Small-Scale Power Generation: U.S. Markets and the Emerging Microgrid

Report Highlights

• The overall U.S. small-scale power market will rise at an average annual growth rate (AAGR) of 16.6%, from $2.8 billion in 2003 to $6.1 billion in2008.
• Reciprocating engines and wind turbines will continue to comprise the majority of sales, 54% and 33.5%, respectively, but are ceding marketshare to high-efficiency gas engines and alternative energy technologies.
• Output of the U.S. small-scale power market is expected to double in fiveyears, growing at an AAGR of 15.1% to 10,109 megawatts in 2008.
• The capacity of the average reciprocating engine will increase as utilitiesexpand their investments in distributed, backup power.
• Solar and wind turbines will exhibit strong output growth reflecting reduced costs from improved engineering, materials and manufacturing processes.

INTRODUCTION

The use of small-scale power generation technologies is projected to grow rapidly over the next five years. Ongoing growth trends are expected to continue and gain momentum with the economy. These include increased demand for higher quality power and standby power from all major end markets: utility, industrial, comercial and residential. This will be led by mission critical applications in the high- technology industry. But the strongest growth typically has come from unplanned events, such as blackouts and terror attacks.

These shifting demand patterns are changing the way power is generated and distributed. Numerous power generation technologies are competing to be part of an energy infrastructure where discrete units are giving way to increased interdependence among power generation technologies, including advanced storage and battery and power electronics. Both incumbent and alternative technologies are competing on key performance benchmarks to secure a central role in emerging generation farms, peaking parks and microgrids.

It is this intensification of competition and the technological race to churn out the highest performing and lowest cost power generators that is captured in this BCC report. The study analyzes the trend towards smaller power generation units (sub-10MW) in the U.S. market and the concomitant change in the composition of technologies and fuels used to generate power. Due to a number of trends, small-scale power sales, e.g., electric power generation equipment in the 5kw to 10MW range, have been gaining momentum for two decades and over the next decade, will register the highest growth rate.

SCOPE OF STUDY

The report contains:

• A comparative analysis of the major smallscale power generation technologies by key performance metrics, including efficiency levels, emissions and costs
• Five-year forecasts (2003-2008) for the small-scale power market by technology, applications and end markets
• An analysis of the impact of these high-performance small-scale power plants on the wider electricity system and grid architecture
• A discussion of the growing and central role of advanced small-scale power technologies in a move away from the centralized utility and the transmission and distribution model to a decentralized microgrid concept.

METHODOLOGY

The material presented in this study is based on information gathered from interviews with industry and government professionals involved in the research and development of small-scale power generation systems, as well as a thorough review of the technology gathered from various government and industry sources. Secondary sources were referenced to supplement the application, market, and trend data gathered from primary sources. This additional data was obtained from extensive reviews of secondary sources such as trade publications, trade associations, company literature and on-line databases.

Unless noted otherwise, and in order to provide consistency for the purposes of comparative analysis, all performance data contained in this report-electricity prices, installed and heat recovery costs, electric and overall efficiencies, emissions etc. -are derived from U.S. Department of Energy sources.

INFORMATION SOURCES

BCC surveyed numerous companies, government agencies and consultants to obtain quantitative data and qualitative background information for this study. Included were manufacturers of reciprocating engines, gas turbines, microturbines, stirling engines, fuel cells and wind and solar turbines. Research also involved the major end use sectors - utility representatives, commercial and industrial power purchasers and cogenerators. In addition, data was compiled from financial and trade information, government sources and technical societies.

ANALYSTS CREDENTIALS

Catherine Lacoursiere is an energy journalist and analyst. She has analyzed the renewable energy, semiconductor and optical communications markets for leading publications and research firms. Ms. Lacoursiere has also written extensively on energy risk management and trading for major energy publications. In addition, she has reported on the corporate finance and investment markets from New York and Silicon Valley.