Combined Heat and Power Market

[333 Pages Report] The global combined heat and power market is estimated to reach USD 39.2 billion by 2029 from an estimated USD 30.4 billion in 2024, at a CAGR of 5.2% during the forecast period. The combined heat and power market is expanding due to CHP plants capitalizing on the inherent heat produced during electricity generation from the combustion of carbon fuels. By locating electric generation close to buildings, the heat generated can be harnessed for local heating purposes, enhancing overall energy efficiency. While all combustion of carbon compounds emits CO2, CHP plants boast higher energy conversion rates, leading to greater electricity or useful heat output per unit of fuel. This results in reduced carbon emissions compared to separate electricity and heating systems.

To know about the assumptions considered for the study, Request for Free Sample Report

To know about the assumptions considered for the study, download the pdf brochure

Combined heat and power Market Dynamics

Driver: Government programs and incentives to promote CHP

Governments Combined Heat and Power (CHP) systems, also known as cogeneration, are efficient systems that generate both electricity and useful thermal energy from a single fuel source. Governments around the world often offer various programs and incentives to promote the adoption of CHP systems due to their potential to reduce energy consumption, greenhouse gas emissions, and overall energy costs.

Restraint: Rising concerns over stable natural gas supply for CHP systems

Natural gas plays a crucial role as an energy source for Combined Heat and Power (CHP) plants, necessitating the development of suitable infrastructure to maximize its potential. However, the construction of natural gas pipelines presents significant challenges due to their complexity and high costs. Various factors influence the construction of these pipelines, including environmental regulations, average capacity factors, gas flow rates, production levels, and pipeline lengths.

The South Stream pipeline project, which traverses Bulgaria, has faced uncertainties due to political tensions between Russia and the EU. Additionally, the 30-year gas supply agreement between Russia and China, inked in 2014, involves an estimated expenditure of approximately USD 30 billion for the construction of pipelines and associated infrastructure. However, the financing arrangements for this project remain unresolved. Consequently, ongoing concerns persist regarding the reliability of natural gas supply and the availability of adequate infrastructure, acting as constraints on the growth of the CHP market.

Opportunities: Increased trend of distributed power generation creates huge opportunity for gas turbine-based CHP market.

Distributed generation refers to the production of power near or directly at the location where it's needed. Historically, electricity was distributed from small-scale power plants utilizing low-voltage DC-based distribution systems. These distributed generation systems can serve both electrical supply and mechanical functions, such as providing torque for moving objects. Typically, distributed generation systems are characterized as stationary or mobile units with capacities under 100 MW. This approach contrasts with centralized power generation, where larger capacity plants generate electricity far from the point of consumption, always in fixed locations. Gas turbines play a crucial role in the current array of distributed power generation technologies, alongside reciprocating engines, solar panels, wind turbines, and fuel cells. Gas turbines stand out due to their heightened efficiency and dependable generation capacity, particularly in providing backup power and meeting onsite generation requirements. Consequently, the ascent of distributed power generation presents a significant opportunity for the gas turbines market to thrive.

Challenges: Challenges posed by utilities for sale of excess electricity by CHP plants

CHP plants encounter obstacles when dealing with utilities, particularly regarding the sale of surplus electricity. Stringent interconnection requirements and high tariff rates present significant challenges for CHP operators. For instance, the Des Moines Metro Wastewater Reclamation Facility in Iowa struggled for two years to negotiate an interconnection agreement, incurring substantial costs in both monetary terms and staff resources. Similarly, the Rock River Water Reclamation Plant in Illinois allocated 10% of its total CHP implementation costs towards addressing interconnection issues with the local utility. In Arkansas, the Fourche Creek Treatment Plant faced grid interruptions, prompting the installation of a fiber interlock between the plant and the electric substation, enabling complete disconnection from the grid during interruptions. In Portland, the Columbia Boulevard Wastewater Treatment Plant was compelled by the local utility to install reverse power relays to prevent any power export back to the grid, encountering resistance regarding power sales under contract terms. Contrarily, the Theresa Street Wastewater Treatment Facility in Nebraska successfully sold excess power to the local utility. However, the facility faced a discrepancy in credit received for the power supplied. While purchasing power at 5.5 cents per kWh, the facility only received 2.5 cents per kWh for the power sold back to the grid. These instances illustrate the challenges confronted by CHP operators in their interactions with local utilities.

Combined heat and power Market Ecosystem

Leading companies in CHP Market include well-established, financially secure producers of combined heat and power products. These corporations have been long operating in the market and have a differentiated product portfolio, modern manufacturing technologies, and robust sales and marketing networks. Major companies in this market include GE (US), Siemens Energy (Germany), Veolia (France), Wartsila (Finland), and 2G Energy (Germany).

The natural gas segment is expected to be the largest market by fuel during the forecast period.

By Fuel, the combined heat and power market is divided into coal, natural gas, biogas/ biomass, nuclear, diesel and other fuel types. The natural gas segment is expected to be the largest in the combined heat and power market because of the increasing utilization of natural gas in gas engines for electricity generation stems from its cleaner combustion and lower carbon emissions compared to other fuels, addressing environmental concerns. Predominantly employed in gas engines ranging from 5 to 20 MW, natural gas finds extensive application in industrial and commercial cogeneration, particularly in utilities. Strengthening natural gas distribution networks in key countries like the US, Russia, and Canada is expected to further drive demand for gas-based Combined Heat and Power (CHP) systems, offering resilience during natural disasters and facilitating remote operations through gas capsules.

By end users, the industrial is expected to be the largest segment during the forecast period.

The industrial segment is expected to be the largest in the combined heat and power market consuming approximately 50% of the world's delivered energy annually, encompasses diverse industries like chemicals, oil & gas, and pharmaceuticals. With countries like China and India experiencing rapid industrialization, policies promoting industrial growth and ensuring reliable power supply are being implemented. Industries prioritize efficient energy use, driving the adoption of Combined Heat and Power (CHP) systems. These installations provide reliable power, utilize heat for heating applications, and often incorporate waste as feedstock, reducing disposal challenges.

“Asia Pacific”: The largest region in the combined heat and power market.

The Asia-Pacific region stands out as the largest market for combined heat and power (CHP) systems due to several compelling factors. Firstly, rapid industrialization and urbanization in countries like China, India, and Japan have led to a significant surge in energy demand across various sectors, making CHP systems an attractive option to meet this growing need efficiently. Secondly, government policies and incentives aimed at promoting energy efficiency, reducing emissions, and ensuring energy security have created a favorable environment for the adoption of CHP technologies. Additionally, the region's diverse energy landscape, including abundant availability of biomass and waste resources, further enhances the feasibility and attractiveness of CHP systems. Moreover, ongoing technological advancements and innovation in CHP technologies have improved their performance, reliability, and cost-effectiveness, driving higher adoption rates in the Asia-Pacific market compared to other regions globally. These combined factors position the Asia-Pacific region as a leader in the CHP market, poised for continued growth and expansion in the coming years.

Key Market Players

The combined heat and power market is dominated by a few major players that have a wide regional presence. The major players in the combined heat and power market are GE (US) Home | General Electric, Siemens Energy (Germany) Home (siemens-energy.com), Veolia (France) Veolia France gère les ressources des collectivités et industries, Wartsila (Finland) The global leader?in?innovative?technologies and lifecycle solutions for the marine and energy markets | Wärtsilä (wartsila.com), and 2G Energy (Germany) 2G Energy. Modular CHP cogeneration systems (2g-energy.com). Between 2020 and 2024, strategies such as product launches, contracts, agreements, partnerships, collaborations, alliances, acquisitions, and expansions are followed by these companies to capture a larger share of the combined heat and power market.  

Want to explore hidden markets that can drive new revenue in Combined Heat and Power Market?

Unlock Insights

Click on image to enlarge

Scope of the Report

This research report categorizes the combined heat & power market by capacity, prime mover, fuel, end user, and region.

On the basis of capacity:

• Up to 10 MW
• 10-150 MW
• 151-300 MW
• Above 300 MW

On the basis of prime mover:

• Gas Turbine
• Steam Turbine
• Reciprocating Engine
• Fuel Cell
• Microturbine
• Others

On the basis of end-user:

• Industrial
• Residential
• Commercial
• Utilities

On the basis of fuel:

• Coal
• Natural Gas
• Biogas/biomass
• Nuclear
• Diesel
• Others

On the basis of region:

• Asia Pacific
• Europe
• North America
• Middle East & Africa
• South America

Recent Developments

• In March 2023, Siemens Energy partnered with customers to tackle ships' environmental impact by introducing methanol fuel cell systems for onboard electricity generation. Developed in collaboration with fuel cell supplier Advent Technologies Holdings, Inc., the technology is now available, offering a tailored net-zero greenhouse gas emission solution for the marine sector in less than two years.
• In August 2023, 2G Energy expanded its core cogeneration business by acquiring Dutch heat pump manufacturer NRGTEQ, adding an innovative division to its portfolio. This move aligns with the growing political emphasis on electrifying the heating sector, showcasing 2G Energy's commitment to diverse and sustainable energy solutions.
• In February 2024, Mitsubishi Heavy Industries invests in Feryo Energy, a Houston-based geothermal technology startup. The investment, facilitated by Mitsubishi Heavy Industries America, includes collaboration with a consortium of investors like Devon Energy Corporation and Marunouchi Innovation Partners.
• In May 2020, Wärtsilä and Uniper supplied a 105 MW combined heat and power (CHP) gas engine plant to Bremen, Germany, commissioned by Erzeugung GmbH & Company KG. The project involved the delivery of nine Wärtsilä 31SG gas engines along with the heat recovery system.

Frequently Asked Questions (FAQ):

To speak to our analyst for a discussion on the above findings, click Speak to Analyst