Market Opportunities for Micro Combined Heat and Power

In general, power plants convert only one-third of the heat they generate into electricity. Combined heat and power (CHP, also called cogeneration) is one solution that has been applied to various energy technologies, such as distributed energy resources (DER) and district heating and cooling (DHC).

Applying Micro-CHP in the Residential and Commercial Sectors

CHP applied to DHC has been a key solution for heating and cooling large areas. However, the residential and commercial sectors have also steadily applied small and medium-sized CHP, or micro-CHP, to address regional needs. For example, according to Japan’s Agency for Natural Resources and Energy, the country’s efforts to support renewable energy and improve energy efficiency through subsidies and research for alternative energy technologies resulted in an estimated 430,000 household fuel cells intended for micro-CHP applications by the end of 2021.

Micro-CHP applications are underway in Europe as well. By 2022, the ene.field program, a 5-year demonstration project, had deployed more than 1,000 fuel cell micro-CHP units across 10 European countries. And in 2020, Germany-based Sunfire presented the Sunfire-Home, the first fuel cell unit directly connected to a liquefied natural gas pipeline. The Sunfire-Home provides low carbon and decentralized electricity and heat using innovative solid oxide fuel cells, which reduce greenhouse gases, particulate matter, and other pollutants (e.g., nitrogen oxides and carbon monoxide) while decreasing operational costs.

The North American market has also shown interest in micro-CHP solutions. In the US, for instance, Illinois-based GTI Energy’s Emerging Technology Program (ETP)—a membership-based utility collaborative intended to accelerate the commercialization of energy efficient technologies—engaged with over a dozen national and international micro-CHP developers to test the technologies in a lab, validate long-term performance and durability, and help promote micro-CHP in residential markets. And Massachusetts-based Tecogen, a clean energy equipment manufacturer, provided two 75 kW CHP units for a micro-CHP demonstration project at a New York City extended care facility in 2021. The power generated is sold back to the utility to offset the facility’s electricity bill, while the waste heat is used to generate hot water for domestic use.

Monitoring Emerging Markets to Anticipate Future Market Transformation

The emerging micro-CHP market can play a crucial role in diversifying decarbonization solutions, which will be critical to achieving emissions reduction targets. Micro-CHP that utilizes clean gas can be a key DER asset for reducing greenhouse gas emissions. For example, Yanmar, a Japanese diesel engine, heavy machinery, and agricultural machinery manufacturer, recently delivered a 35 kW micro-CHP system as part of a demonstration project at Tokyo Gas’s Yokohama Techno Station. The pilot test will demonstrate how CHP operates using methanated hydrogen gas produced in the test facility. Methanation, which synthesizes methane (one of the main fuels for traditional CHP) from hydrogen and CO₂, is expected to be one method for decarbonizing fuel production.

Monitoring micro-CHP technology developments can shape the competitive market of decarbonization solutions by identifying advancements (e.g., policies, promotions, technology developments) and solutions (e.g., greater reliance on DER, integration of renewable resources). Decarbonization requires multiple technologies, as one solution is not suitable for all applications and regions. Micro-CHP has the potential to contribute to carbon neutrality, and tracking its evolution can provide insight into combining technologies to achieve decarbonization.