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Emerging drivers set to promote high-efficiency gas-fired generation in China

With a population of 1.4 billion and an economy which, by some measures, is larger than that of the US, almost all global industries are, to some extent, influenced by China. And while China is not normally the first market which comes to mind when the words ‘efficiency’, ‘decentralised’ and ‘energy’ are used in the same breath, there is no doubt that the sheer scale of the technical potential for distributed power investment makes China one market not to ignore. And so, at Delta-ee, we considered China as one of our nine global countries during ‘Year 1’ of our Distributed Power Service (DPS).

The DPS considers the past, current and future market sizes for gas engines used within stationary power applications. By considering market drivers such as energy price trends, the evolving regulatory environment, macro-economic factors, the competitive landscape and end-user segments, we are able to compile detailed insight on which we base our year-on-year projections out to 2020.

DPS2

Here are three of the key observations from our China research:
  1. Coal mine (and coal bed) methane has taken a significant share of the Chinese gas engine market to date, but will likely have a falling influence in the period to 2020. This is partly due to the demise of the CDM (Clean Development Mechanism) funding stream which previously stimulated investment from overseas, but also due to the emergence of high-efficiency and renewable investments in other sectors. Nevertheless, Coal Mine/Bed Methane projects continue to come online, with both domestic and foreign gas engine manufacturers supplying units - normally in the sub-2 MWe size range.
  2. High-efficiency co- and tri-generation gas-fired projects will become increasingly prevalent. There has already been activity in this sector, with some high-profile projects already appearing. But this is just the tip of the iceberg. With emerging policy support in some regions – and Shanghai leading the way with capital grants and lower gas tariffs for high-efficiency co- and tri-generation developments – together with a continuous and growing need to address air quality issues in densely populated cities, there is strong evidence to suggest that this sector will exhibit growth to 2020.
  3. A shift towards gas-fired power generation will inevitably open up opportunities for large-scale, gas engine-based power plants. While there has been little activity in the ‘power plant’ segment for gas engines in China so far (for ‘power plant’, read multiple 10+ MWe gas engines used primarily for electricity grid export), past performance is unlikely to be a good indicator of the future in this case. The Chinese government has high ambitions to become less reliant on coal-fired power generation, with natural gas set to take an increasing share of the market. While much of this capacity will inevitably be met via large combined cycle gas turbines, towards the end of the decade, we expect multiple gas engine projects will have been announced – especially where flexible, high-efficiency generating capacity is required to meet peak demand. This is indicated via the light-blue bars in the chart above. 

To find out more about the Distributed Power Service, and our China research, please contact John Murray at [email protected].
 

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Thursday, 14 November 2019

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