Energy liberalisation injects new growth into power generation equipment market

Jun 04, 2001 02:00 AM

A wave of energy liberalisation across Europe is injecting new growth into the power generation equipment market. For the past five years, sales in Europe have been uninspiring, with demand pegged at around 18 GW a year. But industry analysts now believe orders for turbines will increase by 3 % in the first half of the decade, making Europe the second-fastest growing market after the US.
Liberalisation of the sector began in 1990 with the privatisation of the UK industry and separation of transmission and generation to allow open access for all power producers. This process is now gathering pace within the European Union following the implementation of the Electricity Directive in February 1999 -- a piece of legislation that requires member states to open at least one-third of their power markets to competition by 2003. Progress across the region has been mixed so far. While competitive wholesale power markets have developed in Scandinavia, the UK, Germany and The Netherlands, southern Europe has been slower to embrace the changes.
Mark Hughes, a partner in the corporate finance department of PricewaterhouseCoopers, the global consultancy, says the next round of market opening in Spain and Italy will be the main driver behind growth in power generation equipment orders in the medium term. "Liberalisation will expose the inefficiency of many of the ageing power plants in Spain and Italy, leading to a programme of new builds and upgrades," he adds.

Enel, Italy's state-owned power giant, has traditionally built dual or tri-fuelled generation plants that could operate on coal, oil or gas. This allowed increased flexibility to buy the cheapest fuel, but the plants are less thermally efficient than modern combined-cycle gas turbine (CCGT) units and contribute more greenhouse gas emissions to the atmosphere. Some 15 GW of oil-fired capacity -- or about 21 % of the country's total generation capacity -- is expected to be converted to CCGTs as a result of increasing competition and new entrants intothe market.
International Power, the UK power station developer, is hoping to be one of the early entrants into the Italian market. The group has signed a joint-venture agreement with Ansaldo Energia, the Italian turbine manufacturer, to build 7.2 GW of new gas-fired capacity at greenfield sites and is in negotiations to build a further 1.6 GW plant.
"As we look at Italy's ageing fleet of oil-fired power plants and relatively high electric demand growth and wholesale prices, we expect our new CCGTs to create economic benefits throughout the country," says Peter Giller, International Power's CEO. Spain also faces the problem of ageing power plant and is expected to have the added pressure of above-average growth in industrial demand driving orders for new power equipment.

Endesa, Spain's largest power utility, plans to increase its combined cycle gas turbine capacity from 800 MW to 3 GW by 2005. Union Fenosa, a rival Spanish group, has meanwhile contracted Siemens to supply turbines for six new CCGTplants by 2005 as part of its aim to increase its share of the power generation market from 13 to 25 %.
Dresdner Kleinwort Wasserstein, the German investment bank, calculates the total planned increase in CCGT capacity in Spain will be 26 GW by 2005. "Even if only one-third of these projects ever get built, this represents a substantial market for General Electric, Siemens and Alstom," says James Stettler, an analyst at DKW. He says the UK will also be a growing market for power equipment in the next few years, despite overcapacity, low wholesale power prices and rising gas prices.
New electricity trading arrangements introduced at the end of March mean flexible power plants are becoming more important to capitalise on price volatility. National Grid, the UK's transmission operator, expects power generation capacity to increase by 18.8 % to 86.5 GW by 2007-08. This would imply a potential surplus of more than 45 % over customers' demand forecasts, suggesting that wholesale electricity prices will fallfurther and leading to slower growth in power plant capacity in the longer term.

Increased orders for new thermal power generation equipment in Italy, Spain and the UK will continue to be countered by weak demand in Germany, due to a reduction in uneconomical capacity. Eon and RWE, the two largest utilities, are currently shutting down 10 GW of plant in response to low prices -- the equivalent of about one-quarter of Europe's total overcapacity.
France is also expected to remain a weak market in the next few years due to overcapacity, slow progress in opening the market to competition and the high share of nuclear power plants, which account for 80 % of the country's total capacity.

Source: The Financial Times
Alexander's Commentary

Change of face - change of phase

In the period of July 20 till August 3, 2015, Alexander will be out of the office and the site will not or only irreg

read more ...
« September 2019 »
September
MoTuWeThFrSaSu
1
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28 29
30

Register to announce Your Event

View All Events