U.S. companies are set to spend some $50 billion on power generation from coal and natural gas this year, the International Energy Agency has said, as quoted by the Financial Times.
This would be the first time in decades that U.S. spending on coal and gas generation would be higher than what China is investing in the two fuels, with the difference at $3 billion.
The surge in spending will come mostly from much stronger demand for gas turbines amid a data center boom in the United States, the FT noted in its report. According to the IEA, U.S. companies placed orders for some 20 GW in gas turbine generation capacity in just the first quarter of this year. Prices for gas turbines, meanwhile, have moved sharply higher on tight supply, contributing to the higher U.S. spending.
The report cited a Rystad Energy analyst as saying prices for gas turbines have gone up from $800 per kWh to over $2,500. In addition to data centers, whose owners have bet on baseload power supply from gas power plants—and coal, too—the expansion of wind and solar has also prompted stronger demand for baseload generation to keep the grid balanced when the weather is unfavorable for either wind or solar generation, or both.
While demand for electricity soars, gas turbine production has been flat over the past few years, resulting in a deficit. Siemens Energy, one of the world’s top three gas turbine makers, reported in February that its gas services business had seen a record quarter in orders, with a total of 102 new turbines in the backlog. As much as 40% of these new orders came from the United States, and another 35% came from Europe.
Even earlier than that, last year, Mitsubishi, the third Big Turbine manufacturer, said it would double its turbine production capacity in response to soaring demand. The company’s chief executive noted that “We were working towards boosting production capacity by 30%, but that’s not enough to grow demand. Fulfilling those orders is our top priority.”
By Irina Slav for Oilprice.com
