Study of the economic viability of cogeneration systems in Portugal: the impact of legislation on the investment decision

Abstract

In Portugal, several decades ago, both academic and industry experts gathered to investigate opportunities for increasing the efficiency of power plants and promoting the cogeneration systems. In Portugal, until 1990, the market penetration rate for cogeneration was reduced, being the total installed capacity below 530 electrical MW. Nevertheless, the government implemented policies to promote the self-production of electricity with the possibility of selling the surplus energy under special remuneration schemes (e.g. feed-in-tariffs). However, the publication of a legal framework providing lower electricity tariffs and reducing the bonuses from the system's operation, over the last few years, has contributed to a considerable setback to the cogeneration activity. Consequently, the new investments decreased and several power plants will be shut down as soon as they finished their period of permanence in the previous legal framework. In this paper, a calculus methodology to analyse the feasibility and economic viability of cogeneration systems is implemented taking into account the sale of the total electricity production under the Decree-Law n.degrees 23/2010 and Decree-Law n.degrees 68-A/2015. The methodology was applied to a realistic scenario of an industrial cogeneration plant with a power capacity of 4MW running on natural gas. All the thermal energy is used in the production of steam and hot water for industrial processes. Knowing the amount of produced energy and the reference tariff, it is possible to calculate the remuneration corresponding to the energy supplied to the national electricity grid. The total remuneration of electricity is then calculated considering the application of high-efficiency bonuses. The methodology includes the efficiency harmonized reference values for a specific technology. Regarding the thermal energy, the equivalent cost of its production might be assumed constant, regardless of the remuneration regime in which the cogeneration is included. The total value of the cogeneration