Frost & Sullivan finds relatively moderate hikes in the price of natural gas ensure positive spark spread
MOUNTAIN VIEW, California, Dec. 17, 2015 /PRNewswire/ -- Combined heat and power (CHP) accounts for 8 percent of The United States' (US) electricity generation capacity, but 12 percent of its annual power generation. This reflects the longer operating hours of CHP plants compared to plants involved in conventional forms of power generation. In addition, as an efficient and clean method of generating electric power and thermal energy from a single fuel source, CHP is used in a broad range of sectors. Approximately 87 percent of CHP units supply heat and power to industries such as chemicals, paper, refining, food processing and metals. The remaining 13 percent is employed for commercial, institutional and residential purposes.
Recent analysis from Frost & Sullivan, North American Combined Heat and Power Generation Market (http://www.frost.com/nfc5), finds that the market earned revenues of $1.50 billion in 2014 and estimates this to reach $1.95 billion in 2021.
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"Strong government support in the form of tax credits and incentives gives impetus to the use of CHP systems in North America," said Frost & Sullivan Energy & Environment Industry Analyst Mahesh Radhakrishnan. "The market will also get a boost from legislation such as the Energy Policy Act of 2005 and Energy Independence and Security Act of 2007, which mandates incentives for CHP and waste energy recovery."
As per the executive order issued by the Federal Government in 2012, 40 giga watts (GW) of cost-effective CHP capacity will be added by 2020. This will take US CHP capacity up to 130 GW, with additional potential for 65 GW each for the industrial and commercial/institutional sectors.
Nevertheless, unclear utility value proposition, limited supply infrastructure and inadequate end-user awareness regarding the benefits of CHP systems are hampering deployment rates. Apart from these challenges, the price of input fuels will play an important role in deciding the growth of the CHP market in North America.
"As more than 67 percent of CHP facilities in the US use natural gas as the input fuel, any volatility in its prices could prove detrimental to the market," noted fellow Frost & Sullivan Energy & Environment Research Analyst Rasholeen Nakra. "Natural gas prices are, however, expected to increase only moderately compared to electricity prices, resulting in positive spark spread and high investments in the CHP market."
North American Combined Heat and Power Generation Market is part of the Energy & Power (http://ww2.frost.com/research/industry/energy-power-systems/energy-power) Growth Partnership Service program. Frost & Sullivan's related studies include: Upstream Oil and Gas Opportunities in Key Countries, Changing Dynamics in Energy Business Models, Global CHP Markets, and Global Liquefied Natural Gas (LNG) Market Assessment. All studies included in subscriptions provide detailed market opportunities and industry trends evaluated following extensive interviews with market participants.
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