Microturbines: the natural choice?
There has been much talk about the growth of distributed generation and the role of the microturbine in that market. But while not everyone is convinced of their potential in a deregulated market, there may be a case for predicting growth in the cogeneration sector.
You could go to a conference everyday in the US on distributed generation. They start off by asking: What is distributed generation? and spend the first hour saying this may be something as small as 1 kW going up to installations as big as 50 MW”. Although most of us are familiar with this scenario not all are convinced that the market is worthy of the hype just yet.
“We`re not looking for distributed generation, per se, we`re looking for economical generation. When you get down to the small sized units, at the moment distributed generation is usually not economical,” continued Mark Axford, vice president of S&S Energy Products, which sells GE industrial and aeroderivative turbines.
Demand in the US is growing at about 3 per cent a year. This, combined with a deregulating market which is seeing utilities trying to capture customers outside of their traditional geographical markets, has made gas turbines become the technology of choice for entering new markets quickly.
Last year the reported orders worldwide for gas turbines of 10 MW and larger was 54 GW. This compares to the previous highest figure of 28 GW. Of the 54 GW, 31 GW were placed in the US. To put this into perspective, in 1997 only 500 MW was ordered in the US.
Natural gas fired plant is the obvious choice for future capacity but not necessarily as distributed generation using microturbines.
You have heard the scenario: `just imagine putting one of these [distributed generation] plants at every McDonalds, but this not how the likes of McDonalds is doing electricity.
Axford explained: “They are going through aggregators. They`ll cut a deal with an aggregator in California to get electricity for 1000 restaurants. These might need, say, a combined total of 75 MW – a large basket of electricity which will find sellers to compete. The aggregators would make all the commercial arrangements to get the electricity to the restaurants. In the current market `a McDonalds` is unlikely to put in a thousand microturbines.”
In spite of this market situation, GE is still taking a pragmatic approach to the distributed generation market – essentially covering all its bases in case the market does take off. Last year it formed an alliance with microturbine manufacturer, Elliott Energy Systems to distribute microturbines worldwide.
Explaining GE`s approach Frank Scovello, director of product and market development for GE microgeneration commented: “GE`s view is that the distributed generation market is growing as a whole. It is too early to say whether the dominant technology will be microturbines, fuel cells, solar or wind. GE is positioned to take advantage of this new market as it takes off.”
Scovello explained how he saw the future of the microturbine: “The price of the microturbine will determine where it plays in the market. With the current price levels, the concept of grid displacement in the US on a wide scale is just not going to happen. There is just no economic driver to do this.”
Some see the initial market for microturbines in applications such as remote prime power but Scovello is not convinced: “Microturbines require relatively high gas pressure, in the region of 75 psi. So if there is no low cost reliable compressor included in the system, you have to make sure there is fuel available at this pressure.
“If the market is for remote prime power applications the next question is: why a microturbine over a reciprocating engine? The most common answer is higher reliability and lower operation and maintenance costs – neither of which have yet been demonstrated for a microturbine. This means penetration in this market will not happen overnight.”.
Scovello does concede, however, that there are some technology issues which could help the microturbine find its true niche. “One advantage that microturbines have over reciprocating engines is an inverter system, which addresses certain power quality issues. If you look at industries which need very clean power, then all of a sudden microturbines become a very valuable commodity – once they demonstrate their reliability.”
In developed countries, customer needs for clean reliable power has become more sophisticated. “Clean power is a must for manufacturing plants,” said Richard Sanders executive vice president of Elliott Energy Systems. “We see a lot of movement towards on-site generation to provide sophisticated manufacturing processes where their inventory, security systems are all tied to power.
According to Sanders, the power quality issue makes the price of power irrelevant. “When you go into a manufacturing plant, they don`t talk about the cost of power. They talk about the cost of producing their widget per year. This includes non-productive down-time, raw materials and everything else. I used to run the automation group for Daimler-Benz in North America. When a plant like that goes off line for eight seconds, you are looking at a $250 000 expense in downtime.”
Sanders stressed it was not just the cost of power that would determine the fate of distributed generation. He saw the backup power issue as crucial, citing the massive outage in New Zealand last year and the ice storms in Canada which saw people left powerless. “This is where the utilities are off base. If I were selling an on-site power system it would not be based purely on the price of power. It would be based on the security, reliability and efficiency of the power that can be delivered.
“This is where utilities are missing the boat. I have met with a lot of utilities and they are saying what IBM said about the PC – they said it would never happen.”
Scovello, however, sees it slightly differently: “It`s not like the personal computer where people had no alternative. Here, the alternative is that you turn on the light switch.”
Scovello likens the microturbine to the cellular phone. “What drove the market for cellular phones was lack of infrastructure in developing countries where there was no alternative for phones. This provided sufficient volumes to drive prices down to a point where the cell phone could come back into the US to compete with the alternatives. The cell phone has been around for over 10 years but it took a long time for the market to ramp-up.”
So where`s the market?
With the odd exception, microturbine technology for distributed generation is predominantly coming from the US. This is partly because the technology formed part of the US hybrid vehicle programme. Geographically, the market will, however, probably kick-off outside the US. Conditions in Europe, for example, are more suited to distributed generation where markets are more deregulated and utility electricity prices tend to be slightly higher than in the US.
In terms of market segment, one area where there seems to be a level of common agreement on the growth of distributed generation on a global basis is in the cogeneration market.
Tom Bray, president and general manager at Vericor Power Systems LLC (the company formed out of AlliedSignal`s alliance with MTU), said: “There is a huge opportunity for distributed generation where there is a need for heat. Developers have done an analysis which says that if you took advantage of all the heat sinks in the US, you could replace half of the standard generation with some form of cogeneration or trigeneration scheme. In the US cogeneration represents less than 10 per cent of electricity generation so clearly there is a huge opportunity.”
“If you look at European countries like some of the Scandinavian countries, about 40 per cent of electricity comes from cogeneration or distributed generation. For an industrialised nation, a reasonable target for electricity from cogeneration or distributed generation would be anything between 30 and 50 per cent. “
Elliott also sees cogeneration and the market outside the US as its main market. “Cogeneration will drive the market. When you talk about the microturbine, the speed and fuel flow is a dynamic of its own. Natural gas is not a problem, but outside the US and Europe the primary fuel is heavy dirty diesel. These have an ashing effect when they burn, which clogs injectors. We are doing development work to enable our units to run on this fuel.”
So it seems that growing the market outside the US before coming back to compete in the market of their origin could be the way microturbines develop – like Scovello`s cell phone scenario.
Prices will only come down with volume and the general view is that distributed generation products will first be seen in niche markets. The question is will these volumes be sufficient to begin the slide in price to allow them to compete in a wider market. GE does not think these volumes will come as quickly as people have been led to believe.
“People say India could be a huge market. But India has reciprocating engines at $150/kW and a market that is satisfied if that unit operates for six hours a day. So how do you compete there?,” noted Scovello.
So while there is agreement that the market for distributed generation will grow, albeit at a pace which none can convincingly predict, the jury is still out on the role of the microturbine when the market does eventually come.
Figure 1. The cogneration market represents a big opportunity
Figure 2. Small gas turbines require less maintenance and have greater reliability