Booming Electricity Demand Spawns a Gas Turbine Supply Shortage
Image courtesy of FirstEnergy under Attribution-NoDerivs 2.0 Generic Deed, resized to 700 x 391 pixels.
In a complete about-face from just a couple of years ago, the natural gas industry is rapidly facing a major gas turbine supply shortage. Gas power is experiencing a sudden resurgence due to the rapid growth of electricity demand. Between AI, data centers, and similar factors, many experts are predicting an upcoming electricity capacity shortage. And natural gas could help plug the gap.
Impacts of the Gas Turbine Supply Shortage
Gas turbine manufacturers are, in essence, a bit caught off guard by the exploding demand for turbines. For the past 10 years, the gas industry has been in a state of flux and was expected to take a backseat to renewable energy sources. But in 2023, an extraordinary reversal took place – propelled by the rapid rise of electricity demand – and now gas turbine manufacturers are struggling to keep up.
The gas turbine supply shortage translates into a whopping 5-year lead time to complete new natural gas installations. In fact, the 3 main gas turbine manufacturers (GE Vernova, Siemens Energy & Mitsubishi Power) are reporting record backlog levels.
As a result, OEM manufacturers have implemented “reservation fees,” which basically serve as non-refundable deposits to secure a spot in the manufacturer’s production queue, as well as “production slot agreements,” which lock buyers into specific contractual commitments. These are tools that help reduce the risk to the manufacturers when supply is squeezed.
Gas utilities such as Duke Energy, Entergy, and Southern Company have also had to adapt to this new market reality to accomplish their buildout goals. Approaches include becoming active in the turbine aftermarket, locking in turbine manufacturing slots years in advance, expanding supplier networks, and forming strategic partnerships with manufacturers and largescale customers.
Ultimately, this is an important topic for both gas and electric utilities because this ‘new normal’ effects both. Without adequate capacity, reliability takes a hit, and we all know what that means from an emergency preparedness perspective. There is little doubt that the impending gas turbine supply shortage is a problem that will require widespread collaboration and innovation to solve.
