The corner may well have been turned for the European power sector, as many operators of fossil plants now focus on balancing markets. Grid services and flexible power supply is seen to remain essential in the medium- to long-term, industry experts at Power-Gen Europe agree, while gas use for baseload power will be very limited, indeed, notably in Europe as well as in parts of the U.S.
These green shoots follow years of gloom, when depressed electricity prices and rising renewable deployment led to wide-spread mothballing of gas-fired power generation capacity across Europe.
“We see real signs of the market turning in Europe and that it will not deteriorate any further than it is today. Capital budgets are still under severe pressure and although growth will occur it will happen at a much reduced rate than previously,” Paul McElhinney, president of Power Services at GE, said, anticipating that “growth will come in the next couple of years and the priority will be efficiency.”
Gas power ‘essential’ part of Europe’s energy mix
Given the current legislation on carbon emissions in Europe and volatility in fuel prices, many players see the future in developing new gas-fired power plants that are specifically purposed for rapid response.
“We have a plant in Italy which was originally built for minimum of 70% capacity operation for baseload but it is now using less than 20%. However, given the increase in renewables there are some days [when] we are still hitting 70% and the plant is still very much an essential part of the country’s energy mix,” Sorgenia CEO Gianfilippo Mancini pointed out.
Alongside a limited number of new-builds, industry players are also exploring means to repurpose existing plants and as a result expect gas-generated power will continue to play a key part of Europe’s energy mix.
“We are definitely in a changing phase and whether this will bring success in the next stage depends on what operators do today. The main changes are in reducing cost of renewables, digitalization and changing customer habits,” Mancini added.
Energy offtakers in focus, rather than producers
The role of distributed power and localized storage is set to drive a transformation of the current energy landscape. Although battery storage is often seen as a savior many manufacturers and utilities still believe scalable battery solutions are some way off and that there is long-term scope for gas power.
“We should be optimistic. In Europe, we have become intelligent and wiser about the challenges that the energy transition brings .There is a still a problem of intermittency and subsidies and you need flexible grids and digitization to kick in – but if you adapt your portfolio and approach to the market then there are opportunities,” said Karim Amin, CEO of Power & Gas at Siemens.
Global growth to support gas development
While any return to growth for gas power in Europe is likely to be limited, industry representatives gathered at the MiCo Milan venue heard that the outlook for global thermal power generation remains strong as demand growth means that full decarbonisation is unrealistic for some time to come.
“Overall, the power sector is set to grow by 50% compared with current levels in the next 20 years,” McElhinney commented. “Around 1.2 billion people have no access to power today and another 500 million have access only to non-reliable power. While renewables may have the fastest growth going forward, the total scale of increase for world [energy] demand will mean that both gas and coal will continue to grow.”