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Top 5 Takeaways from ISH 2013

I’ve been going to the ISH in Frankfurt – one of the world’s largest trade fairs for home energy products - for a number of years now. Here are some of my highlights from the Energy section of this year’s trade show. 
  1. Apps galore – heating companies move into remote control and smart phone apps. But lots of open questions remain about who will ‘own’ the customer, how much value there is in this space, and who will get it. You can read our recent Delta-ee HEMh study for our view of how this market will develop.
  2. Hybrid electric heat pump – gas boiler systems. Lots of models were on display, but some key differences in configurations – which ones are best placed to open up the gas replacement market? We look at this issue in a bit more detail in our recent Hybrid Heat Pumps Report.
  3. Fuel cell micro-CHP – two of Europe’s largest boiler manufacturers (Bosch and Viessmann) displaying new products in conjunction with major Japanese corporations (Panasonic and Aisin), trialling 100s of units now or in the next years, and preparing for market introduction. See Scott Dwyer’s ISH review - ISH 2013 - Germany emerges as a hot bed of activity for small cogen, including a sneak peak at new residential fuel cells -  for Delta-ee’s view of how this market will develop.
  4. The battle for the mini-CHP market is hotting up – more engines, and a lot more products – but how big will this market become? And what’s driving it? See our detailed study prospectus for our new Multi-Client Study here.
  5. Gas heat pumps – new Viessmann products on show in addition to existing products from several manufacturers, and Robur edging closer to a residential-scale product.  Will this move from an interesting sideshow towards the mainstream heating market? See Lindsay Sugden’s ISH review  - The top 5 heat pump technology trends at ISH 2013 - for Delta-ee’s view.
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Ecobuild 2013 – More Products But It’s A Tough Market

Ecobuild is the UK’s largest annual event for sustainable design, construction and the built environment.  Low carbon and decentralised energy technologies are prominent, and this year several of the Delta-ee team spent time exploring the trade fair and talking with exhibitors and other attendees.  We summarise below some of the things we took away from Ecobuild 2013.

More products specifically designed for the UK market.  A number of exhibitors introduced products specifically designed for the UK market.  These included:
  • Stiebel Eltron with a new monobloc ASHP, specifically designed with the UK and French market in mind, and designed to be easy install
  • Laily and Coates, a recent start-up company, exhibited a heat pump specifically designed for UK housing and climate – developed by a Guernsey based entrepreneur
  • Worcester Bosch were displaying their ‘hybrid’ ASHP product
  • BDR were showing their new ASHP product for the first time in the UK – this is launching later in 2013, once it has MCS accreditation.
  • Ochsner Heat Pumps are providing “tailored” ASHPs for the UK market based on an home energy assessment and specific design of the heat pump by their engineers
The RHI – now or never please (but preferably now!)  One of the strong themes that came through several conversations is that frustration with the RHI is close to becoming anger. There are expectations among the industry that the domestic RHI is likely to be further delayed as DECC still has a number of key questions to address. There are two potential sources of anger:
  1. UK subsidiaries of international companies have for three years talked up the UK as a growth market, but that growth has yet to materialise. Corporate head offices may soon start seeing better opportunities in other markets and some may reduce their commitment to the UK if growth does not become evident soon.
  2. The negative impact uncertainty has on the market. Prior to the RHI, the market was growing organically at a reasonable rate. However since the delays to the RHI it has broadly stagnated, as customers and suppliers await clarity. So unless the RHI is finalised soon, the industry may wish it had never been proposed in the first place.  
We heard a lot of mixed feelings about the Green Deal.  The supporters are often working hard to promote it – and many have a vested interest in its success.  However, there are other players in the market, including many that are not yet participating directly, that see that the opportunity with customers as small. This is due to both the complexity of the scheme and the long customer journey.  Delta-ee’s own research with customers (see our Microgen Insight Service) suggests that while the concept is seen positively, the implementation is lacking.

Tough economy showing through.  The event was well-attended (although perhaps quieter than previous years) and while many of the major companies were out in force, there were a small number of big names missing from the exhibitor list.  Perhaps just a reflection of the prevailing economic climate?

Will clarity on the RHI and Green Deal help kick-start the market?  We’ll be addressing this question, and many others, throughout 2013 for subscribers of our Microgen Insight Service.
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Will FC Expo 2013 mark the start of Japan’s second wave of residential fuel cell products?

When I attended FC Expo 2013  - Japan’s largest international fuel cell conference and trade show - in Tokyo last week, a number of people I spoke with mentioned how they thought the Expo had shrunk for the second year running. However, this was not to say there was less fuel cell micro-CHP on show as well as some interesting newcomers…

Five years on from the launch of the initial launch of the ENE-FARM by JX, Panasonic, and Toshiba – and with sales expected to have grown to exceed 50,000 systems in FY2012 – the manufacturers may feel like their initial awareness raising job is complete. Likewise, the deals that will enable the manufacturers to access the potentially lucrative European market are most likely done and dusted (e.g. Panasonic and Viessmann), or at an advanced stage.

So while Toshiba and Panasonic plumped for low key displays - JX avoided putting their wares on show as they did at their large exhibition booth like last year – and Aisin didn’t exhibit their new ‘Type S’ SOFC ENE-FARM developed in conjunction with Osaka Gas and Kyocera - we saw some new pretenders take up a place to show what they have to offer to the international community.

NGK/NTK were there for the second year running. A market leading global manufacturer of components for the automotive industry, they were there showing off their 1kW SOFC system. Admittedly this was the same “display unit” they had on show last year, and there were no obvious signs of the partnership with Honda as was announced late last year. However, this could be a promising move if the Nagoya-based corporation applies to fuel cell stacks the same “high quality, low price” ethos that made them so successful in their core businesses.

Miura Kogoyo and Sumitomo Precision were a newcomer with their 4.2kW SOFC micro-CHP system on display. The former is a major Japanese heating equipment manufacturer - the latter originally an aerospace manufacturing company who branched out into other technologies (e.g. heat exchangers and semiconductors). Predicting commercialisation from 2015 and aimed at the small commercial sector, the compact nature of their system and the ambitious price and efficiency targets means it could be an exciting new product on the market.

And in the technical forums, we heard from TOTO about their plans for residential fuel cells. Another corporation who dominate their “traditional business” space of bathroom equipment, they are another company who can find synergies between the industrial processes they already use – and the ones that can be applied to the manufacturing of ceramic fuel cell stacks.

These newcomers will have a way to go until they’re at the same stage as the current ENE-FARM manufacturers. But while JX, Toshiba, Panasonic, and Aisin may be the only shows in town right now, it won’t stay that way.

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Recent Comments
Steven Ashurst
Scott, You could say we’re in the eye of the storm as far as the fuel cell micro-CHP market goes. We had all the noise and furore... Read More
Friday, 08 March 2013 14:49
I think many people are HOPING that the new entrants will challenge those companies who were the first to launch products under th... Read More
Sunday, 17 March 2013 18:23

Why we expect the CHP share of the gas engine market to decline

Recent Delta-ee research indicates that annual global sales of small-scale gas engines (up to 5 MWe) will grow by around 44% to 2016 and by at least 86% to 2020, from 2011. And we expect the annual global market in all gas engine applications to be worth at least $7-9bn pa by 2020.

The most energy efficient application for this technology is CHP, and one might therefore expect it to take a growing share of the overall gas engine market over time. In fact we expect the reverse - its share will decline slowly, although there will be very high regional disparities with Europe having a relatively high share and Africa a relatively low share.

With all CHP’s well documented efficiency and environmental benefits, why is this?

Our research team has been analysing these markets for over 20 years and experience tells us that CHP markets have grown fastest either when incentivised (more common) or when spark spreads are sufficiently attractive (less common). Overall, however, we expect energy policymakers wishing to achieve low carbon goals to be more willing to incentivise renewables and nuclear power, whose advocates are well-organised and effective, than high-efficiency CHP, which has no voice at all in many countries.

There are certainly some exceptions. Germany’s newly revised CHP Law is likely to deliver further strong CHP growth by 2020. The Brazilian market has been growing well now for a few years based in large part on incentives. The Netherlands had a healthy regulatory framework in place which went a long way to helping CHP account for a third of electricity production by 2009. Overall, however, the CHP share of the electricity market in Europe has been more-or-less flat-lining at 11% for years.

This perspective could certainly change, and we will be looking out for it. If it does, it is most likely to be inspired by one or more of the following groups (alongside the small number of established CHP industry organisations) getting heavily involved to make the case for CHP to energy policymakers:
  • The natural gas industry – more gas-fired CHP means more gas sales;
  • Environmental NGOs – more gas used in CHP (as opposed to its use in other gas applications) means higher energy efficiency and lower carbon emissions;
  • Major industries and building owners – more on-site CHP will normally mean lower energy bills.
Either way, based on today’s market drivers, our research suggests that the next decade will see strong growth in many global markets for gas engines, especially in power-only applications with little or no heat recovery.

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Hybrid heat pumps create new opportunities in the on-gas retrofit sector

Heat pumps sales in Europe have flat-lined for the last few years. Hybrids – a combined electric airsource heat pump plus a gas boiler will open up new opportunities, enabling electric heat pumps to compete with conventional gas boilers – a potentially huge market with 8 million installations per year across Europe. Hybrids also offer opportunities to decarbonise the off-gas grid sector (i.e. when combined with oil boilers).

New in depth research on hybrid heat pumps by Delta-ee, which analyses the current market and outlook for hybrids, indicates that the best potential for hybrids with gas boilers lies in markets such as the UK, The Netherlands and Germany. Four of the five biggest boiler companies in Europe are already offering a hybrid, and there are already nearly 20 different hybrid products on the market. Sales could increase tenfold to 2020, from close to 10,000 per year across Europe today.

Five reasons why hybrids will open up the on-gas retrofit market:
  • Customer economics: The upfront cost of a hybrid is significantly lower than for an electric heat pump alone. Further, where the heat pump works predominantly for space heating, and the boiler provides hot water, running cost savings can be achieved through hybrids compared to a boiler alone.
  • Consumer acceptance: Hybrids using a gas boiler could be far easier to sell to both customers and traditional heating installers than a pure heat pump – gas is familiar and trusted, particularly in gas-dominated markets like the Netherlands, UK and parts of Germany (as shown in Delta-ee’s report for ENA). Could re-naming the system from “hybrid heat pump” to “hybrid boiler” further increase appeal?
  • Retrofitability: A wide range of hybrid system designs fit with a wide range of building types. Emerging compact integrated products which may be able to directly replace combi boilers could open up mass market opportunities. Un-integrated products where the heat pump can be retrofitted to an existing boiler, open up new market opportunities to ‘up-sell’ existing heating systems.
  • Lower carbon than a boiler: Hybrids can play a role in decarbonising heat – by offering a lower carbon alternative to a gas or oil boiler, and potentially even saving carbon relative to a pure HP.
  • Reducing grid impact: ‘Smart’ operation of hybrids (the ability to switch away from electricity at peak times) increases electricity system flexibility & helps manage grid congestion. Therefore, hybrids reduce grid impact relative to full electrification. The value of hybrids to the electricity grid as we move towards a low carbon future could be immense.

For more information on Delta-ee’s recent in depth report on hybrid heat pumps, please contact Dr Lindsay Sugden, Head of Heat Pump Research at Delta-ee at [email protected] or call +44 (0)131 625 1006. A table of contents can be found here.

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3 ways you’ll know that Europe’s residential fuel cell market is ready to take off….

“Will fuel cell micro-CHP ‘make it’ by 2020?”. This was the first question we posed to our contacts and network in the European fuel cell micro-CHP industry.

“What does ‘making it” actually mean?”. This was the second – and arguably more interesting – question we asked the same group.

We have our own view. But what did the industry say?

Well, there was some consistency with the majority defining ‘success’ as at least 70k - 100k annual sales by 2020.

At Delta-ee, our own annual sales forecasts out to 2020 put fuel cell mCHP sales in Europe closer to the low tens-of-thousands.

To get to the bottom of the more likely truth, we focussed our analysis on 3 main points:
  • the market growth rates in the increasingly successful market of Japan,  
  • a close study of the cost curves,
  • and an assessment of manufacturer/developer plans.

Gradually it became clearer that something “out-of-the-ordinary” would need to happen if fuel cell mCHP was to reach annual sales in the region of 70 – 100k.

But what exactly?

Here is our list of the top 3 things that would tell us that the residential fuel cell market is about to take off in Europe…  

1.    Innovative business models appearing and thriving

There will need to be some success stories soon if the products are to be incorporated into a successful model in time. There are still doubts about how much value is actually in virtual power plant and utility ownership models. However, if we see one business model taking off, this could quickly spell a wave of similar offerings and get to volume sales very quickly.

2.    Low cost product hitting the market

A race to volumes will help bring cost down – but there remains the tricky step of transforming from a ‘high-cost, low-volume’ product into one that will appeal to the wider market – not just the innovators. If we see a proven low-cost product (from Europe, Japan, US, or elsewhere) hitting the market, this could be a sign that a market is about to take off.

3.    Seeing European Energy companies /and or Governments throwing their full weight behind the technology

Energy companies and the national Government have been a major factor behind Japan’s success with fuel cell mCHP. In Europe, energy companies certainly have the ability to tap into their customer base and use their resources to drive fuel cell mCHP into people’s homes. But European Governments are becoming sensitive about backing a “single technology”, while most energy companies are remaining cautious and are still waiting to see what the others do. If an energy company makes a success of mCHP – or if a Government decides to introduce policies to stimulate the market (for example, a fuel cell micro-CHP specific incentives or legislation) - this could be the spark needed to start something promising for fuel cell mCHP in Europe.
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