Can Russia build turbines as well as Siemens?

Big turbines are an important political issue in Russia these days. Last year, the secret delivery of Siemens-made gas turbines to Crimea by the Russian state-owned company Rostec caused an international scandal. The move was a violation of sanctions applied to Russia for its 2014 annexation of the Ukrainian peninsula – for international sanctions also include the energy technology sector.

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As a result, Russian firms have been tasked with engineering and building new high-output turbines to replace aging foreign turbines. In April, it became known that a prototype Russian turbine failed tests conducted in December 2017.

Now the company, Silovye Machiny (Power Machines), will join companies such as Rostec, Rusnano and Inter RAO in the quest for energy production success. Aleksey Mordashov, who owns the St. Petersburg-based Silovye Machiny says, "Russia needs to develop its own gas turbine technology." At the same time, he is demanding government funding for this development.

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Will Russia have to start from scratch?

Developing large gas turbines is indeed something that costs a massive amount of money. Manfred Christian Wirsum, from the Institute for Power Plant Technology, Steam and Gas Turbines at the Rhineland-Westphalian Technical University (RWTH) says that initial costs would be in the "hundreds of millions of dollars or euros."

The scientist adds that he knows Russian turbine power plant technology exists – although it is not the newest, largest or most efficient: "The question is whether Russia can build on that technology or if new, large-scale gas turbines will have to be developed from scratch."

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Four major producers worldwide

As well as the huge cost, developing new, large-scale gas turbines also requires intense scientific development and long-term testing. Matthias Zelinger, energy policy spokesman for Germany's Mechanical Engineering Industry Association (VDMA) in Frankfurt, says, "Today's large-scale gas turbines are some of the most sophisticated machines there are." Moreover, Zelinger says, "the technological hurdles for entering the market are extremely high."

The global market for large-scale turbines is currently in the hands of four major producers: The American company General Electric (GE), Germany's Siemens, the Japanese company, Mitsubishi Hitachi and Italy's Ansaldo Energia, which took over part of the French company Alstom's turbine production.

"Every attempt to enter the market over the last twenty years has failed. Only Mitsubishi has been able to make the transition from producing medium-sized turbines to the production of large-scale turbines. And it was only able to do so with great effort and a lot of financial help from the Japanese government," explains Zelinger.

Risks for Russian producers

Beyond the technical and financial hurdles standing in the way of developing such gas turbine power plants, there are also business risks. "Demand has gone down to about 100 units per year. Annual production capacity is around 400 turbines per year," says Zelinger. That is why GE and Siemens are looking for ways to cut thousands of jobs in turbine production.

This means that Russian turbine developers are looking at a shrinking market with massive overcapacity. Still, the Russian government does not expect engineers to produce competitive export products. Moscow is more concerned with the domestic market.

As Russia's Deputy Energy Minister Andrey Cherezov told participants at an economic summit in Yalta this month, demand for powerful turbines is not very high – in fact only one to three such turbines will be needed each year.

"But there is also a program for the modernization of older thermal power plants. That is the sector in which products can be sold," the minister told TASS news agency. And according to Interfax news agency, Cherezov said he would also not discount the possibility that a third unit might eventually be built at the Simferopol thermal power plant in Crimea.

New developments in the energy sector

Producing one to three turbines per year suggests that the millions invested in developing large-scale gas turbines in Russia will be a losing proposition from an economic standpoint. Another problem is that the national plan to replace old foreign turbines at existing power plants with a new Russian electricity industry runs contrary to trends on the global energy market.

Manfred Christian Wirsum believes that the dynamism of recent developments in wind and solar energy production is something that has been completely underestimated by many. He is also of the opinion that most countries already have sufficient conventional energy capacity.

"If we were to see a rapid build up of renewable energy sources – especially wind and solar – and I have no doubt we will, then conventional power plant operators will simply try to keep their plants running as long as possible," says Wirsum. Thus, he is convinced that the market for new gas turbines and conventional power plants will only continue to shrink over time.