Micro Combined Heat And Power (CHP) Market

Market Overview

The global micro combined heat and power (CHP) market was valued at USD 3.75 billion in 2022. It is projected to reach USD 9.36 billion by 2031, growing at a CAGR of 10.70% during the forecast period (2023-2031). Micro-combined heat and power is a group of technologies that simultaneously produce heat and power. Gas or liquified petroleum gas is typically used to power domestic micro-CHP systems (LPG). However, several systems now use biodiesel or oil as their fuel source. Gas and LPG are considered low-carbon technologies since they might be more effective than simply burning fossil fuel for heat and obtaining power from the grid, despite being fossil fuels rather than renewable energy sources. A significant quantity of energy is lost in its production at the power plant and in its transit to households or other enterprises. The onsite cogeneration technology significantly improves the energy production process's efficiency, lowering the overall carbon footprint and reducing dependency on expensive electricity from the national grid.

Market Dynamics

Global Micro Combined Heat And Power (CHP) Market Drivers

Rising Demand for Decentralized Energy Systems and Improved Efficiency

A growing number of people are using micro-CHP systems because of their increased efficiency. The technology can generate heat and power with an overall efficiency output of between 85 and 90 percent. Up to 25kW of electricity can be produced as a byproduct from a typical micro-CHP plant. The cogeneration system is a multifuel facility, meaning it can generate heat and power using conventional LPG fuel and modern micro-CHP technologies like biomass-based micro-CHP systems. The rising demand for decentralized energy systems has led to significant growth in the use of micro-CHP cogeneration systems.

Global Micro Combined Heat And Power (CHP) Market Restraint:

Restrictive and Expensive against Conventional Boiler Systems

Due to reduced capacity ranges, there are limitations in the market for micro-CHP systems. The technology is solely intended for modest-sized buildings. As a result, they are exclusively applicable to the commercial and residential sectors. The method is not appropriate for large industrial applications when the need for power outweighs the need for heat. Even if heat is required, there is a greater demand than capacity. Due to its limited power output, electricity generation can only support a specific variety of electrical appliances. The system cannot eliminate grid power. Thus, it can only use self-generated electricity to pay for a portion of the power tariff. This demonstrates that the product's adaptability in the domestic market is also limited.

When comparing purchase and installation expenses, a micro-CHP system is more expensive than a traditional boiler. The system is CAPITAL intensive if no government incentives are provided for the technology. The commercial sector finds it difficult to use regularly because of the high upfront expenses and lengthy payback periods. These modest installations occasionally serve for a shorter period when they search for long-term applications. The return-on-investment factor, therefore, lowers itself.

Global Micro Combined Heat And Power (CHP) Market Opportunities:

Technological Advancements in Power Sector

A system known as micro-CHP produces both usable heat and power. This method was created to increase the energy required to burn fuel to produce electricity, improving the combustion process's effectiveness. These qualities and technologies will lead to an increase in the micro-CHP industry. There are apartment buildings, restaurants, hotels, shops, hospitals and clinics, factories, and other structures everywhere. The government also places a high priority on this market. Modern micro-CHP technology offers numerous economic and environmental advantages. Nations like Japan, Germany, South Korea, and the U.K. are aggressively working to integrate these advantages into the mainstream energy market.

Segmental Analysis

The global micro combined heat and power (CHP) market is segmented by fuel type and application.

Based on fuel type, the global micro CHP market is bifurcated into natural gas, biogas, and others.

A viable option for producing electricity and heat in homes and business structures is micro-combined heat and power generation (CHP). In powerful nations throughout the globe, where the age of power is predominantly based on fossil fuels, such as natural gas, this method helps to reduce carbon dioxide emissions. Due to lower emissions than fossil fuel-based alternatives, natural gas is becoming more and more popular as a fuel in micro-CHP systems worldwide. Furthermore, compared to condensing boilers, which are expected to grow more popular among residential and commercial consumers during the projection period, micro-CHP heat generation systems have a practical efficiency that is substantially greater.

At the point of consumption, biogas can be converted into heat and electricity using micro cogeneration or micro-CHP. The micro-CHP powered by biogas enables the generation of power and heat (hot water or steam). The equipment in the home and commercial sectors can be powered by the electricity produced. CHP enhances the fuel with a 50% efficiency in heat generation and a 35% efficiency in power generation. Biomass is created from gaseous fuel (biogas), which differs from natural gas in that it is produced naturally through the decomposition of organic waste. As a result, it qualifies as a renewable energy source. Methane (CH4) makes up between 50 and 70 percent of biogas compositions, with CO2 making up most of the remainder and small amounts of nitrogen, oxygen, and hydrogen sulfide.

Other fuel types, such as heating oil and wood pellets, are appropriate for micro-CHP systems. Due to their greater acceptance of micro-CHP compared to biogas, other fuel types have a sizable market share after natural gas. But in the years to come, it's anticipated that factors like the lower efficiency of different fuel types compared to natural gas and biogas, along with the comparatively high emissions from other fuels, would impede the expansion of this market. Due to its regular pricing in the area, wood-pellet-based micro-CHP utilization is concentrated in and around Europe. Wood pellets were comparably consistent compared to the fluctuating prices of natural gas and oil over the past ten years. For a very long period, pellets were more affordable than other fuels. 

Based on application, the global micro CHP market is bifurcated into residential and commercial.

Micro-CHP systems are an efficient option for sectors with relatively modest energy demands, like residences, due to their smaller size. These devices can lower fuel use, which reduces pollutants and lowers expenses. Micro-CHP systems with a smaller size have high-capacity factors (=95%). They can run on conventional fuels like oil, liquified petroleum gas (LPG), or natural gas. They can be combined with low-carbon fuels like biodiesel, hydrogen, renewable natural gas (RNG), or biogas. Additionally, the local energy source offered by residential micro-CHP adds another layer of resilience for isolated communities and households vulnerable to losing electricity due to severe natural catastrophes or system disruptions.

Smaller than 50 kW but larger than residential systems are commercial micro-CHP systems. These offer security and energy independence and are often installed in hotels, supermarkets, office buildings, sports facilities, hospitals, and shopping malls. Commercial systems are typically internal combustion engine CHPs with higher electrical efficiency because these systems are relatively more extensive, and noise is not a fundamental problem. However, fuel cell micro-CHP systems are used more frequently in commercial settings due to the technology's declining costs and growing efficiency. Japan and Europe dominate the markets for the deployment of commercial micro-CHP systems, much like they do for the residential market. 

Regional Analysis

The global micro combined heat and power (CHP) market is bifurcated into four regions: North America, Europe, Asia-Pacific, and LAMEA. 

Asia-Pacific Dominates the Global Market

Asia-Pacific is the most significant revenue contributor. The largest micro-combined heat and power market was obtained in the Asia Pacific, which is anticipated to hold throughout the projected period. The most powerful nation in this area is Japan. Several developing countries, like China and South Korea, contribute to the growth of the regional market because they are energy-efficient, capable of producing both heat and power simultaneously (CHP), and will provide a reliable energy supply in the future.

Europe will see significant growth in the upcoming years. The manufacturing, industrial, and automotive sectors are well-established in the area. Demand for the market is driven by the region's push for zero-emission rules for residential and commercial buildings and a focus on fewer carbon-intensive operations. In addition, a 20% increase in energy efficiency and a 20% decrease in greenhouse gas emissions are significant priorities in the strict environmental protection policies of the European government. As a result, many European nations are adopting energy-efficient technology to stop global warming.

In comparison to the markets in the Asia-Pacific region or Europe, the North American market is comparatively insignificant. However, due to supportive government regulations and rising demand for sustainable energy generation in the area, it is predicted to develop at the fastest rate during the estimated timeframe. Ongoing technological developments will also accelerate the business scenario to boost energy efficiency and raise peak capacity demand across the system.

Due to the slow acceptance of the technology, a lack of awareness, and high initial investment for residential setups, the rest of the world has limited potential for installing micro-CHP. The initiatives are in the beginning stages in some nations, such as Brazil, Chile, and South Africa, where it might take some time for technology to advance in these nations. Micro-combined heat and power system may be readily implemented in the heating systems of existing buildings since it generates reasonably hot heat. The best technology for generating power in the residential and non-residential sectors integrates well with the current gas and electric infrastructure.

Recent Developments

• January 2022- According to Total Energy Systems, an authorized distributor for Gridiron's onsite power production systems was appointed to provide robust power solutions to the upper Midwest. The Power Plant H24 tiny combined heat and power unit, which uses renewable natural gas, natural gas, or propane as its fuel source, is one of Gridiron's goods, based in Houston, Texas.

Micro Combined Heat And Power (CHP) Market Segmentation

By Fuel Type

• Natural Gas
• Biogas
• Other Fuel Types

By Applications

• Residential
• Commercial

By Regions

• North America
• Europe
• Asia-Pacific
• LAMEA