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Mind the Gap: Why are micro-CHP sales lagging in Europe?

Customer willingness-to-pay research shows a distinct gap between potential and actual sales – even at today’s prices. There are many reasons for this – and an equal number of solutions to the problems.

In my last blog I talked about whether micro-CHP is price elastic: i.e. would we expect sales of domestic micro-CHP units to change depending on what price a retailer sets? You can read about that here. (A quick spoiler alert for you: the answer is ‘yes’. But you’ll need to read the post to see by how much…).

However, besides showing how much potential there is for micro-CHP sales to rise if end-user costs are made more competitive (which is significant), perhaps the most interesting finding from our research was that current installation rates– based on the numbers of units we know are sold at today’s prices – is far lower than would be expected.

Delta-ee publishes annual global sales data on micro-CHP units as part of our Micro-CHP Research Service. Comparing the latest numbers of sales in Germany, the Netherlands and the UK with the response to our new willingness to pay research clearly shows that – even at today’s high prices – there is potential in all markets for sales to be higher.

For example: German customers indicated that at current prices of Stirling engine systems, take-up could be up above 20%. In terms of the suitable homes, this should translate into a market of around 30,000 units a year. But we know that the real-life market has only reached around 10% of this potential. Why?

So why is take-up of micro-CHP dragging?

This is definitely an interesting question, and one we’ve explored further in other research from the Micro-CHP Service. Customer over-statement of the likelihood to purchase is not sufficient on its own to explain the large gulf between potential and actual uptake that we can see. To start closing this gap we advise suppliers to look at addressing the following 3 key issues:

1. A lack of product availability (and a lack of knowledge among customers). Is there just not enough choice (yet) for customers who are thinking about buying a microCHP unit? Without a good product range, customers may not be finding the right product for them and/or their home.  If more products were launched into the market, would sales naturally start to climb?  Potentially - Germany offers the most choice to homeowners with 4 Stirling engine, 1 fuel cell and many internal combustion engine products currently available, while UK and the Netherlands have only 1 or 2 to choose from. Sales figures for Germany outrank these other two countries by a factor of 10:1.

2. Industry requires more market creation efforts by suppliers. Are manufacturers pushing their microCHP units hard enough compared to their other low carbon products? Are utilities engaged and committed enough to micro-CHP? Is enough being done to engage and educate the installers, who play a key part in promoting microgeneration technologies to customers? ‘No’ is the simple answer to all the above (for more of our thoughts about this, see here).

3. Ineffective market channels.  Micro-CHP has not fared well so far by being sold through existing gas boiler routes to market. As a much more expensive product than a conventional boiler – while also being a less mature and a more sensitive technology – it has struggled to make an impact at the point of sale. More is now being done by the industry to find innovative and effective channel strategies. Which is just as well, as these interventions will help micro-CHP to meet its (sizeable) market potential.

So, what can the industry do to drive micro-CHP sales upwards? The points above are clearly within retailers’ own powers to influence. However point 2 will rely on the industry working together as a whole and this may prove the biggest challenge if micro-CHP is to “mind the gap” and truly fulfil the potential that our analysis has revealed. 

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Wednesday, 12 May 2021

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