INTERVIEW:Gas turbine market fights policy headwinds to return to growth

The gas turbine market has returned to growth after a significant period of contraction, GE Gas Power's Head of Strategy, Martin O'Neill, told S&P Global Commodity Insights July 8.

A mix of extreme weather events, a loss of inertia and growing renewables had combined to drive new demand for fast-response power generation after contraction in the market between 2014 and 2019, he said.

O'Neill expressed disappointment, however, that gas turbines were still viewed as a transition rather than a destination technology.

"People naturally compare gas to baseload power from coal and nuclear -- but gas is the only technology with an accelerator pedal, we can ramp from zero to 800 MW in eight minutes, and turn down as quickly, and we can be synchronous assets on standby," he said.

For years an overly simplistic narrative had pitched generation technologies as either good or bad, clean or dirty.

"The formation of a taxonomy for sustainable finance has punished the promotion of certain technologies that we are going to need for grid stability," he said, referencing the difficulties gas proponents have had in getting gas into the EU's taxonomy.

"We have to accept the critical role gas turbines play on existing grids, and we need more realpolitik discussions about the supply and demand of gas," he said.

Having said that, O'Neill welcomed the European Parliament's recent recognition that gas plants were important for the future energy system and could transition to renewable gases.

"The rigorous criteria of the taxonomy CDA [complementary delegated act] ensure that gas power plants will decarbonize their operation and are not to compete with renewables, but rather to serve as a complementary solution, maintaining an essential insurance mechanism for a reliable electricity and heat system," he said.

Focus on affordability

Assuming the Russia-Ukraine conflict was a protracted affair of years rather than months, a correction in supply and demand was needed in order for longer term gas contracts to come back to "a range of affordability," he said.

"We need to re-examine some of the decisions we've made in Europe over the last five years," O'Neill said.

While neglected FSRU and LNG import terminal projects were now being hurriedly revived, in the short-term coal burn was likely to rise as German, Dutch and even UK assets were dragged back to the market or granted longer run times.

"Even before the conflict, carbon emissions were 6% higher than prior years coming off the back of Covid, industry was re-engaging and we'd run our gas reserves down," O'Neill said.

Putting a coal plant online versus a gas plant was doubling bad for the system's future, O'Neill said.

"You're producing two to three times the emissions and producing when you don't need it, plus your turning down power from renewables and curtailing it," he said.

Market intervention

Another consequence of the conflict was the looming prospect of market interventions in the footsteps of Spain's gas-for-power price cap.

Manipulation of existing market structures was a dangerous path to go down, O'Neill said – "there are other ways to help the end consumer ahead of artificial intervention."

Whether positive or negative for a particular technology (gas-firing in Spain has climbed dramatically in response to the price cap), "you're damping the true investment signal with snap interventions, and you quickly generate unintended consequences that can be net negative for renewables," he said.

CCS now, hydrogen later

GE has been burning hydrogen in turbines for more than three decade – but it might be another 15 before they can burn the energy carrier in a commercial setting, O'Neill said.

Meanwhile he said he was a big proponent of carbon capture in the right setting.

"25% of all CO2 emissions in the EU come from 20 industrial clusters. Where it's possible to share carbon capture infrastructure, and where there is access to sequestration geology, we should be doing CCS," he said.

GE and Technip Energies are carrying out a FEED study on amine-based carbon capture at bp's Net Zero Teesside's proposed 860 MW gas-fired CCGT at Teesside.

Partners in NZT include Shell and Balfour Beatty. The project hopes to be one of four state-supported CCS clusters to be in place by 2030.

"The art is in integrating a gas plant that ramps up and down with a solvent-based chemical plant - getting all the heat systems to work in concert," O'Neill said.

"We think CCS is the technology to remove CO2 from power generation now, while we're saying late 2030s at the earliest for alternative fuels. We should be much more enthusiastic about CCS," he said.

Destination technology

Even if delayed to the mid to late 2030s, abundant hydrogen availability made the gas turbine a destination technology, not just a transition one as defined in the EC's sustainable finance taxonomy.

"I don't understand why gas turbines get hammered in the press, it shows a lack of understanding. Why would you not want dispatchable, flexible decarbonized power on your grid? And why not avoid billions of grid investment by taking advantage of that asset that is already on the grid?" O'Neill said.

At some point policy makers would have to revisit capacity payments for CCGTs.

Gas plants were built with a 20-year business case. If operations were going to drop from 8,000 hours to 5,000 hours and below, as gas increasingly is playing a role as a firming, ramping technology, "we need to reward those characteristics," he said.

With additional revenue streams in balancing markets, providing inertia, flexibility and black start capability, gas turbines have a viable future provided they could tap into "enhanced" capacity mechanisms.

"We'll see a lot of nation states re-evaluating their energy policies over the next 12 months, focused on strength-and-depth defenses for security. That will come from diversity of generation assets," O'Neill said.