Ton van der DOES PRESIDENT OF COGEN EUROPE by over-capacity in generation. This has a decreasing effect on the market price for electricity, where competition is performed on marginal costs. Therefore, the feasibility of local energy is under pressure. The over-capacity is temporarily. Not only by general economic rules but also by the fact that electricity demand is increasing on one hand and power plants are due to be closed on the other hand. One way to appreciate the value of local electricity is to calculate the avoided costs for the generated heat and deduct it from the costs for local energy. The remaining costs are the costs for local electricity. Another effect of liberalisation is a different structure of capital investments. The regime for depreciation will change. it will be based on the economical lifetime of the equipment, in stead of technical lifetime. This change will have its impact on investments in large power plants and infrastructure. lmportant \ players __J The former electricity companies are forced to separate their activities into a grid company and a trade company. The grid is the most valuable asset of the former electricity companies. This grid is positioned under the grid company, which is highly controlled regarding the use of the grid in monopolistic actions. Government limits the return on investment and regulates the prices charged for transportation. The grid companies are regulated in a free market. The grid is potentially the next stranded asset. The former, integrated energy companies focus at trading of electricity. The trade companies are the new commercial participants in the free market but without any assets. They will respond to the customers' needs and will offer retail services. Of course, they continue the sales of electricity, but new activities like consulting, energy outsourcing, maintenance and buying on site generated electricity may be started. The trade companies will feel the changes the most. Before liberalisation, they were integrated companies, they co-operated with the government and their customers had no choice. After the liberalisation, the customers gained power and to succeed in a free market, these companies need a proper strategy. The former, integrated energy companies have a prisoners' dilemma, in which they are captured by their own investments in infrastructure. The grid is strongly related to the old energy company and its image but the trade companies are forced to reduce their involvement in it. And other companies, the competitors, have the same access to that grid. J1J COGENERATION WORLD & Renewable Energy it is important for the government to understand the changes in the companies and to recognise the need for new systems, since the energy sector has less relation and less co-operation with the government. Electricity production companies will also adjust to the new situation. lnvestments will be tackled with different strategies and conditions. This makes it doubtful that new large power plants will be erected. (The environment � in a liberalised market, principles of economy justify decisions. it is important that the environment is not neglected in the decision making. it needs to be internalised, for instance by taxes. Both the consumption of fossil fuels as the emission of green house gases are environmental items. The use of fossil fuels can be reduced by energy levies to increase energy efficiency and sustainable energy. The emissions can be reduced by a levy on emissions. This levy will also reduce consumption of primary energy. The government should use the income from taxes to support their policy, for instance by grants on technology development, on a wider use of new green technology and on raising awareness amongst the public. (rhe role of infrastructu� The current infrastructure is built on the large is beautiful philosophy. To increase the efficiency economy of scale was required. Power plants were erected on places where fuel was available or where water was available for cooling or for steam production. These were often places far away from the consumers of electricity. An extensive grid was necessary to bring the electricity to the consumers. it is important tor the government to understand the changes in the companies and to recognise the need tor new systems, since the energy sector has less relation and less co-operation with the government.
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