Cogeneration investments are technically justified, but currently are not able to defend themself without a support system
Industrial cogeneration is probably all right, if there are so many implemented and announced investments - said Rafał Psik, Key Account Manager in Doosan Skoda Power. However, it is worth considering the backlog in the development of cogeneration capacity which is supposed to power the local heating networks, because many representatives of the market during the 3rd edition of the seminar "Developing prospects of cogeneration" drew attention to the large amount of holds up for the sector.
During the event a majority representatives of the district heating drew attention to the same support system infirmities, as well as to many risks such as uncertainty in prices of individual fuels and unknown prices of CO2 emission allowances, as well as the development of distributed renewable energy generation and the inability to increase heat prices and low electricity prices. We should not think about the vulnerability in the support systems, but about the vulnerability of the investment, which is a repercussion of the legislative tardiness and several other factors resulting from the European energy and climate policy.
CHP Europe sees through the prism of decarbonisation and energy saving.
The market for some time criticized the uncoordinated actions of the European Commission, but according to Fiona Riddoch, Managing Director of COGEN Europe, the situation will soon positively change due to changes in internal structures. Earlier the European Commission in the development of CHP put almost exclusively on reducing carbon and improving safety, and now has to be better through the Energy Union and activities division into five categories / areas: security, integrated market, energy efficiency, moving away from carbon and innovative research.
According to COGEN Europe representatives in the near future cogeneration should appear intencivly, especially in the context of decarbonisation and energy efficiency, and a new European strategy for heating and cooling. Although some cogeneration areas can handle alone (without support), to introduce cogeneration in the broader range (not just in Poland), the market needs political support and the proper attitude. CHP will not go forward if it is not economically viable for the end user. Riddoch says that the policy must mobilize the policy around the industry, as the support mechanism for the power plant must provide an adequate rate of return and dialogue is essential. Although we recognize the positive effects of earlier systems based on the certificates of origin and tariffs guaranteed, we should not expect to have similar projects. Today in the European Union we go to the mechanisms based on the market game, and the market does not operate in isolation and is sensitive to the policies of the Member States, so the key is to secure guaranteed income and reduce individual risks.
The current support system is not satisfactory for the market, because it's basically prosthesis of the system.
Although the benefits of cogeneration stem directly from the laws of physics, the industry faces a number of obstacles in the implementation of cogeneration investments - Adam Rajewski stated at the outset, from the Institute of Heat Engineering on Warsaw University of Technology. A key factor for the development of installations producing electricity and heat in combination is a support system. Today we have a system which is substantially system prosthesis.
Andrzej Rubczyński, Director of Regulatory and Legislative, PGNiG Termika SA concluded that the cogeneration situation today does not look better than a year ago. Time is running out and a year ago was an additional actions potential that could be performed within twelve months. Rubczyński reminded of European discourse in incentive effect and documents circulation related to it and reported that the company PGNiG Termika received confirmation from the Energy Regulatory Authority (URE) and the European Commission that the company positivly passes the "test" linked to the incentive effect. Although there is a fear that the Commission might in future find that confirmation has been made in the majesty of a specific law and the system, however Rubczyński believes, that the so-called promise to continue the legislation (specifically promise to continue the support mechanisms) is quite strong, as an extension of the support system was repeatedly signaled by the Ministry of Economy even in the “Polish Energy Policy 2030” and in 2050 PEP draft.
Is it worth to base an investment decision based on expectation of continued support for CHP?
Marcin Bruszewski, Legal Director in Fortum Power and Heat Poland Sp. z o.o said that Poland is one of the key markets for the Finnish consortium. The planned investment in Zabrze in cogeneration will have the ability to burn multiple fuels - coal, waste and biomass. Scandinavia shows that you can live without a support system for cogeneration. According to Bruszewski the the support mechanisms extention promise for Fortum is not something on which the firm could rely on an investment decision, because - as stated the representative of the Finnish company - no one ever in a binding manner promised that the system of support for cogeneration will last longer than 2018. Although in government documents appeared incentives for investors, in the meantime, were also created new documents by the European Commission. The reality goes in a direction that it would be difficult to expect that the Commission allow Poland the support, in shape that is today. According to Bruszewski while planning current investments, you should look at the RES Act, because there is currently more certain support scheme. The expert said that the investment decision to build multifuel (coal, RDF / pre-RDF, optionally biomass) unit in Zabrze has been taken, because it "spin up" without a new system of support, but with some external financing based on public funds.
NFOŚiGW: We want to buy the ecological effect by the lowest costs.
Wojciech Stawiany from the National Fund for Environmental Protection and Water Management informed the participants about the current and potential future open calls for the funding of cogeneration investments. For Fund cogeneration is one way of reducing the so-called “low emissions”, but Stawiany pointed out that under the current policy, the ecological effect is to be bought as cheaply as possible. Stork (Bocian) and E-accumulator (E-kumulator) Programs has elements for cogeneration, but valuable information for representatives of the market was certainly the message, according to which the Fund is considering launching a financial cogeneration support program and is closely monitoring the business dialogue that might prepare the right kind of incentives for the planning of new generation sources from national NFOŚiGW's funds (ordinary).
Cogeneration is anchored in the provisions of European law - “Commission's energy summer package” and the strategy for heating and cooling
Dr. Eng. Janusz Ryk, Director of the Polish Association of Heat and Power Plants (PTEZ) believes that support mechanisms should be legal continuity. If today's support mechanism is valid until 2018, and the first auction - in this direction the support mechanisms are heading – will take place in 2017 or 2018, then we can expect new investments approximately in five years, so around years 2022-2023. We need to pay attention in discussions with politicians, that it is not about a break in the functioning of support mechanisms, but stagnation in the construction of new sources. Today, investment decisions are not taken on the basis of known and described legislation but on the basis of its own assessment of the situation, which may be conducted, but not necessarily. Cogeneration is fixed in the provisions of European law – “Commission's energy summer package” and a strategy for heating and cooling. We do not know yet the results of this work, and they can be crucial for the future development of the generation of heat and electricity cogeneration. It is worth remembering that the current uncertainties make it difficult to construct the support mechanism.
Are we threaten by the Romanian scenario of cogeneration fall?
Rafal Psik, Key Account Director CEE in Doosan got participants familiar with CHP regress in Romania, where associated heat and power sources disappeared, and a large part of the installations is in the gigantic debts. In the early 90s in Romania twere about 250 isolated heat networks, today of these systems are only 80. In 90s, nearly 25% of the electricity in the Romanian networks came from cogeneration units, at the moment it is only 10%, for which corresponds to about 60 CHP plants, most of which work on gas and has the power in the range 1-100 MW. It is interesting case of Petroszany CHP plant, which produces the cheapest heat in Romania - the plant is owned by Veolia and it is no subsidized in any way.
Climate change package is now the driver for CHP changes
Krzysztof Kidawa, Vice President, Chamber of Industrial Energetics and Energy Customers recalled that the industry also needs a support system for cogeneration, because the industry produces energy not only for internal purposes, but also supplies the city, which are located at industrial facilities. Despite the today's anxiety energy-intensive industry is counting on rational solution. According to Kidawa driver of changes is now the climate package. Searching for vision of an integrated and sustainable development of enterprises Industry makes investment decisions despite lack of the support system, which would be entirely satisfactory. According to expert there is need to think about the system, which will be partly imposed by EU legislation.
All support the cogeneration system, but unfortunately only verbally
Włodzimierz Kędziora, Vice President and Director of Energy Policy and Regulatory at Veolia Energy Poland SA appealed that in Poland currently there is not good conditions for the development of cogeneration. According to the expert, potential new support scheme should remain in force for a long uninterrupted period of time (about 15 years), so the investments could be profitable. The expert said that all support cogeneration, but only verbally, because in binding documents cogeneration power greater than 20MW is discriminated, mostly couse of the EU ETS and IEDs regulation. According Kedziora,, it is believed in Poland that it is better to destroy cogeneration, and develop renewable energy sources. The mechanism from RES Act, which makes that simple Biomass boiler can displace large cogeneration plants, is in Kędziora convicion defective mechanism. Veolia representative also drew attention to the fact that in development of cogeneration municipalities should be interested, to optimize together with companies the heat distribution and to meet the demand for energy.
Kędziora advises that due to modernization the demand for heat is reducing, so if Veolia will not gain new customers, then network losses and fixed costs will start to grow, what will result in price increase and the recipients disconnecting. It may be, of course, vice versa - prices and losses will fall when the system will join the new recipient.
New support scheme should be developed and implemented as soon as possible.
Marcin Staniszewski, Director of Operations, Manufacturing Department, TAURON Ciepło believes that the current cogeneration situation is bad firstly because of the uncertainty of legislative and secondly because of contracted electricity prices, the Tauron Ciepło cogeneration units practically do not count among others.
Staniszewski informed that Tauron in “Tychy” Power plant five years ago began investment of construction of coal fueled cogeneration unit with circulating fluidized boiler. The project is now almoust completed, but according to the analysis carried out five years ago there were assumptions under which the red certificate had to cost 40 PLN, and MWh of electricity 280 PLN. Today certificate costs about 10 PLN, and the price of electricity on futures for 2016 is 155 PLN, and in 2017 - 158 PLN. According to the expert though today during the winter costs of energy production in cogeneration are relatively low (in the structures of Tauron are coal mines), it is the off season cogeneration unit is unprofitable, if we take into account all the costs associated with the system EUETS
Investors are awaiting a clearer communication
Tadeusz Kopczyński, Head of Production, Municpal Heating Plant in Brzeg (BPEC Sp. z o.o.) added that the government has not thought well the situation, in which most companies will not want to take the risk of investment. The expert suggests that the message should be clear - whether a prolongation of the support system will occur or not - without signals there will not be decision of investment. Today, due to high gas prices - a key cost factor - many companies give up gas-based cogeneration.
Kopczyński added that some of the ideas that work for larger enterprises, not suited for smaller sources - most of the heating plant in the summer just is not working or will not work. The expert stated that the investment already made by BPEC enabled the new customers connection and is a flexible source that can be controlled remotely. Although the current support in the form of certificates of origin is not strictly investment support, however, during the projects preparation they took them into account.
You can not cheat the cash-flow
On the other hand, Jerzy Uziębło, Technical Director, Municipal Heating Plant in Mińsk Mazowiecki (PEC Mińsk Mazowiecki) stressed that the support systems is not just yellow and red certificates, but also environmental investments support. Expert pointed out that some installations could be realized eg. 10% of own funds, and the remaining funds organized with grants and loans. Uziębło stated that the real threat to business growth can be disguised carbon tax, which he believes is hidden, eg. in the excise tax on gas.
Director of PEC Mińsk Mazowiecki believes that awaits us revolution linked to the the price increase (of certificates or heat), because currently the company of similar size and specifications then PEC Mińsk Mazowiecki, an investment of 2.5 MW is a six-cash-flow and this can not be fooled. Uziębło states that the price increase of heat is real, but no one will risk the approval of an increase of 5% per annum. Although at this pmoment due to the coal prices reduction, PEC Mińsk mazowiecki could even reduce the price of heat but in the future as far as possible the price will probably rise.
Cogeneration units that defend themselfs technically - renovate or close?
Michał Kieruczenko, Planning, Investment and Development Chief Specialist in Investment and Devices Management Planning Department, Szczecińska Energetyka Cieplna Sp. z o.o. (SEC) reported that an investment decision on the construction of gas cogeneration company has taken on the basis of financial analysis, which took into account the situation without certificates of origin and the situation when the price of heat and electricity would decrease and the price of gas would increase. The decision was taken due to the possibility of grants from WFOŚiGW ( Regional Fund for Environmental Protection and Water Management) of 40%. Kieruczenko added that 30% of the funds came from a loan and 30% from their own funds.
According to the expert unit defends itself technically and is stopted only for maintenance and during network failure. Due to the current low price of electricity and low prices of certificates of origin and the high price of gas, the plant does not defend economically, but company exploited the unit because of prior financing. In 2018, when end the current system of support, and the eunit will have 60 thousand hours of work, the company will have to consider whether to incur expenditure of 50% of this unit. Analysis of the coming years will result in one of two decisions: overhauling or extinguishing unit. The SEC company considered the construction of larger cogeneration unit, but the projects have been suspended due to vague situation on the market.
Adam Rajewski at the end of the second debate stated that there is the technical potential to meet sub-peak order with cogeneration in our country, but today Polish support scheme does not provide such solution.
The potential for development is huge, but conditions are unfavorable - support should be flexible
Andrzej Rubczyński said that stopping the development of CHP in Poland is caused mainly by that the heat is a tool of social policy and not a marketable product. Low price of electricity is not able to compensate the capital investment at the moment, and therefore could have a flexible support for start-up, which could be corrected individually, when the investment will no longer be able to cope without support.
PGNiG Termika representative presented estimates according to which in Poland is the potential to build 4-5 GWe power cogeneration units, which would result in the additional production of electricity in the amount of 24 TWh and trasmition into energy security increasing. In addition, the mentioned investments would reduce CO2 emissions by 16.4 million tons (0.6 billion PLN) and reduce coal consumption by 6.3 million tons (1.8 billion PLN), and also would reduce transmission losses of 1.9TWh (0.4 billion PLN). Also the social costs unincorporated in the price of energy would be reduced about 1.2 billion PLN.
Air conditioning systems powered by network heat - pilot project in Krakow
Emil Stańczyk, MSc Eng., PhD Student Faculty of Mechanical Engineering and Robotics - University of Mining and Metallurgy in Krakow (AGH), presented the participants pilot research project about instalation for the cold production from district heat and discussed the differences between the absorption and adsorption system units. The "ice water" production project was realized in cooperation with MPEC Kraków, EDF and CEZ.
The aim of the project was to investigate the possibility of increasing the economic efficiency of district heating companies, in particular during the off heating season. The representative of AGH while analyzing the impact of cold production from the heat in reducing the use of electricity for air conditioning systems drew attention to additional profits like reducing emissions of harmful substances into the atmosphere, as well as the ability to increase the amount of produced electricity in combination.
ORC proven technology for energy production in cogeneration
Stella Bolognini, Sales Engineer in Turboden, a Mitsubishi Heavy Industries company, and a global leader in Organic Rankine Cycle (ORC) turbogenerators presented an overwie of ORC cogeneration turbines. The company Turboden has wide experience in Poland. Company carried out the construction of cogeneration units for such entities as: Ostrowski Heating Plant SA, Malteurop Poland Sp. z o.o in Gdansk, as well as many businesses in Europe.
Bolognini draws attention to the fact that units based on ORC are systems easy to use – the turbine start up and shut down does not require skilled operators, who have to be employed in the plant. This translates into low cost of operation. It is worth noting that the technology, in which Italian company specializes can work efficiently at lower loads, which seems to be a big advantage for companies struggling with economically viable production decreased during the heating season.
Roeland Nollen, Sales Manager Northern Europe at TURBOMACH GmbH - Caterpillar group company – introduced the Caterpillar group extensive experience in the field of CHP installations. As part of the Solar Turbines family over 4800 power generation units with over 13’000 MW were installed in all applications and industries such as: food, ceramic, textile, chemical and pharmaceutical, building complex, heating and energy suppliers. The speaker mentioned as an example of investment realized by the Turbomach company in Poland construction of a gas turbogenerator for ZEC Siedlce.
Using the potential of a low-temperature cooling
Günther Hein Chief Executive Officer (CEO) of AGO AG Energie + Anlagen, a plant engineering company in the energy sector, gave a lecture on trigeneration, in particular the production of electricity from waste heat and cold production from waste heat - ammonia/water absorption chiller to generate temperatures as low as -28°C – e.g. for food, beverage and logistic market (“AGO Congelo”). He presented the energy flows on the examples of cogeneration and trigeneration in winter and summer time, where gas turbine was used to produce (beside electricity) in winter - heat and in summer cold. The speaker also presented an example of investment carried out by the AGO for a dairy company in Germany. He also presented economic evaluation - return on Investment for 2 MW Trigeneration Plant in Germany and in Poland, and the economic benefits of such investments depending on the situation legislator.
All representatives of strategic partners argued that cogeneration and polygeneration is the best solution not only for industrial power and district heating, but also for energy-intensive industries.
Cogeneration through the prism of the RES Act
Maciej Szambelańczyk, Legal Counsel at the law firm WKB Wierciński, Kwieciński, Baehr
at the beginning of his lecture outlined the EU and Polish regulations, which lead to the implementation of the new Law on RES i poland in 2015. He introduced and briefly described the main elements of the Act related to cogeneration: Certificates of origin; Auctions for new generators in RES installations; Renewable Energy Settlement Operator (Operator Rozliczeń Energii Odnawialnej S.A.)- The state entity responsible for clearing the auction of electricity from renewable energy installations; Feed-in tariffs (FiT) for new installations up to 10kW; Seller obligation - the obligation to purchase energy from renewable sources; The current system of support (certificates) maintained for existing RES installations (with modifications, existing installations will be able to "enter" to the auction system); The level of support depends on received public aid ; The effectiveness of the system.
Szambelańczyk focused on acquainting the participants with elements of the new auction system: the entities eligible to participate, prequalification system, manner of conducting the auction, reference prices and their settlement.
According to the Legal Counsel at the law firm WKB, companies entitled to participate in the auction now should familiarize themselves with the system prequalification, ways of conducting auctions, and also to think about the reference price and its settlement. Szambelańczyk as well as representatives of the power and heat market stated that our government caused by EC guidelines on State aid, in which manufacturers apply for broad contracts, most likely opt for a system analogous to that which was prepared for renewable energy, that the auction system.
A representative of the WKB added that the Polish legislator did not accept the establishment of support theoretically the best and most expensive energy technologies (in terms of RES installations), which will have paid off only in the future, which makes it difficult to assume that new installations will be constructed, because will not be able to compete within the next few years.
Cogeneration from the industry with his own power generation point of view
Rafał Psik, Key Account Director CEE, Doosan quote to the participants several recently commissioned projects of industrial cogeneration: gas-steam blocks for KGHM (2 x 45 MW) cogeneration unit for the gas coke for the “Koksownia Przyjaźń” Plant (71 MW), development of new turbine set in Synthos Oswiecim (27 MW) and a combustion engine on coke gas for “Koksownia Czestochowa Nowa” plant (3 Mwe). In the CHP recently also invested Orlen (460 Mwe in Wloclawek, in Plock - 580 Mwe), Zaklady Azotowe Kedzierzyn (24 Mwe), TAMEH (55 Mwe), Mondi Świecie (86 MWe) and JSW in Zofiówka (75 MWe). Examples include more, because there are still carried out repairs and modernization.
Doosan representative analyzed for the participants the pros and cons of procurement, both in the formula of turnkey and self-completion method of supply, or buying each device separately, which can be extremely complex and risky procedure. Psik also recalled that some investors do not have the obligation to carry out public procurement. The surprise may be the fact that large state-owned companies as Orlen and KGHM buy blocks of a few billion PLN not in public procurement formula but the normal internal bidding process, in normal negotiations, in which the companies are discussing and repeatedly changing price and adjust the offer very carefully to the needs of the investor. The expert also spoke about the contractual arrangements in case of technology adoption to the needs of the contracting authority (which should be identified) and contracts of service. He also warned against the use of services of suspiciously cheap consultants, because it happens that they copy the tender specifications of other projects on a "copy + paste " way. According to Psik the investor should not save in this way at the beginning of the project, because weak consultant will not be helpful in the bidding process, which ultimately can lead to significant losses later.
The article was prepared by CBE Polska Team on the basis of lectures and materials from the 3rd edition of the International Seminar on "Development prospects of cogeneration," which was held on 26th August 2015 in Warsaw.
Organizing a seminar we host participants both from Poland and abroad. Seminar Strategic Partners included: PGNiG Termika, Veolia Energia Polska, Turboden, Turbomach i AGO AG,
As a Exhibitors presented their brand: Tedom, OPRA Turbines, SOKRATHERM, and the Coffee Break Sponsor was company LUEHR FILTER.
In addition, the event was created in cooperation with: Cogen EUROPE, Fortum, Tauron Ciepło, Brzeskie Przedsiębiorstwo Energetyki Cieplnej, Przedsiębiorstwo Energetyki Cieplnej w Mińsku Mazowieckim, Szczecińska Energetyka Cieplna, FUMAR, BMH Technology, Doosan, Akademia Górniczo-Hutnicza im. Stanisława Staszica w Krakowie, Kancelaria prawnicza WKB Wierciński, Kwieciński, Baehr.
The event was under the Honorary Patronage of: Narodowy Fundusz Ochrony Środowiska i Gospodarki Wodnej, National Energy Conservation Agency (NAPE)., Agencję Rynku Energii (ARE), Polish Chamber of Commerce for High Technology IZTECH, Association of Polish Dairy Processors (APDP), Scientific and Technical Association "Energy and Environment in the dairy", Prof. Wacław Dąbrowski Institute of Agricultural and Food Biotechnology (IAFB), Employers' Association Renewable Energy Forum (ZP FEO), Association of Polish Regional Breweries, The Scandinavian-Polish Chamber of Commerce (SPCC), PPolish-German Chamber of Industry and Commerce (AHK Poland) and The Polish Economic Chamber of Renewable Energy (PIGEOR).
Media Patrons: BiznesAlert.pl, inzynieria.com, Paliwa i Energetyka, Czysta Energia, Energetyka Cieplna i Zawodowa, gramwzielone.pl, srodowisko.abc.com.pl, IOZE.pl and econet-poland.pl.
Simultaneous translation was provided by company Bireta Professional Translations.
During the event a majority representatives of the district heating drew attention to the same support system infirmities, as well as to many risks such as uncertainty in prices of individual fuels and unknown prices of CO2 emission allowances, as well as the development of distributed renewable energy generation and the inability to increase heat prices and low electricity prices. We should not think about the vulnerability in the support systems, but about the vulnerability of the investment, which is a repercussion of the legislative tardiness and several other factors resulting from the European energy and climate policy.
CHP Europe sees through the prism of decarbonisation and energy saving.
The market for some time criticized the uncoordinated actions of the European Commission, but according to Fiona Riddoch, Managing Director of COGEN Europe, the situation will soon positively change due to changes in internal structures. Earlier the European Commission in the development of CHP put almost exclusively on reducing carbon and improving safety, and now has to be better through the Energy Union and activities division into five categories / areas: security, integrated market, energy efficiency, moving away from carbon and innovative research.
According to COGEN Europe representatives in the near future cogeneration should appear intencivly, especially in the context of decarbonisation and energy efficiency, and a new European strategy for heating and cooling. Although some cogeneration areas can handle alone (without support), to introduce cogeneration in the broader range (not just in Poland), the market needs political support and the proper attitude. CHP will not go forward if it is not economically viable for the end user. Riddoch says that the policy must mobilize the policy around the industry, as the support mechanism for the power plant must provide an adequate rate of return and dialogue is essential. Although we recognize the positive effects of earlier systems based on the certificates of origin and tariffs guaranteed, we should not expect to have similar projects. Today in the European Union we go to the mechanisms based on the market game, and the market does not operate in isolation and is sensitive to the policies of the Member States, so the key is to secure guaranteed income and reduce individual risks.
The current support system is not satisfactory for the market, because it's basically prosthesis of the system.
Although the benefits of cogeneration stem directly from the laws of physics, the industry faces a number of obstacles in the implementation of cogeneration investments - Adam Rajewski stated at the outset, from the Institute of Heat Engineering on Warsaw University of Technology. A key factor for the development of installations producing electricity and heat in combination is a support system. Today we have a system which is substantially system prosthesis.
Andrzej Rubczyński, Director of Regulatory and Legislative, PGNiG Termika SA concluded that the cogeneration situation today does not look better than a year ago. Time is running out and a year ago was an additional actions potential that could be performed within twelve months. Rubczyński reminded of European discourse in incentive effect and documents circulation related to it and reported that the company PGNiG Termika received confirmation from the Energy Regulatory Authority (URE) and the European Commission that the company positivly passes the "test" linked to the incentive effect. Although there is a fear that the Commission might in future find that confirmation has been made in the majesty of a specific law and the system, however Rubczyński believes, that the so-called promise to continue the legislation (specifically promise to continue the support mechanisms) is quite strong, as an extension of the support system was repeatedly signaled by the Ministry of Economy even in the “Polish Energy Policy 2030” and in 2050 PEP draft.
Is it worth to base an investment decision based on expectation of continued support for CHP?
Marcin Bruszewski, Legal Director in Fortum Power and Heat Poland Sp. z o.o said that Poland is one of the key markets for the Finnish consortium. The planned investment in Zabrze in cogeneration will have the ability to burn multiple fuels - coal, waste and biomass. Scandinavia shows that you can live without a support system for cogeneration. According to Bruszewski the the support mechanisms extention promise for Fortum is not something on which the firm could rely on an investment decision, because - as stated the representative of the Finnish company - no one ever in a binding manner promised that the system of support for cogeneration will last longer than 2018. Although in government documents appeared incentives for investors, in the meantime, were also created new documents by the European Commission. The reality goes in a direction that it would be difficult to expect that the Commission allow Poland the support, in shape that is today. According to Bruszewski while planning current investments, you should look at the RES Act, because there is currently more certain support scheme. The expert said that the investment decision to build multifuel (coal, RDF / pre-RDF, optionally biomass) unit in Zabrze has been taken, because it "spin up" without a new system of support, but with some external financing based on public funds.
NFOŚiGW: We want to buy the ecological effect by the lowest costs.
Wojciech Stawiany from the National Fund for Environmental Protection and Water Management informed the participants about the current and potential future open calls for the funding of cogeneration investments. For Fund cogeneration is one way of reducing the so-called “low emissions”, but Stawiany pointed out that under the current policy, the ecological effect is to be bought as cheaply as possible. Stork (Bocian) and E-accumulator (E-kumulator) Programs has elements for cogeneration, but valuable information for representatives of the market was certainly the message, according to which the Fund is considering launching a financial cogeneration support program and is closely monitoring the business dialogue that might prepare the right kind of incentives for the planning of new generation sources from national NFOŚiGW's funds (ordinary).
Cogeneration is anchored in the provisions of European law - “Commission's energy summer package” and the strategy for heating and cooling
Dr. Eng. Janusz Ryk, Director of the Polish Association of Heat and Power Plants (PTEZ) believes that support mechanisms should be legal continuity. If today's support mechanism is valid until 2018, and the first auction - in this direction the support mechanisms are heading – will take place in 2017 or 2018, then we can expect new investments approximately in five years, so around years 2022-2023. We need to pay attention in discussions with politicians, that it is not about a break in the functioning of support mechanisms, but stagnation in the construction of new sources. Today, investment decisions are not taken on the basis of known and described legislation but on the basis of its own assessment of the situation, which may be conducted, but not necessarily. Cogeneration is fixed in the provisions of European law – “Commission's energy summer package” and a strategy for heating and cooling. We do not know yet the results of this work, and they can be crucial for the future development of the generation of heat and electricity cogeneration. It is worth remembering that the current uncertainties make it difficult to construct the support mechanism.
Are we threaten by the Romanian scenario of cogeneration fall?
Rafal Psik, Key Account Director CEE in Doosan got participants familiar with CHP regress in Romania, where associated heat and power sources disappeared, and a large part of the installations is in the gigantic debts. In the early 90s in Romania twere about 250 isolated heat networks, today of these systems are only 80. In 90s, nearly 25% of the electricity in the Romanian networks came from cogeneration units, at the moment it is only 10%, for which corresponds to about 60 CHP plants, most of which work on gas and has the power in the range 1-100 MW. It is interesting case of Petroszany CHP plant, which produces the cheapest heat in Romania - the plant is owned by Veolia and it is no subsidized in any way.
Climate change package is now the driver for CHP changes
Krzysztof Kidawa, Vice President, Chamber of Industrial Energetics and Energy Customers recalled that the industry also needs a support system for cogeneration, because the industry produces energy not only for internal purposes, but also supplies the city, which are located at industrial facilities. Despite the today's anxiety energy-intensive industry is counting on rational solution. According to Kidawa driver of changes is now the climate package. Searching for vision of an integrated and sustainable development of enterprises Industry makes investment decisions despite lack of the support system, which would be entirely satisfactory. According to expert there is need to think about the system, which will be partly imposed by EU legislation.
All support the cogeneration system, but unfortunately only verbally
Włodzimierz Kędziora, Vice President and Director of Energy Policy and Regulatory at Veolia Energy Poland SA appealed that in Poland currently there is not good conditions for the development of cogeneration. According to the expert, potential new support scheme should remain in force for a long uninterrupted period of time (about 15 years), so the investments could be profitable. The expert said that all support cogeneration, but only verbally, because in binding documents cogeneration power greater than 20MW is discriminated, mostly couse of the EU ETS and IEDs regulation. According Kedziora,, it is believed in Poland that it is better to destroy cogeneration, and develop renewable energy sources. The mechanism from RES Act, which makes that simple Biomass boiler can displace large cogeneration plants, is in Kędziora convicion defective mechanism. Veolia representative also drew attention to the fact that in development of cogeneration municipalities should be interested, to optimize together with companies the heat distribution and to meet the demand for energy.
Kędziora advises that due to modernization the demand for heat is reducing, so if Veolia will not gain new customers, then network losses and fixed costs will start to grow, what will result in price increase and the recipients disconnecting. It may be, of course, vice versa - prices and losses will fall when the system will join the new recipient.
New support scheme should be developed and implemented as soon as possible.
Marcin Staniszewski, Director of Operations, Manufacturing Department, TAURON Ciepło believes that the current cogeneration situation is bad firstly because of the uncertainty of legislative and secondly because of contracted electricity prices, the Tauron Ciepło cogeneration units practically do not count among others.
Staniszewski informed that Tauron in “Tychy” Power plant five years ago began investment of construction of coal fueled cogeneration unit with circulating fluidized boiler. The project is now almoust completed, but according to the analysis carried out five years ago there were assumptions under which the red certificate had to cost 40 PLN, and MWh of electricity 280 PLN. Today certificate costs about 10 PLN, and the price of electricity on futures for 2016 is 155 PLN, and in 2017 - 158 PLN. According to the expert though today during the winter costs of energy production in cogeneration are relatively low (in the structures of Tauron are coal mines), it is the off season cogeneration unit is unprofitable, if we take into account all the costs associated with the system EUETS
Investors are awaiting a clearer communication
Tadeusz Kopczyński, Head of Production, Municpal Heating Plant in Brzeg (BPEC Sp. z o.o.) added that the government has not thought well the situation, in which most companies will not want to take the risk of investment. The expert suggests that the message should be clear - whether a prolongation of the support system will occur or not - without signals there will not be decision of investment. Today, due to high gas prices - a key cost factor - many companies give up gas-based cogeneration.
Kopczyński added that some of the ideas that work for larger enterprises, not suited for smaller sources - most of the heating plant in the summer just is not working or will not work. The expert stated that the investment already made by BPEC enabled the new customers connection and is a flexible source that can be controlled remotely. Although the current support in the form of certificates of origin is not strictly investment support, however, during the projects preparation they took them into account.
You can not cheat the cash-flow
On the other hand, Jerzy Uziębło, Technical Director, Municipal Heating Plant in Mińsk Mazowiecki (PEC Mińsk Mazowiecki) stressed that the support systems is not just yellow and red certificates, but also environmental investments support. Expert pointed out that some installations could be realized eg. 10% of own funds, and the remaining funds organized with grants and loans. Uziębło stated that the real threat to business growth can be disguised carbon tax, which he believes is hidden, eg. in the excise tax on gas.
Director of PEC Mińsk Mazowiecki believes that awaits us revolution linked to the the price increase (of certificates or heat), because currently the company of similar size and specifications then PEC Mińsk Mazowiecki, an investment of 2.5 MW is a six-cash-flow and this can not be fooled. Uziębło states that the price increase of heat is real, but no one will risk the approval of an increase of 5% per annum. Although at this pmoment due to the coal prices reduction, PEC Mińsk mazowiecki could even reduce the price of heat but in the future as far as possible the price will probably rise.
Cogeneration units that defend themselfs technically - renovate or close?
Michał Kieruczenko, Planning, Investment and Development Chief Specialist in Investment and Devices Management Planning Department, Szczecińska Energetyka Cieplna Sp. z o.o. (SEC) reported that an investment decision on the construction of gas cogeneration company has taken on the basis of financial analysis, which took into account the situation without certificates of origin and the situation when the price of heat and electricity would decrease and the price of gas would increase. The decision was taken due to the possibility of grants from WFOŚiGW ( Regional Fund for Environmental Protection and Water Management) of 40%. Kieruczenko added that 30% of the funds came from a loan and 30% from their own funds.
According to the expert unit defends itself technically and is stopted only for maintenance and during network failure. Due to the current low price of electricity and low prices of certificates of origin and the high price of gas, the plant does not defend economically, but company exploited the unit because of prior financing. In 2018, when end the current system of support, and the eunit will have 60 thousand hours of work, the company will have to consider whether to incur expenditure of 50% of this unit. Analysis of the coming years will result in one of two decisions: overhauling or extinguishing unit. The SEC company considered the construction of larger cogeneration unit, but the projects have been suspended due to vague situation on the market.
Adam Rajewski at the end of the second debate stated that there is the technical potential to meet sub-peak order with cogeneration in our country, but today Polish support scheme does not provide such solution.
The potential for development is huge, but conditions are unfavorable - support should be flexible
Andrzej Rubczyński said that stopping the development of CHP in Poland is caused mainly by that the heat is a tool of social policy and not a marketable product. Low price of electricity is not able to compensate the capital investment at the moment, and therefore could have a flexible support for start-up, which could be corrected individually, when the investment will no longer be able to cope without support.
PGNiG Termika representative presented estimates according to which in Poland is the potential to build 4-5 GWe power cogeneration units, which would result in the additional production of electricity in the amount of 24 TWh and trasmition into energy security increasing. In addition, the mentioned investments would reduce CO2 emissions by 16.4 million tons (0.6 billion PLN) and reduce coal consumption by 6.3 million tons (1.8 billion PLN), and also would reduce transmission losses of 1.9TWh (0.4 billion PLN). Also the social costs unincorporated in the price of energy would be reduced about 1.2 billion PLN.
Air conditioning systems powered by network heat - pilot project in Krakow
Emil Stańczyk, MSc Eng., PhD Student Faculty of Mechanical Engineering and Robotics - University of Mining and Metallurgy in Krakow (AGH), presented the participants pilot research project about instalation for the cold production from district heat and discussed the differences between the absorption and adsorption system units. The "ice water" production project was realized in cooperation with MPEC Kraków, EDF and CEZ.
The aim of the project was to investigate the possibility of increasing the economic efficiency of district heating companies, in particular during the off heating season. The representative of AGH while analyzing the impact of cold production from the heat in reducing the use of electricity for air conditioning systems drew attention to additional profits like reducing emissions of harmful substances into the atmosphere, as well as the ability to increase the amount of produced electricity in combination.
ORC proven technology for energy production in cogeneration
Stella Bolognini, Sales Engineer in Turboden, a Mitsubishi Heavy Industries company, and a global leader in Organic Rankine Cycle (ORC) turbogenerators presented an overwie of ORC cogeneration turbines. The company Turboden has wide experience in Poland. Company carried out the construction of cogeneration units for such entities as: Ostrowski Heating Plant SA, Malteurop Poland Sp. z o.o in Gdansk, as well as many businesses in Europe.
Bolognini draws attention to the fact that units based on ORC are systems easy to use – the turbine start up and shut down does not require skilled operators, who have to be employed in the plant. This translates into low cost of operation. It is worth noting that the technology, in which Italian company specializes can work efficiently at lower loads, which seems to be a big advantage for companies struggling with economically viable production decreased during the heating season.
Roeland Nollen, Sales Manager Northern Europe at TURBOMACH GmbH - Caterpillar group company – introduced the Caterpillar group extensive experience in the field of CHP installations. As part of the Solar Turbines family over 4800 power generation units with over 13’000 MW were installed in all applications and industries such as: food, ceramic, textile, chemical and pharmaceutical, building complex, heating and energy suppliers. The speaker mentioned as an example of investment realized by the Turbomach company in Poland construction of a gas turbogenerator for ZEC Siedlce.
Using the potential of a low-temperature cooling
Günther Hein Chief Executive Officer (CEO) of AGO AG Energie + Anlagen, a plant engineering company in the energy sector, gave a lecture on trigeneration, in particular the production of electricity from waste heat and cold production from waste heat - ammonia/water absorption chiller to generate temperatures as low as -28°C – e.g. for food, beverage and logistic market (“AGO Congelo”). He presented the energy flows on the examples of cogeneration and trigeneration in winter and summer time, where gas turbine was used to produce (beside electricity) in winter - heat and in summer cold. The speaker also presented an example of investment carried out by the AGO for a dairy company in Germany. He also presented economic evaluation - return on Investment for 2 MW Trigeneration Plant in Germany and in Poland, and the economic benefits of such investments depending on the situation legislator.
All representatives of strategic partners argued that cogeneration and polygeneration is the best solution not only for industrial power and district heating, but also for energy-intensive industries.
Cogeneration through the prism of the RES Act
Maciej Szambelańczyk, Legal Counsel at the law firm WKB Wierciński, Kwieciński, Baehr
at the beginning of his lecture outlined the EU and Polish regulations, which lead to the implementation of the new Law on RES i poland in 2015. He introduced and briefly described the main elements of the Act related to cogeneration: Certificates of origin; Auctions for new generators in RES installations; Renewable Energy Settlement Operator (Operator Rozliczeń Energii Odnawialnej S.A.)- The state entity responsible for clearing the auction of electricity from renewable energy installations; Feed-in tariffs (FiT) for new installations up to 10kW; Seller obligation - the obligation to purchase energy from renewable sources; The current system of support (certificates) maintained for existing RES installations (with modifications, existing installations will be able to "enter" to the auction system); The level of support depends on received public aid ; The effectiveness of the system.
Szambelańczyk focused on acquainting the participants with elements of the new auction system: the entities eligible to participate, prequalification system, manner of conducting the auction, reference prices and their settlement.
According to the Legal Counsel at the law firm WKB, companies entitled to participate in the auction now should familiarize themselves with the system prequalification, ways of conducting auctions, and also to think about the reference price and its settlement. Szambelańczyk as well as representatives of the power and heat market stated that our government caused by EC guidelines on State aid, in which manufacturers apply for broad contracts, most likely opt for a system analogous to that which was prepared for renewable energy, that the auction system.
A representative of the WKB added that the Polish legislator did not accept the establishment of support theoretically the best and most expensive energy technologies (in terms of RES installations), which will have paid off only in the future, which makes it difficult to assume that new installations will be constructed, because will not be able to compete within the next few years.
Cogeneration from the industry with his own power generation point of view
Rafał Psik, Key Account Director CEE, Doosan quote to the participants several recently commissioned projects of industrial cogeneration: gas-steam blocks for KGHM (2 x 45 MW) cogeneration unit for the gas coke for the “Koksownia Przyjaźń” Plant (71 MW), development of new turbine set in Synthos Oswiecim (27 MW) and a combustion engine on coke gas for “Koksownia Czestochowa Nowa” plant (3 Mwe). In the CHP recently also invested Orlen (460 Mwe in Wloclawek, in Plock - 580 Mwe), Zaklady Azotowe Kedzierzyn (24 Mwe), TAMEH (55 Mwe), Mondi Świecie (86 MWe) and JSW in Zofiówka (75 MWe). Examples include more, because there are still carried out repairs and modernization.
Doosan representative analyzed for the participants the pros and cons of procurement, both in the formula of turnkey and self-completion method of supply, or buying each device separately, which can be extremely complex and risky procedure. Psik also recalled that some investors do not have the obligation to carry out public procurement. The surprise may be the fact that large state-owned companies as Orlen and KGHM buy blocks of a few billion PLN not in public procurement formula but the normal internal bidding process, in normal negotiations, in which the companies are discussing and repeatedly changing price and adjust the offer very carefully to the needs of the investor. The expert also spoke about the contractual arrangements in case of technology adoption to the needs of the contracting authority (which should be identified) and contracts of service. He also warned against the use of services of suspiciously cheap consultants, because it happens that they copy the tender specifications of other projects on a "copy + paste " way. According to Psik the investor should not save in this way at the beginning of the project, because weak consultant will not be helpful in the bidding process, which ultimately can lead to significant losses later.
The article was prepared by CBE Polska Team on the basis of lectures and materials from the 3rd edition of the International Seminar on "Development prospects of cogeneration," which was held on 26th August 2015 in Warsaw.
Organizing a seminar we host participants both from Poland and abroad. Seminar Strategic Partners included: PGNiG Termika, Veolia Energia Polska, Turboden, Turbomach i AGO AG,
As a Exhibitors presented their brand: Tedom, OPRA Turbines, SOKRATHERM, and the Coffee Break Sponsor was company LUEHR FILTER.
In addition, the event was created in cooperation with: Cogen EUROPE, Fortum, Tauron Ciepło, Brzeskie Przedsiębiorstwo Energetyki Cieplnej, Przedsiębiorstwo Energetyki Cieplnej w Mińsku Mazowieckim, Szczecińska Energetyka Cieplna, FUMAR, BMH Technology, Doosan, Akademia Górniczo-Hutnicza im. Stanisława Staszica w Krakowie, Kancelaria prawnicza WKB Wierciński, Kwieciński, Baehr.
The event was under the Honorary Patronage of: Narodowy Fundusz Ochrony Środowiska i Gospodarki Wodnej, National Energy Conservation Agency (NAPE)., Agencję Rynku Energii (ARE), Polish Chamber of Commerce for High Technology IZTECH, Association of Polish Dairy Processors (APDP), Scientific and Technical Association "Energy and Environment in the dairy", Prof. Wacław Dąbrowski Institute of Agricultural and Food Biotechnology (IAFB), Employers' Association Renewable Energy Forum (ZP FEO), Association of Polish Regional Breweries, The Scandinavian-Polish Chamber of Commerce (SPCC), PPolish-German Chamber of Industry and Commerce (AHK Poland) and The Polish Economic Chamber of Renewable Energy (PIGEOR).
Media Patrons: BiznesAlert.pl, inzynieria.com, Paliwa i Energetyka, Czysta Energia, Energetyka Cieplna i Zawodowa, gramwzielone.pl, srodowisko.abc.com.pl, IOZE.pl and econet-poland.pl.
Simultaneous translation was provided by company Bireta Professional Translations.
