As many readers here will know, gas turbine electric generators (CCGT or combined-cycle power plants) are in short supply, due to the increase in demand for electricity worldwide.
Expected wait times for new equipment have been estimated up to 7 years for a facility ordered today.
Turbine makers, shell shocked from bust cycles that are still fresh in memory, have been loath to invest big to boost production.
Renewable energy sources like wind and solar power are needed to meet rapidly growing energy demand in the United States amid near-term obstacles to increasing natural gas capacity, NextEra <NEE.N> CEO John Ketchum said on Tuesday.
Competition and high costs to obtain gas turbines, a construction labor shortage, and the costs associated with tariffs mean that it will take at least seven years to get new gas-fired power plants online, Ketchum said at the Politico Energy Summit.
==
Manufacturers, having overbuilt and been burned twice in recent decades as demand for turbines waxed and crashed, have been cautious about ramping up production.
—
To the CEOs of all three companies, history would likely seem to justify this discipline. In 2017 and 2018, years of investment into capacity expansion coincided with a near-total collapse in global demand for gas turbines. This market crash was most likely the combined effect of low energy demand growth, energy efficiency improvements, continued use of coal power across Asia, the growing share of renewable energy on the grid, and investors’ realization that solar and wind energy could meaningfully undercut gas on price. All three companies laid off tens of thousands of employees, and the crash contributed to the complete breakup of General Electric and its partial spin-off into GE Vernova last year.
Recently some noise from turbine manufacturers about ramping up production, but not likely to seriously impact the wait times.
Mitsubishi Heavy Industries plans to double its manufacturing capacity of gas turbines over the next two years in response to spiking demand and a backlog of orders, Bloomberg reported Sunday. Average wait times for gas turbine delivery have recently increased by several years.
- GE Vernova, another gas turbine manufacturer, announced on Aug. 19 that it is investing $41 million to enhance the manufacturing of its H65 and H84 generators, used in the company’s HA gas turbines. Siemens Energy, another gas turbine manufacturer, announced in December last year that it’s adding 61,000 sq ft to a facility that makes blades and vanes for its turbines.
- “An individual [original equipment manufacturer] doubling production could increase overall output by 15-40% based on historic data,” Bobby Noble, senior program manager of gas turbine research and development at the Electric Power Research Institute. “It should help over time, but it is likely not enough to drastically reduce [wait times].”
Noble said it would be difficult to determine the exact impact of increased capacity on current wait times, “as it is more complex than simply increasing floor space and factory capabilities for manufacturing additional units.”
“All in all, if more machines can be manufactured, more skilled and engineering labor will be needed,” he said. “This is the part that really complicates the actual timeline.”
Noble said that increasing production of gas turbines “should be sustainable” for manufacturers, though he didn’t discount the possibility of a bubble.
“Increasing production has risks, as long-term demand cannot be guaranteed,” he said. “The natural gas bubble in the early 2000s was a different set of circumstances, but not fully unique compared to today … Twenty-five years ago, natural gas became cheaper than coal and was attractive to move towards. Just as with other commodities, once in higher demand, natural gas prices increased and orders became more scarce.”
That reduced demand meant manufacturing facilities also had to be reduced, Noble said.
Longer waits for new gas turbines, together with Trump administration sabotage of solar, wind and battery projects, means higher prices for ratepayers, (which will make renewables even more attractive, of course.)
One thought on “Gas Turbine Manufacturers Gun Shy about Increasing Production”