Bridging the energy gap: How gas turbines support the global shift to renewables

As the world accelerates toward a more sustainable energy future, the transition is proving to be more complex and nuanced than a straightforward shift to renewables. While the growth of solar and wind capacity continues at a record pace, the need for reliable, flexible, and complementary energy sources remains critical. In this context, gas-fired power plants and turbines are not just relics of the past; they are pivotal in bridging the energy gap and enabling the smooth integration of renewables into the grid.

Leading companies such as GE Vernova, Siemens Energy, and Mitsubishi Heavy Industries (MHI) are at the forefront of driving these changes, pushing technological boundaries to create advanced gas solutions that support decarbonization efforts.

Source: GE Vernova

The role of gas in the green transition

Natural gas, often seen as a relatively cleaner fossil fuel, plays a pivotal role in balancing the goals of reducing greenhouse gas emissions, maintaining energy security, and meeting growing global energy demand.

According to the International Energy Agency (IEA), natural gas contributed around 21% to global electricity generation in 2023 and is expected to stabilize at around 20% through 2030. This stability reflects the fuel's ability to complement the intermittency of renewable energy sources like wind and solar.

The inherent flexibility and rapid ramp-up capabilities of gas power plants make them suitable for integrating with large-scale renewable energy installations. In contrast to coal-fired power stations, gas plants emit approximately 50% less CO2[1]. They can also adapt to low-carbon fuels, such as hydrogen and ammonia, making them more future-proof.

The shift towards gas has also proven beneficial in terms of reducing methane emissions associated with coal mining, particularly in regions like China, where methane contributes significantly to greenhouse gas emissions.[2]

 

Sectoral perspectives: Newbuild market out of the doldrums

The gas turbine market has experienced considerable changes over the last two decades. The market peaked in 2001-02, with around 100 GW of annual installations, but demand dropped to 30 GW in 2022. However, recent data from McCoy confirms a notable recovery in 2024, with total global orders for heavy-duty gas turbines (units >100 MW) reaching 25.3 GW in the first half of the year—up 33% from 18.9 GW in H1 2023. Excluding China, orders amounted to 22.8 GW, an 88% year-on-year increase, signaling a resurgence driven by North America, Latin America, and the Middle East.

The uptick in global orders reflects increasing power demands from sectors like AI, data centers, and electrification trends, suggesting a continued bullish market outlook until 2030, which is also confirmed by the order backlogs of around 3 years.

 

Service Business Opportunities

Not only the newbuild market is improving, but the currently over 10,000 installed gas turbines are also seeing increased utilization rates due to rising electricity demand.

McCoy noted that the utilization of combined-cycle gas turbines in the U.S. increased by 13% in H1 2024, as measured by MWh. This trend bodes well for the service business, as higher turbine use translates to increased demand for maintenance and long-term service agreements (LTSAs), which can enhance profit margins.

 

Technology is also evolving

The efficiency and versatility of gas turbines also continues to improve, especially with improvements in hydrogen and ammonia co-firing capabilities. Companies like GE Vernova and Siemens Energy are developing "hydrogen-ready" turbines, positioning themselves at the forefront of the transition toward low-carbon fuels. GE Vernova, in particular, has reported strong order growth for its HA turbines, which come with higher long-term service attach rates, providing long-term revenue visibility.

 

Sector segmentation

Gas turbines are generally categorized into three types:

• Heavy-duty gas turbines: Predominantly used in combined-cycle configurations, where waste heat is utilized by a steam turbine to boost overall efficiency.
• Industrial gas turbines: These are smaller turbines (often >100 MW) ideal for distributed power generation and applications that demand flexibility. McCoy's recent data indicated a slight downturn in this segment, with orders falling to 5.2 GW in H1 2024 from 5.6 GW a year ago.
• Aeroderivative gas turbines: Known for their rapid start-up times, these are used for fast-response power generation and applications in offshore oil and gas platforms.

The smaller turbine market (<100 MW) remains competitive, with firms offering comprehensive packages that include turbines, generators, and auxiliary equipment. Companies like Wärtsilä challenge gas turbine suppliers with reciprocating engines, which offer advantages in efficiency and scalability.

 

Leading Companies in the Gas Turbine Market

1. GE Vernova

GE Vernova, with a 40% global market share in terms of both turbine units and installed MW capacity, is a dominant player in the gas turbine industry. The company’s approach often involves delivering a "power island," which includes the gas turbine, steam turbine, heat recovery steam generator (HRSG), and other peripherals. However, it does not engage in turnkey power plant construction, leaving this to over 100 Engineering, Procurement, and Construction (EPC) contractors. This strategy helps GE Vernova avoid the lower margins and higher risks associated with turnkey projects.

The U.S. market has been particularly strong for GE Vernova, where it commands a 70% share, driven by the need for flexible power generation to support renewable energy integration. GE's H-class gas turbines are among the most advanced, offering high efficiencies suitable for markets where gas prices are lower.

2. Siemens Energy

Siemens Energy holds around 25% of the global market share. It distinguishes itself by providing both turnkey solutions and power island offerings. The company’s global reach includes significant operations in Europe, North America, and the Middle East. Siemens Energy's turbines are known for their high efficiency and are widely used in combined-cycle power plants, which can achieve efficiency rates above 60%. The company has also been investing in hydrogen-compatible gas turbines, which can transition to burning up to 100% hydrogen, aligning with decarbonization goals.

One of Siemens Energy’s challenges has been the competition for supply chain resources, especially in the casting of turbine blades, where capacity is shared with the booming aerospace sector.

3. Mitsubishi Heavy Industries (MHI)

MHI has carved out a niche in the gas turbine market with a 20% share in terms of installed MW capacity, despite having a smaller share (10%) in the number of turbine units sold. This discrepancy is due to MHI's focus on large, high-efficiency turbines suitable for combined-cycle power plants. The company’s JAC model gas turbine, which offers 99.5% reliability, is one of the most efficient on the market, making it particularly attractive in regions that import gas, such as South Korea and Thailand.

MHI's approach to research, development, and testing is centralized at its Takasago Machinery Works in Japan, which integrates R&D, manufacturing, and verification under one roof. The Takasago Hydrogen Park also plays a pivotal role in advancing hydrogen combustion technologies, with MHI aiming for its turbines to achieve 100% hydrogen-firing capabilities by 2030.

 

Hydrogen and Ammonia: The Future of Gas Turbines?

Gas turbines’ compatibility with hydrogen and ammonia combustion presents a promising avenue for deep decarbonization. Both fuels offer zero-carbon combustion potential. However, the challenges associated with the production, storage, and transport of green hydrogen make it a less economically viable option at present.

Current electrolysis efficiency stands at around 60%, which is lower than storing electricity directly in batteries.

Nonetheless, OEMs are developing solutions to make gas turbines "hydrogen-ready." For instance, MHI's testing of hydrogen co-firing and 100% hydrogen combustion is advancing rapidly, while Siemens Energy is similarly working on high-hydrogen combustion systems. These efforts will likely play a crucial role in sectors where high temperature and industrial heat are required, areas that are hard to electrify.

 

Key Market Dynamics and Outlook

Several factors will shape the gas turbine market in the coming years:

• Demand from electrification and AI: The rise of AI and large-scale data centers is driving new demand for electricity, potentially resulting in a resurgence in gas turbine sales. Data centers alone are anticipated to significantly strain the grid, necessitating reliable backup power from flexible gas plants.
• Geopolitical and economic risks: Gas turbine demand faces risks from global geopolitical events, supply chain bottlenecks, and economic downturns that could reduce investments in power generation infrastructure.
• Long-term service agreements (LTSAs): With over 10,000 installed gas turbines globally, LTSAs will continue to be a key revenue stream for OEMs, providing aftermarket services, maintenance, and upgrades.
• Competition with alternative technologies: Battery storage and other forms of energy storage pose long-term risks to gas turbines, especially if technological advances make storage more cost-effective and scalable.

 

Conclusion

As the world transitions to a more sustainable energy future, gas-fired power plants and gas turbines will play a critical role in providing the stability, flexibility, and efficiency needed to support the growth of renewable energy.

Companies like GE Vernova, Siemens Energy, and MHI are not only competing for market share but also pushing the technological boundaries with hydrogen and other low-carbon solutions. Their efforts will be instrumental in decarbonizing the power sector while meeting the energy demands of a rapidly changing world.

While renewable energy capacity continues to expand, the indispensable role of gas as a bridging technology will provide investment opportunities for companies leading the advancement of efficient and flexible gas power solutions.

 

[1] Source: https://www.woodwayenergy.com/coal-to-natural-gas-conversions

[2] Source: https://www.iea.org/reports/global-methane-tracker-2024/key-findings