A report from Barclays Plc said Mitsubishi Hitachi Power Systems (MHPS) received more than half of all global orders for gas-fueled turbines in the first quarter of 2018, the company’s best-ever performance in a market that has seen traditional gas turbine manufacturers struggle in recent months.
The market report from the London, UK-based multinational investment bank was released May 3. It said Germany-based Siemens AG had 26% of global orders in 1Q2018, with Boston, Mass.-based General Electric (GE)—long the leader in worldwide turbine sales—seeing its share drop to 14%. GE CEO John Flannery, who took the reins of the company last year and immediately set out to restructure its operations, has said GE was slow in recognizing slowing demand for gas-fueled turbines. Flannery has changed the leadership of the company’s struggling Power division and said the group needs a “right-sizing” for market structure, including changes to portfolio, supply chain, and supply base by 2020.
Flannery’s outline for changes came at almost the same time in November 2017 as Siemens announced it would consolidate its power divisions and cut 6,900 jobs. Siemens, in a news release announcing the cuts, also said “Global demand for large gas turbines (generating more than 100 megawatts) has fallen drastically and is expected to level out at around 110 turbines a year. By contrast, the technical manufacturing capacity of all producers worldwide is estimated at around 400 turbines.”
A New Leader
Mitsubishi last year trumpeted news that it had taken the top spot in global orders for heavy-duty gas turbines, according to data from McCoy Power Reports, which said MHPS had 1Q2017 market share of almost 32% for its “advanced class” turbines. Paul Browning, the company’s president and CEO, in an interview with POWER said the success of the company’s JAC gas turbine, an air-cooled J-series model with flexible ramping capability and high efficiency, was helping drive the company’s success.
Though Thursday’s report said Mitsubishi won the most contracts in 1Q2018, it noted that Siemens led the market in the number of gas-turbine units sold, at 30%. GE was next at 27% and Mitsubishi had 14%.
Jamie Miller, GE’s chief financial officer, in an April 20 conference call with analysts said the gas market has not kept pace with the company expectations. He added, though, that GE expects business will improve in the second half of 2018, with more turbine shipments.
Barclays analyst Julian Mitchell in the bank’s report said that its findings could have a positive outcome for GE. Mitchell said the lagging performance “may also reflect a greater internal focus at the company on restructuring the Power business, which should be well-received by investors” moving forward.
Signs of Market Growth
There are signs of growth in the gas turbine market, as POWER has reported. Analysts who spoke with POWER earlier this year said gas-fired generation will continue to increase. The growth in distributed gas generation also is a good sign. And efficiency improvements in gas turbines also are expected to advance global sales.
Global technology research and advisory company Technavio on May 4 released its latest report on the global gas turbine market, saying the Asia-Pacific region “is expected to become the largest revenue contributing region in the market by 2020 and is projected to occupy more than 49% of the overall market share. The high demand for power generation is attributed to the rising economic developments in the region. Factors such as the surge in carbon emission concerns due to prominence of coal-based power generation fueled the demand for gas turbines in the market. The growing need to replace coal-fired plants with natural gas-based gas turbine plants influence the market’s growth.”
Technavio previously has said “The growing demand for distributed power generation is one of the primary drivers for this market. Distributed power technologies use natural gas and are highly flexible, and applicable across various sectors including electric power, propulsion, and mechanical power. They are widely available, compact, more efficient, and less expensive, and help in meeting the global energy requirements. Gas turbines form an integral part of distributed power technologies, and the growth of distributed power systems will augment the demand for gas turbines.”
—Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine).