Microgeneration: foresighting report

Micogeneration includes power generation systems up to 10 kWe (kilowatt electrical) for mass-market residential and small commercial applications. The report aimed to provide an assessment of the microgeneration sector and considered whether: the scale of the microgeneration technology or market opportunity is sufficiently attractive for Scotland to aim to become a leading player; there is scope for Scottish capability in microgeneration that can compete globally; there is a role for ITI Energy in the microgeneration sector; and there is a need for further technology development and funding. The report aimed to: provide a structured analysis of market needs and technology opportunities; present conclusions to ITI members for their review and input; and catalyse further discussion and development of focused project proposals.

The methodology consisted of: a summary of microgeneration technology; an assessment of current proven performance data for commercially available units or prototypes as reported by product developers; and an analysis of the microgeneration markets, focusing on Europe, Japan, South Korea and North America.

The report finds that the current microgeneration market scale is small and a commercially viable market scale is only expected to be achieved in ten to fifteen years from now. There are significant barriers that still need to be overcome: microgeneration has to be able to compete directly with existing generation sources, particularly for applications in the home, and Scotland does not have the depth of research and development (R&D) expertise or scale in this area at present from which to develop a globally competitive industry. There is potential for microgeneration sales to grow rapidly, but one of the major uncertainties affecting market growth is the speed or otherwise of new product commercialisation. The UK may well be initially one of the fastest growing markets for micro-wind and micro-combined heat and power (CHP), giving advantages to UK technology developers. Although micro-CHP is a competitive market, with existing products and new alternatives, there is scope for new technologies where Scottish capacity can be leveraged or built. In the micro-wind market, technology development is not seen as the key enabler for market adoption. The current photovoltaic (PV) market is driven by government grants and too far away from a commercial market: only fundamental technology developments can realise the cost-of-electricity improvements that are required. The micro hydro technology is mature and applications and market size is limited. The base technology of biomass heating is mature, but there are some opportunities for improvements in the fuel supply chain.

Overall, the report recommends that microgeneration is not a top priority for ITI Energy to focus its investment attention, relative to other areas like mature oil and gas, energy storage, offshore renewable and power management. However, specific proposals for investment, especially for off-grid applications can be of interest where: globally competitive Scottish capability can be found or built; there is a clear market opportunity in the next five to ten years; and technology development is a key enabler for market success. The ability of Scotland to compete globally in new technology development requires further investigation.