The Swiss army knife of energy production
The name suggests it: combined heat and power (CHP) combines two technologies in one. CHP plants generate mechanical energy from which electricity and at the same time usable heat are generated - they are therefore a kind of universal tool. As adjustable generators, CHP plants can make an important contribution to energy system transformation by producing more electricity and heat in times of little wind and sun, while conversely, in surplus situations, the renewable electricity is taken out of the system and converted directly into heat. However, the currently planned legal adjustments under the German government's Coal Exit Act are not sufficient to strengthen the role of CHP in the future decarbonised energy system. Only a comprehensive amendment of the Cogeneration Act can set the framework conditions in which the technology can develop its full potential.
The principle of cogeneration is simple: the cogeneration plant produces electricity, and the heat generated can be used, for example, to heat buildings or for industrial processes. The advantages of cogeneration are reduced fuel consumption and the resulting lower pollutant emissions. Depending on the system, CHP plants achieve efficiencies of up to 90% of the energy used. CHP does not stand for THE one technology, but for a variety of technical solutions that can be used in different environments and with different energy sources.
Providing electricity and heat according to demand
Small to medium-sized CHP plants in the range of 1 kWel (nano CHP) up to 50 kWel (mini CHP) as well as larger combined heat and power plants based on combustion engines with sizes of up to 10 MW are increasingly gaining importance. Gas turbines are found particularly in the sizes above 5 MW; they can supply consumer-related businesses, public facilities such as schools or swimming pools and neighbourhoods, but also larger households. Electricity and heat are used locally, and the electricity generated can also be fed into the public grid. Digital technologies make it possible for crosslinked cogeneration plants to provide heat and electricity in line with the prevailing conditions and demands in the electricity market and in the grid.
While the heat supply in CHP plants is limited to a specific object or to the immediate vicinity, larger CHP plants with a capacity of about 10 MWel or more are used for large-scale district heating supply or for the generation of process heat in industry. Mainly gas turbine power plants, steam power plants and combustion engines are used here. Industrial cogeneration is used, for example, in industrial parks, where electricity and heat are supplied to third parties via their own networks or the public distribution grid.
Legal framework and necessary amendments
Since 2002, the basis for the regulations on the feed-in and remuneration of electricity from CHP plants has been, in particular, the Combined Heat and Power Act (KWKG). In 2009, an amendment was introduced for the first time to significantly increase the subsidies for "high-efficiency" CHP plants. The 2016 amendment then made important changes with the introduction of tenders for the promotion of CHP plants between 1 and 50 megawatts and for innovative CHP systems that use a high proportion of heat from renewable energies. The six-monthly invitations to tender are issued by the Federal Network Agency and were first implemented in December 2017.
Within the framework of the current climate protection legislation, the Federal Government attached great importance to CHP. The plan was to comprehensively modernize the Kraft-Wärme-Kopplungs-Gesetz and to expand heating networks and storage facilities and increasingly switch to renewable energies. However, only a few aspects are now regulated in the course of the Coal Exit Act. The Federal Government has set itself the target of achieving an increase of around 1,700 MW of CHP per year, based on calculations from the "Monitoring Report on Security of Supply" of the Federal Ministry of Economics, which was published in summer 2019. From innogy's point of view, the changes made in the framework of the coal phase-out law are not sufficient to achieve the above mentioned objectives. For example, although the amendments provide for an extension of the subsidy for CHP plants until 2029, this applies to plants up to and including 50 MW only subject to an amendment from 2026. This possibility of revision will again significantly reduce planning reliability. Another point of criticism is that no changes are planned in terms of the volume of tenders and therefore a constant increase of 200 MW per year is planned. In order to achieve the stated expansion targets, adjustments would also have to be made here, i.e. an increase in the quantities put out to tender.
Stimulating the use of renewables
In order to encourage the switch from coal to gas cogeneration, appropriate incentives are needed. Previously, a coal replacement bonus of 0.6 ct/kWh for 30,000 hours was granted for this purpose, which is now to be replaced by a one-off capacity payment of € 180/kW. However, in the proposed form, this new regime does not improve the switch from coal to gas and/or innovative cogeneration, apart from minimal interest effects. The focus of the switch away from coal should be on the promotion of CHP, the use of renewable energies and, if necessary, heat storage. A positive aspect is the newly introduced bonus for innovative cogeneration, which is to be paid outside of the tendering process, depending on the share of renewable energies for cogeneration plants. The intended change is much more flexible than the previous one with fixed minimum renewable energy input. It remains to be seen, however, to what extent the bonus is sufficient to achieve the CHP targets.
In addition, the CO2 levy will have a significant impact on the fuel costs of cogeneration. The CO2 price, which will apply from 2021, will noticeably worsen the competitive situation of cogeneration. It is therefore imperative that the entire funding system be adapted to this new framework.
In summary, cogeneration can contribute to the necessary flexibilization and decarbonisation of the entire energy supply system. However, this requires a suitable framework. The amendments made to the Coal Exit Act show good initial elements, but these are not sufficient to achieve the objectives set. A fundamental amendment therefore remains indispensable.