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Understanding the basics of natural gas–fired power plants


Jan. 15 2015, Updated 12:05 p.m. ET

Natural gas–fired power plants

Natural gas is the second most widely used fossil fuel for electricity generation. Electricity can be produced using natural gas in two ways.

  1. Steam turbines: These work in a similar fashion as coal-fired power plants. Natural gas burns to heat water. The steam drives the turbine.
  2. Gas turbines (or combustion turbines), instead of heating water, heat gases up to 1,500 degrees Celsius to drive the turbine.

Over half of natural gas–fired power plants use a principle called “combined cycle.” A gas turbine is used as a primary driver for a generator and waste heat is used to make steam to generate additional electricity using a steam turbine.

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Technological developments

The combined cycle technology increases efficiency by utilizing waste heat for incremental electricity generation. Waste heat is the heat created during the process that doesn’t convert into electricity.

General Electric (GE) recently agreed to acquire Alstom (ALSMY) in a bid to boost its capabilities in steam turbine manufacturing. On the other hand, Siemens (SIEGY) acquired the small gas turbine manufacturing division of Rolls Royce (RYCEY) to boost its product profile. GE has a 1.41% weight in the S&P 500 (SPY), whose performance you can see above.

North America leads the pack

Unlike coal, the market for natural gas–fired power generation equipment is highly concentrated. The current global natural gas–fired capacity stands at around 1,300 gigawatts or GW, out of which over 35% is located in North America. In contrast, less than 20% of global coal-fired capacity is located in North America. There have been 200 GW in net additions to natural gas–fired capacity in North America since the turn of the century on the back of the shale gas boom.

We’ll have a look at the opportunities for equipment manufacturers for gas-fired plants in the next part of this series.


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