Practice and Recommendations for Cost Allocation between Electricity and Thermal Energy in Co-Generating Facilities 201 views

Practice and Recommendations for Cost Allocation between Electricity and Thermal Energy in Co-Generating Facilities

Opportunity Background:

Energy Security Project is USAID project implemented by Tetra Tech ES, Inc. Energy Security Project works with Ukrainian government, private sector, and civil society leaders to improve Ukraine’s energy security, and transform Ukraine’s energy sector into a modern, market-oriented, EU-integrated, engine of growth. Energy Security Project’s goals include inter alia promoting Competitive Energy Markets, facilitating European Integration, strengthening Energy Independence, facilitating Renewable Energy Development, supporting Empowered Sector Regulation, increasing Public Trust and ensuring Environmental and Social Responsibility.

National Energy and Utilities Regulatory Commission is a permanent central executive body with a special status established by the Cabinet of Ministers of Ukraine. The Regulator is a collegial body that carries out state regulation, monitoring and control over the activities of economic entities in the fields of energy and utilities. The Regulator carries out state regulation in order to achieve a balance of interests of consumers, businesses operating in the fields of energy and utilities, and the state, energy security, European integration of electricity and natural gas markets of Ukraine. Energy Security Project is providing technical assistance to National Energy and Utilities Regulatory Commission under a variety of assistance directions, including technical assistance to improve tariff regulatory framework in the district heating area.

One of specific tasks under collaboration with NEURC, is providing support to improving tariff regulatory framework for thermal energy generation. In the scope of this task, ESP will provide recommendations on revising current practices of cost allocation between thermal energy generation and power generation in co-producing facilities. The need for potential revision of cost allocation framework is stemming from the latest developments in Ukrainian power market, which is transitioning onto competitive market with effective competitive principles thereto, while the district heating sector remains under regulatory oversight in terms of costs and pricing.

The efforts of the subcontractor will support NEURC in its tariff framework improvement areas.

Opportunity Structure:


The overall objective of this assignment is to provide support to the National Energy and Utilities Regulatory Commission (NEURC) to improve tariff regulatory framework in the area of district heating. Specifically, the currently used cost allocation method for co-generating entities may request revision due to the fact that power market is under rapid transition towards competitive wholesale market which implies competition based price settlement. On the contrary, district heating sector is remaining under tight regulatory oversight and essentially governed under cost plus regulatory approach. Recognizing, that in the case of co-generating units, both power and thermal energy are produced together, using the same asset and equipment, fuel supplies, other organizational-material means, it shall be appraised that sales of two products are performed under essentially different conditions: sales of power are performed under competitive conditions, and sales of thermal energy (subsequently reverted to district heating service) is performed under quazi monopoly terms.

Interests of DH consumers in this context need to regarded carefully. For heat customers, there is no difference whether the heat is generated from a co-generating unit (CHP) or boiler house (heat-only boiler), therefore, the heat consumer should not to pay more for heat generated by means of a co-generation unit than the heat generated in a boiler house. On the other hand, the heat consumer should also benefit from co-generation, if any benefits are established. Therefore, heat consumer protection issues should be considered by selecting the proper cost allocation method.

Specifically, the subcontractor is requested to achieve the following objective: to inform on best international practices of cost allocation between power and thermal energy in case of cogeneration facilities.

Competitive Scope:

All proposals are due on January 22, 2020 by no later than 14:00 local time in Ukraine. Proposals must be submitted via e-mail at the address [email protected] in the following formats: Adobe Acrobat and Microsoft Word and/or Excel.

All proposals must fully respond to the Technical Specifications enclosed as Attachment A and must include quotes in the format provided in the Attachment B – Table 1 – Detailed Budget. Proposals received after the above-stated due date and time will not be considered for this procurement.

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Tetra Tech is a leading provider of consulting and engineering services. The Company supports government and commercial clients by providing innovative solutions focused on water, environment, infrastructure, resource management, energy, and international development. With more than 18,000 associates worldwide, Tetra Tech’s capabilities span the entire project life cycle.

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Vacancies in Ukraine (ViU)

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