part 1: overview of cogeneration and its status in asia - Fire

Policy framework for promoting cogeneration 41
Where emission regulations are used to limit air pollution related to various economic
activities, they can be discriminatory against cogeneration installations, as the emission
thresholds set do not always recognize the efficiency of energy conversion of the
cogeneration process. Though a cogeneration plant may increase the local emissions, it
normally displaces even more emissions at the fossil fuel power plant. Any relaxation in the
limit of air pollution can help to reduce the investment on cogeneration facilities.
Natural gas is widely recognized as a clean fossil fuel for cogeneration applications. Where it
is available and the gas network exists, natural gas can be a promising fuel if it is not too
expensive. The Netherlands has been most successful in gas powered cogeneration
whereas the price of gas is cited as a major obstacle for its propagation in Germany.
Other barriers include the lack of skilled manpower and management. In most cases, both
the electric utilities as well as the industrial plants lack skilled manpower and managers to
handle the specific task of heat and power production.
4.3 Policy and Regulatory Framework for Promoting Cogeneration
4.3.1 Establishing right policy framework
The development of cogeneration is basically a policy issue. The first prerequisite therefore is
an ideal policy framework, as has been demonstrated by some countries which have made
considerable progress in this domain, such as Japan, Republic of Korea and Thailand in
Asia, and the Netherlands and Denmark in western Europe. The motives for action may vary
depending on the priorities set, and the methodology pursued may also be different.
Whatever may be the rationale behind such a move and whatever the tools used, the policies
must be supported by a clear political will for achieving any tangible result.
Planning and decision making regarding capacity expansion should involve the national
authorities, electricity producers and distributors as well as potential developers of alternative
energy sources including cogeneration. Fair and transparent criteria such as costeffectiveness
and environmental benefits will help to create a more competitive and convivial
atmosphere for greater investment.
Certain principles need to be upheld by the policy makers to assure greater private sector
participation in energy generation and cogeneration, so that the capital requirements for
power system expansion can be met. These include:
• preparation of a well structured regulatory framework, including separation of
responsibilities and authorities for efficient and timely project implementation;
• launching of balanced programme in terms of the type of project (project size,
technology, choice of fuel) and the type of market served (sale to utility, third parties);
• systematic implementation of programmes and projects following a well defined work
plan, including completion of important planning activities and establishment of bidding
and contract awarding procedures;
• setting of fair and transparent procedures for soliciting, evaluating and awarding bids,
which will help to maximize competition thanks to a greater participation of lenders and
investors;
• conducting negotiations in an open and transparent manner, without resorting to negative
tactics;