In the latest sign that the “golden age” of natural gas-powered utilities is drawing to a faster close than its boosters ever anticipated, Siemens is considering selling off the business unit that manufactures natural gas turbines.
“I think that the whole industry has significantly been underestimating the rise of renewable energy,” CEO Joe Kaeser told the Wall Street Journal in March. Last November, the German industrial powerhouse announced it was laying off 7,000 people, nearly all of them in its power and gas division, while GE moved to restructure its gas turbine division. “The power generation industry is experiencing disruption of unprecedented scope and speed,” Siemens managing board member Lisa Davis said at the time.
And now, “according to figures from the UN and Bloomberg New Energy Finance, renewables (excluding large hydro) accounted for 157 gigawatts of electricity capacity additions last year, while fossil fuels only accounted for 70 gigawatts,” Greentech Media notes. “The global gas power market actually lost 12 gigawatts of net capacity in 2017, as retiring plants outpaced new ones.”
Meanwhile, “operating income for Siemens’ gas turbine business fell from US$438 million in Q2 of 2017 to $114 million in Q2 of 2018.” Citing analysis by GTM Research and its parent company, Wood Mackenzie, Greentech states that “four-hour battery storage units will consistently compete with gas combustion turbines for peaking power in the coming years—threatening up to 7.9 gigawatts of plants in the U.S. Other regions of the world, including Australia, are seeing a similar trend. Within a decade, storage will likely always win against gas peakers in the U.S.”
The International Energy Agency still predicts 45% growth in global natural gas demand through 2040. But that’s based on industrial sector demand, with “limited room to expand in the power sector,” Greentech notes.