steam
turbine
20

Steam
turbine
35

2%

2%

2%

12

15

Fuel costs
When determining RCE, fuel costs for CHP generating plants are based on forecasts of
the reference market prices of energy drawn up by the Energy Agency and on the price
models of the methodology for determining RCE.
27

The annual fuel costs are calculated using the following equation:
Annual fuel cost (EUR) = Fuel consumption (MWh) * Price of fuel (EUR/MWh)

Natural gas prices

The reference market price for natural gas is the price of natural gas for own use in the
CB transmission network10 which is, pursuant to the Act Setting the Network Fee for the
Natural Gas Transmission Network (OGRS, No. 138, of 28 December 2006) and the
produced model,11 regularly published by the system operator, Geoplin plinovodi. The CB
price is a very good approximation of the average variable sale price of natural gas in the
transmission network.
The price of natural gas for end-consumers is made up of the following:
1.

variable part of the natural gas price CB price

2.

fixed part of the natural gas price

3.

network charge:
transmission network
distribution network

4.

CO2 emission coupons

5.

environmental tax on CO2

This has varying effects on the final price according to the size of the CHP generating
plant.
The natural gas price for CHP generating plants is determined, for all six size classes, on
the basis of the calculation model, which includes the above-mentioned components. As
shown in Table 11 and the equation below:
Components of the model for determining the price of natural gas according to CHP
size classes
Siz
e
cla
ss

CB
pric
e

Suppleme
nt (fixed
part)

1.

CB

2.

Network
charge
(transmissi
on)

Network
charge
(distributio
n)

CO2
coupo
ns

Environmen
tal tax on
CO2

SF1

NCD1CDK6

from
2013

Yes

CB

SF2

NCD2CDK12

from
2013

Yes

3.

CB

SF3

NCT3CPK3

from
2013

No

4.

CB

SF4

NCT4CPK5

from
2013

No

10
11

28

5.

CB

SF5

NCT5CPK7

from
2013

No

6.

CB

SF6

NCT6CPK7

from
2013

No

CZPj(i) = CB(i) + DFj + OPj(i) + ODi(i) + KCO2(i) + ODCO2(i)

= CB(i) + Dj(i)
where:
1. CB(i) price
is the annual value of the CB price for year i, determined on the basis of an annual
forecast of reference prices for energy made by the Agency, and is the same for all
six size classes.
2. Supplement, fixed part DFj:
The supplement is determined for individual size classes in relation to the current
price higher for lower classes and lower for higher classes and does not
change in annual calculations, unless this would give rise to major changes in
formation of the natural gas price.
3. Network charge for transmission and distribution OPj(i) and ODj(i)
With regard to the size of CHP generating plants, size classes 1 and 2 are dealt
with on the distribution network and the other classes on the transmission
network.
For calculation of the network charge in the transmission and distribution
networks, the typical standard annual characteristics of natural gas consumption
by size class,12 which is shown in Table 12, and the valid prices for transmission
and distribution in the gas network are applied, pursuant to the following valid
acts:
o

Act Determining the Network Charge for the Natural Gas

Transmission Network:

for size class 3, consumption group CPK3

for size class 4, consumption group CPK5

for size classes 5 and 6, consumption group CPK7

o Acts Determining the Network Charge for the Natural Gas Distribution
Network in the geographical areas of the city municipalities of Maribor,
Celje and Ljubljana, and the areas in which the activity of the natural
gas distribution network system operator is performed by Adriaplin
d.o.o. The model uses the average of the calculated network charges for
all the abovementioned areas:

for size class 1, consumption group CPK6

for size class 2, consumption group CDK12

12

29

Typical standard characteristics of use of natural gas by size class of CHP

generating plant
Size class

Electrical
power of
CHP
generatin
g plant

Oper
ating
hours

%
h/a
27.0% 5,500

Annual
Maxi
consumpt mum
ion
daily
consu
mptio
n
Sm3/d
3
Sm /year ay
10,759
47

IzkEl

Maxi
mum
power

up to 50 kW
50100 kW

0.500

38.0% 5,500

764,455

3,336

1,316

15 MW

40.0% 5,500

4,357,394

19,014

7,500

Micro
Smallscale
Mediu
m-sized
1
Mediu
m-sized
2

MWEl
0.005

525 MW

10

31.0% 5,500

Large 1

40

38.0% 5,500

Large 2

up to 50 MW
up to 200
MW

100

42.5% 5,500

18,741,48
1
61,156,41
2
136,702,5
68

81,781
266,86
4
596,52
0

32,258
105,26
3
235,29
4

1
2
3

kW
19

4. Emission coupons KCO2(i)

The costs of purchasing coupons are not included in the natural gas price up to
2013.13 With regard to the method adopted for the allocation of coupons for
cogeneration after 2012, the costs of purchase of coupons shall be appropriately
included in the price of natural gas for size classes 4, 5 and 6 (taking into account
the quantity of free allocated coupons and their expected market price).
5. Environmental tax ODCO2 (i)
This is included in the price of natural gas for CHP generating plant size classes 1,
2 and 3 which, with regard to size (input heat power of fuel) are not included in
the emission trading scheme, since the possibility of the reimbursement of taxes
for cogeneration of 0.44 kgCO2/kWhEl14 is being discontinued from 2009. The
current level of the tax is 0.02375 EUR/Sm3.
6. Dj(i)
Supplement fixed part of natural gas price, which is the sum of all supplements
(25).
The components and final prices of natural gas for 2009, excluding VAT, for the six size
classes of generating plant are shown in Table 13.
13
14

30

In order to make it easier to take a model-based approach, the final price of natural gas is
made up of the variable price (CB) and the fixed supplement, which included all other
components of the price, as shown in Table .
Composition of the final prices of natural gas by CHP generating plant for 2009
EUR/S
m3

VARIABLE
PRICE

SUPPLEMENT Di

Size
class

CB price

Supplem
ent (fixed
part)

1.

0.240

2.

Network
charge
(transmis
sion)

Network
charge
(distributi
on)

CO2
coupons

Environ
mental
tax on
CO2

0.072

0.117

0.0238

0.240

0.059

0.100

0.0238

3.

0.240

0.040

0.023

4.

0.240

0.035

0.021

5.

0.240

0.030

0.019

6.

0.240

0.025

0.019

Final prices of natural gas by size class of CHP generating plant for 2009 (EUR/Sm 3)
Size
class

VARIABLE
PRICE

SUPPLE
MENT Dj

TOTAL

EUR/Sm3

EUR/Sm3

EUR/Sm3

EUR/MW
h

1.

0.240

0.213

0.453

47.8

2.

0.240

0.183

0.423

44.7

3.

0.240

0.063

0.303

32.0

4.

0.240

0.056

0.296

31.2

5.

0.240

0.049

0.289

30.6

6.

0.240

0.044

0.284

30.1

31

Figure 1: Final prices of natural gas by size class of CHP generating plant for 2009
(EUR/Sm3)
In the event of pronounced changes in formulation of the natural gas price or the
introduction of new taxes or significant changes thereto, the methodology is appropriately
adjusted to the new conditions, with the aim of achieving more objective determination of
natural gas prices.
Prices of wood biomass
The reference starting market price of wood biomass is determined on the basis of
statistical data on quantity [kg] and the export value of chipboard [EUR], woodchips and
similar, i.e. for conifers. The Energy Agency publishes the reference starting market price
of wood biomass for the next year [EUR/kg] in its forecast.
The final basic price of wood biomass CLB (green wood chips) is the same for all size
classes and comprises two parts:
1. reference starting market price [EUR/kg]
2. additional costs of handling, storage and transport
Pursuant to an assessment of the state of the wood biomass market in Slovenia and
expectations for the next year, the final basic price of wood biomass C LB for 2009 is
23/MWh.
Value of heat from cogeneration
Useful heat is the main advantage of cogeneration and constitutes an operating revenue
which, when determining reference prices in accordance with the guidelines on
environmental state aid, must be appropriately included in the calculation.
The actual value of heat varies greatly between plants, particularly with regard to:

type of heat produced (steam, hot water, hot air)

source used and price of energy for separate production of heat

32

purpose of heat consumption (industrial processes, heating, technical use of

operation of unit, etc.)

sector of useful heat (industry, households, services, district heating,

agreement, etc.)

inclusion of benefits of cogeneration in relation to heat as well, which is

reflected in the lower value/price of useful heat consumed.
Despite this fact, a certain amount of generalisation is required for the purposes of
transparency and scalability of approach, which is why the following equation is used for
determining the value of useful heat:
1.

For CHP generating plants using fossil fuels:

VT(i) = CZPi (i) / 0.95

2.

For CHP generating plants using wood biomass:

VT(i) = CLB (i) / 0.86

where:
VT(i)
is the value of heat for year i
CZPj(i)
is the price of natural gas in year i with regard to the size
class of the CHP generating plant
CLB(i)
is the price of wood biomass for year i
0.95 and 0.86 are the efficiencies of separate production of heat
The used values of heat for 2009 with regard to the price of natural gas and wood
biomass are shown in Table 15.
The annual revenue from useful heat is calculated according to the following equation:
Revenue from heat (EUR) = Useful heat (MWh) * Value of heat (EUR/MWh)

Value of heat for 2009 by individual size class (/MWht)

Size class
Natural gas
Wood biomass

1
50.3
26.7

2
47.0
26.7

3
33.7
26.7

4
32.9
26.7

5
32.2
26.7

6
31.6
26.7

33

Calculation OF RCE
On the basis of the input parameters presented and the methodology for calculation of
RCE (EUR/MWhel), we can summarise the methodology using the following equations:
RCE = [COSTS (investment + M&O +fuel) REVENUES (heat)] / ELECTRICITY
RCE are divided into two parts:
1. FPRC fixed part (/MWhel):
FPRC = [COSTS (investment + M&O)] / ELECTRICITY
2. VPRC variable part (/MWhel):
VPRC = [COSTS (investment + M&O +fuel) REVENUES (heat)] /
ELECTRICITY
The purpose-built tool RSEE_SPTE.xls (MS Excel environment) is used for the
calculation and determination of RCE.
The calculations of RCE for 2009 for CHP generating plants using fossil fuels and wood
biomass are presented below.
CHP using fossil fuels
Figure 2 and Figure 3 show the structure of RCE for CHP generating plants using fossil
fuels with up to and over 4,000 operating hours a year. The only difference between the
two groups of plants is in investment costs, which for the second group are lower by 35%
for longer operating hours. There are no differences in respect of the other specific costs
and revenues.
A summary of the results of the calculations of RCE for CHP generating plants using
fossil fuels is shown in Figure 4. Reference costs for units with over 4,000 operating
hours are around 20% lower than for units with up to 4,000 operating hours. They are
expected to be much higher in micro units, falling to below 100/MWh up to mediumsized units, and at around 80/MWh for the largest units.
The division of RCE into fixed and variable parts is shown in Figure 5. The variable part
is fairly similar for all size classes at around 40/MWh el; the fixed part is significantly
higher for smaller size classes (80% share of RCE), and is then reduced, reaching
between 50 and 60% of total RCE.

34

CHP using wood biomass

A summary of the results of the calculations of RCE for cogeneration using wood
biomass is shown in Figure 6. Reference costs for units with up to 4,000 operating hours
are around 50% higher than for units with over 4,000 operating hours, which is the result
of high investment costs, which are reflected in even higher RCE for lower operating
hours.
RCE are expected to be much higher in small units, where RCE range between 327 and
220/MWh, falling to between 172 and 253/MWh or between 129 and 187/MWh in
medium-sized units (lower and higher), and to between 110 and 156/MWh in large
(lower) units.

Figure 6: Reference costs for cogeneration using wood biomass with up to and over 4,000
operating hours a year

Harmonisation of the variable part of RCE

The variable part of RCE (VPRC), which is determined by the following equation:
VPRC = [COSTS (fuel) REVENUES (heat)] / ELECTRICITY
is, in the methodology for determining RCE, dependent on the technological parameters
of CHP generating plants (electrical and heat efficiency), on the efficiency of separate
heat production taken into account for determining the value of useful heat, and above all
on the price of fuel used by the CHP generating plant.
Determination of the VPRC can be described using the following equation for more
transparent and simplified monitoring of the harmonisation of the variable part of RCE
for recipients of support:
VPRC = CgorivaSPTE * (1/IzkElSPTE C/IzkLPTop) = CgorivaSPTE * K
where:
35

CgorivaSPTE

IzkLPTop
K

is the price of fuel for CHP generating plants (natural

gas, wood biomass)
is the electrical efficiency of the CHP generating plant
is the ratio between heat and electrical efficiency of a
CHP generating plant (output heat and electrical
power)
is the efficiency of separate heat production
is the technological constant, which includes the stated
technological parameters

The prices of CHP fuel (i.e. of natural gas and wood biomass) are, in the price
determination model, dependent on the published reference market price of fuel and
provided by the equations:
CZPj = CB + Dj
CLB = CLBRef * M
Final dependence of the VPRC on the reference market price of fuel may therefore be
written using the equation:
VPRCZP = (CB + Dj)* K
VPRCLB = (CLBRef * M)* K
We wish to tie harmonisation of VPRC to the starting value of the VPRC and the index of
the change in the reference price of the fuel, which is given for both fuels in the following
sections.
CHP generating plants using wood biomass
Since the VPRC with wood biomass is expressed as a product of the reference price of
the wood biomass and two constants, we can express the annual harmonisation of the
VPRC using the following equation:
VPRCLB (i) = ILB (i) VPRCLB(0)
where:
VPRCLB (i)
VPRCLB (0)
ILB (i)

is the harmonised value of the VPRC WB for the next

year i (/MWh)
is the starting VPRCLB for 2009 (/MWh)
is the index of the price of wood biomass for year i,
which is defined, pursuant to the report on reference
prices of energy, as:
ILB (i)= CLB (i) / CLB (0)
where:

36

CLB (i)

is the reference price of biomass

contained in the forecast from the
Energy Agency for the next year i (/m3)
is the starting reference price of wood
biomass for 2009 (in /m3)

CLB (0)

CHP generating plants using fossil fuel

Since the VPRC of natural gas is not expressed only as a product of the reference price of
natural gas and the technological constant K but, in the natural gas price, is joined by a
supplement to the variable price, the annual harmonisation of the VPRC is expressed
using the following equation:
VPRCZP(i) = IZP(i) x VPRCZP(0) + N(i) N(0) x IZP(i)
where:
VPRCZP (i)
(/MWh)

is the harmonised value of the VPRCZP for the next year i

VPRCZP (0)

is the starting VPRCZP for 2009 (/MWh)

IZP(i)

is the index of the price of natural gas for year i, which is

defined, pursuant to the report on reference prices of energy,
as:
IZP(i) = CB(i) / CB(0)
where:

CB(i)

is the basic variable price of natural gas in the

transmission network contained in the forecast of
the Energy Agency for the next year i (/Sm3)

CB(0)

is the starting basic variable price of natural gas in

the transmission network for 2009 (in /Sm3)

is the corrective factor used to determine the VPRC NG

(Table 16, /MWh)
N(i) = K * Dj(i)
where:
K

is the technological constant, which includes

the stated technological parameters

Dj(i)

is the variable price of natural gas CB for

year i, which includes the network charge,
environmental tax, etc. (/MWh) and may
also change annually on account of their
changes

37

Technological constants K, supplement D and correction factor N

Size class

1.25

1.33

1.39

1.60

1.47

1.36

D (/MWh)

22.45

19.32

6.69

5.89

5.23

4.70

N (/MWh)

28.01

25.68

9.33

9.40

7.68

6.40

The cost tables with a calculation of RCE for individual cogeneration groups are given
below.

38

Determination OF THE LEVEL OF support FOR CHP

The following are taken into account on an annual basis for determining the level of
support for a CHP generating plant:

initial fixed part of RCE, which is given in the decision on the allocation of
support15

variable part of RCE, determined for an individual year of receipt of support

In this process, the following features of CHP generating plants shall be taken into
account when determining support:

In accordance with the Decree, the fixed part of RCE for a CHP generating plant
that received any aid that could be regarded as a subsidy is reduced by the
calculated amount of that subsidy.

In accordance with the Decree on Support, the variable part of the RCE may, for
generating plants using wood biomass:

be increased by 10% with the use of wood biomass to which certificates

on sustainable biomass production apply

be reduced by 10% for the use of by-products and residues from the
wood-processing industry

be reduced by 35% for the use of end-of-life wood

In determining the level of support for CHP generating plants, these RCE shall relate to
RCE of an individual generating plant described above.
Guaranteed purchase
The guaranteed purchase price (GPP) for a CHP generating plant with power of less
than1 MWel is made up of two parts:
1.

Fixed part of the GPP equal to the fixed part of the RCE

2.

Variable part of the GPP equal to the variable part of the RCE determined
for the current year
Fixed part of the GPP does not change for a CHP generating plant for the entire duration
of the contract on guaranteed purchase and is determined in the first decision on the
allocation of support.
Variable part of the GPP is determined annually with reference to the forecast of the
reference market prices and the methodology for calculation of the variable part of RCE,
and is the same for all comparable CHP generating plants in an individual size class.
The GPPs determined for 2009 on the basis of the RCE calculated for CHP generating
plants using fossil fuels are shown in Figure 7 and for wood biomass in Figure 9 (GPP
determined only for small-scale plants).

15

39

Operating support
Operating support (OS) may only cover the difference between the RCE of the CHP
generating plant and the market price of electricity that the CHP generating plant is able
to achieve on the electricity market.
The reference market price of electricity is determined by the Energy Agency in its report
on reference market prices of electricity. The actual market price which a CHP generating
plant is able to achieve on the market depends on other additional factors:

the amount of time and method of operation of the plant (number of operating
hours, daily or band operation, etc.)

constancy of production (fluctuations, interruptions, shortfalls, etc.)

costs of deviations from schedules

size of plant and its market power

Factor B reflects these factors for individual size classes and scope of operating hours of
CHP generating plants; the actual market price that the CHP generating plant is able to
achieve on the electricity market is therefore determined using the following equation:
CElSPTE = CElRef * B
where:
CElSPTE
CElRef

is the market price that the CHP generating plant is

able to achieve on the electricity market
is the reference market price of electricity contained in
the Agencys report on the reference market prices of
energy (EUR/MWh)
is factor B in the correction of the market price of
electricity

The values of factor B for the 6 size classes and both groups of operating hours are
shown in Table
The actual market prices of electricity from CHP generating plants in relation to the
forecast reference market price of electricity for 2009 (EUR 65/MWh) are shown in Table
.

40

Value of factor B for CHP generating plants

Size class

Operating
hours < 4,000

Operating
hours > 4,000

Micro (< 50 kW)

0. 85

0.90

Small-scale (<1 MW)

0.88

0.92

Medium lower (15 MW)

0.93

0.94

Medium higher (525 MW)

0.93

0.94

Large lower (2550 MW)

0.96

0.97

Large higher (50200 MW)

0.96

0.97

Generating plants with nominal electrical power of 200 1

MW or more

Market prices of electricity from CHP generating plants for 2009 (EUR/MWh)
Size class
Micro (< 50 kW)

Operating
hours < 4,000
55.25

Operating
hours > 4,000
58.50

Small-scale (<1MW)

57.20

59.80

Medium lower (15 MW)

60.45

61.10

Medium higher (525 MW)

60.45

61.10

Large lower (2550 MW)

62.40

63.05

Large higher (50200 MW)

62.40

63.05

Generating plants with nominal electrical power of 200 65.00

MW or more

65.00

The equation below is used to determine the OS annually in relation to the calculated
RCE and the forecast reference market price of electricity:
OPj(i) = RCEj(i) - CElRef(i) * Bj
where:
OPj(i)

is the operating support for the current year i

(EUR/MWh)
RCEj(i)
is the calculated RCE for the current year
(EUR/MWh)
CElRef(i)
is the forecast reference market price of electricity
contained in the Agencys report
Bj
is factor B in the correction of the market price of
electricity
The OS for 2009 for CHP generating plants using fossil fuels is shown in Figure 9.
Support for micro cogeneration is between 117 and 178/MWh, for small-scale
41

cogeneration between 62 and 95/MWh, for medium-sized cogeneration between 32

and 57/MWh, and for large cogeneration still only between 21 and 55/MWh.
OS for 2009 for CHP generating plants using wood biomass is somewhat higher (it is not
determined for micro and small-scale plants), particularly for small-scale plants (160
and 269/MWh). For medium (lower) units, it falls significantly to 111 and 192/MWh,
for medium (higher) to 68 and 127/MWh, and for large (lower) to 46 and 93 /MWh.

42