The end of the road for the large Alstom gas turbines?

(corrected February 2015)

The large (>50MW) Alstom gas turbines (GT11N2, GT13E2, GT24 and GT26) represent a line of technology which derives mainly from the BBC range of products (developed further as ABB) and acquired by Alstom in 1999. At that time Alstom’s licence with GE came to an end. But as GEC-Alsthom, Alstom had also inherited the gas turbine technology which came out of GEC in the UK. In the current Alstom range not much remains of the GEC tradition. At the smaller end Alstom also once had the gas turbine technology of the Ruston engines from Lincoln and acquired the ABB range of small machines (which themselves carried forward the developments as ASEA and some of the Sulzer range). But the entire range of industrial (<50MW) gas turbines was divested to Siemens in 2003 (and they are doing very well there).

Now as GE takes over Alstom’s power business (which has still to get final regulatory approval but looks to be a done deal), the days of the Alstom range of large gas turbines are strictly numbered. GE (and Siemens) have their own machines competing directly with the GT24 (60Hz) and GT26 (50Hz) and I do not expect that any more of these machines will ever be sold again. The sequential combustion design concept that these machines employ is so far from the GE approach that it seems impossible for any versions of these machines to continue. Alstom (as ABB) had adopted sequential combustion in the late 1990’s firstly to differentiate themselves from GE and Siemens and to get over their lack of access to advanced, high-temperature materials coming out of military jet engine programmes. Sequential combustion was first used/tested by BBC in the 1960’s 1948* though at much lower temperatures and ABB was trying to create a virtue out of a disadvantage – which the GT24 and GT26 did eventually do, but not without great problems and great cost.

GE may well have some benefit from some of the component solutions that Alstom has been forced to develop – at great expense – to get over the challenges posed by sequential combustion. Similarly some of the low-NOx solutions developed by Alstom could possibly be of use for GE. There may be some tricks for GE to pick-up regarding compressors. Certainly GE will continue with the very lucrative service market in maintaining the Alstom fleet and this will continue for perhaps 10 or 12 years at most. So while GE will benefit from the service revenue and by the reach of Alstom’s global sales organisation, the GT24 and GT26 – as products – have very little benefit to offer. It will not be possible for GE to absorb all the manpower currently employed with Alstom’s gas turbines. Not all those currently involved with the design and manufacture of the GT24 and GT26 will be needed for – or be able to switch over to – the design and manufacture of the GE range. GE’s global procurement network and its qualification of sub-suppliers is probably much more advanced than Alstom’s. I don’t expect that GE’s global sourcing will be much enhanced by the acquisition of Alstom’s Power business. Some job losses at Alstom locations are inevitable and I suspect these will be mainly in Switzerland while jobs in France will be somewhat protected by GE’s promises to the French government. At Belfort, Alstom produced GE machines under licence till 1999 and no doubt this will become GE’s centre for large gas turbines in Europe.

The GT11N2 gas turbine will probably die a natural death. It has not been a really competitive machine for over a decade and even though it has gone through many upgrades and cost reduction exercises, It has some unique advantages with low-Btu fuels but I do not think it offers GE any great advantages and they already have competing machines. The GT11N2 may have survived a little longer within the more restricted Siemens stable but even here it would have eventually withered.

The GT13E2 is possibly the only machine that may survive for a while under GE. It has some unique advantages with low-Btu fuels and could have a geographical market niche in Russia and the former CIS countries. But if it does survive it will do so only as a niche product. Again it would probably have had a longer life under Siemens but my guess is that it will not be sold for more than another 2 or 3 years.

The next market boom for large gas turbines – by my analysis – will come in the second half of 2015. This will be due partly to the 7-8 year “normal” business cycle and partly due to, and reinforced by, the advent of shale gas. And when that boom comes, the Alstom machines will be absent and there will be one less gas turbine technology available in the world. GE, Siemens and MHI will be the only three technologies left and they will be the main beneficiaries. But just three technologies are not enough. A growing market together with a dearth of technology suppliers will probably ensure the entry of another player into the field of large gas turbines.

(Actually Siemens and MHI get the best return at the lowest cost. They gain increased market space as Alstom’s machines disappear at no cost to themselves. GE gains no new products, gets the same increased market space and gets increased service revenue for Alstom machines. But GE has a large cost of acquisition and a great deal of hassle – and cost – to come as they restructure and integrate the Alstom business).

I would guess that this fourth player could well be Shanghai Electric with their newly acquired 40% stake in Ansaldo Energia. This has been something of a coup for Shanghai Electric. Doosan were also eyeing Ansaldo as a way of entering the gas turbine playing field (the entry barriers are too high for a scratch player). Both Doosan and Siemens had made bids for Ansaldo Energia but Siemens’ bid was essentially a defensive and a spoiling bid and they eventually withdrew. Doosan were the sole remaining bidder but it seems that Shanghai have pipped them at the post for this strategic acquisition.

* Correction – Sequential combustion was first used by BBC at Beznau in 1948, operating on distillate and with a TIT of 575ºC.

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