Peak practice page 22. Back to the future page 26. High temperature TBCs page 33

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1 Inside Ansaldo page 11 Changing times page 12 Record breaker page 16 Peak practice page 22 Back to the future page 26 High temperature TBCs page 33 May - June

2 Gas turbine orders on a path to recovery and global growth By Anthony Brough Dora Partners & Company Global industrial gas turbine orders for the Electric Utility sector should rise to 500 units in 2020 from about 450 units this year. The Oil & Gas sector should continue to recover from a record low of 350 units this year and climb to 550 units over the next 5 years. Market dynamics Dramatic changes in the industrial gas turbine marketplace over the last 5 years include consolidation of aerotechnology OEM builders, introduction of digitalization to make gas turbine operation more profitable and responsive, displacement of coal fired generating capacity by gas-fired gas turbines, resurgence of gas turbine peaking and intermediate load capacity to back up the increasing use of renewable energy. General trends Small gas turbines (less than 5 to 6 MWs in unit size) continue losing market share to gas-fired reciprocating engines. Thanks to recips unaffected hot day and high-altitude performance, maintenance cost reductions, higher simple cycle base and part-load efficiencies (than gas turbine), improved exhaust emissions. Aeroderivative technologies developed for advanced aircraft jet engines continue to influence design, operation and performance of more efficient and flexible heavy frame gas turbines. Synergies of this effort have resulted in better Figure 1. GTW s market analysis is based on over 35,000 gas turbine installations ranging from 1MW to 300+MW in unit size (close to 1.5GW TW in capacity). Inner circle is by unit count and the outer circle is by capacity. Ansaldo 4% 1% 1,474GW Light Industrial 12% Aeroderivative Mitsubishi 35,371 Units 35,371 Units Siemens 53% General Electric 83% Heavy Frame n General Electric n Siemens n Mitsubishi n Ansaldo n Solar Turbines n United Engine Corp n Zorya-Mashproekt n Hitachi n Power Machines n All Others n Aeroderivative n Heavy Frame n Light Industrial 12 GAS TURBINE WORLD May - June 2016

3 simple and combined cycle efficiencies, faster start times, higher ramp rates, better turndown characteristics, improved availability and maintainability. Major gas turbine OEM acquisitions and joint ventures to access advanced aero technology. Examples: GE Power leveraging advanced engineering and materials from the aviation jet engine group in the design of its new generation HA-class heavy frame machines; Mitsubishi Hitachi Power Systems adding Pratt & Whitney jet engine technology to its industrial product line (by acquiring PW Power Systems); Siemens acquiring Rolls-Royce s aeroderivative gas turbine engineering, manufacturing and sales operations. gration, suppliers are developing stronger relationships with the OEMs to optimize the total offering and increase net competitiveness. Changing technologies, competitive sources of energy and environmental awareness are now critical factors in shaping new market directions. They are also important to a fundamental understanding of how and why the gas turbine market can be expected to change. Future market studies To be effective, market studies should blend traditional analytic research with an intimate knowledge of competitive gas turbine OEM weaknesses and strengths and the competitive edge of new technology, backed by a sound historic database of year-to-year industry and OEM gas turbine orders. Dora Partners & Company and Mc- Coy Power Reports, have recently joined with Gas Turbine World to pool our industry expertise and resources to deliver multi-client and custom gas turbine market studies and forecasts covering the Electric Power Utility (Power Generation) and Oil & Gas market sectors of the industry. Our reports will take a deep look into the value chain (supplier network) and how it is changing, how the aftermarket is served and is changing, and how renewable technologies will continue to impact the industry. OEM customized use of fleet performance data (digitalization) to improve plant control, dispatch and profitability. Optimization of major systems for combined cycle plants includes tighter integration of the gas turbine, heat recovery steam generator, and balance of plant systems. Net result: faster starts and shorter restarts, improved availability and reliability, higher net plant efficiencies, and better turndown characteristics. OEM offerings of power augmentation systems such as inlet air chilling, fogging and wet compression technologies as options to super-charge gas turbine performance, yielding higher net power output while reducing total capital expenditure on a $/kw basis. Figure 2. Since 2014 gas turbine orders by capacity are up 9.3% while the number of units are down 18.2%. GT Orders in Megawatts (Capacity) 70,000 60,000 50,000 40,000 30,000 20,000 10, ,607MW Suppliers for those fogging and wet compression systems (system integrators, pump manufacturers, electric motor drives, filtration systems, and spray nozzle manufacturers) are likely to see more robust business activity. GT Orders in Units 1, Units Changes in the marketplace As technology, design and performance evolve with time, so does the gas turbine marketplace and opportunities for EPCs and balance-of-plant (BOP) system suppliers. Thanks to increased power plant inte GAS TURBINE WORLD May - June

4 Each of the market research partners is uniquely fitted: Dora Partners has over 20 years of engineering and marketing experience in the gas turbine industry, McCoy over 35 years of collecting data and reporting power project orders, and GTW over 45 years of industry reporting on gas turbine design performance, advanced technologies and project applications. Collectively we have a database of over 35,000 gas turbine orders for units ranging from 1MW in size to the latest jumbo G/H/J technology turbines from GE, Siemens, and MHPS rated at 300 to 500MWs (see Fig. 1). Global turbine orders when measured by capacity have been rather steady at approximately 64,600MWs on average over the past ten years (see Fig. 2). However, when measured in number of units, orders are down significantly for the last two years, primarily driven by a reduction in orders in the O&G sector. In 2015, gas turbine order activity was up 9.3% vs on a capacity basis while down 18.2% on a unit count basis. Since the order activity on a unit basis is down 37%. From a regional perspective (see Fig. 3), North American gas turbine orders have seen an increase in 2015 because of lower natural gas prices, legacy power plant decommissioning, and expansion in Mexico. We anticipate order activity in North America to remain relatively robust, primarily for large Heavy Frame gas turbines over the next few years. Europe has remained flat or even suppressed over the last 8 years, though Eastern Europe and Central Asian activity has balanced this reduction in activity. Despite the downturn in unit orders, overall capacity of gas turbine power plants continues to grow (see Fig. 4) as gas turbine unit output rises and the need to displace coal-fired power plants increases. New production models from GE (Frame 7F, 9F, 7HA, and 9HA), Siemens (SGT5/6-8000H), and MHPS (M501G/J units and M701J) are proving to be cost effective replacement generation sources, even while renewables like wind and solar continue to see additions. Figure 3. Regional distribution of GT orders. Activity in North America expected to remain relatively robust over the next few years, primarily for heavy frame gas turbines Forecast We are working on a 10-year forecast model that is backed by over thirty-six continuous years of historical data, multiple forward-looking market indices, industry contacts, and years of analytic experience by semi-retired gas turbine OEM marketing specialists. Historical input includes traditional factors such as OEM market penetration, regional and key customer/operator order activity, and changing global demographics based on gross domestic product expectations, population growth, industrial development, government action and regulatory expectations. To that is added the potential of different OEMs to introduce advanced technologies and upgraded/new series gas turbine designs which offer a competitive edge. Our GTW forecast takes all these factors into account when analyzing and projecting 10-year order expectations -- including growth sectors, applications, and geographic regions. For context, we have plotted the year-over-year change for capacity and new unit orders since 2007 (see Fig. 5). This baseline forecast is based upon several assumptions, including 1) no significant change in growth in Asia-Pa- Figure 4. Gas turbine plant size continues to grow, while more coal-fired power plants are being shut down and retired. MW % 36% 17% % 16% 9% 21% 3 14% 24% 3% GTs w/unit output of MW GTs w/unit output of MW GTs w/unit output of 300+ MW n North America n Middle East/Africa n Latin America n Europe/C. Asia n Asia Average Power Plant Order (by GT size) 450MW 400MW 250MW GAS TURBINE WORLD May - June 2016

5 cific. 2) natural gas fuel prices remaining relatively constant, 3) oil prices remaining in the $35 - $45/bbl range, 4) global pressure continues to limit coal and nuclear fuel. We estimate that worldwide capacity additions for the Electric Power Utility (PG) Sector will increase 10.1% by the end of 2016 vs and new unit additions increase by 8.4%. For the Oil & Gas Sector, we expect to see a decrease of 8.9% in new units additions by the end of 2016 vs and associated decrease of 10.6% in added capacity. Highlights Reciprocating engines should continue to chip away at the small gas turbine segment (less than 5MW) while large, heavy frame turbines take relatively strong orders in the coming years. New aeroderivative entries like the LM6000PF+ and the FT4000 pose good growth potential in applications such as peaking and highly fit dependent cogeneration projects. Also, while the SGT-800 is not strictly an aeroderivative, it is a highly competitive offering, especially in cogeneration applications. In the Oil & Gas Sector, the LM2500/ LM2500+ have held very strong market shares over a prolonged period and should remain dominant. We also anticipate the combination of investment by Siemens and Dresser-Rand s Oil & Gas business to increase sales of Industrial RB211 and Trent 60 models. The Siemens SGT-750 is likely to make in-roads into the O&G Sector, while Solar will continue to perform well with offerings under 20MWs while also leveraging a strong compressor Figure 5. Plot of year-over-year change for gas turbine capacity and new unit orders from 2007 through Unit Order MW Orders Market Movement (Units) Market Movement (MWs) PG Both OG PG Both OG Actual Forecast Actual Forecast portfolio to pair with their turbines. We anticipate new entrants into the coveted 20 40MW segment and alternative strategies for the MW segment in the coming years. A more detailed analysis of the industrial gas turbine industry by segment and model-by-model, with a detailed 10-year forecast, will be completed soon. It includes scenario analysis with base-case, upside and downside presentations. Based on this forecast, we estimate that approximately $200B will be spent in uninstalled gas turbine package value. Additionally, given the current fleet size, over $240B will be spent in overhaul and repair activity over the forecast period. n GAS TURBINE WORLD May - June