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CODE Project

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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CODE Project

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  1. CODE Project WP3 – Modelling support for cogeneration across the EU27

  2. 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

  3. 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

  4. 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

  5. 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.

  6. 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

  7. 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 €.

  8. 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

  9. 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

  10. 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

  11. 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?

  12. Worked example: UK Model Outputs

  13. 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

  14. 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)

  15. 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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