There is no doubting the importance of the industrial generating sector. According to a Datamonitor report, between 1993 and 1998 an estimated 10.6 GW of new industrial capacity was ordered across the EU.
On a global scale, the drivers for industrial generation are different. In developing countries, the need for on-site power stems from the lack of an electricity infrastructure to provide sufficient, reliable electricity to support industry which in turn drives infrastructure growth.
In developed nations, reduced electricity cost for industry was an initial driver for on-site generation. Further, the installation of cogeneration plant made sense for industries with large heat requirements.
Despite the massive market in the EU, the path of industrial generation seems uncertain in the short term. Deregulation is seeming to cut both ways. In the early days of market liberalization, deregulation encouraged industrial companies to generate their own electricity at a cost which was often lower than that of the local utility. They would then sell electricity to the grid during times of peak demand.
Further liberalization will, however, lead to reductions in electricity prices from utilities as price wars begin across Europe. Already the uncertainty in future electricity prices is having a knock-on effect in the industrial sector. According to Datamonitor figures, last year saw a slowdown in order volumes for industrial equipment in the EU fall from 1536 MW in 1997 to just 902 MW in 1998.
Although there has been a significant pickup in 1999, forecasts for the next five years are not quite as promising as the last five. There are two schools of thought as to which way the market will go. One is that in a free market, industrial generation will decrease. “As markets deregulate, companies will focus more on core business,” said Stefan Storholm of W
Another view is that the slowdown, will only be temporary and that market uncertainty will not stop investment. According to Datamonitor, factors such as process steam requirements and deployment grants will continue to drive investment. It cites the UK experience which has seen industrial cogeneration increase in popularity despite a competitive supply market which has reduced power prices.
Technology will also play a key role in the growth of industrial generation. Many potential generators are put off by investment costs. Although steam turbines represent the main prime mover for industrial generation, the main developments are coming from the stationary engine and gas turbine sectors.
Gas turbine manufacturers are increasing the efficiency of the small units, in some cases through the use of aeroderivative technology. In the stationary engine market dual fuel engines are providing fuel flexibility to the users – an important aspect as fuel is the most significant cost over the lifetime of the plant.
Other technologies like microturbines and fuel cells are also beginning to find their way into industrial plants with smaller electricity needs. Whether these will ever find widespread use in industry, it is too early to say.
What we can say, however, is that the next five years will be interesting as market structures change and technologies advance. The best advice for industrial users is to keep both your eyes and minds open to the opportunities and pitfalls that lay ahead.