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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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Tuesday, 23 July 2019

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