WORLDWIDE GAS TURBINE FORECAST

By Stuart Slade, Forecast International

In its 2017-2026 worldwide market analysis of gas turbine-powered electrical generation, Forecast International projects that revenues over this period will total $112.11 billion, an increase of 6.6% over the comparable figure for the period 2016 to 2025. This increase shows that the utility and industrial power generation market will continue to provide a strong stimulus for production of gas turbines (GTs) in the long term (Figure 1).

But emphasis on reducing resource consumption and emissions (especially in Europe) has resulted in great support for renewable resources. In some areas, heavy subsidies are causing conventional power generators to operate at a loss.

In Germany, for example, new simple cycle facilities have been mothballed upon completion without ever generating a watt of power. In the longer term, increasing power demand will open these mothballed plants. This is contributing to a medium-term dip in demand. In effect, this reserve capacity is limiting additional procurement.

Many of these simple cycle GT plants are new and virtually unused, while others have very few hours on their maintenance records. Major increases in operating economics can be obtained by modernizing them for combined cycle operation by the addition of heat recovery steam generators (HRSGs) and steam turbines (STs).

Once the market moves beyond this mid-term fall, it is likely to rebound. This improvement will show up particularly in increased sales of larger GTs and aeroderivatives. Large GTs will also see high demand.

Machines larger than 200 MW will account for almost half of all sales. They overwhelmingly dominate the market with 45.1% of the total. This amount is likely to increase throughout the 2017-2026 period as the cost efficiency of these machines pushes average output upward. Those operating between 180 and 200 MW make up another 20% of GT revenue. When combined with those greater than 200 MW, that brings the total up to 65%.

In third place is the 20 to 50 MW group with close to 20% of GT revenues. Most of these are aeroderivatives operating in a distributed generation environment. This indicates that aeroderivatives are likely to take over the middle section of the market. This category is going to see strong growth due to advantages in maintenance scheduling and support.

Small turbinesThe prognosis for gas turbines unit sales shows some promise in the long term. However, several more years of flat or declining sales are predicted before any recovery begins. Our market analysis of GT-powered electrical generation projects that between 2017 and 2026, worldwide sales of GTs for electrical power production will total 4,719 machines.

The market for smaller turbines has been taking a serious hit due to several factors. In some cases, numerous smaller units are being replaced by one or more large units. In addition, small GTs are losing ground to gas-burning reciprocating engines.

Recips can now match the power output of small GTs, but operate at greater efficiency. Small GTs have an edge over recips in urban areas in terms of reduced noise and vibration.

Machines in the 3 to 10 MW are projected to account for just less than a third of total GT unit production. Those smaller than that are experiencing low unit sales.

The 10 to 20 MW sector should see less than 5% of unit sales. The second-best category of unit sales is 20 to 50 MW with 31%. This is up from 17% only four years ago.

Much of this gain has come at the expense of the 0.2 to 3 MW grouping which has fallen in that time from 21% to less than 2%. Once again, we see the strength of aeroderivatives and the decline of the bottom end of the GT market.

OEM summary

The five leading companies operating in this market sector have been ranked by value of sales. Note that subsidiaries and licensees are included in the overall total. These five companies together represent 98.83% of the market by value.

1. General Electric Company

General Electric Co (U.S.) is one of the most diversified GT and machine manufacturers in the world. In the GT-powered electrical generation marketplace, its product line spans from 2 MW to 256 MW simple cycle. Despite this presence, the company has seen its position in the market ebb slightly as Siemens absorbed the power generation equipment of Rolls-Royce, and Mitsubishi-Hitachi exploited its expanded product range.

GE is addressing this competition by enhancing its product portfolio. The LM6000 has been continually improved in efficiency and emissions levels, especially via the steam injection process. Its Frame series is also being upgraded, through technology injection from the CF6 and GE90 turbofan programs.

The company has established business, licensee, and packaging agreements with more than 30 firms worldwide. That effort has broadened the geographic appeal of its units.

The estimate for 2017-2026 is that GE will sell 1,439 units (30.49% of  total) worth $43.53 billion (38.82%).

2.  Siemens Energy

The sharp increase in Siemens’ share of the market is attributable to its acquisition of the Rolls-Royce industrial turbine range. The procured equipment has been made part of the SGT series and designated with an A (aeroderivative). Some long-standing names have disappeared in this transition.

In November 2004, Siemens renamed its entire GT product line using a numeric system. It relates a machine and package model’s power output to that of all other machines in the Siemens portfolio. This was followed by several additional bouts of renaming that inserted other products into the SGT series.

The estimate for 2017-2026 is that Siemens will sell 1,008 units (21.36% of  total) worth $36.29 billion (32.36%).

3.  Mitsubishi Hitachi Power Systems (MHPS)

Mitsubishi Heavy Industries had long been a licensee and co-developer with Westinghouse on the Model 501 and 701 series. Under the new MHI designations M501 and M701, it produces 185 MW to 334 MW derivatives of the Westinghouse machines. These are geared for the 50-Hz and 60 Hz markets.

The company also formed a joint power generation venture with Hitachi named MHPS to create a formidable force in power generation. The results can be seen in the steep increase in market share over the last year, though not enough to overtake Siemens.

The estimate for 2017-2026 is that MHPS will sell 532 units (11.27% of  total) worth $20.82 billion (18.57%).

4.  Solar Turbines (Caterpillar Inc.)

At the beginning of 2017, Solar’s product offering included five GT families: Centaur, Taurus, Mars, Mercury, and Titan. The sales projection for these turbines has fallen significantly both in numbers and total sales value. This is partly due to the completion of contracts without replacements of similar magnitude. Solar continues to lead on number of unit sales with over 30%.

The estimate for 2017-2026 is that Solar will sell 1,462 units (30.98% of  total) worth $6.56 billion (18.57%).

5.  Ansaldo Energia

Ansaldo has also moved up in the ranks by means of the purchase of Alstom assets from GE. As well as the GT24/26, it has acquired the GT36 which it is now marketing heavily. 2017-2026 will see the company sell 45 units (0.95% of  total) worth $3.62 billion (3.23%).

Global trendsIt is apparent that a 6.6% revenue increase in GT sales (compared to last year’s forecast) is significantly less than the rate of electric power demand. Global electricity demand is projected to increase by about 85% as living standards rise, economies expand, and the electrification of society continues. About half of the projected growth will come from the industrial sector. Its share is expected to rise as advanced manufacturing, automation and control technologies transform the sector.

Strong growth also will be seen in the residential and commercial sectors as rising living standards generate electricity consumption. A good portion of the growth in electricity demand through 2040 will come from economies gaining access to electricity for the first time. The International Energy Agency (IEA) estimates that by 2030, an additional 1.7 billion people will gain access to electricity. The number who lack electricity will drop from 1.3 billion to just under 1 billion.

Despite steadily increasing demand for electricity, projected sales in the number of GTs over the coming 10-year period will decline steadily. This is taking place at the same time as the cost per unit rises due to a shift toward higher-output turbines.

Power generation GTs operate in an unusually complex market environment. Improvements in the monitoring of power production and the emergence of energy storage enable more precise matching of available generating capacity to total power demand on a real-time basis. This facilitates optimum procurement of the assets required to meet demand.

Meanwhile, the average output of individual GTs has risen. Thus additional power can be met by fewer units. Two decades ago, a typical industrial GT plant might deliver about 800 MW.

This would be split between four 200 MW units. Today, 1.9 GW units are available. This is a big reason why a jump in electricity demand will not translate into unit sales. These mega-turbines deliver significantly greater power per dollar of capital investment than smaller units.

Older plants 

When the U.S. Environmental Protection Agency (EPA) mandated the closing of inefficient and polluting power plants, it set a date for closure, but did not limit the number of hours of running time. The owners of doomed plants ran them into the ground in the time remaining. This created a surge of power availability that discouraged investment. The charts show the short- and medium-term dips in procurement resulting from this factor.

Additionally, the introduction of computerized distribution systems has had a major impact on the procurement of generation capacity. Three decades ago, it was not uncommon for utilities to hold up to 35% reserve capacity. Today, this percentage has been drastically reduced. Reserve capacity in the UK is down to about 5%. Some of the increase in power demand can be absorbed by using capacity previously held in reserve. Alternatively, older baseload generating plants are being replaced by GT facilities originally envisioned as peak load plants.

Another result of the modernization of power distribution systems is detailed analyses of power use patterns. Impending problems can be predicted and alternative generation brought on line. When STs were the major source of power, the response time to an outage could be as much as eight hours. Current response times can be negative (backup power is available before the impending outage is realized).

These analytical capabilities have refined patterns of use. For example, the evening demand spike is much shorter than was originally thought. This opens the possibility of reducing demand during that short period by offering large power users discounted rates if they reduce peak usage.

The same use of distribution analytics can be applied to renewable generation. Wind and solar power generation depend upon weather conditions. The average capacity of a wind or solar unit is about 70% of its nameplate capacity.

Until recently, simple cycle GTs picked up the shortfall. But storage technologies now offer an alternative. Battery technology developed for the automobile industry has slashed storage costs from $1,000 per kilowatt-hour in 2010 to $273 in 2016. Already in South Australia, battery storage is replacing GT peaking plants as a supplement to solar and wind power.

In parallel with this, countries operating older plants are undertaking major rebuilds and modernizations. Their dual-track approach comprises upgrading existing plants to provide baseline capacity while building capacity to meet demand.

Many countries in Eastern Europe and the Far East, however, still use coal. They are adding much extra capacity in the form of ST or combined cycle units. Since these areas contribute a disproportionately large percentage of the predicted rise in power demand, the GT market is adversely affected.

Another trend is the conversion of simple cycle to combined cycle plants by the addition of one or more STs and HRSGs. Once again, the extra power comes at the expense of GT sales. However, this is offset during combined cycle plant modernizations when the boiler house is replaced with GTs.

Over the past decade, the market environment has changed significantly. It has become more complex and is subject to an ever-increasing range of outside influences. This affects investment decisions.

A question remains whether the demand for electrical power can best be addressed by construction of additional capacity, or by better use of existing assets. A decade ago it was taken for granted that new facilities would continue to be built to satisfy worldwide demand. 

It is no longer apparent that this remains the case. The debate has shifted from, “What technology option should we adopt for new generation?” to “Is a new generating plant the most appropriate option for our circumstances?”