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European cogeneration market to pick up steam by 2018

1st February 2013


High investments in equipment and low payback periods of up to 5 to 7 years notwithstanding, cogeneration is all set for a revival in Europe between 2014 and 2018. Most countries across Europe are expected to increase their cogeneration capacity, mainly in the combined cycle form.

New analysis from Frost & Sullivan, European Cogeneration Market, finds that the market earned revenues of €548.1 million in 2011 and estimates this to reach €674.3 million in 2018.

Europe aims to meet its environmental and energy-efficiency targets through gradual developments in cogeneration technology, skills and supply chain. Power plants are particularly keen to invest in cogeneration because governments provide benefits for companies with higher cogeneration potential.

“Investment in cogeneration units is also fairly dependent on the cost of generating electricity,” says Frost & Sullivan Industry Analyst Pritil Gunjan. “Stable energy prices are essential to convince end users to make the right energy investment decisions and assure them that it is a sound strategy to rebuild a cogeneration base.”

Cogeneration is the solution of choice for end users that have a rising need for large-scale power and supporting heat. It is a cost-effective system; in addition, the technology and skill required for setting up a cogeneration project is commercially available.

The development of CHP is heavily influenced by energy supply-side policies and government regulations that are directed towards energy consumers. Policy, tax, electricity reforms and trading arrangements are necessary to nurture cogeneration.

Tax benefits will be particularly useful in the current environment of economic uncertainty and unclear returns. The market will also be pegged back by the delays caused by interconnection issues.

Nevertheless, rising concerns over climate changes and increasing consciousness about the environmental impact of fossil fuels offset all these issues. They have prompted the European Commission to plan for collective energy policies and promote energy efficiency directives.

The combined heat and power (CHP) directive, emission credits and new emission reduction technologies are crucial to the success of cogeneration in Europe. Under the CHP directive, Germany, Italy and Spain have made considerable strides in building a policy framework to support cogeneration, while Germany has set itself a target to double cogeneration capacity by 2020.

“The effective implementation of CHP policies and a focus on creating favourable conditions for cogeneration development are likely to drive the market in Europe,” notes Gunjan. “In 2011, the EU identified cogeneration as the energy application that can make the largest-single contribution to achieving the region's greenhouse gas reductions, giving a huge thrust to the market.”

For more information, www.frost.com









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