Catalyst with Shayle Kann: Episode Summary - "The Gas Turbine Crunch"
In this episode of Catalyst with Shayle Kann, Shayle delves into the intricate dynamics of the gas turbine market with guest Tony Bruff, President of Dora Partners, an energy and gas consultancy specializing in the gas turbine industry. Released on June 5, 2025, this episode provides an in-depth analysis of the current state, historical trends, supply chain challenges, demand drivers, pricing, and technological innovations shaping the gas turbine landscape.
1. Introduction to the Gas Turbine Market
Shayle Khan introduces the episode by highlighting the significance of the gas turbine sector in the broader energy landscape. He underscores the tight market conditions driven by relaxed emissions constraints and rapid load growth, making companies like Mitsubishi, Siemens, and GE Vernova key players with substantial order backlogs.
"It's a good time to be in the gas turbine business... they're pretty well sold out and they have a lot of pricing power."
[02:16] Shayle Khan
2. Historical Boom and Bust Cycles
Tony Bruff provides a historical overview of the gas turbine market, detailing its evolution over the past few decades. He identifies key periods of market bubbles and downturns, emphasizing the role of major Original Equipment Manufacturers (OEMs) and external factors like deregulation and corporate malfeasance.
"The first big bubble back in '98 through 2001 was driven by artificial demand created by Enron... deregulation also played a significant role."
[05:32] Tony Bruff
Shayle connects this to other energy sectors, noting similarities with the transformer market's long lead times resulting from past oversupply.
"It sounds like you're saying this one seems like it's different. What drove those bubbles..."
[05:32] Shayle Khan
3. Current Market Dynamics and OEM Strategies
Shayle inquires about the present market dynamics and whether OEMs are adopting a conservative expansion approach or capitalizing on current demand to maximize their capacity utilization.
"Does that lead to a more conservative approach from the three big OEMs... or do you think they share the view that this one's real?"
[09:15] Shayle Khan
Tony responds with a sentiment of "guarded optimism," explaining that OEMs are investing in future capacity while also catering to the oil and gas sector, which comprises about half of the gas turbines ordered annually.
"All of the OEMs are investing in the future for new production capabilities... 50% of the industrial gas turbines delivered aren't even for the electric power utility sector."
[09:15] Tony Bruff
4. Supply Chain Challenges and Influences
Tony breaks down the gas turbine supply chain into four levels:
- Level 0: Raw materials (e.g., nickel, chromium, titanium).
- Level 1: Manufacturing turbine components (blades, vanes).
- Level 2: Assembling flanged turbines.
- Level 3: Final packaging, delivery, installation, and aftermarket services.
He highlights the overlap with the aerospace industry, which significantly impacts the availability of raw materials and components due to concurrent demand for aircraft manufacturing.
"Levels 0 and 1 are also being impacted by the aerospace industry... with 40,000 aircraft backlogs, they're consuming the same supply chain resources."
[10:32] Tony Bruff
5. Demand Drivers: Electric vs. Oil and Gas Sectors
Shayle seeks to understand the interplay between demand from the electric power sector and the oil and gas industry, especially in the context of low oil and gas prices.
"Oil and gas prices are low right now. Does that mean that there's low investment on that side?"
[13:41] Shayle Khan
Tony explains that while annual orders may dip with low prices, long-term strategic investments in the oil and gas sector maintain steady demand. He notes that midstream companies, less sensitive to price fluctuations, continue to invest in transmission infrastructure.
"Oil and gas companies have long-term strategies... midstream players are making money from transmission fees and continue to invest."
[13:41] Tony Bruff
6. Pricing and Lead Times
Shayle brings up significant price increases in natural gas projects over the past decade and inquires about the factors driving this surge, particularly in relation to turbine costs.
"A decade ago I could have built a new natural gas project for like 750 bucks a kilowatt... today it would cost me 2500 bucks a kilowatt."
[18:30] Shayle Khan
Tony attributes the price hikes to both supply-demand imbalances and escalating raw material costs. He mentions a 30-35% increase in turbine prices over the last five years.
"The price is definitely up... raw materials are up everywhere... producer price indices show a significant bump."
[18:50] Tony Bruff
Regarding lead times, Tony notes that current lead times range between 36 to 48 months, with some OEMs reporting up to 60 months. However, he is optimistic that OEMs are actively working to stabilize or reduce these timelines.
"OEMs are working like crazy to try and shorten up their lead times or at least make sure they don't get worse."
[20:20] Tony Bruff
7. Market Drivers and Segmentation
Tony outlines five major market drivers affecting gas turbine demand:
- Grid-scale battery storage
- Coal plant retirements
- Grid-scale renewable energy expansion
- Development of data centers and AI applications
- Availability and affordability of natural gas
He explains how each driver impacts different segments of the gas turbine market—small (<20 MW), medium (20-100 MW), and jumbo (>150 MW) units—differently.
"Grid-scale battery storage negatively impacts large jumbo units but positively influences 40 to 100 MW turbines through hybrid systems."
[24:15] Tony Bruff
8. Impact of Data Centers on Gas Turbine Demand
A significant portion of the discussion centers on the burgeoning demand for gas turbines driven by the rapid expansion of data centers and artificial intelligence applications. With over 1,400 new data centers planned in the U.S. alone, many requiring substantial power beyond typical loads, this sector is a major contributor to the current gas turbine crunch.
"There are like 1,400 new data centers planned in the United States alone, and over a thousand of those are all large scale."
[30:18] Shayle Khan
Tony highlights regions like Virginia as hotspots for data center activity, driving sustained demand for both mobile and permanent gas turbine installations.
"The region around Virginia, Washington, D.C., has more data centers than anywhere else in the world."
[31:00] Tony Bruff
9. Speculative vs. Real Demand
Shayle raises concerns about the potential for speculative demand in the gas turbine market, given the ambitious projections for data center growth. He questions whether the actual demand will align with the current market exuberance, suggesting the possibility of a speculative bubble if data center development does not meet expectations.
"There are cowboys out there trying to take advantage of the moment... ensuring buyers are real is crucial."
[32:57] Shayl Khan
Tony counters by emphasizing the confluence of multiple market drivers—like low natural gas prices and diverse demand sources—that provide a more stable foundation for the current market conditions compared to past cycles reliant on single factors.
"Having three to five key market drivers creates a little bit of risk comfort for the OEMs."
[34:08] Tony Bruff
10. Technological Innovations in Gas Turbines
In the final segment, Tony discusses ongoing technological advancements in the gas turbine sector. He highlights two main areas:
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Efficiency Improvements: OEMs have incrementally increased the efficiency of combined cycle plants from approximately 55% to over 62%, enhancing competitiveness through lower levelized costs of electricity.
"All OEMs have been successful in slowly increasing the efficiency of their combined cycle plants... now pushing 62% and more."
[34:30] Tony Bruff -
Hydrogen Integration: Efforts are underway to adapt gas turbines to run on hydrogen. While technological progress is notable, Tony expresses skepticism about the availability of sufficient hydrogen supply to make this transition widespread.
"Converting combustion systems to use hydrogen is a major focus, but where will the hydrogen come from for large units remains a significant challenge."
[37:34] Tony Bruff
Shayle muses on the potential for hydrogen-ready turbines to stimulate hydrogen market growth, while Tony remains cautiously optimistic about future developments.
"If we build it, they will come... it's a dynamic market for hydrogen."
[37:55] Shayle Khan
11. Conclusion
Shayle and Tony wrap up the discussion by acknowledging the robust demand drivers currently propelling the gas turbine market into a historically tight phase. They recognize the challenges of potential speculative investments but remain optimistic due to the diversified factors supporting sustained demand.
"With all these market drivers combined, OEMs feel relatively comfortable with their supply chain strategies."
[34:08] Tony Bruff
Shayle thanks Tony for his insightful analysis, highlighting the episode's comprehensive exploration of the gas turbine industry's present and future landscape.
"Tony, this was awesome. Really appreciate the time. Thanks so much for joining."
[37:56] Shayle Khan
Notable Quotes:
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"I'm Shayl Khan and I invest in early stage technologies at Energy Impact Partners. ... it's a really interesting market and one we haven't really talked about here."
[02:16] Shayle Khan -
"Levels 0 and 1 are also being impacted by the aerospace industry... with 40,000 aircraft backlogs, they're consuming the same supply chain resources."
[10:32] Tony Bruff -
"There are like 11,000 data centers serving the digital, commerce and artificial intelligence community already around the world... 1400 new data centers planned in the United States alone."
[30:18] Shayle Khan -
"Converting combustion systems to use hydrogen is a major focus, but where will the hydrogen come from for large units remains a significant challenge."
[37:34] Tony Bruff
This episode of Catalyst offers a thorough examination of the gas turbine market, blending historical context with current trends and future prospects. For stakeholders in the energy sector, understanding these dynamics is crucial for navigating the evolving landscape of power generation and technological innovation.