The escalating costs of the fuels used to generate electricity have spawned a need for technology that can improve the efficiency of fuel conversion. This has, in turn set the stage for combined heat and power (CHP) to emerge as the distributed power generation technology of choice. CHP not only generates on-site power, but also meets the heating and cooling requirements of industries and enterprises at reasonable costs.
New analysis from Frost & Sullivan finds that the market earned revenues of $4.26 billion in 2012 and estimates this to generate $4.91 billion in 2017. The study covers Europe, North America and the Asia-Pacific region across the application sectors of residential, commercial, industrial and institutional.
The efficiency of electricity derived from the grid is only around 30 percent due to heavy losses incurred during transportation. Owing to this, end users in Europe and Asia are increasingly turning to distributed generation.
Another reason for their preference for distributed generation is the looming shortage of power generation capacity and the utilities’ inability to meet the growing demand from various sectors.
“With the phasing out of nuclear power in countries such as Germany and Japan and the decision to move away from polluting coal plants, power shortage is a solidifying threat, unless more generation capacity is added,” said Frost & Sullivan Energy & Environmental Research Analyst Subha Krishnan. “CHP has the potential to significantly lower the pressure on utilities with its ability to save energy and costs.”
While the high energy costs are nudging end users towards CHP, some end users are deferring their investments in CHP equipment, such as gas turbines, until a time when the prices of natural gas are more stable. Not only are these rising costs of natural gas delaying proposed projects but are also causing existing projects to shut down.
Facility owners need to be made aware that CHP equipment can save several projects from premature closure by providing greater flexibility in allowing them to switch fuels, shift loads, and shave peaks, depending on the economic conditions.
“The easy availability of fuels will promote the adoption of cogeneration systems,” noted Krishnan. “Most CHP systems are designed for multiple fuel options and therefore, when the prices of oil and natural gas increase, customers have the freedom to switch to biomass or diesel. These benefits can further shield the facility from price volatility and uncertainty, if it has access to a reliable renewable or waste energy source.”
The CHP market will get added impetus from the rising environmental consciousness all over the world. The regulators of major countries in North America, Europe, and Asia-Pacific have implemented strict policies and a number of regulatory measures, such as carbon credits and renewable portfolio standards, to protect the environment. This will give a huge boost to the CHP market, as its efficient fuel conversion translates to lower greenhouse gas emissions.