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Combined heat and power (CHP) generation is a possibility to use fuels more efficiently. Its environmental and socio-economic benefits, however, depend on the input fuel and the technology used and the energy system replaced. Quality criteria, such as those foreseen in the forthcoming CHP Directive of the EU, help to foster options with a low environmental impact and a high greenhouse gas mitigation potential. Energy market liberalisation can be a chance for these new technologies, provided existing barriers are being eliminated. Abstract & Keywords p. 159

Combined Heat and Power Generation in Liberalised Markets and a Carbon-Constrained World
Reinhard Madlener* and Christiane Schmid o-generation (or combined heat and power production, CHP) refers to the simultaneous generation of power and useful heat or cooling and is a key option for climate change mitigation, and for a more rational use of energy towards the ideal of a more sustainable development. Compared to the separate generation of heat in boilers and power in condensing plants, co-generation systems offer higher energy efficiency levels (up to 90 %) that lead to fuel savings of typically between 1040 %, depending on the technique used and the system replaced. Hence, a widespread use of CHP could significantly curb primary energy needs and allow for environmental and socio-economic benefits per unit of output. This article provides a coherent and concise overview of the various aspects decisive for the promotion and further exploitation of CHP use. Such a synopsis is not trivial, because CHP comprises a multitude of technologies and applications in different framework settings, thus providing a challenge to effective policy action. The European Commission recently submitted a proposal for a new directive on the promotion of CHP within the European Union (EU), which is currently discussed among CHP experts. We hope that our contribution will prove useful for the scientific and non-scientific community and for policy-makers alike in getting a

better understanding of what co-generation is all about and of the recent developments in CHP policy at the EU level.

1.CHP Diffusion and Potential in Europe

In the EU, electricity produced in CHP units accounted for some 12 % of total electricity production in 2000, a figure that changed only slightly during the 1990s despite the Commission's announcement to raise the share to 18 % by 2010 [1]. The diffusion dynamics and share of CHP in the overall heat and power supply system vary widely among nations (see Figure 1 for an overview of the European situation), reflecting different boundary conditions (such as fuel prices and domestic fuel availability, structure and historical development of the industrial sector, existence of district heating networks, etc.) and the energy and environmental policies in place. While the CHP potentials in southern countries are reduced due to the lower heating demand, industrial co-generation (see the example of Italy) and cooling needs (e.g. for air-conditioning) offer plenty of opportunities to extend the use of CHP. Countries with comparatively high CHP shares, such as Denmark, the Netherlands or Finland, frequently have implemented dedicated policies for the promotion of CHP and often also policies for district heating, an important application of CHP. In other countries (e.g. the UK), the rapid growth of CHP utilisation has been mainly a result of the improvement in business opportunities for independent power producers in the process of electricity market liberalisation.

The EU-funded research project "Future COGEN", completed in 2001, aimed at quantifying the future market potential of CHP in Europe under various scenarios. It was estimated that the market share could be almost tripled by 2020, compared to 2000 levels [2]. However, the authors of the study also concluded that, even for the most optimistic scenario, CHP is unlikely to surpass an EU-wide average share of 18 % of total electricity generation by 2010. A higher CHP share would require the creation of significant new CHP market segments, for example based on decentralised micro-generation technologies, especially for residential applications.

2. Applications and Technologies

The effort to reduce fossil fuel consumption and to cut carbon dioxide emissions focuses on two strategies. First, a more efficient use of energy on the demand side. Second, the efficient conversion of energy into end-use energy forms, such as heat for industrial applications or for heating, and power for directly driven industrial systems (e.g. compressors) or for electricity generation. Today, electricity is mainly generated in fossil-fuelled thermal or nuclear power plants, or from regenerative energy sources like hydro, wind, and solar power. Conversion processes are commonly assessed by comparing their energy efficiency, that is the ratio of energy output to energy input. Boilers that produce heat achieve efficiencies of about 8595 %, while thermal power plants for electricity production show values in the range of 3545 %, largely depending on the tech-

* Postal address: Dr. R. Madlener Centre for Energy Policy and Economics (CEPE) Swiss Federal Institutes of Technology ETH Zentrum WEC C 25 CH-8092 Zurich (Switzerland) E-Mail: madlener@cepe.mavt.ethz.ch

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nology used and the vintage of the plant. In other words, in thermal power plants that generate electricity only, a large amount of heat is released unused to the environment. Co-generation, essentially using the same technologies, allows for an exploitation of this excess heat. The overall efficiency, or the ratio of electricity plus heat output to fuel input, totals about 7090 %, meaning that, to produce the same amount of power and heat, less fuel input is needed than in separate production. The drawback of CHP lies in the fact that, due to technical preconditions, the power generation efficiency (the ratio of power produced compared to fuel input needed) is lower than that of comparable thermal power-only plants. The maximisation of power output is preferable from a thermodynamic point of view, as electricity is considered of higher quality than heat energy 1). In practical applications, the choice of CHP technology and the operation of the plant depend on daily, weekly and seasonal electricity and heat demand patterns. In developed countries, the total heat demand in buildings and for industrial applications has stagnated or declined in recent years, a trend likely to continue due to improved building design, insulation, and more efficient processes. At the same time, the demand for electricity is expected to increase, driven by a more intensive use of communication and control technology. The resulting shifts and variations in heat and electricity demand can be partly overcome by using CHP technologies with a higher or a more flexible power-to-heat-ratio. In the same way that CHP technologies vary widely (see Excursus), so do their applications, both in scale and scope, with regard to the input fuels used and the way the generated heat and electricity is distributed. Broadly speaking, three groups of "classical" applications may be distinguished: (1) industrial CHP applications; (2) district heating applications; and (3)
1)

small-scale applications. Another possibility, which has gained popularity in recent years, is the combination of CHP plants with cooling units to produce chilled air or water, commonly referred to as "tri-generation" (see subsection 2.4). 2.1 Industrial CHP The use of CHP in manufacturing and in the service industry has a long tradition. Most applications are in plants with a high demand both for thermal energy (steam, hot water, hot gases, cooling) and for power. Thus, CHP plants are particularly found in energy-intensive sectors, such as paper and board, basic chemicals, refineries, iron and steel, food and textile processing, wood working, and mechanical and vehicle engineering. Natural gas, biogas and solid wastes (e.g. paper and wood wastes) are the major fuel options today. Many CHP plants are individually designed for specific requirements. As a consequence, the size, type of technology, and fuels used vary widely, making it more difficult for manufacturers and suppliers to cut costs by means of standardisation and economies of mass production. Usually, industrial CHP units are designed to meet the heat demand of associated industrial facilities. A connection to the public power grid and heat stoSwitzerland EU 15 Sweden Finland Denmark Netherlands United Kingdom Ireland Luxembourg Germany France
(4.6/2.9) (0.2/2.3) (2.8/1.3) (0.3/4.9) (0.0/1.9) (0.4/2.1) (4.3/6.6) (3.6/2.4)

rage facilities provides increased flexibility for optimal operation with respect to variations in electricity and heat demand and prices. 2.2 District Heating District heating (or cooling), in contrast to individual heating, refers to the centralised production and networkbased distribution of thermal energy. District heating systems are commonly owned and operated by public utility companies, although, under favourable conditions, some industrial CHP plants operated either independently or in cooperation with the utility feed lowtemperature heat into a local grid. While many district heating schemes continue to be supplied by heat-only boilers, district heating constitutes a major area for CHP applications. Due to considerable network losses, the grids are limited in size, with an average length of 1015 kilometres. They are commonly fed with hot water. In Europe, district heating systems are mainly found in the northern countries, where continuous and high demand for heat in winter justifies the high investment costs [4]. The share of CHP-based district heating systems varies widely from some 22 % in France to about 92 % in the Netherlands. In recent years, the share of
Public supply Industrial autoproducers

(19.5/16.3) (56.9/5.4) (26.5/26.1)

(0.0/22.5)

The first law of thermodynamics states that in a closed system energy cannot get lost during conversion processes. However, according to the second law of thermodynamics the "quality" of energy (the so-called "exergy" or "free energy", characterised by the fraction that can be transformed into mechanical or electrical work), can diminish. Heat, unlike mechanical or electrical work, cannot completely be transformed into non-thermal energy. The amount of losses depends on the difference between the temperature of the heat to be transformed and the temperature of the resulting waste heat (Carnot efficiency). Heat at ambient temperature cannot be transformed into any other form of energy and, therefore, its quality is zero. (For a detailed exposition see for example [3].)

Belgium Austria Spain Portugal Italy Greece

(13.7/11.1) (0.0/11.2) (2.1/6.3) (0.6/16.7) (0.2/1.9) in brackets: percentages

0%

10 %

20 %

30 %

40 %

50 %

60 %

70 %

Figure 1. CHP utilisation in 2000 as share of total electricity production in the current EU Member States (EU 15) and Switzerland. Sources: [2, 5, 26]

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natural gas and renewable energy sources (biomass and biogas) has increased substantially across Europe, while solid fossil fuels (particularly coal and coke) have become less important [5]. This is in line with the general trend of increasingly using natural gas as a substitute for coal. District heating not only enlarges the pool of potential users of recovered thermal energy, but also provides an opportunity to exploit additional energy sources that are better suited for combustion in largescale systems and that would otherwise remain unused (e.g. municipal solid waste). 2.3 Small-scale CHP Small-scale CHP systems for the residential and commercial sectors are typically compact and to some extent standardised container units comprising a reciprocating engine (fuelled by heating oil, natural gas, or biogas), a generator, and a heat recovery system. Recent developments of small and often modular system technologies (e.g. micro-gas turbines, fuel cells) and remote control systems have given rise to a new paradigm in energy supply which is based on decentralised (or "distributed", "embedded") generation [6]. The idea implies that small and frequently CHP- or renewables-based electricity generating units are interconnected via data transfer and bundled in so-called "virtual utilities", with total power capacities as high as 10 megawatts (MW) [7], and/or additionally linked by mini-heat-grids in a closely constrained area. This bundling of decentralised capacity enables a more flexible response to energy demand needs. In liberalised markets it also challenges conventional thermal generation in large and centralised district heating systems, not least because transmission losses (typically around 810 %) can essentially be avoided. Decentralised co-generation has an enormous economic and social impact potential, as the expected economies of mass production of modular, relatively small-scale and increasingly standardised systems will make it attractive to an increasing number of potential adopters. Economies of mass production, however, are at least partly offset by higher planning, installation and maintenance cost per unit of capacity installed. 2.4 Tri-generation Combining Co-generation with Cooling Tri-generation, the combination of CHP plants with cooling units to produce chilled air or water, can either make use of power driving a compressor chiller, or

heat used in absorption chillers. Compared to heat-and-power-only generation, tri-generation permits a more flexible use of CHP units. By connecting air-conditioning systems to the CHP unit, cogeneration plants can be operated more profitably due to increased annual operating hours. The growing demand for airconditioning and other cooling applications holds promising prospects for tri-generation use and further development, especially in Southern Europe. Ideal objects for tri-generation include office and (multi-family) residential buildings, hotels, shops, swimming pools, schools, hospitals, and small-scale industries. Alternatively, cooling grids can be operated similarly and in parallel to heating networks. However, as the installation of new cooling networks is costly, on-site tri-generation is the dominant option today and probably in future applications.

3. Environmental and Socio-economic Benefits

Apart from fuel savings, CHP use can also lower emissions of greenhouse gases (especially CO2) and pollutants (especially SO2 and NOx). The reduction of pollutants, however, is of minor importance as it heavily depends on variables such as the fuel used, the clean-up technology employed, and the heat and power generation displaced CHP-specific technological characteristics (such as plant efficiency) play a minor role. Size is also crucial, since large systems tend to pollute less on a unit of output basis (despite considerable technological progress of small-scale systems in recent years) and are easier to monitor due to their smaller number [8]. The greenhouse gas mitigation potential attributable to CHP mainly translates into avoided CO2 emissions and is therefore roughly proportional to the amount of energy saved. The exact amount of energy and CO2 emissions saved depends on the reference scenario or case considered (primarily the fuels used and the energy efficiency on the electricity supply side). An especially high socio-economic impact may accrue from smallscale and decentralised co-generation systems. Future CHP micro-technology options, such as fuel cells and micro-turbines, have attractive and innovative systemic features, which may fit to the decentralised nature they are designed for. First, fuel cells are very quiet, because they have no (and micro-turbines and Stirling engines few) moving parts. Second, pollution from fuel cells is relatively

low for example, compared to conventional gas turbines, fuel cells produce few substances contributing to acidification (SO2, NOx and NH3 emissions) and eutrophication (NOx emissions). Finally, fuel cells play a vital role in the vision of a sustainable, hydrogen-based society, in which the use of fossil fuels is largely replaced by hydrogen produced from renewable energy sources [9]. The prospect of a more decentralised heat and power production is an opportunity for a more pluralistic (e.g. larger number of technologies and market players, more varied fuel logistics and grid use) and a more participatory (e.g. larger number of stakeholders with a potential influence on investment decisions) energy system. However, while CHP plants normally need to be connected to the electric grid, the additional connection to the gas grid aggravates grid dependence further. Nevertheless, an increased penetration of decentralised CHP systems can be expected to strengthen the resilience of the grid-dependent electricity supply system, because it gradually replaces a system based on a few large centralised power suppliers with one based on a large number of much smaller sized generators. Besides, the decentralised production of heat and power offers attractive new perspectives for remote and rural communities. Additional business and job opportunities do exist. Their actual extent is mainly dependent on two effects attributable to CHP systems: (1) the import substitution effect (reduced need for fuel imports) and (2) the investment effect (direct, indirect and induced income and employment effects). Studies with economic models that incorporate both effects have shown that CHP systems can indeed create net additional employment [10 as cited in 11, 12].

4. CHP Economics in Liberalised Markets and Political Trade-offs

4.1 Competitiveness in Liberalised Energy Markets The economics of CHP plants mainly depend on plant characteristics, load factors and prevailing market conditions. Demand patterns for heat, cooling and electricity as well as annual operating hours restrict the range of economically feasible technological options, as do the input fuels to be used. More specifically, the competitiveness of CHP schemes is dependent on the condition of the two parallel markets for heat and electricity. On the heat supply side, capital-intensive dis-

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Excursus

A Primer on CHP Technologies

The term CHP encompasses a great variety of different technologies. The optimal system configuration strongly depends on the energy services needed, the input fuels used, the annual operating hours and the economic conditions in the exchange with input fuel and heat and power markets, respectively. The most widespread CHP technologies currently in use are: back-pressure steam turbines (BPST), extracting condensing steam turbines (ECST), gas turbines (usually including a heat recovery boiler) (GT), combined-cycle power plants (CC), and reciprocating engines (RE). In back-pressure and extracting condensing steam turbines, steam expands in a turbine, thus producing electricity via a connected power generator. In BPSTs, the steam is extracted from the turbine at a higher temperature and supplied to a district heating network or industrial process. The power generation efficiency of BPSTs ranges between 10 % (for small plants with a capacity of a few megawatts (MW)) and 25 % or more (for larger plants of 10 MW and more). In ECSTs, only part of the steam is extracted for heating purposes, the rest is further expanded using a condenser to a pressure as low as 0.05 bar (5 kPa) (which corresponds to a condensing temperature of 33 C), thereby producing more utilisable electricity but not more heat. Hence the power generation efficiency of ECSTs is typically larger, although, as a general rule, the overall efficiency diminishes with higher power generation efficiencies as less steam can be extracted for heating purposes. ECSTs provide an additional degree of flexibility as the amount of extracted steam, and thus the ratio of produced power to heat, is variable. Gas turbines are usually smaller in size and capacity, mostly in the range of several MW, and have higher power generation efficiencies (between 25 and 35 %). The exhaust gases from the combustion of (fossil or biotic) liquid or gaseous fuels drive the gas turbine and are subsequently fed into a heat recovery boiler to produce (process) steam or district heat. In combined-cycle power plants, the steam is also used to drive a steam turbine, thus combining the gas turbine plant with a steam turbine plant. State-of-the-art CCs with electricity-only production achieve efficiencies of between 50 and 58 %, while CHP plants reach overall efficiencies as high as 80 %, and power generation efficiencies of 30 to 40 %. Reciprocating engines are available from 5 kW to 8 MW and are typically oil- or gas-fired. They have overall efficiencies of 80 to 95 %, and typical power generation efficiencies of 30 to 40 %. The heat is recovered both from waste heat and exhaust gases. Smaller systems are usually offered in compact, easy-to-install, single-container modules (a typical size being 4 x 2 x 2 m3). The CHP systems described are commercially deployed and widely installed technologies. They are expected to offer only a modest potential for enhancement of energy efficiency. The future lies in micro-generation CHP technologies, three of which are on the verge of market diffusion: micro gas turbines, fuel cells, and Stirling engines. Micro-turbines are smaller than conventional reciprocating engines and range from 25 to 200 kW. Capital costs per kW are expected in the same range, whereas the need and thus the costs for operating and maintenance (O&M) can be considerably lower per kW of capacity installed. Compared to REs, they have environmental advantages, including lower NOx emissions, although the power generation efficiency (23-30 %) and the overall efficiency (70-75 %) are lower compared to other CHP technologies. Recent developments have lowered production costs and the technology is now beginning to penetrate the end-user market. Fuel cells convert the chemical energy of hydrogen and oxygen directly into electricity; the process involved is similar to that in batteries (compare Brandon and Hart for a brief introduction into fuel cell technology [23]). Fuel cells are based on the oxidation of hydrogen, a chemical reaction which in its reverse form constitutes the electrolysis of water. Because fuel cells do not rely on combustion processes, for which the theoretical energy efficiency is limited by the Carnot factor, their efficiency (at currently achievable process temperatures) is considerably higher than for the technologies described above. Different types of fuel cells are currently under development, varying mainly with respect to the electrolyte used, the operating temperature, and the electric performance (Table 1). The high-temperature waste gases of MCFCs and SOFCs allow the combination with steam or gas turbines, leading to expected power generation efficiencies of up to 70 %. Several types are already in a commercial stage, or about to reach commercial breakthrough within the next 23 years. However, to make them cost-competitive with other small-scale applications, production costs still have to drop significantly, e.g. by exploiting economies of scale, economies of scope, and learning curve effects 2). The Stirling engine technology has been known for more than 150 years [25]. However, although theoretical power generation efficiencies are higher than those of reciprocating engines, realised efficiencies are still too low and generation costs too high. Its comparative advantage accrues from the low maintenance cost, high reliability, low noise levels (compared to reciprocating engines), low emission levels, and especially the wide range of gaseous and liquid fuels that can be used (which makes it particularly attractive for biomass energy applications). Stirling engines are currently built with capacities in the range from 1 to 100 kW, and their power generation efficiency is in the order of 25 to 29 %, with an overall efficiency of about 90 %.

of scale: unit cost reduction potentials accruing from increased production levels at which higher operational efficiencies can be achieved and fixed costs better distributed among the units produced. Economies of scope: cost reductions accruing from synergies of the production of different products within a single company (e.g. because of the joint use of production facilities and inputs, joint marketing/ administration, production of main product provides saleable by-product/s). Learning curve effects: the phenomenon that the unit costs of production typically decrease with time, though at a decreasing rate.

2) Economies

Table 1. Fuel cell (FC) types and characteristics [24].

Type Temperature Stage of development Field of application Power generation efficiency (current benchmark)

AFC Alkaline FC PEMFC Polymer electrolyte membrane FC PAFC Phosphoric acid FC MCFC Molten carbonate FC SOFC Solid oxide FC

60-80 C 70-90 C

Special applications Demonstration

Special applications Mobile, small stationary

60 % 40-50 %

170-200 C

Commercial

Small stationary

40-45 %

650 C

Demonstration

Small to medium power stations

55-60 %

900-1000 C

Demonstration

Small to medium power stations

60-70 %

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Innovative CHP technology at work: The combined fuel cell/microturbine co-generation unit on the site of the Fraunhofer Institute UMSICHT in Oberhausen/Germany represents a path-breaking pilot project for the simultaneous generation of electricity, heating and cooling (initially from natural gas, later from mine gas which would otherwise escape unused into the atmosphere). ( Fraunhofer Institut fr Umwelt-, Sicherheits-, Energietechnik UMSICHT)

tribution infrastructure needs to be taken into account. On the electricity supply side, in a liberalised market, excess capacities and depreciated power plants result in pricing on a marginal cost basis (or even lower, as was seen in Germany for some time after full market opening) [13]. In addition, access to the electricity market (and particularly grid access) has often been impeded by powerful and wellestablished market players. Furthermore, due to different stages in the process of market liberalisation (e.g. if electricity markets are opened ahead of natural gas markets), CHP operators have often faced difficulties, especially against hydro power generators, because profitability of CHP plants strongly depends on the spread between electricity and input fuel prices. In order to provide a transparent and level playing field it is important for regulators to effectively prohibit crosssubsidisation from non-competitive to competitive market segments. On the other hand, this "unbundling" may inhibit the exploitation of synergy potentials accruing from the vertical and horizontal integration of businesses. Uncertainty and risk are prevalent factors especially in the transition phase of market opening. The situation can be further aggravated by uncoordinated, inconsistent, and/or only temporarily implemented CHP policies.3) Finally, given that many CHP applications are feasible in businesses where energy production is not a core business, financing CHP projects may pose an important obstacle to CHP implementation. Modern forms of outsourcing and financing, however, such as sale and lease back, or contracting by specialised energy service suppliers, can help to effectively overcome this barrier. The situation for CHP applications is likely to improve in a few years, as excess capacities are expected to diminish and reinvestments become necessary, for which full cost accounting is the appropriate calculus. On this basis, CHP plants offer cost benefits because of energy savings on the input side even if the environmental benefits of CHP are not (or not fully) taken into account, e.g. in the form of subsidies or a carbon tax [14]. On the other hand, higher investment costs need to be considered for CHP plants. Additionally, liberalisation may boost the application of small-scale applications in decentralised systems, provided that access to power grids at fair and transparent prices is established and maintained. In comparison to large centralised systems, small systems incur lower costs and thus lower investment risks.

4.2 CHP Policy in a Liberalised Market Currently, policies aiming at global climate change mitigation are a major driving force for CHP promotion. Indeed, it is impossible to conceive a sustainable energy system without heavy use of CHP. Effective CHP policy-making in a liberalised market environment implies framework conditions established that allow the share of CHP to grow continuously. However, since boundary conditions and prevailing barriers vary widely between countries, policy approaches have also been heterogeneous in the past (the sustained national CHP policy initiatives of Denmark, Finland, Germany, the Netherlands and the United Kingdom can serve as illustrative and largely complementary examples [15, 16]). Throughout Europe, various national CHP promotion schemes based both on command-and-control (e.g. standards) or market-based (e.g. subsidies, guaranteed feed-in tariffs, tradable certificates) policy instruments have been discussed. In Sweden, a carbon tax on fossil fuels has fostered the tripling of biomass input to CHP systems within a few years, albeit the total share of CHP is still way below EU average [17] (Figure 1). In the Netherlands, a co-generation incentive programme was launched in 1988. Important elements are investment grants, favourable gas tariffs (especially attractive for smaller CHP units) and the establishment of a CHP promotion agency. Under the 1998 Dutch Electricity Act, co-generation was given a special status. Utilities are obliged to accept electricity produced by CHP and a minimum tariff was introduced for electricity supplied to the public grid. These policies led to a tripling of the installed CHP capacity from 2 700 MW in 1987 to 9 600 MW in 2 000 (the target had been set at 8 000 MW) [18]. In Germany, the introduction of a tradable certificate scheme in combination with a quota target was a major topic in the late 1990s, but the idea was eventually abandoned in favour of a bonus system
3) Recent

research has shown that in a liberalised market environment profitability can be raised in the order of 10 %, compared to existing practice, if CHP operators with district heating systems optimise their plants by taking uncertainty into account, and submit optimal bids to the power exchanges (e.g. www.oscogen.ethz.ch). Such an increase can constitute an important element for economic survival of CHP operations in a highly competitive electricity market. See, for example, the range of papers published within the framework of the 'Energiedialog 2000', an initiative of the German Federal Ministry of Economics and Technology (BMWi), www.energiedialog2000.de.

4)

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(that seemed to be easier to implement and is an established instrument) 4). Now a bonus is granted for co-generated electricity fed into the public grid (thus excluding industrial auto-producers). Higher amounts are paid for modernised or new plants and especially for small-scale units and fuel cells. The aim is threefold: (1) avoiding the shut-down of existing plants; (2) supporting the construction of new plants; and (3) promoting innovative energy technologies. An evaluation of the new scheme, however, seems to be untimely. The European Commission repeatedly emphasised the key importance of CHP for a more sustainable development in general and climate change mitigation in particular [19]. After its first concrete initiative calling for an increase in the share of CHP from 9 % in 1997 to 18 % by 2010 [1], it recently submitted a proposal for a directive on the promotion of CHP within the EU [20]. The objective of the directive is to consolidate existing and promote new high-efficiency co-generation installations. It avoids setting a specific future target for the share of CHP, which certainly weakens its implications, but at least contains an explicit obligation for each member state to examine and report on the market potential of CHP on a regular basis. The directive aims at setting a common framework for the promotion of CHP in Europe, while in line with the subsidiary principle leaving major aspects of the policy taken (i.e. targets and reference systems to define the environmental benefits) to the member states. A key element of the directive is to determine the actual amount of electricity produced in co-generation mode and to set efficiency criteria by comparing the fuel input of the co-generation system with separate heat and power generation. The first step aims at providing a scheme on how to differentiate between electricity produced in co-generation mode and electricity-only generation for technologies allowing both working modes (mainly extracting condensing steam turbines). Expert discussions currently revolve around the proposed calculation scheme, which should at the same time be understandable and correctly account for all

kinds of technologies and applications. A recent study, using similar criteria to define the quality of a CHP application, concludes that 13 % of all European CHP units and about 30 % of the electricity designated as CHP electricity in official statistics are not eligible as quality CHP [21]. For the establishment of efficiency criteria, in a second step, the directive outlines a common methodology for comparison (e.g. the principle that similar fuel categories are to be compared), but leaves it to the member states to define the reference system. Co-generation is labelled "highly efficient" if the energy savings amount to at least 10 %. This threshold applies to new units only; existing units must manage 5 %, and 05 % savings are considered sufficient for small and bioenergy-fuelled units. The actual environmental benefits depend heavily on the reference system chosen and thus, with only one or a few reference systems applied, the proposed calculation scheme will tend to fail to appropriately account for the whole spectrum of different CHP applications and operation modes. A carefully designed (and to some extent complex) calculation scheme in the first step, however, might make the reference system redundant altogether. Despite the weaknesses described, we consider the directive a good starting point for effectively promoting CHP, while taking into account the large diversity of technologies and applications subsumed under the heading CHP. In the years to come, the flexible mechanisms aimed at reducing climate change adopted with the 1997 Kyoto Protocol will be major drivers for the penetration of energy-saving technologies. Projects within the framework of Joint Implementation (JI) or the Clean Development Mechanism (CDM) further the diffusion of advantageous CHP technologies to transition and developing countries. Within the EU, an emission trading scheme is proposed to help achieve the target of reducing greenhouse gas emissions by 8 % while assuring this happens at the lowest possible cost [22]. However, it is not yet clear at present how to best include CHP installations in this scheme.

5.Outlook
Without appropriate political intervention, diffusion of CHP into liberalised energy markets is likely to be modest, at least in the early stages of market opening. In the longer term, we expect brighter prospects for CHP due to free access of independent power producers (who may exploit market niches) and higher fuel prices (e.g. due to increasing scarcity and increasing internalisation of external costs), provided the barriers described are eliminated. Innovative small-scale CHP technologies may benefit from the liberalisation process and, together with other new energy conversion technologies, have the potential to change the prevailing "top-down" energy paradigm towards a more decentralised energy system. Power parks, in

politische kologie 81-82

Genopoly
Gentechnik in Landwirtschaft und Ernhrung

Selten wurde eine neue Technologie so sehr gegen den Willen fast aller Betroffenen eingefhrt. Der Nutzen der Grnen Gentechnik ist zweifelhaft, die Risiken schwer einzuschtzen. Siebzig Prozent der VerbraucherInnen in Europa wollen keine gentechnisch vernderten Lebensmittel auf dem Teller, und selbst die konventionellen Landwirte lehnen sie mit groer Mehrheit ab. Wer also profitiert von ihr und wem schadet sie? Welche Entwicklungen in Forschung und Praxis werden gefrdert, welche verhindert? Das aktuelle Doppelheft der politischen kologie behandelt die Nutzungsziele der Gentechnik, die damit verbundenen Hoffnungen, das bislang Erreichte und die bisherigen Enttuschungen, die Risiken und die unerwnschten Nebenwirkungen aber auch alternative Entwicklungspfade, um etwa dem Problem des Hungers auf der Welt zu begegnen.

English-German Glossary
Combined heat-and-power production (CHP) Tri-generation Back-pressure steam turbine (BPST) Extracting condensing steam turbine (ECST) Gas turbine (GT) Combined-cycle power plants (CC) Reciprocating engine (RE) Fuel cell (FC) Kraft-Wrme-Kopplung (KWK) Kraft-Wrme-Klte-Kopplung (KWKK) Gegendruckdampfturbine Entnahmekondensationsturbine Gasturbine GuD-Anlage (Gas-und-Dampfturbinen-Anlage) Verbrennungsmotor (Otto- oder Diesel-Motor) Brennstoffzelle

www.oekom.de
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which existing resources, appropriate conversion technologies, and energy needs can be optimally matched, are an interesting and inspiring development in this respect. Moreover, coupled with modern data communication technologies, a significant number of "virtual power plants" might be commercially established within a few years. The expected widespread diffusion of modular and mass-produced energy technologies, especially fuel cells, is a major element in this development. However, incentive schemes that adequately account for the environmental and socio-economic benefits of CHP systems are a prerequisite to foster such a development, and the establishment and maintenance of fully functioning markets has to be actively pursued by policy-makers and regulators alike. In this respect, the proposed EU directive on the promotion of CHP despite several weaknesses which need to be discussed thoroughly provides a good starting point to promote the establishment of CHP.

References
[1] CEC Commission of the European Communities: Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions A Community strategy to promote combined heat and power (CHP) and to dismantle barriers to its development, COM (1997) 514 final, Commission of the European Communities, Brussels (1997). [2] Future COGEN: The Future of CHP in the European Market The European Cogeneration Study, SAVE Project No. XVII/4.1031/P/99-169 on behalf of the European Commission, Brussels (2001). [3] H.D. Baehr: Thermodynamik, Springer, Berlin Heidelberg (2000, 10th edition). [4] EDUCOGEN The European Educational Tool on Cogeneration: SAVE Project No XVII/4.1031/P/99-159 on behalf of the European Commission, COGEN Europe The European Association for the Promotion of Cogeneration, Brussels (2001). [5] EUROSTAT: Combined heat and power production (CHP) in the EU Summary of statistics, Commission of the European Communities, Luxembourg (2001). [6] R. Madlener, N. Wohlgemuth: "Small is sometimes beautiful: The case of distributed generation in competitive energy markets", Proceedings of the Conference "Energy Market Liberalization in the Central and Eastern Europe", 6-8 Sept. 1999 (1999) 94-100. [7] P. Habay, S. Pariente-David: "The emergence of distributed generation in a liberalising European electricity market", Revue de l'Energie 508 (1999) 398-402. [8] N. Greene, R. Hammerschlag: "Small and Clean is Beautiful. Exploring the Emissions of Distributed Generation and Pollution Prevention Policies", The Electricity Journal 13 (2000) 50-60. [9] F. Babir: "Solar Hydrogen Energy System Real Possibility or Utopia", in S. Ulgiati

(Ed.): Advances in Energy Studies. Exploring Supplies, Constraints, and Strategies, SGE Publisher, Padova (2001). [10] C. Secrett: "Making Work the Environment", The Employment Institute 14 (1999). [11] C. Hewett, J. Foley: Employment creation and environmental policy: a literature review, Institute for Public Policy Research, London (2000). [12] Greenpeace (Ed.): Mehr Arbeitspltze durch kologisches Wirtschaften? Eine Untersuchung fr Deutschland, die Schweiz und sterreich, a study of the Prognos Institute on behalf of Greenpeace, Greenpeace, Hamburg (1999). [13] R. Madlener, E. Jochem: "Impacts of market liberalisation on the electricity supply sector: a comparison of the experience in Austria and Germany", Proceedings of the 3rd International Energy Symposium "Dichotomies and Challenges", 19-21 Sept. 2001, Ossiach/Austria, Forschung im Verbund, sterreichische Elektrizittswirtschafts-AG, Wien 74 (2001) 131-140. [14] AGFW Arbeitsgemeinschaft Fernwrme beim VDEW: Strategien und Technologien einer pluralistischen Fern- und Nahwrmeversorgung in einem liberalisierten Energiemarkt unter besonderer Bercksichtigung der KraftWrme-Kopplung und erneuerbarer Energien, Pluralistische Wrmeversorgung Zeithorizont 2005, AGFW, Frankfurt/Main (2000). [15] COGEN Europe The European Association for the Promotion of Cogeneration: European Cogeneration Review 1999, COGEN Europe, Brussels (1999). [16] K.M. Weber: Innovation Diffusion and Political Control of Energy Technologies: A Comparison of Combined Heat and Power Generation in the UK and Germany, Physica-Verlag, Heidelberg (1999). [17] L. Gustavsson: "Energy efficiency and competitiveness of biomass-based energy systems", Energy 22 (1997) 959-967. [18] www.cogen.nl/info/index.html, retrieved September 2002. [19] CEC Commission of the European Communities: Communication from the Commission to the Council, the European Parliament, the

Economic and Social Committee and the Committee of the Regions Action Plan to Improve Energy Efficiency in the European Community, COM (2000) 247 final, Commission of the European Communities, Brussels (2000). [20] CEC Commission of the European Communities: Directive of the European Parliament and of the Council on the promotion of cogeneration based on useful heat demand in the internal energy market, COM (2002) 415 final, Commission of the European Communities, Brussels (2002). [21] EURELECTRIC Union of the Electricity Industry: European Combined Heat & Power: A Technical Analysis of Possible Definition of the Concept of "Quality CHP", Eurelectric, Brussels (2002). [22] CEC Commission of the European Communities: Proposal for a Directive of the European Parliament and of the Council establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC, COM (2001) 581 final, Commission of the European Communities, Brussels (2001). [23] N. Brandon, D. Hart: An Introduction to Fuel Cell Technology and Economics, Centre for Energy Policy and Technology, Imperial College of Science, Technology and Medicine, London (1999). [24] ASUE Arbeitsgemeinschaft fr sparsamen und umweltfreundlichen Energieverbrauch e.V.: Stationre Brennstoffzellen Grundlagen, Einsatzmglichkeiten, Stand der Technik, Perspektiven, ASUE, Kaiserslautern (2000). [25] M.L. Shelton: The next great thing: the sun, the Stirling engine, and the drive to change the world, W. W. Norton, New York (1994). [26] BFE Bundesamt fr Energie: Thermische Stromproduktion inklusive Wrmekraftkoppelung (WKK) in der Schweiz 1990 bis 2000, Bundesamt fr Energie, Bern (2001).

(Submitted 24 October 2002; revised version accepted 09 May 2003; AJ)

Reinhard Madlener: Born 1964 in Dornbirn, Austria. Studies in international business and managerial economics, economics, econometrics, and paedagogics (M.Sc. 1992, 1994). Doctorate in Economics and the Social Sciences (Dr. rer. soc. oec.), Vienna University of Economics and Business Administration (WU Wien, 1996). Post-graduate diploma in economics from the Institute for Advanced Studies and Scientific Research, Vienna (IHS Wien, 1994). Inspired by the work of scholars such as Amory Lovins, Nicholas Georgescu-Roegen, Bruce Hannon and others, from 1988 onwards specialisation in energy economics with a particular focus on the rational use of energy, renewable energies, diffusion of innovative energy technologies, and energy and climate-change policy. Since January 2001, senior energy economist at the Centre for Energy Policy and Economics (CEPE), Swiss Federal Institutes of Technology (ETHZ, EPFL, PSI), Zurich. Christiane Schmid: Born 1972 in Neumarkt/Oberpfalz, Germany. Studies in chemical engineering and "Applied Cultural Studies" at the University of Karlsruhe (Diploma 1997). Since 1998, project manager in the Energy Department of the Fraunhofer Institute for Systems and Innovation Research (ISI), Karlsruhe, Germany. Currently, while working on her PhD thesis, she is associated with the Centre for Energy Policy and Economics (CEPE), Swiss Federal Institutes of Technology (ETHZ, EPFL, PSI), Zurich. Her current areas of interest include rational energy use and energy consulting in small and medium-sized enterprises, energy monitoring and targeting, energy benchmarking, and analysis of the rational use of energy in industrial applications.

Abstracts

159
GAIA 12 (2003) no. 2

Stephan Dabbert* and Anna Maria Hring

Organic farming: A grassroots movement taken over by policy? GAIA 12/2 (2003) 100106
Abstract: The rapid development of organic farming over the last decade is partly due to increased consideration of organic farming in policy measures. Examining this view, this article briefly discusses the current state and development of the organic farming sector and three lines of justification for policy support for organic farming: organic farming supplies public goods; the organic farming sector can be defined as an infant industry; and organic farming should be supported for risk precaution. Then, based on the observation that policy makers consider organic farming support justified, an integrated approach to organic farming policy is outlined. Keywords: organic farming, agricultural policy, policy justification, infant industry, public goods, risk precaution * Postal address: Prof. Dr. S. Dabbert Institut fr Landwirtschaftliche Betriebslehre Universitt Hohenheim, D-70593 Stuttgart (Germany) E-Mail: dabbert@uni-hohenheim.de

Ecological Perspectives in Science, Humanities, and Economics Copyright 2003: Verein Gaia Konstanz, St. Gallen, Zrich Hauptherausgeber: Ulrich Mller-Herold, Zrich (verantwortlich im Sinne des Presserechts) Senior Editor: Otto Smrekar (Basel) Redaktion: Almut Jdicke (Zrich) Ulrike Sehy (Mnchen) Margarete Smrekar (Basel) Anschrift: Redaktion GAIA Mnsterplatz 6, CH-4001 Basel Telephon (+41 61) 2 63 23 10 Telefax (+41 61) 2 63 23 11 E-Mail Otto.Smrekar@unibas.ch kom Verlag, Waltherstrae 29, D-80337 Mnchen Telephon (+49 89) 54 41 84 42 Telefax (+49 89) 54 41 84 49 E-Mail sehy@oekom.de ETH Hnggerberg, Postfach 150, CH-8093 Zrich Telephon (+41 52) 2 22 28 05 Telefax (+41 52) 2 22 64 61 E-Mail redgaia@umnw.ethz.ch Graphik, Satz und Layout: Dalena Bischeltsrieder, Margarete Smrekar Verlag: kom Verlag Gesellschaft fr kologische Kommunikation mbH Gesellschafter und Anteile: Jacob Radloff, Redakteur, Feldafing, 100 Prozent Waltherstrae 29, D-80337 Mnchen www.oekom.de Anzeigen: Katja Muchow, kom GmbH Telefax (+49 89) 50 00 97 97 E-Mail anzeigen@katja-muchow.de Anzeigenleitung und Marketing: Christine Hrzeler (verantwortlich), kom GmbH Druck: Laub Druck Industriegebiet an der B27, D-74832 Elztal-Dallau Die Zeitschrift sowie alle in ihr enthaltenen einzelnen Beitrge und Abbildungen sind urheberrechtlich geschtzt. Jede Verwertung, die nicht ausdrcklich vom Urheberrechtsgesetz zugelassen ist, bedarf der vorherigen Zustimmung des Vereins Gaia. Namentlich gekennzeichnete Artikel mssen nicht die Meinung der Herausgeber/Redaktion wiedergeben. Unverlangt eingesandte Manuskripte fr die keine Haftung bernommen wird gelten als Verffentlichungsvorschlag zu den Bedingungen des Verlages. Es werden nur unverffentlichte Originalarbeiten angenommen. Die Verfasser erklren sich mit einer nicht sinnentstellenden redaktionellen Bearbeitung einverstanden. Erscheinungsweise: viermal im Jahr. Gedruckt auf surefreiem, ohne chlorhaltige Bleichmittel hergestelltem Papier. Bezugsbedingungen: Jahresabonnement EUR 79., CHF 142.20 fr Privatbezieher; EUR 139., CHF 250.20 fr Unternehmen, Institutionen und Bibliotheken; EUR 50., CHF 90. fr Studierende, Auszubildende, Schler (jhrlicher Nachweis erforderlich); Einzelheft EUR 20., CHF 36.00. Alle Preise inkl. MwSt. zzgl. Porto- und Versandkosten. Abbestellungen mit DreiMonats-Frist zum Ablauf des Abonnementsjahres. Zahlungen jeweils im voraus. Bestellung, Aboverwaltung und Vertrieb: CONSODATA ONE-TO-ONE, Semmelweisstrae 8, D-82152 Planegg Telephon (+49 89) 85 70 91 55 Telefax (+49 89) 85 70 91 31 E-Mail oekom@consodata.de Konto: fr Deutschland Postbank Mnchen (BLZ 700 100 80), Konto 645858800; fr die Schweiz Postfinance DIE POST (BLZ 3000 1101), Konto 40-344357-9 ISSN 0940-5550 Printed in Germany

Stefan Mann*

Merit goods and transaction costs: Economic arguments for policy support of organic farming GAIA 12/2 (2003) 107110
Abstract: In response to conventional agricultural economists, who criticize state-subsidized organic farming by arguing that ecological benefits can be attained more efficiently, this paper presents two new arguments for policy support of organic farming. First, it presents the widely-held positive opinion of organic products and the apparent contradiction that few people are willing to buy them. Along with the calls for support of organic farming, this makes organic food a so-called individualistic merit good. Secondly, it is argued that supporting organic farming is worthwhile because it is a broadly recognized agricultural production system and it is environmentally friendly suggesting, in the end, reduced transaction costs. Keywords : organic farming, merit goods, path dependencies, transaction costs * Postal address: Dr. habil. S. Mann, Eidgenssische Forschungsanstalt fr Agrarwirtschaft und Landtechnik Tnikon CH-8356 Ettenhausen (Switzerland) E-Mail: stefan.mann@fat.admin.ch

Reinhard Madlener* and Christiane Schmid

Combined Heat and Power Generation in Liberalised Markets and a Carbon-Constrained World GAIA 12/2 (2003) 114120
Abstract: Combined heat and power production (co-generation, CHP) is an important option for carbon emission mitigation, the more rational use of energy, and a more sustainable development. This article provides an essentially non-technical overview of co-generation technologies and applications and the potentials, merits and drawbacks involved. The article looks at cogeneration within the context of two major prevailing trends - energy market liberalisation and a growing concern about global climate change and the wasteful use of energy resources. We show that, on the one hand, there is a plethora of different commercial and pre-commercial CHP technologies and applications, with varying cost characteristics, diffusion prospects and potential environmental and socio-economic net benefits. On the other hand, we explain why, at least at the moment, liberalisation constitutes a curse and a blessing for the further market penetration of CHP, and that both the Kyoto process and recent technological developments are key drivers for the further deployment of CHP. Effective and long-term oriented policy action is needed in order to further exploit market potentials and to enhance new potentials by removing or alleviating existing non-technical barriers and market failures (e.g. related to financing, institutional inertia, fair access to the electric grid). In order to enhance its effectiveness, such policy action will to some extent also have to take into account the regionally, culturally, and societally varying conditions, despite the ongoing economic integration. Keywords : co-generation, combined heat and power, CHP, energy market liberalisation, carbon emission mitigation * Postal address: Dr. R. Madlener Centre for Energy Policy and Economics (CEPE) Swiss Federal Institutes of Technology ETH Zentrum WEC C 25, CH-8092 Zurich (Switzerland) E-Mail: madlener@cepe.mavt.ethz.ch