CHP Brochure 09

INTERNATIONAL ENERGY AGENCY
Cog en eration and

District En ergy
Sustainable energy
technologies
for today
and tomorrow
Cog en eration and

District En ergy
Sustainable energy
technologies
for today
and tomorrow
Cogeneration (also known as combined heat and power [CHP]) and district
energy represent a proven, cost-effective and clean solution for delivering
electricity, heating and cooling. Some regions have strategically invested in
CHP and district energy as a tool to meet broader energy and environmental
objectives. However, there are many more countries that could benefit from
greater investigation into CHP and district heating and cooling (DHC). Most
countries have significant potential for increased CHP development, but some
key barriers prevent its realisation.
Cogeneration and District Energy: Sustainable Energy Technologies for

Todayand Tomorrow shows that the key to unlocking this potential lies in the
development and implementation of effective policies. The report documents,
for the first time, the variety of CHP/DHC policy tools that are being used by
leading countries and cities around the world. In this way, the report can be
used as a roadmap for policy makers, providing examples of proven measures
that can be adopted with confidence, in the knowledge that they will help to
make an important contribution to the achievement of broader energy and
environmental goals.
Cog en eration and

District En ergy
Sustainable energy
technologies
for today
and tomorrow
IEA member countries:

Australia
Austria
Belgium
The International Energy Agency (IEA) is an autonomous body which was established in
November 1974 within the framework of the Organisation for Economic Co-operation
and Development (OECD) to implement an international energy programme.
Canada
Czech Republic
It carries out a comprehensive programme of energy co-operation among twenty-eight

of the thirty OECD member countries. The basic aims of the IEA are:
Denmark
n To maintain and improve systems for coping with oil supply disruptions.
Finland
n To promote rational energy policies in a global context through co-operative

relations with non-member countries, industry and international organisations.
France
n To operate a permanent information system on international oil markets.
Germany
n To provide data on other aspects of international energy markets.

n T
o improve the worlds energy supply and demand structure by developing
alternative energy sources and increasing the efficiency of energy use.
Greece
Hungary
n T
o promote international collaboration on energy technology.
n T
o assist in the integration of environmental and energy
policies, including relating to climate change.
Ireland
Italy
Japan
Korea (Republic of)

Luxembourg
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
The European Commission
also participates in
the work of the IEA.
ORGANISATION FOR
ECONOMIC CO-OPERATION
AND DEVELOPMENT
The OECD is a unique forum where the governments
of thirty democracies work together to address the
economic, social and environmental challenges of
globalisation. The OECD is also at the forefront of
efforts to understand and to help governments
respond to new developments and concerns,
such as corporate governance, the information
economy and the challenges of an ageing
population. The Organisation provides a setting
where governments can compare policy
experiences, seek answers to common
problems, identify good practice and
work to co-ordinate domestic and
international policies.
OECD/IEA, 2009
International Energy Agency (IEA)
9 rue de la Fdration, 75739 Paris Cedex 15, France

Please note that this publication is subject to specific restrictions
that limit its use and distribution. The terms and conditions are
available online at www.iea.org/about/copyright.asp
Foreword
At the conclusion of the Group of Eight (G8) Summit in Heiligendamm, Germany in July 2007, the
leaders issued a communiqu that, among other matters, directed countries to ...adopt instruments
and measures to significantly increase the share of combined heat and power (CHP) in the generation
of electricity. As a result, energy, economic, environmental and utility regulators are looking for
tools and information to understand the potential of CHP and to identify appropriate policies for
their national circumstances. This report, completed in April 2009, is a culmination of the IEA work in
responding to the G8 request and helps regulators understand the potential of CHP.
A previous IEA study, Combined Heat and Power: Evaluating the Benefits of Greater Global Investment
(March 2008), confirmed that significant economic, energy and environmental benefits would result
from an increased policy commitment to CHP. This new report is designed to assist policy makers
who would like to turn the conclusions of that first study into action by implementing policies
and programmes to advance clean, efficient CHP. It concludes that CHP and district energy do not
need significant financial incentives to compete in the market place. Rather, they require focused,
consistent government attention to address a variety of barriers that can prevent the realisation of
their full potential. The report includes a variety of best practice policy approaches for energy,
environmental, finance and local officials that have been used successfully to expand the use of CHP
and district energy. As such, this report can enable regulators and others seeking to implement the
G8 Heiligendamm charge by adapting these policies to their particular situation and increasing the
share of CHP in electricity generation.
IEA/OECD, 2009
Mr. Nobuo Tanaka

Executive Director
IEA/OECD, 2009
Acknowledgements
This report was prepared by Tom Kerr of the IEA. The author would like to thank Peter Taylor, DolfGielen,
Cecilia Tam, Robin Wiltshire and the IEAs District Heating & Cooling Implementing Agreement, and
other IEA colleagues who provided ideas and input. The consulting firm Delta Energy & Environment
provided analysis, writing and other support.
The US Department of Transportations Michelle Hershman was seconded to the IEA during the
production of this report and provided editing support. In addition, the author would like to thank the
team in the IEA Communication and Information Office for their ideas and support, including Delphine
Grandrieux, Bertrand Sadin, Muriel Custodio and Rebecca Gaghen.
The IEA would also like to thank the following companies and government agencies who are Partners
in the International CHP/DHC Collaborative. These organisations provided important resources, ideas
and data to help make this report possible:
Alstom
Akzo Nobel
Caterpillar, Inc.
Chevron Energy
ConocoPhilips
The Dalkia Group
Dow Chemical
Euroheat & Power
Exxon Mobil
GE Energy
Helsinki Energy
Iberdrola
International District Energy Association
Japan Gas Association
Korea District Heating Corporation
RWE npower
Solar Turbines
US Department of Energy
US Environmental Protection Agency
Questions and comments should be sent to:

Tom Kerr
International Energy Agency
9, rue de la Fdration
75739 Paris Cedex 15
Email: tom.kerr@iea.org
Tel. +33 (0)1 4057 6784
IEA/OECD, 2009
In addition, several organisations provided invaluable comments, data, and input, including: Cogen
Europe; the Danish District Heating Association; the Danish Energy Authority; the UK Department
for Environment, Food and Rural Affairs (Defra); the Japan Gas Association; the Japanese Ministry
of Economy, Trade and Industry; Natural Resources Canada; Thermax India; the World Alliance for
Decentralized Energy; and the Energy Research Institute of the National Development and Reform
Commission in China.
IEA/OECD, 2009
Table of contents
Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Table of contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Who should read this report? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

How is the report structured? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2 Policy makers should invest in CHP and DHC . . . . . . . . . . . . . . . . . . . 11

There is significant additional potential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

CHP and DHC deliver a range of policy objectives . . . . . . . . . . . . . . . . . . . . . . 13

Why is policy important for CHP? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Well-chosen policy can overcome barriers to CHP . . . . . . . . . . . . . . . . . . . . . . 17

World-class policies: lessons learned from country analysis . . . . . . . . . . . . . 18
Section 3 CHP/DHC policy profiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Financial and fiscal support for CHP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Utility supply obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Local infrastructure and heat planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Climate change mitigation (emissions trading) . . . . . . . . . . . . . . . . . . . . . . . . 24

Interconnection measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Capacity building (outreach and research and development [R&D]) . . . . . . . . . 28
Section 4 Next step action items for policy makers . . . . . . . . . . . . . . . . . . . . . . 31

Some critical success factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Identifying next steps: a pathway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

What next? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Annex 1 Policy-type case studies
Annex 2 Strategic application of policies - case studies
Please note annexes can be found at www.iea.org/files/CHPbrochure09annex.pdf
Abbreviations and acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Table 2.1 Policy types and relevance to policy makers . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 3.1 Financial support mechanisms for CHP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Table 3.2 Utility supply obligations for CHP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Table 3.3 Planning policy supporting CHP and DHC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Table 3.4 Emissions trading schemes and CHP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Table 3.5 Electricity network interconnection measures for CHP . . . . . . . . . . . . . . . . . . . .
Table 3.6 Outreach and R&D programmes for CHP and DHC . . . . . . . . . . . . . . . . . . . . . . . .
18
21
23
25
26
28
29
IEA/OECD, 2009
List of Tables
List of Figures
Figure 2.1 CHP share of national power production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Figure 2.2 Major economies CHP potentials under an accelerated

CHP scenario, 2015 and 2030 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Figure 2.3 CHP applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Figure 2.4 Energy flows in the global electricity system (TWh) . . . . . . . . . . . . . . . . . . . . . .
Figure 2.5 DHC as a flexible platform for CHP and renewable heat sources . . . . . . . . . . . . . .
Figure 2.6 District Energy Initiative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Figure 2.7 Estimated carbon dioxide emissions reductions, 2015 and 2030 . . . . . . . . . . . . . .
Figure 2.8 CHP Plant at Arvind Textile Mill, India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Figure 2.9 Increase in CHP capacity and reduction of CO2 emissions in Denmark . . . . . . . . . .
11
12
12
13
14
14
16
16
17
Figure 3.1 Best-practice CHP/DHC policies and strategies

covered by the IEA CHP/DHC Collaborative . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Figure 3.2 Transactions in a USO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 3.3 Two generator sets installed at an industrial manufacturing site in Trentino, Italy .
Figure 3.4 CHP on Esti Lktp in Hungary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Figure 3.5 IC Engine System Installations at Edinburgh University . . . . . . . . . . . . . . . . . . . .
Figure 4.1 CHP policy decision pathway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19
22
26
27
30
33
IEA/OECD, 2009
Section 1 Introduction
Combined heat and power and district heating and cooling (DHC) represent a series of proven, reliable
and cost-effective technologies that are already making an important contribution to meeting global
heat and electricity demand. Due to their enhanced energy supply efficiency and use of waste heat
and low-carbon renewable energy resources, CHP and DHC are already an important part of national
and regional greenhouse gas (GHG) emissions reductions strategies.
However, while some countries have been able to achieve a high share of CHP in electricity production
up to 50% through the use of effective policy and regulatory measures, most countries have been
much less successful. This report has been designed to provide policy makers with a practical reference
of best practice CHP policy examples from around the world.
This report follows the March 2008 report that highlighted the energy, economic and environmental
benefits of CHP and DHC (IEA, 2008a). That report also provided a technical introduction to CHP/DHC
and described its global status and potential.
Who should read this report?

This report is aimed at those policy makers (including energy, environment, electricity and heat
network managers) and local governments who seek effective policy solutions and strategies that can
reduce carbon emissions and promote energy efficiency.
How is the report structured?

This report is structured as follows:
Section 2 highlights the benefits of CHP and DHC, summarising why policy makers are investing in
policies to advance these important technologies.
Section 3 includes a global overview of policy best practices, classifying policies into relevant policy
types, and providing policy makers with specific case studies to aid in implementation.
IEA/OECD, 2009
Finally, Section 4, the conclusions and recommendations, sets out a practical how to guide on what
options to consider when implementing the policies described in the report.
IEA/OECD, 2009
Section 2 Policy makers should invest in CHP and DHC

This section explains why policy makers are investing in CHP to help achieve their energy and environmental
policy goals. The importance of policy in promoting the development of CHP is also highlighted.
There is significant additional potential

CHP currently generates only around 10% of global electricity generation. Figure2.1 shows that only a
few countries have successfully expanded the use of CHP to between 30-50% of total power generation.
Each of these countries has a unique approach, but one element has been common to all countries with
successful CHP markets: there has been focused government policy on electricity and heat supply (see
Section4 for more on this point). Their collective experience demonstrates what can be achieved via
thoughtful, well-implemented policy intervention.
Figure 2.1 CHP share of national power production

60%
50%
40%
11
30%
20%
Fr
an
Ca ce
na
d
Sw a
ed
en
pa
Ja
ic
ex
Br
az
il
0%
UK
Sp
ai
n
US
A
Ita
Ge ly
rm
an
y
Ch
in
Au a
Cz str
ec ia
h
Re
Po p.
la
Hu nd
Ne ng
th ary
er
la
nd
La s
tv
ia
Ru
ss
Fi ia
nl
De and
nm
ar
k
10%
Source: IEA (2008a).
IEA/OECD, 2009
The other main conclusion from Figure 2.1 is that in the great majority of countries, CHP plays only
a marginal part in electricity and heat generation. Figure 2.2 shows the outputs of IEA analysis, in
relation to the G13 group of countries, on the economic potential for CHP in a policy scenario (the IEA
Accelerated CHP Scenario) that mirrors policies used in some of the most successful CHP countries. By
2030, the CHP share of G13 electricity generation could rise from 10% to around 24% if suitable policy
regimes were to be introduced based on best-practice CHP policies. For fast-growing China and India,
the CHP shares of electricity generation could rise to 28% and 26% respectively by 2030. Currently CHP
makes up about 13% of electricity generated in China and 5% in India (IEA, 2008b). This provides an
excellent opportunity for profitable investment in low-carbon technologies.
Figure 2.2 Major economies CHP potentials under

an accelerated CHP scenario, 2015 and 2030
45
40
35
30
25
20
15
10
2005
2015 (potential)
5
+
G8
US
UK
a
ric
Af
sia
S.
Ru
s
o
ex
ic
pa
Ja
ly
Ita
di
a
In
rm
an
ce
Ge
an
Fr
in
na
Ca
az
Br
2030 (potential)
What is CHP?
CHP is the simultaneous generation of useful heat and power from a single fuel or energy source, at
or close to the point of use. An optimal CHP system is designed to meet the thermal demand of the
energy user whether at industrial, individual building or city-wide levels (see Figure 2.3).
Figure 2.3 CHP applications

District Heating: International Tech Park (Bangalore, India)
Industrial: Industrial site with CHP in northern Italy

Source: IEA (2008b).
CHP encompasses a range of technologies, but will always be based upon an efficient, integrated
system that combines electricity production and a heat recovery system.
IEA/OECD, 2009
12
Ch
da
il
CHP share of total electricity generation (%)
50
By using the heat output from the electricity production for heating or industrial applications, CHP
plants generally convert 75-80% of the fuel source into useful energy, while the most modern CHP
plants reach efficiencies of 90% or more (IPCC, 2007). CHP plants also reduce transmission and
distribution losses as they are sited near the end user.
The importance of the high efficiency of CHP is highlighted by the fact that the average global
efficiency of traditional fossil-fuelled power generation is 35-37% (see Figure 2.4). The large yellow
arrow corresponds to the roughly 2/3 of heat wasted during fossil-fuelled power generation;
transmission/distribution account for an additional 9% of losses.
Figure 2.4 Energy flows in the global electricity system (Mtoe)
Coal
1 924
Oil 298
Gas
909
Nuclear
721
Bioenergies 77
Other renewables 51
Hydro 251
Total
primary
energy
input for
electricity
production
4 231
Conversion losses
from thermal
production
2 657
Own use of
power plant
94
Gross
electricity
production
1 574
Net
electricity
production
1 481
Transmission and
distribution
losses 137
13
Electricity
delivered
to customers
1 343
CHP and DHC deliver a range of policy objectives
DHC infrastructure: a flexible platform for CHP and renewables

DHC networks provide a major opportunity for CHP deployment. DHC with CHP can provide the
double benefit of reducing costs and impacts of both electricity generation and heat supply. District
cooling offers the same opportunity for decarbonising cooling supply.
IEA/OECD, 2009
CHP systems are attractive to policy makers and industry because they deliver a variety of energy,
environmental and economic benefits. These benefits stem from the fact that these applications are
inherently energy efficient and produce energy where it is needed. Their benefits include:
dramatically increased fuel efficiency (see Figure 2.4);
reduced emissions of CO2 and other pollutants;
cost savings for the energy consumer;
reduced need for transmission and distribution networks; and
beneficial use of local energy resources (particularly through the use of waste, biomass, and
geothermal resources in DHC systems), providing a transition to a low-carbon future (see
box below).
While DHC network development requires an initial investment, it provides a long-term asset that
enables a transition to a low-carbon energy system. It can take heat from any source, and so can
recycle waste heat streams that are difficult to use otherwise, and it can change to renewable
heat sources over time as new technologies become available. Combined with CHP, these networks
can therefore create a bridge towards future low-carbon energy supply systems.
Figure 2.5 DHC as a flexible platform for CHP and renewable heat sources
Combined heat
and power plant
Municipal waste
incineration
Biomass
Surplus heat
from industry
and biofuel
refineries
Source: Froning (2009).
The City Challenge: facilitating renewables in urban environments

The IEA, together with Euroheat & Power, the International District Energy Association, Dansk
Fjernvarme and the Danish Board of District Heating (DBDH) are highlighting the opportunities for
synergies between DHC and renewables through the City Challenge a series of events culminating
in a District Energy Summit in Copenhagen on 3 November 2009. More information on the City
Challenge can be found at www.copenhagenenergysummit.org.
Figure 2.6 District Energy Initiative
Source: Froning (2009).
IEA/OECD, 2009
14
Solar thermal
Geothermal
With this wide range of benefits, CHP/DHC can help deliver important policy goals for a range of policy
makers. For example:
National governments and energy agencies: reduced reliance on imported fossil fuels, improved
system efficiency.
Environmental regulators: reduced GHG emissions.
Financial and fiscal departments: increased cost-effectiveness of financial measures to reduce
GHG emissions.
Regional and local governments: improved energy and environmental performance of individual
buildings and urban zones.
Network planners and regulators: improved network stability, deferred need for expensive
infrastructure investment.
CHP benefits: the evidence

There is a growing range of evidence that the wider development of CHP in the future is a costeffective means of reducing CO2 emissions in the near term:
A study by consultancy McKinsey & Co. highlighted the part that can be played by CHP in achieving
emission reductions in the United States. CHP alone provides around 13% of all identified negative
cost CO2 emission reductions (70 megatons) for buildings by 2030 and fully 53% of all negative
cost reductions (80 megatons) for industry by 2030 (McKinsey & Co., 2007).
By 2007, the US Environmental Protection Agency (EPA) CHP Partnership had supported the
installation of 335 CHP plants, achieving CO2 emissions reductions equivalent to taking 2 million
cars off the roads, or planting 2.4 million acres of forest (US EPA, 2008).
15
In a study to assess the cost of carbon abatement policies in the Netherlands, CHP was identified
as one of the least-cost solutions at EUR 25/tonne (t) CO2, lower than building insulation,
condensing boilers and wind power (Boonekamp et al., 2004).
In the IEA Accelerated CHP Scenario there would be a 3% reduction in overall capital investment in
the power sector by 2015, amounting to USD150billion of investment savings (IEA, 2008a). By 2030,
these cost reductions could climb to 7% (USD795billion). These savings are largely derived from savings
from avoided transmission and distribution (T&D) network investment. These savings in capital costs
have a direct link to the reduction in consumer retail costs that the IEA modelling also projected.
Similarly, CO2 emissions are projected by 2015 to be reduced by more than 4% (170 Million tonnes (Mt)/
year), comparable to around 40% of the EU-25 and US Kyoto targets. In 2030, this saving could increase
to more than 10% (950 Mt/year). To put this in perspective, this emissions reduction is comparable to
one and a half times Indias total annual emissions of CO2 from power generation (see Figure 2.7).
. The difference between 1990 Kyoto base year emissions and the respective targets.
IEA/OECD, 2009
CHP also reduces emissions of some atmospheric pollutants, including NOx and SOx. This can contribute
to improving air quality, particularly important in urban areas. For example, the Houston Advance
Research Center estimates that adding 2600 Mega watts (MW) CHP in the Houston-Galveston-Brazoria
region would reduce NOx emissions by 4700 to 5440 tonnes per year (HARC, 2008).
Figure 2.7 Estimated carbon dioxide emissions reductions, 2015 and 2030
12 000
10 000
8 000
CO2 emissions (Mt/yr)
6 000
4 000
2 000
0
IEA APS
2015
Accelerated CHP
CHP Mt/yr
2030
Accelerated CHP
Non CHP Mt/yr
Note: APS = Alternative Policy Scenario.

Policy makers in various countries have already realised the benefits of CHP and promoted its further
uptake to achieve policy goals, such as costs savings and carbon reduction targets. The IEA CHP/DHC
Collaborative Country Scorecards published in 2008 describe the ways in which several countries
have achieved CHP benefits through policy change (IEA, 2008b). The next section highlights why
policy for CHP is so important.
The opportunity for CHP/DHC in emerging economies

Emerging economies represent some of
the best opportunities to achieve the
benefits CHP/DHC can bring, and as a
result, many have started to promote
these technologies. In India, CHP plants
have become commonplace in the food
processing and manufacturing industries,
like at Arvind Textile Mill. China is using
the efficiency saving CHP can bring to
optimise its use of natural gas, like in the
headquarters of the Beijing Gas Group
(IEA, 2008b).
Figure 2.8 CHP plant at Arvind Textile Mill, India
Source: IEA (2008b).
IEA/OECD, 2009
16
IEA APS
Why is policy important for CHP?

In 2008, the IEA undertook a series of country profiles for CHP/DHC, analysing the policy framework
to better understand the keys to success (IEA, 2008b). This analysis discovered that barriers exist in
many places that prevent CHP/DHC from reaching its full potential, and that targeted policy measures
are needed to remove these obstacles to achieve the benefits of CHP/DHC. Experience from these
countries also indicates that the most effective approaches were in countries that made a strategic
decision to invest in CHP or DHC as a key energy security/climate solution. These countries set targets
and created dedicated government departments to achieve these targets. These departments were
charged with identifying CHP/DHC potential, including the barriers that prevented the realisation of
this potential. They were given the authority to then develop policy tools and solutions to address
these barriers in a systematic way. This approach has enabled Denmark, for example, to use CHP/DHC
to reduce energy imports and GHG emissions simultaneously (Figure2.9) (IEA, 2008b).
Figure 2.9 Increase in CHP capacity and reduction of CO2 emissions in Denmark
70
80%
60
CHP shares of electricity and

district heating production
70%
50
60%
50%
40
40%
30
30%
20
20%
10
10%
0%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
CHP share of district heating
CO2 emissions by final energy consumption

(million tonnes CO2 - adjusted)
90%
17
CHP share of thermal electricity production
CO2 emissions by final energy consumption (million tonnes CO2 - adjusted)

Well-chosen policy can overcome barriers to CHP

The evidence from many of the countries highlighted in the previous section is clear: CHP does not
need substantial financial incentives to make it happen. Rather, it requires the effective use of often
modest, targeted policies to systematically address barriers and allow for full realisation of the
potential for CHP and DHC. Common barriers include:
Economic and market issues, relating to the difficulty in securing fair value prices for CHP electricity
that is exported to the grid.
Social/political issues, particularly in relation to a lack of knowledge in society about CHP benefits
and savings.
Difficulties in integrating the GHG emissions benefits into emissions trading or other regulations,
due to CHP/DHCs status as combined technologies that include heat and power.
IEA/OECD, 2009
Regulatory issues, relating to non-transparent, inconsistent interconnection procedures and

backup charges.
World-class policies: lessons learned from country analysis

The IEA analysis of country profiles found several common elements in the strategies used in countries
that have addressed these barriers most successfully (IEA, 2008b). From this finding, the IEA has
identified a consistent set of world-class policies that can be used to address the barriers faced by
CHP and DHC. They are:
Financial and fiscal support page 20
Utility supply obligations page 21
Local infrastructure and heat planning page 23
Climate change mitigation (emissions trading) page 24
Interconnection measures page 26
Capacity building page 28
These individual policies have often proved to be most effective when combined in comprehensive CHP/
DHC strategies implemented by a central policy department or agency (see Annex 2* for examples).
Table 2.1 provides a summary of which policy types are relevant for specific policy makers, and can
thus be used as a reference for policy makers. Section 3 describes these policy types, with case
studies provided in Annex 1*. Annex 2* offers examples of how leading CHP countries have created
comprehensive CHP/DHC strategies tailored to their own circumstances.
Table 2.1 Policy types and relevance to policy makers
18
Environment
Financial
Local authorities
Financial and fiscal support (see p. 20) can provide the additional
push to enable CHP/DHC development and help countries meet
policy goals, like environmental and efficiency targets.
Utility supply obligations (see p. 21) are a market-based

mechanism using certificate trading to guarantee a market
for CHP electricity.
Local infrastructure and heat planning (see p. 23) relates to

heat planning policy and building regulations.
Climate change mitigation (emissions trading) (see p. 24) places

a limit on allowances to emit GHGs and a market price for their
emissions is thereby derived.
Interconnection measures (see p. 26) provide developers with

clear, consistent and reasonable rules for connecting to the grid
network, as well as incentives for selling electricity generated to
the grid network.
Capacity building (see p. 28) relates to outreach and education

and support for R&D.
* Annexes can be found at www.iea.org/files/CHPbrochure09annex.pdf.
IEA/OECD, 2009
Policy type
Network
planners
Energy
Policy makers
Section 3 CHP/DHC policy profiles

This section highlights some of the most successful policies for advancing CHP/DHC. It provides a
summary of the six main policy types introduced in the previous section and presents a series of case
studies that illustrate each of them. This is structured as follows:
1. Financial and fiscal support
Capacity Grants, New York State
Feed-in Tariff, Germany
2. Utility supply obligations
Green Certificate Scheme, Belgium
3. Local infrastructure and heat planning
Building Regulations, United Kingdom
4. Climate change mitigation (emissions trading)
EU Emissions Trading Scheme
5. Interconnection measures
Interconnection Standard, United States
6. Capacity building and outreach
Fuel Cell CHP Research & Development Programme, Japan
19
Figure 3.1 Best-practice CHP/DHC policies and strategies

covered by the IEA CHP/DHC Collaborative
Policy case studies
1.
2.
3.
4.
5.
6.
7.
System benefit charge - New York State, USA

Eurneuerbaren-Energien-Gasetz - Germany
Green certificate scheme - Wallonia, Belgium
Merton rule - United Kingdom
EU emissions trading scheme - EU
US interconnection standards - USA
PE fuel cell roadmap - Japan
10
3
3 2
2
8
4
3 4
4
2
1
5
5
7
6
7
Country scorecards
China
Denmark
Finland
Germany
India
Japan
Korea
Netherlands
United Kingdom
USA
Source: IEA analysis.
CHP strategies
1.
2.
3.
4.
5.
CHP roadmap - USA

CHP directive - EU
Heat planning policy - Denmark
Municipal CHP strategy - Frankfurt am Main, Germany
District heating planning and municipal policy - South Korea
IEA/OECD, 2009
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Financial and fiscal support for CHP

What is it?
The main types of financial and fiscal support relevant to CHP are as follows:
Up-front investment support: Appropriate when financing for CHP projects is difficult to secure,
either because potential developers do not have access to capital or because project returns do not
correspond to the short timeframes used by commercial investors. Examples include grants (direct
support) and accelerated depreciation (fiscal).
Operational support: Operational support can be used to reflect the full value of CHP electricity
and/or heat, for example, by internalising its environmental benefits. Feed-in tariffs (direct) and
fuel tax exemptions (fiscal) are common types of operational support.
R&D funding: Government funding for low-carbon CHP technologies, like fuel cells, can help
an industry to develop commercial CHP products for a sustainable energy system in the future
(discussed further below in the section on outreach and capacity building policy).
How can financial support help CHP?

Financial support can help to trigger CHP development in a number of situations:
To cover additional investment costs: CHP systems, including DHC supply networks, often require
higher up-front investment than conventional alternatives, even though running costs can be lower.
Some energy consumers may not have the capital to make this investment. Grants or low-interest
loans can help bridge this gap by covering part of the additional costs.
To internalise externalities: Financial support can be granted to reflect the environmental and
social benefits of CHP. For example, GHG emissions trading can reward CHP for the CO2 emissions
saved relative to separate heat and power generation.
To address market imperfections: Energy markets are not always open and competitive, and may
not value all forms of generation consistently. For example, generation in high demand areas has a
higher value, because it is often difficult to site new generation. As a result, one strategy to address
high demand is to provide additional financial support for CHP electricity. For example, generation
in high demand areas has a higher value than that elsewhere. As a result, CHP sometimes receives
less for its electricity than society would have to pay for electricity from other new power plants.
Financial support can help adjust such inefficiencies in electricity markets.
Table 3.1 outlines the main types of financial support for CHP, their relevance and effectiveness, and
gives examples of jurisdictions that have implemented them successfully.
IEA/OECD, 2009
20
These can be implemented as feed-in tariffs, up-front support or as fiscal measures as described below:
Feed-in tariffs (FiT) are a market-based policy mechanism providing direct operational support for
CHP/DHC:
FiT usually take the form of a bonus added to the market electricity price paid to plant operators
for each kilo watt hour (kWh) of electricity supplied to the public network. Sometimes electricity
used on-site is also covered.
FiT can also be fixed independently from the electricity price.
FiT can be combined with an obligation on the network operator to buy CHP electricity.
Net metering is similar in guaranteeing the purchase power price for CHP electricity supplied to
the grid.
Up-front financial support facilitates the installation of CHP/DHC systems when up-front costs
present a barrier to investment. For example, installation grants can provide a one-off subsidy.
Fiscal support can offer tax relief for CHP/DHC:
Accelerated depreciation of CHP/DHC investments against corporate tax offers up-front
support.
Exemption from fuel or carbon taxes supports CHP.
Table 3.1 Financial support mechanisms for CHP

Financial support
Feed-in tariffs
Policy goals
To provide greater certainty

for investors in CHP.
To increase the operational
efficiencies of new and
existing CHP plants.
Success
The value of tariffs should
factors
allow for a sufficient return
What makes
to attract investment.
it work?
Long-term contracts to
provide investor security;
i.e. 10 to 20 years.
Where has it
been used?
Europe including Portugal,

Spain, Germany, the
Netherlands, the Czech
Republic, Denmark, Hungary
North America Ontario
Asia including India
(Maharashtra State)
Capacity grants
To help capital-constrained
organisations invest in
CHP to improve energy
performance.
To facilitate the market
introduction of emerging
low-carbon technologies,
such as renewable CHP and
micro-CHP.
Target potential developers
that lack access to
financing.
Regularly evaluate the
level of subsidy to reflect
changing technological and
market conditions.
Europe including the
Netherlands, Italy, Spain,
Belgium
North America Various US
States, Canada
Asia including China
(Shanghai), India, South
Korea, Japan
Fiscal support
To provide greater certainty
for investors in CHP/DHC.
To incentivise organisations
to invest in efficient CHP/
DHC systems.
Use accelerated
depreciation for investment
support and fuel or
carbon tax incentives for
operational support.
Minimise administrative
overhead for CHP/DHC
developer.
Europe including the
Netherlands, Sweden,
Belgium, Italy, Germany,
the United Kingdom
North America the United
States (Federal)
21
Asia including South Korea,

India, Japan
Best practice Germany: Biogas CHP

New York: Annual CHP
The Netherlands: CHP
examples
receives a FiT through the
installations in New York
policies achieved over
4Mt CO2-eq. GHG emissions
Erneuerbare-EnergienCity tripled after subsidies
Gesetz (EEG) (2009), adding
became available in 2001,
reductions in the 1990s.
up to EURc27.67 per kWh
supported by high electricity
The EIA, a fiscal investment
to the electricity price. This
prices (see case study in
credit, achieved its share
policy has been the main
Annex 1*).
at a cost of EUR9 per t
factor supporting biogas
CO2-eq.
Japan: Government
capacity growth from less
subsidies have made Japan
Sweden: Exemption from
than 200 mega watts of
the first country in the
fuel and carbon taxes
electricity (MWe) in 2000 to
world
with
a
commercial
underlies the success of DHC
over 1200 MWe in 2007 (see
micro-CHP market over
development.
case study in Annex 1*).
60000units have been
Maharashtra, India: 2003
installed (see case study in
saw the introduction of a
Annex 1*).
FiT of IND3.05 per kWh for
bagasse-fuelled CHP. Other
Indian states have now
adopted similar policies.
Utility supply obligations

Utility supply obligations (USOs) (also known as energy portfolio standards) are a market-based
mechanism using certificate trading to guarantee a market for CHP electricity. They place an obligation
IEA/OECD, 2009
What is it?
on electricity suppliers to source a certain percentage of their electricity from CHP. The share of supply
to be met by CHP can increase year-on-year, in step with policy targets.
Electricity suppliers can meet the obligation in two ways:
owning a CHP facility;
buying CHP electricity from a CHP facility bilaterally or on the market.
Figure 3.2 Transactions in a USO

RES-E
producer
System operator
(DSO/TSO)
Physical electricity
GO application
Payment
Certificates
Certificates
Obligatory purchase
Supplier
(turnover company
or non-RES electricity
producer using TPA)
President of Energy
Regulation Authority
Certificates
Control of obligation
targets realisation
Source: Adapted from Lipinski (2004).
The energy market regulator provides CHP plant operators with certificates for each unit of electricity
or CO2. Electricity suppliers can then purchase the required number of certificates from the CHP plant
operators. The sale of certificates provides additional revenue to support CHP plants.
Supply of, and demand for, certificates will determine their value, but the regulator can create enough
predictability to incentivise investment in CHP by creating a ceiling and floor on prices:
If suppliers fail to submit the required number of certificates, they must purchase the outstanding
certificates from the regulator at the penalty buy-out price (the ceiling).
Some European USOs also allow CHP plants to sell certificates back to the regulator for a guaranteed
minimum price (the floor).
How can USOs help CHP?
Independent CHP plant operators may find it difficult to find buyers for the electricity they produce.
This can be the result of:
Market procedures: In competitive electricity markets, small independent generators often do not
have the expertise or resources to participate in electricity trading, so they rely on demand from a
local supplier or consumer.
Size: Electricity suppliers generally prefer sourcing electricity from a small number of large power
plants. Small CHP plants may therefore not find a buyer for their output, although using multiple
smaller generators can increase diversity and security of supply.
IEA/OECD, 2009
22
Measurement
and data confirmation
Long-term contracting: In regulated markets, suppliers often buy electricity through long-term
contracts with a small number of power plants. Consequently, independent power producers can
only enter the system when one of these expires.
Costs: Electricity from new efficient CHP plants can be more expensive than electricity from the
existing generation system.
USOs can assist in addressing these issues by:
creating demand for CHP electricity through obligation on electricity suppliers;
allocating tradable certificates for CHP electricity.
Table 3.2 briefly explains the aims of USOs, their effectiveness, and gives examples of jurisdictions
that have implemented them successfully.
Table 3.2 Utility supply obligations for CHP

Policy goals
USOs create a demand for CHP electricity through a purchase obligation on electricity
suppliers. The two main objectives are:
Making CHP plants competitive in the electricity market; and
Guaranteeing a market for CHP electricity.
Success factors
What makes
it work?
Set and adjust the obligation share realistically enough to create scarcity and sustain
demand, but with reference to the potential for developing CHP.
Create a penalty buy-out price to place a ceiling on certificate prices, and a guaranteed
minimum price creating a floor price.
23
Establish a transparent and easy-to-use accounting system for compliance.

Where has it been
used?
Europe
Renewables: 11 of EU-15
CHP: Belgium, Poland
Energy efficiency: Italy
North America
Renewable Portfolio Standards (RSPs): 36 US States, eight of which include CHP
Clean energy/CHP: Pennsylvania, Connecticut
Best practice
examples
Belgium Wallonia has implemented a USO that supports CHP plants with certificates
based on CO2 savings, rather than on electricity output (see case study in Annex 1*).
United States eight US States had included CHP in their RSPs by May 2008:
Colorado, Connecticut, Hawaii, Nevada, North Carolina, North Dakota, Pennsylvania
and Washington (US EPA, 2008). Connecticuts Renewable Energy Portfolio Standard
includes a special category extending the obligation from renewables to CHP. It was
one of the first State RSPs to recognise the CO2 saving potential of efficient CHP plants
(DSIRE, 2009).
Local infrastructure and heat planning

Local infrastructure and heat planning create a rational framework for providing heat and cooling
efficiently by identifying and linking demand and supply, and supporting the best energy sources
available. DHC infrastructure can create the necessary linkages, while CHP is a versatile energy supply
source that can meet demand efficiently.
IEA/OECD, 2009
What is it?
Heat planning typically combines facilitating measures with regulation. Municipal governments in
Denmark, for example, first assessed heat demand and supply options, then introduced restrictions
on electric heating and power generation without heat recovery. At the same time governments
supported R&D in emerging renewable CHP technologies to stimulate a transition to a low-carbon heat
and electricity system.
Building regulations for CHP
Building regulations replicate some elements of heat planning at a building-scale they aim to
further the uptake of systems that optimise the energy supply. Building standards usually set
requirements for the energy performance of buildings, which can be met using energy efficiency
measures, on-site renewable generation or CHP. Developers can choose the most suitable and costeffective option, allowing for flexibility to reflect local circumstances.
How can local energy and heat planning help CHP?
Table 3.3 describes the different types of local heat/energy planning, their relevance and effectiveness,
and gives examples of jurisdictions that have implemented them successfully.
Climate change mitigation (emissions trading)

There is a growing range of policy measures designed to address the challenge of climate change. This
section focuses on cap-and-trade Emissions Trading Schemes (ETS) which are becoming an increasingly
popular measure. These schemes follow the example of carbon taxation, which has been successful in
supporting CHP and DHC development in countries like Sweden.
What is the issue?
The main challenge facing CHP in ETS design is that, with CHP, on-site emissions increase, while overall
global emissions decrease (power plant emissions displaced by CHP exceed the additional on-site
emissions when a boiler is replaced by CHP).
Unless ETS design reflects this issue, CHP will normally be penalised through having to buy more
allowances than would be needed with a heat-only boiler and grid-supplied electricity.
Two other important issues for CHP are:
Determining the sector to which CHP belongs. If CHP is categorised in a sector whose allowances
are capped stringently, this will disincentivise CHP.
IEA/OECD, 2009
24
Local heat/energy planning at a municipal or building level can help to trigger CHP/DHC development
in a number of situations by:
Co-ordinating heat, cooling and energy supply: Heat planning facilitates CHP development by
creating stable heat and cooling loads through DHC networks. Local governments have the spatial
planning tools to facilitate this process and to address the regulatory challenges of construction,
installation and energy sales.
Helping to overcome the high upfront costs of heating and cooling networks: DHC networks are a
valuable long-term asset for optimising energy supply and creating a bridge to low-carbon systems,
but the upfront investment is often not feasible under private-sector criteria. Local governments
can support DHC network investment through loans and guarantees, or by investing themselves, as
with other long-term infrastructure.
Setting standards for building environmental performance that may not be achieved through
market or other incentives: The accelerated use of small-scale CHP and other low energy solutions
in buildings will often require a critical mass of customer demand to bring down product costs.
Building regulation standards, applying to thousands or millions of new buildings, can create this
demand in a relatively short period.
Defining the boundaries for inclusion of CHP. For example, conversion of individual residential
boilers (not included currently in ETS schemes because they are too small) to a large urban CHP/
DHC scheme (which would be included) would disincentivise the emissions reducing investment.
Table 3.3 Planning policy supporting CHP and DHC

Local and individual planning policy
Heat planning and municipal initiatives
Building regulations
Policy goals
To reduce urban or regional carbon To increase the energy efficiency of new

emissions.
buildings.
To improve the efficiency of energy use at To increase the use of low-carbon renewable
the community level by co-ordinating heat energy and CHP in individual buildings.
and cooling supply and demand.
To facilitate the transition to energy systems
using low- or zero- carbon fuels.
To reduce heating costs for consumers and
bring down fuel poverty.
To establish long-term energy supply
assets through supporting investment
in DHC infrastructure.
Success factors
What makes it
work?
Planning at the municipal level requires coordination and co-operation among policy
makers, energy suppliers and customers to
establish clear goals and agreement on the
means of achieving it.
Success requires co-ordination and cooperation between planners and building

developers, and agreement on ambitious but
achievable goals.
Evaluating heat and cooling demands and

available sources is essential for establishing
an efficient supply system.
Where has it
been used?
Europe including Denmark,

Germany, Italy, Russia, Sweden
25
Finland, Europe the United Kingdom, Germany,

Austria
North America Puerto Rico

Asia South Korea, China
Best practice
examples
Denmark Heat planning (see case study in United Kingdom Merton Rule (see case
Annex 1*).
study in Annex 1*).
South Korea Integrated Energy Supply Act Germany the EEWrmeG (Renewable Heat
(see case study in Annex1*).
Law), effective in 2009, obliges building
developers to use renewable technologies
or CHP for heating in new buildings.
How can emissions trading help CHP?

The principle behind ETS is that allowances to emit GHGs are limited and thus a market price for their
emissions is derived.
Table 3.4 briefly sets out the key issues relating to treatment of CHP in emissions trading, its relevance
and effectiveness, and gives examples of jurisdictions that have implemented emissions trading
successfully.
IEA/OECD, 2009
By giving carbon emissions a price, technologies that reduce emissions (e.g. CHP) should benefit in
theory partly through increases in electricity prices. It is, therefore, important to ensure that evolving
ETS design takes account of the unique CHP position in the energy delivery chain and, if desired,
incentivises its development. At the very least, ETS programmes should not penalise CHP.
Table 3.4 Emissions trading schemes and CHP

Policy goals
To bring about cost-effective carbon emissions reductions by incentivising

(or at least not penalising) CHP plants.
Success factors What

makes it work?
The key requirement for those determining allocation plans is to ensure that
the main challenge for CHP is addressed through specific allocation design
features. For example, providing bonus allowances to CHP plants to recognise
the additional useful heat energy that is being used by other energy consumers.
Double-benchmarking is one methodology to allocate allowances more equitably
to CHP plants (see case study in Annex 1*).
Where has it been used?
Experience is predominantly in the EU where the ETS has been in operation

since 2005. Since that time, several member states have introduced innovative
allowance allocation methods for overcoming the main design challenge for CHP.
Best practice examples
There are several examples under the US Regional Greenhouse Gas Initiative
(RGGI) and the EU ETS that are described in the IEA CHP and Emissions Trading
Report (and see EU ETS case study below).
Interconnection measures
What is it?
Figure 3.3 Two generator sets installed at an industrial manufacturing site in Trentino, Italy
Source: Solar Turbines Incorporated

IEA/OECD, 2009
26
The three main types of measures are as follows:

Interconnection standards provide clear rules for obtaining physical connection to the distribution/
transmission network depending on connection voltage levels. They outline the procedures for the application
process in a clear and transparent way. They also set out the technical requirements for connection.
Measures enabling grid access that relate to the participation of CHP plants in the grid network. They
can, for example, be developed to give CHP generators priority access to the electricity system. These
measures include:
Net metering: this allows for the flow of electricity both to and from a customers facility through a
single, bidirectional meter, and can enable the plant to secure an electricity sales price equivalent
to the purchase price.
Priority dispatch: this ensures that generators will have priority in exporting into the grid system.
Licensing exemption: this allows CHP operators to generate without a generator license, helping to
keep costs down.
Incentivising network operators enables them to benefit where they may lose revenue by connecting
CHP plants to their systems. Incentives may include:
Decoupling of the link between kWh throughput and profit.
Allowing, or incentivising, network operators to develop CHP plants.
Allowing network operators flexibility in charging for system use.
How can interconnection measures help CHP?
Grid connection enables a CHP plant to sell any surplus electricity to the grid, and to import when the
site needs exceed the CHP output. A key factor determining the market viability of CHP is therefore its
ability to safely, reliably and economically interconnect with the utility grid system (IEA, 2008b).
However, grid connection has traditionally been one of the main challenges to encouraging increased
uptake of industrial and commercial CHP. See Figure 3.4 for an example of a CHP industrial site. In
some cases the process of interconnection to the network has been unclear and at times inconsistent.
The implementation of measures that facilitate interconnection of CHP systems on the other hand can
provide developers with clear guidelines or incentives for connecting to the grid.
Figure 3.4 CHP on Esti Lktp in Hungary
27
The implementation of such interconnection measures can be done at a national level or regional
level. The rules or standards are mostly proposed and enforced by electricity sector regulators after
discussion and agreement with grid operators, CHP interests and other parties.
Table 3.5 briefly explains these three types of measures, their relevance and effectiveness, and gives
examples of jurisdictions that have implemented them successfully.
IEA/OECD, 2009
Source: Dalkia
Table 3.5 Electricity network interconnection measures for CHP

Interconnection standards
Policy goals
To streamline and facilitate

the interconnection
procedures for CHP and
other decentralised energy
generation projects.
Enabling grid access

To improve the commercial
conditions for CHP.
Incentivising network
operators
These incentives encourage
network operators to treat
CHP favourably when
considering grid connection
applications and after the
establishment of projects.
Success factors Regulators working closely with all the main stakeholders.
What makes Development of standards that address all elements of the interconnection process.
it work?
Making the connection process and related fees commensurate with the generator size.
Monitoring the effectiveness of measures (US EPA, 2007).
Where has it
been used?
In the United States, the Energy Policy Act (2005) urges all States to implement interconnection
standards for CHP, which many have done.
The United Kingdom, the Netherlands and Germany have all implemented a fit and inform
process for grid connection of micro-CHP. This means that there is no cost for connection.
Best practice
examples
The Netherlands: the Dutch Net Code in the 1990s simplified connection rules, ensuring
transparency and fairness in the connection process. The government set out the requirements
and the utilities developed the code. As such it was the utilities initiative, and, therefore, was
more effective.
28
The United States: Many states and non-regulated utilities have developed, or are developing,
standards that take into account the application process and the technical requirements for
connection. The standards set out a standard framework for network connection and export of
electricity (see case study below).
Capacity building (outreach and research and development (R&D))

What is it?
Capacity building can be undertaken in two ways:
Outreach and education raises the awareness of CHP, making known to potential users the benefits
of CHP and the types of sites particularly suited to CHP. This can be implemented through training
programmes, active campaigning or the creation of a central CHP office or champion.
R&D supports the development of CHP technologies and applications towards market
commercialisation. R&D funding can also be applied towards the training of potential users to
facilitate CHP technology uptake.
How can capacity building help CHP?
Incentive policies for CHP can be most effective if the potential users are aware that the CHP opportunity
exists and if emerging technologies are mature enough to be applied on a commercial basis.
IEA/OECD, 2009
Table 3.6 explains the different forms of capacity building, its relevance and effectiveness, and gives
examples of jurisdictions that have implemented it successfully.
Table 3.6 Outreach and R&D programmes for CHP and DHC
Capacity building (outreach and R&D)
To ensure that policy makers can incentivise the best and most efficient projects.
To ensure that energy users are fully aware of the CHP opportunity.
To accelerate the commercialisation of emerging CHP technologies.
Success factors
What makes it
work?
Where capacity building has been most successful, it tends to have:

involved all the key stakeholder groups in programme design;
been accompanied by effective incentive policies;
been targeted at the most suitable energy user groups.
Where has it been

used?
Europe: including Germany and the Netherlands

Asia: including Japan
Best practice
examples
KWK Modellstadt Berlin: The main goal of this scheme is to make Berlin a role model city
for cogeneration. By producing free publications such as CHP: double use of resources
and newsletters, the initiative has been informing the inhabitants of Berlin the potential
users of the benefits and potential of CHP (Berliner Energieagentur, 2009).
Japanese PEFC Roadmap: Brings together government research institutes, technology
manufacturers and energy companies to cooperate towards the successful introduction of
fuel cell CHP systems into the market (see case study below).
Dutch CHP Agency (Projektbureau Warmte-Kracht): The Dutch CHP Agency brought
together government, industry and energy companies to work together to identify
opportunities, advise on policy and implement new projects. The Agency was set up to
overcome the various regulatory and other barriers that hindered the development of CHP,
and played a central role in the CHP boom in the Netherlands in the 1980s and 1990s.
US EPA CHP Partnership: This partnership has successfully engaged potential CHP users
and the wider public since 2001 through workshops, publications and awards, such as the
Energy Star CHP award. By 2007, it has contributed to installing 335 CHP projects with a
total capacity of 4450 MWe (US EPA, 2008).
29
IEA/OECD, 2009
Policy goals
Figure 3.5 IC engine system installations at Edinburgh University
30
IEA/OECD, 2009
Source: GE Energy
Section 4 Next step action items for policy makers

CHP whether applied in industry, in buildings or integrated with DHC networks offers policy makers
a very significant opportunity to achieve a number of energy and environmental goals at relatively low
cost compared to alternatives. CHP also provides a growing opportunity to incorporate renewable biobased fuels that bring about an even greater environmental gain.
Moreover, the majority of CHP applications offer a proven, reliable and cost-effective means to meet
electricity, heating and cooling demand in a highly efficient way. Therefore policy incentives for CHP
are normally only needed where barriers (market, regulatory, institutional, etc.) cause projects to be
uneconomic.
This report provides a summary of some global best practice CHP policies that have successfully
delivered new CHP investment and thus helped achieve wider policy goals. Policy makers can be
confident that they will find among these some effective policy tools that can help them meet their
goals more quickly.
Some critical success factors

The report also highlights some of the critical factors that can most effectively bring about successful
policy development and implementation:
A CHP/DHC champion
This can be an individual or a dedicated CHP department or agency that is charged with driving and
coordinating policy development. Several examples in this report have arisen through such champions.
A CHP/DHC strategic framework
This can consist of a long-term target for CHP development, agreed across government departments
and supported by a clear definition of the actions and initiatives that are needed to bring it about. The
case studies in Annex 2* highlight the importance of a strategic approach to developing policy for CHP.
The case studies are as follows:
31
1. The US CHP Roadmap;

2. The EU CHP Directive;
3. The Danish Integrated Approach to Energy Planning;
4. The Frankfurt (Germany) Municipal CHP Strategy;
5. The South Korean Integrated Energy Supply Programme.
These case studies illustrate the effectiveness of strategic, co-ordinated policy approaches to CHP
development. These examples often consist of longer-term targeted programmes, involving a number
of government agencies and consisting of several different CHP policy incentives, like those highlighted
in Figure4.1.
Many cities have implemented CHP/DHC initiatives to increase the efficiency of energy supply using
building efficiency standards, urban heat planning that incentivises CHP/DHC and the establishment of
low-carbon zones at the local level. For example, Copenhagen, Frankfurt and Mannheim have made
the transition to CHP/DHC Cities, while London, New York and Shanghai have introduced low-carbon
policy initiatives more recently.
IEA/OECD, 2009
Appropriate implementation levels

Some of the most effective CHP policies can be best implemented at the sub-national level: regional,
state, local or municipal. Cities can be especially effective in driving CHP/DHC, as these combine a
dense and steady energy demand with distinct pollution and waste challenges (IEA, 2008c).
Qualifying definitions for CHP

Policy makers have created definitions in order to calculate national CHP capacity/generation and
to ensure that incentives are properly targeted at schemes that meet defined criteria, usually based
on the systems overall energy efficiency and primary energy savings. At present, there is a lack of
international agreement on good or high-quality CHP. This is one reason why different countries
continue to measure national CHP shares in different ways. Nonetheless, the two examples below
indicate that solutions can be found, and may be useful models for other jurisdictions.
EU Cogeneration Directive (2004/8/EC), Article 11 (EU, 2004)
High efficiency cogeneration is in this Directive defined by the energy savings obtained by combined
production instead of separate production of heat and electricity. Energy savings of more than 10%
qualify for the term high-efficiency cogeneration. To maximise the energy savings and to avoid
energy savings being lost, the greatest attention must be paid to the functioning conditions of
cogeneration units. (DG TREN, 2009)
UK Government CHP Quality Assurance Scheme (DEFRA, 2000)
CHPQA provides a methodology for assessing the quality of CHP Schemes in terms of their energy
efficiency and environmental performance. This methodology is based on Threshold Criteria, which
must be met or exceeded in order for the whole of the Scheme to qualify as Good Quality.
Threshold Criteria are set for Quality Index and Power Efficiency, and both can be determined from
just three sets of data: fuel used, power generated and heat supplied.
To help develop a process for choosing and implementing effective CHP policies, a recommended
decision pathway is as follows:
1. Can CHP/DHC help achieve policy objectives? It is important to understand whether the greater
use of these technologies can help achieve specific policy objectives. These objectives include reducing
CO2 emissions, reducing fuel imports and/or increasing energy efficiency. Such an assessment may best
be done at a cross-departmental level. If it is concluded that CHP and/or DHC offers a potentially
effective way forward, cross-departmental links need to be maintained and consideration given to the
benefits of a longer-term strategic approach.
Best practice examples: the Netherlands and Denmark (see Annex 2*) and IEA national CHP profiles
(IEA, 2008b)
2. Is there potential for further development? It is important to understand what the current market
is for these technologies and what the potential for growth is on a sector-by-sector basis. Such an
analysis will be most helpful if it seeks to identify the most cost-effective, new investments based on
reasonable economic criteria.
Best practice example: EU CHP directive (see Annex 1*)
3. Identify market and other barriers. If it is concluded that there is further economic potential, then
it is important to understand again at a cross-departmental level what is holding back investment.
As this report has indicated, there are a wide range of potential barriers that can constrain CHP/DHC
development. If some barriers can be removed, that is the best place to start. Incentives may be
necessary to introduce newer technologies, including biogas CHP or fuel cell/micro CHP.
Best practice examples: US interconnection standards (Annex 1*), CHP Directive (Annex2*)
4. Identify and introduce the most suitable best practice policies. Depending on the governments
policy goals, a choice can be made as to the most suitable best practice policy tools that can be
implemented to bring about market growth and, thus, to make a contribution to the achievement of
broader policy goals.
IEA/OECD, 2009
32
Identifying next steps: a pathway
Best practice examples: Frankfurt, the Netherlands, Denmark and Finland (see Annex 2* and IEA national
CHP profiles (IEA, 2008b))
Figure 4.1 illustrates this decision pathway.
Figure 4.1 CHP policy decision pathway

Analysis
What are the key

policy objectives?
CHP helps meet
these objectives?
Action
Dont
know
Policy
implementation
Identify scope for

CHP contribution to
policy objectives
Yes
Is there economic
potential for CHP
Implement appropriate
policy:
Dont
know
Financial and fiscal

support (page 20)
Analysis of
economic potential
Capacity grants
Feed-in tariffs/net metering
Fiscal support, e.g. tax credits
Yes
Utility supply
obligations (page 21)
Dont
know
Barrier analysis and

economic/market
analysis
33
Local infrastructure and

heat planning (page 23)
Planning policy
Municipal DHC initiatives
Building regulations
Are there
barriers to
realising
potential?
Yes
Remove barriers
if practical
and feasible
No
Increased CHP
market development
Environmental
regulations (page 24)
If
not
Climate change policy

Waste management policy
Air quality policy
Electricity network
measures (page 26)
Grid access and interconnection
measures
Enabling access
Grid pricing
Incentivising network operators
Capacity building
(page 28)
Source: IEA analysis.

IEA/OECD, 2009
Contribution to
achievement of
key policy objectives
These steps will apply differently to different countries, depending on the share of CHP/DHC already
achieved and the overall national experience with CHP. For example:
Little CHP/DHC experience such countries may not have undertaken any steps and will need to
start by gaining a full understanding of how CHP can align with broader policy objectives.
Some CHP/DHC experience such countries may already have an understanding of how CHP can
help meet objectives but have until now only adopted piecemeal approaches to CHP. There are also
likely to be still significant barriers and an incomplete understanding of the full potential for CHP.
CHP success stories such countries will typically have a share of CHP in electricity generation
exceeding 25% and are already enjoying the benefits of this growth. However, there may be
minor barriers remaining, but also new opportunities, for example, for expanding renewable CHP
development.
What next?
Whatever the stage of CHP/DHC development in a country or jurisdiction, there is proven experience
elsewhere that is directly relevant and that can be applied to help achieve important policy goals.
There is almost certainly at least one example and probably several examples of co-ordinated
strategies and individual world-class policies in this report that apply today and so enable a country
to secure many of the benefits already gained by growing numbers of countries and cities around
the world.
The International CHP/DHC Collaborative

The International CHP/DHC Collaborative was launched in March 2007 to help evaluate global lessons
learned and guide the G8 leaders and other policy makers as they attempt to assess the potential of
CHP as an energy technology solution.
The Collaborative includes the following activities:
collecting global data on current CHP installations;
assessing growth potentials for key markets;
developing country profiles with data and relevant policies;
documenting best practice policies for CHP and DHC;
convening an international CHP/DHC network, to share experiences and ideas.
Participants in the Collaborative include the Partners, mentioned in the acknowledgments, as well
as the Collaborators, a group of government, industry and non-governmental organisations that
provide expertise and support. The Collaborative Network, the larger group that is informed about
meetings, publications and outreach, has over 400 participants.
For more information, please visit www.iea.org/G8/CHP/chp.asp.
IEA/OECD, 2009
34
Cog en eration and

District En ergy
A nn exes
IEA/OECD, 2009
Sustainable energy
technologies
for today
and tomorrow
Annex 1 Policy-type case studies

Financial and fiscal support for CHP
Capacity Grants (System Benefits Charge) Case Study
Policy info
Name: System Benefits Charge (SBC)

Where is it implemented? New York State, USA
Why best practice?
The SBC has been effective in recognising CHP as a measure to improve energy efficiency,
reduce network constraints and improve system reliability.
Description
What is the System Benefits Charge?

The SBC is a grant programme for energy efficiency, peak load reduction, outreach / education
and R&D initiatives. It is administered by the New York State Energy Research and Development
Authority (NYSERDA) and funds New Yorks Energy USDmartSM Program.
Two elements of the SBC directly support CHP:
Enhanced Commercial and Industrial Performance Program: three-tier program offering
financial incentives for energy efficiency measures and energy savings in buildings. Tier III
offers incentives for CHP systems.
Distributed Generation as Combined Heat and Power (DG-CHP) Demonstration Program:
provides funding for site-specific feasibility studies and demonstrations, and seeks to
improve awareness of end-users and project developers of DG-CHP.
The performance of funded DG-CHP projects is collected in a database to monitor the success
of the programme, and support education and outreach activities.1
Who does it apply to?
Electricity consumers in New York State installing commercial DG-CHP technology. Systems
must be grid-connected, as the program aims to reduce peak load and improve network
reliability.
What are the specific benefits?

The SBC provides installation grants for demonstration of innovative applications of commercial
DG-CHP systems to help reduce peak loads and network constraints, as shown in the table
below.2
Category
Funding share
Maximum grant (USD)
Demonstration projects
30% to 50%
2 000 000
Fleet Demonstration projects
30% to 50%
4 000 000
Recommissioning studies
50%
75 000
Technology Transfer studies
75%
100 000
The funding budget is USD 67.1 million.
How secure is the incentive?

The SBC has already been renewed twice because of its success, and it is now guaranteed
until 2011, showing the States commitment to continuing it. The programme is not subject
to government budget cuts, as its funding comes from a 1.42% charge on the revenue of New
Yorks electric utilities.
1. NYSERDA, DG/CHP Integrated Data System, http://chp.nyserda.org/home/index.cfm.
2. NYSERDA, Distributed Generation as Combined Heat and Power (DG-CHP) Program Opportunity Notice (PON) 1241, 2008.
3. Database of State Incentives for Renewables and Efficiency (DSIRE), New York Incentives for Renewables and Efficiency, 2008.
IEA/OECD, 2009
How long will this be in place, will it be amended (if so, when)?
The SBC was established in 1996 by the New York Department of Public Service (DPS).3 Its
current stage runs from 1 July 2006 to 30 June 2011.
Capacity Grants (System Benefits Charge) Case Study

Rationale
Why has this policy been put in place? Is it addressing particular issues?
The SBC aims to improve system reliability and deliver cost and environmental benefits for
New York residents.
Reducing electricity use at peak times is a focal point of the SBC because many parts of
New Yorks electricity system are capacity-constrained. Installing CHP systems on customer
sites is often easier and more cost-effective than building new generation and network
capacity, especially in NYCs urban centre.4
NYC has the among the highest electricity prices in the USA, making lower bills for endusers an important policy objective.
PlanNYC2030, the citys long term growth and sustainability plan, aims to create a
sustainable energy supply, including the use of CHP.
Effectiveness
What impact has already been made by this policy? How has it been successful?
The DG-CHP Demonstration Program aims to support at least 50 DG-CHP plants from 2006
to 2011, with cumulative capacity of 100 mega watts of electricity (MWe). 10% of this had
been achieved by 31 December 2007.5 Since its implementation, New Yorks Energy USDmart
Program has also:6
Reduced energy use by 3 057 giga watt hours (GWh) per year, of which 100 GWh is through
CHP. The 45 funded DG-CHP plants reduce peak electricity loads by 23.7 MWe.
Saved New York consumers USD 570 million on energy bills.
Created and sustained 7 200 jobs, increasing labour income by USD 334 million annually.
Cut the citys CO2 emissions by 2.0 million tonnes (Mt) annually (equivalent to removing
400000 cars off its streets).
Why has it worked?
The SBC encourages solutions that combine CHP with energy efficiency measures and
renewable energy use to achieve greater overall benefits.
The SBC recognises that installing CHP at customer sites can be a more cost-effective
measure to mitigate constraints in the energy system than building new capacity.
Lessons learned Key lessons learned

and replication The bigger picture the SBC shows that the benefits of CHP support policy can be optimised
by integrating them with broader energy efficiency and renewable programmes.
NYSERDA Funding Opportunities http://www.nyserda.org/funding/funding.asp?i=2
New York State Public Service Commission http://www.dps.state.ny.us/index.html
4. IEA CHP Collaborative, CHP in the Big Apple: Opportunities and Obstacles, 2008.
5. NYSERDA, New York Energy USDmartSM Program Evaluation and Status Report, 2008.
6. NYSERDA, New York Energy USDmartSM Program Evaluation and Status Report, 2008.
IEA/OECD, 2009
Where can
I find more
information?
Feed-in Tariff Case Study

Policy info
Name: Erneuerbare Energien Gesetz (EEG) (Renewable Energy Law)

Where is it implemented? Germany (2004)
Why best practice?
The EEG has been the main driver of the biogas CHP boom in Germany, increasing installed
capacity six-fold and making German companies world leaders in biogas technology.
Description
What is the EEG?

The EEG is a feed-in tariff providing a guaranteed electricity price for renewable electricity
supplied to the grid. The use of CHP is eligible for a bonus on top of the basic tariff for biomass
and biogas electricity.
Renewable electricity generators that supply electricity to the public network.
The tariffs vary by technology and capacity. Biogas CHP plants can receive tariffs up to c27.67
per kilo watt hours (kWh) as of 1 January 2009.7
How long will this be in place, will it be amended (if so, when)?
The EEG was first introduced in 2000, and tariffs were amended in 2004 and 2009 to reflect
changes in technology and market conditions.
The tariffs are paid for by a small charge on the electricity price for all consumers. It is
therefore not subject to changes in the governments budget. This guarantees that sufficient
funding for the incentive is available over the projected timeline. In 2007, the EEG paid
7.9 billion to renewable generators, adding about c1 per kWh to consumers electricity bills,
just under 5% of the retail price.
Rationale
The EEG was introduced to increase the share of renewable electricity to at least 30% by 2020.
This would contribute to reducing greenhouse gas (GHG) emissions from the energy sector,
and to meeting Germanys Kyoto target.
Effectiveness
Under the EEG, Germanys share of renewable electricity has grown from 6.3% in 2000 to 14.2%
in 2007,8 exceeding its interim 2010 target. In 2006, the policy supported 15.2 tera watt hours
(TWh) electricity in 6 396 biomass installations (2.5% of Germanys electricity consumption),
4 070 of which are using biogas. The EEG achieved annual CO2 emissions savings of 44 million
tonnes in 2006, and created 67 000 to 78 000 green energy jobs.9
Why has it worked?

The EEGs success results from the long-term guarantee on the price for renewable (including
biogas CHP) electricity. This gives project developers and investors the confidence to install
renewable energy systems and ensures an acceptable payback.
and replication The EEG shows that feed-in tariffs are effective when they are guaranteed over the lifetime
of a project and sufficient to cover the additional costs for developing renewable electricity
projects.
Bundesministerium fr Umwelt, Naturschutz und Reactorsicherheit (BMU) Erneurerbare
Energien http://www.erneuerbare-energien.de/inhalt/
Fachverband Biogas e.V. www.biogas.org
IEA CHP Collaborative Country Profile Germany
http://www.iea.org/G8/CHP/profiles/germany.pdf
7. IEA CHP Collaborative, Country Profile for Germany, 2008, http://www.iea.org/G8/chp/profiles/germany.pdf.

8. Federal Ministry for the Environment, Nature Conservation and Nuclear Safety, Electricity from Renewable Energy Sources
What does it cost us?, 2008.
9. Federal Ministry for the Environment, Nature Conservation and Nuclear Safety, EEG Erfahrungsbericht 2007, 2007.
IEA/OECD, 2009
Where can
I find more
information?

Utility Supply Obligations Case Study
Policy info
Name: Green Certificate Scheme

Where is it implemented? Belgium Wallonia
Why best practice?
The Wallonian Green Certificate Scheme is unique in awarding tradable CHP certificates on the
basis of avoided CO2 emissions, rather than electricity production. In this way, the financial
value of support reflects the overall policy objective directly.
Description
What is the Green Certificate Scheme?

The Green Certificate Scheme in Wallonia is a Utility Supply Obligation based on CO2 emissions.
One certificate is issued for each 456 kilograms (kg) of CO2 avoided relative to the separate
generation of heat and power (see figure below).
Green Certificate Allocation in Wallonia

717 kg Natural Gas
CHP
CO2
Heat
1 514 kWh
1 000 kWh Electricity 1 000 kWh
Natural gas
boiler (90%)
CCGT (55%)
Eref =
456 kg CO2/MWh
878 kg
kg
878
CO22
Gain = 878 - 717 = 161 kg CO2/MWh

t = 161 / 456 = 35 %
Therefore the CHP owner will receive 0.35 Green Certificate per MWh or
1 Green Certificate for each 2.8 MWh generated
Source: Region Wallonne, 2003.

Renewable energy generators and gas-fired CHP plants can receive Green Certificates for their
achieved CO2 emissions savings for a maximum of 20 MWe installed capacity.
Electricity suppliers must buy certificates to submit to Commission Wallonnie pour lEnergie
(CWaPE), the regulator, to cover a set share of their supply. The required share is 9% in 2009,
increasing to 12% in 2012.
Renewable energy and CHP plant operators can sell their certificates to suppliers or on the
certificate market. They can also sell to CWaPE for a buy-back price of 65 per certificate.
The buy-out penalty for utilities, effectively the price ceiling, is 100.
Green Certificates are allocated every three months and are valid for three years.
The Certificate Scheme generates additional revenue, rewarding renewables and CHP for
their environmental benefits, and encouraging their wider uptake.
The level of support varies by technology to favour systems with greater overall benefits.
For example, biomass CHP can receive up to two certificates per MWh, compared to one for
natural gas CHP, because it has lower environmental impact.
How long will this be in place, and will it be amended (if so when)?
The Wallonian Green Certificate Scheme was introduced in 2001 and is guaranteed until 2012.
The regulator will evaluate the impact of the policy on renewable energy and CHP plants and
energy prices in 2009.
The Wallonian Government considers the Green Certificate scheme to be its primary strategy
for filling the generation gap as Belgium plans to phase out its nuclear plants and for meeting
GHG emissions targets. It is therefore strongly committed to continuing the scheme.
IEA/OECD, 2009
1 514 kWh
Utility Supply Obligations Case Study

In line with European policy objectives, the Green Certificate Scheme aims to enhance energy
security, support environmental protection, enhance market workings and foster regional
economic development. Allocating certificates for CO2 savings, rather than electricity output,
it directly links the design of the scheme with its environmental goals.
Effectiveness
The number of CHP installations in Wallonia has increased from 17 to 56 under the Green
Certificate Scheme, adding 63 MWe. It has been most successful in promoting biomass CHP
there were 17 plants at the end of 2007 (78.6 MWe), compared to three (30.2 MWe) before
the scheme was introduced.10
CHP plants received a total of 1 797 856 certificates between 2003 and 2007,11 equating to
820 kiloton (kt) CO2 savings. This is 7.5% of Belgiums Kyoto GHG reduction target.12
Why has it worked?
The Wallonian Green Certificate Scheme has been successful because it directly links the
financial benefit for CHP operators to the environmental goal of the policy:
Certificates are awarded for CO2 savings, rather than electricity production.
The cleanest technologies receive most certificates.
The obligation shares are reviewed regularly to sustain the market price and ensure
continuing development of CHP and renewables.

and replication Keep your goal firmly in mind the Wallonian Certificate Scheme shows that support
mechanisms are highly effective when their design directly reflects the overall policy objective
i.e. reducing CO2 emissions rather than producing renewable electricity.
Where can
I find more
information?
Commission Wallonie pour lEnergie (CWaPE) Electricit verte

http://www.cwape.be/xml/themes.xml?IDC=1528
Cogen Sud http://www.cogensud.be/
10. CWAPE, Rapport Annuel Spcifique 2007 sur lvolution du march des certificats verts, 2008 at
http://www.cwape.be/servlet/Repository?IDR=10695.
11. CWAPE, Rapport Annuel Spcifique 2007 sur lvolution du march des certificats verts, 2008 at
http://www.cwape.be/servlet/Repository?IDR=10695.
12. European Environment Agency, GHG trends and projections in Belgium, 2007.
IEA/OECD, 2009
Rationale
Local infrastructure and heat planning

Building Regulations Case Study
Policy info
Name: The Merton Rule

Where is it implemented? United Kingdom London Borough of Merton (2003)
Why best practice?
The Merton Rule illustrates the effectiveness that planning requirements on an individual
building level can have for meeting local and national carbon emission targets, whilst also
stimulating renewable and CHP uptake. Its subsequent widespread adoption across the UK by
other cities shows the impact that one pioneering initiative can make.
Description
What is the Merton Rule?

The Merton Rule is a planning policy, introduced by the London Borough of Merton in 2003.
It requires first, the use of energy efficiency measures, and then on-site renewable energy to
reduce annual CO2 emissions originally in the non residential built environment. CHP offers
an effective way to introduce both renewable generation and energy efficiency.
Originally, this rule required all new buildings to achieve a 10% CO2 emissions reduction, but
where it has been introduced elsewhere in the UK, the target varies.
Housing and commercial building developers.
Rationale
This policy is responding to the UK governments renewable energy and energy efficiency
targets following the publication of the Planning Policy statement 22 (PPS22).13
Effectiveness
The Merton Rule has resulted in more than 70 other local authorities drawing up and adopting
similar planning requirements.14
The first project complying with the target in Merton Willow Lane, in Mitcham used solar
panels and micro wind turbines to achieve the CO2 reductions and now saves 2 021 kilograms
(kg) CO2 per year.
Why has it worked?
A coordinated approach between Merton and building developers to implement this policy has
made it successful.
In the process, clear guidance and advice was offered to all developers so that they could
understand how to meet the requirements.
13. http://www.communities.gov.uk/publications/planningandbuilding/pps22.
14. http://www.merton.gov.uk/living/planning/planningpolicy/mertonrule.htm.
IEA/OECD, 2009
How long will it be in place, will it be amended (if so, when)?

Merton is revising the policy in order to incorporate a requirement that the 10% reduction in
CO2 is also necessary for residential buildings.
Where it has been implemented, the standards remain in force for the length of the local
planning programme typically 5 to 10 years.
Building Regulations Case Study

Lessons learned Key benefits
and replication Adoption of similar initiatives by cities across the UK delivering CO emissions savings from
2
new building developments.
Creation of demand for renewable energy, efficiency and small-scale CHP products.
Replication what to do and what not to do
Do secure agreement with developers on what is, and what is not, achievable. And, while
ensuring the standards are rigorous, do not make them unachievable.
The Merton Rule http://www.themertonrule.org/
Merton Borough Council the Merton Rule
http://www.merton.gov.uk/living/planning/planningpolicy/mertonrule.htm
Combined Heat and Power Association (CHPA) www.chpa.co.uk
IEA/OECD, 2009
Where can
I find more
information?

Climate Change Mitigation (Emissions Trading) Case Study
Policy info
Name: EU Emissions Trading Scheme (ETS) treatment of CHP

Where is it implemented? European Union. There are three Phases of the ETS: I 2005-07;
II 2008-12; III 2013-20.
Why is this best practice?
The various National Allocation Plans under the EU ETS have brought forward several innovative,
and potentially effective, means of ensuring that the ETS overall either incentivises CHP, or
does not penalise it.
Description
What are the main features of the National Allocation Plans that address CHP?
Double benchmarking: To reflect the fact that CHP has two outputs, electricity and heat,
a CHP plant is given a twin allocation based on benchmarking against standardised separate
electricity and heat generators one for the heat output (according to a boiler reference) and
one for the electrical output (according to a central generation reference). In this way, CHP is
provided with allowances that would have been allocated to separate generators to produce
the same output. In this context, the reference values that are used to benchmark CHP are of
great importance since they have a very strong influence on the final allocation. This can be
explained by reference to the figure below.
Energy flows for separate and combined heat and power generation
21 units CO2
55 electricity
39 units CO2
Grid
losses
50 electricity
115 fuel
Central thermal
power plant
18 units CO2
80 heat
100 fuel
215 Fuel
Industrial steam
boiler plant
Combined heat and

power (natural gas)
31 units CO2
50 electricity
80 heat
170 fuel
Industrial CHP plant
Source: IEA, July 2008 (All efficiencies are in Lower Heating Value)
Applying double benchmarking to this example, in a free allocation situation, the CHP would
be allocated 39 emissions allowances (21 relating to separate electricity generation and 18
relating to separate heat generation) instead of 31.
The double benchmarking approach can also be applied to an auctioning situation (most likely to
be the basis of EU ETS Phase III). Using again the example in the figure above, options include:
Giving CHP free allocation of permits equivalent to the carbon savings from the CHP. In the
example, the CHP owner would buy 23 allowances and be freely allocated 8.
Giving CHP free allocation of permits equating to its heat output. In the example, the CHP
installation would be allocated 18 allowances and would buy 13.
CHP bonus allocation: A CHP bonus allocation provides an additional allocation to CHP plants
for each unit of electricity when compared with conventional power plants.
Reducing the Compliance Factor for CHP: This is the speed with which annual reductions
in emissions are required to take place. This approach would enable qualifying CHP plants to
reduce their emissions more slowly over time than conventional installations.
Other means of recognising the emissions benefits of CHP can be found in the IEA CHP / ETS
report (see More Information below).
IEA/OECD, 2009
10
Separate production of heat and

electricity (natural gas)
Climate Change Mitigation (Emissions Trading) Case Study

Description
(continued)

While the EU ETS applies to all EU Member States, those countries that have introduced one
or more of the various means of recognising CHP include:
Germany double benchmarking. For new CHP plants in Phase II:
Electricity the emission factor for the benchmark of power ranges from 365 (for natural
gas-based combined cycle gas turbine (CCGT)) to 750 tonnes (t) CO2 per GWh (coal).
Heat for steam, the emission factor ranges from 225 (for natural gas) to 345 t CO2 per
GWh. For warm water, the emission factor ranges from 215 t CO2 per GWh for natural
gas.
For a 350 MWe CHP plant, this benchmarking might result in an allocation of around 30% more
allowances than through grandfathering.
Czech Republic CHP bonus. CHP plants receive a bonus of 430 allowances per GWh of
electricity produced.
Greece Compliance Factor. A factor of 0.92 was applied to many non-CHP plants in ETS
Phase I, while CHP had a factor of 1.
For each extra allowance that CHP is allocated in a free allocation scheme, and for each
allowance that it need not buy in an auctioning approach, there is a clear monetary gain for
the plant compared to separate, and less efficient, generation of electricity and heat.
How long will this be in place, and will it be amended (if so, when)?
The EU ETS has been operating since 2005 and is now the largest multi-country, multi-sector
GHG emission trading scheme in the world. The design of Phase III (2013-2020) is now under
negotiation among the EU Institutions.
Rationale
Why have these CHP measures been put in place?

The main driver for these various allocation approaches is to address the fundamental design
challenge facing CHP in an ETS: that with CHP, onsite emissions go up, even though global
emissions go down.
Effectiveness
Why is it likely to work?

The main benefits of double benchmarking are as follows:
Double benchmarking is perhaps the most logical solution to the problem of increased onsite
emissions at a CHP site: the CHP site is allocated carbon allowances as if it sourced heat and
electricity separately, so the possible distortion is removed.
CHP efficiency is also rewarded in direct relation to the carbon savings that it generates
compared to separate central generators and boilers.
Flexibility double benchmarking can be used both for new and existing CHP plants.
11

and replication ETS designers need to recognise early that CHP is potentially disincentivised by ETS
schemes.
That it may not always be necessary to incentivise CHP, but its penalisation should be
avoided.
That there are a growing range of design approaches that can reflect the emissions reduction
benefits of CHP.
http://www.iea.org/textbase/papers/2008/chp_ets.pdf
IEA/OECD, 2009
Where can
I find more
information?
Interconnection Measures Case Study
Policy info
Name: USA Interconnection Standards15

Where is it implemented? USA
Why best practice?
CHP projects often meet with inconsistencies in the USA grid connection application process.
Onerous and/or expensive interconnection procedures can comprise a key barrier to
increased use of distributed power and CHP.16 Implementation of interconnection standards
in the USA demonstrates how the introduction of standards can provide a framework for
connection, providing clarity for CHP developers, thereby enabling more projects to move
forward more easily.
Description
What are the USA Interconnection Standards?

The Energy Policy Act (EPA) of 2005 requires that standards for interconnection of CHP
facilities be implemented (or reviewed where they already exist). These standards establish
clear and uniform processes and requirements for connecting to the grid. Both the application
process and the technical requirements for connection (on the basis of the IEEE 154717 and the
UL 1741)18 are detailed in the standards.
The rules affect CHP developers seeking to connect their facilities to the grid system. Utility
companies need to adhere to the procedures set out in the rules when processing applications.
Developers can better anticipate costs and accurately plan for the application process.
The costs of interconnection are uniform throughout the State and are commensurate with
the nature, size and scope of the project.
The benefits of CHP can be harnessed without compromising grid safety and reliability.
12
How long will this be in place, and will it be amended (if so when)?
In some States, interconnection standards have been in place since before the EPA of 2005.
Standards do not have a time limit although regular reviews and updates are required.
Rationale
Why has this policy been put in place?

CHP developers are often faced with varying and inconsistent approaches and charges for
grid connection. Prior to 2005, there were a variety of efforts underway at the federal level
and within individual States to develop fair and uniform interconnection standards to help
facilitate the deployment of distributed generation. It was, therefore, desirable to make
these more uniform across the USA.
Effectiveness
Feedback from CHP developers and operators indicates that the process is becoming easier as
the interconnection constraints have been addressed by the standards. Ongoing refinement of
these standards is likely to continually improve the interconnection procedures.
Why has it worked?
Close involvement of interested stakeholders including electric utility companies,
developers/operators of CHP and government agencies.
Tailoring rules to address specific issues faced by different project sizes (e.g. making the
connection process and related fees commensurate with the generator size).
Creating a streamlined process for small CHP systems that does not require as much detailed
assessment as larger schemes.
17. Institute of Electrical and Electronics Engineers (IEEE), 2003, IEEE 1547 Standard for Interconnecting Distributed Resources
with Electric Power Systems.
18. Underwriters Laboratory (UL), 1999 UL Standard for Safety Inverters, Converters, Controllers and Interconnection System
Equipment for Use With Distributed Energy Resources.
IEA/OECD, 2009
15. CHP Partnership (US Environmental Protection Agency), http://www.epa.gov/chp/state-policy/interconnection_fs.html.

16. Making Connections: Case Studies of Interconnection Barriers and their Impact on Distributed Power Projects, National
Renewable Energy Laboratory, May 2000.
Interconnection Measures Case Study

and replication The need to develop standards that address all elements of the interconnection process
(e.g. processing time, costs, technical requirements and information requirements).
The need to update standards based on effectiveness, feedback from applicants/utilities,
changes in CHP and electric utility technologies, and changes in standards of third-party
technical organisations (e.g. IEEE).
CHP Partnership (USA Environmental Protection Agency)
http://www.epa.gov/chp/state-policy/interconnection_fs.html
13
IEA/OECD, 2009
Where can
I find more
information?
Capacity building (outreach and R&D)

Case Study Roadmap for Fuel Cell and Hydrogen Technology
Policy info
Name: Roadmap for Fuel Cell and Hydrogen Technology

Where is it implemented? Japan
Why best practice?
Through the Fuel Cell Roadmap, Japanese companies have developed the most advanced fuel
cell CHP systems in the world, making the country the first commercial micro-CHP market,
and giving Japanese industry the opportunity to export their products and expertise.
Description
What is the Roadmap for Fuel Cell and Hydrogen Technology?

The Japanese Fuel Cell Roadmap is a Government initiative aiming to promote R&D for fuel cell
technologies. It brings together Government research institutes, technology manufacturers
and energy companies to cooperate towards the successful introduction of fuel cell CHP
systems into the market.
The programme consists of individual roadmaps for six technology fields, two of which are
relevant for CHP:
Polymer Electrolyte Fuel Cell (PEFC) Technology Roadmap (Stationary fuel cell systems)19
PEFC Technology Roadmap

Present
2010
2015
2020 - 2030
Demonstration to
early introduction
Early dissemination
Dissemination
Full dissemination
33%/36%
33%/37%
33%/37%
33%/37%
>36%/40%
20 000 hrs
40 000 hrs
40 000 hrs
40 000 - 90 000 hrs
90 000 hrs
Operating
temperature
70 C
70 C
70 C
70 - 90 C
90 C
4.8 million yen

(average for
large-scale
demonstration
project)
2 - 2.5 million yen

(at early introduction
in 2009)
(1 000 systems/
company/year)
0.7 - 1.2 million yen

(in ca. 2012)
(10 000 systems/
company/year)
0.5 - 0.7 million yen

(in ca. 2015)
(100 000 systems/
company/year)
<0.4 million yen
System cost
Source: New Energy and Industrial Technology Development Organisation, 2008.
Solid Oxide Fuel Cells (SOFC) Technology Roadmap20
SOFC Technology Roadmap

Present
(end of FY2007)
2010
2015
2020 - 2030
Residential
cogeneration system
$Small: Ca.1kW several kW%
Development and demonstration

40%/44%
5 000 hr (continuous operation)
Tens of millions yen/kW
Business-use
cogeneration system
(medium: several hundred kW)
Early introduction
Development and
System development
Dissemination
40%/44%
demonstration
40%/44%
>45%/50%
40 000 hr prospect
40%/44%
90 000 hr prospect
3 000 hr operation verification
1 million yen/kW
10 000-20 000 hr prospect
< 0.2 million yen/kW (at 150 MW/y)
Millions - tens of millions yen/kW
(at several MW/yr)
Millions of yen/kW
Industrial
cogeneration system
Hybrid system development

48%/52%
Millions - tens of millions yen/kW
(medium: hundreds
of kW - several MW)
Early introduction
Dissemination
40%/44%
>40%/44%
40 000 hr prospect
90 000 hr prospect (continuous operation)
(continuous operation)
1 million yen/kW (at several MW/yr) < 0.4 million-yen/kW
Dissemination
Development and
Early introduction
>55%/60%
demonstration
>50%/55%
90,000 hr prospect
50%/55%
40 000 hr prospect
< 0.15 million yen/kW
10 000 - 20 000 hr prospect
Hundreds of thousands
(at 200 MW/yr)
1 millionmillions yen/kW
1 million yen/kW
Source: New Energy and Industrial Technology Development Organisation, 2008.
Each roadmap establishes a timeline for the development of fuel cell CHP technologies and
market introduction. It has regular milestones with technology performance targets (e.g. for
lifetime and efficiency), and installation objectives as shown above.
19. NEDO, Fuel Cell and Hydrogen 2008 2009, Development of Fuel Cell and Hydrogen Technologies, 2008.
20. NEDO, Fuel Cell and Hydrogen 2008 2009, Development of Fuel Cell and Hydrogen Technologies, 2008.
IEA/OECD, 2009
14
Electric
efficiency
Durability
(start/stop
operations)
2008
(end of
FY2007)
Case Study Roadmap for Fuel Cell and Hydrogen Technology

Description
(continued)

Japanese technology manufacturers developing fuel cell systems for micro-CHP applications
can participate in the Fuel Cell Roadmap.
The policy optimises fuel cell R&D by pooling resources, sharing information, and developing
the standards and mechanisms to allow the commercial introduction of fuel cell CHP systems in
Japan. This benefits the technology companies by preparing future markets for their products,
and the economy by creating highly skilled jobs and strengthening the competitive position of
Japanese companies globally.
How long will this be in place, and will it be amended when?
The technological development of PEFC will finish in 2009 2010, when the market introduction
of these systems starts. Solid oxide fuel cell (SOFC) research will continue until 2015, after
which these systems will become available for consumers.
The Japanese Government has allocated funding for the whole Roadmap for Fuel Cell and
Hydrogen Technologies, so it will continue until at least 2015.
Context

The contribution that fuel cell CHP technology can make towards meeting Japans GHG
emissions reduction target is the primary policy driver for the roadmap. In addition, the
Government aims to give Japanese companies a competitive advantage in a future global fuel
cell market, creating jobs and export opportunities.
Effectiveness
The PEFC Roadmap has succeeded in supporting the development of 1 kilo watt of electricity
(kWe) residential micro-CHP systems ready for commercialisation. Demonstration projects have
achieved the technological targets for 2008 (40 000 hour lifetime and an electrical efficiency
of 37%). The average CO2 emissions savings of each system was 91.2 kg CO2-equivalent (eq) per
month. Consequently, these systems will become available for Japanese consumers in 2009.
The SOFC roadmap is still in its R&D phase, but on track to meet its technological targets to
allow for the introduction of these systems into the market.
15
Why has it worked?

Pooling resources and sharing information has led to cost-effective and successful R&D of
fuel cells.
Long-term timelines with concrete milestones and targets ensure that the R&D achieve the
desired results, and lead to successful commercial products.
Covers all technical, commercial and regulatory requirements for the introduction of
fuel cells through co-operation between energy companies, technology developers and
government agencies.
and replication Reducing CO2 emissions by an average 92.1 kg per month for each system.
Development of efficient fuel cell CHP systems for residential consumers.
Creating jobs and export opportunities for Japanese industry.
Where can
I find more
information?
NEDO Fuel Cell and Hydrogen Technologies

http://www.nedo.go.jp/kankobutsu/pamphlets/kouhou/2008gaiyo_e/83_94.pdf
Japan Gas Association http://www.gas.or.jp/english/index.html
IEA CHP Collaborative Country Profile Japan http://www.gas.or.jp/english/index.html
IEA/OECD, 2009
Lessons learned what to do and what not to do

Work together successful R&D policies for emerging CHP technologies bring together a
wide range of stakeholders to pool resources and share information. This optimises the R&D
process, and ensures a concerted and coordinated approach to introducing the technology.
Play on your strengths countries considering R&D programmes for CHP should focus on
technologies and applications suitable to their situation. Japans lead in fuel cell technology
fits well with its strong electronics and IT industry.
Prepare for the future R&D programmes should aim to develop technologies required
in future energy systems, as the introduction of new technologies takes time. Concrete
timelines and targets are an effective way of ensuring useful future results.
Annex 2: Strategic application of policies - Case studies

The five case studies included here illustrate the great effectiveness of strategic and
co-ordinated policy approaches to CHP/DHC development, often consisting of longer-term
targeted programmes, involving a number of government agencies and consisting of several
different policy incentives.
USA CHP Roadmap
Policy info
Name: The National CHP Roadmap Doubling CHP Capacity in the USA by 2010, launched in
March 2001.21
Where is it implemented? USA
Why best practice?
The USA CHP Roadmap has provided a single focus for CHP policy and promotion efforts in
the USA. It also set a target (which is close to being reached) for CHP, and identified means
through which it could be achieved.
Description
16
What is the CHP Roadmap?

The Roadmap, a culmination of meetings, dialogue and debate over a two-year period beginning
in 2008, is a "plan of action" designed to achieve a doubling of USA CHP from 2000 (46 giga
watts of electricity (GWe) to 2010 (92 GWe). This process was driven by the US Department of
Energy, Environmental Protection Agency, Clean Heat & Power Association and the International
District Energy Association. The Roadmap consisted of three specific goals, each of which was
subdivided into a series of programmes to achieve the 2010 target. These are:
Raising CHP awareness
National CHP industry-Government Partnership
Federal / Regional / State CHP co-ordination and outreach
Eliminating regulatory and institutional barriers
Output-based standards (emissions controls that reflect the efficiency of CHP)
Uniform interconnection
Streamlined permitting and siting
Developing CHP markets and technologies
Industrial, commercial and DHC applications of CHP
Federal and State Government facilities
Rationale

The CHP Roadmap process was established to reflect the fact that there was considerable
further potential for CHP development in the USA, but that to unlock the potential, a
collaborative and strategic approach was needed.
Effectiveness
Achievements arising out of the Roadmap include:
The 2010 target of 92 GWe is close to being achieved. By the end of 2007, the figure was 85 GWe.
Many States have passed legislation to remove barriers to CHP.
A series of federal programmes for CHP technology development, demonstration and
deployment have been rolled out.
Standard interconnection rules have been adopted by many States.
Output-based emission standards have been adopted by many States.
The creation of several CHP Application Centres that promote CHP through technical
assistance, project support, outreach etc.
21. http://www.eere.energy.gov/de/pdfs/chp_national_roadmap.pdf.
IEA/OECD, 2009

The Roadmap was published in March 2001 and covers the period to 2010.
USA CHP Roadmap

and replication A series of concrete achievements that directly address the main challenges to CHP.
A structured and strategic programme with long-term goals and a clear pathway to
achieve those goals.
Key lessons learned
A collaborative approach involving government agencies and industry bodies.
Identify first the critical barriers and design the Roadmap to tackle them directly.
Enable regional and local initiative much of what the Roadmap has achieved is through
action at State level.
Where can
I find more
information?
USA Environmental Protection Agenecy (EPA) Combined Heat and Power Partnership
http://www.epa.gov/chp/
US Clean Heat and Power Association www.uschpa.org
European Union (EU) CHP Directive

Policy info
Name: D
irective on the promotion of cogeneration based on a useful heat demand in the
internal energy market (2004/08/EC) (CHP Directive).
Where is it implemented? European Union all EU Member States
Why best practice?
The CHP Directive establishes a comprehensive legal framework for encouraging CHP
development across the EU.
Description
What is the CHP Directive?

The Directive establishes some clear, general principles for CHP policy, leaving detailed
implementation to Member States. It does not set an overall target, but urges Member States
to analyse their potential for developing CHP further.
17

The CHP Directive includes the following elements:
A requirement that Member States identify the potential for further CHP development.
A requirement that Member States facilitate grid access and clear authorisation procedures
for CHP.
Definition of high efficiency (HE) CHP this is CHP achieving at least 10% Primary Energy
Savings (PES) compared to separate generation of heat and power. Small and micro CHP
qualify when providing any PES.22 HE CHP are those projects that can qualify for incentive
measures in the Member States.
A methodology to assess the energy savings from CHP this underlies the definition of HE CHP.
Guarantee of Origin for electricity from HE CHP this identifies CHP electricity that can be
eligible for policy support.
The CHP strategy was introduced in 2004 and does not specify an expiry date.
Rationale

Recognising the energy security and climate benefits that CHP can bring, the EU introduced
the Directive to encourage Member States to be more active in its promotion, and to provide
a framework around which incentives can be introduced.
22. European Union, DIRECTIVE 2004/8/EC, 2004.
IEA/OECD, 2009

The CHP Directive is unlikely to be withdrawn. In time, it may be strengthened as EU climate
policy develops or if implementation by Member States is slow.
European Union (EU) CHP Directive

Effectiveness
What impact has already been made by this policy? How has it been successful? Why has it
worked?
It is too early to identify significant change but the Directive has certainly played a large part
in the recent introduction of CHP incentives in several Member States. For example:
Spain (CHP Royal Decree 661/2007) and Germany (KWK Gesetz (CHP Law) 2009).
Four EU Member States had submitted their CHP potential studies to the European
Commission by 12 November 2008.23

and replication The definition of HE CHP links support directly to those projects that deliver most benefits.
The national CHP potential studies provide a firm and public basis for identifying how
much more CHP can be developed.
Key lessons learned
Identify priorities defining HE CHP and introducing Guarantees of Origin ensure that
support is directed at the best projects.
Know your starting point analysing CHP potential helps policy makers set realistic targets
and design effective legislation.
Allow for diversity leaving the implementation of detailed measures to Member States
ensures that new policies reflect local conditions.
Where can
I find more
information?
18
European Union Cogeneration http://europa.eu/scadplus/leg/en/lvb/l27021.htm

Euroheat & Power www.euroheat.org
Cogen Europe www.cogen.org
Denmark Heat and Electricity Planning
Strategy info
Name: Integrated Approach to Heat and Electricity Planning

Where is it implemented? Denmark
Why best practice?
This strategy resulted in Denmark becoming a world CHP leader.
Description
What is it?
The Danish CHP success story is based on a package of strategies that evolved after the First
Heat Supply Law was introduced in 1979. The law required municipalities to carry out studies
on the potential for district heating (DH) in their jurisdictions, allowing the most effective
layout of DH networks across the country to be planned at a national level.
Following this, planning regulations and financial incentives that worked together to create
desirable market conditions for CHP / DH were put in place. These include:
Planning policies:
An obligation to connect or remain connected to DH.
A ban on electric heating.
Context
Why has this strategy been put in place?

The impetus for such strong support and policy for heat supply based on DH was generated as
a result of the oil crisis that Denmark faced during the 1970s at a time when more than 90%
of Danish energy was met by oil imports.
Emphasis was placed on having more secure energy supply and more efficient generation and
use of energy making CHP/DHC a natural choice.
23. European Union, Energy Energy Efficiency Cogeneration: Member States Reports, 2009.
IEA/OECD, 2009
Other support/incentives:
Differential taxation on fuels for individual and DH heating.
An obligation on electric utilities to purchase CHP electricity.
A feed-in tariff for CHP electricity, with a bonus for biomass and biogas CHP
Denmark Heat and Electricity Planning

Effectiveness
What impact has already been made by this strategy? How has it been successful?
Since this strategy was put in motion:
Denmark has become a world leader in CHP.
Denmark achieved energy self sufficiency in 1997.
Most of the potential for CHP in Denmark has been achieved, with CHP delivering 47% of
thermal electricity and 82% of DH in 2006.24
Why has it worked?
A planning regime developed at a national level, but involving strong local and municipal
participation was the most important factor in the early stages of this development. This
created a clear strategic goal, after which financial incentives were introduced to ensure the
ongoing economic viability of CHP/DHC.
Key lessons
learned
Key benefits:
CTR Copenhagen, the largest DH network in Denmark, sees fuel savings of 290 000 tonnes of
oil equivalent (toe) per year over individual heating.
By 2004, CHP and DH were saving 8-11 Mt CO2 per year.
Energy consumption per meter squared (m2) has fallen by 50% since the early 1970s (also
due to increased end-use efficiency).
Denmark has become an international role model, enabling it to benefit from exporting DHC
technology and expertise.
Key lessons learned
Share responsibility. Involving local authorities in the national planning process has been an
effective way of creating an efficient heating network in Denmark. Sharing of responsibility
helps make the creation of nationwide plans more achievable.
Generate captive markets. Regulation can be used to guarantee heat and electricity loads,
increasing the commercial viability of CHP / DHC.
Where can
I find more
information?
19
Dansk Fjernvarme http://www.danskfjernvarme.dk/In%20English.aspx

Danish Energy Agency www.ens.dk
IEA CHP Collaborative Country Profile Denmark
http://www.iea.org/G8/CHP/profiles/denmark.pdf
Frankfurt am Main Municipal CHP Strategy

Policy info
Name: Municipal CHP Strategy

Where is it implemented? Frankfurt am Main
Description
What is the Municipal CHP Strategy?

Frankfurts CHP Strategy is a core element of the citys Klimaoffensive 1991 (climate
change strategy), aiming to half CO2 emissions in 2010, relative to 1987.25 It promotes CHP to
optimise energy supply for Frankfurt residents and businesses, be it through DHC CHP or CHP
in individual buildings.
The municipality created two dedicated agencies to implement the programme.
The Energiereferat (set up in 1989) identifies suitable CHP locations, provides feasibility
advice and supports information exchange and dissemination.
The BHKW Arbeitsgruppe (set up in 1991) co-operates with energy suppliers to establish
standard installation and planning procedures for CHP.
24. IEA, CHP/DHC Country Scorecard: Denmark, 2008 at http://www.iea.org/G8/CHP/profiles/denmark.pdf.

25. Stadt Frankfurt am Main, Klimaschutz in Frankfurt Informationspaket Fernwrme, 2007.
IEA/OECD, 2009
Why best practice?

Frankfurts CHP strategy illustrates the importance of co-ordination by a dedicated municipal
agency and systematic support for successful CHP policy.

Description
(continued)
Local electricity and gas suppliers, such as Mainova AG and SWAG MKM AG, participate in the
programme, promoting CHP to customers and offering technical and financial support. As gas
suppliers, they benefit from increased local gas sales.
The CHP strategy has evolved over time, as new technologies became available and the use
of CHP in Frankfurt increased.
Energy consumers and electricity suppliers in Frankfurt.
In addition to advice from the Energiereferat and BHKW Arbeitsgruppe, local energy suppliers
offer financial incentives for customers installing CHP.
Gas supplier Mainova AG offers various incentives for customers installing CHP:26
Gas price discount for CHP of up to 0.32 c per kWh generated electricity.
Grants for installing gas mini-CHP covering 20% of project costs or up to 4,000 per system
(no longer available).
Mainova financing for CHP installation, which consumers can pay back over time.
Stadtwerke StVV, the electric utility, introduced a favourable buy-back price for CHP electricity
supplied to the network in 1992.27 This was abolished in 1999 with the liberalisation of the
electricity market, but replaced by the feed-in tariff of Germanys Federal CHP Law in 2002.
The CHP strategy exists since 1991 and will continue until at least 2010.
Frankfurt is strongly committed to its Climate Strategy, and CHP has been a cornerstone to
its approach. This makes future support secure, but specific incentives change with state of
technology and development of CHP.
20
Context
Frankfurts Klimaoffensive first of all aims to reduce CO2 emissions to address climate
change, but also helps reduce energy costs for consumers.
Effectiveness
The CHP strategy has supported the installation of 120 CHP systems throughout Frankfurt
from 1991 to 2007, with a total capacity of 24 MWe. The city now has 11 DHC networks with
combined length of over 150 kilometers (km).28
The CHP systems have delivered direct benefits for Frankfurts residents and businesses:29
70 000 t CO2 reduction per year (340 kg per year for average single family home).
15 million electricity costs savings for CHP operators annually.
1 000 jobs created in industry and manufacturing.
26. Mainova AG, Klima Partner Programm Frderrichtlinie fr Mini-BHKW, 2006.

27. Stadt Frankfurt am Main, Klimaschutz in Frankfurt am Main Bericht 1990 2007, 2007.
IEA/OECD, 2009
Why has it worked?

The Energiereferat and BHKW Arbeitsgruppe have been fundamental to the success of
Frankfurts CHP strategy. They fostered a sense of political ownership and pro-active policy
implementation. This facilitated cooperation with energy suppliers in the dissemination of
information to consumers.
Other success factors include the standardisation of planning and installation processes,
and the long-term approach of the strategy.
18
27
16
24
14
21
12
18
10
15
12
1991 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Installed electric capacity
Number of units
Cumulative electric capacity
Cumulative electric capacity (MW)
Growth of CHP in Frankfurt since 1991
Installations per year

(MW, number of units)
Effectiveness
(continued)
Source: Stadt Frankfurt am Main, 2007.

and replication Cost-effective, clean and reliable energy supply for Frankfurt residents and businesses.
CO2 emissions reductions and costs savings.
21

Political ownership creating a dedicated agency with the remit of implementing CHP
policy ensures long-term stability and commitment that facilitates co-operation with
energy suppliers and consumers.
Predictability standard procedures for installing CHP, obtaining planning permission,
and supplying CHP electricity to the network create predictability that gives project
developers the confidence to implement their plans.
Where can
I find more
information?
Energiereferat Stadt Frankfurt www.energiereferat.stadt-frankfurt.de/

Mainova Klima Partner Programme http://www.mainova.de/uebermainova/2458.jsp
South Korea Heat Planning and Municipal Initiatives

Policy info
Name: Integrated Energy Supply (IES) Act

Where is it implemented? South Korea (1999)
Description
What is the IES Policy?

Under this policy, the Ministry of Knowledge Economy (MKE) can designate an area for
development as an Integrated Energy Supply Area (IESA). The plan must include an energy
supply network connected to an Integrated Energy Facility (IEF) and all buildings and apartment
blocks on the site are obliged to connect to it. This policy specifies three types of IEFs:
District Heating and Cooling CHP.
CHP plants supplying heat for industrial complexes.
IEA/OECD, 2009
Why best practice? The policy integrates district heating networks into the construction of
new urban developments. This is an efficient and cost-effective way to create guaranteed
heat loads that allow successful commercial development and operation of CHP plants.
South Korea Heat Planning and Municipal Initiatives

Description
(continued)
Community Energy Systems (CES) - CHP plants supplying electricity, heat and cooling to
small groups of residential buildings.
Through a bidding process, a single company becomes the monopoly heat provider for an IEF.
While there is no direct financial incentive in place, this law creates a captive market for the
provision of heat, and therefore is an effective support mechanism for CHP.
IEFs are eligible for tax reductions on the investment costs needed for the heating
infrastructure.
CHP and DHC operators and developers; housing/apartment block and commercial building
developers.
The private company that is selected to provide the heat for the heating networks is
guaranteed monopoly rights to serve this heat load, making its financial investment more
secure.
Consumers benefit through an efficient and clean energy supply, generally cheaper than
individual energy systems.
The Integrated Energy Supply Act has been in place since the 1990s and is likely to remain in
place in order to ensure the continued development of efficient heating infrastructure.
To increase the efficiency of energy supply in urban areas.
To reduce GHG emissions to meet climate change targets.
To provide residents with an affordable and efficient energy supply.
Effectiveness
Over the last five years, the use of DH has:
Reduced fuel consumption by 53%;
Reduced annual running costs by 72%;
Reduced air pollution by 46%.30
South Korea now has DHC CHP providing heat and power to 1.6 million households in 26 areas
most of which are in the greater Seoul region (see the Korea CHP/DHC scorecard for the case
study of Paju New Town).31
Why has it worked?
The IES policy guarantees customers for the heat load, giving confidence to investors.
Integration of a DH system is required before developments can gain permission, ensuring
the expansion of the DH network.

and replication Approximately 10% of the South Korean population receive heat via DHC CHP, with the whole
country benefiting from the reduced CO2 emissions.
Drive infrastructure development. Planning regulation encourages the investment in and
development of long-term DHC infrastructure.
Where can
I find more
information?
Korea Energy Management Corporation (KEMCO) Integrated Energy Supply

www.kemco.or.kr/web/kcms/bord/bord_FD.asp?f=4123
Korea District Heating Corporation www.kdhc.co.kr
IEA CHP Collaborative Country Profile Republic of Korea
http://www.iea.org/G8/CHP/profiles/Korea.pdf
30. Korea District Heating Company, http://www.kdhc.co.kr/eng/.

31. IEA, CHP/DHC Country Scorecard: Korea, 2008 at http://www.iea.org/G8/CHP/profiles/Korea.pdf.
IEA/OECD, 2009
22
Context
Abbreviations and acronyms

APS:
CCGT:
CHP:
CHPQA:
DHC:
EEG:
EEWrmeG:
EIA:
ETS:
FiT:
GHG:
RGGI:
RPS:
USO:
Alternative Policy Scenario

Combined Cycle Gas Turbine
Combined Heat and Power
Combined Heat and Power Quality Assurance
District Heating and Cooling
Erneuerbare-Energien-Gesetz (Renewable Energy Law)
Erneurebare-Energien-Wrme-Gesetz (Renewable Heat Law)
Energieinvesteringsaftrek (Energy Investment Allowance)
Emissions Trading Scheme
Feed-in Tariff
Greenhouse Gas
Regional Greenhouse Gas Initiative
Renewable Portfolio Standard
Utility Supply Obligation
Units Used
CO2-eq.:
GWe:
GWh:
Kg:
Km:
Kt:
KWh:
M2:
MW:
MWe:
MWh:
Mt:
Mtoe:
Toe:
TWh:
CO2-equivalent
Giga watts of electricity
Giga watt hours
Kilogram
Kilometer
Kiloton
kilo watt hours
Squared meter
Mega watts
Mega watts of electricity
Mega watt hours (of electricity)
Million tonnes
Million tonnes of oil equivalent
tonnes of oil equivalent
Tera watt hours
23
IEA/OECD, 2009
References
Berliner Energieagentur (2009), KWK Modellstadt Berlin, http://www.kwk-modellstadt-berlin.de/.
Boonekamp, P.G.M. et al. (2004), Milieukosten Energiemaatregelen 1990 2010: Overzicht kosten en
mogelijke verbeteringen in de monitoring, Rijksinstituut voor Volksgezondheid en Milieu (RIVM) and
Energy Centre of the Netherlands (ECN), Petten.
Database of State Incentives for Renewables and Efficiency (DSIRE) (2009), Renewable Portfolio
Standards, http://www.dsireusa.org.
Department for the Environment, Food and Rural Affairs (DEFRA) (2000), Introducing CHPQA:
The CHPQA Standard & Guidance Notes, Quality Assurance for CHP, London,
https://www.chpqa.com/guidance_notes/documents/Summary_Nov00.pdf.
Directorate-General for Energy and Transport (DG TREN) (2009), Directive on the Promotion of
Cogeneration Based on a Useful Heat Demand in the Internal Energy Market, European Commission,
Brussels, http://www.managenergy.net/products/R81.htm.
Froning, S. (2009), District Heating and Cooling in Europe, Presentation Euroheat & Power,
29October 2008.
Houston Advance Research Center (HARC) (2008), NOx Emissions Impact from Widespread Deployment
of CHP in Houston, Gulf Coast CHP Application Center, Austin TX.
International Energy Agency (IEA) (2007), Electricity Information 2007, IEA/OECD, Paris.
IEA (2008a), Combined Heat and Power: Evaluating the Benefits of Greater Global Investment,
IEA/OECD, Paris.
IEA (2008b), CHP/DHC Country Scorecards, http://www.iea.org/G8/CHP/profiles.asp.
IEA (2008c), World Energy Outlook 2008, IEA/OECD, Paris.
Lipinski, G. (2004), GO Implementation in Poland: An Accession Country Approach, Presentation at
EU ALTENER Programme seminar, Brussels, 12 March 2004,
www.setrec.info/seminar120304/Lipinski_Poland.ppt.
McKinsey & Co. (2007), Reducing U.S. Greenhouse Gas Emissions: How Much at What Cost?,
US Greenhouse Gas Abatement Initiative, Chicago.
US Environmental Protection Agency (EPA) (2007), Interconnection Standards Fact Sheet, EPA Combined
Heat and Power Partnership, Washington,
http://www.epa.gov/chp/state-policy/interconnection_fs.html.
US EPA (2008), Partnership Update 2007, EPA Combined Heat and Power Partnership, Washington,
http://www.epa.gov/chp/documents/chp_partupdate07.pdf.
IEA/OECD, 2009
24
Intergovernmental Panel on Climate Change (IPCC) (2007), Working Group III Report: Mitigation of
Climate Change, Fourth Assessment Report, Cambridge University Press, Cambridge.
The Online Bookshop
All IEA publications may be bought

online on the IEA website:
w w w. i e a . o r g / b o o k s
You may also obtain PDFs of
all IEA books at 20% discount.
Books published before January 2008
- with the exception of the statistics publications can be downloaded in PDF, free of charge
from the IEA website.
IEA BOOKS
CUSTOMERS IN
NORTH AMERICA
Turpin Distribution
The Bleachery
143 West Street, New Milford
Connecticut 06776, USA
Toll free: +1 (800) 456 6323
Fax: +1 (860) 350 0039
oecdna@turpin-distribution.com
www.turpin-distribution.com

9, rue de la Fdration
75739 Paris Cedex 15, France
You may also send

your order
to your nearest
OECD sales point
or use
the OECD online
services:
www.oecd.org/bookshop
CUSTOMERS IN
THE REST OF THE WORLD
Turpin Distribution Services ltd
Stratton Business Park,
Pegasus Drive, Biggleswade,
Beds SG18 8TQ, UK
Tel.: +44 (0) 1767 604800
Fax: +44 (0) 1767 60604140
oecdrow@turpin-distribution.com
www.turpin-distribution.com
IEA/OECD, 2009
Tel: +33 (0)1 40 57 66 90

Fax: +33 (0)1 40 57 67 75
E-mail: books@iea.org

CHP Brochure 09

Hochgeladen von

Dokumentinformationen

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

CHP Brochure 09

Hochgeladen von

Copyright:

Verfügbare Formate

INTERNATIONAL ENERGY AGENCY

Cog en eration and

Cog en eration and

Cogeneration and District Energy: Sustainable Energy Technologies for

INTERNATIONAL ENERGY AGENCY

Cog en eration and

IEA member countries:

INTERNATIONAL ENERGY AGENCY

It carries out a comprehensive programme of energy co-operation among twenty-eight

n To promote rational energy policies in a global context through co-operative

n To operate a permanent information system on international oil markets.

n To provide data on other aspects of international energy markets.

Korea (Republic of)

9 rue de la Fdration, 75739 Paris Cedex 15, France

Mr. Nobuo Tanaka

Questions and comments should be sent to:

Section 4 Next step action items for policy makers . . . . . . . . . . . . . . . . . . . . . . 31

Table 2.1 Policy types and relevance to policy makers . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 3.1 Best-practice CHP/DHC policies and strategies

covered by the IEA CHP/DHC Collaborative . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 3.2 Transactions in a USO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Who should read this report?

How is the report structured?

Section 2 Policy makers should invest in CHP and DHC

There is significant additional potential

Figure 2.1 CHP share of national power production

Source: IEA (2008a).

Figure 2.2 Major economies CHP potentials under

Source: IEA (2008a).

Figure 2.3 CHP applications

Industrial: Industrial site with CHP in northern Italy

CHP share of total electricity generation (%)

Figure 2.4 Energy flows in the global electricity system (Mtoe)

Source: IEA (2008a).

CHP and DHC deliver a range of policy objectives

DHC infrastructure: a flexible platform for CHP and renewables

Source: Froning (2009).

The City Challenge: facilitating renewables in urban environments

Figure 2.6 District Energy Initiative

Source: Froning (2009).

CHP benefits: the evidence

CO2 emissions (Mt/yr)

Non CHP Mt/yr

Note: APS = Alternative Policy Scenario.

The opportunity for CHP/DHC in emerging economies

Figure 2.8 CHP plant at Arvind Textile Mill, India

Source: IEA (2008b).

Why is policy important for CHP?

CHP shares of electricity and

CO2 emissions by final energy consumption

CHP share of thermal electricity production

CO2 emissions by final energy consumption (million tonnes CO2 - adjusted)

Well-chosen policy can overcome barriers to CHP

Regulatory issues, relating to non-transparent, inconsistent interconnection procedures and

World-class policies: lessons learned from country analysis

Table 2.1 Policy types and relevance to policy makers

Utility supply obligations (see p. 21) are a market-based

Local infrastructure and heat planning (see p. 23) relates to

Climate change mitigation (emissions trading) (see p. 24) places

Interconnection measures (see p. 26) provide developers with

Capacity building (see p. 28) relates to outreach and education

* Annexes can be found at www.iea.org/files/CHPbrochure09annex.pdf.

Section 3 CHP/DHC policy profiles

n To promote rational energy policies in a global context through co-operative

Figure 2.2 Major economies CHP potentials under

Regulatory issues, relating to non-transparent, inconsistent interconnection procedures and

Figure 3.1 Best-practice CHP/DHC policies and strategies