WORLD MARKET OUTLOOK
HOW ENVIRONMENTAL AND ECONOMIC TRENDS ARE DRIVING GAS TURBINE SALES AND TECHNOLOGICAL INNOVATION
STUART SLADE
A Forecast International study of the market for gas turbines (GTs) used by the electrical generation industry shows worldwide sales will total 5,480 GTs for electrical power production between 2016 and 2025. The total value of this production will be $105.3 billion. Close to 70% of these sales will come from small turbines and microturbines. Those below 10 MW will account for almost half of all unit sales over that period, and those below 3 MW (microturbines) will amount to nearly 20% of unit output. A separate look at dollar value sales of GTs, however, provides a different perspective. Over the next decade, the bulk of investment will be on power generation in the range above 180 MW (Figures 1 to 4).
Figure 1: Gas turbine electrical power generation, power class unit comparison 2016-2025
Figure 2: Gas turbine electrical power generation, power class unit comparison 2016-2025
Figure 3: Gas turbine electrical power generation, power class value comparison 2016-2025
Figure 4: Gas turbine electrical power generation, power class value comparison 2016-2025
An examination of projected power generation capacity demonstrates that the average capacity of individual installations is growing more rapidly than the projected demand for power. Therefore, centralized power generation facilities will rely on fewer generating stations of significantly larger capacity than has been the case to date. Natural gas has become the fuel of choice in cogeneration plants due to lower gas prices and low carbon emissions. By 2025, the annual installation of gas-powered generators is expected to increase from its present level of 12,900 MW to 27,100 MW.
Power generation
The shift from coal to natural gas has led to the gradual shuttering of coal plants in Europe and North America. In the UK, most coal plants have already been closed. Coal-fired power accounts for only 4.42% of UK energy production. In contrast, combined cycle GTs account for 52.33% and nuclear power 23.53%. The EU Large Combustion Plant Directive required member states to limit fuel gas emissions from combustion plants having a thermal capacity of 50 MW or greater. The Directive set a schedule for the closure of coal-fired plants. It ranged from 2012 to 2015, depending on the generating station. This gave operators an incentive to run at full power as they came up to that date, artificially inflating coal use figures and delaying the procurement of replacement GT plants. This has caused a shortterm dip in European gas turbine procurement for power generation.
The GT marketplace is also being influenced by innovation in power distribution. The application of computerized control systems, for example, has exerted significant impact on the structure of power generation equipment sales. The evolution of computer technology has improved forecasting methods. New control systems and analytical techniques show that the annual peak load is typically a short, sharp spike. As a result, the need for reserve power generation capacity is falling fast. In the UK, for example, the power grid used to maintain a 35% reserve capacity to deal with plant outages and power failures. That has now been cut to 5%. Experience has shown that with a modern computerized control system, connectivity has improved so that sudden shocks to the grid are spread over a wider area and thus mitigated.
Better power distribution management means that the distinction between baseload generation and peaking power capacity is vanishing rapidly. Currently, at least 85% of power generation GTs are assigned to continuous duty as compared to about 60% of the machines a decade or so ago. Outside of Europe and the U.S., a distributed generation strategy is gaining ground as an alternative to power plant centralization. Small generation plants are built close to the point of use, which keeps distribution infrastructure to a minimum and reduces the lead time for construction. Further, power-use patterns are in a state of flux and this is having an impact on GT sales. In the U.S. and Western Europe, an emphasis on energy efficiency has had the effect of smoothing out the spike in demand during peak hours. Regional considerations vary in their impact upon the GT market.
U.S. generation
According to the U.S. Energy Information Administration (EIA), coal currently accounts for about 41% of the nation’s power versus 27% from natural gas. This situation is changing fast. The increasingly unfavorable environment for coal will have led to the shuttering of some 70 GW of coal generation by the end of 2016. This generation capacity is being replaced, in the main, by natural gas combined-cycle (NGCC) units. By 2035, therefore, the EIA that anticipates natural gas will be the primary fuel for power generation. Natural gas-fired generation is projected to grow 3.1% a year through 2038. That equates to more than 340,000 MW of gas-fired capacity to be added to the U.S. grid in that time span. The impact of improved distribution control networks in the U.S. is continuing to blur the distinction between baseload and peaking capacity. Only nuclear-powered generation capacity is now unequivocally considered to be baseload due to its long run times at steady-state load. In contrast, fossil-fueled plants are experiencing a different pattern of operation that demonstrates frequent starts, load-following, and shutdowns to meet seasonal demands. As quick-reacting GTs replace more sluggish steam, this trend is likely to continue.
However, the majority of breakdowns happen when a plant is either started up or shut down. Therefore, this evolving operational profile is likely to increase the frequency of outages and the costs of procuring replacement parts. This means that operations and maintenance costs are expected to increase, a trend that will particularly affect older turbines whose long-term service agreements are expiring. As this takes place, sales of advanced class machines such as the G, H and J classes are increasing as utilities place more importance on efficiency, and vendors accumulate operational experience with these new designs.
Eastern Europe
Net electricity generation has risen in Eastern Europe over the last few years. Countries such as Romania, Poland, Slovenia, Bulgaria and the Czech Republic have a power generation system comprised of old and inefficient equipment that had been poorly maintained. Based on KPMG estimates, Eastern Europe has 53 GW of obsolete capacity that must be replaced by the end of this decade. In addition, 42 GW of additional capacity will be needed to meet existing demand. These requirements will consume between $129 billion and $163 billion by 2020. That represents a large investment in gas and steam turbines.
However, natural gas currently only accounts for 9% of generation capacity in this region while doubts over the stability of supplies from Russia remain. This is driving the development of nuclear power. Slovakia, for example, plans the construction of two reactors with a total capacity of 840 MW, while Bulgaria envisages the construction of two reactors with a generating capacity of 1,900 MW. If all the nuclear plants presently being developed are completed, Eastern Europe will build 14 more reactors with a total of 21,655 MW, doubling its generating capacity. These plants will all use steam turbines. Thus, Eastern Europe may be unusual in being one of the areas where steam turbines will retain a strong foothold. Gas turbines, though, continue to hold a strong position in Poland, Croatia, Macedonia and Hungary. Poland intends to build up to 8,000 MW of gas-fired generating capacity over the next decade. The rate of growth in Eastern Europe will be high. However, constraining factors may be economic rather than technical or environmental the shortage of investment funds. This suggests that those selling successfully into this market sector will do so by aiding the customer in finding finance for projects,
Southeast Asia
Southeast Asia’s energy demand is projected to grow by 80% by 2040 as the regional economy triples in size and the population soars by almost a quarter to 760 million. As a result, it is likely that oil demand will increase from 4.7 mb/d in 2014 to 6.8 mb/d in 2040, while natural gas use grows by almost two-thirds to around 265 bcm. In sharp contrast to the regions discussed above, coal demand will expand at an unprecedented rate and by the end of the projection period coal will overtake oil to become the largest fuel in the energy mix. Modern renewables — including hydro, geothermal, wind and solar — will make inroads into the region’s energy mix but in sharp contrast to Europe and the U.S., renewables will decline from 26% to 21% as the share of fossil fuels rises from 74% in 2013 to 78% in 2040. Steam-driven turbines are expected to retain their position as the dominant technology.
Meeting Southeast Asia’s hunger for electrical power will require the installation of 400 GW of power generation capacity of which 40% will be coal-fired. This trend is being reinforced by the fact reduced oil output in the region. Brunei, Indonesia, Thailand and Vietnam are curtailing total oil output from 2.5 mb/d to 1.6 mb/d. Natural gas production is expanding, but at a much more moderate pace than in recent decades. Another aspect of the energy situation in Southeast Asia is that power generation grids and regional interconnectivity are limited and, in some areas non-existent. Major efforts are being placed in expanding regional power grid interconnections and attracting investment to develop energy infrastructure. While six cross-border power grid interconnections are currently in operation with many more under construction or planned, more than 120 million people lack access to electricity.
Global demand
Global electricity demand is projected to increase by about 85% as living standards rise, economies expand, and the electrification of society continues. The demand for fuel to produce that electricity is projected to rise by only about 50%, however, due to changes in the mix of fuels used to produce electricity, as well as improved efficiency in power generation and transmission. The International Energy Agency (IEA) estimates that by 2030, an additional 1.7 billion people will have gained access to electricity, and the number of people who lack electricity will have dropped from 1.3 billion to just under 1 billion, or about 10% of the population. Rural electrification in some developing countries is expected to bypass large national grids in favor of distributed generation.
Vendor trends
Let us end with a brief discussion of vendor dynamics. Two years ago, GE caught up with Solar to claim top equal position on unit sales. However, Solar has once again pulled away from the pack with 38.1% of projected sales over the next decade compared to GE’s 26.41% (Figure 5). But when the value % statistics are reviewed, GE is the clear leader at 45% of projected sales between now and 2024 (Figure 6). Siemens comes second with 29.58% and MHI is third at 12.98%. Solar Turbines, by far the dominant force in unit sales, lags in fourth in terms of overall value at 9.19%.
Figure 5: Gas turbine electrical power generation, unit statistics % market share 2016-2025
Figure 6: Gas turbine electrical power generation, value statistics % market share 2016-2025
Stuart Slade is the Senior I&M Gas Turbines Analyst at Forecast International. This article provides data compiled from the Forecast International Industrial and Marine Gas Turbine Database, a comprehensive listing of more than 41,150 gas turbine installations, of which 3,916 (9.51%) are marine gas turbines used for propulsion and 933 (2.27%) are gas turbines used for onboard power generation. For more information, visit: www.forecastinternational.com www.turbomachinerymag.com
