A new report from market intelligence firm Pike Research says the industrial distributed generation (IDG) market is poised for significant growth over the next five years. Under a “slow growth” forecast scenario, Pike Research forecasts that total IDG capacity will increase by 46% between 2011 and 2016, rising from 91 GW to 133 GW during that period. A more optimistic forecast scenario, which assumes a more favorable regulatory environment for IDG, considers 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.

Source: Pike Research