Power Plants operating environment
The Power Industry
The main market segments covered by Power Plants are Flexible baseload, Grid stability and peaking, Industrial self-generation and the Oil & Gas industry. The main customer groups within these markets are utilities, Independent Power Producers (IPP's), industrial manufacturers in industries such as the cement, mining and textile industries as well as oil & gas industry customers.
Power plant projects are often significant investments. Wärtsilä's power plant projects are financed by the customer's own cash flow or through debt financing, typically from local financial markets. As a result, Wärtsilä's power plants are funded in many geographical markets. Wärtsilä does not provide funding to its customers, but provides support in finding funding solutions for them.
General market drivers in Power Plants
The demand for power generation is driven primarily by economic development. As electricity consumption grows, the demand for both new power generation equipment and replacement equipment for older capacity increases correspondingly. Looking ahead, growth is expected to be higher in non-OECD countries, due to increasing industrialisation and improving living standards. The majority of Wärtsilä Power Plants' orders comes from the emerging markets. In emerging markets and remote areas, the demand for flexible baseload power plants as well as for industrial self-generation is driven by growth in electricity consumption and by developments in the mineral prices. The demand for gas driven plants increases along with the introduction of gas networks to the emerging markets.
While the economic development is a less important driver in the OECD countries than in the non-OECD countries, the ageing installed capacity will drive demand for new investments.
Important drivers include stricter environmental regulations and the aim for low carbon power systems, which are spurring investments in renewable energy. Solutions, such as wind power, lead to unforeseen grid stability challenges, which require additional backup and balancing power. The large scale use of renewable power increases the need for flexible, reliable, and efficient power that Wärtsilä's solutions provide.
As gas is a flexible fuel with lowest emissions compared to other fossil fuels, the demand is expected to grow. This is further supported by increasing availability of gas due to growing LNG investments as well as unconventional sources such as shale gas becoming economical. The gas power plant capacity is expected to grow by 2% per year, and 70% of this growth is expected to occur in non-OECD countries. Wärtsilä is well positioned in these markets.
Power Plants competition
In larger liquid fuel or gas-fired projects, Wärtsilä often competes against gas turbine technology and other manufacturers of reciprocating engines. In the heavy fuel oil based power plant market, Wärtsilä's competitors are mainly other engine suppliers. We hold a leading position in this market, and our competitive strength is the ability to provide complete turnkey power plants combined with fuel and operational flexibility. In the gas power plant market, our competitors are both gas engine and gas turbine suppliers. Our main strengths compared to gas turbine technology are higher efficiency in varying loads and the capability to achieve fast starts without increased costs.
Main drivers for Wärtsilä's Power Plants business
- Economic development and growth in electricity consumption
- Growth in use of gas as fuel in power plants
- Environmental concerns and renewable energy investments
- Ageing generation capacity