CHP means replacing energy with capital: generating and distributing district heating require major investments with long amortisation periods. The general macro-economic benefit is indisputable; the political provisos - such as energy-saving and reduction of energy imports - are realisable. The entrepreneurial benefit, however, is not always immediately apparent.
Nevertheless, CHP should be so well established in entrepreneurial practise that it can withstand the competition on the heat market.
For this reason, CHP will require effective, long-term safeguards for the confidence placed in it, which in turn will have to be reflected in reliable parameters. Moreover, it will require national and European parameters and guidelines on energy policy that will also reconcile environmental policy with macroeconomic imperatives. The district-heating industry will need these types of clear and unmistakable signals to be able to develop economically and with an entrepreneurial orientation.
CHP can make use of any and all primary energy carriers; in fact, depending on the economic situation with regard to energy, switching between the respective energy carriers to be utilised is generally feasible.
By means of official subsidies made available for CHP, the district-heating industry has been able to enjoy sustained micro-economic success in cases which were not initially profitable while at the same time fulfilling its macro-economic mandate.
1. CO2/Energy Tax
Combined heat and power generation should not be penalised as a difficult entrepreneurial sector through an environmental tax, regardless of the type. Instead a bonus arrangement should be considered.In general, those facilities should be preferred in which electricity and useful heat are generated using CHP, as such cogeneration processes display high efficiency and utilisation ratios.
2. European Electricity Guidelines/ Deregulation Initiatives
Further promotion of CHP in Germany - as in Denmark - will require special consideration in the European Community owing to the significant prospects thus made possible for implementing energy efficiency.Cogeneration means the combined production of electricity and heat. Consequently, deregulation cannot be put into effect solely for electricity alone. Here, a reorientation of current political discussions is called for.
In light of the intense competition on the heat market (competing for market share with individual oil and gas heating units), limits have been placed on the use of district heating. Entrepreneurial action will have to be oriented to phases of higher and lower energy prices and rates just as it is with fluctuating interest rates on the capital market. Currently, prices for oil and gas are relatively low, while interest rates are relatively high. This naturally tends to curb capital-intensive district heating investments.
The development of district heating over several decades is shown in Fig. 1. At the time of German reunification in 1989-90, the proportion of district heating used to heat living space was approx. 8-9% in Western Germany and approx. 23-24% in Eastern Germany. Consequently, more than 12% of the German populace now live and work in buildings supplied with district-heating service.
More recent statistical surveys have shown that - at clearly below 40% of district heating output - the percentage of CHP generation in the Eastern part of Germany is considerably lower than indicated by former GDR statistics. In Western Germany, approximately 70% of district heating supplied to networks stems from cogeneration (CHP) plants.