HIGH EFFICIENCY CHP GUARANTEES OF ORIGIN

The European CHP Directive (2004-8-EC), requires Member States to implement by 21 February 2006 systems to guarantee the origin of high-effiicency CHP. The AIB certificate system can facilitate this, since these certificates are first and foremost guarantees of origin.

The background to the Directive and its ongoing implementation are follows.

The priorities of the European energy strategy include: completion of the internal energy market; security of supply (Primary Energy Savings); sustainable, efficient and diverse energy mix; reduced global warming by means of primary energy savings and CO2 savings; energy technology plan and innovation; and a common external energy policy.

The Green Paper on energy efficiency was developed for a number of reasons: improving the cost-effectiveness of energy efficiency conferred benefits to the economy of perhaps 20 % savings; reduced wastage of rare resources and emissions of greenhouse gases would contribute to Kyoto commitments; and security of energy supply would be promoted. This is expected to benefit all sectors in production and end-use, industry and services, households and buildings and transport. These benefits would be achieved by means of Directives, objectives, financial incentives, information and training, and integration of efficiency with other initiatives.

There were three main pillars of the action plan: awareness at various levels (including education, training and labeling of appliances); improved mechanisms for financing energy efficiency; and implementation and function of existing EU legislation. The end-use platforms are the transport sector, the energy transformation sector, and energy efficiency in foreign and trade policies.

The instruments for EU energy policy include legislative measures, such as: EU Directives, electricity from renewable energy sources (RES), biofuels, the labeling of appliances, minimum efficiency requirements for appliances, energy performance of buildings, cogeneration (CHP), ecodesign (Energy Using Products, including boilers) and energy end-use efficiency and energy services. They also include programmes, wuch as the 6th RTD Framework Programme and Intelligent Energy – Europe (including SAVE and ALTENER).

The major instrument regarding the promotion of Cogeneration (CHP) is Directive 2004-8-EC. This was adopted on 11 February 2004 with the intention of achieving complete transposition in Member States by 21 February 2006. Unfortunately this was delayed because comitology, but it is not required that this is implemented by Member States by 6 August 2007.

The Directive has an informal indicative target of increasing the share of CHP electricity from 11 % in 1998 to 18 % in 2010. It includes harmonised definitions, Guarantees of Origin, access to electricity grids, identification and elimination of administrative barriers, the possibility of support systems for high-efficiency CHP, and the analysis of the national potential in Member States and statistical requirements.

In November 2004, a study was launched to help the implementation process (the committee procedure or comitology) to develop: Annexes II and III on reference values for energy savings and calculation methodology; and Annex IV for guidelines for the analysis of the national potential of Member States.

A number of supportive actions were undertaken, including workshops on CHP statistics (Eurostat with DG TREN) and Guarantees of Origin (Member States with DG TREN); and for new Member States (JRC with DG TREN).

Other actions included: scrutiny of legislation and support systems for CHP, and of CHP projects co-funded by the EU, EIB and EBRD; contacts with market players and stakeholders; and exploring new developments (micro-CHP, trigeneration, Biomass Action Plan).

Article 5 of the CHP Directive requires Member States to put in place a scheme for Guarantees of Origin of electricity from high-efficiency CHP (CHP-GO). These CHP-GO will be based on the reference values which are to be formally approved by the Member States in June 2006, and are now likely to be published early in 2007, along with the official detailed guidelines for Annex II. Member States must administer the CHP-GO system themselves, or by means of bodies independent of generation and distribution within 6 months of the official adoption of these reference values. While schemes for CHP-GO are not necessarily linked to national support schemes for CHP, this is permissable.

Legal general requirements for GOs are that they be reliable, accurate, transparent, fraud resistant and recognised by all Member States. Legal specific requirements for GOs are the declaration of: lower caloric value of the fuel source for the electricity; specification of the use of the combined heat production; quantification of the electricity in conformance with Annex II; and specification of Primary Energy Savings (PES) based on the reference values.

Considerations of the Commission to help Member States in the development of CHP-GO schemes: provide assurance that as many Member States as possible will soon have schemes which comply with the CHP Directive; avoid too much diversity in national CHP-GO schemes, to facilitate mutual recognition and exchangeability in the internal market; create GOs that can be used for support schemes; create GOs that stakeholders can really use; and support a European system which has critical mass.

The Commission supports co-operation with the AIB in this matter for the following reasons:

• The AIB has agreed that the Commission can check the legal requirements following on from the CHP Directive and comitology;

• The Commission can see many positive elements in the AIB system. The AIB is controlled by TSOs and/or energy regulators, and already half of the EU Member States are represented in AIB, and have substantial experience in trading GOs and certificates. The AIB EECS system is voluntary, but used and appreciated by the major commercial players, including utilities and industry, and is robust and cost-effective. Critical mass has been achieved for use of GOs on a European scale, and the ready-to-use nature of the system supports fast implementation of CHP-GOs by Member States.

The AIB and the Commission consulted Member States and other stakeholders concerning the fine-tuning of the AIB text, confirming those Member States that were interested in participating , along with identifying potential barriers. The AIB formally adopted the text of the EECS chapter on 2nd July 2006, and continues to cooperate with the Commission in order to guarantee consistency with future CHP committee decisions. To this end, the AIB has developed a model of the calculation methodology, which is available to its members. After this, it will be up to Member States and their designated competent bodies to join the AIB CHP-GO system.

In the longer term, there will be progress reports and data from Member States, input from stakeholders (AIB and industry) and evaluation by the Commission of the effects of the legislation. Possibly, there will also be further initiatives (harmonisation, action plans and proposals); and there is a possibility of stronger coherence and/or a wider range of other legal initiatives and trends, such as white certificates, CO2 savings calculations e.g. ETS and disclosure. The AIB will continue to cooperate with the Commission to guarantee consistency with future CHP committee decisions, wider legislation and technological developments.