Cogeneration Equipment Market Size, Share & Trends Analysis Report By Capacity (Less than or Equal to 30 MW, 31 MW–60 MW, 61 MW–100 MW), By Fuel (Coal, Natural Gas, Biomass), By Technology (Gas Turbine, Reciprocating Engine, Steam Turbine, Combined Cycle Gas Turbine), By Application (Commercial, Residential, Industrial) and By Region(North America, Europe, APAC, Middle East and Africa, LATAM) Forecasts, 2024-2032

Market Overview

The global cogeneration equipment market size was valued at USD 27.2 billion in 2023 and is projected to reach a value of USD 57.6 billion by 2032, registering a CAGR of 8.7% during the forecast period (2024-2032). The growing global energy demand is the primary driver of the cogeneration equipment market growth.

Cogeneration equipment consists of machinery and systems that create electricity while capturing heat from waste, increasing energy efficiency. Cogeneration equipment, also known as combined heat and power (CHP) systems, converts a single fuel source, such as natural gas, biomass, or waste heat, into electricity and thermal energy.

Furthermore, cogeneration frequently reduces energy consumption and is a cost-effective process that improves energy supply security, increasing the demand for cogeneration systems, which may act as a significant growth factor for the global cogeneration equipment market share over the forecast period. Furthermore, expanding gas infrastructure worldwide has increased demand for cogeneration systems, which might be a significant development driver for the market. Furthermore, the high investment costs associated with developing cogeneration systems and regulatory frameworks are expected to act as a restricting factor in the market.

Market Dynamics

Global Cogeneration Equipment Market Drivers:

Rising Energy Costs

As energy costs rise and markets become more volatile, cogeneration equipment is a cost-effective solution for onsite power generation and thermal energy production. Cogeneration systems, which generate electricity while capturing waste heat for heating or cooling, can assist businesses and institutions in reducing their dependency on grid-supplied electricity and lower total energy costs, boosting their competitiveness and financial performance. According to the United States Environmental Protection Agency (EPA), cogeneration systems can reach an overall energy efficiency of 65-90% instead of 35-40% for conventional power generation technology. This increased efficiency leads to significant cost savings for users. According to a study by the American Council for an Energy-Efficient Economy (ACEEE), industrial cogeneration systems can lower energy expenses by 20-40% compared to grid-supplied electricity and purchased heat.

Additionally, cogeneration projects can offer an attractive return on investment. In June 2023, Italy, Poland, and the United Kingdom had some of the world's highest commercial electricity prices, at over USD 0.40 per kilowatt hour. Ireland also had the world's highest home electricity prices, roughly USD 0.52 per kilowatt-hour, compared to the United Kingdom's USD 0.44 per kilowatt. A case study by the International Energy Agency (IEA) discovered that European cogeneration plants had payback periods ranging from 2 to 7 years, depending on system size, fuel costs, and energy savings.

Similarly, research conducted by the Combined Heat and Power Alliance in the United States discovered that commercial and industrial cogeneration projects often have 3 to 5-year payback times, making them appealing investments for firms looking for long-term cost savings. As a result, with the potential for significant cost savings and short payback periods, cogeneration systems are an appealing alternative to offset the impact of rising energy costs and improve long-term financial performance for end users in various industries and areas.

Global Cogeneration Equipment Market Restraints:

High Initial Investment Cost

One of the main obstacles to the widespread adoption of cogeneration equipment is the significant upfront financial expenditure necessary for installation and commissioning. Cogeneration systems incur large infrastructure costs, including procuring prime movers (gas turbines or engines), generators, heat recovery units, and control systems. These upfront expenses can be too expensive for some end users, particularly small and medium-sized firms (SMEs) or organizations with restricted capital budgets, limiting market adoption.

For example, a cogeneration system's typical cost varies according to brand, efficiency, and installation. For instance, Inoplex 50 KW electrical generators can cost USD72,000, and Inoplex 67 KW electrical generators can cost USD97,000. A complete unit, including installation, can cost between USD15,000 and USD20,000.

Furthermore, the payback period for cogeneration projects, which is the time it takes for cost savings from energy efficiency gains to cover the initial investment expenses, varies based on system efficiency, fuel prices, power tariffs, and incentives. According to research by the United States Department of Energy (DOE), payback durations for cogeneration projects typically vary from 3 to 7 years, with some projects reaching significantly lower payback periods under ideal conditions. However, the lengthy payback times associated with some cogeneration projects may put off potential investors, particularly those with shorter investment horizons or tighter financial limitations.

Global Cogeneration Equipment Market Opportunity:

Decentralized Energy Generation

The trend to decentralized energy generation and distributed energy resources (DERs) creates an attractive potential for cogeneration equipment. Cogeneration systems offer onsite power generation and thermal energy production, enabling resilience, dependability, and security against grid outages. As businesses and communities strive to improve energy security, reduce dependency on centralized power grids, and shift to more resilient energy systems, cogeneration provides a scalable and cost-effective alternative for localized energy generation and consumption.

In addition, in 2023, renewable energy sources such as solar, wind, hydro, biomass, and geothermal accounted for 22% of total US electricity generation, or 874 billion kWh. This growing trend toward renewable energy may raise demand for decentralized power generation systems. According to a report from the United States Department of Energy (DOE), cogeneration systems improve energy resilience by providing onsite power generation capabilities that can run independently of the grid during grid outages or emergencies. Cogeneration facilities with backup capabilities, such as black start or islanding, can continue to deliver electricity to critical loads even when grid power is unavailable, maintaining business continuity and reducing disruptions for end users.

Furthermore, adding cogeneration systems to the grid can improve grid stability and reliability by reducing the pressure on centralized generation and transmission facilities. By decentralizing energy generation and utilizing distributed energy resources (DERs) such as cogeneration, utilities can improve grid operations, balance supply and demand, and reduce voltage fluctuations and grid congestion. According to studies, distributed generating technologies, such as cogeneration, can improve grid resilience and minimize the likelihood and duration of power outages, which benefits both utilities and end consumers.

Regional Analysis

Europe Dominates the Global Market

The global cogeneration equipment market analysis is conducted in North America, Europe, Asia-Pacific, the Middle East and Africa, and Latin America.

Europe is the most significant global cogeneration equipment market shareholder and is estimated to grow at a CAGR of 9.3% over the forecast period. Europe is expected to experience the fastest growth rate throughout the forecast period, thanks to the widespread availability of natural gas in economies such as Russia and Germany. In cities, Space and expense constraints and stringent environmental restrictions are projected to increase demand for this equipment during the forecast period. Despite the region's significant power and energy production capacity, certain economies account for most global electricity imports. Natural gas remains a region's leading energy supplier despite using alternate energy sources to create power.

Additionally, various government authorities, including the Organization for Economic Cooperation and Development (OECD), are providing incentives to increase the use of natural energy sources in countries. Economies such as the United Kingdom and Germany have implemented many tax incentives and rebates to encourage the installation of cogeneration equipment. Several significant enterprises and industries in this region have the financial resources to place large orders for this equipment. However, because this is a mature economy, the area is expected to grow moderately over the projected period.

North America is anticipated to exhibit a CAGR of 8.9% over the forecast period. North America is a significant producer and consumer of electricity in the world. The United States is the region's major power consumer and producer. The US Energy Information Administration (EIA) predicts that energy demand in the United States will fall to 4,010 billion kilowatt-hours (kWh) in 2023, down from a record high of 4,048 billion kWh in 2022. This is due to weaker economic growth and milder weather in 2023. The EIA predicts demand will increase to 4,067 billion kWh in 2024 as economic growth accelerates. According to the US Energy Information Administration, energy consumption is expected to exceed 6 TWh by the end of 2050. This can be attributed to the increased demand for electricity in the industrial sector.

In addition, the adverse winter conditions boosted the demand for space heating, resulting in the development of micro CHP, which leveraged the demand for cogeneration equipment. Massive demand for power and electricity due to technical advancements and commercial space expansion boosts demand for HVAC, contributing to the growth of the North American cogeneration equipment market.

The Asia-Pacific region has enormous potential for growth due to rapid population increase and high energy demand. Rapid urbanization and industrial growth not only increased electricity demand but also had a severe influence on the environment. To combat escalating environmental deterioration, governments and commercial entities are investing in green energy, driving the growth of the cogeneration equipment market.

Furthermore, China is the global leader in renewable capacity installations, accounting for 91% of global growth in wind power and 43% in solar generating in the first half of 2023. China's proportion of global electricity consumption is predicted to increase to one-third by 2025, from one-quarter in 2015. Over the next three years, China, India, and Southeast Asia are expected to account for more than 70% of the increase in global electricity demand. 

Segmental Analysis

The global cogeneration equipment market is segmented based on capacity, fuel, technology, and application.

The market by capacity is further segmented into Less than or Equal to 30 MW, 31 MW–60 MW, and 61 MW–100 MW.

This segment includes larger-scale cogeneration facilities that may meet the energy demands of big industrial complexes, metropolitan districts, or utility-scale operations. Cogeneration plants of this capacity range have extensive power generation capabilities, allowing them to supply electricity and thermal energy to various end customers, including industrial operations, district heating and cooling networks, and utility grids. These larger-scale cogeneration systems provide economies of scale, operational efficiency, and grid support services, all of which contribute to improved energy security, grid stability, and environmental sustainability at the regional and national levels.

Cogeneration systems in this capacity range may handle the energy demands of medium-sized industrial operations, big commercial complexes, and multi-building campuses. These systems have a higher power generation capacity than smaller-scale installations, allowing for more comprehensive coverage of electrical and thermal energy demand within a single facility or across numerous interconnected sites. Cogeneration facilities in this capacity range provide increased energy reliability, resilience, and cost savings, making them appealing solutions for medium-sized businesses looking to optimize energy use and lower operating costs.

Based on fuel, the market is fragmented into Coal, Natural Gas, and Biomass. 

Natural gas is one of the most popular fuel sources for cogeneration systems because of its broad availability, low cost, and cleaner combustion than coal. Natural gas-fired cogeneration plants use gas turbines, reciprocating engines, or combined-cycle systems to transform the chemical energy in natural gas into electricity, with waste heat recovered for thermal use. Natural gas cogeneration is a popular alternative for commercial, industrial, and utility-scale applications that require dependable and cost-effective onsite power generation and thermal energy output due to its high efficiency, quick starting times, and flexibility to meet changing energy demands.

Biomass-based cogeneration systems generate power and heat using organic fuel sources such as wood, agricultural wastes, municipal solid waste, or specific energy crops. Combustion, gasification, and anaerobic digestion processes transform biomass feedstocks into biogas, syngas, or steam, which are then used to generate electricity and recover thermal energy. When biomass is sourced sustainably, it may generate renewable energy, reduce waste, and be carbon neutral. Biomass-based cogeneration is critical for boosting renewable energy integration, lowering greenhouse gas emissions, and stimulating rural development in agricultural regions. However, fuel availability, transportation, and environmental sustainability must be solved to fulfill biomass cogeneration's potential fully.

The market is classified based on technology into Gas Turbines, Reciprocating Engines, Steam Turbines, and Combined Cycle Gas Turbines.

Steam turbine-based cogeneration systems use steam turbines to transform thermal energy from steam into mechanical energy, which drives generators to generate electricity. These systems often use boilers or heat recovery steam generators (HRSGs) to produce steam from a fuel source (e.g., natural gas, biomass, or waste heat) or industrial operations. Steam turbine cogeneration is ideal for large-scale industrial facilities, power plants, and district heating systems due to its high efficiency, dependability, and capacity to use various fuel sources.

Combined cycle gas turbine cogeneration systems combine gas and steam turbines to increase energy efficiency and power output. In a CCGT system, the gas turbine's exhaust heat is recovered to create steam, which is then expanded through a steam turbine to generate extra power. CCGT cogeneration has greater overall efficiencies than standalone gas turbine systems, making it a viable alternative for large-scale power generation applications, utility-scale projects, and combined heat and power (CHP) plants serving industrial or municipal customers.

The market can be bifurcated by application into Commercial, Residential, and Industrial.

Office buildings, retail centers, hotels, schools, hospitals, and other commercial facilities are examples of non-industrial establishments that fall under the commercial sector. In the commercial sector, cogeneration systems are used to efficiently meet these buildings' energy, heating, and cooling needs. For example, cogeneration systems deployed in big office complexes can generate onsite power to meet electrical demand while capturing waste heat for space heating or cooling using absorption chillers or heat pumps. Cogeneration in the commercial sector has advantages such as energy cost reductions, dependability, and environmental sustainability, making it an appealing alternative for firms seeking to minimize operational costs and carbon footprints.

The residential sector comprises households and residential buildings, such as single-family homes, apartments, condominiums, and housing projects. While less prevalent than in commercial and industrial applications, cogeneration systems can be used in residential settings to provide combined heat and power (CHP) solutions for individual homes or multi-unit residential complexes. Residential cogeneration systems typically employ small prime movers, such as microturbines or reciprocating engines, to create electricity and thermal energy for space heating, hot water production, and other household requirements. Compared to traditional grid-supplied electrical and heating solutions, these systems save households money on energy, promote energy independence, and have a lower environmental impact.

Impact of covid-19

COVID-19 critically impacted almost all industry verticals globally. The market of the robotic refueling system witnessed slight declination due to the shortage of skilled laborers and disruption in supply chain and manufacturing operations across the globe. Moreover, the market of robotic refueling is likely to come back on track post-pandemic on account of the several measures taken to eliminate the transfer of bacteria, which prompt consumers to adopt a robotic fuelling system. Furthermore, the increasing adoption of autonomous vehicles would also impact the adoption rate of robotic fuelling systems in the near future.

Recent Developments

• January 2024- Tecogen introduced Self-Learning Intelligent Control for Cogeneration Systems.
• January 2024- Caterpillar demonstrated the viability of using hydrogen fuel cell technology for backup power at the Microsoft data center.
• March 2024- GE Vernova's Global EPC Summit brought the sector together in Dubai, encouraging collaboration and shared safety standards.