Will gas engines start to take market share from gas turbines?

Credit: Wärtsilä

Gas turbines have traditionally been used in Europe for power projects above 100-200 MW. But do changing market conditions mean that gas engines could compete at this scale? Tildy Bayar talks to industry players to find out what the current and future landscape looks like for the gas engine segment

In December 2014, Finnish gas engine maker Wärtsilä filed a legal challenge in Poland which aimed to show that utility PGNiG Termika’s tender for the modernization of the Żerań combined heat and power (CHP) plant, which specified that the project would be open to gas turbines only, “drastically breached” Poland’s public procurement law in terms of “fair competition”.

“For the described purpose [delivery of 420-490 MWe and 250+ MWth], using engine technologies offered by the Finnish company is equivalent to solutions based on combined cycle gas turbines“, Wärtsilä said in its appeal. Indeed, it noted that “examples from professional literature prove that, as far as the functional and operational parameters characteristic of installations used for co-generation of heat and electricity are concerned, engine and turbine technologies are equivalent”.

Wärtsilä ultimately lost the appeal. Adam Rajewski, Wärtsilä Polska’s sales manager for power plants, told PEi: “Our claim was rejected on the grounds that yes, the investor has the right, according to Polish law, to pre-select the technology if they choose to.” However, he emphasized that “the discussion was about a certain article of Polish public procurement law” rather than a debate over whether gas engines can compete with gas turbines for power/CHP projects at the 200+ MW level – and that Wärtsilä sees the appeal as a good start toward raising wider awareness that they can.

While gas turbines have traditionally been used in larger-sized power and heat projects, and engines in those below 100 MW, industry players agree that this is changing. The question in Europe right now is whether engines will start to take market share away from turbines due to their greater flexibility, which is needed as the profile for gas-fired power plants changes from baseload to flexible generation in response to an influx of renewable power sources which have priority on the grid.

A changing tradition?

“Tradition held it that the limits for gas engine technology are somewhere around 50, 60, 70 MW,” said Rajewski, “but now we have clear evidence that engines are clearly superior in more like 200 MW and above – they are simply competitive and it’s simply a matter of who proposes the better deal. (For 100 to 200 MW there is quite a clear case that they are superior.)”

Rajewski attributes this new competitiveness to steady progress in engine technology, as well as to the industry’s long-term work on achieving higher efficiencies. “Fifteen years ago engine technology was used only in small-scale applications, 100 MW tops,” he says. “Since then plants over 400 MW have been delivered. The largest project, over 600 MW, was inaugurated in Jordan in April. The increased plant size is of course thanks to technology progress and better efficiency.”

Rajewski noted that in Poland “we’re doing our best to convince investors that we are absolutely confident that our solution is competitive in economic terms of a district heating plant even of the scale of 300 MWth plus electrical output. A Polish company did a comparative feasibility study and proved that, at this scale, those solutions are fully competitive – the differences are very, very small in favour of our technology.”

Rajewski also pointed to Stadtwerke Kiel’s July 2014 tender for a 200 MW CHP project in Kiel, Germany, for which gas engine technology was specified by the customer. “The Kiel project is a dynamic district heating plant, not a full baseload plant,” he said, “so it will need strong startup and shutdown capability depending on current market conditions. For that project it is quite clear why they don’t consider turbines: they require very high flexibility of the plant, something which gas turbine combined cycle could not match. If it was a baseload project as in Poland, then an open competition could be a good thing.”

Karl Wetzlmayer, general manager, reciprocating engines for GE’s Distributed Power business, points to two trends that are encouraging the uptake of recriprocating engines for larger projects: “We see that in industry, in Germany for example, companies like BMW, Airbus etc basically use reciprocating engines to produce their own power and also utilize the heat in their facility. That trend is going on, there is no doubt about that, and municipal utilities are installing more and more CHP plants.” However, he adds, “I think the turbine segment will grow as well because if you have larger blocks, there will be larger power plants built because turbines can go up to 60 per cent electrical efficiency in combined cycle.” And as emissions regulations become more stringent, he says, “I believe there will be more and more replacement of coal-fired power plants” and a corresponding need for more flexible power generation solutions. “A combined-cycle power plant is less flexible,” he notes. “A gas-fired combined-cycle power plant + renewables + a reciprocating engine in CHP, that’s a pretty good mix, I would say.”

Dr Tilman Tütken, European head of power plant sales for MAN Diesel & Turbo, also sees a trend in favour of gas engines. “Following the gas engine market and the statistics,” he says, “we can see a rising demand for engines to take on what used to be typical turbine applications.” This is due, he believes, to several factors: “The energy systems are changing and baseload applications are losing significance. Today’s plants need to manage fluctuating loads and offer a high efficiency of engines at the same time, e.g. in CHP applications. But even with regards to baseload, engine combined cycle plants make a good case.”

Gas engines also offer “less temperature and altitude dependence. Over the last years we’ve seen big [gas engine power] plants being created. MAN’s largest plant in operation is 340 MW. Ten years ago nobody would have dreamt of engine plants that size. Engines are moving into domains traditionally dominated by turbines,” he concludes.

There is a growing need for more flexible power solutions

Credit: GE

However, he adds that as a maker of both gas engines and gas turbines, MAN can see things from both sides. “We as a supplier have to educate our customers on the benefits each technology brings to the table, depending on the application. For instance, gas turbines will always have an important role to play, wherever steam is needed, e.g. in the chemical industry. Also, when I see a requirement in the market for an 800 MW power station, I know this is not a project I will look into [as an engine supplier].

“The power range up to 300 MW is an area we are aggressively targeting because here engines can offer benefits, which can definitely make a difference,” he notes. But, in the end, “you have to look at the details of every project. Some projects will clearly fit into this corner and some into the other – but there is a clear trend and in some segments it will be more difficult to make a case for gas turbines as larger gas engines become available.”

And gas engines are indeed getting larger, with MAN itself helping the trend along. “What we are announcing this year at POWER-GEN Europe is a 20.7 MW gas engine – the largest in the world – which again stretches the area where we can be competitive,” Tütken notes.

“Over the last years we have seen the gas engine market coming from 2 or 4 MW to the 10 MW class, then the 17, 18 MW class, and now to 20 MW,” he says. “We will have to see what power densities we will reach further on. There are limits of course, but currently there is still room for further increases in power as well as efficiency.”

Efficiency and flexibility: twin goals

Industry players agree that improvements in efficiency and flexibility equal increased competitiveness for gas engines, and indeed GE (in March) and MAN (in April) have both recently announced the achievement of engine efficiencies of over 50 per cent.

MAN’s Tütken says his firm has been working on this development for a while: “We intensified our development programme for gas engines six to seven years ago and went through various stages of development,” he explains. “This superior efficiency we’re now seeing is a combination of improved and partly new models for gas engines combined with an innovative and efficient turbocharger setup.

Design for Stadtwerke Kiel’s 200 MW CHP project in Kiel, Germany

Credit: Wärtsilä

“We are reaching the highest efficiencies with a two-stage turbocharger solution, a technology which we have been using for liquid engines for years and have now applied to gas engines,” he adds. “The combination of optimized gas engines, spark plugs, ignition timing and increased pressure of the engine, together with the two-stage advantages, takes us beyond 50 per cent.” How much beyond it “depends on the customer application,” he says. “When we talk efficiencies we ask the customer what he really wants. We have three basic application situations: single cycle, where we can achieve close to 51 per cent efficiency; in combined cycle mode, which is especially applicable for baseload operation, we attach a steam recovery system and a steam turbine and land in the area of 52+ per cent. And with a combined heat and power solution we can reach numbers beyond 90 per cent.”

According to GE’s Wetzlmayer, “Ten years ago people said 50 per cent electrical efficiency was not possible. Just a few weeks ago we confirmed it is possible, and of course we are very proud of it, but electrical efficiency is only one part of a recip[rocating engine]. If you ran that engine in CHP, we are currently at about 90 per cent total [efficiency]. If you add a heat pump to bring the heat up again, you can achieve efficiency levels of 100 per cent today (we have shown 95 per cent). In single cycle our 60 Hz engines have already proven 49 per cent electrical efficiency in tests, and now 50.1 per cent.”

He also notes the importance of flexibility: “If you have renewables coming in, within a few minutes you have to make sure you get the power you miss on the renewable side. If there are clouds or rain, power goes significantly down, similar to wind, and then you have to make sure the backup power is extremely fast. With a reciprocating engine you can be on the grid within a minute and have full power within five minutes – another big advantage. Compared to a 100 MW turbine, if you have ten 10 MW engines and a very volatile power profile, you can just shut down two to three engines and still run with all the others on full power and efficiency, while certain gas turbines can be dispatched at loads as low as 20 per cent of full load and can respond at rates in excess of 50 MW per minute, enabling rapid response to sudden changes in load or renewable energy production, but then efficiency goes significantly down if you run on part load.”

According to Wärtsilä’s Rajewski, project type is a key consideration in the efficiency that can be achieved. “In CHP applications we basically match the total efficiency of CCGTs; ours is exactly the same. A little bit different power-to-heat ratio,” he says. “It is a popular belief – and it’s true – that with CCGTs it’s possible to reach electrical efficiencies of over 60 per cent, whereas engine technology is only around 50 per cent – but it’s true only for pure power plants. In CHP plants, the combined cycle uses its electrical efficiency if heat is to be recovered; for CHP, electrical efficiency is almost equal. The total amount of fuel energy converted to both useful forms of energy is pretty much the same – 85-90 per cent depending on local conditions.”

However, he notes that efficiency is not the only consideration in choosing a technology. “Even if combined cycles are slightly cheaper to run, then we are much cheaper to build and within a typical lifetime [the costs] cancel each other out. CCGTs’ maintenance cost is slightly cheaper, but not such a big difference as many people seem to believe – a little bit lower for CCGTs – it’s an inherent feature of the technology. It depends on the organization of the maintenance process and how long-term service agreements are signed,” he explains.

“The slightly higher electrical efficiency of CCGTs means that if the target is electricity, then perhaps CCGT comes out a little better at least in big-scale applications,” he continues, “but if the purpose is to build a CHP plant in a city and its main purpose is delivering heat, a CCGT plant is going to be bigger because for the same amount of heat it will generate more electricity. The larger plant will be more expensive and this undermines the feasibility just a little bit more.” In addition, he says, “engine technology is much easier to adapt to the specific needs of customers because we are adding identical units so can match their needs and make a step-by-step extension. If a city needs 10 per cent more, not today but 10 years from now, we can easily add a unit or two; in the case of CCGTs this is basically impossible.”

New markets and future trends

Delta Energy & Environment (Delta-ee) is a consultancy specializing in global heat and distributed energy markets. Dina Darshini, a market analyst with Delta-ee, says: “In my opinion, Wärtsilä is successfully marketing itself as a key player that is able to respond to a particular market need – the need for decentralized systems and flexible generation amidst more intermittent renewables coming online. The market for distributed power systems sized 10 MWe and above has traditionally been more oriented towards smaller gas turbines and less towards internal combustion engines. But Wärtsilä is slowly gaining market share and I anticipate further decline of the small gas turbine market share.

“And it is not just Wärtsilä,” she continues. “Take the US market, for example: GE introduced its 9.5 MWe gas engine in 2014 and has already agreed to supply six engines to Sky Global (an IPP). CAT will be supplying twelve 9 MWe engines to Sunflower Electric Power Corp for a 110 MWe plant as well. MAN Diesel & Turbo are also actively looking for opportunities with their 18 MWe unit.”

The need for fuel flexibility is another growing trend

Credit: MAN Diesel & Turbo

Wärtsilä’s Rajewski says: “In some markets we have commissioned external analyses which indicate that engine technology with high flexibility and the ability to start up very fast is able to catch profits from very rapid price changes in the market – this is particularly true for some of the US energy markets.” And he adds that “the more volatile European markets are becoming, the more useful engine technology’s features will be. Small Danish CHP plants are now starting up and shutting down according to intra-day electricity market prices – they can start up immediately when the wind starts blowing. This model will be propagating to other countries with a higher share of renewable energy,” he predicts.

GE’s Wetzlmayer notes that “in emerging countries, of course, we talk about base load, but the landscape there is also very distributed because most of the time you can’t invest in transmission lines. If you go to Southeast Asia – Indonesia, Thailand – or Pakistan or Bangladesh, these countries all invest in smaller power generation equipment because it’s faster – you can install it in a couple of months – and highly flexible, so you don’t need to build huge transmission lines. Very often industry, not the government or the state, invests in those countries because industry, of course, is interested in having reliable power. In all those countries gas is available, and the industry builds the power plant first of all for their own purpose, for heat and power production, and secondly also provides heat and power to the city or the region. This is a trend we see in emerging countries.”

The need for fuel flexibility is another growing trend, and Wetzlmayer believes that demand for multi-fuel engines is set to increase worldwide. He explains that “if today in Nigeria you are a company, and today you don’t have gas available, but you know that in the next couple of years a pipeline will be built or there is LNG coming, you start your business with diesel engines because the grid is not very reliable or you are in a remote location with no electricity. You know gas is coming soon, in the next couple of years, and gas is one-third the price of diesel. So you ask for a product that can burn gas and diesel because you’ll switch as soon as gas comes.”

“Even in Europe,” he continues, “customers ask me: ‘Now I have a gas engine, but what happens if Russia cuts the gas line, what can I do with my engine?’ Also those people think more and more ‘Is there a high-efficiency technology around?’ Our focus is mainly on the emerging world, however standby generators are also needed in the developed world and that’s also our focus. Emissions and fuel costs are always important even if you run only 500 hours per year.”

MAN’s Tütken echoes this theme. “Customers are seeing cost advantages and environmental advantages from using gas,” he says. “But it’s also clear that distribution and support networks for gas in [developing] countries are not yet there, or not yet as stable as they might be for liquid fuel logistics. Accordingly, quite a number of customers are still looking for fuel flexibility to cover the risk of interruptions in the gas supply.

“We offer an engine that can run on heavy fuel oil as well as gas,” he continues. “We’ve secured orders in Africa for mining, but also in Europe for customers setting up infrastructure who want to have security of supply. What we also see is that customers are more interested in different gas qualities. With engines, new technology can help accept lower gas quality, so we’re also flexible here. It goes without saying that heavy fuel oil engines can also burn diesel.

“An important aspect of why customers are going to engines is that, because these engines can really burn the cheapest liquid fuel and also gas in an efficient way, typically in the engine there might be conversion possibilities. It’s a flexible solution, whatever happens to that customer over the 20 to 40 years of plant lifetime.”