Combined Heat and Power Systems - The Future of Energy

Combined Heat and Power Systems - The Future of Energy

By Knowledge Sourcing Intelligence Thought Articles

The Combined Heat and Power Market is expected to grow at a compound annual growth rate of 14.58% over the forecasted period to reach a market size of US$28.532 billion in 2027 from the US$11.002 billion in 2020. A CHP (combined heat and power) system refers to an energy-efficient system that is able to generate electricity from a variety of fuels and has the ability to retain the heat that is generated to be reused for applications like domestic hot water and industrial processes, among others. These systems can be installed in a number of places like, hotels, office buildings, individual facilities and so on. Combined heat and power systems are considered the best for those facilities that have a requirement for both electricity and heat. One of the prime factors driving the growth of the combined heat and power market is the steady growth of end-user requirements for the replacement of conventional energy systems with these CHP systems. This is because of the very high operational costs as well as maintenance costs associated with those systems and also owing to uninterrupted utility supply.

 

Adding to that, the increasing demand for energy efficiency, especially in the industrial sector, has further catalysed the adoption and application of these systems in the analysed period, which will inevitably lead to the growth in the market. According to the United States Environmental Protection Agency, about 67% of the energy used by conventional energy systems is often wasted into the atmosphere in the form discharged heat during the electricity distribution process. Hence, CHP systems are considered highly efficient and useful as they are able to retain the heat and cope with the losses due to distribution. These systems have the potential to improve efficiency up to 80% which makes it about 30% higher than the conventional technologies.

 

Furthermore, the constant rise in the demand, as well as usage of natural gas due to the growing awareness among people has also attributed to the growth of the combined heat and power systems market during the forecast period. The attractive and useful features like better reliability, efficiency and safety, offered by these CHP systems have also been observed to be factor in their adoption in multiple countries across the globe. There are also many countries in both developed as well as emerging economies that are focusing on the reduction of greenhouse gas emissions. This has further led to a rise of expenditure in renewable energy and related projects, which consequently is anticipated to propel the growth opportunities for manufacturers in the times to come.

 

Government regulations to attribute to market growth

 

The prime factor driving the combined heat and power market is the increasing focus of governments across the globe towards the reduction of carbon footprints and the aim of protecting the environment that has degraded due to the heavy use on fossil fuels. Consequently, governments and corporations around the world have started investing religiously in exploring the potential that is offered by the renewable sources of energy like solar, wind, hydroelectric energy and so on. With these rising investment in the setup of clean energy power plants along with strict government policies, there is a potential for a lot of business opportunities for combined heat and power systems manufacturers in the coming times. For instance, in June 2019, the UK  government an announcement to amend the Climate Change Act 2008, which included the reduction of carbon emissions by 80% by 2050. Likewise, in Germany, the  adoption of CHP plants has been prevalent throughout the country owing to Combined Heat and Power Act 2002. The act focused on promoting the adoption of these plants by offering adequate funding as well as subsidiaries to lure manufacturers for their adoption. Further, according to a US Environmental Protection Agency report, the country aimed at installing 40 gigawatts of new, cost-effective CHP by 2020 and with that aim of saving  $10 billion per year in terms of energy use and also raise the total CHP capacity by approximately 50% in the next decade. Hence, all these government regulations and actions are anticipated to drive the growth of the combined heat and power market during the forecast period.

 

High initial cost and setup and maintenance cost to cause a restraint to growth

 

One of the biggest problems of installing a CHP system is the high initial cost associated with it that is required for its installation. In addition to the equipment for power generation like generator systems, prime mover, among others, CHP plants also require other equipment that include boilers, absorption chillers, heat exchangers and so on. The cost of a conventional CHP plant is estimated to be about 2.4 times more than that of a power generation plant of the prime mover and same capacity, making it a major obstacle towards growth for the CHP market. Moreover, maintenance costs of CHP systems are also exceedingly high due to the complexity of the system, which includes a plethora of components such as prime mover, heat and steam pipes and so on. To achieve high efficiency of the CHP system, timesly maintenance of all its components is needed regularly, which adds on to the overall maintenance costs. Therefore, this factor can potentially discourage people from setting up CHP plants thus being a restraint towards market growth.

 

Europe and North America to holds significant market share while the APAC region to show robust growth

 

Geographically speaking, Europe is projected to hold a significant market share as it is considered as one of the most prominent regions inclined towards reducing carbon emissions. Several countries in this region are taking necessary steps to lower their carbon emissions along with strict regulations concerning the promotion of CHP projects in the form of subsidy schemes and funding provided to these projects. Further, an increased amount of investments in clean energy projects is also projected to be a major factor contributing to the market growth in the European region. North America is also projected to hold a significant share in the market due to the region being one of the most prominent in the early adoption of technology. Adding to this, the presence of cutting-edge infrastructure backing the power sector and a growing focus on increasing the installation capacity of CHP plants will be some major factors in driving the the market in the North American region towards growth. The Asia Pacific region is expected to show robust growth during the forecasted period, owing to the growing emphasis of the governments of many countries to raise the share of clean energy in the energy mix.

Covid Insights

The pandemic affected the CHP market very negatively due to the fall in demand for energy as the subsequent lockdowns led to  the shutting down of many manufacturing plants across the globe. Adding to this, due to the slowdown in the market, a lot of CHP companies were not able to update their industrial process and equipment to be in line with the environmental regulations.