Last March, executives at General Electric Co’s power-plant business gave Wall Street a surprisingly bullish forecast for the year. Despite flat demand for new natural gas power plants, they said, GE Power’s revenue and profit would rise.
Showing data from financial firm Lazard and other sources, their presentation said natural gas, coal and even some nuclear power plants were the lowest-cost producers of electricity on the planet, cheaper than wind or solar.
What GE has not emphasized is that wind and solar now cost substantially less than gas and other conventional energy sources - and have for years, according to a widely respected energy cost report Lazard has published since 2008.
But according to more than a dozen former executives, rivals and energy experts interviewed by Reuters, GE’s reading of the market left the company deeply vulnerable to the sudden drop in demand for conventional power plants, as sales of wind and solar surged.
“There are just fewer gas turbines being bought,” one former GE executive said. “The market is not flat, it’s down.”
One of the slides in the article shows GE dominating the older F-Class gas turbines, but Mitsubishi Hitachi Power Systems and Siemens taking the largest market share of the newer advanced turbines.
I looked up about the "F-Class turbines", and came across this article from 2015 which talked about the newer classes overtaking the older F-class: http://www.power-eng.com/articles/print/volume-119/issue-8/features/the-fall-of-the-f-class-turbine.html
Advanced class turbine (typically defined as G-, H-, and J- class technologies) sales have seen greater than 50 percent year-on-year growth in the past five years
The F-class took off in 1987, and the newer turbines started to take off in 1990-2000s. The article from POWER Engineering said that the F-class turbines were being pushed out by increasingly more integrated electrical grids, which allows the newer turbine classes to run at a lower cost (and also allow more wind/solar generation to be built without causing massive volatility in the transmission systems).
Continued from the Reuters article:
Power is not GE’s only problem. Its financing arm, GE Capital, took a massive, unexpected charge that contributed to a nearly $10 billion loss in the fourth quarter and prompted U.S. regulators to broaden an ongoing probe of its accounting practices. Profit also fell sharply at GE’s separate oil and gas and locomotive businesses last year, and Flannery has suggested he may break up the company.
But power is one of GE’s oldest and largest businesses, and supplied 60 percent of the conglomerate’s profit as recently as 2016. Now, GE is cutting 12,000 jobs, 18 percent of the unit’s workforce, after announcing 6,500 job cuts in early 2016.
From my understanding, GE doubled down on gas turbines right as the power market started to stagnate, and seems to be having a harder time selling their newer advanced gas turbines compared to their competitors. I am currently researching why their competitors are selling more advanced class turbines than GE is, but that may take a while.
EDIT: I am well aware of the wind/solar limitations, and that even with their rapid growth, most of their new generation capacity is being used to replace nuclear and hydro power plants that are being decommissioned. However, the electricity market is facing the challenges of reduced demand from better efficiency of various devices, such as lighting and appliances. That has resulted in electricity consumption stagnating even as the economy continues to grow.
EDIT2: WSJ had an article that focused more on GE's management issues, which were likely the contributing factor to GE getting into this mess in the first place. https://www.wsj.com/articles/how-jeffrey-immelts-success-theater-masked-the-rot-at-ge-1519231067
Submitted February 23, 2018 at 04:56PM by COMPUTER1313 http://ift.tt/2sMN601
