Taking energy efficiency seriously

Thank you very much for inviting me to say a few words this evening. 

COGEN holds its annual conference this year at a key moment for the cogeneration industry.

I sense that the past few years have been a time of considerable frustration for everyone.

I want to look at what some of the problems have been in the past.

Then I want to look at what is on offer in the legislation currently under negotiation – the Electricity Directive and the various elements of the Climate Package, particularly the Renewables Directive.

And finally I want to look ahead and consider what opportunities there might be to push the cogeneration agenda over the next twelve months up to the end of the mandate of this Parliament and Commission.

Firstly, what have the barriers been in the way of the expansion of cogeneration?

A huge obstacle has been the failure of governments and the Commission to take energy efficiency seriously.

Nobody disputes the general fact that energy efficiency is the cheapest and quickest way to reduce carbon emissions.

Nor does anyone deny that cogeneration is the most efficient way of producing electricity and heat or indeed cooling.

But there has been a failure on many levels to put that theory into practice.

Last year I wrote the Parliament’s report on the Commission’s 10 point Action Plan on energy efficiency and had some very harsh things to say about the failures of Member States to transpose, implement and enforce various existing legislation on energy efficiency such as the Energy Performance of Buildings Directive and the Energy End Use Efficiency and Energy Services Directive which brought in the requirement for National Energy Efficiency Action Plans and of course the 2004 Directive on the promotion of cogeneration.

I was also critical of the Commission’s failure to dedicate enough time and human resources to nurturing and policing energy efficiency implementation.

Some things have improved in recent months – certainly, the Commission has more staff working on energy efficiency now, and all but two of the National Energy Efficiency Action Plans, the NEEAPs, have now been submitted.

The first Commission report on the NEEAPS was quietly published on the same day in January as the Climate Package.

I am afraid it is extremely downbeat.

Member States are accused of being modest in their energy efficiency ambitions.

Because so many plans missed the 30 June 2007 deadline and only arrived months later they are only now being analysed in depth.

I would be interested to know – and maybe you have looked into this – how many NEEAPs do include a plan to increase high-efficiency cogeneration and move to holistic planning of electricity and heat requirements, as the Parliament recommended they should.

In the absence of a template for the NEEAPs my guess is that inclusion of cogeneration will be patchy.

And we will have to see how the Commission reacts to those MS who fail to promote - or possibly even mention - cogeneration in their national plan.

The Commission should of course also be monitoring the implementation of the 2004 Cogen Directive. Unfortunately, the response to the requirements of the CoGEN directive has been even poorer than on the NEEAPs. As you will be aware, Member States were requested to submit 4 reports by August 2007.

These were on

- The national potential for Cogenreation

- The barriers to achieving that potential

- The details of a robust scheme for establishing Guarantees of origin

- And on the support mechanisms in place for Cogeneration

All these reports are necessary if the national potential for high-efficiency cogeneration is to be fully harnessed.

But I understand that very few of these reports have been delivered. If you have the figures, I would be very interested - if you don't have the exact figures, then I'd be happy to table a question to the Commission.

I also understand that the main reason behind the non-implementation of the COGEN directive is too much reliance on comitology, and too long deadlines. It is shocking to hear that, almost four years after the publication, important points have still not been agreed! I have the feeling that since 2004 the Parliament has gained confidence and is not ready to leave so much to comitology anymore. I can reassure you that this should not happen again in the future.

So both the Energy End use efficiency directive and the COGEN directive have had rather disappointing outcomes to date

A third failure of implementation has occurred in relation to existing legislation on grid connection and distributed generation. The joint renewables cogeneration letter to the regulators in 2007 resumed the problems very clearly. The letter called for an improvement in the regulations relevant to decentralised generators. The research carried out by the ELEP team, which comprised manufacturers such as Turbec, Rolls-Royce and Wärtsilä, highlighted an overall lack of transparency and difficult market access conditions in many EU Member States. The project's recommendations were then shared with the European Energy Regulators and DG TREN. The Joint Letter's aim was to increase the political pressure and it succeeded. The Joint Letter got significant specialised European media coverage and the Council of European Energy Regulators, chaired by Sir John Mogg, responded in an official letter dated 19th July. The letter proposed that the "European regulators would reflect carefully on the treatment of distributed generation (in their 2008 work programme)". However, the letter also noted that "some stakeholders argued that decentralised generation would lead to massive price fluctuations with potential supply disruptions"... That was a salutary reminder that some incumbent generators are still actively opposed to cogeneration, and to whatever investment whatsoever.

So the story of the last few years has been somewhat disappointing.

Can things only get better?

I'd like to say a word now about the legislation currently on the table and in the hands of the European Parliament and the Council.

Firstly, the Energy Package published last September.

It is mainly the electricity directive which has to do with efficiency and cogeneration. I was very happy that the Parliament could agree on a text which requires the system operator to give priority to generating installations producing CHP (as well as RES); we also urged Member States to "encourage the modernisation of distribution networks, which shall be built in a way that will encourage decentralised generation and shall ensure energy efficiency". This should be facilitated by the unbundling of energy companies, and I hope negotiations with the Council will end up on a good compromise. We still have one year for that, and I am confident the Parliament will be strong.

I just would like to add a word on an amendment which I had proposed with colleagues: we were requiring new power stations to emit less than 420 grams per kilowatt hour of energy produced. This would have forced energy companies to use CHP or CCS, when today new coal-fired plants are about to spring out of the ground across Europe, none of them with efficiencies above 50%... I regret that the amendment didn't pass through, but awareness on these issues is growing and things might change in the new future (if CCS has to become mandatory why not CHP?).

Secondly, the Renewables Directive.

Here we really do have some good news.

Before I focus on the importance of the RED to Cogen I would like to stress the importance of Cogen to renewables: because Cogen is a way of saving your overall energy consumption, using it reduces your overall renewables target. The EU definitely needs cogeneration if it is to reach the 20% by 2020 target for renewables!

More generally, the problems suffered by the cogeneration industry in terms of transparency, connection to the grid, grid planning, and authorisation procedures are problems suffered by most generators of renewable electricity.

Now that there is an EU target of 20% renewable energy in 2020 it seems that the Commission has at last been galvanised in doing something about these issues.

Article 12, 13, and 14 of the Renewables Directive cover administrative procedures, information and training and access to the grid.

The wording on access to the electricity grid is strong and clear

- Member States shall provide priority access to the grid system for electricity from renewables

- and transmission system operators shall give priority to generation from renewable sources insofar as the security of the national electricity system permits.

The rapporteur Claude Turmes published his draft report last week and he is proposing to further strengthen the requirements.

For example, he proposes that the burden of proof for any refusal to prioritise renewables should lie with the network operator and the renewable provider should be compensated when access is denied.  He also proposed that the costs for grid reinforcements related to large and small scale renewables should be borne solely by the transmission and distribution system operators, rather than the cost being shared as the Commission proposes.

I'll be fighting in negotiations with the Council to keep as strong a wording as possible on issues such as priority access and connection cost.

Theses changes, if properly implemented, would transform the potential for cogeneration from renewables.

Biomass is one of the core pillars of EU renewables energy policy and there will simply not be sufficient biomass resource unless it is directed towards the most efficient and sensible uses. It cannot be acceptable that over 70% of the energy content of biomass be wasted in power-only installations. Generating power from limited biomass resources only makes sense in cogeneration mode, where the low electrical efficiency is compensated by the production of useful heat.

In my view the proposals on authorisation + access to the grid also provide a template for removing the barriers to take up al ALL cogeneration.

Cogen from biomass will always be the best option for cutting CO2 emissions, but there is an important role for highly-efficient cogeneration from fossil fuels, such as micro-cogeneration from gas. Decentralised generation in general can not only learn from but also take advantage of the rebalancing of the grid which is now being proposed in the Renewables directive.

As well as the RED, two other parts of the January Climate package are of interest to the Cogeneration industry.

The burden sharing proposal, officially known as "effort of Member States to meet the Community's greenhouse gas emission reduction", covers CO2 emissions from sectors not covered by emissions trading. the discipline of meeting this the target of 10% less GHG emissions in these sectors by 2020 is going to bring a much increased emphasis on energy efficiency in buildings, where 40% of our energy is consumed.

For new houses, the most efficient approach is likely to be to build to passive house design standards and use micro-renewables to make buildings into net providers of zero carbon energy. But for existing houses, 75% of which will still be around in 2050, it will be more a case of adapting existing infrastructure. For eastern European countries with antiquated district heating systems, a straightforward route to burden sharing targets for CO2 will be to upgrade their district heating so that it comes from Cogeneration wholly or partially fired by biomass.

Finally, there is the ETS side of the story. As you know, the ETS is a "point source emission based system", which means emissions of an industry are calculated on the production site only, and not on an overall basis. Switching to CHP allows emissions saving on the whole energy system, but on site emissions increase, which means more credits to be paid. I am aware this is a big problem for cogeneration, and I am aware that the Commission hasn't addressed it in its proposal. Energy-intensive industries in Europe face the same type of problems with their self-generated electricity, and this is why, with other Colleagues in the European Parliament, we will table amendments to take into account the problem faced by cogeneration and self-supply electricity by allowing those two processes to get free allocation.

I know the Commission is very opposed to this system because of risks of "distortion of the electricity market". But the rapporteur in the Parliament, Avril Doyle, is on our side, and awareness is growing at Council level. I am confident that the problems of cogeneration within the EU-ETS will be solved before the final agreement.

So big parts of what is being discussed in the European Parliament right now -energy package, renewables, ETS and burden sharing- have big implications for cogeneration.

To finish off, I just want to look ahead and flag up a couple of other pieces of legislation coming up over the horizon.

Firstly, there is the recasting of the Energy Performance of buildings Directive, due in November.

One of the many neglected aspects of the current EPBD is the requirement for

new and refurnished buildings with a floor surface of over 1000 m2 to consider low carbon and passive solutions,  namely by installing small-scale renewables and high efficiency cogeneration systems.

This requirement is strengthened on its renewables part in the RED, which states in article 12 that "Member States shall require the use of minimum levels of energy from renewable sources in new or refurbished buildings. So far though, this piece of legislation has had virtually no impact on the development of micro and small-scale cogeneration, despite the tremendous importance of energy use in buildings. This Directive is currently being revised and one can only hope that the language will get tougher and national and local administrations more serious about cogeneration in buildings.

Crucially there is no mention of a 1000m2 threshold. The abolition of the threshold is already what the Parliament voted for in my report on the Energy Efficiency Action Plan.

Some worrying signals are emerging from the Commission that the recasting of the EPBD will be a modest affair. I hope the Parliament will insist instead that the recast is much more continuous and stringent - otherwise it would be better not to have it at all until the new parliament in 2009.

Finally, this autumn will see the Strategic Energy Review setting the basis of the 2009-2014 European Energy Policy.

It is known that the emphasis of the review will be energy security, a matter of huge concern and much political debate in those countries heavily dependent on Russian gas. Because of the hugely superior efficiency which cogeneration offers, it should be given prominence in the review. More cogeneration equals less energy dependency. This may turn out to be the single most important message the Cogen industry can publicise. Energy is a precious and expensive resource, so let's use it to the full - for electricity and heat together.

Thank you