Combined Heat Power Market Growing at 7.2% CAGR Through 2031 – The National Law Review

Global Combined Heat and Power Market: A Report on Growth, Trends, and Contribution to Sustainable Development Goals

A recent market analysis indicates that the global Combined Heat and Power (CHP) market, valued at $24.6 billion in 2021, is projected to reach $48.4 billion by 2031, expanding at a Compound Annual Growth Rate (CAGR) of 7.2%. This growth is intrinsically linked to the global pursuit of the Sustainable Development Goals (SDGs), particularly those concerning energy, infrastructure, and climate action. The increasing demand for energy efficiency, the adoption of cleaner fuels like natural gas, and the need for resilient, decentralized power systems are key drivers propelling the market forward.

Market Drivers and Alignment with Sustainable Development Goals

Energy Efficiency and Support for SDG 7 and SDG 12

The primary driver for CHP market expansion is the global demand for enhanced energy efficiency. CHP systems, also known as cogeneration, operate at efficiency levels of 80-90%, a significant improvement over traditional separate heat and power generation. This high efficiency directly supports:

• SDG 7 (Affordable and Clean Energy): By maximizing the energy output from a single fuel source, CHP reduces energy waste and lowers operational costs, making energy more affordable and sustainable.
• SDG 12 (Responsible Consumption and Production): The technology promotes more efficient use of resources, aligning with sustainable consumption and production patterns.

Transition to Cleaner Fuels and Contribution to SDG 13

The market is heavily influenced by the shift towards cleaner energy sources. The increasing use of natural gas in CHP systems is a significant factor, driven by its lower emissions profile compared to other fossil fuels. This transition is crucial for achieving:

• SDG 13 (Climate Action): By facilitating the use of cleaner fuels and reducing overall energy consumption through efficiency, CHP systems play a vital role in mitigating greenhouse gas emissions and combating climate change. The potential for multi-fuel systems utilizing biomass or hydrogen presents further opportunities for decarbonization.

Infrastructure Development and Alignment with SDG 9 and SDG 11

The expansion of industrial and commercial infrastructure necessitates reliable and independent power solutions. CHP systems provide decentralized energy generation, which enhances energy security and resilience. This supports:

• SDG 9 (Industry, Innovation, and Infrastructure): CHP is an innovative technology that builds resilient energy infrastructure for critical facilities like manufacturing plants, hospitals, and data centers.
• SDG 11 (Sustainable Cities and Communities): By providing a stable on-site power source, CHP reduces strain on national grids and helps create more sustainable and self-sufficient urban and commercial environments.

Market Segmentation Overview

By Fuel Type

• Natural Gas (Dominant and fastest-growing segment)
• Coal
• Biomass
• Others

By Capacity

• Up to 10 MW (Leading segment due to commercial adoption)
• 10–150 MW
• 151–300 MW
• Above 300 MW

By Technology

• Combined Cycle (Market leader in 2021)
• Steam Turbine
• Gas Turbine
• Reciprocating Engine
• Others

By Application

• Industrial (Largest segment)
• Commercial
• Residential
• Utility

By Region

1. Europe (Held the largest market share in 2021)
2. North America
3. Asia-Pacific
4. LAMEA

Market Challenges and Opportunities

Restraints to Growth

The primary challenge impeding market growth is the high initial capital investment required for CHP project installation. This can be a significant barrier for small and medium-sized enterprises without access to government subsidies or financial incentives, potentially slowing the widespread adoption of this sustainable technology.

Opportunities for Sustainable Advancement

Significant opportunities lie in the growing regulatory and consumer preference for greener fuels. The increasing demand for natural gas, coupled with innovation in multi-fuel prime movers capable of operating on biomass, hydrogen, and other renewable gases, is expected to create new avenues for market expansion and further align the industry with global climate goals.

Impact of the COVID-19 Pandemic

The COVID-19 pandemic led to temporary disruptions in the CHP market, causing delays in project commissioning due to supply chain issues and labor shortages. However, the post-pandemic economic recovery has seen a renewed focus on building resilient energy infrastructure and improving energy efficiency, which has accelerated the market’s rebound.

Conclusion

The Combined Heat and Power market is positioned for robust growth, fundamentally driven by its alignment with global sustainability objectives. By providing highly efficient, reliable, and increasingly clean energy, CHP systems are a critical technology for achieving SDG 7, SDG 9, SDG 11, SDG 12, and SDG 13. As nations and industries intensify their efforts to decarbonize and build resilient infrastructure, the role of CHP in the global energy transition will become increasingly prominent.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

1. SDG 7: Affordable and Clean Energy
   • The article’s central theme is the Combined Heat and Power (CHP) market, a technology focused on providing efficient and reliable energy. It directly relates to ensuring access to affordable, reliable, and modern energy. The text highlights “the rising demand for energy efficiency” and the use of “cleaner energy sources” like natural gas.
2. SDG 9: Industry, Innovation, and Infrastructure
   • The article discusses the adoption of CHP systems in industrial and commercial sectors to “upgrade their energy systems.” This aligns with building resilient infrastructure and promoting sustainable industrialization by adopting cleaner and more efficient technologies. The expansion of infrastructure like “IT parks, airports, and universities” using CHP is a key point.
3. SDG 11: Sustainable Cities and Communities
   • The growth of CHP in the commercial sector, including “malls, airports, colleges, hospitals, and corporate parks,” points to making cities and human settlements more sustainable. By providing “reliable, decentralized power solutions,” CHP systems help reduce the strain on central grids and improve the resilience of urban infrastructure.
4. SDG 13: Climate Action
   • The article emphasizes that a major driver for the CHP market is the need to “cut carbon emissions.” It notes that governments are “implementing stricter rules on fossil fuel emissions” and promoting a transition “toward greener energy.” The high efficiency of CHP systems directly contributes to climate change mitigation by reducing energy consumption and associated emissions.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. Under SDG 7 (Affordable and Clean Energy):
   • Target 7.3: By 2030, double the global rate of improvement in energy efficiency. The article directly supports this by stating, “CHP units deliver energy at nearly 80–90% efficiency, significantly reducing energy losses compared to traditional separate heat and power systems.”
   • Target 7.a: By 2030, enhance international cooperation to facilitate access to clean energy research and technology… and promote investment in energy infrastructure and clean energy technology. The article, being a market report, details global market growth, investment trends (projected to reach $48.4 billion), and technological advancements like “combined cycle technology,” which aligns with promoting investment and access to clean energy technology.
2. Under SDG 9 (Industry, Innovation, and Infrastructure):
   • Target 9.4: By 2030, upgrade infrastructure and retrofit industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean and environmentally sound technologies. The article describes how “industries and commercial facilities upgrade their energy systems to reduce costs and achieve energy independence” by adopting CHP, a technology that improves energy efficiency and uses cleaner fuels like natural gas.
3. Under SDG 11 (Sustainable Cities and Communities):
   • Target 11.6: By 2030, reduce the adverse per capita environmental impact of cities. The adoption of CHP in urban commercial centers (“malls, airports, colleges, hospitals”) contributes to this target by providing a more efficient energy source with “lower emissions,” thereby reducing the overall environmental footprint of these facilities.
4. Under SDG 13 (Climate Action):
   • Target 13.2: Integrate climate change measures into national policies, strategies and planning. The article mentions that “governments around the world are pushing for cleaner energy sources” and implementing “stricter rules on fossil fuel emissions,” which are direct examples of integrating climate action into policy and regulatory frameworks.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

1. For Target 7.3 (Energy Efficiency):
   • Indicator: Energy efficiency of CHP systems. The article explicitly states a quantifiable metric: “CHP units deliver energy at nearly 80–90% efficiency.” This figure can be used as a direct indicator of the level of energy efficiency achieved by adopting this technology.
2. For Target 7.a (Investment in Clean Energy):
   • Indicator: Market value and growth of clean energy technologies. The article provides financial data that serves as an indicator of investment: the global CHP market size was “valued at $24.6 billion in 2021 and is projected to reach $48.4 billion by 2031.” This financial growth reflects increasing investment in this efficient energy technology.
3. For Target 9.4 (Adoption of Clean Technologies):
   • Indicator: Market share of cleaner fuels and technologies. The article implies this indicator by segmenting the market by fuel type and technology. The finding that “Natural gas was the leading fuel type in 2021 and is expected to grow the fastest” due to “lower emissions” indicates a shift towards cleaner industrial processes. The growth of “Combined cycle technology” also points to the adoption of more advanced systems.
4. For Target 13.2 (Climate Action Policies):
   • Indicator: Implementation of regulatory frameworks promoting cleaner energy. The article implies this through statements like “governments implementing stricter rules on fossil fuel emissions” and the existence of “supportive regulatory frameworks” in Europe, which drive the market. The presence and strength of such policies are an indicator of progress.

4. Table of SDGs, Targets, and Indicators

Source: natlawreview.com