Industrial Power Users Are Increasingly Turning to Distributed Energy Generation

August 16, 2011

The market for distributed generation at the industrial scale is dominated by energy supply concepts that predate the utility industry, where industrial users choose to generate their own energy requirements rather than rely on outside supply.  At the same time, the industrial distributed generation (IDG) market landscape is beginning to include new technologies, systems, business models, and service providers that are altering how traditional transmission and distribution systems are controlled and operated.

According to a new report from Pike Research, the IDG market is poised for significant growth over the next five years.  Under a “slow growth” forecast scenario, the market intelligence firm forecasts that total IDG capacity will increase by 46% between 2011 and 2016, rising from 91 gigawatts (GW) to 133 GW during that period.  A more optimistic forecast scenario, which assumes a more favorable regulatory environment for IDG, contemplates that the market could expand to as high as 168 GW of capacity during that period, an 85% increase over 2011 levels.

“In recent years, industrial distributed generation has often been synonymous with combined heat and power (CHP),” says Pike Research president Clint Wheelock.  “However, the mix is getting more diverse all the time, and while CHP is 86% of the total IDG market in 2011, its share of the market could dip as low as 53% by 2016.  Renewable energy, fuel cells, aggregated generation, opportunity fuels, and data center applications are all showing strong potential to capture increasing shares of the industrial power market.”

Pike Research’s analysis indicates that, although incentives have facilitated growth in some sectors of this market, the state of the economy, uncertainties in natural gas prices, and diminished access to capital are all deterrents to growth, particularly for CHP installations.  At the same time, third party providers are creating a new class of large scale distributed generation by aggregating much smaller units into industrial sized blocks of power, selling energy, capacity, and ancillary services into wholesale markets or in bilateral contracts with utilities, or incorporating them into energy management systems that combine generation with load curtailment.

Pike Research’s report, “Industrial Distributed Generation”, examines industrial distributed generation in both the traditional vertically integrated regulatory framework, as well as in the new grid-level open wholesale markets.  Typical systems, business cases, and key participants are discussed, dividing the market into the mature sector of combined heat and power; the evolving sectors of aggregated generation and renewable IDG; and the nascent sectors of biomass/biogas and data center CHP.  Capacity forecasts are provided through 2016 under three economic growth scenarios, and company profiles are provided for key industry players.  An Executive Summary of the report is available for free download on the firm’s website.

Pike Research is a market research and consulting firm that provides in-depth analysis of global clean technology markets.  The company’s research methodology combines supply-side industry analysis, end-user primary research and demand assessment, and deep examination of technology trends to provide a comprehensive view of the Smart Energy, Smart Grid, Smart Transportation, Smart Industry, and Smart Buildings sectors.  For more information, visit www.navigantresearch.com or call +1.303.997.7609.

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