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

Cogeneration experiences around the world 91
2000
1994
1993
1992
1991
1989-90
1986-88
1980-85
1980
0 500 1,000 1,500 2,000 2,500
MWe installed capacity
PAEE target
Over target
Figure 3.2 Forecast of cogeneration growth in Spain
Spain has about 20 utilities, mostly private, which account for 98 per cent of the generation
and supply of electricity. As cogeneration schemes were found to provide lucrative returns
with payback periods of 5 years or less compared to 25 years for the conventional plants,
many utilities took active interest in promoting cogeneration in the form of investment and joint
ventures, mostly in industrial schemes. Data for 1994 shows that the installed capacity was
higher than the PAEE target at 1,847 MWe, producing 10,650 GWh and accounting for 6.5 per
cent of the total power generation. Three industrial sectors - paper, refining and chemical -
had about 110 new schemes, accounting for 75 per cent of the new capacity. Small
cogeneration units installed since 1980 contributed to 17 MWe, of which 36 installations were
below 1 MWe capacity, mostly using natural gas.
Though some utilities became active in promoting cogeneration because of the attractive
returns on investment, the response of the power sector as a whole was mixed. On some
occasions cogeneration was opposed, on others the power industry was either neutral or
supportive to the concept. This confused attitude often sent a negative signal to the
prospective investor. Particularly, a year prior to the issuance of the new Electricity System
Law in 1995, it was widely known that some changes unfavourable to cogeneration would be
introduced. This effectively put a block on the development of new schemes.
The new law of 1995 is expected to have some regressive impact on the extent of new
cogeneration development in Spain. This legislation intends to harmonize self-generation with
the central system and develop a uniform tariff. A major blow on the cogenerator has been the
reduction of the tariff of exported electricity in steps by 30 per cent after 5 years of
commissioning. Accordingly, the payback periods are expected to be much longer, as much
as 15 years. The minimum purchase contract period has been specified for five years. The
cogenerator is allowed to sell only the electricity produced in excess. Penalties for non-supply
of guaranteed electricity have become so high that the cogenerator is likely to choose a
programmed tariff that has a lower rate. The law appears more favourable to the power sector
which will become a major player in cogeneration investment in the future as it is highly