Turbines Headed for 50% Meltdown
High natural gas prices, performance issues and higher than
expected maintenance costs, a general economic slowdown and several
other key factors will combine to create a "near-term meltdown in
the gas turbine market," according to a report by WEFA, Inc.
Reporting on a study about to be published by the analysis and
consulting firm based in Eddystone, PA, one of its authors
predicted "a substantial short-term correction in the gas turbine
market...which could render 50% of current North American projects
uneconomic." Jason Makansi, principal of Makansi & Co., pointed
to other factors, such as the inexperience of many generating
companies with the hedging and trading skills necessary to optimize
profits in the peaking market, the rise of "stealth capacity" from
refitted or otherwise optimized coal and nuclear plants, "gas
transportation bottlenecks and persistent issues with safety and
explosions," and "a protracted quasi-regulatory quagmire."
Under the heading of stealth capacity, "old assets are being
purchased or merged into new electric economy organizations that
will improve capacity factors at coal-fired plants from the typical
60-65% to perhaps 80-85% within five years." A major part of the
gain will come simply from operating the assets to serve the market
and not just a single service territory, Makansi said. He reported
on the soon-to-be released study at WEFA's World Economic
Conference last week in New York.
The nuclear industry is experiencing a similar transformation.
Several years ago predictions were that as much as one-third of
nuclear plants would soon be retired. Today, with many units sold
to new owners and re-licensed, it appears the retirement rate will
be more like 5-10% and productivity for the remaining units will be
The WEFA report points to a "technological correction" for the
advanced technology "F-Class" turbines going into most new plants
today, as unexpected problems crop up with extended use. There are
a host of problems in the technology area, which can be met, but at
a cost: the new units may not meet emissions targets without
impacting efficiency, heat rate and durability; fuel-switching is
not living up to its advance billing; units may not perform as well
at high ambient temperatures; overhauls are required more
frequently than had been expected; maintenance costs also are
exceeding expectations; and fuel quality is becoming an issue.
"Variable O&M costs at some projects with F-class machines
are running as high as $25,000 to $30,000 per start. Considering
that some of these machines may exhibit several hundred starts in a
year, you have a variation of that worn phrase, "a start here, a
start there, pretty soon you're talking about real money!"
"The bottom line of all this is that many of the claimed
performance advantages of the gas turbine have been lost or
severely eroded." Makansi also pointed to similar experiences with
gas turbines in the U.K., Asia, Australia, and Chile. He predicted
a turbine market correction "and an unavoidable plateau to work out
technological kinks, modify designs and inject reality into
business models. We believe all this will push consolidation in the
generation sector of the electricity industry even faster." Makansi
predicted about half a dozen major players will control 50% of the
generation capacity in the U.S. within five to 10 years.
Co-authors of the report include Robert Swanekamp, a principal
of Competitive Power Resources; engineering consultant Jeffrey J.
Fassett; and Kemm Farney, vice president, WEFA Electric Power
Service. For more information go to www.wefa.com.