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Article 14 of Directive 2012/27/EU: “Promotion of efficiency in heating and cooling”

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European countries are currently facing complex energy challenges including major external energy dependence or an increasing concern about climate change. The Conclusions of the European Council in 2007 and 2011 established a need for reaching at least a total 20% of savings in the European primary energy consumption by 2020 (2007 baseline).

In order to meet this challenge, the European Union published in 2012 the Energy Efficiency Directive 2012/27/EU (EED), which has established a common framework to promote concrete actions related to energy efficiency in the European market.

Within the EED, the Article 14 stands out for promoting the energy efficiency through the use of CHP (combined heat and power), district heating and cooling and by recovering industrial waste heat.

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Article 14 of Directive 2012/27/EU: “Promotion of efficiency in heating and cooling”

  1. 1. Article 14 of Directive 2012/27/EU: “Promotion of efficiency in heating and cooling” Carolina Fondo, Manager 24 September 2015 at 13h00 CET Article 14 of Directive 2012/27/EU: “Promotion of efficiency in heating and cooling” Carolina Fondo, Manager 24 September 2015 at 13h00 CET Financial AdvisoryStrategy Consulting Market IntelligencePolicy Consulting
  2. 2. Training & Outreach Engineering OEM1)Consulting Training (presential & on-line) Manuals & Guides Communication & Outreach Energy Procurement Energy Certification (CALENER, LEED...) Energy Audits Policy Consulting Strategy Consulting Financial Advisory (M&A, ESCO, origination) 1 2 3 4 Monitoring &Telemetry A One stop-shop for sustainable energy services Measurement & Verification (ESCOs) Climate Change (GHG inventory, carbon footprint, adaptation) Market Intelligence Structuring of ESCOs Energy Efficiency Planning (corporate, local, national) Harmonization Committees (IEC, AENOR) Multilateral Projects (H2020, IBD, EIB, etc.) Energy Management Energy Management Systems (ISO 50001) Note: 1) Outsourced Energy Management (OEM) Software Design & Development PPA identification & negotiation
  3. 3. • History and context of the Article 14 - European EE objectives: 20% 2020 - Directive 2012/27/EU • Main content of the Article 14 • Main impacts on European markets • Business opportunities Agenda • History and context of the Article 14 - European EE objectives: 20% 2020 - Directive 2012/27/EU • Main content of the Article 14 • Main impacts on European markets • Business opportunities 3
  4. 4. DIRECTIVE 2012/27/EU • European countries are currently facing complex energy challenges including major external energy dependence or an increasing concern about climate change • The European Council concluded in 2007 and 2011 that the European Union should save over 20% of their expected primary energy consumption in 2020 - The 2020 projection was estimated on a 2007 basis and accounted for 1.842 Mtoe • Energy Efficiency (EE) arises as one of the most valuable tools to carry out this objective - The Conclusions of the European Council February 2011 stand out that “...investments in energy efficiency enhance competitiveness and support security of energy supply and sustainability at low cost” 368 1.200 1.400 1.600 1.800 2.000 EU Primary energy consumption projections and objectives1 The European Union has established a 20% energy saving target by 2020 for all the EU countries 4 • European countries are currently facing complex energy challenges including major external energy dependence or an increasing concern about climate change • The European Council concluded in 2007 and 2011 that the European Union should save over 20% of their expected primary energy consumption in 2020 - The 2020 projection was estimated on a 2007 basis and accounted for 1.842 Mtoe • Energy Efficiency (EE) arises as one of the most valuable tools to carry out this objective - The Conclusions of the European Council February 2011 stand out that “...investments in energy efficiency enhance competitiveness and support security of energy supply and sustainability at low cost” 1.842 1.474 0 200 400 600 800 1.000 2020 Estimation 2020 Objective Required savings Mtoe Note: 1 2007 baseline Source : Conclusions – European Council 4 February 2011; Directive 2012/27/EU
  5. 5. DIRECTIVE 2012/27/EU • In order to meet the 2020 20% challenge, the European Union published in 2012 the Energy Efficiency Directive 2012/27/EU (EED), which has established a common framework for EU countries related to energy efficiency - The EED was adopted on 25 October 2012 and came into force on June 2014 • The EED establishes both general guidelines and also specific measures and targets to ensure major energy savings for consumers and industry • This Directive is composed of 30 articles related to all stages of the EE chain - Building renovation (art. 4), - Energy efficiency obligation schemes (art. 7), - Energy audits and energy management systems (art. 8), - Metering (art. 9), - Cogeneration and district heating and cooling (art. 14) - Etc. Directive 2012/27/EU The 2012 Energy Efficiency Directive provides an approach to help the EU reach its 20% energy efficiency target and covers all stages of the energy chain (from production to end users) 5 • In order to meet the 2020 20% challenge, the European Union published in 2012 the Energy Efficiency Directive 2012/27/EU (EED), which has established a common framework for EU countries related to energy efficiency - The EED was adopted on 25 October 2012 and came into force on June 2014 • The EED establishes both general guidelines and also specific measures and targets to ensure major energy savings for consumers and industry • This Directive is composed of 30 articles related to all stages of the EE chain - Building renovation (art. 4), - Energy efficiency obligation schemes (art. 7), - Energy audits and energy management systems (art. 8), - Metering (art. 9), - Cogeneration and district heating and cooling (art. 14) - Etc. http://eur- lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2012:31 5:0001:0056:en:PDF Source : European Comission; Directive 2012/27/EU
  6. 6. DIRECTIVE 2012/27/EU • Article 14 extends the scope and replaces the substantive provisions of Directive 2004/8/EC on the promotion of cogeneration (the so-called CHP Directive) • The overall objective of Article 14 is to encourage the identification of cost effective potential for delivering energy efficiency in heating and cooling (H&C) - According to the Directive, the use of CHP, efficient district H&C and the recovery of industrial waste heat would represent the most effective tools to achieve that potential - When these technologies are not cost-effective, the potential may be seek through other efficient H&C supply options • Article 14 also requires Member States to design practical instruments to ensure that if the technology/measure that has been analyzed (CHP, district heating, etc.) contributes to increase the cost effective potential, the technology/measure has to be promoted or developed Article 14 intends to promote the energy efficiency in heating and cooling through the use of combined heat and power (CHP), district heating and cooling and the recovery of industrial waste heat 6 • Article 14 extends the scope and replaces the substantive provisions of Directive 2004/8/EC on the promotion of cogeneration (the so-called CHP Directive) • The overall objective of Article 14 is to encourage the identification of cost effective potential for delivering energy efficiency in heating and cooling (H&C) - According to the Directive, the use of CHP, efficient district H&C and the recovery of industrial waste heat would represent the most effective tools to achieve that potential - When these technologies are not cost-effective, the potential may be seek through other efficient H&C supply options • Article 14 also requires Member States to design practical instruments to ensure that if the technology/measure that has been analyzed (CHP, district heating, etc.) contributes to increase the cost effective potential, the technology/measure has to be promoted or developed Source : Guidance note on Directive 2012/27/EU on energy efficiency, amending Directives 2009/125/EC and 2010/30/EC, and repealing Directives 2004/8/EC and 2006/32/EC Article 14
  7. 7. • History and context of the Article 14 • Main content of the Article 14 • Main impacts on European markets • Business opportunities Agenda • History and context of the Article 14 • Main content of the Article 14 • Main impacts on European markets • Business opportunities 7
  8. 8. 1 Developing a comprehensive assessment of the potential for the application of high-efficiency cogeneration and efficient district H&C Adopting policies which encourage the use of efficient H&C systems Carrying out a cost-benefit analysis (CBA) in order to identify the most cost-efficient solutions to meeting H&C needs Adequate measures to ensure that a H&C infrastructure is developed when its CBA shows potential Ensuring the development of a CBA for all those new or refurbished thermal electricity generation installations, industrial installation or DH networks 2 3 6 ARTICLE 14. CONTENT 7 Excluding from the CBA those peak load and back- up electricity installations, nuclear power installations and installations placed near a geological storage site Adopting authorization criteria to take into account paragraphs 1 and 5 Excluding specific individual installations from implement options whose benefits exceed their costs for justified reasons Paragraphs 5, 6, 7 and 8 shall apply to installations covered by Directive 2010/75/EU Ensuring that the origin of electricity produced from cogeneration can be guaranteed according to objective, transparent and non-discriminatory criteria laid down by each Member State Ensuring that any support for cogeneration is used to achieve primary energy savings 8 The Article 14 is composed of 11 paragraphs which aim the Member States to the promotion of efficiency in heating and cooling Developing a comprehensive assessment of the potential for the application of high-efficiency cogeneration and efficient district H&C Adopting policies which encourage the use of efficient H&C systems Carrying out a cost-benefit analysis (CBA) in order to identify the most cost-efficient solutions to meeting H&C needs Adequate measures to ensure that a H&C infrastructure is developed when its CBA shows potential Ensuring the development of a CBA for all those new or refurbished thermal electricity generation installations, industrial installation or DH networks 4 5 Excluding from the CBA those peak load and back- up electricity installations, nuclear power installations and installations placed near a geological storage site Adopting authorization criteria to take into account paragraphs 1 and 5 Excluding specific individual installations from implement options whose benefits exceed their costs for justified reasons Paragraphs 5, 6, 7 and 8 shall apply to installations covered by Directive 2010/75/EU Ensuring that the origin of electricity produced from cogeneration can be guaranteed according to objective, transparent and non-discriminatory criteria laid down by each Member State Ensuring that any support for cogeneration is used to achieve primary energy savings 9 10 11 8 Source : Official Journal of the European Union Directive 2012/27/EU
  9. 9. Developing a comprehensive assessment of the potential for the application of high-efficiency cogeneration and efficient district H&C • Member States should carry out the assessment before 31 December 2015 • The assessment must contain, among others1: - A description of H&C demand of the country and a forecast of how this demand will change in the next 10 years - A map of the national territory identifying H&C demand points, existing and planned district H&C infrastructure and potential H&C supply points - Identification of H&C demand that could be satisfied by high-efficiency cogeneration - Strategies, policies and measures that may be adopted up to 2020 and up to 2030 to realise the potential of H&C - Estimate of the primary energy to be saved - Estimate of public support measures to H&C • At the request of the Commission, the assessment shall be updated and notified to the Commission every five years ARTICLE 14. CONTENT The Article 14 is composed of 11 paragraphs which aim the Member States to the promotion of efficiency in heating and cooling 1 • Member States should carry out the assessment before 31 December 2015 • The assessment must contain, among others1: - A description of H&C demand of the country and a forecast of how this demand will change in the next 10 years - A map of the national territory identifying H&C demand points, existing and planned district H&C infrastructure and potential H&C supply points - Identification of H&C demand that could be satisfied by high-efficiency cogeneration - Strategies, policies and measures that may be adopted up to 2020 and up to 2030 to realise the potential of H&C - Estimate of the primary energy to be saved - Estimate of public support measures to H&C • At the request of the Commission, the assessment shall be updated and notified to the Commission every five years 9 Note: 1 Annex VIII / Directive 2012/27/EU Source : Official Journal of the European Union Directive 2012/27/EU
  10. 10. Adopting policies which encourage the use of efficient H&C systems • Member States shall adopt policies which encourage to take into account at regional and local level the potential of using efficient H&C systems • In particular, high-efficiency cogeneration shall be considered ARTICLE 14. CONTENT Carrying out a cost-benefit analysis (CBA) in order to identify the most cost-efficient solutions to meeting H&C needs • For the purpose of the assessment referred to in Paragraph , , Member States shall carry out a CBA covering their territory based on climate conditions, economic and technical feasibility1 • The CBA shall facilitate the identification of the most cost-efficient solutions to meeting H&C needs The Article 14 is composed of 11 paragraphs which aim the Member States to the promotion of efficiency in heating and cooling 2 3 10 • For the purpose of the assessment referred to in Paragraph , , Member States shall carry out a CBA covering their territory based on climate conditions, economic and technical feasibility1 • The CBA shall facilitate the identification of the most cost-efficient solutions to meeting H&C needs Note: 1 In accordance with Annex IX / Directive 2012/27/EU Source : Official Journal of the European Union Directive 2012/27/EU 1 Adequate measures to ensure that a H&C infrastructure is developed when its CBA shows potential • Where the assessment referred to in Paragraph 1 and also the CBA identify a potential for the application of high-efficiency cogeneration and/or efficient district H&C, Member States shall take adequate measures to ensure that kind of infrastructures will be developed 4 1
  11. 11. Ensuring the development of a CBA for all those new or refurbished thermal electricity generation installations, industrial installation or district H&C networks ARTICLE 14. CONTENT 5 • Member States shall ensure that a CBA1 is carried out when, after 5 June 2014: - a new thermal electricity generation installation with a total thermal input >20 MW is planned - an existing thermal electricity generation installation with a thermal input >20 MW is substantially refurbished - an industrial installation with a total thermal input >20 MW generating waste heat at a useful temperature level is planned or substantially refurbished - a new district H&C network is planned or substantially refurbished The Article 14 is composed of 11 paragraphs which aim the Member States to the promotion of efficiency in heating and cooling 11 • Member States shall ensure that a CBA1 is carried out when, after 5 June 2014: - a new thermal electricity generation installation with a total thermal input >20 MW is planned - an existing thermal electricity generation installation with a thermal input >20 MW is substantially refurbished - an industrial installation with a total thermal input >20 MW generating waste heat at a useful temperature level is planned or substantially refurbished - a new district H&C network is planned or substantially refurbished Note: 1 In accordance with Part 2 Annex IX Source : Official Journal of the European Union Directive 2012/27/EU Excluding from the CBA those peak load and back-up electricity installations, nuclear power installations and installations placed near a geological storage site • Member States may exempt from Paragraph 5: : - those peak load and back-up electricity generating installations which are planned to operate under 1500 operating hours per year as a rolling average over a period of five years - nuclear power installations - installations that need to be located close to a geological storage site approved under Directive 2009/31/EC 6 5
  12. 12. Adopting authorization criteria to take into account paragraphs 1 and 5 ARTICLE 14. CONTENT 7 • Members shall adopt authorization criteria or equivalent permit criteria to: - take into account the outcome of the comprehensive assessment referred to in paragraph 1 - ensure that the requirements of paragraph 5 are fulfilled - take into account the outcome of CBA referred to in paragraph 5 The Article 14 is composed of 11 paragraphs which aim the Member States to the promotion of efficiency in heating and cooling 8 5 5 1 12 Source : Official Journal of the European Union Directive 2012/27/EU Excluding specific individual installations from implement options whose benefits exceed their costs for justified reasons 8 • Member States may exempt individual installations from being required to implement options whose benefits exceed their costs, if there are imperative reasons of law, ownership or finance for so doing • In these cases the Member State concerned shall submit a reasoned notification of its decision to the Commission within three months
  13. 13. 10 ARTICLE 14. CONTENT Ensuring that the origin of electricity produced from cogeneration can be guaranteed according to objective, transparent and non-discriminatory criteria laid down by each Member State • Member States shall ensure that the origin of electricity produced from high efficiency cogeneration can be guaranteed according to objective, transparent and non-discriminatory criteria laid down by each Member State • Any refusal to recognize a guarantee of origin as such proof, must be based on objective, and transparent criteria Paragraphs 5, 6, 7 and 8 shall apply to installations covered by Directive 2010/75/EU 9 The Article 14 is composed of 11 paragraphs which aim the Member States to the promotion of efficiency in heating and cooling 13 • Member States shall ensure that the origin of electricity produced from high efficiency cogeneration can be guaranteed according to objective, transparent and non-discriminatory criteria laid down by each Member State • Any refusal to recognize a guarantee of origin as such proof, must be based on objective, and transparent criteria Ensuring that any support for cogeneration is used to achieve primary energy savings 11 • Member States shall ensure that any available support for cogeneration is subject to the electricity produced originating from high-efficiency cogeneration and the waste heat being effectively used to achieve primary energy savings • Public support to cogeneration and district heating generation and networks shall be subject to State aid rules, where applicable Source : Official Journal of the European Union Directive 2012/27/EU
  14. 14. • History and context of the Article 14 • Main content of the Article 14 • Main impacts on European markets - Assessment of the potential of CHP and DH - Cost – benefit analysis • Business opportunities Agenda • History and context of the Article 14 • Main content of the Article 14 • Main impacts on European markets - Assessment of the potential of CHP and DH - Cost – benefit analysis • Business opportunities 14
  15. 15. • The comprehensive assessment of national H&C potentials which is described in paragraph 1 can be expressed as a whole with the national heat map • The heat map is an interactive map of a national territory that identifies the H&C demand points across different segments (e.g., household, industry or tertiary sector) - It should also identify existing and planned district H&C infrastructure and potential H&C supply points • The Directive requires a high zoom level in the map - Municipalities and conurbations with a plot ratio of at least 0.3 - Industrial zones with a total annual H&C consumption > 20 GWh Paragraph 1 (a comprehensive assessment of the potential for CHP and efficient district H&C) includes the main practical impacts that Article 14 may bring for the industry ASSESSMENT OF THE POTENTIAL OF CHP AND DH 1 • The comprehensive assessment of national H&C potentials which is described in paragraph 1 can be expressed as a whole with the national heat map • The heat map is an interactive map of a national territory that identifies the H&C demand points across different segments (e.g., household, industry or tertiary sector) - It should also identify existing and planned district H&C infrastructure and potential H&C supply points • The Directive requires a high zoom level in the map - Municipalities and conurbations with a plot ratio of at least 0.3 - Industrial zones with a total annual H&C consumption > 20 GWh 15 Source : UK national Heat Map
  16. 16. The heat map has already been developed by United Kingdom, Scotland and The Netherlands ASSESSMENT OF THE POTENTIAL OF CHP AND DH Scotland heat map - Example http://heatmap.scotland.gov.uk/ 16 Source : Scotland national Heat Map
  17. 17. The heat map has already been developed by United Kingdom, Scotland and The Netherlands ASSESSMENT OF THE POTENTIAL OF CHP AND DH The Netherlands heat map - Example http://agentschapnl.kaartenbalie.nl/gisviewer/viewer.do?code=0f2d31b5cee824a43bf2ad238f41d101 17 Source : Agentschap NL, Ministerie van Economische Zaken
  18. 18. The heat map has already been developed by United Kingdom, Scotland and The Netherlands ASSESSMENT OF THE POTENTIAL OF CHP AND DH UK heat map - Example http://tools.decc.gov.uk/nationalheatmap/ 18 Source : Department of Energy & Climate Change
  19. 19. National level Paragraph 3, 4 and 5 include a cost-benefit analysis with an impact in 2 different levels: individual installations and national territory as a whole COST – BENEFIT ANALYSIS Individual installation level • Paragraph 3: “…shall carry out a CBA covering their territory based on climate conditions, economic feasibility and technical suitability…” - This analysis shall include an economic analysis covering socio-economic and environmental factors - The purpose is to establish not the most cost- effective technology but the most beneficial one for the territory • Paragraph 4: “…shall take adequate measures for [those infrastructures] to be developed” • Paragraph 5: “a CBA [...] is carried out when: a)a new thermal electricity generation installation … b) an existing thermal electricity generation installation… c)…” - This analysis shall include an economic and financial analysis reflecting actual cash flow transactions from investing in and operating individual installations CBA levels 19 Source : Official Journal of the European Union Directive 2012/27/EU • Paragraph 3: “…shall carry out a CBA covering their territory based on climate conditions, economic feasibility and technical suitability…” - This analysis shall include an economic analysis covering socio-economic and environmental factors - The purpose is to establish not the most cost- effective technology but the most beneficial one for the territory • Paragraph 4: “…shall take adequate measures for [those infrastructures] to be developed” • Paragraph 5: “a CBA [...] is carried out when: a)a new thermal electricity generation installation … b) an existing thermal electricity generation installation… c)…” - This analysis shall include an economic and financial analysis reflecting actual cash flow transactions from investing in and operating individual installations Is this specific installation (and technology) attractive for the final user? Is this technology attractive for the country? Subsidies, technical regulations, etc.
  20. 20. • History and context of the Article 14 • Main content of the Article 14 • Main impacts on European markets • Business opportunities Agenda • History and context of the Article 14 • Main content of the Article 14 • Main impacts on European markets • Business opportunities 20
  21. 21. BUSINESS OPPORTUNITIES Individual user H&C infrastructure developers • Every user will be forced to evaluate the financial attractiveness of efficient H&C system as an alternative of their first-choice installation • If the financial analysis benefits the efficient H&C installation, the user will implement that option (except authorized exceptions) Increasing H&C installation demand Making easier the identification of business opportunities • The heat map enables developers to identify attractive locations for efficient H&C systems - “Match between demand and supply” - CHP, district heating, waste heat to be used, etc. Although every European country will present differences in the implementation of the Directive, Article 14 will foster the European H&C market in 3 fronts: individual users, developers and authorities 21 Source : Creara analysis H&C infrastructure developers Governments and authorities Making easier the identification of business opportunities Increasing governmental support • The heat map enables developers to identify attractive locations for efficient H&C systems - “Match between demand and supply” - CHP, district heating, waste heat to be used, etc. • National and regional authorities are compelled to analyze efficient H&C technologies from a global point of view and to identify the advantages that they can bring to the country (financial, technical, environmental and social perspectives) • New regulations and support schemes may be expected throughout Europe: - Specific tenders for CHP generation, subsidies, etc.
  22. 22. Asesoramiento FinancieroConsultoría Estratégica Market IntelligenceConsultoría Regulatoria CREARA S.L. c/ Monte Esquinza, 24 28010 Madrid jib@creara.es

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