Cogen Market Growth Slows, GRI Says
While natural gas has captured the lion's share of the expanding
cogeneration market in recent years, "the phenomenal growth of
[cogeneration in] the past was a one-time event resulting from a
unique combination of regulatory and market changes," according to
the Gas Research Institute's Marie Lihn.
Lihn is project manager for a new GRI report, "Summary of the
1999 Cogeneration Projection" (GRI-99/0155). She expects to see
growth in the cogeneration market shrink to produce a 20-year
average of 1.4% a year between 1996 and 2015 versus the 10% a year
common in the late 1980s and early 1990s. The projected average
growth rate will be greater in the earlier years and less in later
"Future growth in industrial gas consumption will be driven
predominantly by more traditional gas applications, including
drying, fluid heating, metal heating, smelting and heat treating,"
according to the report prepared for GRI by Energy and
Environmental Analysis of Arlington, VA.
The Public Utilities Regulatory Policy Act cleared the
regulatory obstacles to the construction of efficient cogen
projects. The market, however, also was artificially stimulated by
projects built to take advantage of the law's requirement that
utilities buy back cogenerated power at high prices. As a result
consumption grew 22% per year from 1985 to 1990.
The buyback requirement was eased in 1992, cutting the legs out
from under this so-called "non-traditional" market. That market is
expected to reverse and then decline through 2005 as uncompetitive
cogen facilities are closed. The traditional facilities also will
suffer from the deregulating electric power market, surplus
capacity and low buyback rates, GRI said. "However, buyback rates
will again become a function of a region's generation costs by 2010
with the rebalancing of supply and demand."
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