Leveraging both the public and private financial sector to allocate the necessary investments to decarbonisation solutions will be key for a successful energy transition. In this regard, the European Commission has mandated a Technical Expert Group (TEG) to come up with a first draft in a move to set sustainability definitions and benchmarks for investments.
Doing more with less is crucial for achieving climate neutrality. It will reduce both costs and emissions. Cogeneration is one of the solutions that allows to do this by providing reliable and efficient power and heat to businesses, households and public buildings at an affordable cost. Key ingredients for greening our economy and making it grow.
However, the TEG falls short of recognising these benefits. Future investments in cogeneration projects will need to meet a unique threshold of 100g CO2e/kWh to receive a sustainability label. The approach proposed by the TEG displays shortcomings and fails to properly take into account the benefits of cogeneration to achieve the European climate and energy objectives. First of all, no method is provided to allocate emissions from cogeneration. A cogeneration unit does not only generate electricity, but also heat, thereby replacing nearby polluting heat sources. This benefit has been overlooked. This may lead to an unlevel playing field benefiting less efficient heat- and power-only generation solutions, despite the benefits of cogeneration.
Furthermore, one can also wonder why such a low threshold as a starting point. Electricity today is indeed on average 296g CO2e/kWh, according to the European Environment Agency and will likely remain close to that level in the next few years When we electrify heat or transport, carbon intensity of that electricity is actually even higher, more than 400g CO2e/kWh, according to this FfE report. Besides, it appears that some assumptions by the TEG on the availability of technologies which are not yet mature enough, such as Carbon Capture and Storage, are too optimistic.
Overall, the TEG seems to undervalue the potential of energy efficiency, especially when it comes to primary energy savings. This is at odds with European Union (EU) legislation such as the Energy Efficiency Directive and the Harmonised Reference Values Regulation, which provides the recognised framework to measure properly the primary energy savings and CO2 emissions reductions from cogeneration against the best-in-class separate heat and power solutions. This deviation from existing EU energy legislation is particularly remarkable as other technologies covered by the TEG report do follow EU legislation. This point is reflected among others in a joint statement by a broad coalition of different stakeholders which have called for basic principles to be followed by the TEG.
EU legislation recognises the benefits of cogeneration and aims to prioritise the combined generation of heat and power over its separate production, where possible. When tabling its own proposals to establish criteria for sustainability, the European Commission should take into account existing EU legislation to ensure a level playing field for all decarbonisation solutions. Imposing instead an absolute simplistic 100g CO2e/kWh threshold for investments in cogeneration would disadvantage this solution vis-à-vis other less efficient technologies, against the EU goals. The potential of an important asset to achieve EU climate and energy goals should not be left untapped.