The global market for microturbines in combined heat and power applications is predicted to top 4 GW by 2024, but this growth will not necessarily be a smooth ride. Tildy Bayar spoke with two firms at opposite ends of the commercial spectrum to find out how each strategises their market approach.
According to new analysis from Navigant Research, the expansion of shale oil and gas production across North America, and the potential for shale gas production in other regions such as Latin America, Asia Pacific and Africa, has increased the market potential for microturbine technology from 30 kW to 250 kW. In addition, microturbines’ compatibility with a wide range of opportunity fuels makes them an attractive solution in combined heat and power (CHP) systems in regions where the cost of grid power is high.
However, although Navigant has recorded steady revenue growth in the global microturbine market since 2010, slowing development activity in the oil and gas sector in the past year has led to a drop in sales for leading microturbine manufacturers. But according to Navigant, this is merely a temporary situation: the firm expects the market to bounce back as shale oil and gas development continues, with revenues from annual microturbine installations predicted to top $1 billion by 2020. In all, over 4 GW of microturbine capacity is predicted to be installed globally through 2024, largely in North America and Asia Pacific.
COSPP spoke with two microturbine firms at opposite ends of the market spectrum – one the established market leader, with an 85% market share; one a new sector entrant with significant market potential – to discover the commonalities and differences in how each has strategised its market approach.
|Microturbine installation in Recla, Italy Credit: Capstone Turbine|
The market leader
Jim Crouse, Executive Vice-President of Sales and Marketing at microturbine manufacturer Capstone Turbine, says he ‘would agree with’ Navigant’s analysis. Although increased shale gas availability in the US ‘hasn’t been as impactful on the cogen side,’ he notes, it has ‘certainly been helpful from an oil and gas perspective.’
However, he said that ‘over time I would agree that the availability of natural gas continues to drive our commercial and industrial CHP business, which is currently good, and we certainly see it growing in the US.’ In other parts of the world, he added, the shale gas sector has been much slower to develop, so his firm is ‘yet to see much in the way of benefit’. And he noted that, while Capstone has seen a slowdown in drilling, it has not been ‘a dramatic dropoff’ as it has in some other areas of the oil and gas business. ‘This year, more than last, we’ll see the impacts,’ he says.
These developments have changed Capstone’s approach to the oil and gas market over the past year and a half. ‘Customers that traditionally wanted to purchase equipment are now looking at other alternatives, either leasing or rental,’ says Crouse, so that they can ‘provide needed power out of their operational budgets vs their capital budgets.’ Rental power, he adds, has ‘taken up the slack’ as many planned projects were ‘slowed down, but not cancelled’. And while Capstone’s market share in the oil and gas space ‘varies quarter to quarter, depending on which projects get closed and ship’, and it has been as high as 65%-70%, Crouse says it’s ‘now more in the 50% range’.
‘Of the other 50% of our market,’ he notes, ‘probably 40% is commercial and industrial CHP. Of the last 10%, probably 8% or 9% of that is renewables. The last 1%-2% is “other” – hybrid electric vehicles, the marine sector, and newer markets.’ Among Capstone’s projects in these markets is a LNG-fueled combined cooling, heating and power (CCHP) installation on a river barge in Germany. Two 30 kW microturbines provide auxiliary power for the ship, while the heat is used for space conditioning and water heating, and an absorption chiller is used to make chilled water. According to Crouse, the packager working with Capstone is Microturbine Marine Energy (MME), which features a standard design that includes hot water heat recovery for the yacht industry. ‘More than half of the marine projects we do will incorporate CHP,’ Crouse says.
|Mictoturbines in Pawnee, Texas, US Credit: Capstone Turbine|
In the renewables sector, Capstone’s technology is used in CHP installations in ‘biogas applications, agricultural and food waste, food processing, breweries, landfills, waste water treatment plants and human waste treatment,’ Crouse says. Use of microturbines in renewable power and heat projects is ‘growing, but at a slower rate than some of the other markets,’ he adds.
In relation to the growing issue of fuel flexibility, Crouse notes that ‘in general, turbine technology is able to accommodate a wider range of fuels more readily than combustion engines. Engines tend to have to derate because detonation and other challenges are associated with fuels with lower octane ratings.’
Propane-fueled projects constitute a growing section of Capstone’s business, he says, and ‘high-BTU fuels in general are ok for us’.
Fuel availability issues can also be market drivers, leading to projects in places where the use of alternative fuels is necessary. As Crouse notes, the firm’s propane-fueled installations have focused on ‘Latin America in general’ and the US state of Hawaii – ‘any place where people have traditionally used diesel as fuel and there’s propane and/or LNG available, we provide a good option to switch from diesel,’ he says.
He also notes that island nations that used to subsidise the price of diesel ‘are finding that they don’t have the ability to subsidise quite as well as they used to, so again the cost of diesel is going up, the cost of electricity is going up, and there are challenges as they try and move to renewables-based generation schemes.’
Among these challenges, intermittency issues in relation to wind and solar power have proved to be drivers for the adoption of microturbine-based systems, he says, as power producers ‘have to invest in other assets to maintain grid stability.’
|An EnerTwin system
In terms of R&D, among Capstone’s projects in the works is a 370 kW two-spool microturbine which will boost electrical efficiencies ‘up into 40%-42% and still leave us with an exhaust stream that provides good recoverable energy,’ Crouse says, although the company is still ‘probably three years away from having anything that would start to look commercial’.
‘In the first phase we’re developing a 250 kW microturbine,’ he explains, ‘so a little larger than our current 200 kW, that will have improved efficiency in the 36% range. That programme is further along: we’re on track for commercialisation in next couple of years. The 370 [kW model] would follow that by a year or two, probably.’
In addition, he said the firm’s R&D focuses on ‘continuing to try to improve the combustion process, maintaining very low emissions out of the turbine, and the ongoing certification and combustion engineering work that we do regularly to try and maintain a leadership role from an emission perspective.’ The company is also doing ‘a lot of work in power electronics … to comply with some of the interconnection regulations,’ he notes. ‘Because we’re inverter-based generation, we see some changes, primarily in Europe, in relation to grid connection,’ and these changes are ‘driving features and benefits’.
‘Last year,’ he concluded, ‘we invested probably $1 million in test equipment to be able to do testing on power electronics to validate all of the changes we were making for different certification agencies.’
Asked whether he foresees any significant changes for his market, Crouse says: ‘No. I think trends in the utility industry tend to be slower than in other markets. Interest in CHP, and market awareness, continues to grow, and that helps us. General acceptance of microturbine technology also continues to grow.
‘We’d love to see a more major tipping point in the market, but we don’t have a business strategy that’s based on getting lucky. We see the general trends and market conditions continue to improve for CHP, and that’s the direction we’re headed.’
The new market entrant
Dutch company MTT’s product is the EnerTwin, a micro-CHP system which produces 3 kWe and 15 kWth. It features a permanent magnet-based microturbine designed with turbocharger components used in the automotive industry, the company says. It adds that the system can be used on its own for generating power and heat, or it can be configured in combination with a hot water buffer vessel, in a cascade of several units, or in combination with one or more boilers. This flexibility makes the EnerTwin suitable to be used in micro-CHP applications ranging from large private homes to small businesses, the company says.
According to MTT’s CEO, Willy Ahout, the system has been in development for two years, and is currently completing field testing. The tests have ‘only found eight issues, not bad for a new technology,’ he says. ‘Those things have been adapted and we’re now validating them in second-phase field tests.’
|EnerTwin system front view Credit: MTT|
The technology ‘seems to work well,’ he says. ‘We have clocked over 75,000 hours now, and three units have done more than 10,000 hours each.
‘This is with many start-stops,’ he adds, noting that although stopping from full load can cause overheating for turbine bearings, ‘for us this is not so much a problem, as the turbine is based on turbocharger components.’
In the second-phase field tests, he says, ‘we see that we are at our target specifications. Our net electrical efficiency at system level is 15%, while the overall efficiency (heat and power combined) is 90%.’
Ahout says that, in developing its technology, his company took an approach that was ‘a bit different’ from the major market players in the gas-fired microturbine sector. ‘Their approach,’ he says, ‘was pretty much that if you have a small turbine you can sell more of them; there are more advantages in terms of economies of scale and the system will gradually become cheaper, and you will achieve large markets.
‘Our approach is a little bit different: we use commercial off-the-shelf components as much as possible, such as turbocharger parts. We lose a little in efficiency, but have advantages due to economy of scale almost from the start of commercialisation.’
According to Ahout, the major players’ ‘line of thinking is correct, but they created a chicken-and-egg problem because they needed higher volumes to get a low price and the other way around. So maybe we are the iPad of the turbines, or even the iPhone. Cheap, reliable, low-cost and mass-manufactured.’ The EnerTwin system, he says, is expected to be around 40% cheaper than competing units.
Once MTT had developed its technology, he continues, ‘we needed to focus on a particular market. We had chosen micro-cogeneration, a common and large market, and also a market where the specific advantages of the microturbine are very important.’ Micro-cogeneration, he says, has ‘been around for 10 to 15 years now with no real breakthrough: the available systems are too expensive and/or the maintenance costs are too high.
‘With the long life of our gas turbine, and by using commercial off-the-shelf components, we will be able to tackle those two major problems to offer very low maintenance costs and also a very acceptable price at a relatively low volume.’
Ahout believes the EnerTwin system will be a good fit for ‘the top 5% to 10% of households’ in Europe – large houses with high heat demand – as well as in the small and light commercial sectors, such as bed-and-breakfasts, small family hotels, fitness centres and restaurants, which he says together represent 60% of MTT’s market potential.
‘That’s for micro-CHP,’ he says, ‘but we also see, from the oil and gas industry, quite an interest in our small gas turbine because the EnerTwin could fit very well in metering stations and gas decompression stations. Alongside gas pipelines,’ he explains, ‘every 50 km there is a metering station which keeps track of the quality and amount of gas, which is signalled to the SCADA.’ A metering station, he notes, uses around 3 kW of power.
As there is ‘no electricity in the middle of Kazakhstan’, but the operators ‘don’t want to use solar [power] because in winter it’s unreliable, and gas engines require too much maintenance, they really want gas turbines’. So, he says, the station’s operators install a larger microturbine-based system from a major player, ‘throw away 97% of the energy, and use 3 kW of electricity – that is something that can be improved by using our turbine’.
MTT’s initial market focus is on Europe – specifically Germany, France and the UK, Ahout says. However, he notes that ‘we get a lot of attention from Canada, the US and Russia, and also from China, South Korea. and Brazil. In Russia we have old contacts for oil and gas applications, but it’s a bit low-key due to the crisis and sanctions.’ The high amount of interest from the US and Canada has been due to the shale gas revolution, he says, with ‘many requests and enquiries from gas utilities, home service companies and installation companies to introduce our product to these markets’.
The company’s five-year plan, he says, is to ‘introduce the product in European markets, becoming commercial next year’. The first contracts have been signed with ‘a Belgian boiler manufacturer and a German party’. Next is certification for the US and Canadian markets, which requires ‘quite some paperwork, some engineering and adaptations in the power electronics’. And there are ‘at least one or two markets we approach that do not come from micro-CHP,’ so the firm ‘will have various product combinations in five years’.
‘If we look at our market applications, and compare them with other companies that offer micro gas turbines,’ Ahout notes, ‘as a result of our much smaller power range, we look much more in the way that solar PV or heating systems are marketed and commercialised – like a heating system that would fit in a large home. Whether you are an SME or a consumer, you can generate your own electricity.’
For more information on Capstone Turbine, visit www.capstoneturbine.com
For more information on MTT and the EnerTwin, visit www.enertwin.com