In 2021, the combined heat and power (CHP) installation market was estimated to be worth USD $940 billion. The market is projected to expand at a CAGR of 5% during the forecast period of 2023 and 2030. Cogeneration, also known as Combined Heat and Power (CHP), is the process of producing both heat and electricity at the same power plant or heat engine through the utilization of a heat engine. Installations of combined heat and power (CHP) are used extensively in a variety of applications, including commercial buildings (including office buildings, hotels, and nursing homes); retail; residential—multifamily buildings; co-ops; planned communities; institutions (colleges and universities, hospitals, and prisons); military bases; municipal systems such as district energy systems; wastewater treatment facilities; and industrial facilities. CHP installations can also be found in some municipal systems.

The global market for Combined Heat and Power (CHP) installations is being propelled by the surging need for electricity. It is probable that there will be a rise in demand for the installation of combined heat and power (CHP) systems as a result of the rising standard of living enjoyed by the people. The increasing popularity of autogas as a preferred fuel around the world can be attributed to the environmental benefits offered by the fuel as well as the introduction of severe government rules to decrease carbon emissions. Therefore, it is anticipated that government programs and incentives, notably in nations such as the United States of America, the United Kingdom, Germany, and Japan, will boost the growth prospects for the combined heat and power (CHP) industry. When it comes to supplying backup power capacity and satisfying the generation requirements of onsite facilities, gas turbines have an advantage over other dispersed generation technologies due to their higher efficiency and more stable generation capacity. Therefore, one of the emerging trends in the CHP (combined heat and power) installation industry is the development in distributed power generation.

Increased Demand for Electricity Around the World

Both industrialization and urbanization have been on the rise for some time now across the entirety of the planet. Because of this, there has been a rise in the demand for power all across the world. It is anticipated that the global demand for electricity would expand at a pace of 2.1% per year until 2040, which is equivalent to twice the rate of the increase in the demand for primary energy. As a result, there will most certainly be an increase in demand for the infrastructure required for the installation of combined heat and power (CHP). In an effort to satisfy the ever-increasing need for electricity, the governments of the number of different countries are placing increased emphasis on renewable energy. It is anticipated that this increase in demand for electricity would lead to an increase in demand for combined heat and power systems all over the world. Consequently, the global market for the installation of Combined Heat and Power (CHP) systems is predicted to be driven throughout the forecast period by a growth in the demand for energy.

Increasing Demand for CHP Systems in Developing Countries

Globalization, industrialization, and urbanization have all seen significant development in recent decades, and this progress has led to a change in the flow of investment from rich countries to developing countries. This can be attributed to the lower costs of labor and infrastructure that are seen in underdeveloped countries. Rules and regulations pertaining to the environment are also not enforced strictly in developing countries. Companies gain an additional competitive advantage as a result of this. The rise in household income, as well as the amount of money that people in the middle class and lower middle class have available to spend, has been attributed to the concurrent development in industrialization and urbanization. As a direct consequence of this, the residential and transportation sectors have begun to implement fundamentals of combined heat and power generation.

Environment-Friendly Solution to Drive the Market Growth

There is a concerted effort being made by the governments of a number of nations to increase the utilization of Combined Heat and Power (CHP) installations. For instance, increasing awareness regarding the concerns relating to the environment, as well as the enforcement of severe rules and regulations by regulatory agencies, have forced corporations to seek out environmentally friendly solutions. In recent years, the construction of Combined Heat and Power (CHP) systems has become an increasingly popular alternative to the usage of gasoline and diesel. The Combined Heat and Power (CHP) Installation is considered to be an environmentally friendly fuel. Companies can save money by utilizing Combined Heat and Power (CHP) installations, which are increasingly becoming more popular. As a result, the increase in demand for Combined Heat and Power (CHP) installation in developing countries such as China, India, Indonesia, Brazil, Mexico, and Nigeria for commercial and residential and various other industrial uses is anticipated to drive the market value of the CHP (Combined Heat and Power) installation market during the forecast period.

Demand For Natural Gas in CHP Systems Is Growing as A Result of Its Abundant Availability and Affordable Pricing

The global market for the installation of Combined Heat and Power (CHP) systems has been divided into three categories in terms of the fuel used: biomass, coal, and natural gas. In 2021, the natural gas sector owned the largest share of the market, accounting for sixty percent of the total. Natural gas is an excellent choice for use as a fuel in combined heat and power (CHP) systems since it is inexpensive and abundantly available. In addition, natural gas is considered to be an environmentally friendly form of energy that can contribute to the reduction of carbon emissions. It is anticipated that this sector will have the lion's share of the market throughout the time under consideration. During the forecast period, it is anticipated that the biomass and coal segments will both expand at a consistent rate.

A High Degree of Adaptability Along with A Variety of Possible Uses for the Driving Portion of The Combined Cycle

The global market for the installation of Combined Heat and Power (CHP) has been segmented according to the prime mover, which includes the steam turbine, combined cycle, gas turbine, reciprocating engine, and other options. In 2021, a considerable portion of the overall market was owned by the sector known as the combined cycle. Due to its high degree of flexibility, high power production, and wide uses in a variety of industries, it has the potential to be the market for CHP (combined heat and power) installation that expands at the quickest rate throughout the course of the projection period.

Programs And Incentives Offered by The Government to Encourage the Use of CHP Are the Drivers

It is anticipated that government programs and incentives, notably in OECD nations such as the United States of America, the United Kingdom of Great Britain, Germany, Japan, and others, will drive the growth of the combined heat and power industry. In 2012, the United States of America adopted a new policy for the promotion of CHP for the purpose of increasing energy efficiency. At the same time, the President of the United States at the time signed an executive order for energy efficiency in industries. The order established a goal for combined heat and power to account for 20% of total electricity generation in the United States by the year 2020, which would be an increase from the 8% proportion it held in 2012. A number of state governments in the United States, in addition to the federal government, have provided financial incentives and tax rebates for combined heat and power installations. The order instructs the United States Departments of Energy, Commerce, and Agriculture, as well as the Environmental Protection Agency (EPA), to coordinate their efforts to provide commercial and technical assistance to state governments in order to encourage investments in industrial energy efficiency. The measure to extend a tax incentive of 10% for enterprises that adopt CHP in their facilities to encourage energy efficiency was approved by Congress in February 2018, and the bill went into effect on April 1, 2018.

Countries in Europe such as Germany and the United Kingdom have taken steps to promote combined heat and power. The combined heat and power (CHP) market in Germany is the largest in Europe, and the market for CHP is primarily driven by policies and initiatives implemented by the German government. In 2001, Germany put its policy on cogeneration into effect, with a primary emphasis on on-site combined heat and power (CHP) units that run on biomass and natural gas. An amendment to the German Cogeneration Act was implemented throughout the country in the year 2016. (KWK-G). The amendment establishes a volume objective for combined heat and power plants in Germany of 120 terawatt hours of electricity generation by 2025. This would equate to a share of approximately 25 percent of the overall generating in the nation. The act provides tax rebates and incentives for combined heat and power installations, particularly biomass-based CHP systems. The size of the installation determines the amount of tax rebate received

Lack of Awareness Barricading the Market Expansion

The lack of awareness among potential customers regarding the site permissions necessary in order to install these systems is one of the obstacles that hinder the growth of the market for CHP installation. The fact that these systems can only be installed in locations that require both electricity and hot water presents a challenge to the expansion of the market because it is the only situation in which they are suitable. In addition, the initial costs to establish these systems are fairly substantial, which might make them unaffordable for businesses that operate on a smaller scale.

Increased Expenses Associated with The Installation and Upkeep of CHP Systems Are A Constraint

The large initial capital expenditure that must be incurred in order to establish a CHP plant is one of the most significant negatives associated with this option. CHP facilities require additional equipment in addition to power production equipment such as the prime mover, generator systems, and other equipment. This additional equipment includes heat exchangers, absorption chillers, boilers, and other types of equipment. The fact that the price of a traditional combined heat and power plant can be over 240% higher than the price of a power production plant with the same capacity and prime mover is a significant barrier for the market for CHP systems. Due to the intricate construction of a CHP system, which comprises a variety of components such as a prime mover, heat recovery system, and heat and steam pipes, the costs of maintenance are also rather high for these types of systems. It is necessary to do routine maintenance on all of the components of the CHP in order to achieve the high level of efficiency desired, which contributes to an increase in the overall maintenance expenses.

Damage To Prime Movers as A Result of Contaminants In Biogas Used To Fuel CHP Plants Is One Of The Challenges.

Understanding the significance of gas pre-treatment and devising a strategy for it is one of the most significant issues faced in combined heat and power plants (CHP). CHP systems that are powered by biogas often make use of prime movers such as a gas turbine, a micro gas turbine, a reciprocating engine, or a Stirling engine. These systems get their energy from the oxidation of methane in a combustion chamber. This results in the production of heat energy and the driving of a piston or turbine; the shaft work that is produced is then used to generate electricity in a generator. When fuel cells are put into operation, they use an electrochemical process to oxidize methane, and methane is often the primary fuel that is utilized by each prime mover. Nitrogen (N2) and carbon dioxide (CO2) are two components of biogas that, in most cases, do not do any harm to the primary mover. However, this causes the fuel to become less effective and dilutes the fuel. The primary mover is particularly susceptible to damage from minute contaminants including hydrogen sulfide (H2S), carbon monoxide (CO), and ammonia (NH3). The oxidation of hydrogen sulfide (H2S) results in the formation of sulfur dioxide (SO2) and sulfuric acid (H2SO4), which in turn leads to corrosion and the failure of the prime mover. In the combustion chamber, siloxanes have the potential to undergo oxidation, which results in the formation of silicon dioxide (SiO2, solid phase). This has the consequence of negatively affecting both the turbine and the piston. In spite of the fact that the prime mover can tolerate a trace level of these pollutants, the life of the CHP is drastically shortened when there is a higher concentration of these impurities.

The Growing Trend of Distributed Power Generation Presents a Significant Opportunity

Creating electricity in close proximity to where it will be used, also known as distributed generation, is the definition of this term. In the past, electricity was supplied by a network of decentralized, low-voltage power plants that were connected to a distribution system. Distributed generation has applications in both the provision of electrical power and the performance of mechanical labor (providing torque to move objects). Systems that are either permanent or mobile and have a capacity of fewer than 100 megawatts (MW) are considered distributed generation systems. When it comes to producing electricity, distributed generation is not the same as a centralized generation, which involves generating power at a considerably higher capacity than a distributed generation, but at plants that are always in the same location. Reciprocating engines, solar panels, wind turbines, and fuel cells are some of the other technologies that make up the present suite of distributed power-generating technologies. Gas turbines are an essential component of this suite. When it comes to supplying backup power capacity and meeting onsite generating requirements, gas turbines have a competitive advantage over other dispersed generation technologies due to their higher efficiency and more stable generation capacity. As a result, the growth of decentralized power generation creates a significant opportunity for the combined heat and power sector.

Restricted Applications and High Initial Investments Would Slow Down the Market

The execution of a CHP project calls for a sizeable investment of cash, which is not viable in the absence of any financial backing or aid from the government. This could potentially impede the expansion of the combined heat and power market. Because of the wide range of pricing offered by the various prime mover technologies, buyers are hesitant to switch from the alternatives that are already available. In addition, prime mover technologies that operate on alternative fuels, such as natural gas, diesel, or hydrogen, may also be a factor that slows down the market speed.

Capacities up to 10 MW to be the Fastest Growing Market

The Up to 10 MW sector is anticipated to be the CHP market segment with the highest rate of growth during the period covered by the research. End users in the residential, industrial, and commercial sectors are the primary contributors to the demand for CHPs in this capacity segment. CHP installations in residential properties can have a capacity of as little as 1.5 kW and as high as 0.5 MW, and their normal fuel of choice is natural gas. When compared to conventional systems, CHP systems can lower the expenses associated with using energy. The need for these is being spurred on by various government initiatives pertaining to micro-CHP and fuel cells. Fuel cells, on the other hand, generate electricity without actually burning the fuel, in contrast to reciprocating engines and gas turbines. Consequently, combined heat and power (CHP) systems that are based on fuel cells are utilized in fixed, portable, and emergency backup power applications. Combined heat and power (CHP) solutions are typically provided for this capacity range by businesses such as AB Holding, 2G Energy, FuelCell Energy, and Capstone.

Fuel Cell Segment to Expand at the Fastest Pace During the Forecast Period

It is anticipated that the fuel cell segment of the CHP market would exhibit the highest rate of growth over the period covered by this research. A fuel cell is an emerging technology for the generation of power that bypasses the combustion process in favor of the direct conversion of the chemical energy contained within a fuel into electrical energy. Because water, electricity, and heat are the byproducts of fuel cells, this technology is far more environmentally friendly than other primary movers that are used to generate power.

The type of fuel cell and the temperature at which it is operating both have an impact on the quality of the heat produced by the cell. Throughout the process, hydrogen is extracted from various hydrocarbon fuels, including natural gas, coal gas, methanol, and others. Because of the limited volume and specialized nature of fuel cell production, capital expenditures have remained relatively expensive. It provides a number of advantages, including a low level of hazardous pollutants, a low level of noise, and substantial market subsidies. Micro-Combined Heat and Power (CHP) systems, which can be powered by fuel cells and range in size from 1 kW to 5 kW, are referred to as "micro-CHP." Countries in Asia, such as the United States, Japan, and South Korea, are currently installing large cogeneration facilities that are powered by fuel cells and have plant capacities ranging from 5 MW to 80 MW. There are already 126 fuel cells deployed in the United States that are designed for combined heat and power (CHP) operation, and their total capacity is 67 megawatts (MW).

Among the End User Segment Utilities to Grow the Fastest

During the time frame covered by this estimate, the segment representing utilities is expected to experience the highest growth rate within the CHP market. The power that is generated by utilities can either be used to supply electricity to the facilities located locally or exported to the electricity grids located locally. CHPs are utilized by utilities because they provide a source of electric and thermal energy at a reduced cost. CHP plants can achieve an efficiency rating of up to 80%, in contrast to the efficiency rating of 25–30% that is achieved by non-CHP thermal plants. Because it is able to generate both electricity and thermal energy that can be put to productive use, combined heat and power technology have become indispensable tool for municipal and municipal district utilities. Historically, utilities have not shown much enthusiasm for combined heat and power (CHP) installations. However, utilities have recently begun to recognize the benefits of large-scale centralized CHP systems, which offer both commercial and technical benefits to utilities as well as to the customers of utilities.

The heat that is produced as a by-product of the generation of electricity can be monetized by utilities through the use of combined heat and power (CHP) systems, which also allow utilities to save money due to the high operational efficiency of these systems. CHP facilities make use of the thermal energy that is created as a by-product of power generation in order to provide district heating or cooling systems through the provision of steam, hot water, or chilled water. This is accomplished by utilizing thermal energy.

The Size of the Combined Cycle Is Expected to Reinforce Significant Growth

The market is primarily segmented into the combined cycle, steam turbine, gas turbine, reciprocating engine, and other categories based on the technologies that are used to produce the products. It is anticipated that combined-cycle CHP systems will dominate the global CHP market in the year 2021. Combined cycle systems at power plants use the waste heat that is accumulated in the exhaust gases to produce more electricity, which results in a reduction in the amount of energy that is lost. When these systems are implemented, the overall efficiency of the plant improves by more than 50%, whereas the efficiency of conventional steam turbine plants is roughly 40%, and the efficiency of gas turbine plants is 35%.

Expansion Plans for the Grid Provide Assistance to the Commercial and Industrial Markets, as well as the Large Power Producing Facilities

The market can be broken down into utilities, residential, and commercial & industrial categories according to the application it serves. The commercial and industrial market size is benefiting from directives that are encouraging the installation of solar power units across the board and expanding retail business, both of which are supported by industrialization. As a result of an increase in the adoption of CHP units for emergency power backup in the residential sector, it is anticipated that the residential segment's share of the market will increase during the period covered by the projections. A similar pattern can be seen in Europe, where a number of countries are adopting technology that is both environmentally friendly and efficient in its use of energy to heat and power residential buildings. Ironically, Japan is investing in energy policies for residential buildings in order to decrease its reliance on fossil fuels and increase the country's level of energy security.

APAC Remains as the Global Leader

In 2021, Asia Pacific had a significant part of the worldwide market, accounting for 55% of the total market. During the time period that is being forecasted, it is anticipated that the market in the region would expand at a significant rate. Within the Asia-Pacific region, China is an essential market for the installation of Combined Heat and Power (CHP) systems. Since a few years ago, the government of China has been actively supporting the installation of Combined Heat and Power (CHP) systems in rural regions for the purpose of cooking. The combined heat and power (CHP) installation market in the Asia Pacific is anticipated to be driven in the next years by investments in big new gas-fired cogeneration plants as well as huge coal-fired plants. This is in addition to the rising demand for energy. The installation of Combined Heat and Power (CHP) systems is also a significant market in North America. In 2021, the region owned a share of the worldwide market equal to 25% of the total. China and India due to the development of new infrastructure, continuing power production projects, and technical advancements. It is anticipated that during the next five years, the expansion of the Asia Pacific CHP market will be driven by investments in big new gas-fired cogeneration plants as well as large coal-fired plants. This growth will also be driven by the increased demand for energy. China and India are driving the growth in both power generation and consumption, which has resulted in this area becoming the world’s largest user of energy. 

Market Remains Consolidated Complicating Entry of New Players

There are only a handful of large-scale suppliers that hold the majority of the share in the global Combined Heat and Power (CHP) Installation market. This market is highly consolidated. The majority of businesses are devoting a sizeable portion of their budgets to extensive research and development efforts in order to create environmentally friendly technologies. Siemens Energy AG, 2G Energy Inc., Capstone Turbine Corporation, Aegis Energy Services, Inc., Cummins Inc., Wartsila, General Electric Company, Aegis Energy Services Inc., Generac Holdings Inc., Primary Energy Recycling Corporation, Integral Power are the primary players in the market for the installation of Combined Heat and Power (CHP). Manufacturers are focusing on forming important agreements and partnerships in order to participate in new undertakings and introduce technically advanced items to the market. In addition to this, the sector has witnessed the introduction of new tactics being implemented by major global and regional participants, in addition to a large number of small and medium business system integrators.

Historical & Forecast Period

This study report represents analysis of each segment from 2022 to 2032 considering 2023 as the base year. Compounded Annual Growth Rate (CAGR) for each of the respective segments estimated for the forecast period of 2024 to 2032.

The current report comprises of quantitative market estimations for each micro market for every geographical region and qualitative market analysis such as micro and macro environment analysis, market trends, competitive intelligence, segment analysis, porters five force model, top winning strategies, top investment markets, emerging trends and technological analysis, case studies, strategic conclusions and recommendations and other key market insights.

Research Methodology

The complete research study was conducted in three phases, namely: secondary research, primary research, and expert panel review. key data point that enables the estimation of Combined Heat and Power [CHP] Installation market are as follows:

• Research and development budgets of manufacturers and government spending
• Revenues of key companies in the market segment
• Number of end users and consumption volume, price and value.
• Geographical revenues generate by countries considered in the report
• Micro and macro environment factors that are currently influencing the Combined Heat and Power [CHP] Installation market and their expected impact during the forecast period.

Market forecast was performed through proprietary software that analyzes various qualitative and quantitative factors. Growth rate and CAGR were estimated through intensive secondary and primary research. Data triangulation across various data points provides accuracy across various analyzed market segments in the report. Application of both top down and bottom-up approach for validation of market estimation assures logical, methodical and mathematical consistency of the quantitative data.

Key questions answered in this report

• What are the key micro and macro environmental factors that are impacting the growth of Combined Heat and Power [CHP] Installation market?
• What are the key investment pockets with respect to product segments and geographies currently and during the forecast period?
• Estimated forecast and market projections up to 2032.
• Which segment accounts for the fastest CAGR during the forecast period?
• Which market segment holds a larger market share and why?
• Are low and middle-income economies investing in the Combined Heat and Power [CHP] Installation market?
• Which is the largest regional market for Combined Heat and Power [CHP] Installation market?
• What are the market trends and dynamics in emerging markets such as Asia Pacific, Latin America, and Middle East & Africa?
• Which are the key trends driving Combined Heat and Power [CHP] Installation market growth?
• Who are the key competitors and what are their key strategies to enhance their market presence in the Combined Heat and Power [CHP] Installation market worldwide?