BREAKING DOWN THE GAS TURBINE MARKET

Mark Axford, the principal of Axford Turbine Consultants LLC, discusses orders, trends, market evolution and future expectancies for aeroderivative and heavy frame gas turbines

What did you expect in 2012 and how did it turn out?

We predicted GT orders in the U.S. would be up 20% and up 5% worldwide. In actuality, the U.S. was only up 10% and the world was down a surprising 20%.

Why the worldwide drop?

A EuroZone slump has been badly affecting overall GT orders. Since its 2007 high of close to 10,000 MW, European orders have fallen each year and are now below 1,000 MW. This was sharply down on what was expected at the beginning of 2012.

How are U.S. long-term trends in comparison?

U.S. orders suffered a collapse after a high in 2008 but have been up the past two years and are now at just over 6,000 MW of GTs added per year. But that masks a broader trend. The U.S. represented close to a quarter of worldwide orders 20 years ago. Today it is only 10%. Clearly, the GT marketplace has expanded far more overseas during that time.

How about China?

For the past two years, China has brought more GT MWs online than the U.S. China peaked in 2011 at more than 10,000 MW and scored just over 9,000 MW last year. Chinese orders are being driven by the expansion to the West-East pipeline as well as power generation.

How is the worldwide aeroderivative market?

I would characterize it as having steady annual sales. GE sold 42 LM6000 gas turbines in 2012 (10 in the U.S. and none in the EuroZone). Over the past decade, there has only been one year when less than 25 LM6000 units were ordered (2009). For the past three years, it has been holding steady at 40+ units.

How is GE’s newest aero turbine, the LMS100, doing?

As you know, the LMS100 is a hybrid GT; part aero, part heavy frame. Orders hit a snag in 2012. After a surge to 16 LMS100 orders in 2011, they collapsed to only two last year. At the end of 2012, 56 units had been sold in total, 38 of which were for the U.S. The projection for 2013 is for 10 LMS100 turbines to be ordered worldwide.

Do heavy frame turbines still dominate overall?

Yes. Expressed in MW, heavy frame GTs consistently account for 84% to 88% of the pie. The size of the pie, however, did get slightly smaller last year, down from around 75,000 MW to 60,000 MW.

Is that an apples-to-apples comparison?

Not exactly. The largest pure aero is the Rolls Royce Trent rated at 65 MW. Heavy frame GTs can exceed 400 MW in size. But when one compares GTs in the 10 MW to 65 MW category, aeros actually outsell their heavy frame cousins, scoring anywhere from 61% to 67% of the total year after year.

The U.S. was quicker to adopt aeros than other nation. What units are ordered outside the U.S.?

The LM2500 was the most popular followed by the LM6000. Together, they accounted for 80% of 2012 orders. There were no LSM100 sales outside of the U.S. during 2012. The rest of the orders went to the Russian firm, PERM, the Pratt & Whitney FT8, and the Rolls- Royce RB211 and Trent.

Are the GT orders for simple cycle or combined cycle?

For the U.S., the breakdown in 2012 was 67% combined cycle and 33% simple cycle. This has been trending upward from a 50-50 split five years ago.

What factors will influence the U.S. market in the years ahead?

Electricity consumption fell during the recession and has been slow to come back. In many states, new generation is tilted to wind and solar projects as a result of political mandates despite the higher cost. At the same time, coal usage will decline further while the power generation share of natural gas will increase. With so much more domestic gas available via shale resources, the price of gas is expected to remain low. We will also see far more trucks and trains being fueled by compressed natural gas. And the allure of the LNG (high prices being charged in Asia) could see the appearance of a whole new U.S. LNG export market.

What is the outlook for 2013?

Europe remains in recession and demand will be soft. I see a relatively slow order rate for GTs worldwide, but it should be better than 2012. The U.S. is seeing an economic rebound in the manufacturing sector and we anticipate load growth in Ohio, Indiana, Texas and Pennsylvania. So the domestic outlook is strong. For Asia, the order rate will continue to surge high above historical averages. And further down the line, China may turn out to have its own shale gas boom to look forward to. Overall, the worldwide orders should be a little up on last year with a bigger jump expected in the U.S.

What else intrigues you in the GT space?

I’ve been wondering about the Mitsubishi - Pratt & Whitney Power Systems (PWPS) deal. When will they step up production of the trailer-mounted FT8, or launch the PW4000 engine, which includes a 60 MW genset and a 120 MW TwinPak? They have the potential to make a bigger dent in the market dominated by GE aeros.

Mark Axford can be contacted at www.axfordconsulting.com or maxford@axfordconsulting.com