Market Opportunities in the CHP Sector

Combined Heat and Power (CHP) - the simultaneous generation of usable heat and power in a single process - offers significantly higher fuel efficiency compared with conventional centralised ways of generating electricity from fossil fuel. CHP can therefore make a significant contribution to European sustainable energy goals, bringing environmental, economic, social and energy security benefits



Report Highlights
The EU-27 is now home to the world's largest CHP industry, with c.104 GWe installed capacity. Nearly 40% of the electricity produced from cogeneration is produced for public supply purposes, often in connection with district heating networks, whereas 60% is generated by auto-producers, normally for industrial processes The European CHP market lacks typical unifying competitive demand and supply structures. In its current initial form, the European CHP support framework does not fully meet the requirements of the sector. As a result, the relative efficiency of different European schemes aimed at boosting high-efficiency CHP varies widely Micro CHP is likely to be one of the high-growth areas in the next few years. Similarly, the district heating sector could yield steady if not spectacular growth in the medium term. Biomass-fired CHP also has growth potential, but it is likely to remain a more niche market in most countries as it struggles to overcome significant hurdles


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DATAMONITOR VIEW 1
CATALYST 1
SUMMARY 1
SOURCES 1
ANALYSIS 2
The practice of capturing and using surplus heat from electricity generation has many applications and is well established 2
Combined Heat and Power (CHP) is the simultaneous generation of usable heat and power in a single process 2
CHP systems can be employed over a wide range of sizes, applications, fuels and technologies 3
There is significant variation in the cost, application and performance characteristics of established CHP technologies 3
Key capacity and efficiency metrics of the principal established and alternative technologies are wide ranging 4
CHP can make a significant contribution to sustainable energy goals, bringing environmental, economic, social and energy security benefits 5
Reduced cost, both for electricity consumers and electricity producers, is arguably the most important benefit that CHP offers 5
Great efficiency gains can be obtained in the form of waste heat utilisation and reduced transmission and distribution losses 6
CHP is a front runner in the EU's battle to reduce CO2 7
CHP can play a significant role in combating climate change: UK case example 8
CHP can reduce the environmental footprint of providing energy 8
CHP can help curb Europe's dependence on imported gas 9
CHP can ensure greater power quality, reduce vulnerability of the grid, and increase self sufficiency 10
Circa half of the combined European CHP installed capacity is accounted for by five main markets 10
In the remaining markets the share of CHP in total electricity production ranges from moderate to insignificant 11
The European CHP market lacks well-defined competitor, demand and supply structures 12
The 2004 Cogeneration Directive has created the foundations for arguably the most comprehensive European support framework 13
Current incentives to develop CHP fall short in many countries 14
European CHP continues to face significant barriers to growth 16
Two segments of the CHP industry are likely to benefit most from the current regulatory framework 17
Domestic and commercial micro CHP is set to be one of the high growth areas in the next few years 17
Biomass CHP is more likely to remain a niche market in most countries as it struggles to overcome significant hurdles 18
In many central and eastern European countries, district heating could yield strong and steady CHP growth in the medium term 19
European CHP installed capacity could double by 2025 20
APPENDIX 21
Further reading 21
Ask the analyst 21
Datamonitor consulting 21
Disclaimer 21

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Table 1: The estimated land use requirements for decentralised CHP generating capacity is 66 to 400 acres less than that of more traditional centralised generation methods 8


Figure 1: In general, cogeneration can be applied in all cases where electricity is produced by thermal combustion 2
Figure 2: CHP technologies are at various stages of commercialisation 3
Figure 3: Available CHP technologies currently exhibit a large variation in their technical characteristics 4
Figure 4: Heavy generators and consumers of electricity are more likely to break-even within an acceptable timeframe 5
Figure 5: If the CHP unit is displacing less efficient fossil fuel technologies gains can be higher than the 25% shown 6
Figure 6: Emissions from heating and cooling account for 47% of Europe's total CO2 emissions 7
Figure 7: Average European gas consumption is expected to increase by 2% annually 9
Figure 8: The major European CHP markets can be categorised in three groups 11
Figure 9: The European CHP market does not have a typical unifying competitive structure with a defined set of participants competing for a defined customer base 12
Figure 10: The EU Cogeneration Directive does not prescribe specific support mechanisms for cogeneration: instead, this is left to the discretion of the member states 14
Figure 11: The relative efficiency of schemes aimed at boosting "good quality" CHP varies widely 15
Figure 12: A doubling of the current European installed CHP capacity by 2025 is achievable 20

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