Globally, I echo John’s optimism. Several countries look exciting, including Brazil and China. South-east Asia as a whole is also bright. Experience of the last 10 years shows strongly that, when rates of new capacity development are high, cogeneration markets are also buoyant, even though the market share may not be that great. In general, it is the emerging markets which will show the greatest need for new plant for the foreseeable future, and I expect cogeneration to play a role in those countries – especially where natural gas or biofuels are available and where supply quality and reliability are poor.
Therefore, many of the drivers look positive, and much of the demand growth will be for energy-intensive industry and for cooling applications in commercial buildings – ideal for cogeneration. If we can ensure that developers are not faced by a regulatory stranglehold, then that role should be a big one.
I too am optimistic at the moment; I just hope that it is not another false dawn. The main drivers in Europe for DE and cogen are Europe’s response to the Kyoto Protocol, energy market liberalization, and specific EU legislation directed at renewables and cogeneration. The response to climate change is two-pronged: firstly an emissions-trading scheme (ETS) for all large emitters of carbon dioxide, which will put a modest price on carbon and will drive the market actors towards lower carbon solutions; and secondly direct policies aimed at sectors not in the ETS – this is still to be worked through.
However, the Directives on cogeneration, brought into force this year, and on renewable electricity, enacted three years previously, remove obstacles to the use of DE/cogen and force governments to improve the conditions for these options. In open energy markets, with provisions for DE/cogen and a carbon dioxide driver, I expect to see substantial changes in the next few years.
The long-term prospects in Europe are good, and I believe it is possible that cogeneration could reach market penetrations of 15%-20% in the next 10-15 years. This would equate to some 100 GWe of new capacity.
Prospects to 2030
Summarizing a recent IEA report,1PETER FRASER describes the current market status of distributed generation (DG) technologies, highlighting the experience of four selected OECD countries, and examines the implications of the wider deployment of DG for the operation of electricity transmission and distribution networks. The author also looks to the prospects of DG worldwide to 2030.
Most of the electricity produced in the OECD is generated in large generating stations. These stations produce electricity and transmit it through high voltage transmission systems, then at reduced voltage through local distribution systems to reach electricity consumers. Distributed generation (DG) plants are different: they produce power on a customer’s site or at the site of a local distribution utility and supply power to the local distribution network directly. Distributed generation technologies include engines, small turbines, fuel cells and photovoltaic systems.
Despite their small size, DG technologies are already a factor in electricity markets, particularly for high reliability applications, as a source of emergency capacity or to defer the expansion of a local network. In some markets, they are actually displacing more costly grid electricity. Worldwide, more distributed generation capacity was ordered in 2000 than for new nuclear power.
Diesel and gas reciprocating engines and gas turbines are well-established commercial distributed generation technologies. Industrial-sized diesel engines can achieve fuel efficiencies in excess of 40% and are relatively low cost per kilowatt. Engines and turbines accounted for most of the DG capacity being installed – approximately 20 GW in the year 2000, or 10% of total capacity ordered. While nearly half of the capacity was ordered for standby use, the strength of the demand for units for continuous or peaking use has also been increasing – see Figure 1.
FIGURE 1. Engine and gas turbine orders for continuous or peaking use (1-30 MW). Source: DGTW, 2001
Other DG technologies have yet to make a large commercial impact. Microturbines form a new technology that converts natural gas to electricity with relatively low emissions. But their capital costs is higher than for natural gas engines, while fuel economy is similar. Fuel cells are the object of intensive research and development, primarily for transportation applications. They have been deployed for power generation in a limited way, but their capital costs will need to fall greatly to be competitive. The cost of photovoltaic systems, while still high, is expected to go on falling over the next decade.