Despite surging power demand, gas-fired power faces manufacturing constraints that could limit near-term growth

A new report from Wood Mackenzie finds that despite surging power demand, the gas turbine market could experience "turbo lag" in the next 15 years due to manufacturing constraints, rising costs, and competition from renewables.

The report, titled "Turbocharged vs turbo lag: The new landscape for gas-fired power", projects that around 890 GW of new gas-fired generation capacity will be added globally between 2025 to 2040. Combined, China and the US average 47% of global annual additions from 2025 to 2040. Other markets and regions, including Southeast Asia, India, and the EU27 range from 53% of global annual additions from 2025 to 2040.

However, several factors may limit growth, particularly in the near-term:

• Manufacturing capacity constraints could delay new gas plant construction. Wood Mackenzie calculates around 90% utilisation of gas turbine manufacturing capacity in 2025, which could cause some US developers to find that 2030 or beyond is the earliest opportunity to bring new combined cycle capacity online.
• In the US, skyrocketing capital costs and power market prices below the cost of new gas generation pose challenges.
• In Asia, high imported gas costs limit gas to a peaking role despite strong power demand growth.
• In Europe, decarbonization goals are pushing unabated gas to the margins by 2040.

"While power markets will require natural gas-fired power as part of the energy transition through 2040, gas's role will have limits," said David Brown, Director of Energy Transition Research at Wood Mackenzie. "High fuel costs in some regions, rising construction costs, and continued cost declines for renewables and energy storage will constrain gas's growth potential."

Key questions facing natural gas-fired power from 2030 to 2040  

Looking towards 2030-2040, several key questions will shape the future of gas-fired power. The materialization of data centre demand, particularly in the United States, remains uncertain. Recent project cancellations by major tech companies have cast doubt on earlier projections, and the economics of data centre development are being challenged by various factors.  
  
The expansion of gas turbine manufacturing capacity is another crucial consideration. While current capacity appears sufficient for projected installations through 2040, manufacturers remain cautious about long-term expansion plans, mindful of past market crashes.  
  
The emergence of net-zero power technologies, such as carbon capture and storage (CCUS) and hydrogen blending, presents both opportunities and challenges.
  
Finally, the development of midstream infrastructure will play a critical role in the growth of gas power. 

"For the gas turbine supply chain, these limits point to continued tight conditions in turbine deliveries through 2030, with conditions loosening between 2030 and 2040," Brown added.