“Millions of homes may be generating their own power using micro-CHP.”

“Fuel cell developer raises millions of dollars on the stock market.”

“Micro-CHP manufacturer announces major orders from utility companies.”

These may sound like the heady days of the 1999-2001 technology bubble. But in fact they represent micro-CHP's fortunes today in Europe and Japan. And Technology development overseas is starting to find its way across the Atlantic and Pacific as companies turn their attention to the North American market. This trend is expected to continue.

Micro-CHPs, defined as products generating heat and 5-kW or less of electricity, are beginning to burn bright on European and Japanese power-sector radar screens, powered by a potent mixture of technology development, environmental concerns, and market pressures. Just five years ago it was a very faint blip, with just a handful of installations. Now, over 15,000 ECOWILL systems have been sold in Japan; over 10,000 SenerTec DACHS units have been sold in Europe; and utility E.ON UK has placed an order for 80,000 WhisperGen units.

Nearly all these units are effectively sold and installed as heating appliances—providing space heating and domestic hot water to homes and small business, with electricity generated as a byproduct. In many cases the micro-CHP unit is purchased instead of a boiler (or a furnace), operating according to the thermal demand of the house or the small business. The unit generates electricity in parallel to the grid. Micro-CHP products designed for households often provide around one third of a home's electricity, with the balance supplied by the grid. When electricity produced by the micro-CHP unit exceeds the in-house demand it is usually exported to the grid.

Surprising to many in North America, units on sale in Europe and Japan typically don't provide power when the grid goes down. The high reliability of European and Japanese grids is one factor; another is that some products use induction generators that can't easily run independent from the grid without additional controls. But grid-independent capability is being developed by some companies, which will certainly add value to the micro-CHP proposition in North America, even if it just enables the heating system to function in the depths of winter and provides power for some lights and the freezer in the event of a utility power outage.

Delta Energy & Environment's micro-CHP research identified eight companies currently offering micro-CHP products to households and small businesses on a commercial basis. More than 25 other companies are developing products for micro-CHP applications—attracted to the potential pot of gold of millions of homes generating a portion of their own power. In the next few years, Delta expects several companies to bring additional micro-CHP products to market.

Europe and Japan will continue to set the pace, but micro-CHP is starting to gain a (very) small foothold in North America. As previously reported in Distributed Energy (May/June 2005; September/October 2005), both Aisin Seiki and Power Plus Technologies have units generating around 5 kW running in the US. Nevada-based VectorCogen has also installed a number of 5-kW units. And Climate Energy unveiled its 1-kW unit in 2005, with commercial sales expected this year.

Despite this progress, the North American market holds some tough regulatory, market, and commercial challenges for micro-CHP vendors and developers. Better political, regulatory, and commercial environments in Europe and Japan mean these markets will continue to be the focus of most (but not all) activity in the next few years. Three of the four products currently installed in North America have roots in Europe and Japan. Looking overseas to these markets is essential to see the next steps on the micro-CHP horizon.

Micro-CHP Products
At the basic level, micro-CHP products can be viewed as a black box generating heat and electricity for a home or a small business. Looking more closely at this black box, however, shows some significant differences among products. Four technologies are currently being used by product developers and manufacturers.

Internal Combustion Engines
The most mature of these is the internal combustion engine. Such companies as Honda, Aisin Seiki and SenerTec have developed engines with long lifetimes and long service intervals. Emissions are kept low, and acoustic insulation holds noise levels down. Internal combustion engines account for six of the eight micro-CHP products currently available. Five of these generate around 5 kW of electricity, and one generates 1 kW of electricity. The larger-capacity units are typically installed in small businesses and multifamily homes that are able to use all of the heat produced.

Honda's internal combustion engine typifies the ECOWILL micro-CHP product, producing 1 kW of electricity and just over 3 kW of heat. Well over 15,000 of these have been sold to Japanese households and housing developers since the product was launched in 2003, and most Japanese gas utilities are now selling it. Heat is recovered from the engine to supply a home's domestic hot-water system and hydronic underfloor heating system (popular in new homes in Japan). The engine runs for several hours a day—led by the home's thermal demand—with heat stored in a hot-water storage tank, where a supplementary burner can provide additional heat as necessary. The Honda engine is exceptionally quiet and clean and needs servicing only every 6,000 hours. Climate Energy—based in Massachusetts—this year unveiled a micro-CHP product for the North American market. The system provides warm air (rather than hot water) and is built around Honda's internal combustion engine.

Stirling Engines
Some observers say that Stirling engines have been “two years from market” for several years. Whisper Tech, a New Zealand-based company, has broken this myth by supplying 1-kW units to E.ON UK, which is selling them to UK households and housing developers. The units, branded WhisperGen, generate 1 kW of electricity and around 7 kW of heat and are designed to be installed instead of a conventional boiler, supplying domestic hot water and hydronic heating systems. Expressing its confidence in the product, E.ON UK has placed an order for 80,000 units to be delivered through 2010. Natural Resources Canada recently tested a WhisperGen unit in one of the Canadian Centre for Housing Technology's test houses, and units are being tested and evaluated in a number of other countries.

Centrica, the UK's leading natural gas retailer, has a partnership with another Stirling engine developer, Microgen, a subsidiary of upstream oil and gas company BG Group. Microgen expects to launch its micro-CHP product in the UK and the Netherlands in 2007. It recently announced test results showing an electrical efficiency of 15% (higher heating value), planning to increase this to 20% and as high as 25% in the long term. A product for the North American market is firmly on Microgen's product-development roadmap.

Rankine Cycle Engines
The potential simplicity of Rankine cycle technology has attracted the attention of a number of developers. Products with power outputs between 1 kW and 5 kW are under development in Europe, with commercialization planned by 2008. Relatively low electrical efficiencies are compensated for by high thermal efficiencies.

One such example is a 1-kW system being developed by Baxi, one of Europe's leading boiler manufacturers. Baxi is using technology first developed in the US by Battelle: an organic Rankine cycle using a scroll compressor running in reverse to extract power from the system (Climate Energy is developing a similar system based on a water-steam cycle.) The pressures in the system are similar to refrigeration pressures, and no exotic materials or components are required, so in principle the product should be relatively cheap to manufacture. Baxi is planning to launch a product in the UK in 2008.

Fuel Cells
Several developers of fuel cell technology are making steady progress on commercializing their products for micro-CHP applications, although all need to see further progress on cost, reliability and lifetime. Japan is the current hotbed of activity, with much of the focus on 1-kW polymer electrode membrane (PEM) fuel cells, and with companies there already leasing hundreds of units to households. Like the ECOWILL system, these units are supplied with a hot-water storage tank and a supplementary burner to meet all of a household's thermal needs. The installations are heavily supported by government funding, and gas utilities aim to start selling systems by the thousands, beginning in 2008. Manufacturers supplying these units include Ebara Ballard, Matsushita, Toshiba, and Sanyo, all of which are striving to increase the lifetime and reliability of their systems and reduce costs.

The high electrical efficiency of solid-oxide fuel cells continues to attract attention, with such developers as Acumentrics (US), Fuel Cell Technologies (Canada), and Ceramic Fuel Cells (Australia) all supplying test units to, or setting up partnerships with, European organizations. The former two organizations also have a number of units running in North America. The potential to generate electricity with an efficiency of 40% (or possibly more) gives this technology some interesting applications. While all of these companies are looking at CHP applications for their products, a heat-to-power ratio of 1:1 means it will be relatively easy to find uses for the waste heat.

Challenges
Micro-CHP markets will be far from uncomplicated to develop. A number of regulatory boxes must be ticked, including those that affect simple and direct connection with the grid. In the UK, once a micro-CHP product has been “type approved” it can be connected in parallel with the grid, on the customer side of the meter, without any prior approval from the grid company. The company has to be notified within 28 days of the connection. This arrangement is far from typical of the status quo in North America.

Housing developers and households need to be persuaded to purchase micro-CHP units—often instead of purchasing a boiler or a furnace. Or, they need to agree to a utility or other third party installing, owning, and operating such a unit. The evidence from Japan and Germany shows that sales of thousands of units a year can be achieved. In the UK, some reports suggest annual sales of hundreds of thousands of units in the course of five years. But persuading households and small businesses to use such products—when a cheaper furnace or boiler would also meet their thermal needs—has its challenges.

A number of governments are introducing policies to support the development of micro-CHP in recognition of its energy efficiency and greenhouse-gas-reduction benefits. In Japan, subsidies are given to help close the gap between the cost of a micro-CHP unit and the cost of a boiler. In some US states, natural-gas-fired micro-CHP installations qualify for net metering. The UK government has reduced the rate of value-added tax on micro-CHPs from 17.5% to 5%. And in Germany micro-CHP users avoid paying Eco-tax (a tax levied on all fossil fuels) on the natural gas used by the unit.

Progress in North America will likely be more measured than that in Europe and Japan—at least in the next few years. Climate Energy plans to have units for sale to households in northeastern parts of the US in 2006, and the Aisin Seiki and Ecopower products have already been installed. The US Department of Energy's “Micro-CHP Roadmap” says that “by 2010, environmentally friendly, cost-effective, versatile, reliable, fuel-flexible micro-CHP appliances will be commercially viable for the American residential marketplace,” and the DOE has awarded grants to four micro-CHP product developers. Providing cooling using micro-CHP is also a goal of the DOE's “Roadmap,” and one of its grant recipients has been looking at this area.

As more product developers establish themselves in Europe and Japan, they are likely to turn their attention to North American opportunities, joining the few companies already active in this market. The challenge involved in developing micro-CHP products and markets means that it won't be a quick route to success for micro-CHP in North America—but the size of the opportunity means that a number of companies are likely to pursue the chances.

JON SLOWE is a director at Delta Energy & Environment, a research and consultancy firm specializing in decentralized power generation.

DE - March/April 2006