By Danny Kennedy
Amidst the madness of 2017, a bigger shift was missed than probably any other — right at the commanding heights of the economy: Natural gas fizzled out of the plan for the future.
Natural gas is no longer a contender or pretender, just a relic of the past, likely to fall as far and as fast as Old King Coal, and maybe faster. This has repercussions for the economy of many states and nations, and the politics of the transition in terms of what we ask for and what we will get.
Here’s what I’m thinking:
The big signal that got some coverage in the pink pages (FT) and energy-wonk trade press in November was the closure of the Siemens and GE’s gas turbine-making capacities.
Just to recap for those that missed it, first Siemens, the giant European champion of the electric power revolution, laid off 7,000 workers. It reported that it had a capacity to make 400 100MW gas turbines annually but only had received orders for 110 in 2017. Ouch. Retrain!
And then GE: Two weeks later, it laid off 20,000 workers in its gas-related business, including turbine-making teams around the world.
Remember, just about five years ago Siemens and GE battled for the gas business of Alstom, the French descendent of the same companies GE came out of in the early 20th century. GE paid $10 billion for it and declared a coup.
But now, they’re writing it off. Their strategic choices under Jeff Immelt are being questioned by the market: while the Dow is up about 30 percent over the past 12 months, GE’s stock is down about 45 percent. (Indeed, GE won the “honor” of being the Dow Jones Industrials worst-performing stock of 2017.)
What’s significant is the timing of these announcements. Is it a coincidence that they happened as South Australia was turning on a 100-megawatt battery that had been built in just 100 days by Tesla and a consortium?
If the reality is that we can build large-scale storage that can do all the functions of a fast-ramping gas turbine at, say, 100MW scale, and we can build it in less than six months (gas peakers would take six years) for less money, then I think there will be no market for gas turbines to provide peaking services.
It’s pretty binary. And I think Siemens and GE know it.