Summary of the Development of Gas Turbine Industry in China

VM at china conference

On March 18th and 19th I attended a Gas Turbine conference in Beijing, China, where I had been invited as a Chairman and speaker. It was a great learning experience, with many interesting presentations involving energy and modern turbomachinery. I wanted to summarize some topics and ideas which I found particularly interesting.

  1. Supply: Projections for China through 2020 show increases in the Liquefied Natural Gas supply. This LNG will most likely stem from the new agreement between China and Russia. At the same time, still today within China, there is not enough pipe line capacity to efficiently transport it. These two factors make the price very high. In order for Gas Turbine technology to really become economically viable, there needs to be a decrease in the price of fuel, perhaps cheaper locally manufactured machines, and tax & other incentives. Today for most, it is simply a lot more expensive than traditional fossil fuel technology which accounts for more than 60% of all energy being generated today.

  1. The Product: There are two new areas of focus in terms of development trends: the development of local core technology, and the improvement of the efficiency, reliability and safety of existing technologies which are already manufactured locally. From the perspective of a strengthened focus on Development of local Competency & Core Technology there are several ways to go about it. While currently a lot of local technology is manufactured under JV or License agreements from foreign manufacturers (and this doesn’t limit itself to Gas Turbines), it is done with foreign specifications, which causes local performance issues (I.E. air quality is different in China vs. Germany). If China follows in the footsteps of the Indian and other emerging & industrialized economies, which have started to move in the direction of developing core technologies internally upon JV expiration, there could be some interesting changes in the local market. These internal developments of core technology can occur through M&A (for example presented was by Shanghai Electric bought 40% of Ansaldo) or Technology Transfer projects, when a local company hires a foreign company with core technology domain expertise to develop a product line and teach the local engineers how to do it for the future. While M&A is an option for some, it’s not feasible for others as the global M&A activity often bids up prices and puts pressure on licensing agreements, sometimes making it even more difficult for local companies to develop. (i.e. how do the GE / Alstom or Siemens / Dresser Rand acquisitions affect the companies licensing from Alstom or Dresser Rand?). This point was especially interesting as at our company, SoftInWay, we work with many players who have been acquired and also help local companies develop core technology from scratch to help mitigate such risks (by performing technology transfer & core technology development services). Hand-in-hand with developing core technology, the continued attention to improving the reliability, longevity and efficiency of existing Turbomachinery is essential, but the standard still has a long way to go, in order to be truly competitive with the European, American or Japanese levels of Testing, Reliability and Efficiency. However, since the cost of production is often lower in China, or at least has been in the recent past, it is generally felt that once core competencies are gained, the Chinese manufacturers could become extremely competitive in the global market place.
  1. The Future: Academic and Governmental agencies are starting to aggressively look towards the future of cleaner technology, and trying to battle with air quality and other local and global environmental issues. Similarly to Europe, and the rest of the world, some of these new ideas and technologies are coming from cross – industry applications (i.e. borrowing concepts from aerospace and applying them to power generation technologies). Also, slowly but surely, modular gas turbine technology is coming to China and companies are trying out small machine configurations (i.e. using 4, 10mw machines as opposed to 1, 40mw machine). While the efficiency in this situation can be lower, there are many cost benefits to be considered and cost is still a big barrier of entry to the gas turbine market. Finally, the local Universities and research laboratories are working hard in renewable areas, from ORC to SCO2. The government’s 863 programs for investment into cleaner technologies, as well as Shanghai’s Free Trade Zone are great examples of the thinking that will really support local, private, and public organization in developing competencies and marketable technologies.

I hope that you enjoyed this short summary, and if you are interested in discussing any of these points in greater detail, or are interested to discussing our core technology and technology transfer services, please contact me.

One thought on “Summary of the Development of Gas Turbine Industry in China

  1. What is your opinion of the HUGE move of people (by the government) from the ‘countryside’ to the new ‘cities’ or the high rises you see when traveling from Beijing to Yangzhou, to Hangzhou, and then to Shanghai?? All those high rises being built – the joke is the Chinese national bird is the (industrial) crane.
    It’s one thing to be presented with what the government WANTS you to know and to espouses to happen, as you state in your presentation here, vs what is really happening. I was there a year ago. The college kids don’t even know about Tieneman Square and the massacre that took place there. Beware – travel around yourself and get out from behind the corporate mantel. Mao and Communism is still very much alive; there are white stones below the Great Wall urging love and loyalty to Mao. I can’t even freely email one of the college girls who acccompanied and sheparded us on our study tour for ICMA…International City/County Managers Association last spring. I do know govt wants to go green, and wants any engineers LEED certified to come and help. Off my soap box. Katya Kincel

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