The Western European energy market, beleaguered by increasing oil prices, threats of climate change and greater dependence on fuel imports, has turned to cogeneration for a long-term solution to all these issues. But what exactly is cogeneration? It is combined heat and power (CHP) and implies the use of a heat engine or a power station to simultaneously generate both electricity and useful heat.
New analysis from Frost & Sullivan (energy.frost.com), Western Europe Cogeneration Equipment Market, estimates the market to touch revenues of $1.39 billion by 2013.
The ever-increasing energy demand, combined with the challenges in material supply, has necessitated a strong focus on resource consideration. It is vital to have plants that are more efficient and utilise as much heat as possible from the power and heat generated through cogeneration. Moreover, governments in Europe have realised that cogeneration’s higher energy efficiencies and clean, environment-friendly power can significantly help create a well-balanced energy portfolio.
Although CHP contributes to only a small percentage of the total power generation market, governments of European countries are striving for the advancement of the market through favourable legislations and complementary tax incentives. Further, they have to establish proper regulatory frameworks, highlight the carbon savings, provide incentives to cogeneration plants in terms of electricity tariff and reduce interconnection charges as well as emission credits to attract investments.
“The environmental advantages of cogeneration are clear but obtaining economical benefits from it despite numerous constraints requires strong policy instruments in favour of CHP,” notes Frost & Sullivan Research Analyst Hema Sarathy. “Customers are looking for a stable and secure environment to conduct business and that is possible only when policies supporting market growth are in place.”
Apart from financial plans, the European energy market is also striving to meet the ambitious Kyoto Protocol-based environmental targets, while the European Commission has already announced aggressive proposals for a new collective energy policy. Several investments in R&D indicate a keenness to increase the use of cogeneration equipment in the European Union.
Moreover, with gas prices spiraling out of control, facilities are relying on CHP to rein in costs and help them adhere to a tight energy budget. Reacting to this need for greater cost savings, equipment manufacturers have begun to replace expensive natural gas, which forms more than 75 per cent of the fuel type used in cogeneration equipment, with the more economical biomass, bio liquids and other alternate biofuels.
The market is expected to witness a surge in demand from software, banks, semiconductor and other manufacturing and process industries, which require reliable and quality power. The major end users in the industrial segment are chemicals, petrochemicals, refineries, pharmaceuticals, paper and pulp, steel, ceramics and food and beverage.
“The chemical-based industries contribute to more than 60 per cent of the total cogeneration equipment market revenues,” notes Ms. Sarathy. “Thus, the cogeneration market should not be looking to build a few large plants but many small plants across various industries.”
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