By George Harvey
On May 23, the price of General Electric (GE) stock fell steeply. This happened because GE announced that its power division is not making money. The power division makes steam and gas turbines for fossil fuel and nuclear plants, but it does not make wind turbines. The wind division at GE is making money, but not enough to make up for the power division’s slow sales.
Other makers of steam and gas turbine are also slogging along in an increasingly tough market. Siemens is not optimistic. Mitsubishi really spelled things out clearly, saying that it expects the steam and gas turbines market to “run dry” by 2020.
We must consider that projections from the United States Department of Energy (DOE) would make things seem rosy for the natural gas industry. The DOE says natural gas is expected to have more capacity installed than all renewable energy technologies combined in 2018, the first time that has happened since 2013. But we have to remember that the natural gas plants coming online were ordered quite some time ago, when gas prices were especially low. It takes years to find sites, get permits, arrange for financing, and build the plants. The plants may all go to completion, even if their owners do not see a lot of chance to make money with them, because otherwise they would certainly be big money losers.
We should all have seen this coming. While some gas advocates and even gas investors refused to look at the clear evidence, there were other, less optimistic numbers being posted by the DOE’s Energy Information Administration. Production of electricity by gas-burning plants in the U.S. in 2017 was down over 8.5% from 2016, despite additions of new capacity. More capacity generating less power means that the economics of natural gas plants in the U.S. worsened quite a lot during that period.
We also have news that speaks to how electric utilities feel about the future. On May 23, just as GE shareholders were selling off holdings because the gas turbines were not selling, two major utilities, with a total of 5.5 million customers, made relevant announcements. Vistra Energy Corporation and Dominion Energy Inc. both announced that they would not build any more combined cycle natural gas power plants. When these two utilities need more capacity, they will add solar farms because of their economic advantages over gas. They had decided to do this despite the fact that the federal government has put tariffs on solar panels.
At the same time all this news appeared (along with announcements on offshore wind power from three states, see “Offshore Wind Power Coming to the Northeast,” on page 15), we got a projection on the future of solar power from GTM Research, which specializes in market research for companies and technologies relating to green energy. GTM Research’s projections have costs for solar panels falling to 24¢/watt by 2022. It said it expects the cost of fixed-tilt utility-scale systems to fall to 70¢/watt in the same time. And according to the company, this means the cost of electricity from utility-scale solar systems could fall to 1.5¢/kWh or lower.
Meanwhile, battery backup power has become so cost-effective that it can take up the electricity supplied to the spot market by fossil fuels. (Please see the article “The Disruption has Begun,” on page 1, for a discussion of this.)
Wärtsilä is a Finnish company that makes some of the biggest combustion engines on earth. In April, at a Bloomberg New Energy Finance summit in New York, the president of energy solutions at Wärtsilä, wondered aloud about the future of natural gas generation. His suggestion was that anyone who built a new combined-cycle natural gas plant might be, to use his term, “crazy.”
Clearly, we would agree. The future looks bleak for natural gas, which only recently vanquished coal.