COGENchallenge - European Campaign for the Development and Documentation of 1000 Small-scale Cogeneration Projects in European Cities and Towns

project thoroughlyPlan your cogeneration

Good Practice Guide/Project Checklist Frequent Asked Questions List

A Good Practice Guide of small-scale cogenerationJuly 2006

Table of contents

Good Practice Guide & project checklist................................. 2

First rough assessment with easyCOGEN.xls ........................ 4

Feasibility study carried out by an expert................................ 5

Choose your individual financing option ................................. 6

Public support mechanisms .................................................... 7

Grid connection....................................................................... 8

New energy contracts ............................................................. 9

Administrative licensing procedures ..................................... 10

Environmental permit ............................................................ 11

Green certificates procedures............................................... 12

Call for tender........................................................................ 13

Offers comparison................................................................. 14

FAQ list – General ................................................................ 15

FAQ list – Country specific ................................................... 17

COGENchallenge Facilitators ............................................... 19

Who we are ........................................................................... 20

1

Good Practice Guide & Project Checklist If a cogeneration project is well designed, primary energy savings of 10 to 25% can be achieved and sometimes even more. Projects with such a high amount of energy savings are also known as "high efficiency cogeneration". In order to achieve these results, it must be ensured that as little energy as possible is wasted. This can be only done by using the total amount of heat and electricity produced by the cogeneration unit in an effective and efficient way.

The first big challenge for the realisation of a high efficiency cogeneration project therefore is to find the right capacity of the cogeneration unit. If the unit is too small, the opportunity to save more energy is missed. If the unit is too big, energy will be wasted. Project developers determine the size of a unit always according to various criteria such as the heat load, the electricity needs and the regulatory framework. Another important aspect is the question, whether it is possible to sell excess electricity.

The purchase and the installation of a cogeneration unit is a considerable investment which needs to pay back. The more hours of a year the cogeneration unit is in operation, the more money is saved during this year. Therefore, project developers choose a size for the cogeneration unit which does not cover the highest possible heat load but a load which will allow the cogeneration unit to run for at least half the year.

If the technical and economical analysis is positive for a cogeneration plant, some legal and other aspects have to be kept in mind. Depending on the size of the plant, an operator needs permissions from different parties. The checklist on page 3 will provide all necessary steps, from the first rough calculation to the running of the cogeneration, but cannot cover all national regulations in the European countries. It is helpful to ask local facilitators or engineers or the suppliers that have experience with cogeneration installations. On page 19 of this guide you find the contact details of six regional Facilitators (Austria, Belgium, France, Germany, Slovenia and Spain), which are information and support facilities for small-scale cogeneration.

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□ easyCOGEN.xls

□ feasibility study

□ financing option

□ public support mechanisms

□ grid connection

□ new energy contracts

□ administrative licensing procedures

□ environmental permit

□ green certificates procedures

□ call for tender

□ offers comparison

3

First rough assessment with easyCOGEN.xls

Countries concerned: all

Depending on your site's energy needs and the operational requirements, a range of energy experts can assist you in carrying out a proper sizing of your cogeneration project. These may be the supplier of the cogeneration unit, an energy consultant or a so-called energy services company (ESCO). With a "feasibility study" the experts can measure your consumption of heating fuel and of electricity and simulate (with a complex software tool) different sizes of cogeneration units. They can calculate for each size the profitability and then propose the best option, giving also an assessment of the economical benefits, the energy and environmental balance, and the technical integration into the building.

The COGENchallenge team recommends to you to begin by doing the first assessment yourself and for free. For this reason, we have created a simplified version of the same software tool that energy professionals use in their work. The Excel-based software easyCOGEN.xls allows also non-experts to carry out a first rough assessment whether the installation of a cogeneration plant is a good option or not. You can download this Excel file on the www.cogen-challenge.org website. By entering key data of your project (buildings, enterprise, offices, etc) in the blue boxes you can assess easily the size and the profitability of a suitable cogeneration unit (results are shown in the grey boxes).

TO DO LIST :

Collect your energy bills (fuel and electricity) for one year

Download the easyCOGEN.xls

Enter your data

Check if cogeneration is an opportunity for you or not

⇒ If YES, you can go ahead: the feasibility study

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Feasibility study carried out by an expert

Countries concerned: all

In most cases a feasibility study is necessary because there is no standard formula to calculate the size of a cogeneration unit (unlike for a typical boiler). It means that for the same enterprise or building, there is a wide range of suitable cogeneration size options, but only one is the most beneficial for you. The main target is to assess the optimum size of the cogeneration you can install.

A feasibility study, carried out by an expert, will calculate the best option for you. The study will also give you an assessment of the economical benefits, the energy and environmental balance, and the technical integration into the building. With all this information, you are ready to order (or not) a cogeneration unit.

The COGENchallenge team recommends that the expert uses a simulation software, like the Excel COGENsim.xls software, which is very useful to carry out the feasibility study. This software will simulate, 1/4 hour by 1/4 hour, different sizes of cogeneration units and calculate the price and cost-effectiveness for each size. Then the expert can suggest to you the best option according your wishes (profitability, CO2 savings, investment, reliability). This Excel software is freely available on the www.cogen-challenge.org website.

TO DO LIST :

Order a feasibility study for a cogeneration in your specific building

Propose to the expert to use COGENsim.xls software or a similar one

Invite the expert to analyse the possible integration

Analyse the feasibility report

⇒ If POSITIVE, you can go ahead: choose the financial option

5

Choose your individual financing option

Countries concerned: all

As with all other investments in life the rate of return of your investment in cogeneration depends on the level of risk that you are willing to take. You have different options:

1. You manage the entire investment by yourself, but you can outsource part or all of the maintenance. You control the project and the benefits;

2. You ask a bank, even an investment fund, to finance the cogeneration unit and you can also outsource the maintenance. You also control all the project;

3. You sign a "partnership contract" with an energy supplier or producer, also called an Energy Service Company (ESCO), who will provide an individual range of services, from design and installation to operation, maintenance and monitoring, including finance. Most importantly, the ESCO guarantees the user certain thermal and electrical outputs at agreed prices from the CHP-installation for the duration of the contract. In this case, the ESCO owns the unit;

4. You agree to a so-called Third Party Financing (TPF) contract. In this case, a third partner will carry out all the investment and the maintenance of the unit. But you stay the owner of the project. You work with the TPF on a open contract basis: the "true" benefits are retrofit to all parties.

You should thoroughly assess, which option fits best to your financing plan. If you want to know more about financing cogeneration projects, please consult the Guidance Document on CHP Financing Guide on the COGENchallenge website.

TO DO LIST :

Check your ability to finance yourself the cogeneration

Download the CHP Financing Guide

Choose the best financing plan for you

⇒ If OK, you can go ahead: find the public support mechanisms

6

Public support mechanisms

Countries concerned: all

This is an important item, but not essential, for the potential investor and needs to be thoroughly checked. All over Europe there are different public support mechanisms for cogeneration in place: grants for study costs and/or investment, feeding tariffs, green certificates, tax allowance, better VAT rates, ... It is sometimes necessary to contact a variety of different public authorities in order to receive all financial support (for the actual investment but also for the feasibility study or for the operation costs).

It is important to know how you will finance the cogeneration project in advance because some financing options, like the "partnership contract", do not allow additional public support mechanisms in some countries. Be aware that sometimes you need to ask the public authorities before you decide to invest in a cogeneration unit.

You will find more information on the financial and regulatory support mechanisms in your country on the COGENchallenge website. In order to have complete information on possible support, you should also ask a regional expert or Facilitator in this field. On the last but one page of this guide you find the contact details of six regional Facilitators (Austria, Belgium, France, Germany, Slovenia and Spain) which are information and support facilities for small-scale cogeneration.

TO DO LIST :

Check all the public support mechanism you can receive

Fill in the necessary forms and send to the authorities

Check if their answers is positive

If not, check if the project stay attractive without public support

⇒ If YES, you can go ahead: check the grid connection

7

Grid connection

Countries concerned: all

The electricity distribution network operator should be involved in the project at an early stage. In the case of bigger units the impact on the grid needs to be checked and the point of interconnection needs to be defined. It is also helpful to know the interconnection costs. These costs can vary from 5 to 20% of the total installation costs, sometimes cheaper. This information (interconnection feasibility and costs) are part of the "connection contract" you will generally pay to the distribution network operator. This step must then occur just after you decide to install a cogeneration unit in your building.

More often, the distribution network operator will facilitate the interconnection of your cogeneration unit. For instance, the electricity produced by a cogeneration unit might receive preferential treatment when fed into the grid. The distribution network operator is normally the right address to find out about the conditions in your country and region. In some countries you will be asked to add a "decoupling connection" system to your cogeneration plant. The performance of this decoupling system needs to be tested before you start to run your cogeneration plant. The distribution network operator will also check and often change the electricity meter.

TO DO LIST :

Ask your distribution network operator for the "connection contract"

Check if the interconnection costs are affordable

⇒ If YES, you can go ahead: negotiate new energy contract

8

New energy contracts

Countries concerned: all

Running a cogeneration unit may have an effect on the price you pay for the remaining electrical energy. Even if your electricity bill will decrease after installing a cogeneration unit, the unit price of your electricity might increase because you purchase less energy for the same power supply. This effect has been taken into account in the feasibility study. Now a final contract has to be asked from the energy suppliers, not only for the remaining electricity (you will probably need after installing a cogeneration unit), including back-up if the cogeneration unit is switched off, but also for the surplus produced by the cogeneration unit. The feasibility report, which normally contains an accurate estimation of the new electricity profiles, can help you in this negotiation. In some cases your current contracts can remain the same if you install a cogeneration unit.

Contrary due to the installation of a cogeneration unit your fuel consumption on the site will increase, you can probably negotiate a better unit price. Therefore you should contact your fuel supplier and his competitors to amend the contract, if necessary.

TO DO LIST :

Check if you have the new energy profiles with cogeneration

Ask suppliers for new energy contract (if needed)

Check if the profitability is positive enough with the new contracts

⇒ If POSITIVE, you can go ahead: administrative license procedures

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Administrative licensing procedures Administrative licensing procedures

Countries concerned: all, except Belgium Countries concerned: all, except Belgium

In some countries, the authorities will require you to fulfil certain legal regulations concerning your license, such as to generate electricity and to sell it to a third party. These regulations vary substantially depending on your country and region. In order to clarify these rules you need to ask a cogeneration expert even the Facilitator. On the last but one page of this guide you find the contact details of six regional Facilitators (Austria, Belgium, France, Germany, Slovenia and Spain) which are information and support facilities for small-scale cogeneration.

In some countries, the authorities will require you to fulfil certain legal regulations concerning your license, such as to generate electricity and to sell it to a third party. These regulations vary substantially depending on your country and region. In order to clarify these rules you need to ask a cogeneration expert even the Facilitator. On the last but one page of this guide you find the contact details of six regional Facilitators (Austria, Belgium, France, Germany, Slovenia and Spain) which are information and support facilities for small-scale cogeneration.

In Belgium, the best option is to self-consume the electricity produced by the cogeneration unit. The possible surplus can be sold to a supplier or to a third party. As the licensing procedures are quite complex, we suggest to sell this surplus only

In Belgium, the best option is to self-consume the electricity produced by the cogeneration unit. The possible surplus can be sold to a supplier or to a third party. As the licensing procedures are quite complex, we suggest to sell this surplus only to a supplier for whom you do not need a license. Even the price from a third party could be quite higher than the supplier's price.

TO DO LIST :

Check if you prefer to sell electricity to a third party than to a supplier

Ask the authorities for the license procedure

Fill in the required license forms

Wait for the answer of the authorities

⇒ If POSITIVE, you can go ahead: ask the environmental permit

10

Environmental permit

Countries concerned: all

Depending on your home country and region, you might need a permission from the public authorities in order to install a small-scale cogeneration unit. The building regulations vary substantially across Europe, so that a general statement towards the permit procedure is difficult to make. In any case, you should inform yourself on the specific requirements in your region.

The environmental permit includes in each country certain regulations on air quality that need to be fulfilled. Emissions of nitrogen oxides (NOx) typically cause the greatest concern and legislative attention. Nitrogen oxides are toxic, they cause acid rain and contribute to the depletion of the ozone layer. Emissions can be reduced by a regularly maintenance of the cogeneration plant and by installing catalysts on the exhaust gas. Additional emissions regulations may concern sulphur dioxide (SO2), carbon monoxide (CO) and dust. Modern cogeneration plants can meet these requirements.

TO DO LIST :

Apply at the authorities for the necessary environmental permit

Check if you need an extra CO2 quota allowance for the project

Wait for the answer of the authorities

⇒ If POSITIVE, you can go ahead: call of tenders

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Green certificates procedures – specific to Belgium Green certificates procedures – specific to Belgium

Country concerned: Belgium Country concerned: Belgium

Citizens in Belgium, who want to publish a call for tender, need to certify their future cogeneration unit if they want to get green certificates. The green certificates system gives a grant when you save CO2 emissions (in Brussels and Wallonia) or when you save energy (in Flanders) with your cogeneration unit. These green certificates can be sold to the energy suppliers who need them to give back to the government, if they do not want to pay a fine for missing green certificates.

Citizens in Belgium, who want to publish a call for tender, need to certify their future cogeneration unit if they want to get green certificates. The green certificates system gives a grant when you save CO2 emissions (in Brussels and Wallonia) or when you save energy (in Flanders) with your cogeneration unit. These green certificates can be sold to the energy suppliers who need them to give back to the government, if they do not want to pay a fine for missing green certificates.

The cogeneration owner can then receive a financial advantage which in some cases can be very important, as shown in the table below. The cogeneration owner can then receive a financial advantage which in some cases can be very important, as shown in the table below.

253 / 292184 / 183

12712850450

€/MWhelectricity

92113Wind / Hydro / PV cell138113/ 143Biomass cogen (farm biogas/rapeseed)

€/MWhelectricity

€/MWh electricity

Technologies

184122 / 146Biomass cogen (wood/landfill gas)

92126Biomass (dual-fuel) cogen3036Steam turbine2633Gas engine/turbine1630Oil cogeneration

253 / 292184 / 183

12712850450

€/MWhelectricity

92113Wind / Hydro / PV cell138113/ 143Biomass cogen (farm biogas/rapeseed)

€/MWhelectricity

€/MWh electricity

Technologies

184122 / 146Biomass cogen (wood/landfill gas)

92126Biomass (dual-fuel) cogen3036Steam turbine2633Gas engine/turbine1630Oil cogeneration

You first need to fill in the forms and send them to the energy market regulator. Depending on your region, download these documents on : www.ibgebim.be (Brussels:

), www.cwape.be (Wallonia: ) or www.vreg.be (Flanders: ).

TO DO LIST :

Get the necessary forms and send these to the energy market regulator

Wait for the answer from the energy market regulator

⇒ If POSITIVE, you can go ahead:

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Call for tender

Countries concerned: all

Unless you know the technology and/or partner you will choose, we suggest to undertake a call for several tenders for the cogeneration unit which you want to install on your site. The call for tender depends on the financial option is yours. If you prefer to keep the management of the project, you will ask suppliers of cogeneration units; otherwise you have to ask several energy partners (ESCO) or third part financing partners for an "all include" contract: the cogeneration unit installation, but also the related services (maintenance and management).

The feasibility study will certainly help you to write this call for tender and, afterwards, to compare precisely the offers.

On the COGENchallenge website, you can download the European Directory of Cogeneration Developers.

TO DO LIST :

Check if all the steps are OK or POSITIVE

Write the call for tender, based on the feasibility study

Download the European Directory of Cogeneration Developers

Send the call for tenders to several suppliers and/or partners

Wait for the offers and check if they are complete

⇒ If POSITIVE, you can go ahead: offers comparison

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Offers comparison Offers comparison

Countries concerned: all Countries concerned: all

It is important to compare the offers with the results of the feasibility study and to compare the different offers. During the comparison, you need to determine the best technology but also the best supplier/partner.

It is important to compare the offers with the results of the feasibility study and to compare the different offers. During the comparison, you need to determine the best technology but also the best supplier/partner.

The regional Facilitator as proposed and established by the COGENchallenge campaign, can help you to draw up a list of criteria for this important step. On the last but one page of this guide you find the contact details of six regional Facilitators (Austria, Belgium, France, Germany, Slovenia and Spain) which are information and support facilities for small-scale cogeneration.

The regional Facilitator as proposed and established by the COGENchallenge campaign, can help you to draw up a list of criteria for this important step. On the last but one page of this guide you find the contact details of six regional Facilitators (Austria, Belgium, France, Germany, Slovenia and Spain) which are information and support facilities for small-scale cogeneration.

TO DO LIST : TO DO LIST :

Draw up the list of comparison criteria Draw up the list of comparison criteria

Determine the best technology and the best supplier/partners Determine the best technology and the best supplier/partners

⇒ Enjoy your cogeneration unit ⇒ Enjoy your cogeneration unit

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FAQ list – General What is cogeneration?

Cogeneration is the simultaneous production of electricity and heat. For small and medium installations a combustion engine firing natural gas, biogas or diesel is often used that drives a generator to produce electricity. Moreover, the heat released by the engine in the cooling water and in the exhaust is recovered by heat exchangers to be used to heat a building or to make domestic hot water.

Why install cogeneration in my building?

The principal reason is that this technology makes it possible to consume less primary energy to produce the same quantities of electricity and heat, and thus a reduction in energy costs. It also results in a reduction of gas emissions and thus pollution.

Is cogeneration profitable in my establishment?

The answer to this question is not immediate and very often requires a small pre-feasibility study. This can be made by yourself thanks to the pre-feasibility guide “ Install a cogeneration in your establishment, available from this project. If this looks promising then further investigations will be necessary.

Is it necessary that the cogeneration functions continuously during the whole year?

No, there can be periods when the cogeneration can stop. During design it is necessary to consider carefully the dimensioning of the cogeneration to optimise the operating regime. In any case, it is normal that during periods of low or no heat demand the cogeneration unit will stop.

It is said that cogeneration is very noisy, is this true?

No, a well designed and well installed machine is not noisy at all. The majority of the machines is delivered in a sound-proof enclosure and can reduce the noise to a very low level.

What happens when the cogeneration unit breaks down?

No panic, you are always connected to the electrical supply network and your system of traditional heating. The change of one to the other is done in an entirely automatic way. The cogeneration unit usually can be quickly repaired.

Can a unit of cogeneration be useful as an emergency power unit?

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No. A European Directive, yet to be adopted, forbids an emergency power unit to function “ uninterrupted” , which is practically the case of cogeneration. An emergency power must, no matter what happens, always be available. However, adding a unit of cogeneration to the already existing emergency power unit makes it possible to profit from a “ secondary” emergency power unit of comfort. Moreover, this “ secondary” emergency power unit can be fed with natural gas and/or fuel oil, contrary to the “ principal” emergency power unit which can only be fed with fuel oil.

According to which parameters is the cogeneration controlled?

The cogeneration unit will be normally controlled by the demand for heat.

What happens if I don't have a demand for heat?

If there is no more request for heat, the cogeneration will stop. It will start again when the demand for heat is sufficient. A balloon with a reserve of hot water makes it possible to accumulate a certain quantity of heat and to return this heat at another time. It will be the object of the optimisation and the guiding of the installation.

Who can help me with the design, construction, financing and operation of a CHP installation?

There are energy service companies who offer a complete range of services at guaranteed prices. They even can arrange financing. For details see the TPF-guide (Third-Party Financing) or the database on the COGENchallenge website.

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FAQ list – Country specific Can public support be asked by the owner of cogeneration?

BELGIUM:

Brussels Capital:

You obtain green certificates (currently about € 70 certificate) when your cogeneration plant saves more than 5% of CO2 compared with the CO2 emissions of the traditional productions of the same electricity and heat.

Wallonia:

You obtain green certificates (currently about € 90 certificate) when your cogeneration plant saves more than 10% of CO2 compared with the CO2 emissions of the traditional production of the same electricity.

Flanders:

The Flemish Region has two different certificates:

1. Green power certificates (for installations with electricity production from renewable energy sources; one certificate per kWh produced electricity) and the price per certificate = 90 to 95% of the penalty price (€ 125);

2. CHP certificates (only for installations who have a system to utilise the heat as efficient as possible and have relative Primary Energy savings more than 5%). The price per certificate: +/- € 38, penalty price = € 40.

Each regional Government gives grants for the feasibility study costs (about 50%) and for the investment cost (from 10 to 30%). The Federal Government gives also a tax allowance reduction of 13.5% (private companies) to 15% (residential)

FRANCE:

Fixed feed in tariffs are offered for cogeneration unit respecting the requirements: for units below 36 kVA it is the same as the price paid for electricity and for units above it is calculated according to a reference system (combined gas cycle) and differentiated according to the supplied power. The contract is running for 12 years. Certain regional authorities in France (like e.g. in Rhône-Alpes) are also giving investment subsidies for units below 1 MWe to owners from the public and semi-public sector (up to 30%). Feasibility studies can be supported by the national French energy and environment agency and also by some regional authorities (up to 70%).

GERMANY:

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The Cogeneration Act (April 2002) guarantees temporary bonus-payments from the operators of the public grid for CHP electricity transferred to the public grid. The amounts of bonus-payments vary according to the type of CHP installation, and are declining. An accreditation from the Federal Office of Economics and Export Control (BAFA) for the installation is requested. The amount of the bonus-payments varies from 1.53 cent/kWh in 2002 reduced annually to 0.97 cent and phasing out in 2006 for existing CHP plants, to 5.11 cent/kWh for new small installations up to 50 kW if continuous operation is taken up until end of 2005 as well as for fuel cell plants for ten years. The estimated total cost of these bonus payments is € 4.45 billion between 2002 and 2010. 2003 approx. € 700 million (bonus-element). Vegetable oil and biogas fired CHP installations are especially funded by the Renewable Energy Sources Act.

AUSTRIA:

Supported feed in tariff are only available for certain installations depending on fuel and electric power output. Fuel used is exempted from energy tax. Different investment incentives are available for installations depending on power output and environmental benefit.

SLOVENIA:

Fixed feed in tariff is offered for excess electricity sold to the greed. Network system operator is responsible for the purchase of all offered electricity and obliged to conclude 10 years feed-in contract. CHP operators are not paying balancing costs. Fuel used by CHP unit is exempted from payment of CO2 tax (0.44 kg CO2/kWhel). Subsides for preparation of investment documentation are tendered by Ministry of the Environment and Spatial Planning.

SPAIN:

The Electricity Act (1997) guarantees temporary bonus-payments for the electricity transferred either to the grid operator or to the pool market. The bonus vary from € 22.8 MWh to € 15.2 MWh depending on the installed capacity. For small installations under 1 MW there is a special feed in tariff of € 68.4 MWh. There are not tax exemptions for fuel costs. The Government is now giving a national grant for the feasibility study (maximum 75% of the study cost) and a subsidy of 10% (maximum € 200,000) for non industrial CHP investment.

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COGENchallenge Facilitators

GERMANY:

Paul Fay Stadt Frankfurt am Main - Energiereferat Galvanistraße 28 D- 60486 Frankfurt am Main (Germany) Tel: +49 69 212 39199 Fax: +49 69 212 39472 Email: paul.fay@stadt-frankfurt.de

FRANCE:

Reinhard Six Rhônalpénergie Environnement (RAEE) 10 rue des Archers FR-69002 Lyon (France) Tel: +33 4 78 37 29 14 Fax: +33 4 78 37 64 91 Email: reinhard.six@raee.org

BELGIUM:

Ismaël Daoud Cogeneration Facilitator for Wallonie COGENSUD asbl Bd Frère Orsban, 4 B-5000 Namur (Belgium) Tel: +32 81 250 480 Fax: +32 81 250 490 Email: facilitateur@cogensud.be

AUSTRIA:

Jan Bleyl Grazer Energieagentur Kaiserfeldgasse 13/I A-8010 Graz (Austria) Tel: +43 316 811 848-20 Fax: +43 316 811 848-9 Email: bleyl@grazer-ea.at

SPAIN:

Carlos García Fundación Asturiana de la Energía (FAEN) Área de Relaciones Externas C/ Fray Paulino, s/n E-33600 Mieres (Spain) Tel: +34 985 46 71 80 Fax: +34 985 45 38 88 Email: cgarcia@faen.es

SLOVENIA:

Stane Merse "Jozef Stefan" Institute - Energy Efficiency Centre Jamova 39 SI - 1000 Ljubljana (Slovenia) Tel: +386 1 5885 250 or 210 Fax: +386 1 5885 377 Email: stane.merse@ijs.si

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Who we are

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