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Regulation of heat and electricity produced in combined-heat-and-power plants

This study reviews the current combined-heat-and-power plants (CHP) situation with regard to the benefits of CHP, status of CHP usage, market liberalization, promotion policies for CHP, and barriers against sustaining, and increasing the use of CHP, as well as the effects of CHP pricing on the competitive situation of electricity and district heating (DH) in the European Union (EU) member states, EU candidate countries, and Former Soviet Union (FSU) countries. In addition, it examines the regulatory frameworks in these countries, and establishes a basis for comparing cost allocation methodologies for CHP, and for recommending methodologies to be utilized in different market situations. Experience from other parts of the world where CHP, and DH systems are well developed could be beneficial to DH industry managers, and regulators in Eastern and Central Europe, and FSU countries, in improving their policies, and practices to better ensure the competitive position of both electricity, and DH. Pricing heat and electricity from CHP plants more correctly, will help these products maintain their competitive positions, and avoid stranded costs to the economy of existing infrastructure. The initiative is intended to increase the awareness, and understanding of the more appropriate cost allocation, and regulatory practices that can be applied, and of the benefits that CHP plants can provide, especially in reducing emissions of CO2, and other harmful greenhouse gas emissions.