Keywords: cogeneration, panel econometrics, steam capacity, power purchased
The adoption of cogeneration in the Japanese manufacturing sector: technological, economic and institutional determinants
Combined heat and power (CHP) has been identified by the Second and Third Assessment Report of the Intergovernmental Panel on Climate Change as a powerful carbon abating technology. In this paper, we review trends and overall changes in power generation technologies insofar as these affect industrial CHP in Japan; we also propose an empirical model for the analysis of CHP adoption based on time series cross-sectional (panel) data. This is followed by a discussion on current energy policy targets towards CHP and the changes in steam capacity (process heat) that have occurred during the period 1985-1998. Site information on 1500 CHP sites was gathered and combined with industrial statistics for a 14 year span during which Japanese power markets underwent deregulation. Based on the panel regression, we found that an increase in the probabilities of installing new CHP will be linked with a unit increase in purchased power, industrial production and consumption of self-generated power, while a unit increase in non-CHP boiler steam capacity will decrease the probability of adding CHP for the 7 industries. The fixed effects model showed that CHP faces increasing returns to scale over the period 1985-1998. Empirical work on CHP on cross sectional studies carried elsewhere confirms some of our findings. Additionally, it is found that adoptions of CHP are linked to the small to medium size industrial plants since the latter account for the mass of steam capacity retired.