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The Combined Heat and Power Association has therefore identified the following steps as means of improving the situation for the development of CHP projects:- • Introduction of a CHP obligation, similar in form to the Renewables Obligation but with a lower buy-out price, to provide an underpinning market mechanism • A proactive planning and communication strategy • Adequate resourcing within government • Full implementation of existing support mechanisms for CHP • Action to address existing and emerging barriers to CHP • Delivery of effective support to emerging technologies 6.5 North American Market The North American market at present is considered by some to be expanding significantly, in contrast to the opinions expressed by some consultees (see Section 6.3 above). In the year 2001 according to Power Magazine [61] an installation record of 48.6 GWe in total was established for new gas turbine based power plants. This figure surpasses the 1974 record of 43 GWe for new installations. However, the 2001 record is envisaged as being short lived as a result of the 66 GWe for 2002 and 69 GWe for 2003 announced or under construction [61] . Whilst mid-sized aero-derivative gas turbines are part of the sales surge, the vast majority of this increased capacity has been, and no doubt will continue to be in large, utility scale machines. When it is considered that just 27 GWe of new capacity came on line in the year 2000, the extent of the rapid growth within the North American market is clearly apparent. Whilst the size of the North American market is clearly large, there are obvious signs of the high level of competition existing in this potentially lucrative business sector. Evidence of this rivalry can be found from the undisputed fact that in recent years the market has attracted the attention of several new competitors, all contending for their share of the profits. Furthermore this additional competition has emerged from both international manufacturers winning American based contracts and American based companies with previously limited interests in the HRSG market suddenly expanding their involvement. From what was essentially a US supplier only market, there has been a recent spate of key contracts awarded to non-US manufactures such as Toshiba (Tokyo, Japan), CMI (Brussels, Belgium) and Hitachi (Tokyo, Japan). Foster Wheeler is a prime example of an American company expanding its activities in the HRSG market. Prior to 1997 its HRSG interests were considered not to be a prime business within the company. However, the company claims that having recognised the huge potential for rapid combined cycle power plant expansion, it strategically expanded into this area from its traditional business of solid-fuel boiler fabrication. The end result is that in just 5 years its HRSG business has now grown from a minor business sector to its largest one. (112)
6.5.1 Possible Non-Technical Barriers to Development of Combined Cycle Technology within the USA Some analysts [82, 83] are sceptical about the future of the North American market and predict as much as 50% of the announced future projects in the states will not make it further than the drawing board. The main reasons cited are:- • Inadequate supplies of natural gas: Natural gas is the fuel of choice for at least 95% of the projects. The US Energy Information Administration estimates that natural gas production and delivery would have to rise 40- 50% over the next 15 to 20 years to supply the projected combined cycle developments. This is viewed as a somewhat heroic task based on the aged state of the nation’s gas fields and requirement for extensive new pipelines for gas delivery. • Price of Gas: Market forces are also at play with the high price of gas dissuading investors in gas turbine technology and looking towards coal, nuclear and hydro power for their energy solutions. The use of gasification combined cycles is still however a possible lucrative market that should not be ignored. 6.5.2 The US CHP Market In the US, the Assistant Secretary for Energy Efficiency and Renewable Energy has issued a CHP challenge calling for industry and government to work together to double the capacity of CHP in the US by 2010. According to the US Combined Heat and Power Association (USCHPA), the current installed capacity is around 65GW, on the way from 46GW in 1998 to the goal of 92GW in 2010. However measures to support this target are limited. There are federal programmes supporting awareness raising, research and demonstration. A 10% investment tax credit for CHP was included in proposed legislation passed by both houses of Congress in the last two years, but it was not enacted into law due to disagreements over other provisions of the law. In order to avoid revenue loss, the same provision would have stretched out CHP asset depreciation for tax purposes, so it was considered something of a neutral measure by the CHP industry. There are federal requirements that CHP operators achieving certain levels of efficiency can compel utilities to purchase their power at the utilities' avoided costs. This was a strong incentive for CHP in earlier times when incremental power generation costs were quite high, but motivates fewer projects now, according to the USCHPA. Few states have introduced mechanisms to support CHP or equitable rules to govern the connection of CHP schemes to the grid. 6.6 Chinese Market In terms of future world markets the People’s Republic of China is significant. Currently the installed power generation capacity in China is the second largest in the world, with the United States being in first position. However the per capita electric power utilisation level in China is still low. China expects its economy to grow at an average rate of 7% or more per year over the next decade. Therefore if a constant ratio of primary energy to gross domestic (113)
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