German cogeneration subsidy finalised

"Innovative" emergency price support scheme welcomed by EU industry association

Struggling German cogeneration (combined heat and power) plants should receive emergency aid from next month under a law given its final reading in the lower parliamentary house (Bundestag) on Friday. Approval by the upper house, expected on 7 April, is the only remaining step before the measure can enter into force.

Germany's cogeneration sector has been badly hit by electricity market liberalisation, which has seen power prices fall by 30% in many cases and by up to 60% in some. Accounting for up to 15% of national electricity output, cogeneration capacity is currently falling by some 200 MW per month as plants become uneconomic. The sector will disappear entirely in five years if this trend continues, Germany's cogeneration industry complains.

The government indicated last autumn that it wanted to stem the tide of plant closures (ENDS Daily 12 November). As finally agreed by the Bundestag, the emergency law will boost cogeneration plant revenues by euros 0.015 (DM0.03) per kWh, falling progressively to half this amount after five years. Only plants built before 2000 will be eligible.

Small municipal cogeneration plants producing power for their own use already receive government support in the form of an exemption from mineral oil tax, but the new emergency measure is believed to be the first general price support for cogeneration to be introduced by an EU state.

European industry association Cogen Europe welcomed the law as an "innovative" attempt to protect the sector. Earlier this month, the body called for EU action to protect cogeneration, which it said was facing a "disastrous" decline due to electricity liberalisation (ENDS Daily 7 March). The German environment ministry indicated on Monday that it will propose long-term support measures for cogeneration before the end of the year, designed to double its share of power by 2010.

Follow Up:
The new law is posted on the website of the German parliament, tel: +49 30 227 22 152; Cogen Europe, tel: +32 2 772 8290.

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