Thursday, September 27, 2012

GE Sees Boost in Gas in Baseline Power Generation

The Financial Times reports that the head of GE's power and water division says the company is seeing increased investment worldwide in power plants that use natural gas to provide baseload electricity (may require registration).  Gas normally is used for peaking needs because gas turbines are easier to start and stop while baseload needs are usually carried by coal, nuclear or oil.

GE is touting new orders in Japan, Saudi Arabia and the U.S.  In all of those cases, there are good reasons:  Japan is shifting away from nuclear after the recent earthquake and tsunami, Saudi Arabia would rather export its oil for $100+/barrel than burn it for electricity and the U.S. has an abundance of cheap gas and will see new pollution restrictions on coal-fired power plants in the next decade.

The real trick will to see this trend hit China and India, which are both building coal plants faster than we can count.  This, unfortunately, is unlikely until both countries obtain a reliable pipeline (no pun intended) of natural gas to support such investment.  China has large shale gas deposits and is in the beginning stages of exploring and developing them.  It is also working on big conventional offshore projects.  Indian companies are dipping a toe in shale gas, through some "educational investment" and LNG deals, but they likely will trail China.

Generally, I think using natural gas as a baseline fuel is a trend that will continue in coming decades as new gas sources are tapped worldwide (they are out there, for sure).  GE certainly sees this as a trend:  FT notes that GE invested $11 billion in gas-related acquisitions in 2010-11.

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