Points of comparison between the US and European CHP markets

Michael  Brown of Delta-ee

Before Christmas, I attended the annual national conference of the US CHP Association in Washington DC.  I was invited to present and took the opportunity to compare the US and Europe in current and future CHP market trends. 

There are plenty of similarities and several significant differences.  From both, here’s 5 of the most important:

US-EU flags
First, one of the sub-themes of the event that popped up from time to time was, in short, ‘we can learn from what’s going on in Europe because they have lots of CHP and have had lots of pro-CHP policies for years’.  A sort of ‘little brother’ situation.  Today, I would say this is now a relationship of much greater equality.   In terms of the CHP share in national power generation, it looks like the US is now ahead – 12% in the US and 11.2% (and declining) in the EU.  So, while there are several European countries performing better than the US, there are many which are not.

Second, in terms of pro-CHP policies the US is also ahead.  There must be at least 8-10 US States where there are meaningful incentives or support programmes for CHP that are helping to accelerate the market.  In Europe, there are no more than 4-5 Member States where this is the case today.  At the federal level, the Obama administration has said that it wants 40 GWe of new CHP by 2020.   While not a firm commitment, this is nonetheless an emphatic statement of support compared to EU CHP initiatives in recent years.

Third, the price of gas.  The US shale gas phenomenon is well known, and it means that US gas prices are less than half those in Europe, and are projected to remain so for years.  Much of Europe looks enviously at this situation.  With growing confidence in the industry that the relative price of US gas will remain low, this will likely have a profound impact on future CHP market development.  

Fourth – and here Europe has the edge – the attitude of the electricity industry to CHP investment is changing in both the US and Europe.  Overall, European electric utilities have a stronger track record than the US.  Energy companies in the Netherlands, Denmark, the UK and Germany have all, at one time or another since the 1980s, been active in investing in new CHP projects in various applications - industrial, commercial and district heating.  Today, with much of the European power industry in a mess, diversification is a priority and CHP is one of the targets.  See an earlier Delta-ee blog on this subject.  In the US, the electricity industry is at an earlier stage of recognising that the business models of the past will not work in the future as annual demand growth rates approach zero.  Some will develop new CHP businesses, though the conference had little confidence that they will make a success of it.

Fifth – and here the two regions are in a similar situation – market prospects are net positive after several years of flat-lining.  Our view of the European market, and certainly in a few key countries, is that growth rates will exceed, possibly far exceed, recent historic rates up to 2020.  In particular, we are optimistic for smaller systems in commercial and small industrial installations in the 10 kWe – 5 MWe range.  In the US, driven in large part by low gas prices, the projections are also for much stronger market growth than  has been seen for years – and like Europe, the smaller end of the market will figure very strongly.



Michael Brown is a Director at Delta Energy & Environment (http://www.delta-ee.com), a specialist decentralised energy research and consulting company. For more information on global distributed power market trends, please contact Michael at michael.brown@delta-ee.com.



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