October 1, 2025 • 35 mins
Rising power demand from data centers for artificial intelligence has led to a shortage of the gas turbines needed to generate electricity. This shortage might not seem the most obvious climate story, but it's having impacts across the entire energy sector. This week on Zero, Bloomberg’s Stephen Stapczynski joins Akshat Rathi to look at what’s causing the bottleneck in gas turbines, if the shortage will make companies look to renewables or coal, and whether natural gas is really a “bridge” fuel.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to Zero. I am Akshatrati. This week gas turbines
a blessing or a curse. For the last year at Bloombergreen,
(00:20):
I've been investigating bottlenecks to our clean, electrified future. We've
covered several different topics on zero, from a lack of
grit transformers to the shortage of skilled workers. Today, we
are going to be talking about something that might not
have an immediately obvious climate benefit. Gas turbines, those spinning
things that burn natural gas, turn a generator and produce electricity.
(00:45):
There's a growing shortage of gas turbines. It used to
take around two years to get a new one, Now
it takes up to five or more. Advocates for gas
call it a transition fuel, something that can fill the
gap between burning coal and moving to one hundred percent
carbon free grid. That's because for every killer what are
of electricity produced from gas, it only releases half the
(01:08):
amount of carbon dioxide as compared to coal. Gas can
also provide a useful and relatively cheap backup to renewables,
allowing for more clean power to be built out quickly
without worries of blackouts. But there are serious concerns about lockin.
Once someone spends billions of dollars building a gas power plant,
(01:29):
they'll want to run it for long enough that it
can make a decent return on their investment. Also, it's
worth noting that natural gas is mostly made of methane,
which has eighty times the warming potential of carbon dioxide.
There's a risk that if methane leaks aren't kept in check,
then gas power plants could be worse than coal power plants.
(01:50):
Whether you believe gas is a blessing or a curse
for the energy transition, the shortage of gas turbines is
causing serious headaches in the buildout of the electricity supply
that businesses desperately need. Joining me to discuss all this
is Steven Stopchinski, who add its energy stories and writes
about natural gas for Bloomberg. He and I collaborated with
(02:10):
our colleague Jostsol to conduct a global investigation into the
state of the gas turbine industry. Today on zero we
look at what's causing the bottleneck and gas turbines, whether
the shortage will make companies look to renewables or go
back to coal, and whether gas is really a bridge
to the future or the end goal for the fossil
fuel industry. Steven, welcome to the show.
Speaker 2 (02:35):
Thank you for having me so.
Speaker 1 (02:36):
I consider you to be Bloomberg's resident expert on natural gas.
You nerd out about lnged hankers, you put out tiktoks
about crazy price swings, and there are lots of Simpsons
characters in there on your charts. I also assume that
sitting in Singapore you have set up binoculars that you
use to see these bulbous ships go past.
Speaker 2 (03:00):
Right. Man, if I had a place in Sentosa, I
would totally do that, but unfortunately my view is just
a bunch of buildings. But when I do go to
the beach, I do look out for LNG ships and
I see them.
Speaker 1 (03:10):
So it's great to have you on zero. And we're
going to talk about a phenomena that you and I
have both seen building up for some time now, but
it has come to a crisis point. Is the shortage
of gas turbines. When did you first hear about it?
Speaker 2 (03:25):
You know, I've been reading reports about this for maybe
a year, how there have been more gas turbine orders,
And I actually didn't pay very much attention to it
because I've been covering LNG at Bloomberg for over a decade,
and for a long time, gas turbines was one of
the more boring parts of the industry. You would order
your turbine, it would come twenty four months later, usually
without fail there will be no issues. But I was
(03:46):
at an energy conference in India and February, and in
India they want to boost gas. They want to make
it fifteen percent of the energy mix by twenty thirty,
basically double where we are today. And so I would
ask the utilities, you know, what are you going to do.
Your greate is mostly coal? Are you going to build
some new gas fire power plants to try to boost
(04:07):
those numbers and hit the twenty thirty goal for MODI?
And the utilities looked at me and they said, we
can't afford that, And I said, why not. It is
because the gas is too expensive. You know, the invasion
of Ukraine or Russia kind of shocked the market. Prices jumped,
and they said, well, that's one issue, but another is
gas fire power plants are just too expensive for us
to build at the moment. It makes far more sense
(04:27):
for us to look at coal or even in some
cases renewables I was a little bit surprised by that.
I didn't know gas power plants got so expensive and
they're on the front lines, probably one of the more
price sensitive buyers. So that got me kind of looking
into it, and I realized that there was just something
happening in the market. From Asia to the US to Europe,
people weren't getting the turbines that they wanted quickly, and
(04:48):
it was costing them far more money.
Speaker 1 (04:49):
Yeah. So it is a strange thing because if you
are not the nerd that is Steven who looks at
energy prices daily, you're going to be like, hold on
a minute. Was the Russia Ukraine War that caused this
huge gas bike people were struggling to get gas and
now we have gone and swung the other way where
(05:09):
it's not about gas shortages, it's about the shortage of
gas turbines. How does that happen?
Speaker 2 (05:16):
First off, I think we need to explain very bally
what a gas turbine is. Right, it's the heart of
a power plan. So if you want to generate electricity,
you have to build a power plant and essentially turn
a turbine, and that's where the gas turbine comes in.
It's one of the more efficient ways to produce electricity
at a large scale. It's very complicated. These things are
(05:37):
the size of the bus. They weigh the same as
a fully loaded Boeing seven forty seven, and this is
a piece of equipment that has been in demand right
The demand for gas fire power plants has been pretty
steady over the last decade, especially in the United States.
The US built a number of gas fire power plants
(05:57):
after the Shell Revolution caused gas prices to drop, making
it more affordable than coal. Likewise, places like Japan, Korea,
and even in China to an extent, have been turning
more to gas because they're able to deal with different
changes in power supply from renewables. Gas plants known as
peaker plants, can quickly ramp up and ramp down output,
(06:20):
unlike coal, so which is more steady across the board.
So there has already been this demand for gas, and
on top of that, the power industry has been looking
at gas as a way to shift away from coal.
So here in Asia, especially in the emerging world, which
is very dependent on coal, they've been looking at instead
of building new coal fire power plants to meet their
(06:41):
rapid demand increases. Of Vietnam, India and other places. There's
been a kind of a shift to look at how
can we build more gas fire power plants. One of
the reasons being that gas emits about half as much
CO two emissions when combusted compared to coal, which is
the dirtiest fossil fuel. Now there's been this kind of
(07:02):
steady demand across Asia because of that, and especially in
the last I think ten years, a lot of countries
have been pushing forward with their plans to build more
gas fire power plants. Now you look at the West,
it's a different sort of story. Power demand had largely
been sort of peaking in the US. You saw it
kind of an increase, but it has been pretty steady.
(07:24):
But the AI boom in particular has really increased the
need for electricity, especially as there's a large build out
in data centers. I mean, the numbers there are pretty ridiculous.
In the US, they're looking to potentially see peak demand
increase by one hundred and fifty gigawatts over the next
decade due in part two AI. That's an eighteen percent
(07:46):
growth from current levels. It's like adding the equivalent of California,
Texas and New York to the power system, and then
on top of that, the US has to also replace
old coal plants and old gas plants. That's another essentially
one hundred and twenty gigwatts of existing power capacity, or
ten percent of the total US fleet that's expected to
retire over the coming decade. All of that together really
(08:10):
increases demand there and it's caused a spike in orders
for turbines.
Speaker 1 (08:16):
And what you and I have been hearing from the
industry is that there's this timeframe which is to be
about twenty four months to get a gas turbine, has
now suddenly gone to five years, or you just cannot
get on the queue to get one of these large
gas turbines. So that's when you and I and our
colleague in New York, Josh Saul, teamed up and we
(08:39):
wanted to understand the real reasons for why this kind
of shortage exists. And this story needed three reporters in
three regions, right absolutely.
Speaker 2 (08:48):
I think because the nature of the industry, there are
three major suppliers that essentially dominate it. There's giev Renova,
which is essentially located in North America. There's Semens, which
is located in Europe. You went to see them there.
And then there's Mitsubishi Heavy, which is a Japanese company,
and each of them kind of have a large share.
(09:09):
While they do sell turbines across different regions, they really
do sort of dominate their home markets. So, for example,
Mitsubishi Heavy, a lot of their customers are in Asia.
Speaker 1 (09:19):
And so this episode is part of the Bottlenecks series
where we've covered the things that are holding back the
world from speeding up toward a cleaner and more electrified future.
And throughout we've found that there are a few reasons
that these bottlenecks exist. So in this case, given Semen's Energy,
jie Van Nova and Mitsubushi Heavy own about seventy percent
(09:41):
of the market for large gas turbines, isn't it the
onus on them to expand capacity. They are going to
earn tens of millions of dollars per turbine, Their profits
are going to be great, They're already pretty good. Why
is it that their expansion is not keeping up with
the of the demand for these turbines.
Speaker 2 (10:02):
I think you have to kind of look at the
history of this industry first to go into that. So
back in two thousand, there was another gas turbine boom
due in part to deregulation in the United States. There
were a lot of orders in Texas, and you saw
orders of turbines rise to above one hundred gigawatts of orders.
(10:22):
The capacity today is about sixty gaguats. Now, the industry
did build up and they spent a lot of money
investing in new capacity in the early aughts, but the
demand quickly fell apart and they didn't see a return
to that one hundred gigawatt level, and that gas turbine
boom in the early oughts really fizzled for a few reasons. One,
(10:44):
gas prices. Natural gas prices rose in the United States,
making it not very economical to operate these facilities. They
just kind of got out of vogue because it was
too expensive. And then right after that, there was a
financial crisis, which just took a hit to power demand
as well, and utilities weren't eager to build new power plants.
So over the last two decades, while there has been
increases here and there and have been hills and valleys,
(11:06):
the industry was really hurt by that and they never
kind of recovered, and a lot of people who are
executives today at Cemen's ge Rinova and Mitsubishi Heavy have
memories of that, and so they're worried again that is
its demand really going to stick? You know, the AI
boom clearly, you know, we write a lot about it,
and you are seeing data center build out in the
(11:28):
United States and you are seeing a lot more demand
for electricity out of certain parts of the US. But
how sticky is that, I think are what people in
the industry are wondering. That's the one thing, Because the
other thing is that this is hyper technical, hyper specialized
equipment that requires really a certain type of factory that
(11:48):
can't just be built overnight, and so investing in that
requires a lot of money, a lot of expertise, and
a lot of time. So do they one still expect
that this demand increase will last over the next five
to ten years, as some analysts are saying, And then two,
do they have the wherewithal to really look at building
(12:09):
new factories? Because actually Mitsubishi Heavy has said to us
we had an exclusive interview with their CEO. He said
that they're looking to double their capacity. But when you
get into the details, it's not that they're building a
new factory. They're just trying to make their existing factory
as efficient as possible. So I think what you're going
to see is folks are going to try to pump
(12:29):
out as much as they can out of their existing
factories before they really look at putting shovels in the
ground to build new factories that are going to cost
a lot of more money.
Speaker 1 (12:38):
That's the same thing I found reporting on Semen's Energy
that they have already increased the number of cast turbines
that they can make from their existing factory over the
last two years, and they are looking to expand, but
only within the dimensions of their own factory, which is
in central Berlin, and so there's not that much land
to expand, and so they're having to move some parts
of it out just to be able to ensure that
(13:00):
can produce more gas turbines from those places. So you
touched a little bit on the fact that the factory
itself as complicated, But surely, given how much money you
could be making, why aren't small companies or even startups
coming into solve what is clearly a big commercial opportunity.
Speaker 2 (13:19):
The thing with the turbines is that these companies have
been developing them for decades. It is not something that
they came in and decided, hey, we're gonna crash this out.
These aren't startups. These are companies that have been working
on turbines for in some cases close to a century.
When I met with the folks at Mitsubishi Heavy in Tokyo,
they told me that it's really this testing. It's the
(13:42):
data that they've collected through decades and decades of operations. Actually,
one interesting thing about mitsbec Heavy is that they have
their turbine. They're one of their turbines operating at their
factory so that they can use it as a test
case for when they make small tweaks to the design.
It's something that's really important that others cannot easily do.
(14:02):
And on top of that, turbines are just really complicated.
We've to an extent, really perfected them. I kind of
look at turbines similar to how we look at semiconductors. Right,
you can't just jump in and start building a semiconductor.
You have to really understand the intricacies of where every
single one of those small thousands of blades go. This
thing is rotating at three thousand revolutions a minute, and
(14:26):
to do that perfectly requires precision, it requires materials, and
it requires a wherewithal to keep at it that other
companies can't easily break into. And it's actually interesting. China
is developing their own turbine. They're looking at commercializing a
three hundred megawat turbine, and yet it still isn't up
to par with what these three companies are doing with
(14:48):
their five hundred to six hundred megawatt level equipment. These
companies are also very secretive and they really look after
their IP remarkably highly. It's something that I saw when
we were interviewing Mitsubishi Heavy Industries. We start a photographer
there to look at it. We sent a reporter and
he couldn't take pictures inside of the building. One of
these issues is this high entry barrier. I think when
(15:11):
you spoke with Range Schmirker at Semen's Energy, he had
a really interesting quote.
Speaker 1 (15:15):
Yeah, he said, is the beauty of our industry that
it has a super high entry barrier. And that's because
it just costs a lot of money to develop these
gas turbines and takes years of experience.
Speaker 2 (15:27):
Now you know, these companies are very very secretive. Like
I said, We tried to get some pictures inside the
factories at Mitsubishi Heavy they wouldn't allow it in Japan.
We weren't very successful. Did you have any better luck
action when you went to Seaman Energies factory. Yeah.
Speaker 1 (15:42):
I was surprised by the fact that they actually let
me see all of it without restriction. It felt like that,
and towards the end I asked them, what did you
not show me? And I'll tell you more about that.
But the factory itself was amazing. So it was built
in the very early twentieth century, and at that time
it was on the edge of Berlin, but of course
(16:03):
Berlin has grown since then and so now it sits
in the heart of Berlin. Like I was staying in
a hotel in central Berlin and it was a ten
minute taxi right to get to this massive factory which
has three thousand workers, which produces fifty sixty gas turbines
a year. The factory itself now has heritage buildings, so
certain things cannot be modified because it is considered part
(16:26):
of German history. It's made of glass and steel and concrete.
It's got massive ceilings going up twenty five meters. The
turbine haul itself is two hundred meters long, and you
can see from one end to the other end if
you go to a high point, and then the equipment itself.
I knew what gas turbines looked like, I'd seen photos
(16:47):
of them, but seeing them up close is just stunning.
There are these massive, really precisely engineered pieces of metal
with sometimes really fancy coatings on them that are over months.
You know you said takes twenty four months from getting
an order to a turbine. It really does take months
(17:08):
to be able to ensure all these different parts of
the supply chain come into Semen's energy, and that engineers
are able to then assemble these tiny pieces all together.
And the engineering precision is needed because of the speed
at which they're rotating, but also the temperature at which
they're operating.
Speaker 2 (17:26):
Actually, can you just walk through the engineering of a
gas turbine forming.
Speaker 1 (17:31):
It's something that I think most people, at least people
who've taken a flight would actually be able to understand
pretty easily, because a gas turbine is really a large
version of what a jet engine looks like. There is
air coming from one end, there is fuel being burnt
inside the turbine and the exhaust gases from this combustion
(17:53):
is what is in the case of a jet engine,
propelling it to fly in the air, in the case
of a gas turbine, turning a shaft that then can
generate power. But to make that happen is not that simple.
It's taking this air, but it compresses it using these
rotors and blades that are turning at three thousand revolutions
per minute. And in the process of compressing the air,
(18:14):
it's heating it up, so it's going from room temperature
air to six hundred degrees celsius. And then this hot
air is combined with natural gas and burnt in the
combustion chamber and raises that temperature to fifteen hundred degrees celsius,
and all that hot gas is released out into the
exhaust section, where again lots of rotors and blades take
(18:34):
all that mechanical energy and turn the shaft. It is simple,
and yet because of the pressure and temperature and speed
at which it operates, it's really complicated engineering.
Speaker 2 (18:48):
And then on top of that you also have the
combined cycle aspect of it. Do you want to talk
about that as well? Really quick?
Speaker 1 (18:55):
Yeah, It's a good point because when gas turbines were
initially created, just like engines, if you just burn the
fuel and you let the exhaust go out, the exhaust
is at still a pretty high temperature, and which means
you're just losing a ton of energy to the atmosphere.
That's what gas speaker plants do today. They take the gas,
they burn it, and then they let out quite a
(19:17):
lot of energy just into the atmosphere. So the industry
came up with a way to make the process more efficient.
Rather than just leaving this exhaust gas which has so
much energy in it, they combined it by taking that
exhaust gas, using it to heat water, make steam, and
then have a steam turbine turn and make more power.
(19:38):
So combined cycle power plant can be as efficient as
sixty sixty five percent, whereas a gas turbine plant is
thirty five, forty maybe forty three percent efficient at best.
After the break, what was the Semen's factory hiding from me?
And why were they hiding it? If you're enjoying this episode,
(20:01):
please give Zero a review on Apple Podcasts and Spotify
to help new listeners find the show. Recently, Travels for
Work wrote this podcast is data driven and delivered with
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Thanks travels for work.
Speaker 2 (20:33):
All right, and I want to go back to this
factory you saw in Berlin. What exactly do you think
Siemens was being secretive or hiding stuff from you about.
Speaker 1 (20:40):
So on the tour, I really couldn't tell, Like there
was no closed off area, there was no indication, don't
go there, don't see this, And so I just had
to ask, because of your experience with Mitsubushi, as like, guys,
surely you're hiding something from me. And they said, there
are two things we haven't shown you and we can't
show you. They said, we can't show you our latest model,
(21:02):
which is the nine thousand HL, which produces about six
hundred megawads of power. We can't show you because we
don't want to show you, but also currently we're not
manufacturing one. And then the other side they didn't show
me was the design studio where they run simulations on
these blades and rotors that determine how gas and air
(21:24):
is flowing through the turbine, because that determines how efficient
the gas turbine can be, and that is a process
that again takes years of work. They do three D
printing off metal parts to be able to test them out,
and that's the section they didn't show me. Now.
Speaker 2 (21:38):
Actually, you host this Climate Solutions podcast. Gas turbines are
both a blessing and a curse, right they are.
Speaker 1 (21:44):
You know, you talked a little bit about the fact
that in Asia there is this move to go from
coal to gas, and that can be a good thing
because in total CEO two emissions, burning gas for power
produces about half the emissions. There is a downside, which
is if gas is leaking and gas has methane as
its main component, that can cause sometimes gas to become
(22:09):
worse than coal because this methane will end up in
the atmosphere. It'll heat up ton for ton the planet
about eighty times as much, and that's not good. But
if you can keep the leaks to a bare minimum
or eliminate them altogether, then you are really getting the
benefit of half the emissions for the same amount of power.
There's also the curse side, which is once you build
(22:31):
a large gas power plant, and this can be you know,
billion to billion dollars worth of investment. You as a
power company, you as a utility that has ordered a
power company to make it for you are going to
use it, so it is sunk cost. It is an
asset that will have to run its life to make
sure the returns have been made. And that means there
(22:53):
is a lock in that could come from building all
these gas turbines even if the coal to gas switching
is happening. And then the curse side also extends into
what is happening with the AI boom where they really
don't care where the power is coming from, and the
data center people are ready to build whatever they can
(23:13):
get their hands on. So in a classical case, we
had XAI, which is the company that Elon Musk runs,
build a data center where they couldn't get a large
gas turbine, so they ended up buying tons of small
gas turbines which do not have a combined cycle, which
burn all this gas, which cause all these methane emissions,
but also all these carbon dioxide emissions, and do it
(23:35):
in a very inefficient way. And that side is tough,
but there could be a blessing, which is we have
heard from experts who say that if gasturbine shortage exists,
then more and more of these AI data center companies
will have to look at renewables and storage and somehow
find a way to make it work, and that could
create a boom for renewables, especially in the US where
(23:58):
the federal government is right now trying to curtail a
lot of the renewables development through cutting off subsidies, but
also other problems.
Speaker 2 (24:05):
I mean, but there's just something I have to ask you.
If if there's a shortage in turbines and you can't
build power plants, or if the power plants cost too much,
won't that make companies just look to renewables instead?
Speaker 1 (24:17):
It is I mean, we looked at the cost of
these gas power plants from next Energy, which is one
of the biggest utilities in the US. We got an estimate.
They said that a combined cycle gas power plant used
to cost about eight hundred dollars a KILLOWOT in twenty
twenty one. Today that cost is about two thousand, six
hundred dollars to two thousand, eight hundred dollars a killo VOT.
(24:40):
And the kicker is that next Era CEO John Ketchum
said gas fire power plants in the US will come
online at a higher cost than renewables plus battery storage,
and so we will see AI data center companies turn
to renewables plus storage. But we also know currently battery
storage cannot do all the things that gas turbines can do.
(25:04):
So gas turbines provide something called inertia, which is something
we've discussed in this series in bottlenecks before, where just
a spinning mass is necessary to keep the frequency and
the voltage stable on the grid, we can find devices
like a synchronous compensator which does the turning, doesn't burn
any gas, but you need that extra device to provide
(25:25):
that inertia. Batteries may be able to do it at
some point, but they can't always, or utilities aren't trusting
of batteries to do that just yet. Plus batteries still
remain pretty expensive, so you might be able to cover
two hours, four hours, or even eight hours of gap
between not having enough sun and not having enough wind,
(25:46):
but gas power can cover you twenty four to seven
at a stable rate, So it's not a perfect one
to one, and yet sure companies will turn to renewables,
but not enough. So then coming to the side off
the blessing, there was this move in Asia to convert
away from gold into gas. From your vantage point, looking
(26:09):
at this region, what are examples where this turbine shortage
is actually holding back this switching from happening.
Speaker 2 (26:17):
You know, I think one country that I looked at
very closely for this story is Vietnam. Vietnam has these
huge plants. They want to basically double their power capacity
by twenty thirty. This isn't an Ai story. This is
just a developing country. They've got industry people, it's growing
at a rapid pace, so they need a lot of energy. Now,
(26:38):
a large part of that will come from renewables, but
they also want to add potentially thirty gigatts of gas
fire generation. That's like twenty two new at least gas
power plants by twenty thirty. Now, I surveyed every developer
of these projects, and through that and through different analysis
of what's been publicly released by utilities, only think one
(27:00):
of those power plants has secured a gas turbine, and
that power plant's going to come online at the end
of this decade. Now, the issue with that is if
Vietnam can't get these power plants online, they either face
energy shortages, which they clearly don't want or they double
down back on coal, which is something that is a
(27:21):
big risk and could happen if they don't have other
options available to them. That's specifically an issue for the
emerging world where you can't, like you've been describing, quickly
ramp up renewables and batteries. It's just not economically feasible.
And also their demand is just constantly growing and growing.
They need large power plants to be on the grid
(27:44):
be providing power around the clock.
Speaker 1 (27:47):
So far, we've looked at the fact that we've gone
from high gas price to actually having gas turbine shortages.
There is a combination in the West of AI data
centers and there is this need in the East switching
from gold to gas that is causing the demand for
gas turbines to spike. We've also seen these three companies
(28:09):
Semens Energy, g Vernova and Mitsubushi Heavy that we've reported
on that they are looking to expand the capacity of
their manufacturing but not really build new factories. So the
expansion is not going to happen at the pace at
which the demand is growing. But let's look at the
next decade. What does the supply and demand outlook look like.
Speaker 2 (28:30):
Right now? Demand for this year is looking to shape
up to over sixty gigawatts of orders for new turbines. Now,
that's a really important number and threshold because according to
some analysts, that's the capacity of global production. So that's
the annual production of what the world can produce for
new turbines. We're going to be at that level or
(28:52):
over it this year, and then from twenty twenty six,
twenty twenty seven, twenty twenty eight and onwards at least
through twenty thirty or beyond were to be above that
level every year. And so the current capacity of where
we are, you just can't build that much, which means
that there will be a number of power plants dozens
and dozens of gigawatts of capacity that is either planned
(29:13):
or in pre construction level will not be able to
get their turbine on time or at all. In some cases,
if you look at the emerging world, how can you
even compete and try to build a project if it
is multiple times more expensive than it was a few
years ago. So that's the situation, and one of the
outcomes of that could very well be there are some
(29:35):
countries that can afford to build gas fire power plants
and there are others that cannot.
Speaker 1 (29:40):
Now.
Speaker 2 (29:40):
The industry, of course, like you said, is responding. So
we're seeing GeV Vernova looking to expand their capacity. One
analyst says that they could increase by thirty percent over
the next few years. It's be she heavy told us
that they're looking to double their capacity over in the
next several years as well. Siemens has some plans. I
know they were a little bit care with you when
you spoke with them, but they're also, according to analysts,
(30:04):
looking to expand. But even with that expansion, analysts are
saying that we're not going to be able to meet
the orders that are being given. And on top of that,
there's an interesting thing happening. Those are just orders, right,
those are binding contracts. There's another thing where people are
making they're putting five, ten percent, twenty percent down to
basically reserve a turbine and we're not even counting that.
(30:26):
And that's also playing out, and people are reserving turbines
so much. It wasn't something that was happening a few
years ago, but it's something that happened in two thousand.
When there was that first boom two decades ago, people
were reserving and kind of trading those slots, and you're
seeing that emerge again.
Speaker 1 (30:43):
These slots can be millions of dollars worth of slots
that companies are just ready to pay upfront for access
to a turbine that may or may not come by
twenty thirty or even beyond that. It's kind of stunning
what could be a curveball in this supplied amount of
outlat It's already looking pretty strained.
Speaker 2 (31:03):
It is, and I think China, unfortunately, is potentially that curveball.
It is one of the pressure points that if China
wants to suddenly build a lot of gas fire power plants,
then you could be in a situation where the global
supply chain is even more strained. Now it isn't guaranteed
at the moment, but there was an outline by some
(31:24):
domestic energy producers that they want to push in the
next five year plan that's coming out next year to
basically sanction construction about seventy gigawatts of new gas fire
capacity by the end of the decade in China. Now,
China doesn't have really their own large scale turbines. They
still depend on giv Veranova and folks like Mitsubishi Heavy.
(31:44):
So if China comes in big and suddenly decides, hey,
we want to shift away on our power grid from
coal to a degree and really go harder into gas,
then and they have the money in the capacity to
do that, then they might suddenly also start reserving slots
or buying a lot of turbines. I think one other
thing is the Middle East, which we haven't mentioned yet,
(32:06):
but Saudi Arabia is planning over twenty gigawatts of new
capacity editions by twenty thirty. I heard anecdotally that they're
essentially paying any price to get their turbines because they
have the money to do that, and they want to
get basically get away from oil, which makes up half
of their power grid by the end of the decade.
Speaker 1 (32:25):
Let's take one last climate question, because on gas turbines
it's a complicated story. There was this talk about natural
gas at one point being the transition fuel. It was
this time when renewables were still pretty expensive. They were
coming down in price, but nobody knew if they could
fall as far as they have fallen now, and so
people thought, okay, well, goal is too bad. Let's move
(32:46):
to natural gas. It'll provide this lower emission fuel. As
we get to absolutely clean renewables, that talk of transition
fuel is coming back. Now it's been called the bridge
fuel again. What do you make of this?
Speaker 2 (33:00):
I write a lot about the industry, and they've been
they've always been calling it a bridge fuel. And what
they're doing is they're actually doubling it down and they're
saying it's the destination. So they're not having saying a
bridge or temporary. They're saying it's a destination. So if
the industry gets what they want, then these gas plants
are going to be operating well past the middle of
the century. I think the key thing about the climate
(33:20):
is that, yes, building a gas power plant if you're
able to shift away from coal and use it as
a peaker plant to compliment intermittent renewables, so you're not
using it at you know, eighty percent ninety percent capacity
and definitely and you're slowly ramping down that output, and
you're using that generation just when you need it, either
at at night or when there's you know, heat in Vietnam,
(33:43):
or if if you need inertia on the grid. But
if you're building it and you're using it like a
coal plant, where you're using it as a base load
around the clock. You're never reducing it. You're going to
use it because you need to. You spend all this
money on it, and you're going to use it to
twenty fifty to twenty sixty and beyond. That's when the
argument of the bridge fuel starts to fall apart and
the argument of the destination kind of takes over. So
(34:06):
I think that's the slippery slope in the climate debate
for this.
Speaker 1 (34:10):
And we're going to start to see that debate play
out here in the UK. They're planning to get to
in ninety five percent clean power grid by twenty thirty,
and in that plan, they are going to increase gas
power capacity but reduce the amount of gas that is
being burned exactly by using it in the climate friendly
ways you suggest. And then we'll see countries like the
US or Vietnam to tell us the counterpoint of what
(34:33):
the climate cost of gas could be. This was a
great story to work on together, Steven. Thank you for
your insights from Asia, and thanks also to our colleague
Josh Saul for reporting in the US. Thank you for
having me, and thank you for listening to zero Now
(34:54):
for the sound of the week. That's the sound of
a Pine Martin. The species was almost hunted to extinction
in the UK, but is now making a comeback thanks
to successful reintroduction efforts across England, Wales and Scotland over
(35:17):
the last decade. If you like this episode, please take
a moment to rate and review the show on Apple
Podcasts and Spotify. Share this episode with a friend or
with someone who is good at keeping secrets. This episode
was produced by Oscar boyd Our. Theme music is composed
by Wonderly Special Thanks to Josh soul Nicholas Takahashi, David Stringer,
(35:38):
Emily Buzzo, Jody Maxin, somnadbad Somarsadi, Moses Andam, Laura Milan
and Sharon Chan i'm Akshadarrati Back soon
Welcome to Zero. I am Akshatrati. This week gas turbines
a blessing or a curse. For the last year at Bloombergreen,
(00:20):
I've been investigating bottlenecks to our clean, electrified future. We've
covered several different topics on zero, from a lack of
grit transformers to the shortage of skilled workers. Today, we
are going to be talking about something that might not
have an immediately obvious climate benefit. Gas turbines, those spinning
things that burn natural gas, turn a generator and produce electricity.
(00:45):
There's a growing shortage of gas turbines. It used to
take around two years to get a new one, Now
it takes up to five or more. Advocates for gas
call it a transition fuel, something that can fill the
gap between burning coal and moving to one hundred percent
carbon free grid. That's because for every killer what are
of electricity produced from gas, it only releases half the
(01:08):
amount of carbon dioxide as compared to coal. Gas can
also provide a useful and relatively cheap backup to renewables,
allowing for more clean power to be built out quickly
without worries of blackouts. But there are serious concerns about lockin.
Once someone spends billions of dollars building a gas power plant,
(01:29):
they'll want to run it for long enough that it
can make a decent return on their investment. Also, it's
worth noting that natural gas is mostly made of methane,
which has eighty times the warming potential of carbon dioxide.
There's a risk that if methane leaks aren't kept in check,
then gas power plants could be worse than coal power plants.
(01:50):
Whether you believe gas is a blessing or a curse
for the energy transition, the shortage of gas turbines is
causing serious headaches in the buildout of the electricity supply
that businesses desperately need. Joining me to discuss all this
is Steven Stopchinski, who add its energy stories and writes
about natural gas for Bloomberg. He and I collaborated with
(02:10):
our colleague Jostsol to conduct a global investigation into the
state of the gas turbine industry. Today on zero we
look at what's causing the bottleneck and gas turbines, whether
the shortage will make companies look to renewables or go
back to coal, and whether gas is really a bridge
to the future or the end goal for the fossil
fuel industry. Steven, welcome to the show.
Speaker 2 (02:35):
Thank you for having me so.
Speaker 1 (02:36):
I consider you to be Bloomberg's resident expert on natural gas.
You nerd out about lnged hankers, you put out tiktoks
about crazy price swings, and there are lots of Simpsons
characters in there on your charts. I also assume that
sitting in Singapore you have set up binoculars that you
use to see these bulbous ships go past.
Speaker 2 (03:00):
Right. Man, if I had a place in Sentosa, I
would totally do that, but unfortunately my view is just
a bunch of buildings. But when I do go to
the beach, I do look out for LNG ships and
I see them.
Speaker 1 (03:10):
So it's great to have you on zero. And we're
going to talk about a phenomena that you and I
have both seen building up for some time now, but
it has come to a crisis point. Is the shortage
of gas turbines. When did you first hear about it?
Speaker 2 (03:25):
You know, I've been reading reports about this for maybe
a year, how there have been more gas turbine orders,
And I actually didn't pay very much attention to it
because I've been covering LNG at Bloomberg for over a decade,
and for a long time, gas turbines was one of
the more boring parts of the industry. You would order
your turbine, it would come twenty four months later, usually
without fail there will be no issues. But I was
(03:46):
at an energy conference in India and February, and in
India they want to boost gas. They want to make
it fifteen percent of the energy mix by twenty thirty,
basically double where we are today. And so I would
ask the utilities, you know, what are you going to do.
Your greate is mostly coal? Are you going to build
some new gas fire power plants to try to boost
(04:07):
those numbers and hit the twenty thirty goal for MODI?
And the utilities looked at me and they said, we
can't afford that, And I said, why not. It is
because the gas is too expensive. You know, the invasion
of Ukraine or Russia kind of shocked the market. Prices jumped,
and they said, well, that's one issue, but another is
gas fire power plants are just too expensive for us
to build at the moment. It makes far more sense
(04:27):
for us to look at coal or even in some
cases renewables I was a little bit surprised by that.
I didn't know gas power plants got so expensive and
they're on the front lines, probably one of the more
price sensitive buyers. So that got me kind of looking
into it, and I realized that there was just something
happening in the market. From Asia to the US to Europe,
people weren't getting the turbines that they wanted quickly, and
(04:48):
it was costing them far more money.
Speaker 1 (04:49):
Yeah. So it is a strange thing because if you
are not the nerd that is Steven who looks at
energy prices daily, you're going to be like, hold on
a minute. Was the Russia Ukraine War that caused this
huge gas bike people were struggling to get gas and
now we have gone and swung the other way where
(05:09):
it's not about gas shortages, it's about the shortage of
gas turbines. How does that happen?
Speaker 2 (05:16):
First off, I think we need to explain very bally
what a gas turbine is. Right, it's the heart of
a power plan. So if you want to generate electricity,
you have to build a power plant and essentially turn
a turbine, and that's where the gas turbine comes in.
It's one of the more efficient ways to produce electricity
at a large scale. It's very complicated. These things are
(05:37):
the size of the bus. They weigh the same as
a fully loaded Boeing seven forty seven, and this is
a piece of equipment that has been in demand right
The demand for gas fire power plants has been pretty
steady over the last decade, especially in the United States.
The US built a number of gas fire power plants
(05:57):
after the Shell Revolution caused gas prices to drop, making
it more affordable than coal. Likewise, places like Japan, Korea,
and even in China to an extent, have been turning
more to gas because they're able to deal with different
changes in power supply from renewables. Gas plants known as
peaker plants, can quickly ramp up and ramp down output,
(06:20):
unlike coal, so which is more steady across the board.
So there has already been this demand for gas, and
on top of that, the power industry has been looking
at gas as a way to shift away from coal.
So here in Asia, especially in the emerging world, which
is very dependent on coal, they've been looking at instead
of building new coal fire power plants to meet their
(06:41):
rapid demand increases. Of Vietnam, India and other places. There's
been a kind of a shift to look at how
can we build more gas fire power plants. One of
the reasons being that gas emits about half as much
CO two emissions when combusted compared to coal, which is
the dirtiest fossil fuel. Now there's been this kind of
(07:02):
steady demand across Asia because of that, and especially in
the last I think ten years, a lot of countries
have been pushing forward with their plans to build more
gas fire power plants. Now you look at the West,
it's a different sort of story. Power demand had largely
been sort of peaking in the US. You saw it
kind of an increase, but it has been pretty steady.
(07:24):
But the AI boom in particular has really increased the
need for electricity, especially as there's a large build out
in data centers. I mean, the numbers there are pretty ridiculous.
In the US, they're looking to potentially see peak demand
increase by one hundred and fifty gigawatts over the next
decade due in part two AI. That's an eighteen percent
(07:46):
growth from current levels. It's like adding the equivalent of California,
Texas and New York to the power system, and then
on top of that, the US has to also replace
old coal plants and old gas plants. That's another essentially
one hundred and twenty gigwatts of existing power capacity, or
ten percent of the total US fleet that's expected to
retire over the coming decade. All of that together really
(08:10):
increases demand there and it's caused a spike in orders
for turbines.
Speaker 1 (08:16):
And what you and I have been hearing from the
industry is that there's this timeframe which is to be
about twenty four months to get a gas turbine, has
now suddenly gone to five years, or you just cannot
get on the queue to get one of these large
gas turbines. So that's when you and I and our
colleague in New York, Josh Saul, teamed up and we
(08:39):
wanted to understand the real reasons for why this kind
of shortage exists. And this story needed three reporters in
three regions, right absolutely.
Speaker 2 (08:48):
I think because the nature of the industry, there are
three major suppliers that essentially dominate it. There's giev Renova,
which is essentially located in North America. There's Semens, which
is located in Europe. You went to see them there.
And then there's Mitsubishi Heavy, which is a Japanese company,
and each of them kind of have a large share.
(09:09):
While they do sell turbines across different regions, they really
do sort of dominate their home markets. So, for example,
Mitsubishi Heavy, a lot of their customers are in Asia.
Speaker 1 (09:19):
And so this episode is part of the Bottlenecks series
where we've covered the things that are holding back the
world from speeding up toward a cleaner and more electrified future.
And throughout we've found that there are a few reasons
that these bottlenecks exist. So in this case, given Semen's Energy,
jie Van Nova and Mitsubushi Heavy own about seventy percent
(09:41):
of the market for large gas turbines, isn't it the
onus on them to expand capacity. They are going to
earn tens of millions of dollars per turbine, Their profits
are going to be great, They're already pretty good. Why
is it that their expansion is not keeping up with
the of the demand for these turbines.
Speaker 2 (10:02):
I think you have to kind of look at the
history of this industry first to go into that. So
back in two thousand, there was another gas turbine boom
due in part to deregulation in the United States. There
were a lot of orders in Texas, and you saw
orders of turbines rise to above one hundred gigawatts of orders.
(10:22):
The capacity today is about sixty gaguats. Now, the industry
did build up and they spent a lot of money
investing in new capacity in the early aughts, but the
demand quickly fell apart and they didn't see a return
to that one hundred gigawatt level, and that gas turbine
boom in the early oughts really fizzled for a few reasons. One,
(10:44):
gas prices. Natural gas prices rose in the United States,
making it not very economical to operate these facilities. They
just kind of got out of vogue because it was
too expensive. And then right after that, there was a
financial crisis, which just took a hit to power demand
as well, and utilities weren't eager to build new power plants.
So over the last two decades, while there has been
increases here and there and have been hills and valleys,
(11:06):
the industry was really hurt by that and they never
kind of recovered, and a lot of people who are
executives today at Cemen's ge Rinova and Mitsubishi Heavy have
memories of that, and so they're worried again that is
its demand really going to stick? You know, the AI
boom clearly, you know, we write a lot about it,
and you are seeing data center build out in the
(11:28):
United States and you are seeing a lot more demand
for electricity out of certain parts of the US. But
how sticky is that, I think are what people in
the industry are wondering. That's the one thing, Because the
other thing is that this is hyper technical, hyper specialized
equipment that requires really a certain type of factory that
(11:48):
can't just be built overnight, and so investing in that
requires a lot of money, a lot of expertise, and
a lot of time. So do they one still expect
that this demand increase will last over the next five
to ten years, as some analysts are saying, And then two,
do they have the wherewithal to really look at building
(12:09):
new factories? Because actually Mitsubishi Heavy has said to us
we had an exclusive interview with their CEO. He said
that they're looking to double their capacity. But when you
get into the details, it's not that they're building a
new factory. They're just trying to make their existing factory
as efficient as possible. So I think what you're going
to see is folks are going to try to pump
(12:29):
out as much as they can out of their existing
factories before they really look at putting shovels in the
ground to build new factories that are going to cost
a lot of more money.
Speaker 1 (12:38):
That's the same thing I found reporting on Semen's Energy
that they have already increased the number of cast turbines
that they can make from their existing factory over the
last two years, and they are looking to expand, but
only within the dimensions of their own factory, which is
in central Berlin, and so there's not that much land
to expand, and so they're having to move some parts
of it out just to be able to ensure that
(13:00):
can produce more gas turbines from those places. So you
touched a little bit on the fact that the factory
itself as complicated, But surely, given how much money you
could be making, why aren't small companies or even startups
coming into solve what is clearly a big commercial opportunity.
Speaker 2 (13:19):
The thing with the turbines is that these companies have
been developing them for decades. It is not something that
they came in and decided, hey, we're gonna crash this out.
These aren't startups. These are companies that have been working
on turbines for in some cases close to a century.
When I met with the folks at Mitsubishi Heavy in Tokyo,
they told me that it's really this testing. It's the
(13:42):
data that they've collected through decades and decades of operations. Actually,
one interesting thing about mitsbec Heavy is that they have
their turbine. They're one of their turbines operating at their
factory so that they can use it as a test
case for when they make small tweaks to the design.
It's something that's really important that others cannot easily do.
(14:02):
And on top of that, turbines are just really complicated.
We've to an extent, really perfected them. I kind of
look at turbines similar to how we look at semiconductors. Right,
you can't just jump in and start building a semiconductor.
You have to really understand the intricacies of where every
single one of those small thousands of blades go. This
thing is rotating at three thousand revolutions a minute, and
(14:26):
to do that perfectly requires precision, it requires materials, and
it requires a wherewithal to keep at it that other
companies can't easily break into. And it's actually interesting. China
is developing their own turbine. They're looking at commercializing a
three hundred megawat turbine, and yet it still isn't up
to par with what these three companies are doing with
(14:48):
their five hundred to six hundred megawatt level equipment. These
companies are also very secretive and they really look after
their IP remarkably highly. It's something that I saw when
we were interviewing Mitsubishi Heavy Industries. We start a photographer
there to look at it. We sent a reporter and
he couldn't take pictures inside of the building. One of
these issues is this high entry barrier. I think when
(15:11):
you spoke with Range Schmirker at Semen's Energy, he had
a really interesting quote.
Speaker 1 (15:15):
Yeah, he said, is the beauty of our industry that
it has a super high entry barrier. And that's because
it just costs a lot of money to develop these
gas turbines and takes years of experience.
Speaker 2 (15:27):
Now you know, these companies are very very secretive. Like
I said, We tried to get some pictures inside the
factories at Mitsubishi Heavy they wouldn't allow it in Japan.
We weren't very successful. Did you have any better luck
action when you went to Seaman Energies factory. Yeah.
Speaker 1 (15:42):
I was surprised by the fact that they actually let
me see all of it without restriction. It felt like that,
and towards the end I asked them, what did you
not show me? And I'll tell you more about that.
But the factory itself was amazing. So it was built
in the very early twentieth century, and at that time
it was on the edge of Berlin, but of course
(16:03):
Berlin has grown since then and so now it sits
in the heart of Berlin. Like I was staying in
a hotel in central Berlin and it was a ten
minute taxi right to get to this massive factory which
has three thousand workers, which produces fifty sixty gas turbines
a year. The factory itself now has heritage buildings, so
certain things cannot be modified because it is considered part
(16:26):
of German history. It's made of glass and steel and concrete.
It's got massive ceilings going up twenty five meters. The
turbine haul itself is two hundred meters long, and you
can see from one end to the other end if
you go to a high point, and then the equipment itself.
I knew what gas turbines looked like, I'd seen photos
(16:47):
of them, but seeing them up close is just stunning.
There are these massive, really precisely engineered pieces of metal
with sometimes really fancy coatings on them that are over months.
You know you said takes twenty four months from getting
an order to a turbine. It really does take months
(17:08):
to be able to ensure all these different parts of
the supply chain come into Semen's energy, and that engineers
are able to then assemble these tiny pieces all together.
And the engineering precision is needed because of the speed
at which they're rotating, but also the temperature at which
they're operating.
Speaker 2 (17:26):
Actually, can you just walk through the engineering of a
gas turbine forming.
Speaker 1 (17:31):
It's something that I think most people, at least people
who've taken a flight would actually be able to understand
pretty easily, because a gas turbine is really a large
version of what a jet engine looks like. There is
air coming from one end, there is fuel being burnt
inside the turbine and the exhaust gases from this combustion
(17:53):
is what is in the case of a jet engine,
propelling it to fly in the air, in the case
of a gas turbine, turning a shaft that then can
generate power. But to make that happen is not that simple.
It's taking this air, but it compresses it using these
rotors and blades that are turning at three thousand revolutions
per minute. And in the process of compressing the air,
(18:14):
it's heating it up, so it's going from room temperature
air to six hundred degrees celsius. And then this hot
air is combined with natural gas and burnt in the
combustion chamber and raises that temperature to fifteen hundred degrees celsius,
and all that hot gas is released out into the
exhaust section, where again lots of rotors and blades take
(18:34):
all that mechanical energy and turn the shaft. It is simple,
and yet because of the pressure and temperature and speed
at which it operates, it's really complicated engineering.
Speaker 2 (18:48):
And then on top of that you also have the
combined cycle aspect of it. Do you want to talk
about that as well? Really quick?
Speaker 1 (18:55):
Yeah, It's a good point because when gas turbines were
initially created, just like engines, if you just burn the
fuel and you let the exhaust go out, the exhaust
is at still a pretty high temperature, and which means
you're just losing a ton of energy to the atmosphere.
That's what gas speaker plants do today. They take the gas,
they burn it, and then they let out quite a
(19:17):
lot of energy just into the atmosphere. So the industry
came up with a way to make the process more efficient.
Rather than just leaving this exhaust gas which has so
much energy in it, they combined it by taking that
exhaust gas, using it to heat water, make steam, and
then have a steam turbine turn and make more power.
(19:38):
So combined cycle power plant can be as efficient as
sixty sixty five percent, whereas a gas turbine plant is
thirty five, forty maybe forty three percent efficient at best.
After the break, what was the Semen's factory hiding from me?
And why were they hiding it? If you're enjoying this episode,
(20:01):
please give Zero a review on Apple Podcasts and Spotify
to help new listeners find the show. Recently, Travels for
Work wrote this podcast is data driven and delivered with
so much integrity. There's episodes I have listened to multiple times.
Thanks travels for work.
Speaker 2 (20:33):
All right, and I want to go back to this
factory you saw in Berlin. What exactly do you think
Siemens was being secretive or hiding stuff from you about.
Speaker 1 (20:40):
So on the tour, I really couldn't tell, Like there
was no closed off area, there was no indication, don't
go there, don't see this, And so I just had
to ask, because of your experience with Mitsubushi, as like, guys,
surely you're hiding something from me. And they said, there
are two things we haven't shown you and we can't
show you. They said, we can't show you our latest model,
(21:02):
which is the nine thousand HL, which produces about six
hundred megawads of power. We can't show you because we
don't want to show you, but also currently we're not
manufacturing one. And then the other side they didn't show
me was the design studio where they run simulations on
these blades and rotors that determine how gas and air
(21:24):
is flowing through the turbine, because that determines how efficient
the gas turbine can be, and that is a process
that again takes years of work. They do three D
printing off metal parts to be able to test them out,
and that's the section they didn't show me. Now.
Speaker 2 (21:38):
Actually, you host this Climate Solutions podcast. Gas turbines are
both a blessing and a curse, right they are.
Speaker 1 (21:44):
You know, you talked a little bit about the fact
that in Asia there is this move to go from
coal to gas, and that can be a good thing
because in total CEO two emissions, burning gas for power
produces about half the emissions. There is a downside, which
is if gas is leaking and gas has methane as
its main component, that can cause sometimes gas to become
(22:09):
worse than coal because this methane will end up in
the atmosphere. It'll heat up ton for ton the planet
about eighty times as much, and that's not good. But
if you can keep the leaks to a bare minimum
or eliminate them altogether, then you are really getting the
benefit of half the emissions for the same amount of power.
There's also the curse side, which is once you build
(22:31):
a large gas power plant, and this can be you know,
billion to billion dollars worth of investment. You as a
power company, you as a utility that has ordered a
power company to make it for you are going to
use it, so it is sunk cost. It is an
asset that will have to run its life to make
sure the returns have been made. And that means there
(22:53):
is a lock in that could come from building all
these gas turbines even if the coal to gas switching
is happening. And then the curse side also extends into
what is happening with the AI boom where they really
don't care where the power is coming from, and the
data center people are ready to build whatever they can
(23:13):
get their hands on. So in a classical case, we
had XAI, which is the company that Elon Musk runs,
build a data center where they couldn't get a large
gas turbine, so they ended up buying tons of small
gas turbines which do not have a combined cycle, which
burn all this gas, which cause all these methane emissions,
but also all these carbon dioxide emissions, and do it
(23:35):
in a very inefficient way. And that side is tough,
but there could be a blessing, which is we have
heard from experts who say that if gasturbine shortage exists,
then more and more of these AI data center companies
will have to look at renewables and storage and somehow
find a way to make it work, and that could
create a boom for renewables, especially in the US where
(23:58):
the federal government is right now trying to curtail a
lot of the renewables development through cutting off subsidies, but
also other problems.
Speaker 2 (24:05):
I mean, but there's just something I have to ask you.
If if there's a shortage in turbines and you can't
build power plants, or if the power plants cost too much,
won't that make companies just look to renewables instead?
Speaker 1 (24:17):
It is I mean, we looked at the cost of
these gas power plants from next Energy, which is one
of the biggest utilities in the US. We got an estimate.
They said that a combined cycle gas power plant used
to cost about eight hundred dollars a KILLOWOT in twenty
twenty one. Today that cost is about two thousand, six
hundred dollars to two thousand, eight hundred dollars a killo VOT.
(24:40):
And the kicker is that next Era CEO John Ketchum
said gas fire power plants in the US will come
online at a higher cost than renewables plus battery storage,
and so we will see AI data center companies turn
to renewables plus storage. But we also know currently battery
storage cannot do all the things that gas turbines can do.
(25:04):
So gas turbines provide something called inertia, which is something
we've discussed in this series in bottlenecks before, where just
a spinning mass is necessary to keep the frequency and
the voltage stable on the grid, we can find devices
like a synchronous compensator which does the turning, doesn't burn
any gas, but you need that extra device to provide
(25:25):
that inertia. Batteries may be able to do it at
some point, but they can't always, or utilities aren't trusting
of batteries to do that just yet. Plus batteries still
remain pretty expensive, so you might be able to cover
two hours, four hours, or even eight hours of gap
between not having enough sun and not having enough wind,
(25:46):
but gas power can cover you twenty four to seven
at a stable rate, So it's not a perfect one
to one, and yet sure companies will turn to renewables,
but not enough. So then coming to the side off
the blessing, there was this move in Asia to convert
away from gold into gas. From your vantage point, looking
(26:09):
at this region, what are examples where this turbine shortage
is actually holding back this switching from happening.
Speaker 2 (26:17):
You know, I think one country that I looked at
very closely for this story is Vietnam. Vietnam has these
huge plants. They want to basically double their power capacity
by twenty thirty. This isn't an Ai story. This is
just a developing country. They've got industry people, it's growing
at a rapid pace, so they need a lot of energy. Now,
(26:38):
a large part of that will come from renewables, but
they also want to add potentially thirty gigatts of gas
fire generation. That's like twenty two new at least gas
power plants by twenty thirty. Now, I surveyed every developer
of these projects, and through that and through different analysis
of what's been publicly released by utilities, only think one
(27:00):
of those power plants has secured a gas turbine, and
that power plant's going to come online at the end
of this decade. Now, the issue with that is if
Vietnam can't get these power plants online, they either face
energy shortages, which they clearly don't want or they double
down back on coal, which is something that is a
(27:21):
big risk and could happen if they don't have other
options available to them. That's specifically an issue for the
emerging world where you can't, like you've been describing, quickly
ramp up renewables and batteries. It's just not economically feasible.
And also their demand is just constantly growing and growing.
They need large power plants to be on the grid
(27:44):
be providing power around the clock.
Speaker 1 (27:47):
So far, we've looked at the fact that we've gone
from high gas price to actually having gas turbine shortages.
There is a combination in the West of AI data
centers and there is this need in the East switching
from gold to gas that is causing the demand for
gas turbines to spike. We've also seen these three companies
(28:09):
Semens Energy, g Vernova and Mitsubushi Heavy that we've reported
on that they are looking to expand the capacity of
their manufacturing but not really build new factories. So the
expansion is not going to happen at the pace at
which the demand is growing. But let's look at the
next decade. What does the supply and demand outlook look like.
Speaker 2 (28:30):
Right now? Demand for this year is looking to shape
up to over sixty gigawatts of orders for new turbines. Now,
that's a really important number and threshold because according to
some analysts, that's the capacity of global production. So that's
the annual production of what the world can produce for
new turbines. We're going to be at that level or
(28:52):
over it this year, and then from twenty twenty six,
twenty twenty seven, twenty twenty eight and onwards at least
through twenty thirty or beyond were to be above that
level every year. And so the current capacity of where
we are, you just can't build that much, which means
that there will be a number of power plants dozens
and dozens of gigawatts of capacity that is either planned
(29:13):
or in pre construction level will not be able to
get their turbine on time or at all. In some cases,
if you look at the emerging world, how can you
even compete and try to build a project if it
is multiple times more expensive than it was a few
years ago. So that's the situation, and one of the
outcomes of that could very well be there are some
(29:35):
countries that can afford to build gas fire power plants
and there are others that cannot.
Speaker 1 (29:40):
Now.
Speaker 2 (29:40):
The industry, of course, like you said, is responding. So
we're seeing GeV Vernova looking to expand their capacity. One
analyst says that they could increase by thirty percent over
the next few years. It's be she heavy told us
that they're looking to double their capacity over in the
next several years as well. Siemens has some plans. I
know they were a little bit care with you when
you spoke with them, but they're also, according to analysts,
(30:04):
looking to expand. But even with that expansion, analysts are
saying that we're not going to be able to meet
the orders that are being given. And on top of that,
there's an interesting thing happening. Those are just orders, right,
those are binding contracts. There's another thing where people are
making they're putting five, ten percent, twenty percent down to
basically reserve a turbine and we're not even counting that.
(30:26):
And that's also playing out, and people are reserving turbines
so much. It wasn't something that was happening a few
years ago, but it's something that happened in two thousand.
When there was that first boom two decades ago, people
were reserving and kind of trading those slots, and you're
seeing that emerge again.
Speaker 1 (30:43):
These slots can be millions of dollars worth of slots
that companies are just ready to pay upfront for access
to a turbine that may or may not come by
twenty thirty or even beyond that. It's kind of stunning
what could be a curveball in this supplied amount of
outlat It's already looking pretty strained.
Speaker 2 (31:03):
It is, and I think China, unfortunately, is potentially that curveball.
It is one of the pressure points that if China
wants to suddenly build a lot of gas fire power plants,
then you could be in a situation where the global
supply chain is even more strained. Now it isn't guaranteed
at the moment, but there was an outline by some
(31:24):
domestic energy producers that they want to push in the
next five year plan that's coming out next year to
basically sanction construction about seventy gigawatts of new gas fire
capacity by the end of the decade in China. Now,
China doesn't have really their own large scale turbines. They
still depend on giv Veranova and folks like Mitsubishi Heavy.
(31:44):
So if China comes in big and suddenly decides, hey,
we want to shift away on our power grid from
coal to a degree and really go harder into gas,
then and they have the money in the capacity to
do that, then they might suddenly also start reserving slots
or buying a lot of turbines. I think one other
thing is the Middle East, which we haven't mentioned yet,
(32:06):
but Saudi Arabia is planning over twenty gigawatts of new
capacity editions by twenty thirty. I heard anecdotally that they're
essentially paying any price to get their turbines because they
have the money to do that, and they want to
get basically get away from oil, which makes up half
of their power grid by the end of the decade.
Speaker 1 (32:25):
Let's take one last climate question, because on gas turbines
it's a complicated story. There was this talk about natural
gas at one point being the transition fuel. It was
this time when renewables were still pretty expensive. They were
coming down in price, but nobody knew if they could
fall as far as they have fallen now, and so
people thought, okay, well, goal is too bad. Let's move
(32:46):
to natural gas. It'll provide this lower emission fuel. As
we get to absolutely clean renewables, that talk of transition
fuel is coming back. Now it's been called the bridge
fuel again. What do you make of this?
Speaker 2 (33:00):
I write a lot about the industry, and they've been
they've always been calling it a bridge fuel. And what
they're doing is they're actually doubling it down and they're
saying it's the destination. So they're not having saying a
bridge or temporary. They're saying it's a destination. So if
the industry gets what they want, then these gas plants
are going to be operating well past the middle of
the century. I think the key thing about the climate
(33:20):
is that, yes, building a gas power plant if you're
able to shift away from coal and use it as
a peaker plant to compliment intermittent renewables, so you're not
using it at you know, eighty percent ninety percent capacity
and definitely and you're slowly ramping down that output, and
you're using that generation just when you need it, either
at at night or when there's you know, heat in Vietnam,
(33:43):
or if if you need inertia on the grid. But
if you're building it and you're using it like a
coal plant, where you're using it as a base load
around the clock. You're never reducing it. You're going to
use it because you need to. You spend all this
money on it, and you're going to use it to
twenty fifty to twenty sixty and beyond. That's when the
argument of the bridge fuel starts to fall apart and
the argument of the destination kind of takes over. So
(34:06):
I think that's the slippery slope in the climate debate
for this.
Speaker 1 (34:10):
And we're going to start to see that debate play
out here in the UK. They're planning to get to
in ninety five percent clean power grid by twenty thirty,
and in that plan, they are going to increase gas
power capacity but reduce the amount of gas that is
being burned exactly by using it in the climate friendly
ways you suggest. And then we'll see countries like the
US or Vietnam to tell us the counterpoint of what
(34:33):
the climate cost of gas could be. This was a
great story to work on together, Steven. Thank you for
your insights from Asia, and thanks also to our colleague
Josh Saul for reporting in the US. Thank you for
having me, and thank you for listening to zero Now
(34:54):
for the sound of the week. That's the sound of
a Pine Martin. The species was almost hunted to extinction
in the UK, but is now making a comeback thanks
to successful reintroduction efforts across England, Wales and Scotland over
(35:17):
the last decade. If you like this episode, please take
a moment to rate and review the show on Apple
Podcasts and Spotify. Share this episode with a friend or
with someone who is good at keeping secrets. This episode
was produced by Oscar boyd Our. Theme music is composed
by Wonderly Special Thanks to Josh soul Nicholas Takahashi, David Stringer,
(35:38):
Emily Buzzo, Jody Maxin, somnadbad Somarsadi, Moses Andam, Laura Milan
and Sharon Chan i'm Akshadarrati Back soon
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