COMBINED HEAT AND POWER (CHP) MARKET ANALYSIS

The combined heat and power (CHP) market size is estimated to be valued at US$ 250 Mn in 2022 and is expected to surpass around US$ 445.6 Mn by 2030, expected to exhibit a compound annual growth rate (CAGR) of 7.5% from 2023 to 2030. CHP which is also known as cogeneration, is the simultaneous production of electricity and heat from a single fuel source such as natural gas, biomass, biogas, coal, waste heat, or oil. The technology can result in substantial energy savings by utilizing the waste heat that is normally rejected to the atmosphere in conventional power generation systems. CHP systems are highly efficient and make use of these captured heat energy streams for heating or cooling purposes in residential, commercial, and industrial applications. The combined heat and power market is segmented into  fuel type, capacity, technology, application, and region. By fuel type, the natural gas segment held the largest market share  in 2022. Natural gas-fired CHP systems are widely adopted due to their low emissions, high efficiency, ease of availability, and low cost.

Combined Heat and Power (CHP) Market Regional Insights

• North America is expected to be the second-largest market for combined heat and power market during the forecast period, accounting for over 30% of the market share in 2023. The market growth in North America is due to the increasing adoption of CHP systems in commercial, institutional, and industrial applications driven by incentives, policy support, and growing awareness about energy efficiency.
• The Asia Pacific market is expected to be the largest market for combined heat and power market, accounting for over 45% of the market share in 2023. The market growth in the region is due to rapid industrialization and urbanization, rising energy demand, and government policies supporting CHP adoption.
• The Middle East & Africa market is expected to be the fastest-growing market for combined heat and power market, with a CAGR of over 15% during the forecast period. The market growth in the region is due to increasing investment in new power generation capacities and focus on enhancing energy efficiency and security.

Figure 1. Combined Heat and Power (CHP) Market Share (%), By Region, 2023

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Combined Heat and Power (CHP) Market Drivers:

• Increasing energy efficiency and cost savings: CHP systems can achieve efficiencies of up to 90%, providing substantial cost savings as compared to separate heat and power systems. Rising energy prices globally are encouraging industries and commercial sector to adopt CHP systems. For instances, according to the U.S. Government, CHP can provide savings of up to 40% and a payback on investment of 2-3 years, and the projected cost reductions for U.S. ratepayers from including CHP in a clean energy standard exceed US$500 billion by 2035.
• Supportive government policies and incentives: Governments across major countries such as U.S. India ,China , Russia are providing financial incentives, funds, and beneficial policies to drive CHP adoption. This includes investment subsidies, tax reductions, low interest loans, and others. For instances, according to the U.S.  Federal Government on 13 November 2023.Several state and local governments have implemented policies and incentives that are designed to overcome barriers and deploy CHP more effectively.
• Growing environmental concerns: CHP systems significantly reduce Carbon Dioxide and greenhouse gas emissions as compared to conventional power generation. The emphasis on reducing carbon footprint and shift towards renewable energy sources is positively influencing the market growth.
• Rapid industrialization in emerging economies: The ongoing rapid industrialization and commercial development in emerging economies such as China, India, Indonesia, and others is escalating the demand for reliable and efficient power and heating technologies like CHP.                                                               

Combined Heat and Power (CHP) Market Opportunities:

• Waste heat recovery applications: Waste heat recovery CHP systems provide enormous opportunity to improve energy efficiency in energy-intensive industries. This allows capturing waste thermal energy from sources such as exhaust gases, flue gases, and others. and converting it into useful energy. For instances, according to the U.S. The cogeneration of heat and power typically achieves effective electrical efficiencies of 50% to 70%. The amount of recoverable waste heat available at high temperatures in the U.S. is estimated to support 7,600 megawatts of electric power.
• Transition from conventional fuels: The transition from conventional fossil fuels to renewable fuels such as biomass is creating substantial opportunities for renewable-based CHP systems integration with industries having biomass waste streams.
• Residential micro-CHP systems: The emergence of micro-CHP units that is designed specifically for small residential buildings and households, provide opportunities for wider penetration in the residential sector.
• Grid stability and resilience: CHP systems enhance electricity grid stability, provide backup power generation, and improve resilience in times of power outages. This is creating opportunities for CHP adoption by critical facilities such as hospitals, data centers, and others.

Combined Heat And Power (CHP) Market Trends:

• Hybrid CHP systems: Growing trend of utilizing hybrid CHP technology that combines two or more energy generation methods into one integrated system, provides higher efficiency and flexibility.
• Smart CHP systems: Integration of digital technology such as artificial intelligence, Internet of Things, big data analytics, and others into CHP systems to develop smart and connected CHP systems that provide better monitoring, control, and optimization.
• Growing distributed generation: The shift towards distributed power generation models is driving the adoption of CHP systems by commercial and industrial establishments to meet their local energy needs.
• Biomass-based CHP: Using biomass and waste materials as a fuel for CHP systems is gaining increased focus as it provides clean and renewable energy generation.

Combined Heat And Power (CHP) Market Restraints:

• High initial costs: The significant upfront capital investment that is required to install CHP systems is a major barrier, especially for smaller commercial and industrial entities.
• Lack of infrastructure: Insufficient infrastructure such as district heating networks, gas pipelines, biomass supply chains, and others in several regions hampers the adoption of CHP technology and scaling up capacities.
• Regulatory uncertainty: Inconsistencies in regulations related to grid interconnectivity standards, revenue models, and others across different states, create an unfavorable environment for new investments in CHP projects.

Counterbalance Governments and agencies could offer subsidies, grants, tax incentives, or low-interest loans to offset the initial investment cost and encourage more widespread adoption.

ANALYST VIEW

The combined heat and power market remains an attractive sector for investment due to continued government support through subsidies and tax incentives across major markets. However, high initial installation costs and long payback periods still pose challenges to more widespread adoption of CHP technologies. Of the various fuel sources used in CHP systems, natural gas is expected to dominate the market owing to its wide availability, low transportation costs, and relatively clean burning qualities. Asia Pacific represents the most significant opportunity area for CHP system providers as the region experiences rapid urbanization and industrialization. Countries like China and India are expected to see growing demand for reliable and efficient on-site power solutions to support their growing energy needs. Additionally, stringent emissions norms in major industrial hubs could drive increased CHP deployments. The industrial sector remains the largest end-user segment and prominent verticals like manufacturing and food & beverage are poised to boost utilization of waste heat recovery systems. Among various technologies, gas turbines followed by reciprocating engines are likely to witness higher sales contributions in the coming years. However, the modular micro-CHP category may register fastest growth on the back of improving design efficiencies and falling equipment costs. Further technological advances to integrate renewable energy sources like solar could expand the viable applications of CHP systems.

Recent Developments

New product launches

• In March 2022, 2G Energy AG launched a new CHP plant series named BiogasMaster for optimized biogas applications up to an electrical output of 463 kWe. It provides high fuel efficiency up to 90%.(2G Energy AG is a Germany-based company that operates in the energy sector. It is a leading international manufacturer of combined heat and power (CHP) plants for decentralized generation and supply of energy.)
• In January 2022, Yanmar launched two new large-scale gas engine CHP systems having output of 1.8MW and 2.8MW respectively. They have high total system efficiency and low emissions. (Yanmar is a Japanese diesel engine, heavy machinery, and agricultural machinery manufacturer founded in Osaka, Japan in 1912)
• In June 2021, Manufacturer Clarke Energy and partner INNIO launch a 2 MW CHP system operating on a hydrogen blended fuel mix. This demonstrates the viability of hydrogen-ready CHP plants.( Clarke Energy is part of the Kohler Company and is a multinational specialist in the sale, engineering, installation and maintenance of power plants that use gas engines & INNIO Jenbacher designs and manufactures gas engines and cogeneration modules in the Austrian town of Jenbach in Tyrol. It is part of the INNIO portfolio of products and is one of their gas engine technologies; the other being Waukesha Engines.)

Acquisition and partnerships

• In June 2022, FuelCell Energy acquired 5.7 MW project including CHP plant from Pfizer. This expanded FuelCell Energy capacity and allows use of CHP technology to provide steam and power.
• In November 2021, Capstone Green Energy Corporation partnered with Biogas Fuel Cell Energy to drive CHP adoption by using renewable biogas from wastewater treatment plants in Italy.
• In April 2021, Aurelius along with Attero NH acquired Econergy, an operator of biomass and biogas-fueled CHP plants. The acquisition helped in expanding presence in sustainable energy solutions

Figure 2. Combined Heat and Power (CHP) Market Share (%), By Fuel Type, 2023 

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Top companies in Combined Heat And Power (CHP) Market

• Wärtsilä
• Siemens
• GE
• 2G Energy
• Aegis Energy Services
• Bosch Thermotechnology
• Kawasaki Heavy Industries
• Viessmann Werke
• FuelCell Energy
• Veolia
• Clarke Energy
• CAPSTONE TURBINE
• Caterpillar
• Yanmar
• ABB
• Edina
• Wolf GmbH
• Atlas Copco
• Tecogen Inc.
• Innovate Steam Technologies

Definition: Combined heat and power (CHP) which is also known as cogeneration, refers to the simultaneous generation of electricity and useful thermal energy from a single fuel source such as natural gas, biomass, biogas, coal, oil, and others. CHP systems utilize the heat that is normally wasted in conventional power generation, and recycled it to provide heating or cooling across residential, commercial, and industrial applications.