The crisis in Ukraine has led to widespread calls for the European Union to accelerate its energy transition, increasing the uptake of renewable energy and boosting energy efficiency in order to reduce Europe’s dependence on energy imports. This is seen as going hand-in-hand with Europe’s ongoing efforts to reduce emissions, in the framework of the Paris Agreement and the EU Green Deal, which are also reflected in the package of legislative proposals known as ‘Fit for 55’.

The vast majority of stakeholders in the European energy community agree on the end goal – net zero emissions by 2050. The potential pathways and milestones towards net-zero emissions are currently under debate and these will also depend on the specific conditions in each country. Concerns in relation to energy security and affordability must also be taken into account.

Although the goal of decarbonisation is widely accepted and supported, there remains a need for policymakers to take a balanced approach. Yes – it’s important to invest in renewable sources of energy, but we are still a very long way from such sources being able to meet 100% of the energy needs of all Europe’s households and businesses. Therefore, we also need to look for ways to save energy and reduce emissions by choosing the most efficient technologies. Especially in today’s circumstances – Europe simply cannot afford to continue wasting energy!

Despite ambitious energy efficiency legislation being passed at EU level (the Energy Efficiency Directive of 2012 and its revision in 2018), Europe has made slow progress and only just met its 2020 target for cutting energy consumption due to the coronavirus pandemic. Currently, the European Parliament and the Member States are looking closely at the details of a new Energy Efficiency Directive (EED), based on a text that was put forward by the European Commission last summer, as part of the ‘Fit for 55’ package.

The Commission’s proposal for a new EED seeks to reconfirm ‘energy efficiency first’ as an overall principle of EU energy policy. It includes ambitious and binding targets for reducing energy consumption in the current decade by obliging each Member State to deliver annual energy savings across all sectors – including buildings, industry and transport.

The Commission’s new text echoes the previous EED in stating that “high-efficiency cogeneration and efficient district heating and cooling have significant potential for saving primary energy in the EU”. The cogeneration sector – represented by COGEN Europe – is ready to play its part in helping the EU and its Member States to reduce their energy consumption by offering efficient technologies that provide communities and businesses with the electricity, heat and cooling capacity they require – precisely where and when these are needed.

Cogeneration, also known as Combined Heat and Power or CHP, is the simultaneous production of heat and power. The technology optimises the use of any thermal source – including gases, bioenergy, hydrogen, waste heat, geothermal or solar thermal – by minimising the amount of energy that is wasted. CHP reduces emissions by displacing power plants and boilers that are less efficient and more polluting. By producing dispatchable electricity, CHP can complement clean energy solutions like heat pumps, solar (PV) and wind.

Today, cogeneration provides 12% of all the electricity used in Europe and 16% of all the heat. CHP is the best available technology of wide range for industries that need a continuous supply of process heat, including chemicals, pulp and paper, food & drink, ceramics and alumina. CHP also plays a significant role in the building sector – either via district heating networks or micro-CHP solutions. The public sector is also reaping the benefits of cogeneration – including the main EU institutions, which all rely on CHP to heat and power their Brussels headquarters.

Crucially, in the context of the EU Green Deal and Fit for 55 – cogeneration is a future-proof technology that will maximise the efficiency of any thermal energy source. Already today around one third of Europe’s CHP is driven by renewable and low-carbon energy sources. Modern CHP units have the capability to switch from natural gas to renewable gases and hydrogen, as these become available. Regardless of which fuel one chooses to use – decentralised CHP is the most efficient solution for delivering electricity and heat (or cooling) to households and businesses.

As Europe advances along the road to net zero, cogeneration can play a central role in helping to achieve a decarbonised, efficient and resilient energy system. It will be especially important for decarbonising heat across industry, buildings and district heating, wherever renewables-based electrification is not feasible. CHP also represents the most efficient source of flexible electricity, complementing intermittent renewables such as wind and solar (PV), and reducing or even eliminating the need for new gas-fired or nuclear power plants.

Cogeneration is essential for ensuring that renewable fuels such as biogas, biomethane and green hydrogen are used in the most efficient way – delivering the maximum amount of useful energy to households and businesses. According to a study commissioned by COGEN Europe in 2020, promoting the Europe-wide uptake of CHP could lead to cost savings of up to € 8.2 billion per year as part of a net-zero emissions Europe by 2050.

For Europe to meet its emissions targets and reach net zero, efforts to reduce demand for energy and increase the uptake of renewables must be accompanied by measures to ensure energy is produced and managed as efficiently as possible. The new Energy Efficiency Directive (EED) has a crucial role to play in driving efficiency gains across the entire energy system – including conversion, transmission, distribution and final use. In this context, the EU should prioritise cogeneration in order to ensure the most efficient use of all thermal energy sources.

Hans Korteweg, Managing Director of COGEN Europe

Published on 7 April 2022

Energy efficiency is recognised as a first fuel and key contributor to Europe’s climate, energy and competitiveness ambitions on the path to carbon neutrality by 2050. To deliver on its objectives, the upcoming Fit for 55 package must reinforce energy and system efficiency across all sectors, all fuels and all segments of the energy value chain. To foster higher energy efficiency ambition, Fit for 55 should prioritise cogeneration as a key solution empowering European citizens and industry to generate their own efficient, reliable and affordable clean heat and power locally¹.

Do not waste heat, produce it efficiently

In 2019, power plants across the European Union (EU) wasted 215 Mtoe in the form of heat discharged to the atmosphere. An additional 15 Mtoe² of energy is lost when transporting electricity through power grids to end consumers. The wasted energy across the electricity sector is equivalent to the total heating and cooling consumed by European homes (i.e. 192.5 Mtoe³).

By capturing and using heat that would otherwise be wasted, and by avoiding distribution losses, cogeneration can achieve efficiencies of over 80 percent, compared to 50 percent for standard technologies.

Cogeneration today delivers 11% of EU’s electricity and 16% of its heat, including more than 50% of heat supplied to district heating. This reduces CO2 by 250 million tons, equivalent to the emissions of 100 million internal combustion cars cars. By 2030, cogeneration could generate 20% of electricity and 25% of heat. In a net-zero energy system by 2050, cogeneration will continue playing an important role, reducing energy system costs by EUR 4-8 billion per year thanks to the continued energy savings, avoided grid losses and flexibility benefits.

Source: Artelys, 2020

In district heating, most scenarios estimate cogeneration will remain the main contributor, generating as much as 40% of the heat required across a range of carbon neutral sources. In addition, cogeneration will help unlock district heating flexibility potential, producing efficient heat and dispatchable power at time of high heat and power demand.

Source: Heat Roadmap Europe, 2019

Support smart electrification

With end use electrification identified as an important dimension of the EU’s decarbonisation path, we must ensure that it is done increasingly through both renewable and efficient energy solutions.

Many studies have shown that end use electrification, especially when applied to heating buildings, will significantly increase peak demand. Even when maximising demand efficiency and meeting heating and cooling demand with highest efficiency heat pumps, it is expected that peak demand in winter will more than double in many European countries⁴. The challenge of matching increasing peak demand with variable renewable energy requires an integrated systems approach. A mix of efficient and renewable solutions is needed to address it.

Source: Artelys, 2020

Cogeneration will be key to complement electrified demand and help support security of supply cost-effectively.

Efficiently integrate renewables

Accelerating the uptake of renewable energy sources will also be key to the EU’s decarbonisation efforts. A diverse mix of wind, solar, bioenergy, geothermal, solar thermal and gaseous fuels will be necessary to ensure net-zero emissions energy is available when and where needed.

To ensure consumers are on board, both the availability and the affordability of renewable sources must be promoted. Since all renewable solutions rely on limited resources, the fuel itself, the land required or the materials used to build the equipment, their efficient use and consumption should be prioritised. Cogeneration is one of the ways to efficiently use thermal renewable energy sources, including renewable and decarbonised gases. Moreover, cogeneration is available to generate efficient power (and heat) at times of insufficient wind or solar power, especially during the winter season.

How can Fit for 55 support energy efficiency ambitions?

Fit for 55 offers the opportunity to consistently promote energy efficiency across EU legislation, setting a level playing field for all decarbonisation solutions and fostering system integration across the entire energy values chain. For an ambitious and cost-effective approach to energy efficiency in Fit for 55, COGEN Europe recommends:

1 https://www.artelys.com/wp-content/uploads/2020/11/Artelys-Presentation-Key-Findings-Study-Commissioned-by-CE-final-1.pdf
2 https://ec.europa.eu/eurostat/cache/sankey/energy/sankey.html?geos=EU27_2020&year=2019&unit=KTOE&fuels=RA000&highlight=_&nodeDisagg=0111100000001&flowDisagg=true&translateX=-1557.14656397826&translateY=-562.960004178233&scale=2.644521026097703&language=EN
3 https://ec.europa.eu/energy/topics/energy-efficiency/heating-and-cooling_en
4 https://www.sciencedirect.com/science/article/abs/pii/S0360544217312124

In the context of the Fit for 55 and the upcoming Green Gas Package, COGEN Europe joins industry stakeholders in calling for for a European Union (EU) policy framework that promotes the production, market uptake and system integration of renewable and decarbonised gases. The upcoming Green Gas Package will play a key role in aligning gas market regulation with the delivery of the European Green Deal to speed up the decarbonisation of all sectors, including buildings, at the lowest cost for EU consumers.

Fostering efficient system integration

The decarbonisation challenge is a systemic issue, which requires a systems’ approach. Planning for a net-zero emissions future should integrate energy systems across electricity, heat and gas networks. This is why putting energy efficiency first must go beyond the single appliance approach and favour system efficiency to ensure lowest cost for consumers and society alike.

From this perspective, a power-to-gas project combined with cogeneration will deliver significant system efficiency benefits by providing seasonal storage, energy savings, renewable energy integration and security of supply. Defining and implementing system efficiency will help identify synergies and highlight positive externalities of clean energy solutions, accounting for local circumstances, combining green gases, efficient CHP, district heating, electrification, variable renewables and considering the value of existing infrastructure.

In addition to system efficiency, the Fit for 55 packages must prioritize the efficient use of all gases. Gas-based cogeneration solutions are “no regrets”. They can be compatible with different types of gases and will accept varying blends of hydrogen. Once renewable and decarbonised gases become available, using them with high-efficiency cogeneration ensures that these valuable resources are not wasted. Therefore, high-efficiency cogeneration must be consistently promoted across EU legislation, including in the Green Gas Package but also via the Energy Efficiency Directive, the Renewable Energy Directive, Energy Labelling and Energy Performance of Buildings Directive.

Accelerating the abundant and affordable uptake of green gases

Today gas is affordable, reliable and adaptable to diverse customer needs. Moreover, it can be combined with efficient and hybrid solutions to deliver immediate emission cuts (such as solar, hybrid heat pumps and cogeneration). The existing gas grids can integrate and store large quantities of renewable energy cost-effectively and for a long term, reducing the need for costly power grids reinforcements and battery storage deployment. In the medium to long term, the affordability of gas will be impacted by carbon pricing policies as well as the price evolution of green gases.

EU and national roadmaps, including targets and support measures, for decarbonising gas are needed to ensure investor certainty across the entire value chain. The gas sector will need to scale up the production and reduce the cost of new gases. On the demand side, gas users also need certainty that green gases will be available and affordable in the future. To stimulate demand, both industrial and residential consumers should be incentivised to switch t cleaner fuels as well as to higher efficiency and future proof equipment. Moreover, solution providers require predictable regulation, robust standards and updated state aid rules to adapt their technologies to new gas quality specifications as well as H2 readiness.

Creating local economy synergies

EU industry is committed to reaching carbon neutrality by 2050, while boosting its competitiveness worldwide and fostering local economy ambition. There is a strong manufacturing base of cogeneration solutions in the EU, with state-of-the-art solutions being produced in Europe by highly skilled workers. Moreover, the cogeneration project developers and operators create local green jobs and empower consumers. Industrial sites use cogeneration in pulp and paper, chemical sector, food & drink, alumina production and others, creating jobs and contributing towards local system integration.

The emergence of green gases offers opportunities in the area of circular economy, including by producing biomethane as a by-product of the local agricultural and waste streams and using it efficiently with cogeneration. Green gases blended into existing gas grids can help decarbonize many cities and buildings more cost-effectively and at a faster pace than by switching to a different energy vector. In addition, off-grid remote and rural areas can benefit from fuel cell micro-CHP running on bio-LPG.

An ambitious move towards green gases, used efficiently, is key for the decarbonisation of the entire economy, contributing towards a diversified, economically, and environmentally sustainable energy mix that guarantees security of supply. The Green Gas Package should therefore provide an enabling framework for industry to deliver on the Fit for 55 higher ambition.

The Recovery and Resiliency Facility Regulation will be a key instrument to identify and implement strategic projects to support EU’s transition to carbon neutrality by 2050. For the Resiliency and Recovery Plans to support a green transition lowest cost for citizens, businesses and society as a whole, they must prioritise energy efficiency, system integration and flexibility.

In order to deliver on the green recovery ambition, Recovery and Resiliency Plans should touch upon the following dimension

1. Take an integrated approach to energy systems, putting energy efficiency first

COGEN Europe recommends that the RRP considers the links between heat, power and gas systems, with a view to decarbonise the economy at lowest cost through energy efficiency and renewable energy uptake. The greening of existing infrastructure should be considered, including the repurposing of gas grids to increasingly distribute renewable gases.

2. Foster a resilient power system through efficient dispatchable generation

The increased electrification of the economy must be done efficiently and increasingly through renewable energy. Complementing direct electrification through efficient and dispatchable generation and demand response, including through high efficiency cogeneration connected to district heating or on industrial sites, will ensure security of supply to address mismatches between increasingly electrified demand and variable renewable energy supply.

3. Prioritise efficient and renewable heating and cooling in the green recovery plans

As part of the green investment’s objective under the EU Recovery and Resiliency facility, modernising heating and cooling presents an important opportunity to reduce carbon emissions, increase energy efficiency and foster smart energy uptake, all while bringing value in the local economy. To identify key heating and cooling projects for RRP, the national Comprehensive Assessments for Heating and Cooling should be fully considered.

4. Realise the potential of high efficiency cogeneration across Europe

High-efficiency cogeneration has multiple benefits in terms of efficiency of energy supply, transmission and distribution, flexibility and security of supply across integrated electricity, heat and gas systems. In the EU, high efficiency cogeneration already cuts today 250 million tons of CO2 CHP (equivalent to the emissions of 100 million petrol cars). Cogeneration is already supported as a key solution for greening industry, buildings and districts by key Member States. Furthermore, cogeneration has an important growth potential for 2030 and is a no-regrets solution towards 2050. Complementing demand side efficiency, direct electrification and the uptake of variable renewable energy, the efficient use of thermal energy through cogeneration (applied to all gases, hydrogen, biomass, geothermal energy, solar thermal) must be prioritised over the inefficient power-only and heat-only generation.

The RRPs should provide ambitious action plans to accelerate the uptake of energy efficiency and renewable energy across electricity heat and gas beyond 2026 to ensure investor certainty towards 2050. This should include concrete plans to deploy efficient solutions like cogeneration and district heating along with the greening of all energy carriers, including power and gas. Continued support and plans for further investment building on the RRP should be put forward, with a view to ensure industry can make long term commitments for a green transformation.

Prioritising energy efficiency, renewable energy and system integration as part of your country’s RRP will be key in delivering on the multiple objectives of the EU Green Deal, putting Europe on a cost-effective pathway to decarbonisation.

[1] https://ec.europa.eu/energy/topics/energy-efficiency/heating-and-cooling_en
[2] See support schemes in Germany, Slovakia, Romania.
[3] CODE2, 2015. European Cogeneration Roadmap for 2030.
[4] Artelys, 2020. Towards an efficient, integrated and cost-effective net-zero energy system in 2050. The role of cogeneration

The European Union (EU) wants to become the global leader in fighting climate change and has made its Emission Trading Scheme (ETS) a cornerstone of this objective. The ETS has managed to significantly reduce emissions in Europe, especially in the power sector. However, the risk of carbon leakage is looming around the corner, whereby emitting installations will move outside Europe due to higher production costs, lack of regulatory stability and increasing international competition. Further tightening the EU ETS without supporting European industry to adopt cost-competitive, low-carbon alternatives might have the reverse effect. Emissions could decrease in Europe, yet increase worldwide.

The effectiveness of the EU ETS in creating price signals for the required investments in low-carbon technologies is threatened by the fact that it only covers European installations, whereas the markets in which European industries compete have become increasingly global and interconnected. This leads to carbon leakage, which already is a reality for many sectors.

For example, over the past 15 years, 10 of the 26 primary aluminium plants that existed in Europe have been shut down. This production has been replaced almost exclusively by production and overcapacity in China (see thereto also EMBER’s recent analysis), with a carbon footprint that is three times higher than the average footprint of European production.

Simply exporting our emissions to other regions of the world does not help us to tackle climate change, and this problem will be exacerbated as the EU ETS price continues to increase. The mooted Carbon Borden Adjustment Mechanism is an attempt to solve this problem, but the wider discussions surrounding this measure have already revealed that it, unfortunately, could never actually work as intended[1].

If the EU wants to succeed in its climate ambitions, a new approach to the EU ETS, and more broadly, to climate policy) is paramount. Instead of focusing solely on increasing the cost of carbon, we need to focus on decreasing the cost of low-carbon alternatives. This way, carbon leakage can be reversed. Given that many low-carbon technologies involve additional costs compared to their conventional counterparts, public funding has a crucial role to play in bridging the investment gap. This would enable European industries to decarbonise their processes without compromising their global competitiveness, with a substantial positive impact on global emissions.

Our approach to reducing CO2 emissions could borrow from the science-based approach that is already applied to reducing other emissions, in the context of the Industrial Emissions Directive (IED). Science-based Best Available Techniques (BAT) are an integral part of the IED, indicating the suitability of specific technologies for reducing industrial emission levels. Contrary to the EU ETS, the BAT conclusions are based on achievable and economically viable techniques based on robust data, whereas the regular reviews ensure that the BATs remain up to date with the latest technological developments.

At the same time, we must focus on channeling investments towards the most efficient, low-carbon technologies that are actually available to us today and represent no-regrets solutions up to 2050. In this regard, high-efficiency cogeneration (HE-CHP) can and should play a crucial role in both decarbonising the European economy, and in the carbon-neutral world of tomorrow, being the optimal, feasible, resource-efficiency technology, maximizing primary energy savings. Through simultaneous generation of heat and electricity in the most efficient, i.e. sustainable, way currently available, HE-CHP is the best available system-integration tool. Equally importantly, cogeneration is ready for renewables fuels!

To ensure European industry continues to lead on both climate action and competitiveness through innovative solutions, the EU ETS revision should adequately recognize the full emission reduction benefits of HE CHP over less efficient and more carbon intensive alternatives.

Contribution by Nick Keramidas
EU & Regulatory Affairs Director at MYTILINEOS S.A.

[1] A comprehensive impact assessment of any type of CBAM as a carbon leakage measure, i.e. its potential to effectively reduce global CO2 emissions, also compared to existing CL measures, is absolutely imperative.

In the framework of Fit for 55 Package, the European Commission (EC) has completed a stakeholders consultation process for the revision of the Energy Efficiency Directive (EED). The proposal for the revised directive is expected to be published in June. At the same time, the EC will also issue a guidance regarding the implementation of Energy Efficiency First (EEF) principle.

The main objective of the EC is to make this directive crucial for the energy sector and compliant with the new 2030 target for greenhouse gas (GHG) emissions reduction. The goal is to increase its overall ambition and design to deliver greater energy savings. This vision for higher ambition represents an opportunity to transform the EED not only into a genuine vehicle for optimised energy consumption, but also for its production and distribution, regardless of the type of fuel and energy vector.

This can only happen if the overall philosophy of the directive is reviewed to lead to system efficiency, which requires a change of focus from final energy consumption to encompass, and this time seriously, primary energy savings. For this to happen, we need to have higher energy efficiency targets systematically expressed both in final and primary energy terms, and article 7, the only one with a compulsory target, to allow supply side energy efficiency measures to be counted, without any limits and ceilings, towards its objective.

Energy efficiency on the supply side will be addressed, with a reinforced article 14 as well as specific provisions on efficient district heating. This has to be done in a way that will provide genuine incentives for investments in “no regrets” solutions such as highly efficient cogeneration. Therefore, it is crucial that cogeneration remains an essential component of the definition of highly efficient district heating. In addition, increased efficiency on the supply side should not be reduced to electrification of the heat supply.

Complementing electrification and variable renewables, high efficiency cogeneration is a “no regrets” supply side efficiency solutions today and up to 2050. To this end, the revised EED must prioritise high efficiency cogeneration for all required thermal heat and power supply. This would ensure that heat demand which cannot be electrified is supplied where possible through cogeneration.

Moreover, flexible electricity from cogeneration can help support power grids where and when needed. For that, any revision of the Primary Energy Factor for grid electricity should follow strict criteria to make sure that as we move towards more integrated energy systems and foster more ambitious energy savings, the PEF reflects seasonal and marginal aspects, as well as the national mixes (rather than an average, at EU level and on an annual basis).

Last but not least, as a shift towards systemic efficiency requires that the energy efficiency first principle is duly enshrined in the revamped Directive, it is paramount to safeguard the meaning of the EEF principle as defined in the Governance Regulation. This definition encompasses energy savings on the supply side and hints on at the importance of a systemic approach to energy efficiency – as opposed to project level and in-silo type of assessment.

Consequently, the guidance under preparation should consider the benefits and the costs of direct, indirect electrification and greening of gas grids, as well as mitigation options including cogeneration & heat pump complementarity in maintaining power system stability during winter, and cogeneration efficiency gains for hydrogen and renewable gases use.

As an industry, we have been in continuous dialogue with the European Commission to make sure solutions such as cogeneration get the recognition they deserve in the framework of the Green Deal, given the numerous benefits they provide at the energy system level and their contribution to smart energy systems integration. Maybe this time around, the EC, the Council of the European Union and the European Parliament will make things right and we will get the EED we all need.

Contribution by Kamila Waciega
Director, Energy, Public Affaires Department at Veolia

Bringing down emissions from buildings to zero might be the hardest nut to crack for the European Green Deal. With heating and cooling in buildings responsible for 40% of energy consumption and 36% of emissions, the importance of its decarbonisation is paramount.

As the current annual renovation rate is below 1% and more than 70% of heating in buildings is supplied by old and inefficient boilers, buildings are unanimously recognised as a hard-to-decarbonise sector by the European Renovation Wave Strategy published in October 2020, the European Union (EU) Energy Efficiency Directive (EED) and various strategies of individual European Member States.

Due to the heterogeneity of the building stock and climatic conditions in Europe, a one-solution-fits-all approach will bring more headaches than benefits. A range of solutions will be needed to supply efficient and increasingly renewable heat to and in buildings. It will include reducing demand, direct electrification, district heating, high-efficiency combined heat and power, waste heat, solar thermal, and geothermal.

The choice between different decarbonisation solutions will largely depend on the seasonality of heat demand, the variability and limited capacity of renewable electricity supply, constrained electricity grids, customer preferences and the costs. Direct electrification with heat pumps is not always economically feasible in every building and will double the peak demand for electricity in winter in most European countries.

Therefore, the efficient use of hydrogen and renewable gases in buildings will be needed. In this regard, cogeneration, which combines the generation of heat and electricity in a single unit to be more efficient, will play a key role to complement an increasingly electrified and renewable energy system. This could be done via district heating combined with large-scale cogeneration or via micro-cogeneration systems inside buildings.

Since 70% of cogeneration is already low carbon today, these various combined heat and power solutions are significantly cutting CO2 emissions already. In the future, cogeneration will continue displacing more carbon intensive and less efficient generation.

Some examples of users include the City of Vienna which is using waste heat from power generation through cogeneration for its district heating network as well as the German local utility Stadtwerke Hassfurt which generates its own hydrogen from local renewable electricity and uses it in a cogeneration unit to supply regional customers with heat and electricity.

On the system level, with the electrification of heat, power grids will be increasingly constrained in winter as peak demand will more than double in many countries. When the uptake of electrified solutions is complemented by gas-based CHP systems roll-out in the same neighbourhood or region, expensive power grid updates can be reduced or avoided.

The integration of energy systems by optimally linking electricity, gas and heat networks will also yield a more flexible energy system and help integrate substantial amounts of renewable energy in the economy. Thus, it is crucial to make use of the existing wide gas grid which is covering more than 50% of the energy needs in European buildings today. Therefore, greening the gas grid must be considered a key objective for decarbonising the European building stock.

In the wake of the economic recovery from the COVID-19 pandemic, the European Commission has launched its “Recovery and Resiliency Facility” which aims to mitigate the economic and social impact of the pandemic. In its strategic guidance, the importance of pursuing economic recovery on the basis of the Green Deal is acknowledged by high efficiency CHP and district heating being recognised as solutions eligible to count towards the RRF’s 37% green recovery objective.

Currently, the Member States are drafting their national recovery and resilience plans which are due to be submitted by 30 April 2021. Most recently, Poland has launched a public consultation on its national recovery plan, with the current draft also foreseeing a replacement of inefficient existing heat sources with high efficiency cogeneration, renewable energy or waste heat to obtain energy efficient district heating systems (target: 85% of systems in Poland to 2030).

Therefore, the RRF presents an immense opportunity to support the decarbonisation of Europe’s buildings by fostering the uptake of highly efficient, future-proof and renewables-ready solutions like cogeneration. With the right incentives in Member States’ national recovery plans in place, the recovery pathway will also contribute to delivering an ambitious Green Deal and meet Europe’s climate commitments.

In a bid to accelerate the energy transition, the European Commission (EC) recently published its draft proposal for an EU Taxonomy. The initiative aims to classify investments making a substantial contribution to the European Union’s (EU) fight against climate change. The proposal sets strict criteria to be labelled “environmentally sustainable”. Yet, skimming through the 500 pages of the text, industrial players and investors may find that one element is missing: the very notion of “transition”.

Among the flagship criteria proposed by the EC is the one-size-fits-all emissions threshold of 100g CO2e/kWh for sectors listed as climate change mitigation activities. That limit is so low that only very few energy solutions are currently able to comply, mainly solar and wind. That leaves many leading European industries, such as the chemical, food and drink, ceramics, pulp and paper and alumina sectors to name a few, with limited choices when seeking funding or getting loans to accelerate their energy transition. Indeed, they need a lot of energy, in particular continuous high temparature heat supply for 24h/7 running production lines. Such heat types cannot be electrified for technical or financial reasons.

Many wonder why such a low threshold was set as a starting point when the carbon intensity of electricity today is on average 296g CO2e/kWh, according to the European Environment Agency. It is even closer to 446g CO2e/kWh or higher when heat or transport are electrified, says The Research Center for Energy Economics in a recent study.

The EU taxonomy Regulation foresees situations where there are no technologically and economically feasible low-carbon alternatives and stipulates that these should qualify as sustainable in so-called “transition activities”. The EC‘s proposal is at odds with this obligaton, for it requires these activities to also meet the – not quite transitional – 100g CO2e/kWh emissions limit.

The result is that power-only plants producing electricity from natural gas would be excluded. Even the most efficient and clean combined heat and power plants (cogeneration), which bring emissions from natural gas to a minimum, would not be able to meet this requirement.

Today, cogeneration is the best emissions performance solution available to these sectors needing huge amounts of energy at competitive prices and at all times. Running increasingly on renewable energy sources, cogeneration is ready for the ‘big switch’ to fuels such as renewable hydrogen and decarbonised gases, when available. Not only will this avoid a carbon lock-in, it will also boost the uptake of these valuable fuels. Moreover, it will avoid wasting renewables fuels thanks to the very high efficiency level of cogeneration.

Elsewhere in the text, the EC considers that emissions lower than 270gCO2e/KWh would do no significant harm. Yet such an emissions limit would not apply, for it is only meant for so-called “climate change adaptation activities”. Given the currently availability of energy technologies, this 270g CO2e/kWh limit would already be a better starting point for transitional mitigation activities to qualify as sustainable. This clarity is urgently needed.

This would also bring greater consistency. The proposed treatment for cogeneration in EU Taxonomy is contradictory of the one of the European Climate Bank, the European Investment Bank (EIB). The EIB decided to stop funding polluting and inefficient fossil fuels and recognised the benefits of high-efficiency cogeneration in its recently revised Energy Lending Policy, provided that their emissions are lower than 250gCO2e/kWh of electricity .This is close to the EC’s 270g CO2 limit proposal. What is more is that the EIB uses the right emissions calculation method for cogeneration to fairly compare emissions from its electricity with electricity from power-only generation, by deducting the emissions that cogeneration avoids on the heat side when replacing an inefficient heat boiler elsewhere in the system. Aligning the EU Taxononmy with EIB’s freshly adopted standards for transitional mitigation activities would bring consistency and investment security.

The very notion of transition is important. Making large carbon emitters such as energy intensive industry less polluting, for example through higher energy efficiency gains, can have major environmental benefits, even if not meeting the 100gCO2 limit. Financing the transition in sectors that are necessary for the European economy and making them more environmentally friendly should be the absolute priority, also to maintain jobs in Europe and avoid carbon leakage.

With its rigid and strict approach, the EC may well prevent, rather than accelerate, investments in sectors where investments are urgently needed. This would run against the intended goal of helping the European economy becoming more sustainable. The text of the EU Taxonomy is expected to be adopted by the end of December 2020. This leaves little time to ensure the currently proposed emissions threshold will not leave industry being stuck in the middle of the energy transition.

The COVID-19 crisis has made it even more important for Europe to set its priorities right and investing in high-impact projects. As European policymakers discuss the framework for the next European Union (EU) budget and the Recovery and Resiliency Facility instrument (RRF), energy efficiency and system integration in heating and cooling should be key drivers for the green recovery objective.

Why heating and cooling for a green recovery?

Representing 50% of energy consumption, heating and cooling is a key sector that needs to embark onto the green transformation. Heating, cooling and hot water make up close to 80% of the final energy use of households, while industrial process and space heat demand make up 70% of businesses’ energy consumption[1]. Heating and cooling supply and demand is very much based on local circumstances, as it cannot be transported far away like other energy carriers. Therefore, financial resources invested in greening this sector will directly benefit European citizens and local businesses.

More than 70% of heating and cooling supply is neither efficient nor renewable. Moreover, renovation rates have remained modest over the past years. These impediments have been flagged by the European Commission in its Renovation Wave and Industrial Strategy communications.

What are the available solutions?

To address the challenges of heating and cooling decarbonisation, there is a need for local strategic planning of demand and supply, efficiency and renewable energy, as well as all energy infrastructure in an integrated way.

Numerous studies have shown that there is no single solution to decarbonise heating and cooling. Accounting for the diversity of energy users, geographies, existing infrastructure at local level and specifics of the building stock, a mix of green heating and cooling solutions should be deployed as soon as possible.

On the demand side, there is ample potential for building renovation and industrial process efficiency, as well as digitalisation, controls and demand response. Concerning the supply of heating and cooling, a win-win strategy will be the uptake of efficient, decentralised generation combined with the switch to renewable sources in both electricity and gas carriers.

System integration solutions like high-efficiency cogeneration will play a key role in modernising heating and cooling between now and 2050[2]. Reducing energy consumption across all fuels will ensure higher uptakes of renewables. Supplying renewable and low carbon heat at times of high demand will help reduce the burden of heat electrification on the power system. Moreover, supplying flexible electricity at times of insufficient wind or sun will further improve system efficiency and resiliency.

EU Member States are already looking into the best mix of heating and cooling solutions for the future as part of their obligations under the Energy Efficiency Directive and the Renewable Energy Directive. The so-called national Comprehensive Assessments on Renewable and Efficient Heating & Cooling (CA H&C) are due at the of 2020 and should guide Member States, industry and local authorities towards green investments in the sector.

How can RRF help?

Member states must commit to prioritising green investments through their recovery and resilience plans. Immediate emissions, efficiency and air quality benefits can be achieved by modernising district heating and cogeneration or replacing old boilers with innovative micro-cogeneration.

Given the diversity of local circumstances, rigid EU level criteria may stifle rather than promote fit for purpose solutions on heating and cooling. Linking the RRF to the outcome of the national CA H&C will ensure an ambitious and flexible approach for much needed investments in the sector. Accounting for the system integration and energy efficiency in heating and cooling as part of the recovery plans, will be key in accelerating EU’s energy transition and boosting local economies at the same time.

[1] https://ec.europa.eu/energy/topics/energy-efficiency/heating-and-cooling_en?redir=1

[2] https://www.cogeneurope.eu/knowledge-centre/cogeneration-in-2050

Shaping a climate neutral world consists of many building blocks. Cutting CO2 emissions, developing renewable energy coupled to increasing energy efficiency and circularity are some of them. It will also require breaking the barriers between disconnected energy systems to decarbonise households, transport and industry at a least cost. The challenge is to start today to make it happen before 2050.

European Union (EU) institutions currently debate increasing the EU’s greenhouse gases (GHG) reduction target to 50-55% by 2030 (compared to 1990 levels). Additional ambition requires a robust impact assessment comprising all solutions for all sectors. It will take boosting renewable energy and energy efficiency in a more decentralised and flexible system. This is key to meet higher targets while taking into account the different energy needs of different economic sectors. Cogeneration, the combined generation of heat and power, is uniquely placed to help deliver higher ambition.

Cogeneration already delivers significant CO2 reductions. Currently, cogeneration is more than 70% renewable and low carbon¹. In the transition phase, cogeneration is the most efficient way of using natural gas and minimising its emissions. Stronger and more stable support is now needed to allow cogeneration delivering further CO2 cuts. Accelerating the uptake of renewable fuels such as hydrogen and bioenergy and using them efficiently in cogeneration will match increased emissions targets.

“Cogeneration is needed for more ambitious 2030 targets and
will integrate energy systems on our 2050 decarbonisation path.”

Beyond helping reducing CO2 emissions, cogeneration delivers the fundamental dimensions Europe needs to become carbon neutral. EU legislation supports cogeneration for its benefits. However, these have been largely overlooked in the various European Green Deal communications released so far. Legal proposals are expected in June 2021. Better considering the below benefits delivered by cogeneration will be key to ensure that households, districts, public buildings and industry can reap the full value of investing in this sustainable and affordable solution.

Breaking the silos. Cogeneration integrates energy systems by optimally linking electricity, gas and heat networks and ensuring their most efficient use at local level. This avoids energy waste, fosters a more flexible energy system and provides energy where and when needed. By offsetting efficiency losses in transmission, distribution and generation, cogeneration becomes particularly important to cost-effectively integrate substantial amounts of renewable energy such as biogas or hydrogen within the economy.
Maximising energy and resource efficiency. Thanks to its high efficiency, cogeneration will enable industry, cities and citizens to make the most out the valuable fuels of the future like bioenergy and hydrogen. Not only will they save money, they will also use less of these primary energies for their heating, cooling and power needs and leave more of them available to decarbonise other sectors.
Enabling circular economy. Today, a vast amount of heat is being wasted, unused. In industry for example, this can be avoided by using cogeneration, for recovery on-site or re-use via district heating in nearby businesses and local communities. The latter enjoy affordable and secure heat supply and the heat supplier gets extra revenues for this service. This makes valuable heat last longer in the economy.
Supporting power grids. To successfully electrify the economy, electricity from dispatchable efficient solutions like cogeneration will be needed. Being local, these solutions will not only meet electricity demand at times of low wind and sun, they will also relieve pressure on electricity grids during peak demand and reduce needs for costly grid reinforcement.

1 27.3% comes from renewables and 45.6% from natural gas according to the latest EU statistics.