Filling the Black Hole

The 2014 Turbomachinery Handbook features two analyses of the U.S. and world power markets from Forecast International and Industrial Info Resources. I’ll leave you to read them to review their many conclusions about how the industry will shape up over the coming decade.

But their numbers were just too interesting to leave it there. So here are a few comments and forecasts of our own. The big one is that the U.S. coal industry is being sucked into a black hole. Right or wrong, coal is being legislated out of the energy mix. We are talking about a paltry 2 GW of new coal over the next five years (1% of the pie as opposed to 3% in 2011 and 43% in 2006). By way of a comparison, the modest U.S. solar industry brought 3 GW online last year alone.

To make matters worse, the table on page 17 shows over 50 GW of recent or planned coal shutdowns between 2012 and 2017. So how is the black hole to be filled? The IIR chart on page 16 displays the utter dominance of planned renewables and natural gas between now and the end of 2018. At first glance, renewables are the big winner at 61% with natural gas a poor second at 36%. But a deeper looks indicates that gas is the real champ.

The IIR figures show plans for 119 GW of renewables and 69 GW of gas in the next five years. And many regions are rushing to the party with renewables typically accounting for anywhere from 62% to 90% of planned new capacity. But that is a false high.

The bald facts are that 75% of planned renewables won’t be built in the next five years while two thirds of the gas-fired facilities in the pipeline will be seen through to completion. When you do the math in that light, 25% of 61% (about 15%) loses to 67% of 36% for gas (about 24%). So gas wins easily.

We took a look back at the IIR forecast in our 2011 Turbomachinery Handbook and discovered that gas had surged from 18% to 36% in that short time. Gas gobbled up market share from coal (3% down to 1%), nuclear (13% to 2%) and even renewables (65% to 61%). So there is no doubt that a natural gas capacity build out boom is apparent.

But some regions didn’t get the memo. New England is predicted to be in big trouble on the power front. It only plans to build 4,503 MW over five years, by far the lowest in the nation. When you consider that 72% of that is renewables of which 75% won’t get built, you have a recipe for disaster. That leaves 28% gas of which 2/3rds will probably come online, i.e., around 800 MW of gas and perhaps 800 MW of renewables for a region that is likely to soon force the closure of the Bridgeport Harbor Station coal plant (400 MW). Its 2,037 MW Millstone Nuclear Power Station is also under heavy attack on many fronts, not the least of which is its use of 2 billion gallons of water per day from the Long Island Sound. Remember that this is the same region that has stalled a large offshore wind farm for a decade. So they are eliminating coal, they don’t want nuclear, they can’t stand offshore wind and good luck with solar. It might take rolling blackouts before this region gets a reality check on its energy priorities.

The Southwest (especially Texas) presents another picture entirely. It’s been the champion of wind for a decade and leads the nation by a large margin in total renewable capacity. But its 44% natural gas figure (next five years) indicates it is dialing back on its wind ambitions significantly.

The Forecast International report (page 10) also delivered some fascinating numbers. The 2011 Turbomachinery Handbook forecast $150 billion in gas turbine sales over 10 years with the graph remaining flat or declining over the long term. This year, it is a rosier scene. Forecast predicts $205 billion in GT sales over ten years with sales trending upwards.

Two years ago, unit production over the coming ten years heavily favored Solar Turbines with 32.78%, then GE (23.98%), Kawasaki (10.78% and Siemens (8.65%). Mitsubishi Heavy Industries (MHI) was grouped into the “Other” category. This year, Forecast has GE and Solar essentially tied at around 24% each, Kawasaki up to almost 12%, Siemens up beyond 11% and MHI with about 7.5%. On the value side, MHI also jumped from 10 to 15%.

Clearly MHI is a growing presence in the marketplace. And with the Forecast International outlook indicating Asia as having by far the biggest growth potential, MHI is positioned to consolidate its gains. Time will tell how well GE and Siemens do in China and Asia from their respective U.S. and European strongholds