This may be the best time ever to be a manufacturer of natural gas turbines. The U.S. seems poised for a sharp increase in power demand in the coming years and order books are filling up, but it’s not all smooth sailing and significant headwinds remain. In today’s RBN blog, we will explore how rising costs, supply-chain constraints, long lead times and tariffs could impact turbine manufacturing and complicate efforts to expand gas-fired power generation.
As we said recently in Only Happy When It Rains, there’s been a lot of talk recently about needing more electricity to meet the growing demands of electrification and data centers. Developers have been considering the full spectrum of power-generation sources — ranging from renewables to nuclear — but almost everyone understands that gas-fired plants will be a big part of the solution. A number of major gas producers and just about every big midstreamer with a gas pipeline network have been talking up their plans to serve these new power plants, and several gas-fired projects — many tied directly to data centers — have already been announced (see We Should Be Friends, Part 1 and Part 2). That has made acquiring the turbines needed to run a gas-fired power plant a priority — and a bigger challenge than it might appear.
In Part 1, we discussed the specialized and complex nature of gas turbine manufacturing and noted that while there are a host of manufacturers out there, there are three major players: GE Vernova, Mitsubishi Power and Siemens Energy. They all face a number of manufacturing challenges, including a complex and lengthy construction process, the need for metals and alloys that can be difficult to obtain, and the impact of new U.S. tariffs.
Manufacturing Challenges
We’ll get into how much it costs to build a turbine shortly, but let’s start with the overall manufacturing challenges. Gas turbines are comprised of thousands of individual parts and operate in oppressively hot environments, requiring advanced alloys that can withstand scorching temperatures. Steel, titanium, aluminum and nickel alloys all play crucial roles in turbine construction and have faced price volatility in recent years. For example, prices for the types of steel used in casings, rotors and structural supports have increased by more than 70% since 2020 and a number of across-the-board price hikes have contributed to a 10% rise in overall gas turbine prices compared to last year.
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