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Building a head of steam

The steam turbine market is forecast to be worth $19 billion by 2020 Siemens
The steam turbine market is forecast to be worth $19 billion by 2020
Credit: Siemens

How is the steam turbine market holding out against the rise of renewables and where do the OEMs predict growth? Kelvin Ross takes the pulse of the sector with some of its major players.

The global steam turbine market is forecast to grow from $14 billion this year to $19 billion by 2020, according to recent analysis.

The study, from research and consulting firm GlobalData, finds that the steam turbine market has been boosted by the increasing demand for electricity, driven by growth in both population and economic development.

In its report, GlobalData states that steam turbines will see steady growth despite the rise of renewables, because thermal power is still often seen as a cheaper and more reliable alternative. Sayani Roy Nath, GlobalData’s power analyst, says: “Although the focus on renewables is increasing, it has so far been difficult to achieve a major shift towards alternative sources, because they are either uneconomical or incapable of generating sufficient power to meet demand.

“Global coal reserves are much larger than oil and gas reserves, reaching almost 861 billion tonnes in 2012. Therefore, thermal power is still the dominant source of energy, and with clean coal technology gaining ground, the steam turbine market is set for steady growth in the future.”

Market growth

In 2000, the global installed capacity for thermal power was 2.2 TW. In 2012, this had increased to around 3.5 TW, having grown at a compound annual growth rate of 3.9 per cent during that 12-year period.

According to GlobalData, this rise in capacity is expected to continue to 2020, when it predicts the total installed capacity will reach around 4.4 TW.

In 2000, revenue from the global steam turbine market was around $14 billion, but decreased to $11 billion in 2008 as the effects of the global economic crisis started to bite. GlobalData says the crisis “stopped growth in the market by lowering investor confidence in new projects and increasing the cost of capital”.

However, the market research company forecasts that as economic woes fade and the need for power increases, the steam turbine sector can look forward to worldwide revenues of $19 billion by 2020.

Optimistic forecasts

But GlobalData’s optimistic outlook in its report is not shared by all players in the sector.

A spokesman for MAN Diesel & Turbo says: “We regard this foreseen growth as highly optimistic as the market for turbomachinery is stagnating. Currently, we cannot see any reflection in our sales of industrial steam turbines which we provide in the range from 2″160 MW.”

He accepts that factors such as a growing population will affect the steam turbine market: “Emergent countries in Asia and Africa are building up or improving their infrastructure. This, plus the foreseen world population growth, will lead to an increasing demand of electrical power.”

He says that “as coal is an abundant and cheap resource in these countries, it might lead to a growth in the steam turbine sector” but then adds the caveat that “this is something hardly foreseeable as there are many instable factors, such as economic crises or natural disasters”.

On the rise of low-carbon technologies, the spokesman says there will “definitely be a shift towards renewables in industrial countries”.

“We already have good references in CSP applications with our steam turbines. However, coal will stay cheap and easy to access in emergent countries which will lead to fossil energy sources for their local demand.”

Elio Mastella, Marketing and Business Development executive at Ansaldo Energia believes that “the very cheap costs linked to the use of coal as primary fuel all around the world” is driving the upbeat forecasts for coal and oil-fired steam turbines. However he adds that the flip side of the coin is that “in some important regions, such as the US and Europe, recent restrictive laws make new coal projects very difficult to be realized”. He suggests that the steam turbine sector for coal projects “will grow but this will be confined to some special areas of the world, particularly Asia-Pacific”.

He also believes the market for steam turbines for combined-cycle plants is growing and that growth “is much more distributed all around the world than that of steam turbines for coal plants”.

Mastella says that the real driver behind the use of steam turbines in coal plants is “the relative low levelized cost of electricity of the coal plants due to the very low price of this commodity all around the world”.

“The demand for steam turbines will remain solid in emerging, large economies, such as India and China, where the growing global population and economic development is constantly increasing.”

Meanwhile, Trevor Bailey, general manager for Combined Cycle Power Plant Products at GE, says the company is seeing growth “at a very high level”. He adds that “one of the big things to bear in mind for steam turbines from a power generation point of view is that they fit in pretty much all of the major thermal power generation categories”.

“The market segmentation for steam turbines is enormous and when you start to think about that from a global reach point of view ” the fuels that are being used in different parts of the world, the changing trends around clean generation and shifts from one fuel to another ” then that starts to give a bit of a back-drop to the kind of dynamics that are going on in the global market. That’s really the precursor to the trends that we are seeing in terms of growth.”

He says the main growth area is in combined-cycle applications: “This type of equipment is obviously complimentary to the growing trend for renewable energy in many parts of the world ” you need these large, rapid-response-type, high-efficiency plants to be able to take the demand when the wind stops blowing or the sun’s not shining.”

GE is seeing “considerable interest in that type of product capability” across Asia and the US. And Europe? There the pace is rather slower. Bailey says that “although moving in the same direction, the demand is not so high. It’s not so clear when Europe will start to move again ” that’s a less clear picture, certainly from our point of view.”

He says that with Europe “you have to look almost country by country. The further south you go, the economic situation is such that you’re not going to see an awful lot of movement there for a number of years.”

Steam turbine global market revenue ($bn) - 2000, 2012 & 2020  GlobalData
Steam turbine global market revenue ($bn) – 2000, 2012 & 2020
Source GlobalData

Looking to growth

So where do some of the leading companies in the steam turbine market see as the growth areas between now and 2020?

MAN Diesel says: “Until 2020, we see emerging markets especially in African and Asian countries. They are building up infrastructure and their demand for energy is constantly growing. Small and decentralized biomass power plants are one trend we can see which is driven by the utilization of agricultural waste as fuel.”

Chiara Marongiu, business analyst at Ansaldo says: that “coal will be the main winner in Southeast Asia’s energy mix and China and India will play a significant role in this energy mix asset. In the US, Europe and the rest of Asia, coal demand is expected to keep the same level as today.”

Bailey says that “China is a large contributor to the overall volume because of the availability of coal and its use as a primary power source, but there is a steady and progressive move to gas as a fuel. We are seeing more and more demand for combined-cycle applications.”

He says the Middle East “continues to be dynamic” while the US “is going through a phase of continuing to build out more combined-cycle capability as the retirement of the older fossil plants continues to gain momentum, so there’s some replacement demands in the US in particular. Again they are pushing towards combined-cycle, higher-efficiency power blocks.” Bailey stresses that “it’s quite a diverse series of market conditions now ” you’ve almost got to look at it on a country by country basis to understand the dynamics or what’s going on and how the fuel mix is workingࢀ¦ and of course I include in that the renewables”.

Asia is a growth market for steam turbines MAN Diesel & Turbo
Asia is a growth market for steam turbines
Credit: MAN Diesel & Turbo

The renewables factor

How do the steam turbine players see the market performing in a global energy mix that in many regions is leaning more and more towards the integration of renewables?

says that the continued dominance of coal will ensure business for steam turbine manufacturers.

While she says that the rise of renewables, in particular wind and solar PV, “is a truth all around the world except in Africa and the Middle East”, she adds that “despite the fact that renewable energy has emerged as a significant source in the global energy mix, coal demand will grow at an average rate of 2.3 per cent, per year, through 2018. This is mainly because renewables show very high levelized costs of electricity and their growth is still linked to incentives in most areas of the world.

“The result is that even though renewables are increasing, they are still uneconomical and sometimes incapable of meeting the power demand. Coal accounts for over 40 per cent of global electricity generation, making coal prices a key determinant of electricity prices and developments in the power market.

China is by far the world’s largest producer and consumer of coal, and accounts for more than 45 per cent of both global totals. Therefore, development of the global coal market will largely be driven by China through its economic growth, investments in infrastructure, energy diversification and energy efficiency programmes and policies.”

Bailey from GE meanwhile is keen to stress that the rise of renewables is not a threat to the steam turbine market. “The two complement each other very well and with combined cycle you have a large array of capabilities that can serve pretty much any need or any grid situation. Combined cycle has much more flexibility in that respect than, let’s say, ultra-supercritical coal or nuclear. And the response capability is much better than both of those types of technologies.”

A FlexEfficiency 50 combined-cycle plant GE
A FlexEfficiency 50 combined-cycle plant
Credit: GE

Steam vs gas turbines

As to whether steam turbines have a rosier future than their gas counterparts, Bailey says that there is “a balance and it goes back to fuel availability”.

He says that some countries ” and highlights Bangladesh, Vietnam, Chile ” “have plentiful coal and not necessarily huge access to gas, so there you will see coal-based power plants continue to be built”.

However he has a warning for the players in the market: “A lot of people tend to view steam turbines as a mature technology ” we need to be careful with that. I think although we are on the top part of that curve and pushing close to entitlement, as we move to higher efficiency applications we need to be able to ensure that our steam turbine technologies complement the other products in the portfolio ” again focusing around the combined-cycle space as that’s probably the largest growth potential. We are continuing as an organization to invest significantly in gas and steam turbines to push our combined-cycle offerings and continue in that multi-year growth band to go to high efficiencies.”

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