2 nd meeting of SAVE II project

1
2 nd meeting of SAVE II project

• REGIONAL ACTION PLAN FOR PROMOTION OF COMBINED
  HEAT AND POWER PRODUCTION IN THE NEISSE-NISA-NYSA
  EUROREGION
• Zittau, 2 July 2001
• Prague, 3 July 2001

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AGENDA OF PROJECT TEAM MEETING (1) Monday, 2nd
July

• 900-915 Opening the meeting, agenda,
  organisational issues of the project (Miroslav
  Maly)
• 915-930 Presentation of the outcomes of the
  Phase 2 for Germany (Dietmar Bothmer)
• 930-945 Presentation of the outcomes of the
  Phase 2 for Poland (Andrzej Rajkiewicz)
• 945-1000 Presentation of the outcomes of the
  Phase 3 for Czech Republic (Miroslav Maly)
• 1000-1015 Presentation of comments to outcomes
  of the Phase 2 (Miroslav Maly)
• 1015-1045 Discussion to Phase 2 (participants)
  and conclusions (Miroslav Maly)
• 1045-1100 Coffee Break
• 1100-1115 Presentation of the proposal
  methodology for the Phase 3 (Miroslav Maly)
• 1115-1200 Discussion of the methodology for
  the Phase 3 (participants)
• 1200-1215 Conclusions on the methodology for
  the Phase 3
• 1215-1230 Brief discussion of other project
  phases, preparation of the next meeting,
  presentation of project outcomes - web-site,
  conferences, journals (participants)
• 1230 Closing the meeting (Miroslav Maly)
• 12.30-13.30 Lunch break, continuation of the
  discussion, if necessary
• 1400-1600 Site visit to Biomass CHP in Ostritz
  (15 km from Zittau)
• 1600 Expected end of the meeting

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AGENDA OF PROJECT TEAM MEETING (2) Tuesday, 2nd
July

• Only bilateral discussion of the Project Manager
  with Mr. Hans Heuij, representative of ECN, on
  the outcomes of the work of ECN for individual
  phases of the project.
• Nevertheless everybody is welcome to participate.
• Location SRC International CS office, Prague

4
Opening, Organisational issues of the project

• 1. Opening and welcome
• 2. Payment
• Money for first installement received form
  Brussels.
• Money were transferred to all partners except
  ECN (invoice)
• 3. Inception report
• Inception Report has been sent to Brussels, no
  feedback yet.
• 4. Distribution of papers for the Phase 2
• 5. Distribution of the Methodology for the Phase 3

5
Analysis of legal, administrative and regulatory
barriers to the expansion of CHP and district
heating, and assessment of possible impact of the
new liberalised energy markets

• Germany
• Poland
• Czech Republic

6
Presentation of the papers on Phase 2

• Brief outline of the country presentations
• 1. Current situation in energy supply, CHP and
  district heating
• Only very brief information to get inside the
  issue, no technical details. More detailed
  presentation will be given in Phase 3.
• 2. Current policy, legal and institutional
  framework
• Very brief information on the framework for CHP
  and district heating development, impact of
  energy market opening, CHP promotion policy, role
  of regional authorities etc.
• 3. Main barriers for CHP and district heating
• Review of major barriers, including assessment
  on functioning of the current policy, legal and
  institutional framework and changes expected.
• 4. Conclusions and recommendations
• Review of major findings from the Phase 2 and
  recommendations both for the changes of the
  situation if needed, and for next phases of the
  project.

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Czech Part of the Euroregion
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Current situation in energy supply, CHP and
district heating (1)

• Territory 3 566 km2
• Population 481 624
• 5 regions Liberec, Jablonec, Semily, Ceská
  Lípa, Decín (part)
• Largest city Liberec, 102 000 inhabitants
• Other large cities district centres
• Region is net energy importer of all energy
  sources (fuels, power), except heat
• Local primary energy sources renewables
  (biomass, hydro, other limited), municipal waste,
  uranium
• Power supply 2 regional power distribution
  companies, in some rural areas not sufficient
  capacity and low voltage
• Gas supply 2 regional distribution companies,
  fast extension of gas network in last few years,
  all major cities connected to high-pressure gas
  network

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Current situation in energy supply, CHP and
district heating (2)

• District heating large DH networks in all
  district centres and some other cities (32 in
  total)
• Large public CHP only in Liberec
• 220 MWt and 12 MWel
• Few old industrial medium-sized CHP plants
• Incineration plant only in Liberec, no
  cogeneration
• Major fuels for CHP and HOB plants
• coal
• natural gas
• fuel oil

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Small-scale district heating sources
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Large-scale district heating sources
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Emmission of pollutants from large-, medium and
small-scale sources (except transport)
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Population, employment
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Future plans in energy supply, CHP and district
heating

• Electricity supply strengthening of some lines
• Gas supply extension of distribution networks in
  large to medium cities, nevertheless some parts
  of the region will be without gas even in the
  future
• Local energy sources biomass use for DH and
  local heating mostly in rural areas
• District heating no plans for extension of
  district heating
• Continuation of fuel switching in DH from coal
  and oil to gas and biomass
• Some ideas for small- to medium-sized CHP but no
  final decision and no construction

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Current policy, legal and institutional framework

• Policy framework State Energy Policy of January
  2000
• Legal framework
• Energy Act of January 2001
• Energy Management Act of January 2001
• Clean Air Act
• Pricing and Taxation Act, etc.
• Institutional framework
• Ministry of the Industry and Trade (MIT)
• Ministry of the Environment (MoE)
• Energy Regulatory Office (ERO)
• Regional, district and municipal offices

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Institutional Framework for Energy Policy
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National Energy Policy

• The National Energy Policy approved by the
  Government in January 2000 indicates the targets
  in the areas of energy management according to
  the needs of economic and social developments
  including environmental protection.
• The National Energy Policy sets the short-,
  medium- and long-term targets for district
  heating and CHP extension. Nevertheless these
  targets are very general and not quantified.
• There is evidence that the new Energy Act does
  not directly support CHP in the manner suggested
  by the Energy Policy document and other legal
  measures may be needed to do so. The Energy
  Policy document is scheduled for revision and
  updating by end 2001.

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Regional Energy Policy

• Energy Management Act introduces the requirement
  of development of regional energy policies for 14
  regions, one of which is the new established
  Liberec region (1st January 2001), and for
  largest cities (regional centres).
• Energy Management Act recommends to development
  local/municipal energy policies based on regional
  policies.
• Regional/local energy Policies should follow the
  standard methodology given in the Decree to the
  Act.
• No policy has been developed for the Liberec
  region by now.

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Legal Framework

• Energy Market Regulation
• Energy Act of January 2001
• Environment Regulation
• Clean Air Act
• Regulation of prices and Taxes
• Pricing and Taxation Act on 1992
• Energy Efficiency Regulation
• Energy Management Act of January 2001

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Energy Market Regulation

• Autorisation
• Construction of generation units of electricity
  with the total installed capacity of 30 MW and
  more, and heat units with the total thermal
  output of 30 MW and more - MIT. Less than stated
  capacities - regional administration.
• Licencing
• A licence is issued by ERO for a determined
  period for generation of electricity and gas,
  transfer of electricity and gas, distribution of
  electricity and gas, storage of gas, generation
  and distribution of thermal energy. The licences
  are issued for at least 25 years.
• Energy Regulatory Office
• Operator of Power Market
• Office for Protection of Economic Competition

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Institutional Framework for Power Supply
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Environment Regulation

• Clean Air Act
• According to the requirements of the Clean Air
  Act, measures to reduce emissions had been
  implemented between 1991 and 1998. Total
  investments exceeded CZK 100 billion (EUR 3
  billion). As a result, national emissions of
  major pollutants decreased.
• Environment Impact Assessment (EIA)
• Act on Waste Management
• Pollutants Charge rate of emission taxes
  (CZK/Euro per ton)
• SO2 1,000 / 30
• NOX 800 / 24
• Particulates/solid substances 3,000 / 90
• CO 600 / 18
• Hydrocarbons 2,000 / 60

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Regulation of Prices and Taxes

• Pricing and Taxation Act on 1992
• reduced VAT rate for district heating
• facilities for generation of electricity or heat
  from biomass are excempted from taxation of
  income for the period of 5 years

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Energy Efficiency Regulation

• Energy Management Act of January 2001
• Chapter IV entitled " Measures to Enhance
  Efficient Use of Energy" deals specifically with
  the ways to promote energy efficiency such as
  minimum energy efficiency requirements, energy
  audits, energy auditors and co-generation of heat
  and power (CHP) with capacity of 5 MWt, 10 MWe
  (steam turbines), 2 MWe (gas turbine) and 0.8 MWe
  (gas engines).
• Decree 150/2001 on minimal energy efficiency of
  power and heat production, 12 April 2001
• Decree 151/2001 on energy efficiency of heat
  distribution, 12 April 2001
• Proposal of the Decree on energy efficiency of
  energy use in buildings

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Main barriers for CHP and district heating (1)

• Policy Framework
• State Energy Policy does not specify any
  quantitative targets in CHP
• Energy Act does not meet requirements of the
  Energy Policy in CHP promotion.
• Legal Framework
• Missing Decrees on bay-back tariffs for power and
  heat from CHP
• Obligation to purchase power and heat from CHP
  may create negative reaction on the market
• Mandatory energy audit for assessment on
  efficiency of CHP project may not an efficient
  tool

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Main barriers for CHP and district heating (2)

• Financing
• Barriers in economics of CHP schemes
• Cost effectiveness of CHP installations is given
  by the share of total costs for production and
  distribution of energy and revenues for sales
• Internal rate of return is then low compared to
  other projects
• Capital intensity is high compared to other heat
  solutions and thus lower capital intensity with
  higher operational cost intensity is given
  priority
• Barriers in capital availability and requirements
• In-house capital is usually missing, mainly in
  case of municipalities
• Private capital is difficult to involve (high
  interest rate, high transaction costs, high risk
  perceived by the lender, etc.)
• The commercial risk of unreliable revenues from
  electricity and heat sales is high
• Czech investors have low credit-worthiness
• Limited public grant sources (State programme for
  energy savings)

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Main barriers for CHP and district heating (2)

• Financing
• Additional barriers
• Complex and timely procedure of public
  procurement by local authorities which makes
  difficulties for ESCOs.
• In the governmental sector new financial rules
  allow for multiannual financing. The institutions
  have not yet become familiar with the rules. Need
  to be developed before ESCOs enter successfully
  this sector.
• The rules for depreciation of equipment are not
  convenient for energy technologies and make
  problems for new investments with high capital
  cost.
• A shortage of expertise exists to develop a
  bankable project proposal
• Investors have limited experience in working with
  foreign and international financial institutions
• Banks miss a long-term view on investment
  opportunities, well developed energy concepts and
  proper project development (knowledge)

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Main barriers for CHP and district heating (3)

• Knowledge, awareness and capability
• In municipal CHP plants a lack of knowledge
  exists in operating the plants . This is
  sometimes solved by contracting to external
  organisations, or by selling the plant to a
  private owner.
• Many potential users and possible investors are
  not aware of the advantages of CHP, in particular
  of small-scale CHP.
• At the same time, experience is lacking in
  dealing with proposals for CHP investments.
• In addition, smaller banks may not have
  specialised skills in assessing the CHP project.
  This lack of experience leads to large overhead
  costs for the development of small CHP projects.
  At the same time, the need for external qualified
  assistance is underestimated, as well as the
  necessity op proper project development and its
  relevant costs.

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Conclusions and recommendations

• The Government should
• Eliminate price distortions between natural gas
  and electricity tariffs.
• Lift the current price control for household
  tariffs under a determined ceiling (price cap per
  square metre) to ensure that energy saving
  investments (possibly by ESCo, EPC) are made for
  mutual benefits of operators and customers.
• Promote cost-effective cogeneration and metering
  at building level.
• Reconsider the obligation to purchase electricity
  from CHP.
• The regional and local municipalities should
• Develop their Energy Policy
• Make energy audits of existing DH networks, HOB
  and CHP plants
• Consider possible implementation of CHP schemes
  where economically viable

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Comments to outcomes of the Phase 2
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(No Transcript)
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(No Transcript)
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Proposed structure of analysis of CHP potentials
in the Euroregion NISA/NYSA/Nieße

• Methodology for Phase 3

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Phase 3 Review of identified Tasks (1)

• Aim It is expected that the introduction of a
  new legal, administrative and regulatory system
  and mainly opening energy market would influence
  the expansion of centralised and decentralised
  CHP and district heating.
• The following tasks are envisaged
• Task 1 Brief analysis of power and heat supply
  with the stress on the current situation in CHP
  and district heating in the Neisse-Nisa-Nysa
  Euroregion. Existing studies/analysis will be
  used as much as possible to minimise duplication
  of the work. Close collaboration with regional
  state administration and local municipalities as
  well as with energy utilities, industries, and
  other independent power and heat producers will
  be used to get as reliable data as possible.
• Task 2 Assessments on the needs for
  rehabilitation of existing heat only boilers and
  district heating systems and analysis of possible
  combination of their rehabilitation with an
  implementation of CHP technology.

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Phase 3 Review of identified Tasks (2)

• Task 3 Assessment on the technical potential of
  CHP and district heating development and
  calculation of the impact of new legal,
  administrative and regulatory systems and market
  opening on the economic CHP potential in the
  Neisse-Nisa-Nysa Euroregion.
• Task 4 Review of technology options convenient
  for implementation in the Neisse-Nisa-Nysa
  Euroregion taking into account local and regional
  conditions (availability of local energy sources,
  availability of natural gas, requirement to
  protection of the environment etc.).
• Task 5 Calculation of impact of extension of
  district heating and CHP on improvement of the
  energy efficiency and environment in the
  Neisse-Nisa-Nysa Euroregion.
• Task 6 Identification of Pilot actions - this
  task should focus primarily on identification of
  pilot actions in municipalities, commercial and
  public segment with the stress on identification
  of potential projects. The task should also focus
  on best practice in CHP on the municipal level
  and take into account the availability of fuels.

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Methodology for Phase 3 Proposed structure of
analysis of CHP potentials in the Euroregion NISA

• AIM not to analyse a very accurate CHP potential
  but the following issues
• Rough estimation of technical potential of CHP by
  sector/site and by technology option.
• Analysis of recently successfull / unsuccessful
  CHP projects and also projects
• Identification of few pilot actions/projects in
  key sectors
• Simulation of the impact of new legal,
  administrative and regulatory systems and market
  opening on the economic potential of CHP
• Description of energy planning and project
  development processes, including major barriers
  to implementation of concrete project.
• Draft of chapters 3 and 4 of the Action Plan
  (role of municipalities/utilities promotions CHP
  and possible actions).
• The methodology applied to analyse the CHP
  potential - combination of top-down and
  bottom-up approach. Top-down is the
  identification of potential on the basis of the
  regional analysis. Bottom-up is on the basis of
  individual (potential) projects.

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Analysis of CHP potentials
Euroregion Nisa-Nysa-Neisse
PL
D
CZ
Selection of basic statistical units for analysis
of CHP and DH potentials
Collection of basic statistical data, data about
already installed CHP and DH sources and possible
future plans, implemented CHP projects
Evaluation of implemented CHP projects
Definition of criteria for evaluation of
potential CHP applications
Evaluation and update of collected data according
to the defined criteria
Definition of typical technological solutions of
CHP (model CHP projects)
Allocation of model CHP projects to each
statistical unit matching the criteria
Comparative CHP case study for selected model
CHP project
CHP technical potential
Definition of economic evaluation methodology
CHP economic potential
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Analysis of CHP potentials(1) COLLECTION OF
BASIC STATISTICAL DATA

• A. Selection of basic statistical units for
  analysis of CHP and DH potentials (? regional
  administration units ?)
• B. Collection of basic statistical data about
  each part of ERN according to statistical units
• inhabitants, buildings by type, availability of
  natural gas network, availability of DH network,
  energy supply/consumption and its structure (if
  available), potential of biomass use, waste water
  treatment plants / landfills, etc..
• C. Collection of data about already installed CHP
  and heat sources and possible future plans
• data from suppliers, municipalities (development
  plans, energy concepts), emission sources
  registers (CZ, available in PL, D ???).

1 - statistical matrix
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Analysis of CHP potentials(1.C) Analysis of
recently successful / unsuccessful CHP projects

• The implemented projects should be described as
  exactly as possible
• Type of fuel(s) used
• Type of technology / supplier
• Power and heat capacity (kWe, kWt), capacity
  range
• Heat and power efficiency ()
• Utilisation time (hours) (at nominal capacity)
• Total investment costs, including civil
  engineering works, average connection costs,
  start up costs (local currency or Euro)
• Fixed O M costs (local currency or Euro/year)
• Marginal operating costs (local currency or
  Euro/kWh or GJ generated)
• Fuel consumption or power/het production (kWh,
  GJ)
• Electricity and heat price (for sale)
• Fuel price
• Financing, including subsidy scheme if any
• Sector
• Ownership structure

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Analysis of CHP potentials(2) DEFINITION OF
CRITERIA FOR EVALUATION OF POTENTIAL CHP
APPLICATIONS

• Definition other evaluation criteria will extend
  the statistical background with further
  quantitative and non-quantitative information by
  each statistical unit (municipality).
• This information should be specifically focused
  on potential for development of CHP sources and
  ntypical applications of CHP from more or less
  organisational or managerial point of view.
• Selection of criteria / questions is quite
  flexible and can be based on examples of typical
  applications of CHP. The extension of statistical
  background with evaluation criteria can have the
  form of a table or checklist for each statistical
  unit (municipality).

2 - statistical matrix updated with evaluation
criteria w/ answers
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Analysis of CHP potentials(3) DEFINITION OF
TYPICAL TECHNOLOGICAL SOLUTIONS OF CHP APPLICABLE
IN THE REGION

• Steam CHP
• by typical capacity range (up to ca. 2 - 3 types)
  
• Natural gas - gas engines, gas turbines
• by typical capacity range (up to ca. 4 - 5 types,
  for example in CZ gas engine 22 kWe, 140 kWe,
  250 kWe, 900 kWe, 1600 kWe)
• Biomass / biogas / biodiesel fired CHP
• CHP based on fuel cells etc. (maybe not in the
  timeframe to 2010)
• Each technological solution to be described by
  the same structure as in 1.C
• Comparative case study (CZ/D/PL) for 1 selected
  comparable technological solution

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Analysis of CHP potentials - (4) EVALUATION OF
TECHNICAL REPLICATION POTENTIAL OF IDENTIFIED
TECHNOLOGICAL SOLUTIONS

• technical replication potential of each of
  identified technological solutions will be
  evaluated by each statistical unit based on
  previously collected statistical data and answers
  to evaluation criteria gt the identified
  technological solutions or model CHP projects
  will be allocated by each statistical unit
• number of CHP projects and total capacity
  (preferably given by range) will be evaluated and
  specified by each statistical unit

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Analysis of CHP potentials - (5) EVALUATION OF
ECONOMIC POTENTIAL OF CHP BY EACH STATISTICAL UNIT

• Two different approaches (to be discussed)
• 1. Comparison of competitiveness of heat produced
  by CHP to standard heat sources
• necessary input data investment, operating
  costs, lifetime, price of electricity (own
  consumption or purchase), utilisation time -gt
  heat electricity production
• output price of heat to be compared with price
  of heat from local heat or DH sources -gt is price
  of own heat lower? -gt CHP is economically viable
  and competitive
• 2. Analysis of payback of investment to CHP
  source
• necessary input data investment, operating
  costs, lifetime, price of electricity (own
  consumption or feed-in), utilisation time -gt heat
  electricity production
• price of heat (must be competitive to standard
  sources) is also an input
• output simple payback or other economic
  criterion (NPV, IRR ..) -gt comparison to limit
  value (ex. simple payback lt 10 years) -gt is
  lower? -gt CHP economically competitive

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Analysis of CHP potentials - (6) EVALUATION OF
ECONOMIC POTENTIAL OF CHP BY EACH STATISTICAL UNIT

• Two different approaches (to be discussed)
• 1. Comparison of competitiveness of heat produced
  by CHP to standard heat sources
• necessary input data investment, operating
  costs, lifetime, price of electricity (own
  consumption or purchase), utilisation time -gt
  heat electricity production
• output price of heat to be compared with price
  of heat from local heat or DH sources -gt is price
  of own heat lower? -gt CHP is economically viable
  and competitive
• 2. Analysis of payback of investment to CHP
  source
• necessary input data investment, operating
  costs, lifetime, price of electricity (own
  consumption or feed-in), utilisation time -gt heat
  electricity production
• price of heat (must be competitive to standard
  sources) is also an input
• output simple payback or other economic
  criterion (NPV, IRR ..) -gt comparison to limit
  value (ex. simple payback lt 10 years) -gt is
  lower? -gt CHP economically competitive

45
Next steps and other issues

• Brief discussion of the next steps
• Other project phases
• Preparation of the next meeting
• Presentation of project outcomes

46
Brief discussion of the next stepsTime schedule
of the project
47
Other project phases (1)

• Phase 4 Analysis of possible sources of
  financing CHP
• Availability of financing sources seems to be a
  crucial barrier for many CHP and district heating
  projects in most of countries. Major barriers and
  possible sources of financing will be analysed
  and recommendations will be given in this field.
  The following financing sources will be analysed
  national/international grant financing, ESCOs,
  project financing, commercial loans, etc.
• The content of the Phase 4 will be further
  discussed when the outputs of the Phase 2 are
  available.
• Output of the Phase 4 Working paper
• Methodology for Phase 4 March Consulting by 15
  September 2001

48
Other project phases (2)

• Phase 5 Drafting the Action Plan for promotion
  of CHP in the Region
• The proposal of the Action Plan for promotion of
  CHP and district heating in the Neisse-Nisa-Nysa
  Euroregion will be developed ready for the
  implementation by regional associations and
  administration, local municipalities, energy
  utilities, industries and other independent power
  and heat producers, financiers, technology
  producers, project developers, etc.
• The Action Plan will be based on results of
  previous tasks and would include the following
  major chapters
• Chapter 1 Brief review of the current situation
  in CHP and district heating and the impact of
  legal, administrative a regulatory framework
  changes, privatisation and opening energy market
• Chapter 2 Potential for extension of CHP and
  district heating and impacts on the environment
  and major barriers to this extension

49
Other project phases (3)

• Chapter 3 The role of national and regional
  authorities in promotion of CHP and district
  heating and the list of possible actions in this
  field
• Chapter 4 The role of energy utilities and
  independent power and heat producers in promotion
  of CHP and the list of possible actions in this
  field
• Chapter 5 The system of financing of district
  heating and CHP and
• Chapter 6 Evaluation of social, economic and
  environmental benefits of the Action Plan
  implementation.
• The content of the Action Plan will be further
  discussed and adjusted, if needed, during the
  third project team meeting when the outputs of
  the Phase 2-3 are available and after the
  discussion with beneficiaries and other
  stakeholders (e.g., energy utilities).
• Output of the Phase 5 Draft Interim Report,
  Action Plan

50
Other project phases (4)

• Phase 6 Dissemination of the results and the CHP
  Action Plan
• Web site
• Workshops and seminars
• Training of selected staff of the regional
  authorities/local municipalities who will be
  responsible for future implementation of the
  Action Plans
• Papers with the summary of the project outputs in
  journals and presenting them on conferences, both
  in the EU and in the Czech Republic, Germany and
  Poland on national and/or regional levels.

51
Preparation of the next meeting

• Date
• second half of September, or
• first half of October
• Place
• Jelenia Gora, Poland
• Agenda
• presentation and discussion of draft outputs of
  the Phase 3 and the structure of the Interim
  Report
• discussion of the methodology of Phase 4
• discussion of extended outline of the Phase 5
• seminar
• other project outcomes (web-site, papers,
  training, etc.)