Hazards in Transition of gasfired Decentral and Industrial Combined Heat and Power to a Liberalized Market

Panel: Panel 1: Policy (incentives, normative measures, policy mixes to achive CO_2 reduction)

Author:
Jesper Koch, Danish Energy Agency

Abstract

In Denmark the transition to the liberalized energy market is well under way. The superior objectives of the paper are:

to introduce the future regulation of the electricity sector in Denmark,
to identify and evaluate the conditions influencing the decentral and industrial CHP sector with special regard to the liberalization of the electricity market,
to identify environmental consequences and threats of liberalizing the energy market.

It is not the expectation that decentral and industrial CHP will be able to compete on electricity price even if the subsidy of 70 DKK per MWhe (8,5 EURO per MWhe) for running costs is maintained. If independent cogeneration is forced into competition this may lead to a significant and unacceptable increase in heat prices. There will also be high risk that companies with industrial CHP permanently convert to use heat only boiler. These effects will cause a significantly increase of the national CO2-emision.

It is therefore the intention to proceed with the principles in the Electricity Supply Act no. 486 in which this kind of electricity production is given priority. This is expected to be carried out as long as the independent electricity production sector is too sensible to competition.