For its upcoming report, “Industry Opinions on Opportunities in the European CHP and District Heating Market,” Datamonitor consulted with a range of organizations including leading energy service providers (such as Cofely), trade associations (such as the Combined Heat and Power Association), and a volume house builder and developer of energy systems (Barratt Homes). There was a general view from the organizations consulted that CHP has a future role to play in the supply of heat to buildings, but there are challenges to address in overcoming constraints on the development of CHP and heat distribution, and also in determining its appropriate configuration. The viability of CHP depends on a range of factors, but possibly the most critical is the difference between gas and electricity price (the spark spread). Gas prices are currently being kept high by long-term contracts linked to oil prices, and electricity prices have been kept low as a result of the recession; this relationship does not currently favor CHP, but certain project types can be viable in spite of this, and thus the relationship fluctuates. Historically subsidies have enabled the CHP industry to grow in certain countries in Europe, and they still have an impact on viability.
However, other important drivers include regulatory and planning obligations. It has been demonstrated that consumers´ resistance to CHP where it is not widespread (for example in the UK) can be overcome through effective communication. The view has been expressed that consumers are generally reluctant to accommodate increasing complexity in their energy systems; for domestic consumers this can mean additional time spent on maintenance and for commercial consumers this can detract from the core business. District heating with an external energy center can cushion the consumer from complexity and give greater flexibility in the future introduction of efficient low carbon energy sources. In response to requirements to reduce carbon dioxide emissions in the energy sector, much of the focus in Europe has been on electricity supply. There is much further to go in the heat sector, and CHP represents a significant opportunity to contribute to this. Datamonitor´s upcoming report “Industry Opinions on Opportunities in the European CHP and District Heating Market” presents the prospects for CHP and district heating across Europe from the perspective of key industry sources.