BY THE NUMBERS: 25% more GT capacity will be ordered for electric generation in the US this year than in 2012

AxfordMark Axford, the Houston-based turbine consultant considered by many to be the leading independent expert on gas-turbine markets, predicted at the Western Turbine Users Inc’s (WTUI) 2013 Conference (March 10-13, San Diego) that US orders for GTs would increase by 25% this year compared to 2012. Worldwide, he expects only a 5% increase, with the Eurozone’s crippling recession a major factor in the downward pressure on orders (less than 800 MW last year).

The Axford Report, as this consultant’s annual presentation at WTUI has come to be known, traditionally opens the meeting on the second day of the event. It is highly regarded by conference attendees and always attracts a large audience.

Axford is bullish on the US market because of favorable gas prices underpinned by promising reserves of shale gas. The availability of energy at low cost is a primary reason for the economic rebound in the manufacturing sector—particularly in Pennsylvania, Indiana, and Ohio. He said that coal “is under pressure” when the gas price is below $3.30/million Btu.

The market analyst began his well-prepared and impeccably delivered remarks almost apologetically for overestimating his AxSpectations of 20% US growth in 2012 compared to 2011. Actual US orders were up by about 10%. Worldwide, he had expected 5% growth and orders were down by 20%.

Geographically, 38% of the orders were from Asia, 20% from the Middle East. Regarding market share by OEM, Siemens and GE combined for 76% of the total order book in 2012; typically they have split three-quarters of annual GT sales. Mitsubishi emerged as a clear third last year, taking a 17% share.

In North America, 2012 orders for aeroderivative engines totaled 1800 MW, frames 7000 MW in round numbers. GE garnered 87% of the aero market. Rolls Royce received an order for one Trent for a project in Mexico; Pratt & Whitney sold only 60 MW and those two engines went to APR as trailer-mounted gensets for international delivery. In the frame sector, however, Siemens and Mitsubishi proved tough competition for GE, which won only 33% market share based on capacity.

Figs 1, 2. Axford BTN

Worldwide, aeros captured a 13% market share of all turbines ordered in 2012. Fig 1 shows the split between aeros and frames has remained relatively constant for the last several years, with frames capturing 84% to 87% of the business. But aeros are the clear choice among users for gas turbines rated between 18 and 65 MW, which includes all the LM engines supported by the WTUI (Fig 2).

Fig 3, Axford BTN

Analyzing 2012 orders placed for aeros from outside the US, Axford revealed that 57% were for LM2500s and another 23% for LM6000s. As you look at the Fig 3 pie chart it’s obvious that Perm Engine Co, a virtual unknown in GT circles, was a solid third place with 10% of the business—ahead of Pratt & Whitney and Rolls Royce. The Russian company, located in the city of

Perm, supplies simple-cycle and cogeneration systems for electric production, and compressor drivers for pipeline service. Sizes range from 2.5 to 25 MW. Its customer base is located primarily in the republics of the former Soviet Union.

Global orders for LM6000s totaled 42 engines in 2012, two fewer than in 2011. Interestingly, orders came in from 12 countries, with the US buying 10 units and the Eurozone none. Surprising, perhaps, was that orders for the LMS100 dropped dramatically from 16 in 2011 to two in 2012. To date, a total of 56 simple-cycle units have been ordered, 38 for the US. The consultant believes annual sales will rebound to 10 units this year.

Axford began wrapping up the presentation with a couple of charts that supported his prediction for a significant increase in US gas-turbine orders this year. Fig 4 shows the expected growth in US electricity consumption for 2013 as reported by DOE’s Energy Information Administration and by IHS CERA (many in the industry will remember this well-respected group by its former name, Cambridge Energy Research Associates).

Fig 4, Axford BTN

EIA predicts a 0.5% increase, CERA, which has its fingers on the pulse of the US economy, predicts more than three times that (1.6%). Back-of-the-envelope calculations by Axford offered valuable perspective on the difference between the numbers. He said the difference (red portion of the bar) translates to the annual generation by 1140 LM6000s operating at base load.

The impact of shale-gas discoveries in the US is shown in Fig 5. Axford believes the price of natural gas could remain low and stable for the next several years at least. Coal, which produces 42% of the nation’s electricity today, is expected to generate 37% at the end of 2017 according to government data. Gas, by contrast, which stood at 25% as 2013 dawned, is expected to grow to 30% within five years.

Fig 5, Axford BTN

Axford closed with these thoughts, among others:

• Europe’s recession continues, but the order rate for GTs should improve in 2013. One reason is that Germany is relearning its need for fossil generation.

• Order rate for gas turbines in Asia could leap upward if China’s “shale gale” materializes.

• Electricity rationing continues in Japan, which last year produced 45% of its electricity from LNG. In the aftermath of Fukushima, four-dozen nuclear units still wait for approval to restart. CCJ