Combined Heat and Power (CHP) Market Size, Share & Industry Analysis, By Fuel Type (Natural Gas, Coal, Biomass, and Others), By Technology (Combined Cycle, Steam Turbine, Gas Turbine, Reciprocating Engine, and Others), By Capacity (Up to 10 MW, 10-150 MW, 151-300 MW, and Above 300 MW), By Application (Utilities, Residential, and Commercial & Industrial), and Regional Forecast, 2024-2032

The global combined heat and power (CHP) market size was valued at USD 16.84 billion in 2023. It is expected to grow from USD 17.90 billion in 2024 to USD 30.38 billion by 2032, exhibiting a CAGR of 6.84% during the forecast period. The combined heat and power market in the U.S. is projected to grow significantly, reaching an estimated value of USD 7.25 billion by 2032, driven by the rising focus on energy efficient and low operating cost of energy systems.

Combined heat and power (CHP) offers a productive and clean way to deal with creating electric power and thermal power from a single fuel source. CHP power plants are often close to the end user's site so that the heat released out of power generation can be utilized to meet the user's heat necessities while the power produced meets all or a part of the site's energy needs. Applications with consistent electricity and thermal energy demand are great monetary focuses for CHP deployment. Industrial applications, especially in businesses with consistent handling and high steam prerequisites, are exceptionally monetary and address a huge portion of existing CHP capacity today. Moreover, hospitals, nursing homes, laundries, and lodgings with large hot water requirements are well-appropriate for the commercial applications of combined heat and power systems. Institutional applications such as universities and schools, prisons, and private and sporting offices have incredible possibilities for CHP deployment.

The outbreak of COVID-19 and the lockdowns negatively impacted the global combined heat and power (CHP) market. Many CHP stakeholders reported that several critical CHP projects were behind schedule due to disruptions caused by the COVID-19 crisis. For instance, in November 2020, Virt Energy GmbH, the Germany-based franchisor of Virt biogas systems, announced the commissioning of the Virt Mobile biogas demonstration plant in Sri City, Andhra Pradesh, India. Due to pandemic-related lockdowns, the company reported delays of about six months, as about 80% of the work was completed before the pandemic.

Combined Heat and Power (CHP) Market Trends

Growing Inclination Toward Smart Heating Systems is the Latest Trend

Increasing inclination toward smart heating systems and the rising investments in research and development of technology programs are considered to be the latest trends in this industry. The industry is witnessing increased adoption of gas-powered systems derived from low-fossil fuel by-products, combined with evolving customer inclination toward cleanliness, in countries around the world. Substituting conventional energy-producing systems with highly efficient cogeneration plants is expected to help business development across countries.

Moreover, the government in the U.S. is substantially investing in research and development for various prime mover technologies to run the combined heat and power (CHP) units economically. The U.S. national administration has introduced several economic benefits to customers to sustain the installation. For instance, the U.S. Internal Revenue Code (IRC) Section 48 provides an investment tax credit (ITC) for certain energy-related investments. The government aims to support sustainable energy development programs by offering subsidies and tax credits to investors and citizens to adopt efficient and clean energy sources. Under the ITC program, there is a 30% permanent credit rate for solar, while combined heat & power accounts for a 10% credit rate till 2022.

In October 2020 the U.K. Administration announced the introduction of a new biomass strategy for the year 2022 for progressing bioenergy usage to support renewable revolutions. The new publication was drafted by the Department of Business, Energy and Industrial Strategy (BEIS) of the U.K., as per the findings of the Committee on Climate Change’s (CCC) progress report. In its 2018 publication, CCC directed the potential for the usage of biomass, wood, and waste by 2050. In addition, the National Renewable Energy Association (REA) projected that bioenergy sources are capable of meeting up to 16% of the total primary energy generation by 2032.

Combined Heat and Power (CHP) Market Growth Factors

Prodigious Demand for Heat and Power to Boost Combined Heat And Power (CHP) Market Growth

Energy is essential for paving the way for nurturing economies. It not only ensures continuous investment, innovation, and expansion of industries but also generates employment, inclusive growth, and shared prosperity for entire economies. So, there is a massive requisition for heat and power to meet the economic targets. Combined heat and power (CHP) units are deployed in several IT parks, hospitals, schools, universities, airports, malls, and commercial spaces, among others, to generate heat and power economically in order to generate independent energy producers. The growing commercial sectors, owing to the inflation of economies, may increase the demand for heat and power, which is set to accelerate the demand for CHP. As per the International Energy Agency, the global sales of heat pumps grew by around 11% in 2022 across the world owing to the rising requirements of heating and cooling. European countries, the U.S., and China have been the major market leaders in the world for selling heat pumps.

Drift Toward Sustainable Energy Development to Mitigate Increasing GHG Emissions to Spur the Market Growth

The requirement for power and electricity is continuously growing across the globe due to the surging population and expansion of residential, commercial, and industrial sectors. According to the International Energy Agency (IEA), the total energy consumption across the globe increased to about 2% in 2023 and is expected to rise further to around 3.3% in 2024. To curb this growing power demand, governments of various countries such as India, Saudi Arabia, China, Brazil, and others are taking various initiatives and making investments to expand their power generation capacities. For the expansion of the power generation capacities, the governments of the countries are primarily focused on renewable energy sources to achieve net zero carbon emissions by 2050, as discussed in the Paris Agreement.

According to the International Renewable Energy Agency, the total installed renewable capacity at the end of 2022 was around 3,372GW, which has grown by around 295GW from the previous year, thus representing a growth of approximately 9.6%. In addition, the CHP or cogeneration power-producing facilities also serve as a medium for reducing carbon emissions to a much greater extent than thermal power generation and traditional heat-producing technologies.

RESTRAINING FACTORS

Constrained Application and High Initial Investment May Hamper the Market Growth

The combined heat and power (CHP) system implementation requires a huge capital investment, which becomes non-feasible without any government funds or financial assistance that may hinder the combined heat and power (CHP) market growth. In addition, varying prices between the different prime technologies create a reluctance among customers to shift their choices from existing alternatives. CHP is mainly adopted in densely populated areas to integrate the systems on a large scale to manage overall installation costs. However, the low-populated residents are hesitant to incorporate advanced combined heat and power (CHP) units due to the high initial costs of installation.

In addition, a lack of awareness, along with deficient technical knowledge regarding the benefits of CHP, may limit the market growth. For example, as per the U.S. Environmental Protection Agency (EPA), the installation costs for various prime movers fueled by biomass range from USD 350 per kW to USD 10,000 per kW. The prices are highly dependent on the demonstration, introduction, and commercialization statuses and available models across the market. Furthermore, the availability of prime mover technologies operating on other fuels such as natural gas, oil, diesel, and hydrogen may also act as a restraining factor to the market growth.

Combined Heat and Power (CHP) Market Segmentation Analysis

By Fuel Type Analysis

Natural Gas-Based CHP Units Dominates the Market Owing To Rising Adoption of Clean Fuel

Based on fuel type, the market is segmented into natural gas, coal, biomass, and others.

Natural gas dominates the market due to its high efficiency and low cost compared to other fuel types. Moreover, an increase in funding and assistance from government and private players for the development of highly efficient natural gas power plant projects is likely to boost realistic gas-based CHP deployment.

The continuous adoption of clean fuel with concern over rising carbon emissions from burning coal to produce steam has led to a decline in the utilization of coal-based CHPs. A significant proportion of coal-fired combined heat and power (CHP) plants have been fitted with low-NOX burners to minimize NOX emissions, and some units have been equipped with flue gas desulphurization equipment.

The biomass combined heat and power (CHP) demand is expected to grow at a significant rate over the forecast period. The setup of new projects with wooden and agricultural fuel, high calorific value, established acceptability, efficient operations, and substantial energy production are some of the key features favoring the segment's growth.

The coal-fired power generation sector has also progressively closed down its older power stations as more efficient plants have come on-stream.

By Technology Analysis

Combined Cycle Segment to Dominate Owing to Higher Electrical Efficiency

Based on technology, the combined heat and power (CHP) market is categorized into combined cycle, steam turbine, gas turbine, reciprocating engine, and others.

The combined cycle segment is expected to lead the global CHP market during the forecast period. These systems typically use a gas turbine to drive an electrical generator and recover waste heat from the turbine's exhaust to produce steam. Steam from the waste heat is passed through a steam turbine to provide additional power. The overall electrical efficiency of a combined cogeneration system is typically in the 50-60% range, which is a significant improvement over the approximately 33% efficiency of a simple open-cycle cogeneration application.

The steam turbine segment also holds a substantial portion of the market share after the combined cycle. However, the major hindrance to the segment growth is that steam cogeneration is a high-temperature HVAC that requires high usage and demand in order to be practical.

By Capacity Analysis

151-300 MW Segment Dominates Owing to the Huge Preference for Industrial Applications

Based on capacity, the combined heat and power (CHP) market is segmented into up to 10 MW, 10-150 MW, 151-300 MW, and above 300 MW.

The 151-300 MW is the dominating segment among other capacity types, as 151-300 MW is majorly preferred for commercial, industrial, and utility applications. This capacity range offer significant scale efficiencies while still being manageable in terms of installation and operation compared to larger systems. Industries and district heating applications often require CHP systems in this capacity range to meet their combined electricity and heat demands efficiently.

The up to 10 MW segment is anticipated to be the fastest growing segment during the forecast period. The capacity mainly plays specific roles in the application segment. CHP technologies can help manufacturing facilities, federal and other government facilities, commercial buildings, institutional facilities, and communities reduce energy costs and emissions and provide more resilient and reliable electric power and thermal energy.

By Application Analysis

Expanding Commercial Sector to Augment the Commercial & Industrial Segment Growth

Based on application, the market is segmented into utilities, residential, and commercial & industrial.

The commercial & industrial segment holds the dominant share in the market due to the expansion of the commercial sector underpinned by industrialization for generating high GDP in countries across the globe. The government of several countries worldwide have been focusing on the expansion of these sectors by making huge investments and framing initiatives to attract high FDIs.

The utility segment also grabbed a notable share in the market in 2023 due to the fact that utilities are particularly well-suited to help CHP deployment rise because they are uniquely capable of making and encouraging long-term, cost-effective investments for the greater efficiency of the grid.

Furthermore, the residential segment is also witnessing a steady expansion owing to the increase in the adoption of CHP systems for emergency power backup units in the residential sector. A similar trend is foreseen in Europe as several nations are embracing clean and energy-efficient technology to heat and power their residential buildings.

REGIONAL INSIGHTS

Based on region, the market is divided into North America, the Asia Pacific, Europe, the Middle East & Africa, and Latin America.

Europe held a dominant part in the combined heat and power (CHP) market share during the historical period. It is expected to continue to dominate during the forecasted years as well, owing to the strict rules and regulations in this region regarding carbon emissions & sustainability. Europe’s directives on energy efficiency & renewable energy promotion, along with feed-in tariffs and carbon pricing mechanisms, significantly influence CHP deployment. For instance, the U.K. reduced its VAT from 20% to 5% on domestic CHP installation, while Germany provides KWKG allowance to promote cogeneration.

In addition, North America and the Asia Pacific regions have also prioritized control of carbon emissions and have implemented various initiatives to control them. The installations of CHPs have further been magnified due to the expansion of commercial, residential, and industrial sectors in these regions. In North America, the U.S. is the leading country in the CHP market due to the increasing investments in developing large-scale projects, establishing a robust policy framework, and availability of colossal infrastructure, among other factors. Moreover, in 2023, the Canadian government awarded a USD 35 million contract to develop a 6.5 MW CHP plant and connect it to a local diesel microgrid.

The Middle East & Africa region is also gaining gradual traction toward the deployment of combined heat and power in sectors such as oil refineries, petrochemicals, and district cooling systems. Government policies aiming at energy diversification, renewable energy targets, and enhancing energy efficiency drive the adoption of CHP in select industries.

KEY INDUSTRY PLAYERS

Companies Focus on Catering to Specific Demands of the End-use Industry to Strengthen their Position

The global CHP market is significantly fragmented into numerous players offering varied products and services across the global value chain. Numerous companies are actively operating in the region to meet the specific demands of the end-use industry, mostly in power generation.

Siemens AG and General Electric are expected to have a significant market share because they have been active in the industry for a long time, and the operational potential of the portfolio has been improved. In addition, the company operates hundreds of cogeneration plants globally, offering the advantages of both heavy-duty gas turbines and gas engines. Other major participants also include Kawasaki heavy industries, Mitsubishi Power, Wärtsilä, and Cummins, among many others, which are present with various technologies across the industry to stay connected with the top-performing players.

List of Top Combined Heat and Power (CHP) Companies:

• MAN Diesel & Turbo (Germany)


• Wärtsilä (France)


• General Electric (U.S.)


• Kawasaki Heavy Industries, Ltd. (Japan)


• Mitsubishi Heavy Industries, Ltd. (Japan)


• Bosch Thermotechnology  (Germany)


• Viessmann Werke (Germany)


• FuelCell Energy (U.S.)


• Cummins (U.S.)


• Veolia (France)


• BDR Thermia (Netherlands)


• CENTRAX Gas Turbines (U.K.)


• 2G Energy Services (Germany)


• ABB (Switzerland)


• Siemens (Germany)

KEY INDUSTRY DEVELOPMENTS:

• October 2023- Malarenergi partnered with ABB to upgrade its switchgear along with retrofit solutions at its cogeneration plant located in Vasteras. Malarenergi’s CHP plant has 98% of all local properties connected to the district heating system. The retrofit process was carried out in three different stages with customized solutions for each of CHP's switchgear cabinets. By modernizing its switchgear, Malarenergi aims to maintain predictable delivery to its customers and increase safety for both personnel and equipment.


• July 2023- Mitsubishi Power received an order for two gas turbines for a 1,600MW Class GTCC Power Plant in Uzbekistan. Mitsubishi Power supplied a range of equipment, including a series of orders for the H-25 series of small and medium-sized gas turbines for an urban distributed natural gas-fired cogeneration (CHP) facility being developed in Tashkent.


• May 2022- Wärtsilä collaborated with Capwatt on a green hydrogen blending project in Portugal, which started in the first quarter of 2023 and aims to test mixtures with up to 10% green hydrogen by volume. The CHP plant, which supplies energy to the Sonae Campus and the national grid, is currently powered by a natural gas-powered Wärtsilä 34SG engine.


• January 2022- Veolia signed a new 15-year contract with Total Fitness to reduce energy consumption and carbon emissions at 17 different health and fitness centers in the North of England and Wales. Under the agreement, Veolia will help Total Fitness reduce its gas consumption by 32% using CHP. The latest technology installed increases electrical efficiency by 22% compared to existing cogeneration equipment, lowers energy costs and further reduces CO2 emissions in the 134,000 m2 building area.


• June 2019- BDR Thermea Group declared to launch the first-ever hydrogen-powered domestic boiler across the globe. The breakthrough is to be deployed in a pilot project in Rozenburg, Netherlands and is set to use hydrogen fuel derived from solar and wind energy to curb any release of harmful CO2.

REPORT COVERAGE

The report provides a detailed analysis of the market and focuses on key aspects such as leading companies, product/service types, and leading applications of the product. Besides, the report offers insights into the market trends and highlights key industry developments. In addition to the factors above, the report encompasses several factors that contributed to the growth of the market in recent years.

REPORT SCOPE & SEGMENTATION