The main market segments covered by Power Plants are Flexible baseload, Grid stability and peaking, Industrial self-generation and the Oil & Gas industry. The main customer groups within these markets are utilities, Independent Power Producers (IPP's), industrial manufacturers in industries such as the cement, mining and textile industries as well as oil & gas industry customers.
Power plant projects are often significant investments. Wärtsilä's power plant projects are financed by the project's or customer's own cash flow or through debt financing, typically from local financial markets. As a result, Wärtsilä's power plants are funded in many geographical markets. Wärtsilä does not provide funding to its customers, but provides support in finding funding solutions for them.
General market drivers in Power Plants
The demand for power generation is driven primarily by population growth and economic development. As electricity consumption grows, the demand for both new power generation equipment and replacement equipment for older capacity increases correspondingly. Looking ahead, growth is expected to be higher in non-OECD countries, due to increasing industrialisation and improving living standards. The majority of Wärtsilä Power Plants' orders comes from the emerging markets. In emerging markets and remote areas, the demand for flexible baseload power plants as well as for industrial self-generation is driven by growth in electricity consumption and by developments in the mineral prices. The demand for gas and dual fuel driven plants increases along with the introduction of gas networks to the emerging markets.
Final electricity generation by region
While the economic development is a less important driver in the OECD countries the ageing installed capacity will drive demand for new investments. Important drivers include stricter environmental regulations and the aim for low carbon power systems, which are spurring investments in renewable energy. Solutions, such as wind power, lead to unforeseen grid stability challenges, which require additional backup and balancing power. The large scale use of renewable power increases the need for flexible, reliable, and efficient power that Wärtsilä's solutions provide.
Age profile of installed thermal and nuclear capacity by region
Share of renewables in electricity generation by region
As gas is a flexible fuel enabling system balancing with lowest emissions compared to other fossil fuels, the demand is expected to grow. This is further supported by increasing availability of gas due to growing LNG investments as well as unconventional sources such as shale gas becoming economical. The gas power plant capacity is expected to grow by 2.4% per year, and 65% of this growth is expected to occur in non-OECD countries. Wärtsilä is well positioned in these markets. In regions where gas infrastructure is being built, a key feature of power plants is the capability to utilise available liquid fuels until gas is available and fully reliable.
World electricity generation by type
Power Plants competition
In larger gas-fired projects, Wärtsilä often competes against gas turbine technology. In smaller gas based projects and in the heavy fuel oil based power plant market, Wärtsilä's competitors are mainly other engine suppliers. We hold a leading position in engine technology with the largest and most efficient gas and dual-fuel engines. Our competitive strength is the ability to provide complete turnkey power plants combined with operation & maintenance agreements as well as fuel flexibility. Our main strengths compared to gas turbine technology is higher efficiency in varying loads and the capability to achieve faster starts without increased costs as well as the ability to offer dual-fuel solutions for markets transitioning to natural gas.
Gas turbine and engine manufacturers
Wärtsilä is increasingly competing against gas turbines in larger gas-fired power plant projects. Wärtsilä's market share of the engine based power plant market is over 60%.
Main drivers for Wärtsilä's Power Plants business
- Economic development and growth in electricity consumption
- Growth in use of gas as fuel in power plants
- Need for fuel flexibility due to uncertainty in gas availability
- Environmental concerns and renewable energy investments
- Ageing generation capacity