Adoption and Diffusion of Decentralised Energy Conversion Technologies: The Success of Engine Co-Generation in Germany

Abstract

Energy market liberalisation, concerns about environmental pollution and climate change, and the dependence on fossil fuel imports render the adoption and diffusion of distributed generation technologies a field of research increasingly recognised as important. This paper contains a brief overview of both commercially available and close-to-market distributed co-generation (CHP) technologies and fields of application. It also provides a thorough investigation on the adoption and diffusion of engine-based CHP systems in the German market since 1960. The empirical analysis is mainly based on a detailed data set of nearly 5,000 such systems installed in Germany until 1998. It makes use of descriptive data analysis, net present value calculations, and micro-econometric (hazard rate) modelling. We further assess market diffusion from 1998 until today and future diffusion prospects, and discuss impacts on the development that stem from liberalisation-driven energy market transformation processes. The results show that economic considerations alone do not suffice to explain the adoption decisions taken by investors, and also present some new insights with regard to the use of hazard rate models in the context of energy conversion technology adoption.