Ten years ago, the market for industrial distributed energy generation – wherein industrial users choose to generate their own power requirements rather than rely on outside supply—was typified by end-user-owned combined heat and power (CHP) facilities that met the majority of electricity, heat, and cooling demands for a site. These CHP systems range between several megawatts and several hundred megawatts, provided by combustion-based prime movers, such as natural gas-fueled reciprocating engines and turbines, or by heat recovered from a plant process.

For the most part, that definition still applies; over the last three to five years, however, a number of drivers and new contexts have emerged for the use of large-scale, user-sited generation. The industrial distributed generation (IDG) market landscape is evolving to include new technologies, systems, business models, and service providers that are altering how traditional transmission and distribution systems are controlled and operated.

As a result, according to a recent report from Pike Research, the IDG market is poised for significant growth over the next five years. Under a “low growth” forecast scenario, the market intelligence firm forecasts that total IDG capacity in the United States will increase by 46% between 2011 and 2016, rising from 91 gigawatts (GW) to 133 GW during that period. A more optimistic forecast scenario, which assumes a more favorable regulatory environment for IDG and more robust U.S. economic growth, foresees the market expanding to as high as 168 GW of capacity during that period, an 85% increase over 2011 levels.

“Industrial distributed generation presents a variety of business opportunities to the end-user to better manage energy use, increase efficiency and asset utilization, and tailor sources of energy to unique site requirements,” says Pike Research vice president Bob Gohn. “In addition, if they have access to wholesale electricity markets, end-users can also benefit from additional revenue streams by selling energy, capacity, and ancillary services to grid operators.”

In practice, the opportunities available depend entirely on the local energy supply market. Traditional vertically integrated markets, which predominate in the Pacific Northwest, the Southwest, and the Southeast, offer one set of market opportunities; meanwhile, the newly created wholesale markets evolving within the seven ISO and RTO grids are distinctly different and vary from one ISO/RTO to the next.

Pike Research’s report, “Industrial Distributed Generation,” examines industrial distributed generation in both the traditional vertically integrated regulatory framework, as well as in the new grid-level open wholesale markets. Typical systems, business cases, and key participants are discussed, dividing the market into the mature sector of combined heat and power; the evolving sectors of aggregated generation and renewable IDG; and the nascent sectors of biomass/biogas and data center CHP. Capacity forecasts are provided through 2016 under three economic growth scenarios, and company profiles are provided for key industry players. An Executive Summary of the report is available for free download on the firm’s website.