Since February last year when the EU Electricity Directive came into force, electricity liberalisation has proved to be bad for the environment and for industrial competitiveness. On the environmental side, liberalisation has spurred a race to the bottom and has actually resulted in an increase in Carbon Dioxide and other emissions as highly polluting electricity plants are brought back into full operation. Predatory pricing policies of some electricity companies are targeting certain customers and competing operations in a desperate race to win market share. This has resulted in cogeneration plants being taken out of operation in the Netherlands and Germany.
Liberalisation, through the incomplete way it has been implemented in the EU Member States has led to an environmentally and economically distorted market. The access to the power grid for new and clean producers is often prevented by the setting of unscrupulous prices by former monopolistic utilities still owning the grid. Liberalisation takes no account of other important policy measures. Chief amongst these is the reduction of greenhouse gas emissions such as carbon dioxide resulting from the burning of fossil fuels to mitigate impact on the climate. The EU is committed to decrease greenhouse gas emissions by 8 percent based on 1990 levels by the period 2008-2012. The EU, however, is far from being on track. Emissions are likely to jump again in 2000 with the effects of liberalisation. "Cogeneration more or less doubles the efficiency of power production and thus is one of the single largest solutions to climate change world wide. Unfortunately it is currently one of the solutions that are most at risk from unfettered liberalisation, without regard for other policy objectives. Our industries, new, efficient and clean, cannot compete with the prices of old and written-off power stations being operated at the marginal cost of the fuel without due regard for environmental impact or sustainability in the electricity industry," said Dr Simon Minett, Director of Cogen Europe in Brussels.
Liberalisation, through its lack of safeguard of other policy measures, has resulted in cogeneration being squeezed out by more polluting electricity supply options. To illustrate the serious problem two countries’ extensive use of cogeneration is currently being systematically destroyed. In the Netherlands, where 40 percent of the electricity comes from cogeneration, one third of the installed capacity is now under serious threat of closure. In Germany, which has Europe’s greatest amount of cogeneration, 9 percent of cogeneration plants have been closed down, 6 percent are partly shut down, 18 percent are seriously thinking about stopping their engines and turbines and a further 27 percent are suffering serious economic problems. This is the result of a decline in power prices of about 30 percent in Germany for large power consumers. Other EU countries face a similar plight. Indications from the cogeneration supply industry are that development of new schemes has decreased by between 25 percent and 50 percent in the EU as a whole and that this would have been even worse had there not been a special pre-liberalisation boom in France. This trend is set to continue, at least for the next few years. Europe still leads the world in cogeneration technology and expertise, but this is now about to be thrown in the dustbin. "This stagnation of the cogeneration market is bad for clean industries and bad for the environment. The EU`s renewable industries face a similar plight. It is time to act. WWF urges the EU to agree legally binding targets to at least double cogeneration and renewable energy by 2010. Otherwise climate targets will not be achieved," said Dr Stephan Singer, Head of the European Climate and Energy Policy Unit of WWF in Brussels.
In theory liberalisation should bring benefits for clean and efficient electricity production. The moves in the UK where cogeneration is being integrated with liberalisation and climate policies is demonstrating how countries can achieve competitive carbon reductions and sustainability in energy markets. Other Memberstates need to learn from this integrated approach. Cogen Europe and WWF call on the Brussels Institutions to urgently reconsider the priorities in their policy making. In particular a directive on cogeneration is required together with comprehensive strategies and action plans at the EU and Member State levels. CHP, Combined Heat and Power, or cogeneration is the simultaneous production of heat and electricity. This proven technology produces around 10 percent of Europe’s electricity and heat requirements and has a significant growth potential, which will lead to an improved environment and greater economic competitiveness. It is a highly efficient energy solution that delivers substantial reductions in greenhouse gases and other pollutants and is the single largest solution to meeting the Kyoto Protocol on climate change for Europe.
Cogen Europe is Europe’s umbrella organisation representing the interests of the cogeneration industry, users of the technology and promoting its benefits in the EU and the wider Europe. The association is backed by the key players in the industry including gas and electricity companies, ESCOs, equipment suppliers, consultancies, national promotion organisations, financial and other service companies. WWF is the world's largest and most experienced independent conservation organisation. It has over 4.7 milllion supporters and a global network active in 96 countries.