Electricity and heat supply account for almost 70 % of final energy consumption in Germany.

Transitioning towards climate-neutral solutions is therefore key in achieving Germany’s climate goals, and there is particular urgency as these goals must be met within 25 years.

In our recent study, on behalf of the German association Zukunft Gas, we analyse:

• The contribution combined heat and power ("CHP") can make to climate-neutral heat and power supply in Germany;
• How CHP would have to adapt over time; and
• The framework conditions that need to be created for CHP to make a meaningful contribution to climate neutrality.

The role of CHP in achieving climate neutrality

The ambitious goal of climate neutrality by 2045 places high demands on our future energy system. CHP is a sector coupling technology with a wide range of possible applications. It can be used both centrally for district heating, for industry, and de-centrally for supplying buildings and neighbourhoods.

CHP has an important role to play in achieving climate neutrality:

• CHP plants can be operated on a 100% renewable basis and can therefore contribute to the reduction of greenhouse gas emissions.
• CHP is capable of flexible operation, contributing to system and supply security.
• For the transformation of heat generation, central CHP (district heating) and near-consumption CHP (supply to buildings/neighbourhoods or industry) is an essential component. This highlights that CHP is an important pillar of the energy transition, providing electricity and heat at places and times where supply-dependent climate technologies (heat pump, PV and wind) cannot be used.

How must CHP adapt?  

In order to use CHP effectively to achieve a climate neutral energy supply, it is important to create the right framework conditions. We suggest the following as part of our study:

• Maintaining and expanding CHP: First of all, existing CHP capacities should be preserved and the targeted construction of new plants – where economical - made possible. In addition to a solid legal framework, this requires appropriate incentives for investments in CHP plants, heat storage facilities and heating grids, the use of renewable and decarbonised gases and accelerated approval procedures.
• Making CHP more flexible: Incentives must also be designed to operate existing and new CHP plants in a way that is beneficial to the electricity system.
• Defossilisation of CHP: This includes measures to promote the replacement of coal-fired CHP with H2-ready gas-fired CHP and to secure the supply of sufficient biomethane and hydrogen.

For further details, please download our study below.

Frontier regularly advises clients on energy issues, and has been at the forefront of the debate on issues related to the energy transition. For more information, please contact media@frontier-economics.com or call +44 (0) 20 7031 7000