Diverse and dynamic

Rice: GE expects a high level of activity in the central and eastern European power market
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These are certainly challenging times for the global energy business. Deregulation issues, wide swings in electricity prices, electricity shortages, and even the collapse of one of the world’s major energy companies, have plunged the industry into uncharted territory.

It is critical that we assess the changing global market conditions and make the adjustments that will help our companies, our customers and the energy industry succeed in the years ahead.

For the past several years, activity in the USA has clearly set the pace for the world power market. Now, as most of us in the industry had anticipated, that market surge is slowing. We must look for new growth opportunities in other parts of the world.

One region offering considerable promise over the next several years is Europe, where basic market activity has increased and has shifted dramatically to natural gas-based generation, including large combined cycle plants.

We expect load growth in Europe to continue at a moderate 2-3 per cent, with wide variations in reserve margins across the region. The increasing availability of natural gas, coupled with environmental concerns, will create some displacement opportunities, and deregulation and privatization will continue to drive mergers and acquisitions.

Ever-changing market factors such as electricity prices, deregulation, fuel cost and diversity make it extremely difficult to predict how much capacity will be added in the next few years. Our cautious view is that approximately 165 GW of new capacity will be developed in Europe, through about 2010.

There are a couple of key factors driving growth opportunities in Europe. One is the need for fundamental load growth in countries with growing economies. The other is deregulation. As we have seen in the UK and other markets around the world that have been deregulated, there has been fairly fast-paced building activity, including some displacement of existing and less efficient power plants.

In addition to traditional, in-country activity by the national and local power entities, more and more European energy companies are operating beyond their historic territories, buying assets in countries outside their own. With utilities aggressively expanding their traditional roles, an extremely dynamic environment has been created across Europe.

Among the European countries with the most potential for significant, near-term capacity growth are Spain and Italy. Each has need for fundamental load growth to support their expanding economies. In Spain, where several dry years have placed a heavy burden on the country’s hydropower industry, there also is a need to increase the country’s generation mix with the addition of thermal power plants. In Italy, deregulation is driving market activity.

Both Spain and Italy also need to be well prepared for self-capacity, since the amount of power they can import is limited by the number of transmission lines coming over the mountains from other European countries.

Spain and Italy, and Western Europe in general, are displaying strong interest in large, gas turbine combined cycle projects. This trend is easy to explain. Gas remains relatively inexpensive and is clean. Much of the gas for western European power projects will come from Russia and Kazakhstan. Some will come in the form of LNG imported from the Middle East.

In addition to the inherent environmental benefits of gas, combined cycle technology offers high levels of thermal efficiency, enabling power plant owners and operators to compete effectively in this era of deregulation. In many parts of Europe, older and less efficient power plants are likely to be replaced by new, gas-fired facilities.

Integrated Gasification Combined Cycle (IGCC) also is generating considerable interest, in Europe and elsewhere. IGCC was conceived as a power generation technology to burn coal, one of the world’s most abundant fuels, in an environmentally acceptable manner. Today, the technology has been demonstrated in 24 projects around the world, including ten in Europe.

Along with gas, Western Europe has a major focus on renewable, or green, energy. It is an environment that encourages wind power, biomass, solar and related kinds of generation.

There is a significant need for additional power in central and eastern Europe and we expect a high level of activity there, but the region faces financial constraints. Meeting the energy requirements of the area is less a matter of technology and more a matter of available financing.

In addition to new power plant construction, there are efforts in the region to finish existing projects. Romania, for example, has a number of hydro projects in various stages of completion, and there are some nuclear projects under way in both Romania and Bulgaria. Other European countries, such as Finland, also have demonstrated interest in nuclear.

The European energy industry is as diverse and dynamic as Europe itself. The next few years will be challenging and busy ones across the region for those of us who provide technology and services to help power the continent.

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