The gas turbine crunch

Turbines have always been a boom-and-bust business, and the most recent bust left scars. The 1998-2001 bubble was driven substantially by Enron’s artificial market signals arriving alongside deregulation, and by Brough’s estimate at least half that order volume was never real. Orders were cancelled, including by large regulated utilities, and everyone involved got burned. So the natural question is whether manufacturers are now too gun-shy to expand. The answer he gives is “guarded optimism”: they are investing, carefully.

What makes them willing is that this boom rests on five demand drivers at once rather than one. Grid-scale battery storage, coal plant retirements, grid-scale renewables, data centers and AI, and cheap abundant natural gas are all pulling simultaneously. Brough contrasts this directly with his own experience as an executive at a major manufacturer twenty years ago, when the strategy depended on a single driver that failed to materialize. Diversified demand is what converts this from a bubble they should fear into a market they can build toward.

The supply chain explanation is the part worth carrying. He splits it into four levels: raw materials such as nickel-based superalloys, chromium and titanium; cast and forged components like blades and vanes; the manufacturer assembling the turbine itself; and final packaging, installation and commissioning. The first two levels are shared with aerospace, where roughly 40,000 aircraft sit in backlog, which represents at least 80,000 jet engines drawing on the same foundries and casting shops. Add that about half of industrial gas turbines go to oil and gas, and the conclusion follows: you cannot understand the power sector’s turbine problem by studying the power sector.

The last move is to stop treating “gas turbines” as one market. Small units under 20 megawatts, mid-size 20 to 100 megawatt machines, and jumbo units of 150 to 250 megawatts and up respond to the same driver in opposite directions. Grid-scale batteries are the clearest case. Intuitively, storage should destroy demand for gas, and for jumbo units it does. But for mid-size units it is a positive, because developers use gas to recharge batteries in hybrid configurations rather than relying on renewables alone. The same inversion shows up with renewables expansion, which hurts jumbo units while creating demand for peaking and mobile machines to cover when the sun sets.