Demand Analysis Model

Completed

Other Power and Storage Technologies(Electric power conversion)

Applied Research and Development

OTHER

Not Cross-cutting

Mr S Hunt
Society of British Gas Industries

3

Carbon Trust

01 May 2003

30 July 2003

3 months

£43,000

West Midlands

Mr S Hunt, Society of British Gas Industries

To facilitate the adoption of DCHP by reducing the risks faced by potential DCHP manufacturers in entering the market. To inform government of fiscal incentives that can be used to encourage adoption of DCHP by end users.

Domestic Combined Heat and Power (DCHP) is widely regarded as a key means of the UK achieving its CO2 reduction targets. The simultaneous generation of usable heat and electricity in a single process at point of need can lead to significant efficiencies when compared with electricity generated remotely and heat generated by heat-only boilers. These efficiencies translate into CO2 emissions reductions. It is common for new technologies coming onto the market to have a price premium associated with them. In the case of DCHP systems this presents a barrier to uptake in preference to conventional heating boilers. This uncertainty surrounding market penetration can lead to reluctance among potential manufacturers to make the early investments necessary for them to enter the market as suppliers. Moreover, the Government, keen to provide incentives for the uptake of this energy efficient technology, is lacking a full understanding of which incentives will deliver an increased uptake. In order to address these barriers, SBGI has compiled a demand analysis model. By undertaking market research among consumers and installers of gas heating systems and electricians SBGI obtained a wealth of primary data which underpinned the DCHP demand analysis model. The model has been constructed in such way that for a range of market scenarios, potential DCHP suppliers are able to generate price-volume relationships and assess price elasticity. Armed with this knowledge the level of comfort felt by these suppliers on entering the market is increased, with the result that the barriers mentioned previously are more likely to be overcome. Furthermore, the use of this model highlights the key variables that have the greatest influence on end user adoption. These key variables present themselves as levers that the Government can use in its efforts to promote this technology, thereby assisting it in achieving its CO2 reduction goals

01/01/07