Why stationary power is a growth market for gas engines

Latest research by Delta Energy & Environment shows that the global stationary power gas engine market stood at an annual installed capacity addition of about 6 GWe in 2017, and is set to grow to some 7.5 GWe / year by 2022. The scope of the research is restricted to gas engines (ie, reciprocating engines) sized 400 kWe and above and only takes account of gaseous- fuel-based machines in stationary power applications (ie, no dual-fuel, diesel, HFO- based engines, marine engines, compression machines, or rental units <3 years).

Figure 1 provides a regional breakdown of the >400 kWe gas engine market (MWe/ year).

Europe (including Russia and Turkey) clearly is the #1 region in the world, with an annual installed capacity addition of approximately 2 GWe in 2017.

The region suffered a blow in 2015 and 2016 as Germany, Russia, and Turkey each suffered various market barriers at the same time:

• Germany: Uncertainty surrounding regulatory support for CHP (ie, the CHP Law 2016). During 2015 we witnessed a decline in gas engine sales while the CHP sector waited for clarity on future policy support. There was an upturn in sales in 2016 and 2017.
• Russia: A deeper than expected recession (~4% GDP decline from 2014 to 2015) impacted gas engine sales.
• Turkey: Gas engine sales fell in 2015 and 2016 due to political instability, a weakening economy, falling energy prices and a weak currency.

North America is ranked second, with South Asia / South East Asia / Pacific third. We expect the market in the East Asia region to almost double in size during the next five years, with most growth coming from China.

Looking at engine size distribution, this differs depending on region and application. The 400 kWe – 2 MWe size bands, especially in CHP applications, are most dominant in Europe. Distributed power-only applications for the 400kWe – 2MWe size range are dominant in emerging markets where energy demand is increasing and power shortages are common. Large engines (>5 MWe) are more common in Europe and North America across industrial sites and district heating schemes, in line with the ongoing trend towards more flexible and larger gas-engine based power plants.

Turbines vs pistons

Where does this leave the market for similar- sized gas turbines? We think gas turbines in the capacity range 1-30 MWe, especially in CHP appplications, will be likely to continue to have the majority market share for mid-sized and large industrial sites with electricity and high temperature steam/ heat needs. However, gas fuelled piston engines in the 100 kWe – 20 MWe range are increasingly stealing market share across a variety of other end-use sectors.

Figure 2 highlights the gradual shifts towards gas engines that we believe are likely to happen by 2020-2025.

Delta Energy & Environment has identified three “battlegrounds” where we are currently witnessing gas engines winning market share relative to gas turbines: district heating with CHP; large commercial buildings; and peaking plants. How might these sectors of the market unfold over the next 5 to 10 years? 

Battleground #1: district heating with CHP (> 25 MWe)

• Traditionally, larger district heating (DH) projects that employ CHP have relied on gas turbines or coal. In many countries and regions, this will inevitably continue (eg, in Eastern Europe and some parts of Asia).

• However, there is growing evidence to suggest that DH schemes of the future will seek to utilise CHP plants which can operate flexibly in response to increasingly volatile electricity prices (while continuing to meet heat demands). This positions gas engines well to increase market share in the CHP sector at the expense of gas turbines, which are less able to ramp up/ramp down quickly.

• Germany is leading the charge in this regard with the announcement of 100 MWe-scale CHP plants (190 MWe and 100 MWe) using gas engines to be installed within DH schemes in 2018.

• In future, we expect greater demand for flexible CHP projects in DH schemes. This will likely be most evident in Western Europe and North America.

Battleground #2: large commercial buildings/campuses

• This sector is one in which gas engines have made significant in-roads in market share relative to gas turbines in recent years, and the trend will likely continue. With more gas engine products in the larger (>3 MWe) size range coming to the market, with improved performance (ie, greater electrical efficiencies), and a greater demand for flexible operation (perhaps the most significant development), gas turbine suppliers are increasingly coming under pressure from gas engines.

• A couple of gas turbine packagers have effectively withdrawn from the European market as a result of low sales. While this was not purely down to competition from gas engines, Delta Energy & Environment understands this to be a significant contributory factor.

Battleground #3: peaking power plants

• By definition, peaking power plants need to have the ability to operate flexibly, often with fast ramp up/ramp down rates. Gas engines are well placed to meet these needs.

• The transition to gas engines is already well underway (although gas turbines will continue to be commonplace, especially within larger peaking plants, ie > 100 MWe in size).

• Wärtsilä, in particular, has recently been successful in winning orders for new gas-fired peaking power plants using reciprocating engines, often with project requirements for quick delivery and to provide electric grid stability. We expect gas engines to be selected for an increasing number of such peaking plant projects. 

*Dina Darshini is a principal market analyst at Delta Energy & Environment, which is a consultancy specialising in global heat and distributed energy markets. To find out more about Delta Energy & Environment’s distributed power research activities contact dina.darshini@delta-ee.com