NEWS RELEASE April 2018
Coal-fired Boiler Component Market is Large and Slowly Growing
The market for combust, flow and treat (CFT) products for coal-fired boilers is large and not shrinking. It is larger than represented in many reports. Forecasts for purchases of each type of product is made possible by detailed analysis of the MW of capacity and each specific variable impacting the market for a product. In the past the change in capacity has been overshadowed by new environmental regulations. Over the last 40 years there has been wave after wave of investment as one region after another adopted air and water pollution emission limits. There is still a wave in the ASEAN nations and India, but this wave is overshadowed by the 2000 GW of environmental equipment which needs to be constantly repaired and replaced.
The starting point to determine the market for CFT products is the installed generation capacities. The difference in installed capacity from one year to the next equals new builds less retirements. Pumps, valves, nozzles, blowers and similar components need to be replaced every 10-15 years. So, unless the growth rate is higher than 6%/yr. to 10%/yr. the replacement market will be larger than the new market. In a high growth country such as India the new build expenditure will be greater than the replacement, but the total investment will still be small compared to that in a country such as China with 1000 GW of coal-fired capacity. The compound annual growth rate (CAGR) for installed capacity ranges from 7% in West Asia to a negative 5% in NAFTA. In two regions capacity will be shrinking. But the component market will be substantial even if it is being reduced by 2-3% per year.
|World Coal-fired Capacity|
|South & Central America||0|
The result will be a very large but mature market for CFT components. This contrasts to the market for new coal-fired boilers and environmental control systems which will be much lower than in the past. Consider the market in 1974 in the U.S. OPEC cut off oil to the U.S. Utilities panicked and ordered 70,000 MW of new coal-fired boilers within a few months. From 1974 to 2018 less than 70,000 MW of new capacity was actually installed in the U.S. So, the order rate has been negative for the last 44 years. China has initiated FGD and SCR programs which, in just a few years, resulted in 400,000 MW of environmental retrofits.
Those days are gone. Not only have these big sudden markets disappeared but the technology has become standardized. This means that Indian and Chinese companies are supplying systems at prices which exclude international competition. The same is not necessarily true of components. There could be some system exceptions. The problem is that the international system suppliers do not have the profits to reinvest in R&D.
Let’s take rare earth extraction as an example. The Philadelphia Electric MgO FGD system coincidently makes a perfect rare earths feed stock in the HCl/particulate scrubber. DOE and the Chinese government are pursuing the expensive micronizing of fly ash landfills rather than the much more cost effective in situ approach, but no vendor is attempting to leverage this very big potential.
It is possible to greatly improve the accuracy of market forecasts for components by obtaining accurate capacity forecasts and then to relate the investment for each component as a function of capacity. The following segments need to be considered. Incremental new systems, new systems which replace retired systems, replacement components, repair and service of existing components.
Over the life of the average pump, blower, or high-performance valve, the cost of repair will exceed the original cost. As a result, the largest markets for component suppliers are at existing plants in countries with a large installed base.
The movement to IIoT and Remote O&M adds the potential to expand the service and advisory opportunity and to negotiate yearly contracts which can be fixed price or on a partnership basis where the owner and supplier share the savings.
Since owners will be armed with total cost of ownership data due to IIoT and data analytics, the supplier will want to spend the time to prepare a total cost of ownership evaluation. If this is not the lowest then he will need to invest in R&D and be able to submit the Lowest Total Cost of Ownership Validation (LTCOV).
It is highly desirable and possible to forecast the purchases for the few hundred enterprises which buy or influence the majority of the component purchases. Let’s use FGD components as an example.
FGD Example: FGD consumables include lime, limestone, water treatment chemicals, filtration cartridges and belts, membranes, dust bags, seals, balls for ball mills, general performance analyzers and similar items. Minor replacements include nozzles, valves, general performance pumps and mist eliminators. Repairs are needed for high performance pumps, dampers, high performance valves, scrubber linings, continuous emissions monitoring systems, fans and high-performance analyzers.
Many FGD systems in the U.S., Japan and Europe were installed in the 1980s. These systems are being updated with extensive automation and in some cases new scrubber vessels. New pumps and fans are also being installed. In part this is due to end of life issues but often upgrades are required to meet tougher regulations.
The yearly FGD capacity additions have peaked both quantitatively and in terms of percent increases. In the 1980s the new yearly additions were 20,000 MW per year but in the early 1980s this represented as much as 20 percent of the installed capacity. At the peak in 2005 the yearly additions were 90,000 MW but only represented 10 percent of the total installed capacity. Now orders for new systems have dropped to 60,000 MW per year but this represents only 4 percent of the installed capacity.
What this means is a big change in the ratio between markets for new systems and the purchases for existing systems. The market for new systems in 2018 will only be $3 billion while the purchases for existing systems will be $16 billion. Most of the new purchases will be in a few Asian countries. The total $19 billion market will be dominated by relatively few end users and suppliers according to the latest forecast in N027 FGD Market and Strategies.
|FGD System, Component, Consumables and Repair Purchases in 2018|
|Company||Country||Rank||% of Total Coal-fired FGD Purchases in 2018||FGD Purchases
|National Thermal Power Corporation (NTPC)||India||4||7||1,330|
|Vietnam Power (EVN)||Vietnam||8||2||380|
Many of the decisions are increasingly being made by OEMS and EPCs. Let’s take the example of flow control components such as pumps, valves, fans and dampers. For new systems the end user will not often directly purchase these components. Large FGD system suppliers will typically purchase or specify the specific brand and product.
FGD system suppliers are making a big effort to serve their existing customers with O&M services which include component replacement. In the future third party O&M will become commonplace as explained inN031 Industrial IoT and Remote O&M.
The remote monitoring of every valve, pump, fan and damper will generate unique knowledge for the corporate utility personnel and OEMs. As a result, a few thousand people in 31 corporations will make more than 70 percent of the purchase decisions for high performance FGD components.
|Decision Makers for High Performance FGD Components||Percent|
|Top 16 operators - Direct||40|
|Top 16 EPCs and OEMs for the top 16 operators||12|
|Smaller EPCS for top 16 operators||3.8|
|Top 16 operators sub total||55.8|
|Top 16 EPC’s for smaller operators||15|
|Top 31 sub total||70.8|
|Purchases by smaller EPCs for smaller operators||9|
|Smaller operators - Direct||20.2|
The market report provides forecasted purchases by each of the large operators and OEMS. Detailed profiles of the FGD OEMS are also provided. Detailed profiles of the operators are found in42EI Utility Tracking Systemwhich also tracks individual projects on a weekly basis.