Combined Heat and power generation is also gaining immense popularity owing to the various benefits associated with the adoption of this method of energy generation. The global combined heat and power market size will hit USD 46.3 billion by 2030 with a CAGR of 5.5% from 2022 to 2030.

In the modern era, the development of technology is reaching heights in almost every sector. Growing demand for sustainable and efficient sources of electricity generation has experienced a major surge. Combined Heat and power generation is also gaining immense popularity owing to the various benefits associated with the adoption of this method of energy generation. This equipment supplies continuous power even during grid outages.

Combined heat and power is used to generate electricity and thermal energy at high efficiency with the help of technologies and fuels. This method of energy generation is quite affordable and can be deployed easily.

The system can be powered by various fuels including coal, natural gas, coal, biomass, and fossil fuels. The technology can be used in wide applications including small-scale or large-scale industrial applications. Surging penetration towards the sustainable source of energy and alleviating the traditional method of electricity generation to reduce wastage is propelling the growth of the industry.

The global combined heat and power market size will hit at USD 46.3 billion by 2030 from valued at USD 30.17 billion in 2022. It is growing at a CAGR of 5.5% from 2022 to 2030.

Market Overview

The Combined heat and power market is expected to gain momentum during the upcoming years on account of increasing initiatives taken by the government of various countries. The recent move towards the adoption of an efficient method of energy generation in various countries such as the UK, Germany, Japan, and the US is expected to propel the growth of the industry. Moreover, the government of the United States along with other states has introduced new policies in order to promote the Combined heat and power system. The government have also introduced tax rebates and various incentives which is further providing lucrative opportunities for the market demand. Other incentives such as loans on low rate of interest is also adding to the development of the industry.

Increasing awareness regarding the benefits associated with the usage of CHP such as it reduces the cost of purchasing energy from the grid. This system helps in minimizing the cost by generating electricity and heat-onsite.

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Key Report Highlights

Although natural gas-fuelled CHP remains dominant, biomass-fuel based CHP systems will witness higher demand growth during the period of projection.

CHP systems currently generate around 11% of Europe's electricity, and nearly 15% of heat used for various industrial applications, which are estimated to rise to 20%, and 25% respectively, by 2030 end
COVID-19 pandemic largely influenced combined heat and power market due to unavailability of components/equipment. High reliance on China, and trade restrictions held the market growth back amid the pandemic situation

Increasing government efforts is supporting the market

Increasing awareness regarding the benefits of combined heat and power among policymakers in terms of energy efficiency is leading to the adoption of supportive policies. Policymakers across various states are addressing utility regulatory policies.

The Green Communities Act in Massachusetts offers a refund incentive for effective CHP systems ($750/kW up to 50% of total installed expenses). The incentive value is decided on a case-by-case basis taking into account the importance of CHP in the overall energy efficiency portfolio of the participating utility, the benefit-to-cost ratio, the project's contribution to energy efficiency, project risk, and the minimum level of customer investment. The serving utility's energy efficiency targets are credited for all of the kilowatt-hours produced by the CHP units installed as part of the program.

Feed-in Tariff for CHP under 20 MW in California — In order to achieve its GHG reduction targets, California has set a target of up to 6,500 MW of additional CHP capacity by 2030. This target was made under Governor Brown's Clean Energy Jobs Plan, which was unveiled in 2010. The state started a feed-in-tariff (FIT) for CHP systems less than 20 MW and with excess power to encourage the implementation of CHP. (per AB 1613). The CHP system needs to be sized for the thermal load and runs at a higher efficiency than 62%. The FIT price is based on market price referent (MPR) natural gas prices that have been adjusted for the time of day and season. FERC does not block California's FIT so long as Combined
Heat and Power: A Clean Energy

Benefits of adopting CHP

The adoption of Combined heat and power benefitted the economies in various ways. The combined heat and power system is an effective way of generating electricity. The system has improved the US manufacturing process by reducing the cost of energy generation. Moreover, it provides a 24/7 power supply and ensures business continuity even during the situation of natural or man-made disasters. The CHP technology is renewable and has proven to be effective in reducing Greenhouse gas emissions. Furthermore, more than 80% of the combined heat and power capacity is fuelled by clean sources including natural gas and biomass.

Increasing environmental benefits to propel the market

People are becoming aware of the benefits associated with the usage of combined heat and power systems. The system allows environmental benefits as compared to the purchased electricity. Combined heat and power is a more effective way of generating electricity as compared to the traditional methods, as capturing and utilizing the heat that would have been wasted otherwise. Moreover, this technology also reduces greenhouse emissions.

Compared to conventional separate electricity and heat production, CHP now saves the United States more than 1.9 quadrillion Btu of fuel usage and 248 million metric tonnes of CO2 emissions. This decrease in CO2 is the same as taking more than 45 million vehicles off the road.

Outcome of auctions for CHP installations and for innovative CHP systems

Auctions for CHP installations from 1 to 50 MW and for innovative CHP systems take place twice a year; the most recent one was on 2 June 2020.

22 bids with a volume of 70.5 MW were submitted for the tendered quantity of 75 megawatts (MW).

21 bids with a volume of 68.5 MW were accepted. The tender volume was not exhausted. One bid had to be excluded from the award procedure as it did not meet the formal requirements. The value of the bids awarded funding ranged from 4.70 ct/kWh to 7.00 ct/kWh. The quantity-weighted average bid value stands at 6.22 ct/kWh and is the highest of all previous bidding rounds.

In parallel to the auction for medium-sized CHP installations, the auction for innovative CHP systems was also held.

Innovative CHP systems combine CHP installations, electrical heat generators and an innovative source of renewable heat. They are intended to gather initial experience with CHP installations using a significant share of renewable energy and thus to provide insights into the future role of CHP installations in the provision of heat.

13 bids with a volume of 43.8 MW were submitted for the tendered quantity of 29.5 megawatts. This was the first time that the volume up for auction in the tender for innovative CHP systems was oversubscribed. As was the case with the tender for CHP installations, one bid had to be excluded from the award procedure for formal reasons.

Of the twelve admissible bids, eight were accepted. The prices at which bids were approved were between 9.50 ct/kWh and 10.98 ct/kWh. The quantity-weighted average award value is 10.22 ct/kWh. The last bid could not be accepted because it exceeded the tendered quantity to a large extent. It was thus not possible to exhaust the entire quantity of 26.2 MW which was up for auction.

The next CHP auctions will be for bids due on 1 December 2020.

Insights into Regional Analysis

Germany has set itself ambitious targets: by 2050, it intends to have reduced greenhouse gas emissions by 80-95% compared with 1990 levels, with intermediate goals set out for 2020, 2030 and 2040. All sectors of the national economy will contribute to achieving these goals. While efficiency measures and renewable energy can reduce emissions in the industrial and agricultural sectors, they cannot eliminate these entirely. Consequently, other sectors need to sharply reduce their energy consumption and minimise their use of fossil fuels. This also applies to the electricity sector.

Europe continues to spearhead global combined heat and power market, which is clearly attributable to the region's harsh winters, especially across the UK, and Finland. Cold weather in European nations is expected to push demand for cogeneration equipment that also plays an important role in electrical and thermal applications. The need for reimagined heating solutions will continue to drive Europe's combined heat and power market.

On the other side, combined heat and power market in Asia Pacific is likely to make great strides on the back of strong government support, and dynamic industrial activities eyeing infrastructural developments across the region. Moreover, the developing economies in the Middle East and Africa, and Latin America are projected to represent high-potential markets based on robust developments in both the residential, and commercial sectors. In line with an increasing number of governments offering subsidies on combined cycle CHP installations, it is more likely that the combined heat and power market will spot multiple revenue generation opportunities across nations like Mexico, and Brazil as well.

By Type

• Large Scale


• Small Scale

By Fuel

• Coal


• Natural Gas


• Biomass


• Others

By Technology

• Gas Turbine


• Steam Turbine


• Reciprocating Engine


• Fuel Cell


• Microturbine


• Others (stirling engine and combined cyle power plants)

By Capacity

• Up to 10 MW


• 10-150 MW


• 151-300 MW


• Above 300 MW

By End user

• Residential
  
  
  
  • Space Heating/Cooling
  
  
  • Water Heating
  
  
  • Cooking
  
  
  • Lighting & Others
  
  
  
  


• Commercial
  
  
  
  • Educational Institution
  
  
  • District Energy
  
  
  • Office Buildings
  
  
  • Government/Military
  
  
  • Others
  
  
  
  


• Industrial
  
  
  
  • Chemicals
  
  
  • Petroleum Refining
  
  
  • Food
  
  
  • Paper
  
  
  • Primary Metals
  
  
  • Others
  
  
  
  

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