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CODE Project. WP3 – Modelling support for cogeneration across the EU27. What WP3 seeks to achieve. Model the effect of support mechanisms within Member States (MS) Model the internal rate of return (IRR) of the same 5 theoretical projects across all MS

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Presentation Transcript
code project

CODE Project

WP3 – Modelling support for cogeneration across the EU27

what wp3 seeks to achieve
What WP3 seeks to achieve
  • Model the effect of support mechanisms within Member States (MS)
  • Model the internal rate of return (IRR) of the same 5 theoretical projects across all MS
  • Identify the value of the support in each MS improving the IRR of a project
output sought
Output sought

The table above to be completed for all 27 MS. Column 2 represents which country is the most attractive for investment. Column 4 represents the value of fiscal support offered for each MS

achieving the desired output
Achieving the desired output
  • PGC at CHPA UK developed a model which compares the investment costs for installing and operating a CHP plant with and without policy support
  • BUT – gas and electricity markets operate differently in MS.
    • Data need to be supplied so that policy support from Government can be separated from other costs and benefits from operating in a given MS
achieving the desired output5
Achieving the desired output…
  • Working closely with each region within the CODE project a spreadsheet was developed to enable MS to provide data on costs and financial support.
  • The datasheet seeks to allow for all possible differences in charging mechanisms in MS.
  • This presentation seeks to highlight what data are needed and explain the need for the detail sought.
dividing up the problem
Dividing up the problem
  • Installing CHP is a choice compared with buying a boiler and importing electricity. The investment decision involves 5 key areas
    • The cost of the CHP plant and heating boiler (purchase and maintenance)
    • The cost of input fuel
    • The cost of purchasing electricity (avoided by CHP)
    • The value of selling additional electricity from CHP
    • The value of any Government support
  • The presentation examines each in turn and what data are required
  • Data are required for each of the five scenarios
equipment purchase
Equipment purchase
  • How much does the CHP plant cost to install?
    • This can be reported as total cost or cost in € per kW
  • How much does the maintenance of the CHP plant cost (not including fuel inputs)?
    • This can be reported as total annual cost or cost in Euro per kWh
  • Does the Government offer any support for purchase?
    • Is the support in the form of an avoided cost – e.g. tax rebate, reduced tax rate (Enhanced capital allowances in the UK)
    • Is the support in the form of a grant?
    • What is the value of that support? Figures can be reported as € kW or total €.
options for an investor
Project A – Boiler

Buy Fuel

Buy electricity

Sell heat

Project B CHP

Buy fuel (more than an equivalent boiler)

Avoid buying electricity

Sell electricity?

Sell heat

Receive incentives

Options for an investor

Calculate the IRR of the CHP with and without incentives

the price of input fuel per kwh
The price of input fuel (per kWh)

Boiler

CHP

Base

price

Base

price

Overall

fixed

gas

price

including

all

costs

and

taxes

Overall

fixed

gas

price

including

all

costs

and

taxes

Costs

e.g.

T

and

D

Costs

e.g.

T

and

D

Taxes

Taxes

Incentive

Avoided

tax

the price of purchased electricity per kwh
The price of purchased electricity (per kWh)

Boiler

CHP

Base

price

Zero

Overall

fixed

gas

price

including

all

costs

and

taxes

Costs

e.g.

T

and

D

Taxes

the value of electricity generated and sold per kwh
The value of electricity generated and sold (per kWh)

CHP

Boiler

Avoided electricity purchase

Total generation value

Exported electricity price

Base

import

price

Total

generation

Incentive

e.g.

a feed

in tariff

Base

export

price

Overall

fixed

electiri

price

including

all

costs

and

taxes

No electrical generation from a boiler

Avoided

costs e.g.

T and D

Export

Incentive

Embedded

Benefit

Taxes

Export

costs or

taxes

Incentive

Incurred

costs?

uk support mechanisms
UK Support mechanisms
  • About 7.5 GW CHP in the UK
  • No UK wide grant schemes for CHP

Enhanced capital allowances

Set full capital cost of construction against tax in year 1

Embedded benefit

    • Ca. 1 euro MWh electiricy exported
uk support mechanisms14
UK Support mechanisms

Climate change levy exemption

  • levy exemption certificates for exported electricity
  • Ca. €5 MWh electricity exported
  • Import fuel exempt

Feed in Tariff for domestic (<2kWe CHP)

  • Generation payment (10p kWh)
  • Export payment (3p kWh)
uk support mechanisms15
UK Support mechanisms

Renewables Obligation Certificates

  • Market based system
  • All renewable electricity
  • Suppliers obligated to present certificates (ROCs) for renewable electricity (a varying proportion)
  • Uplift for biomass CHP
  • Only support for energy from waste is for CHP
    • 1 ROC but halved due to proportion of renewables assumed at 50%
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