Cogeneration – high-efficiency combined heat and power generation – is having a hard time economically: ‘must-run’ units, in particular, will probably no longer be operating cost-effectively in 2020. These units account for around 20% of total installed cogeneration capacity. Flexibly operated units are positioned somewhat better in the market. If the required investments for substitute plant are also factored in, it is estimated that over 50% of installed cogeneration capacity will no longer be cost-effective in 2020. The unfavourable market position is due to various factors, including high gas prices, low electricity prices and cheap CO2 emission credits. These mean that other kinds of gas-fired plant are also in a poor position. Shut-down of cogeneration capacity will likely lead to substantial growth of CO2 emissions, the precise increase depending on whether substitute units are coal- or gas-fired. By 2030 there should be a slight improvement in the market position of cogeneration.
The main options for ‘greening’ the heat supply to industry and greenhouse horticulture are biomass and geothermal energy, though these will only be cost-effective if subsidised. Such subsidies are provided for under the SDE+ Renewable Energy Incentive Scheme.
These are the main conclusions of a study carried out by CE Delft and DNV GL for the Dutch Ministry of Economic Affairs.