The OEM gas turbine overhaul: War on efficiency, price & intellectual property

It is often thought that imitation is the sincerest form of flattery. But is it? In a constant battle between invention and replication, as well as the increased pace of innovation and development, many interesting opportunities are emerging in the gas turbine retrofitting and aftermarket parts space. This article will take a look at how these opportunities emerged, who is taking advantage of them,and what can we expect in the future.

It will also focus on GE for the purposes of illustrating various examples, given their vast size and our experience working with them. To get a holistic understanding of the space, we will explore this market from two main perspectives. The first being engineering challenges such as gas turbine cooling, geometric data, manufacturing, and so on, and the second being commercial challenges such as intellectual property (IP), competitive pricing, and delivery time.

To give this idea more clarity, it’s important to start with an overview of major gas turbine players and their business and services model as well as major advances and developments (since their complexity will directly correlate to the proliferation of competitors and aftermarket players). On the larger spectrum of power, the main gas turbine OEM companies include GE, Siemens AG, Kawasaki Heavy Industries, Mitsubishi Hitachi Power Systems, and Ansaldo Energia S.P.A. Since the 1980's, these companies have dominated a majority of the market share, making up roughly 65-80% of the market. Traditionally, these companies, along with the sales of their new units, offer long term service agreements (or LTSAs) where for the duration of the “usable life”, they will service the machines. However, given the current state of global affairs and the economy, public utilities as well as private power producers and other end-users are searching for ways to reduce costs, and past the warrantees and LTSAs, are going out into the open market and searching for aftermarket service companies, parts and so on.

In addition to the OEMs, a number of player son the service side including PW Power Systems, Ethos Energy, and Turbine Services Limited are going after this market. Furthermore, new players who are studying the market and selling aftermarket replacement parts are throwing their hat in the ring. This begs the question of why?

To answer this question, let’s take the most popular large machines. Around these machines, a whole ecosystem has been born due to the price change of OEM parts. Hot gas path capital costs of 80- 100 MW machines have increased from $400K-$600K per set to $800K-$900K and beyond per set (Natole). On an even larger scale, hot gas path spares for a 150-200 MW machine will run from $1.5 to $2.5 million per set. As one can imagine, these very large numbers can seem attractive to those looking to compete with OEMs and, as a result, repair companies from all over the world are trying to go after this market.

Now let’s explore the technical challenges of competing with OEMs, especially ones like GE. While on the steam turbine side, the technology and designs have been around for some time and thus low-level and now even mid-level replication is abundant all over the world, on the gas turbine side of things replication is an order of magnitude harder. In fact, many companies, even today, do not have their own gas turbine technology and thus, can simply replicate or replace in-kind the blades, or manufacture blades, for the hot path under license.

The reason for this complexity is because gas turbine temperatures and pressures are so high, that these machines often have complicated cooling schemes and geometries which require a significantly in-depth understanding in order to even attempt to replicate. Thus there are only a few players in the world that are able to chase this market, and even if they are technologically capable, there is the other whole issue of IP violations and infringement. GE, arguably one of the most, if not the most advance industrial manufacturer in the world, while simultaneously going on a technological shopping spree and investing in as well as purchasing 3D additive manufacturing technologies and releasing their digital Predix platform, have also ramped up their legal efforts with increasing vigor and rightful ferocity to go after the copycat aftermarket players. If the aftermarket players are able to convince the end customers to buy their parts, and not original GE parts, for example based on service guarantees, price, delivery and so on, there is still that issue of working with lawyers to make sure that there is no legal risk.

In order to develop new aftermarket parts and be able to compete in this market, the following steps must be carried out:

• Market study of quantity and popularity of out-of-warrantee machines currently operating in the world.
• Economic study of redesign/re-manufacture of aftermarket parts and the possibility of competing with OEM parts.
• Scanning, reverse engineering and creation of a digital twin of the original turbine and flow path as well as study of the machine in design and off-design conditions.
• Meticulous study of the original patents to understand both the patents themselves and the methods in which the constraints are placed on the flow path configuration.
• Creation of new airfoils as well as blades and vane blocks with complete cooling schemes and optimization in order to satisfy and exceed efficiency, structural and performance requirements of the original parts.While this step may be possible for older frames and machines, for new ones it would be almost impossible to do so in an economical way. It is also senseless because new machines are under LTSAs.

Another factor to take into account is pricing and delivery time. As the old saying goes, “fast, cheap, and good. Pick two.” This leaves aftermarket players with two options when fighting for these contracts and projects:

• Bid for a redesign one project at a time, knowing that they will be competing with OEMs and that many machines will be different. This options puts aftermarket players at a constant time disadvantage (price is harder to say because while traditionally OEM solution will be more expensive, in these situations OEM has no engineering to do, while the independent service provider still has to re-engineer the parts and thus their internal cost becomes potentially higher).
• Create a library (or stock pile) of aftermarket, white-labelled parts, that can easily be sold as “off the shelf” for popular machines and ranges which these aftermarket players already service. This approach requires a significant investment upfront, however simultaneously gives agility, speed and substantially more pricing power to the service provider when it’s time to make a bid.

It would be an understatement to say that gas turbines play a part in powering the world.These machines span many other industries, making them the more versatile and aggressive cousin of the steam turbine. While gas turbines have many applications from aerospace propulsion to industrial and distributed power, this article focused on the larger spectrum of the industrial range. At the same time, in terms of smaller gas turbines, it is often easier to compete with and replicate these machines since they are less expensive, meaning there is not as much opportunity to perform large projects/sell large upgrades and thus, not as many of the bigger players are actively targeting the space. That being said, with the advancements of 3D printing and additive manufacturing as well as the increase in computing speed and capacity, it is becoming increasingly cheaper and easier for manufacturers to come up with new, more advanced machines, upsell them into power plants with older machines, and continually roll clients into LTSAs. However, as they say, competition and speed means that there is a market, and so this will continue to push all of the gas turbine manufacturers and aftermarket providers to come up with better designs with more competitive pricing per KW which ultimately means better, cheaper, cleaner and more reliable electricity for the world.

Author: Valentine Moroz is the COO of SoftInWay Inc., a company that supports over 300 OEMs and service providers via its AxSTREAM turbomachinery design, analysis and optimization software platform, as well asturbomachinery development services from the concept through manufacturing.