While there is considerable interest in micro-CHP technologies, sales of units to date have been very small – except for Japan, which seems to have three-quarters of the global market. But the scope for explosive growth in the next two or three years is there, writes Jon Slowe, in several European countries as well as Japan.
Micro-CHP sales are still a still a dot on the power generation landscape. Worldwide micro-CHP installations in 2005 amounted to some 31 MW of installed capacity, up from 25 MW in 2004, according to analysis by Delta Energy & Environment. Just four companies had product available for commercial sales. Taken in isolation, this is not impressive in terms of scale or growth. But the interest in micro-CHP is not about markets and growth today, but mainly about the possible explosive growth and development of mass markets in the next 3-10 years.
This article examines the current status of micro-CHP markets across the world (primarily in the US, Europe and Japan) together with technology development and market prospects. Delta defines micro-CHP as generating less than 6 kWe, with these products typically suitable for single-family homes and multi-family homes.
MICRO-CHP MARKETS AT THE BEGINNING OF 2006
Delta estimates that some 16,000 micro-CHP units were sold in 2005. Japan accounts for around three quarters of these sales through the ECOWILL unit and Yanmar’s Genelight unit. The German market contributes just under one fifth of these sales, through the SenerTec DACHS unit and Power Plus Technolgies’ Ecopower unit. Companies with product available for sale and delivery in 2005 are shown in Table 1.
In Japan the ECOWILL product continued to sell well, with most major gas companies offering it to housing developers and homeowners, while Tokyo Gas (who is starting to sell the unit in 2006) is a notable exception. Compared with 2004, annual sales for 2005 increased by around 25% to over 10,000 units. Yanmar made steady progress with its Genelight product, selling a few hundred units a year. This product is typically sold to small businesses such as restaurants. Other CHP products in the 6-10 kWe range sold in Japan include those from Aisin Seiki and Sanyo.
All of these products currently sold in the Japanese market are based on internal combustion engines. Japanese manufacturers have successfully controlled noise and emissions to acceptable levels, and have extended servicing requirements to long intervals. For example, the Honda engine at the heart of the ECOWILL system only requires servicing every 6000 hours of operation. Yanmar’s unit has even longer service intervals, at 10,000 hours.
In Germany, SenerTec continues to successfully sell its DACHS micro-CHP product. Annual sales increased to close to 3000 units a year, with the German market accounting for the vast majority of these sales. Rising electricity prices helped to stimulate sales, as did continued strong marketing and sales activity through SenerTec’s network of regional SenerTec centres. SenerTec is owned by Baxi Group, one of Europe’s five largest boiler manufacturers. Vaillant, also one of Europe’s top five boiler manufacturers, owns Power Plus Technologies, which offers the Ecopower micro-CHP product – of which a few hundred units were sold (again primarily in Germany) in 2005. The DACHS and Ecopower units are also both built based on internal combustion engines. Noise and emissions, as with the Japanese engines, are controlled down to acceptable levels.
Sales of this Ecopower micro-CHP unit are particularly active on the German market (Vaillant/PowerPlus Technologies)
Elsewhere in Europe, most other micro-CHP market activity is focused on the UK. Utility E.ON-UK offers Whisper Tech’s micro-CHP product to households and housing developers. Current activity is more akin to a market trial rather than a commercial launch. To fulfil the order from E.ON UK for 80,000 WhisperGen units, Whisper Tech must secure a manufacturing partner – as only 2000 units a year can be made in their New Zealand facilities. Actual installations lagged sales in 2005, although E.ON-UK reports sales of several hundred units.
The UK is another European country seeing much market activity in micro-CHP. This WhisperGen unit is being offered to UK households and housing developers (Whisper Tech)
Two new micro-CHP manufacturers – both based in Germany – started taking orders for micro-CHP products in 2005, although none of these were available for installation until 2006. OTAG took orders for its 3 kWe steam-driven LION micro-CHP product, which is designed for single-family homes. OTAG reports that it is already selling 600 units, its entire planned manufacturing run for 2006. Sunmachine sold distribution licences for its 3 kW biomass-fuelled Stirling engine in 2005, and at the beginning of 2006 reported selling 70 licenses and over 1000 units for delivery in 2006.
North American markets
Activity in North America was much more muted than in Europe and Japan. Vector Cogen, who had brought a 5 kWe micro-CHP product (built around a Kawasaki internal combustion engine) to market in 2004, closed its doors to business. Marathon Engine Systems continued to plan to bring the Ecopower micro-CHP product to the US, and Climate Energy unveiled a micro-CHP prototype based on Honda’s internal combustion engine, to be launched in 2006.
MICRO-CHP PRODUCT DEVELOPMENT ACTIVITY
Micro-CHP markets promise to take off, possibly with exponential growth in the next four years. The rate and timing of market growth is far from certain, partly due to the uncertainty about the plans of product developers to commercialize their micro-CHP products.
Although internal combustion engines account for all bar one product on the market today, many technologies are under development, namely:
- fuel cells
- internal combustion engines
- Rankine/steam cycle engines
- Stirling engines.
As an example of the number of companies working on these technologies, Figure 1 shows selected product developers targeting the European market (many other developers – mostly focusing on fuel cell technology – are targeting the Japanese market).
Figure 1. Selected developers/manufacturers in the European market
Stirling engines are on the cusp of market introduction in Europe, with a number of developers aiming to introduce product into markets in the next two years. One steam engine is being introduced to the German market in 2006, with a Rankine-cycle product slated for launch within 2-3 years. And fuel cells are being tested and demonstrated, but are not yet ready for true market introduction.
Japan: fuel cell research, development and demonstration
In 2005, Tokyo Gas, Nippon Oil and other kerosene, LPG and gas suppliers started offering PEM (proton exchange membrane) fuel cell micro-CHP systems to homes through leasing packages. We do not categorize this as commercial sales, as this activity is more akin to a demonstration project or wide-scale field trial. Over 500 units had been installed in homes by May 2006. Manufacturers of these fuel cells include Ebara Ballard, Matsushita, Toshiba, Toyota and Sanyo.
These developers, in partnership with fuel suppliers, are targeting a mass-launch of fuel cell micro-CHP systems in 2008, with plans to sell thousands of units a year. However, substantial progress is necessary to reduce costs and improve lifetime and reliability in order for these targets to be met. It remains to be seen whether the necessary progress will in fact be made.
A SenerTec DACHS mini-CHP unit supplies electricity to a sheltered accommodation scheme for the elderly in the UK (Baxi Technologies)
Solid-oxide fuel cells (SOFC) are also being developed in Japan. Kyocera has demonstrated a 1 kW micro-CHP (SOFC) with Osaka Gas and a 5 kW unit with Tokyo Gas. The units have demonstrated impressive electrical efficiencies of over 40% (lower heating value).
The overall market environment in Japan for micro-CHP is very favourable. Government support, together with gas utility action and investment, is leading to strong micro-CHP growth. Most gas utilities are now offering the ECOWILL unit to their customers. And the major gas, LPG and kerosene companies are heavily involved in demonstrating and testing both PEM and solid oxide fuel cells. Japan is likely to continue to be the leading micro-CHP market in the world for the next few years.
Several products near commercial launch in Europe
Many companies are developing micro-CHP products for the European market, with several of these hoping to commercialize systems by 2008. Details of selected developers follow.
- Microgen Energy Ltd, a subsidiary of the BG Group, is developing a 1 kW Stirling engine micro-CHP system. Microgen is planning a large-scale field tests in the UK and the Netherlands in 2006, with commercial launch following in 2007. It has teamed up with Dutch boiler manufacturer Remeha to commercialize its product.
- ENATEC, a joint venture between Dutch utility ENECO and the Energy Research Centre of the Netherlands, is also developing a 1 kW Stirling engine micro-CHP unit. ENATEC has a manufacturing agreement in place with Japanese gas appliance manufacturer Rinnai, and plans to license its technology to European boiler manufacturers for integration into heating systems.
- Baxi, one of Europe’s leading boiler manufacturers, is developing a 1 kWe organic Rankine-cycle micro-CHP unit, which it targets to commercialize in 2008.
Honda, who manufactures the internal combustion engine at the heart of the ECOWILL system sold in Japan, is also planning to introduce product onto the European market by 2008. Coupled with other Stirling engine product development activity and the introduction of the WhisperGen, OTAG and Sunmachine units into markets, several micro-CHP units could be on the European market within the next 2-3 years.
Several companies are also developing fuel cells for the European market, although market introduction of these products is likely to follow that of Stirling engines, steam/Rankine cycle engines and internal combustion engines. Fuel cell micro-CHP system developers focusing on the European market include boiler manufacturers Baxi, Viessmann and Vaillant (Vaillant is working with fuel cell technology developer partners), Hexis, Ceres Power and Ceramic Fuel Cells. In 2005 Ceramic Fuel Cells raised à‚£37 million (€54 million) on the UK Alternative Investment Market, which it will use to bring their product to market – with a target of ‘volume production’ of fuel cell stacks by 2010.
Utilities’ interest in micro-CHP in Europe is still patchy. In the UK, E.ON-UK is leading the market by offering the WhisperGen unit to households. Centrica has a ‘heads of terms’ agreement with Microgen, and an agreement with Ceres Power. Micro-CHP interest in the UK has been buoyed by political support for micro-generation. In April 2006, the Government published a Micro-Generation Strategy, and earlier the electricity and gas regulator OFGEM announced it would work to remove barriers to the growth of microgeneration.
In the Netherlands, gas wholesale company Gasunie Trade and Supply is encouraging the development of the Dutch micro-CHP market. It has sponsored a field trial of WhisperGen units, involving most of the electricity and gas retail companies. There are signs that at least one, and possibly more, of these retail companies is keen to offer micro-CHP products to their customers.
The situation amongst German utilities is harder to read. Several have been involved in, and a number continue to be involved in, fuel cell micro-CHP field trials. However, only a few are also testing other micro-CHP technologies that are arguably nearer to market than fuel cells.
Commercial prospects in North America
The North American market is, generally, a more challenging market for micro-CHP. This is due to low electricity prices in much of North America, resistance (in the form of interconnection arrangements and tariffs) from some electric utility companies, the penetration of low-cost warm air furnaces rather than the boilers found in Europe and Japan, and a greater policy focus on local air pollutants rather than greenhouse gas emissions.
Modest micro-CHP activity is likely in the next few years in North America. Climate Energy is field-testing its Honda engine-driven micro-CHP product in winter 2005-6, with a target of launching commercial sales later in 2006. Marathon Engine Systems, manufacturers of the engine at the heart of the Ecopower micro-CHP system sold in Europe, is also expected to launch its product in the next couple of years. But both of these products are likely to play in niche markets, at least for the first few years of availability.
Some of the major HVAC manufacturers – AO Smith, Trane, UTC Corporation, have been involved in micro-CHP research projects, although it is not evident that they will drive development of micro-CHP products for the North American market.
THE FEW YEARS AHEAD
Micro-CHP sales are likely to continue growing steadily in 2006 in Japan and Germany – the only two markets currently with significant micro-CHP sales. From 2007 onwards, there is the possibility of an inflection point in market growth as new products are brought to market, with most of this increased market activity likely in the UK, Netherlands, Japan, and possibly Germany.
Market development will depend on a number of critical factors, as shown in Figure 2.
Figure 2. Factors contributing to mass market development. Source: Delta Energy & Environment
Japan is likely to continue to be the world’s leading micro-CHP market for the next few years. In Japan, product is available (with others being developed) which offers a reasonable economic proposition, the regulatory framework is friendly enough for micro-CHP, gas companies are pushing product to market, and customers are purchasing products. The major point to watch here is whether fuel cells have been sufficiently developed to be widely commercialized in 2008.
In Europe there is more uncertainty. Niche micro-CHP markets are currently showing steady growth, but there is the potential for rapid growth if new micro-CHP products suitable for single-family homes and mass markets are brought to market, and utilities and boiler manufacturers aggressively push micro-CHP to customers. Additional work is required in some markets on regulatory issues, and market pull has not been widely demonstrated.
North America has lagged behind these other two markets, and is expected to continue doing so. Micro-CHP is expected to establish itself in a few niche markets over the next few years. Stronger market growth is dependent on a number of different parts of the micro-CHP jigsaw falling into place.
Jon Slowe is a Director of Delta Energy & Environment, based in Glasgow, Scotland, UK. Fax: +44 141 227 3984 E-mail: firstname.lastname@example.org
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