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Chapter 1 Gas-fired generation, the natural gas resource and global
electricity production from gas
Gas fired power generation has become a key technology for producing
electricity, particularly within developed countries where it forms part of an
emission reduction strategy. The technology, normally based on combined cycle
power plants, is cheap to install and the facilities are efficient generators of
electricity but their economics are sensitive to the cost of gas. In addition,
markets for natural gas are fragmented. There is no overall global market as
exists for oil. This means that prices can vary significantly from region to
region. Global gas reserves have risen over the past 20 years as prospecting has
improved knowledge of the natural gas available beneath the ground and
discoveries of new fields have been made. The ability to extract shale gas has
also increased the extractable reserve significantly. However extracting shale
gas is costly and the downturn in the price of oil has hit many US shale gas
producers. While gas reserves are widely distributed the distribution is not
even with a small number of countries holding a large share of global deposits.
Production and consumption of natural gas vary from region to region with large
levels of consumption in North America and in some of the large gas producing
nations, particularly those where the cost of gas is subsidized.
Chapter 2 Technology trends in gas-fired power generation
Gas turbines are highly specialized machines and the number of companies that
are capable of manufacturing them is extremely limited. For large gas turbines
there are only four main players while a larger number can supply smaller
machines. The limited number of suppliers means that power plants based on gas
turbines must be imported in most countries. On the other hand the global nature
of the market means that there is stiff competition for all major projects and
this makes prices extremely competitive. Technically there are several
challenges facing gas turbine manufacturers. One is to achieve high efficiency.
A second, contrary, demand is for highly flexible gas turbine-based plants to
support gas fired generation on global grids. There is also an imminent need to
limit the emissions of carbon dioxide from natural gas-fired power plants.
Technologies already being developed for coal-fired power plants can be adapted
to gas-fired stations but they all lead to an increase in the cost of the plant
and the cost of electricity.
Chapter 3 The economics of gas-fired power generation
The cost of electricity from a gas fired power plant depends on a balance
between the cost of the plant and the cost of gas. Capital costs for gas-fired
plants are generally low compared to similar costs for other types of power
station because of the modular nature of the plants with major components
available assembled from the factory. However the cost of natural gas can be
high. This has forced utilities in Europe in particular to mothball combined
cycle power plants in recent years because they are not economical to run. In
the US on the other hand, where the cost of natural gas is low because of the
supply of shale gas, the economics favour gas-fired generation. Levelized cost
estimates for electricity from combined cycle and open cycle gas turbine plants
show that the cost of electricity from these plants is expected to be low in the
US but that it is likely to be higher elsewhere. Countries that rely on imported
LNG will often have the highest cost of electricity. However these countries
often exploit natural gas for power generation as a specific part of energy
policy that requires them to maintain a diverse portfolio of sources for energy.
Chapter 4 The market and economic prospects for gas fired power generation
The levelized cost of electricity from natural gas fired combined cycle plants
is competitive with all alternative forms of power generation, with the possible
exception of onshore wind, when the cost of natural gas is low. Adding carbon
capture and storage to a combined cycle plant will push the cost up but the
technology will still offer a cheaper source of electricity than a coal-fired
power plant with carbon capture and storage. However depending on specific
market conditions, wind and solar photovoltaic may offer a cheaper source of
power than gasd. Over the next 25 years, until 2040, gas-fired power generation
is expected to grow much faster than coal as retiring coal plants are replaced
with gas, particularly in the US and Europe. This new gas-fired capacity will
offer lower emissions than coal, even without carbon capture and storage and
this will be one of the driving forces for the shift. Another key driving force
will be the need to use combined cycle plants to support gas fired generation on
the world’s grids.
Key features of this report
- Analysis of gas fired power generation technology costs, concepts, drivers
- Assessment of electricity costs for different technologies in terms of the two
fundamental yardsticks used for cost comparison, capital cost and the levelized
cost of electricity.
- Examination of the key gas fired power generation technologies costs.
Key benefits from reading this report
- Realize up to date competitive intelligence through a comprehensive power
cost analysis in gas fired power generation markets.
- Assess gas fired power generation costs and analysis – including capital costs
and levelized costs.
- Quantify capital and levelized cost trends and how these vary regionally.
Key findings of this report
- The largest regional production is found in Europe and Eurasia with 1,032.9 bn
m3 pumped during the year
- It is estimated that 60% of Europe’s combined cycle capacity, 110GW, was not
recovering its fixed costs.
- Elsewhere in the world gas prices are still high because US gas is not
available and shale resources have yet to be developed in any quantity.
- When CCS is added to a combined cycle plant it increases the cost
- The cost of a gas turbine combined cycle plant in 2014 was between $1,006/kW
Key questions answered by this report
- What is gas fired power generation going to cost?
- Which gas fired power generation technology types will be the winners and
which the losers in terms of power generated, cost and viability?
- Which gas fired power generation types are likely to find favour with
manufacturers moving forward?
Who this report is for
Power utility strategists, energy analysts, research managers, power sector
manufacturers, gas fired power developers, investors in gas fired systems and
infrastructure, gas fired power developers, energy/power planning managers,
energy/power development managers, governmental organisations, system operators,
companies investing in gas fired power infrastructure and generation, investment
banks, infrastructure developers and investors, intergovernmental lenders,
energy security analysts.
Why buy it
- To utilise in-depth assessment and analysis of the current and future
technological and market state of gas fired power, carried out by an industry
expert with 30 years in the power generation industry.
- Use cutting edge information and data.
- Use the highest level of research carried out.
- Utilize expert analysis to say what is happening in the market and what will
- Save time and money by having top quality research done for you at a low cost.
Key areas covered by the report
Key products/categories profiled:
The Future of Gas Fired Power Generation – Adapting gas technology to the
gas fired generation landscape
Key regions/countries covered:
Europe and United States of America. Global focus.
Table of Contents
About the author 2
Note about authors and sources 3
Table of contents 4
Table of tables 5
Table of figures 5
Executive summary 7
Chapter 1 Gas-fired generation, the natural gas resource and global electricity
production from gas 7
Chapter 2 Technology trends in gas-fired power generation 7
Chapter 3 The economics of gas-fired power generation 7
Chapter 4 The market and economic prospects for gas fired power generation 8
Chapter 1 Gas-fired generation, the natural gas resource and global electricity
production from gas 9
Global natural gas reserves 10
Production and consumption of natural gas 14
Chapter 2. Technology trends in gas-fired power generation 21
The gas turbine market 22
Efficiency versus flexibility 24
Carbon emissions 27
Chapter 3. The economics of gas-fired power generation 29
Natural gas prices 30
Capital cost of gas turbine plants 33
The levelized cost of electricity from gas turbine-based power plants 39
Chapter 4. The market and economic prospects for gas fired power generation 44
The comparative cost of power from natural gas-fired plants and other
Market growth 52
The future of gas fired power generation 59
List of abbreviations 60
List of Tables
Table 1: Natural gas reserves by region 1993 – 2013 (trillion cubic metres),
Table 2: Annual global production and consumption of natural gas 2003 – 2013 (bn
cubic metres), 2014 14
Table 3: Natural gas production by region 2013 (bn cubic metres), 2014 16
Table 4: Global electricity production from natural gas 2004 – 2012 (TWh), 2014
Table 5: Gas turbine manufacturers, 2015 23
Table 6: Carbon capture options for combined cycle power plants 28
Table 7: US natural gas prices for utilities 2003 – 2015 ($/GJ), 2015 31
Table 8: Overnight capital cost of US combined cycle power plants 2004 – 2013
($/kW), 2014 35
Table 9: Capital and levelized costs for gas turbine power plants ($/kW, $/MWh),
Table 10: Levelized cost of electricity from gas turbine-based power plants ($/MWh),
Table 11: US EIA comparative cost of generating technology in 2019 ($/MWh), 2014
Table 12: Levelized cost of electricity comparison for different technologies
($/MWh), 2014 48
Table 13: Levelized cost estimates for gas turbine technologies, 2014 – 2030 (£/MWh),
Table 14: Electricity generation by source 1990 – 2040 (TWh), 2014 53
Table 15: Global power generation by electricity source 2010 – 2040 (TWh), 2013
Table 16: Natural gas-fired capacity additions by region 2014 – 2040 (GW), 2014
List of Figures
Figure 1: Natural gas reserves by region 1993 – 2013 (trillion cubic metres),
Figure 2: Annual global production and consumption of natural gas 2003 – 2013 (bn
cubic metres), 2014 15
Figure 3: Natural gas production by region 2013 (bn cubic metres), 2014 17
Figure 4: Global electricity production from natural gas 2004 – 2012 (TWh), 2014
Figure 5: US natural gas prices for utilities 2003 – 2015 ($/GJ), 2015 32
Figure 6: Overnight capital cost of US combined cycle power plants 2004 – 2013
($/kW), 2014 36
Figure 7: Capital costs for gas turbine power plants ($/kW), 2014 38
Figure 8: Levelized costs for gas turbine power plants ($/MWh), 2014 38
Figure 9: Levelized cost of electricity from gas turbine-based power plants ($/MWh),
Figure 10: US EIA comparative cost of generating technology in 2019 ($/MWh),
Figure 11: Levelized cost of electricity comparison for different technologies
($/MWh), 2014 49
Figure 12: Levelized cost estimates for gas turbine technologies, 2014 – 2030
(£/MWh), 2013 51
Figure 13: Electricity generation by source 1990 – 2040 (TWh), 2014 54
Figure 14: Global power generation by electricity source 2010 – 2040 (TWh), 2013
Figure 15: Natural gas-fired capacity additions by region 2014 – 2040 (GW), 2014