The market for gas engine is expected to grow at a CAGR of 5.74% during the forecast period of 2020 – 2025. The two major factors driving the market are lower gas prices, which have declined by more than 30% in the past few years, and strict emission regulations on marine fuel, which are resulting into increasing adoption of LNG-fueled vessels. Furthermore, expanding gas transportation infrastructure is supporting the increasing share of gas in primary energy consumption, and hence, gas engines. However, the market is restrained by the growing competition from the renewable sector, whose intermittency challenge is now being addressed by integrating energy storage systems with solar and wind power systems. Also, the increasing use of electric vehicles is hindering the market growth.
- Utilities has accounted for the largest share in the gas engine market by end-user industry owing to the current demand for these vessels driven by the uptake in offshore drilling activities.
- As gas-fired aircraft require high-quality, reliable gas engines, the use of gas-fired engines in the aviation industry is expected to provide significant opportunities for the gas engine market in the future.
- North America accounted for more than a quarter of the market in 2018 with the majority of the demand coming from the United States and Canada.
Key Market Trends
Increasing Demand from Utilities
- Electric utilities operate gas engine generators continuously to serve base electrical loads. The use of gas engines across the utility sector is considered particularly advantageous in the absence of a reliable supply from the centralized power plant, or where the economics and availability of natural gas fuel are considered as the critical drivers.
- In addition, the use of gas engine generators is also considered highly useful for handling peak load demand. Several utilities across the world witnessed a rapid spike in the peak load demand, particularly during the morning and evening time period.
- Owing to rising population, increasing urbanization and industrialization activities, infrastructure development, and high economic growth in countries, such as India, and China, are expected to result in significant growth in demand for electricity. According to the World Energy Council (WEC), the global demand for electricity is expected to double by 2060 from the present level.
- As construction of new power plants and transmission lines impose huge costs and often faces formidable social and political barriers, utilities are favoring cost-effective ways to keep up with rising demand for power. With the increasing quest for integrating natural gas into electricity generation mix and with improving natural gas associated infrastructure, gas engines-based distributed power generation is fast emerging as an economic solution for the utility companies.
- Furthermore, lower gas prices across several countries, such as the United States are expected to further supplement the demand for gas engines. In addition, with air quality emission standards getting more stringent and with the increasing cost of diesel fuel, gas engine-based power units have become preferred electricity generating source, across countries.
North America to Dominate the Market
- North America has accounted for more than 25% of the market share in 2018 and is expected to continue its dominance over the forecast period.
- Natural gas-fired power is widely distributed across the United States. As of 2018, natural gas surpassed coal as the main fuel used to generate electricity in the United States, owing to the boom in shale gas production in the United States, and a shift toward cleaner energy fuels and decline in the gas prices.
- According to the Annual Energy Outlook 2018 Reference case, natural gas is expected to remain as the leading source of electricity generation through the years till 2050. Natural gas is estimated to account for almost 35% of total electricity generation by 2050 in the United States.
- CNG and LNG are considered as alternative fuels under the Energy Policy Act of 1992. There are light-, medium-, and heavy-duty NGVs available in the country. As of July 2018, there are 175,000 natural gas vehicles and 922 compressed natural gas fueling stations in the United States.
- Canada has abundant natural gas resources. The total remaining natural gas resource size is 30.8 tcm, with 72% coming from tight and shale gas formations in Alberta and British Colombia.
- In 2018, natural gas accounted for 8.9% of the total electricity generated. On February 2018, the federal government released its long-awaited draft regulations for the phase-out of coal-fired power plants in the country. This step was taken to promote the country’s transition toward a low-carbon economy. Due to this, provinces, such as Alberta, Saskatchewan, and Nova Scotia, are planning to replace a lot of their lost generation capacity with natural gas.
- Therefore, the increasing growth in shale gas production and the rising demand for electricity along with the plans to phase out coal-fired power plants are expected to drive the demand for gas engines, over the forecast period.
The gas engine market is moderately consolidated. The key players in this market include General Electric Company, Wartsila Oyj Abp, Rolls-Royce Holdings PLC, Caterpillar Inc., and Cummins Inc.
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