A COMMITMENT TO CHP

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A COMMITMENT TO CHP

• David Green
• Director
• Combined Heat and Power Association
• 13 November 2003

2

• In opposition we supported CHP,
• in Government we will positively
• promote it
• Rt. Hon John Prescott MP
• Deputy Prime Minister
• July 1997

3

• The benefits of CHP are impressive. CHP's high
  energy efficiency
• levels cut energy costs for UK businesses,
  increasing their
• competitive edge. Community Heating schemes using
  CHP take
• disadvantaged people out of fuel poverty,
  providing affordable
• warmth and cheaper electricity from a secure,
  local source
• supporting sustainable community development. And
  CHP reduces
• carbon emissions substantially, playing a vital
  part in combating
• climate change.
• This is why the Government has demonstrated its
  support and
• encouragement of CHP.
• Rt. Hon Tony Blair MP
• Prime Minister
• January 2000

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• We will shortly update our national
• target for CHP, and the strategy for
• working together with CHP companies
• and users to achieve the target.
• Rt. Hon Tony Blair MP
• Prime Minister
• January 2000
• 2003 - its (still) coming...

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What the White Paper said...

• We remain committed to a target of 10 GWe of
  Good Quality CHP capacity being installed by
  2010.
• Energy White Paper 2002

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BUT

• Governments CHP target of 5 GWe by 2000 not yet
  met.

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And

• Additions of new CHP capacity fell by 95 year on
  year
• The output of existing CHP schemes fell by at
  least 17
• The capacity of operating CHP plant effectively
  fell by 800 MWe since 2000
• 11 MWe of CHP lost in 2001/02

8

• CHP Schemes consented by DTI and on
  hold/"deferred"or "scrapped by MWe
• Jaguar Plant, Halewood, Liverpool 70
• British Sugar Cantley 70
• British Sugar York 70
• Kellogg's Trafford Park 62
• Scottish Brewery Reading 60
• Sevalco, Avonmouth, Bristol 180
• Brockworth, Gloucester 18
• Basell Polyolefins, Carrington, Manchester 60
• Ixguardian, Hounslow 19
• British Salt Middlewich 19
• Kimberley Clark , Gravesend 100
• Ansty, Coventry 49.9
• Thamside Energy Park 215
• DuPont Brockworth, Gloucestershire 18
• Irvine, Scotland 49
• Ineos Chlor Runcorn (previously ICI) 240
• Sudbrook Paper Mill, Caldicot, Monmouthshire 115
• Alcan Fife 13

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The goal

• a doubling of Combined Heat and Power
• by 2010
• Labour Party Manifesto
• June 2001

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OPPORTUNITY

• NEW HOMES NEW COMMUNITIES
• BETTER BUILDINGS

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OPPORTUNITY

• EU EMISSION TRADING SCHEME

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OPPORTUNITY

• THE TRUSTS

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OPPORTUNITY

• GOVERNMENT BUILDINGS

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OPPORTUNITY

• REGIONAL STRATEGIES

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OPPORTUNITY

• BUILDING REGULATIONS

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OPPORTUNITY

• 2004 ENERGY ACT

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We can deliver

• IF
• CHP is fully incentivised under the new EU
  Emissions Trading Scheme
• A functioning heat market is created
• New CHP technologies are effectively
  stimulated

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• These days we make progress
• by inches

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• Political leadership
• Partnership
• Delivery!

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What the White Paper did say...

• Extension of the Climate Change Levy
• exemption to all Good Quality CHP electricity
  outputs
• Reality
• 1999 Exemption not needed
• 2002 Full Exemption Granted -
• 18 months held up by OFGEM
• Little impact of CCLAs

21
Eligibility of leased assets for Enhanced
Capital Allowances (ECAs)

• Reality
• finance leasing excluded till April 2002
• government has no knowledge of impact
• only benefits profitable businesses!

22
Reduction in VAT on certain grant-funded
domestic MicroCHP installationsto five per cent

• Reality
• Good, but for most CHP schemes it will deliver no
  real benefit or incentive at all.

23
The 50 million two-year Community Energy grant
programme

• Reality
• Positive programme, but
• Short term
• Not geared to market take off
• Private sector customers excluded

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NEW!?

• To require significant evidence that power
  station consent applicants have considered all
  economically viable options for CHP and community
  heating

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3 years ago...

• The Government strongly supports CHP and we will
  expect developers to be able to show that they
  have explored opportunities to use CHP, providing
  heat for business and the community, although we
  recognise that this may not always be practical.
  We shall be discussing with developers
  information which needs to be submitted as part
  of notifications under section 14 of the Energy
  Act and applications under section 36 of the
  Electricity Act.
• Rt. Hon Stephen Byers MP
• Secretary of State for Trade and Industry
• House of Commons Hansard 17 April 2000

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• ...emphasise the benefits of CHP and community
  heating whenever planning or sustainable
  development guidance is introduced or reviewed
• Reality
• CHP omitted from regional renewable studies
• Most regional guidance already complete

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• ...work with Ofgem to ensure a level playing
  field under NETA for smaller generators,
  including CHP
• and previously
• ...the new trading arrangements will provide...
  
• encouragement for Combined Heat and Power
• and renewables generators.
• Ministerial Statement. DTI Press
  Release. 8 October 1998

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• set targets for use of CHP in the Government
  Estate
• But dont they already exist?

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• ...explore incentivising CHP within any
  expansion of the domestic Energy Efficiency
  Commitment (EEC) from 2005
• Reality
• Missed opportunity of EEC1
• Explore!

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• support field trials designed
• to evaluate the benefits of MicroCHP
• ?

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• ...invite the Energy Saving Trust and the Carbon
  Trust to review their current and future
  programmes to ensure they reinforce delivery of
  our CHP target
• Last minute addition!

32

• work on a framework for pilot projects within
  the UK Emissions Trading Scheme for which CHP
  projects may be eligible
• Reality
• Early opportunity missed
• may...
• CHP needs a boost

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Did the White Paper deliver for CHP?

• NO

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It failed to

• produce the stable market framework for CHP that
  Ministers had committed to
• establish a CHP commitment at the heart of CHP
  policy
• deal with the consequences of electricity market
  reform
• remove the cost burdens placed on the industry as
  a result of drafting errors in the 2000 Utilities
  Act

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• Political leadership
• Partnership
• Delivery!