The $2.3 billion European steam and gas turbine market is now on the upswing after hitting a trough in 2003, says a new report from market analysis firm Frost and Sullivan.
The escalating demand for electricity, particularly in central and eastern Europe (CEE), the decommissioning of both thermal and nuclear power facilities, and the need for greater efficiency and competitiveness are set to push revenues to nearly $16.9 billion in 2011, says the report.
Anticipated capacity additions in Spain, Italy and Turkey are set to underpin particularly strong market growth over the coming year with the market forecast to expand steadily over the long term. An estimated annual growth of 12.3 GW is projected to occur over 2005-2011, amounting to a total capacity of more than 86 GW.
While the rising need for electricity in western Europe, notably in the Netherlands, France and Italy, is expected to contribute to turbine demand, it is the CEE region that is expected to figure highly the medium to long term. Principal growth drivers are likely to be tough environmental controls, efficiency imperatives and a sharply rising demand for electricity along with deteriorating energy infrastructure presenting opportunities for plant repowering.
Market development is also likely to be advanced by the decommissioning of old thermal power plants to meet EU legislative directives governing coal-based plants. In addition, the decommissioning of several nuclear plants in CEE is expected to create opportunities for steam and gas based technologies.
With biomass gaining popularity greater emphasis is expected to be placed on distributed generation and on smaller steam and single-cycle gas turbines and their efficiencies. Smaller turbines are therefore expected to increase their share of the total demand, driven by liberal electricity markets, incentives to cogeneration and declining costs. However, the medium range turbine segment is likely to continue as the favourite output segment.
The market is expected to remain tilted towards gas turbines both in terms of revenue and total MW capacity to 61.4% of the market over 2005 - 2011. Moreover, gas based turbines are likely to account for three quarters of revenue generated in the European steam and gas turbines market by 2011.
Despite intense competition, growth potential is anticipated for all market participants. "Pitted against the technological edge of western regional original equipment manufacturers (OEMs) will be the entrenched, but admittedly vulnerable, positions of regional CEE OEMs, and joint ventures and partnerships may become increasingly common," says Frost & Sullivan research manager Harald Thaler. "In less developed countries of CEE, it might even be necessary for the OEM to contribute to the project equity in order to enable the financial closure. This would then make not just the technology but current financial strength of the OEM also a critical factor," concluded Thaler.
In a second report from the company, the increasing need for power coupled with rising customer awareness of the benefits of power rentals bodes well for participants in Europe, the Middle East and Africa. Demand from Western Europe and the Middle East is also set to boost revenues over the short-term, while the as yet untapped markets in Eastern Europe and Africa offer more long-term growth potential with a total market size of $993.8 million forecast in 2011.
A projected increase in demand for power from countries in Eastern Europe, the Middle East and Africa is expected to spur market expansion. Escalating demand for power, particularly in regions with poor or even unreliable grid connections is likely to create an opportunity for power rentals to emerge as a viable option to meet end-user requirements.
"Lack of a reliable power transmission network in parts of Middle East and Africa is one of the biggest factors promoting the development of power rentals industry in those areas," said Frost & Sullivan research analyst Rajat Kumar. "In the absence of a sound transmission network, the power needs would be met by rented power."
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