Combined Heat and Power (CHP) Market - Forecasts from 2022 to 2027

The combined heat and power (CHP) market was evaluated at US$11.002 billion for the year 2020, growing at a CAGR of 14.58% reaching the market size of US$28.532 billion by the year 2027.

Combined heat and power refers to an energy-efficient system that generates electricity from several types of fuels and has the ability to capture the heat that is generated and can be reused for space heating, domestic hot water, and industrial processes, among others. These systems can be installed in several places, such as buildings, utilities, individual facilities, and others. Combined heat and power systems are often considered useful, especially for those facilities that have both requirements for electricity and heat both.

The market for combined heat and power systems is primarily being driven by the constantly growing end-user requirements for the replacement of conventional energy systems due to considerably high operational as well as maintenance costs and also due to uninterrupted utility supply. Furthermore, the constantly growing usage of natural gas also acts as a catalyst for the combined heat and power systems market growth during the forecast period. Additionally, the growing demand for energy efficiency, especially across the industrial sector, has further propelled the adoption of these systems in the coming years, which in turn is playing a significant role in shaping the market growth during the next five years. The beneficial features, such as enhanced reliability, efficiency, and safety, offered by these cogeneration systems have also led to an upsurge in their adoption across several countries. Also, there are many countries in both developed and underdeveloped economies of the world that are now focusing their intention on the reduction of greenhouse gas emissions, which has further led to increased spending in renewable energy projects, which in turn is anticipated to propel the business growth opportunities for manufacturers over the course of the next five years.

According to the United States Environmental Protection Agency, approximately two-thirds of the energy that is primarily used by conventional energy systems is often wasted as discharged heat into the atmosphere. During the electricity distribution process, a significant amount of energy is also wasted in the form of heat. Thus, these systems are considered highly beneficial as they are able to capture the heat and help with distribution losses. These systems are able to improve efficiency by almost 80% which is around 30% higher than the conventional technologies used.

However, the market may be restrained by the fact that these systems have considerably high upfront costs and maintenance costs which are considered to be one of the primary factors that are expected to restrain the market growth during the course of the next five years. Also, the advent of COVID-19 is also projected to slow down the market growth to some extent due to the fact that the halt in industrial activity has further led to a slump in the electricity demand in many parts of the world. In addition, to this, the economic shock caused by COVID has further impacted the new capitulation investments in the energy sector around the globe. Thus, all these factors mentioned above are anticipated to negatively impact the market growth in the coming years.

The graph mentioned above represents the total energy investment made in the power sector around the globe, which represents a sharp decline during the year 2020 (Source: IEA).

Government regulations

The combined heat and power market is primarily being driven by the growing focus of governments around the globe towards the reduction of carbon footprints with the aim of protecting the environment as heavy dependence on fossil fuels has led to a degradation in the overall environment. . As a result, governments and corporations across the world are investing in exploiting the potential offered by renewable sources of energy, i.e. wind, solar, and hydroelectric energy among others. Growing investment in the setting up of clean energy power plants coupled with favourable government policies is poised to create significant business opportunities for combined heat and power systems manufacturers over the coming years. For example, in June 2019, the U.K government announced a statutory instrument to amend the Climate Change Act 2008, which includes the reduction of carbon emissions by 80% by 2050. Similarly, in Germany, the Combined Heat and Power Act 2002 has been one of the major factors that has promoted the adoption of CHP plants throughout the country. The acts focused on promoting the adoption of these plants by offering numerous funding as well as subsidy schemes to persuade their adoption. Also, according to the report by the U.S Environmental Protection Agency, the country aimed to install 40 gigawatts (GW) of new, cost-effective CHP by 2020 with the aim of saving $10 billion per year compared to current energy use and alsoincreasing the total CHP capacity by almost 50% in the next decade. Thus, all the factors that are mentioned above are anticipated to propel the combined heat and power market growth during the forecast period.

The combined heat and power market has been segmented on the basis of fuel type, application, configuration, and geography. On the basis of fuel type, the market has been divided into coal, natural gas, biomass, and others. On the basis of application, the market has been segmented into commercial, residential, and others. By configuration, the segmentation is done on the basis of combustion turbines and steam boilers. Geographically, the distribution of the market has been done into North America, South America, Europe, the Middle East and Africa, and the Asia Pacific.

Natural Gas to hold a healthy market share

By fuel type, the natural gas segment is projected to hold a substantial amount of market share throughout the course of the next five years. The primary factor supporting the significant share of this segment includes natural gas, which is considered one of the cleanest sources of energy and is comparatively less costly than other types of fuel. Furthermore, the constantly growing usage of natural gas in the energy mix especially in the developing economies of the world is supporting the growth of this segment throughout the forecast period. The coal-based combined heat and power systems are also projected to hold a considerable share in the market. However, the growth of this segment is expected to be slow due to the fact that there is a growing focus on the usage of renewable sources for electricity generation. However, its high calorific value, coupled with the low cost, are some of the factors driving the growth of this segment during the next five years. The biomass-fuelled CHP systems are projected to show promising growth during the forecast period.

Key Developments and Product Launches

Owing to the increasing natural gas industry and the implementation of strict environmental regulations by governments, the combined heat, and power market has reported substantial advancements in the sector.

In April 2022, Capstone Green Energy Corporation, a global pioneer in sustainability and on-site resilient green Energy as a Service (EaaS) solutions, that Arctic Energy Inc., its Alaska distributor, received an order for five Capstone 65 kW ICHP dual-mode microturbines. A waste treatment facility owned by the Municipality of Anchorage adopted the system. It will provide both heat and electricity to the facility’s entire vital infrastructure, allowing it to operate even in the harshest winter weather. Overall, the approach will save money for the town by protecting it from increasing utility bills. The inherent efficiency of the CHP system, as well as the high reliability/low maintenance attributes of the microturbines, will help to reduce costs.

In May 2022, Doosan Group declared that over the next five years, it will invest heavily in energy industries such as small modular reactors (SMRs), gas turbines, hydrogen turbines, and hydrogen fuel cells. Doosan Enerbility intends to undertake relevant investments to resuscitate the local nuclear power plant ecosystem in the second half of 2023, to begin manufacturing key SMR bodies. Earlier this year, Doosan Enerbility and NuScale of the United States came into an agreement to produce major components for SMRs, as noted by NuScale.

Wärtsilä, a technology company, will work with Capwatt, a Portuguese energy solutions provider and independent power producer, to test green hydrogen and natural gas blend fuel for the Capwatt power plant in Maia. The initiative is expected to start in 2023 and will test mixtures including up to 10% green hydrogen. A Wärtsilä 34SG natural gas engine presently powers the combined heat and power plant that supplies electricity to Sonae Campus and the national grid. This will be one of the first times that green hydrogen will be utilized to reduce the carbon footprint of a Wärtsilä power plant that operates on gas.

APAC to show significant growth

Geographically, the European region is anticipated to hold a considerable market share owing to the fact that the region boasts of being one of the most prominent regions inclined towards reducing carbon emissions. Several countries in the region are taking all the necessary steps to curb carbon emissions. Also, increased investments in clean energy projects are also a key factor supplementing the market growth in the European region during the next five years. Also, stringent regulations regarding the promotion of combined heat and power projects in the form of funding as well as subsidy schemes are also one of the major factors supporting the significant share of the European region in the global market.

North America is also expected to hold a significant share in the market owing to the fact that the region is one of the most prominent regions in the early adoption of technology. This, along with the presence of cutting-edge infrastructure across the power sector and a growing emphasis on increasing the installation capacity of CHP plants in many parts of the region, will be key factors bolstering the market in the North American region over the next five years. However, the Asia Pacific region is projected to show promising growth during the next five years, primarily due to the growing focus of the governments of many countries to increase the share of clean energy in the energy mix.

Impact of the COVID-19 pandemic

COVID-19 is an unprecedented worldwide public health crisis that has impacted practically every industrial sector, leading to a slowdown in the global economy. The pandemic also affected the combined heat and power market negatively, leading to a decrease in its demand. With the closure of major industries, the energy demand decreased, leading to a decrease in profit. Moreover, several CHP companies, that were supposed to update their industrial equipment and processes to meet environmental regulations, would not be able to fulfil these standards due to the slowdown in the market during the COVID-19 pandemic.

However, as countries have started to reopen their industries and relax their lockdown protocols, the market is anticipated to rebound and increase in demand.

Competitive Insights

Prominent/major key market players in the combined heat and power (CHP) market include General Electric, Kawasaki Heavy Industries Ltd., Siemens Energy, Mitsubishi Heavy Industries, and Robert Bosch among others. The players in the combined heat and power (CHP) market are implementing various growth strategies to gain a competitive advantage over their competitors in this market. Major market players in the market have been covered along with their relative competitive positions and strategies. The report also mentions recent deals and investments of different market players over the last few years. The company profiles section details the business overview, financial performance (public companies) for the past few years, key products and services being offered along with the recent deals and investments of these important players in the combined heat and power (CHP) market.

Segmentation

By Fuel Type

• Coal
• Natural Gas
• Biomass

By Application

• Commercial
• Residential
• Industrial

By Configuration

• Combustion Turbine
• Steam Boiler

By Geography

• North America
• USA
• Canada
• Mexico
• South America
• Brazil
• Argentina
• Europe
• Germany
• France
• UK
• Italy
• Middle East and Africa
• UAE
• Saudi Arabia
• Asia Pacific
• China
• India
• Japan
• South Korea
• Taiwan
• Thailand
• Indonesia