1. COGENERATION A Major Challenge and Opportunity for Central and Eastern Europe Dr Simon Minett Director COGEN Europe

2. Qualifications Worked in Ukraine, Belarus Directed staff working in Russia, Slovenia, Poland, Hungary, Romania and Estonia Market Prospects for Cogeneration in Poland, Hungary and Czech Republic Membership for COGEN Europe –National Members in Slovenia, Estonia, Hungary, Poland, Croatia and Czech Republic –ESCOs –Links to all the other countries in Region

3. COGEN EUROPE European Trade Association for CHP 195 Members 30 Countries Promotion of Cogeneration Climate Change Reducing Barriers Studies/Literature

4. Coverage Trends The Challenge Hungary Role of ESCOs Getting the Policy Right Be Bold!

5. Trends Europe –Liberalisation –Greater Decentalisation –Response to Kyoto Central & Eastern Europe and CIS –Accession –Investment in Infrastructure –District Heating versus Point of Use

6. CHP in Europe (% of generation)

7. Share of CHP in Heat Production 1994

8. CHP in Transition Countries

9. Scale of the Challenge Infrastructure needs massive investment Modernisation of industry, bankruptcy and markets 185 million on District Heating Fuel Supply issues Political Structures in need of reform

10. Scope for Savings District Heating 30-60% Building Energy Use 20-40% Industrial Energy Use10-30% Electricity Distribution10-20% Electricity Generation10-12%

11. Potential COGEN Europe’s estimates Poland 15.000 MWe Ukraine 40.000 MWe Hungary 40% of demand = 2.500 MWe Official Forecasts Poland 20-30% (now 10%)

12. Focusing on Hungary Dynamic Country in first wave for EU Electricity 7.500 MWe and 30 TWh/yr Gas 12 million cubic metres, 40% of energy District Heating 108 localities, 8.400 MWth Cogeneration currently 11% of electricity Restructured energy sector

13. Hungary’s Electricity Sector

14. Hungary’s Energy Policy Goals –reduce import dependence –restrict control to a minimum –improve energy efficiency –liberalise tariffs to reflect economic costs –environmental priorities –move to the market economy –adopt least cost solutions

15. Difficulties Prices for gas and electricity are unfavourable for cogeneration No capacity fee Partial reform of the energy prices Restrictions on the use of gas Attitudes to District Heating - old regime Non payment of heating bills

16. Potential Cogeneration on DH 1.800 MWe Cogeneration in industry 450 MWe Cogeneration in tertiary sector > 300 MWe Current capacity ~ 800 MWe Potential = 40% of demand

17. Poland in Perspective 80 years of cogeneration history First installed in industry: sugar, chemicals and mining District Heating growth from 1950, especially the large urban areas such as Warsaw, Wroclaw and Gdynia Now 3.000 MWe in industry and 4.800 MWe on District Heating

18. Cogeneration’s Share Total installed capacity - 33.717 MWe CHP on District Heating - 4.800 MWe CHP in Industry - 3.000 MWe Total CHP - 7.800 MWe = 23% Total production - 142.769 GWh CHP Production - 22.050 GWh = 15%

19. Problems with CHP Statistics: –Industrial CHP is not fully used due to market –Some industrial schemes are closing –Some of the DH CHP is not full CHP True CHP share of market is nearer 10% Much of the CHP is coal-fired and not best in class The investment climate is improving slowly, but...

20. Energy Scene New Energy Law in place, Secondary legislation mostly complete Still political interference in tariffs Tariffs are not fully cost reflective, but they are improving, Principles for independent generation in place Public perception that DH is the past

21. New Projects Katowice 120 MWe coal cogeneration scheme due in November 1999 Jaworzno III 140 MWe coal cogeneration due September 1999 Gorgow 55 MWe gas CCGT cogeneration handed over in January 1999.

22. Potential Major potential for cogeneration on the District Heating through re-powering of DH boiler houses. Question mark over decentralised CHP. As the Polish industry picks up major opportunities in this sector too. We estimate potential is at least 50% of electrical demand = 15.000 MWe

23. What Should be Done? Set the right frameworks - regulatory and legislative Address all the issues affecting cogeneration Encourage and ensure the conditions are right for foreign investment Develop a strategy and set a target

24. Role of ESCOs Transfer of technology from west to east Financing of energy projects and CHP EBRD support Players - Honeywell, Landis&Gyr, Compagnie Generale de Chauffe and ESCO International, And more….?

25. Policy Actions Electricity Regime Heat Regime Planning, Taxation, Environment Investment Climate Reduce Barriers Co-ordinated Promotion

26. The Next Few Years Are Critical Debate between District Heating, Decentralised Cogeneration and Centralisation of Electricity Set Targets Get the Investment Climate Right Cogeneration has a major role to play in changing the economic well being of the region

27. Boldness is necessary! This is not an academic exercise Cogeneration is a key part of realising the EU’s legally binding commitments made in Kyoto The Strategy target to double cogeneration must therefore be achieved We MUST find the will to achieve growth in the new liberalised world

28. Be Bold There are 10 years left to double cogeneration’s share of the market. This is 60-70.000 MWe in the EU 15 Plus 20.000 MWe replacement of existing plant Plus Transition Economies (0 to 30 GWe) Thus ~ 100 GWe or 10.000 MWe per year Around 4 times current activity