Changes in heat flows between installations made after 30 June 2011 may significantly impact the level of free allocation of permits and, pursuant to the rules governing the EU ETS as from 2013, it may be sometimes effected in quite surprising way.
Allocation of free emission allowances as regards heat is a complex issue under EU ETS rules.
The importance of this topic has not vanished with the completion of the allocation procedure for the period 2013 – 2020 as installations are all the time subject to ongoing changes reflecting economy cycles, technology development, evolving business strategies, finally, also current changes in factual circumstances.
It is noteworthy that not all of the above modifications influence on the volume of permits granted. Only significant changes (extensions as well as reductions) are relevant (criteria determining which capacity changes are “significant” pursuant to Article 3(i) – (k) of Benchmarking Decision see here).
Another useful observation is that significant changes in installations between 1 January 2005 and 30 June 2011 impact the historical activity level, while changes after 30 June 2011 are subject to new entrant/closure regulations. New entrant/closure regulations provide also for rules on cessation of operations of the installation (partial cessation including).
So, changes in heat flows between installations made after 30 June 2011 may significantly impact the level of free allocation of permits.
When it comes to heat, the chart of technical connections is of crucial importance. The regulations require that each operator should clearly list its technical connections. All connected installations and entities have to be identified and notified to the competent authorities.
Guidance Document n°6 on the harmonized free allocation methodology for the EU-ETS post 2012 Cross-Boundary Heat Flows Final version issued on 14 April 2011 explained that, in principle, heat is eligible for free allocation if it can be regarded as covered by the ETS and if it is not produced via electric boilers. This is in particular likely to be the case for measurable heat directly linked (combustion process or exothermic production process) to source streams which are contained in the monitoring plan of an installation covered by the EU ETS (exceptions to this rule see here).
No distinction is made between heat from different sources (e.g. produced from different fuels, produced by boilers or CHP, heat as by-product of a benchmarked production process, etc.).