E.ON’s recent announcement that it is developing small gas-fired CHP systems (less than 1 megawatt) for the retailer METRO is a significant one -- mainly because such activity in Europe by a large integrated utility has been a rarity for almost two decades, so rare as to almost be invisible.  

Some regional and municipal utilities have developed such projects in a few countries, but the predominant players across Europe have been relatively small and specialized developers.

Indeed, one analyst quoted in the Wall Street Journal after the announcement indicated that E.ON’s timing is wrong, that it’s late in the game, that the smaller players have gotten there first. We’re not so sure. And, for us, that’s not the right question to be asking.

Delta-ee’s research indicates that the markets for gas-engine-based CHP -- both natural-gas-fired and biogas-fired -- in several European and non-European countries have plenty of untapped economic potential. That's the case even in Germany, the world leader in the development of such projects.  

Overall, we believe that most of the key drivers for this scale of project are net positive for the period to 2015 to 2020. We project annual European deployment of around 1.5 gigawatts to 2.0 gigawatts of projects in the 0.4-megawatt to 5-megawatt size range by 2020, and up to 1.5 gigawatts in the 10-kilowatt to 400-kilowatt size range. That’s more than a doubling of today’s rates.  

That is potentially very good news for the product manufacturers and developers. There are new engines coming into the market almost every month, especially in the smaller size ranges, including new ones like that being introduced by E.ON.

So the market looks likely to be there for E.ON, and the timing is not bad in our view. The main question is: can a company of this scale develop a nimble business with the right sales, marketing and after-sales service strategies to win new customers and build great relationships with them?

Only time will tell, but the commitment is clearly there. E.ON has already made steps into decentralized customer solutions in a few markets, including PV, district heat schemes and heat pumps.

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This article is reposted with permission from Delta Energy and Environment.

Michael Brown leads Delta-ee’s work on markets for CHP (from 10 kWe to multi MWe systems) and home energy management systems.