The purpose of the German cogeneration law is to increase the power production share of CHP plants through bonus payments to generators [BritischeBotschaft 2001]. The payments are designed to maintain and modernise cogeneration capacity, to encourage investment in small units and to aid the commercialisation of fuel-cell CHP units. Other measures in the package include energy saving and the building of new, non-subsidised cogeneration capacity. The complete package is expected to reduce 45 Mt of CO2 emis­sions annually by 2010. (All targets are measured against 1998). These measures are in addition to the voluntary agreement signed with industry in 2000 to reduce CO2 emissions. In that way, fossil fuel consumption and emission rate is expected to decrease. The coge­neration law is seen as an instrument to reach the commitment made in the framework of the Kyoto protocol. In Germany small-scale CHP plants (up to 50 kWe) will receive bonus payments of 5,11 cents/kWh for electricity from cogeneration exported to the public grid for a period of 10 years after the first start-up of the plant. These time-limited bonuses will be paid in addition to the market price for electricity. The recent price currently averages 2.5 cents/kWh [Geiftler 2002]. However, the remuneration for the exported electricity and the benefit from the heat production must offset the investment and operation costs in order to make the investment in CHP plants financially attractive.

With rCHP, the advantages are that power and heat can be generated in the vicinity of the consumer when needs arise. In that way, distribution and storage losses largely vanish. Distribution losses currently account for approx. 6% of the transported electricity in the EU — 15 [Cogen 99]. rCHP will be assigned to produce peak power at full power rate. From the point of view of the grid operator, rCHP will have the function of peak shaving and will alleviate the need for additional peak power plants (i. e. large-scale gas turbine power plants). The simultaneously produced heat will be directed to a thermal storage for a later use in the building. One way to remotely control the rCHP plants, in the event that rCHP are owned by private investors and not by the grid operator, is to send an offer in terms of remuneration for the exported power. The control unit of each rCHP will consider this offer, the usage level of the thermal storage unit and the current need for electricity of the building occupants (on-site electricity consumption), balancing all these factors with the fuel price. The controller will correspondingly set a new operating point for the plant (cost — led decision).