Distributed power generation gathers pace

Projected capacity shortages and increasing electricity prices in the residential market are boosting demand for distributed power generation in Europe.

Projected capacity shortages and increasing electricity prices in the residential market are boosting demand for distributed power generation in Europe.

In particular, demand for micro combined and heat power (CHP) is rising due to the high overall efficiency and the cost savings it presents to end users.

To maintain this momentum, partnerships between boiler manufacturers, installers and utilities will be critical.

Frost and Sullivan finds that the European Micro CHP Market earned revenues of $66.7 million in 2005 and estimates this to reach $817.8 million in 2012.

"Governments in Europe are beginning to take note of the benefits of micro CHP; the recent reduction of VAT from 17.5 to 5% in the United Kingdom is a favourable sign and will be more regulatory support for this technology in the future", according to Frost and Sullivan.

"Anticipated incentives for micro CHP due to its carbon saving potential will also give a thrust to the market".

Although market participants are confident about micro CHP's prospects, end users are excited at the possibility of having a small power station in their homes.

Utilities are interested in micro CHP to improve their share of eco-friendly electricity.

Micro CHP also offers opportunities for boiler manufacturers and installers that are already familiar with producing and selling boilers.

The market has shown consistent growth over the past five years.

With an increase in investment, more products and manufacturers are likely to enter the market.

Already, companies are tapping into new markets and developing novel applications for micro CHP units.

Despite this upbeat scenario, the industry still faces a number of challenges.

Currently, developers sell their units either directly to customers or through distribution partners.

This business model places the entire risk of investing in a new technology on end users.

Therefore, there is an immediate need for innovative business models to ease the adoption process.

"Reaching out to end users is a big challenge in the micro CHP market", according to Frost and Sullivan.

"Winning over utilities and boiler installers that are likely to form an important part of the distribution network will be a difficult task".

Low awareness levels among end users are also restraining the rapid adoption of micro CHP.

Boiler installers that often recommend replacement of boilers in households could assist in promoting this product.

Utilities, which supply electricity to households, can also reach out to end users.

Thus, partnerships with utilities and installation companies will be crucial for the product to take off in the market.

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