GE, SIE, MHVYF: A Primer on How the Power Market Shapes the Market for Gas Turbines – Historical Developments & Their Implications for the Future

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Eric Selmon Hugh Wynne

Office: +1-646-843-7200 Office: +1-917-999-8556

Email: eselmon@ssrllc.com Email: hwynne@ssrllc.com

SEE LAST PAGE OF THIS REPORT FOR IMPORTANT DISCLOSURES

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November 15, 2018

GE, SIE, MHVYF:

A Primer on How the Power Market Shapes the Market for Gas Turbines –

Historical Developments & Their Implications for the Future

In this note, we explain how trends in the market for gas turbine can be traced to their underlying drivers in the power market. The first of a two-part primer for investors unfamiliar with power markets and their impact on power equipment demand, this note traces the timing and composition of past generation capacity additions and explains their implications for future gas turbine orders. Part two will trace shifts in the mix of generation over time, how these have affected the operating profiles of existing power plants and the implications for utilities’ choice of generation technology, including the level and composition of gas turbine orders. Readers interested in reviewing our underlying models and data, or discussing our analysis, are invited to contact the authors.

  • The U.S. Energy Information Administration (EIA) collects detailed data on the capacity, fuel, generation technology, on-line dates and retirements dates of all power plants operating in the United States. The EIA and the International Energy Agency (IEA) also provide more general data on power generation around the world. This data can be mined to analyze historical patterns of capacity additions and retirements, and assess their implications for the future, providing a better understanding of the trends in power systems and power equipment needs around the world.
  • The trends evident in this data suggest that the U.S. will become the single largest market for gas turbines over the next 20 years, with over 30% of global gas turbine orders (see Exhibit 5).
  • The most salient fact visible in the historical data, and arguably the most important in assessing the outlook for gas turbine orders, is the intense cyclicality of capacity additions (see Exhibit 1).
  • Historically, the bulk of capacity additions have not occurred through smooth, annual increments to installed capacity, but rather in periodic bursts that surge well above the previous trend.
  • Reflecting this cyclical pattern, ~80% of the coal fired capacity operating in the U.S. today was built in the 20 years from 1967 to 1986; ~90% of U.S nuclear capacity was added in the 20 years from 1971-1990, and ~50% of U.S. gas turbine capacity was added in 10 years over 2000-2009.
  • These periodic construction booms will predictably give rise to echo booms as the capacity installed during these surges reaches the end of its useful life.
  • EIA data on U.S. power plant retirements show that the average age at which steam turbine generators have been withdrawn from service is ~60 years, while gas turbine and combined cycle gas turbine generators have been retired on average after ~35 years.
  • We therefore expect two large components of the U.S. generating fleet to face retirement over the next two decades: first, the ~232 GW of aging nuclear and coal fired steam turbine generators brought into service from 1965 to 1980 and, second, the ~229 GW of gas fired generation capacity added over the years 2000-2009.
  • As a result, we expect average annual retirements of U.S. generation capacity will more than double by 2035, rising from an average of ~17 GW annually over 2021-2025 to 21 GW over 2026-2030, 34 GW over 2031-2035 and 37 GW over 2036-2040 (see Exhibit 2).
  • Similar patterns of past capacity additions in developed economies around the world suggest that global retirements of fossil fuel generation capacity will average ~58 GW annually over 2021-2025, 88 GW annually over 2026-2030, 123 GW annually over 2031-2035, and 142 GW p.a. over 2036-2040.
    • Our analysis suggests that the wave of retirements forecast for the United States over 2025-2040 will be paralleled by rising retirements in the developed economies of Europe, Japan, Eurasia and the Asia Pacific region such as South Korea, Taiwan, Australia and New Zealand (Exhibit 10).
    • In emerging markets whose economic development has accelerated in more recent decades, such as China, India and the Middle East, generating fleets are relatively young and expected capacity retirements remain low.
  • Globally, as a share of gross annual additions of generation capacity, the need to offset retirements will far outweigh the need to add net new capacity to meet the growth in load.
    • Because this global wave of retirements will be concentrated in the developed economies of North America and Europe, we expect these regions to become the two largest markets for fossil fuel capacity additions, including gas turbines, over this period (see Exhibit 5).
  • Our forecast of global capacity additions models gross annual additions of firm generating capacity as the sum of (i) the net new capacity required to meet the annual growth in global power demand plus (ii) the capacity required each year to replace retiring power plants.
  • With respect to net new capacity additions, our forecast assumes that the ratio of the growth in power demand to the growth in GDP falls to half the level observed over the last 10 years in each region of the globe (see Exhibit 6). While conservative, this assumption is consistent with the observed deceleration in power demand growth over the last five years in every region of the world (see Exhibit 8) as ratios of power demand to GDP growth have fallen (Exhibit 9).
  • In the developed economies, power demand growth has slowed markedly in recent years, so that capacity retirements will become the primary driver of gross capacity additions.
  • In certain developing regions, including China, India and the Middle East, power demand growth remains strong, requiring capacity additions well in excess of expected retirements.
  • By the late 2020s, however, net additions of new firm capacity are likely to slow in these rapidly developing regions, reflecting (i) the gradual deceleration of economic growth in China, India and the Middle East and (ii) increasing energy efficiency in these economies Exhibits 6 to 9.)
    • To arrive at required additions of fossil generating capacity, we subtracted from our estimate of gross required additions of firm generating capacity the IEA’s forecast of (i) planned additions of nuclear capacity, and (ii) the firm capacity value of new renewable resources. Our forecast of global gross additions of fossil generation capacity over the next two decades is presented in Exhibit 11.
    • To break down our forecast of fossil fuel capacity additions into its component parts — coal fired power plants, GTs and CCGTs — we assumed that coal fired capacity will continue to grow, in those regions that have historically relied upon it, in the same proportion to gross capacity additions as seen over the last 25 years, unless a government policy has been laid out to govern coal fired generation additions, in which case we modelled that policy. GTs and CCGTs make up the remainder.
  • Our base case forecast of gas turbine orders is set out in Exhibit 12. Based on the assumptions above, we see total gas turbine orders rising from 31 GW in 2020 to 49 GW in 2025 and 70 GW in 2030, implying 5-year growth rates of 9.4% p.a. over 2020-25 and 7.6% p.a. over 2025-30.
  • We have also modeled six alternative scenarios. In none do we see a significant reduction in GT orders from current levels (see Exhibit 13).
    • The scenarios that pose the greatest risk (a 50% increase in wind and solar capacity additions combined with the use of electric energy storage as peaking capacity) are consistent with annual gas turbine orders of at least 26 GW, with growth to 33 GW by 2025 and to over 50 GW by 2030.

The Cyclical Pattern of Historical Capacity Additions and Their Future Echo Booms

The Energy Information Administration of the U.S. Department of Energy collects detailed data on the capacity, fuel, generation technology, on-line dates and retirements dates of all the power plants operating in the United States. The EIA and the International Energy Agency (IEA) also provide general data on generation from around the world. This data can be mined to analyze historical patterns of capacity additions and retirements, and assess their implications for the future.

The EIA’s highly granular data on the U.S. bulk power system is particularly helpful in estimating the useful lives of different generation technologies and the breakdown by technology of historical capacity additions – key elements of our forecast of future capacity retirements, which we expect will become the primary driver of gross capacity additions in future years. Given our expectation that the U.S. market will account for approximately a third of gas turbine orders over the next two decades, moreover, the EIA’s data is valuable in its own right for the insights it can provide into future gas turbine demand (see Exhibit 6 below).

The most salient fact visible in the historical data, and arguably the most important in assessing the outlook for gas turbine orders, is the intense cyclicality of capacity additions.

Exhibit 1: Additions of Generating Capacity by Fuel, United States, 1950-2010 (MW)

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Source: Energy Information Administration of the U.S. Department of Energy

Historically, the bulk of capacity additions have not occurred through smooth, annual increments to installed capacity, but rather in periodic bursts during which annual capacity additions surge well above the previous trend. This cyclical pattern is clearly evident in Exhibit 1. As can be seen there, coal fired capacity additions surged from 1967 through 1986: of the 261 GW of coal fired capacity in operation in the United States today, ~206 GW or almost 80% was built during this 20 year period. The implication is that the bulk of U.S. coal fired capacity was installed 30 to 50 years ago. Similarly, the nation’s nuclear generation capacity was largely added over the period from 1971 through 1990: of the 102 GW of nuclear capacity in operation in the United States today, ~94 GW or almost 90% were built over these 20 years. The 10 years from 2000 through 2009 saw the largest wave of capacity additions in U.S. history, when ~229 GW of new gas turbine (GT) and combined cycle gas turbine (CCGT)[1] capacity were added, accounting for over half of the nation’s 429 GW GT and CCGT fleet.

These periodic construction booms will predictably give rise to echo booms as the capacity installed during these surges reaches the end of its useful life.

The three waves of coal, nuclear and gas fired capacity additions discussed above, each packed into periods of 10 to 20 years, portend a similar wave of retirements when these power plants reach the end of their useful lives.

Importantly, EIA data provides empirical evidence that can be used to estimate the useful lives of these existing units, included the years of operation of each retired power plant in the United States, as well as its primary fuel and generation technology. Based on this data, we estimate that nuclear, coal, gas and oil fired steam turbine generators can be expected to operate for ~60 years, and gas and oil fired combustion turbines and combined cycle gas turbine generators for ~35 years.

Based on the age and composition of the generation capacity in operation in the U.S. today, and the average age upon retirement of similar generating units in the past, we expect retirements of U.S. generating capacity to rise markedly in the late 2020s, accelerate in the early 2030s, and to remain robust through 2040. This forecast reflects the need to replace two large components of the U.S. generating fleet over the next two decades: first, the ~232 GW of aging nuclear and coal fired steam turbine generators brought into service from 1965 to 1980 and, second, the ~229 GW of gas fired generation capacity added over the years 2000-2009. As can be seen in Exhibit 2, we anticipate that that the gradual decommissioning of these two generating fleets will cause U.S. capacity retirements to reach ~20 GW annually in the late 2020s, ~30 GW annually by the early 2030s and ~40 GW annually by the middle years of that decade. Expressed as a percentage of U.S. generation capacity in operation today, we expect power plant retirements to rise from ~4.6% of today’s generating capacity over 2018-2020 to ~7.4% over the five years 2021-2025, 9.5% over 2026-2030, 13.6% over 2031-2035 and 16.1% over 2035-2040. The scale and duration of this wave of retirements implies that over a fifth of the generation capacity in operation in the United States today could be retired by 2030, over a third by 2035 and over half by 2040. (See Exhibits 3 and 4).

Exhibit 2: Expected Retirements of U.S. Generating Capacity (MW) [2]

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Source: Energy Information Administration, S&P Global, SSR research and analysis

Exhibit 3: Generating Capacity Retirements Exhibit 4: Cumulative Generating Capacity

by Period (% of Total 2016 Capacity) Retirements (% of Total 2016 Capacity)

 

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Source: Energy Information Administration, S&P Global, SSR research and analysis

Critically, this retired capacity cannot be replaced solely with intermittent renewable resources such as wind and solar power. Power grids must be continuously maintained at a constant voltage and frequency if the electrical equipment connected to the grid is to function properly; surges in voltage can damage equipment (hence the need for circuit breakers) while low voltage can cause lights and computers to dim. To maintain constant voltage and frequency, the power supplied to and the power withdrawn from the grid must be kept in constant balance. Because it is not yet economic to store large amounts of electricity, the implication is that the demand for electricity must be matched by an instantaneous supply response. Power grids are therefore designed on the principle that the sufficient capacity to generate electricity must be available to offset immediately the demand for electricity, whenever this demand occurs — including times when equipment failures render large power plants and transmission lines inoperable. To achieve high levels of grid reliability, generation capacity that can be dispatched on command (“firm capacity”) must exceed the peak demand for electricity by a margin sufficient to offset the impact of such potential equipment failures. The excess of this firm capacity over peak demand is referred to as the reserve margin of the power system. In the absence of large scale, economic electricity storage, renewable resources cannot count to towards this firm capacity: the intermittent nature of the wind and solar resource implies that renewable capacity cannot be dispatched, or turned on and off at will, to meet an increase in power demand or offset a loss of power supply.

However, across large fleets of wind and solar generating units, it is possible to predict the minimum levels of generation that are likely to be continuously available across 24 hours or predictable during the hours of highest demand, which grid operators can then use for planning purposes in securing supply for reliability needs. Although it can vary widely by location, we used an estimate of 10% of the nominal capacity of wind plants and 40% of the nominal capacity of solar plants, which is in the middle of the ranges of estimates we have seen used by grid planners around the U.S. and in other regions around the world. The continued growth in renewable generation can thus offset to a degree the need for net additions of fossil generation. We therefore account for the firm capacity value of growing wind and solar fleets in assessing future requirements for firm generation capacity.

Globally, we expect the need to replace retiring generation capacity to become the biggest driver of demand for fossil fueled generation plant, sustaining robust growth in gross capacity additions from the late 2020s through the 2030s. Because this wave of retirements will be concentrated in the developed economies of North America and Europe, we expect these regions to become the two largest markets for fossil fuel capacity additions, including gas turbines, over this period (see Exhibit 5).

To estimate future additions of generating capacity globally, we begin with the premise that gross annual additions of firm generating capacity will reflect the sum of (i) the capacity required to meet the annual growth in global power demand plus (ii) the additional capacity required each year to replace retiring power plants.

We estimate future growth in power demand by region as a function of the growth in regional GDP, as forecast by the OECD (Organization for Economic Cooperation and Development) (see Exhibit 6). We note that our forecast adopts two very conservative assumptions. First, we have assumed that the long-term ratio of the growth in power demand to the growth in GDP falls to half the level observed over the last 10 years in each region of the globe (see Exhibit 7). This assumption, while conservative, is consistent with the observed deceleration in power demand growth over the last five years in every region of the world (see Exhibit 8), driven by declining ratios of power demand growth to GDP region in most regions (see Exhibit 9). Second, we have assumed that in North America, Europe and Japan, the current excess of generation capacity will allow power demand growth to be absorbed through 2025 with no net additions of firm generation capacity.

Exhibit 5: Forecast Gas Turbine Orders by Region (Cumulative GW Over 2020-2038)

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Source: Energy Information Administration, International Energy Agency, Organization for Economic Co-operation and Development, Organization for Economic Co-operation and Development, SSR analysis and estimates

Exhibit 6: OECD GDP Growth Forecast Exhibit 7: Ratio of Power Demand Growth

To GDP Growth, 2006-2016

 

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Source: Organization for Economic Co-operation and Development, Energy Information Administration, International Energy Agency, SSR analysis and estimates

Exhibit 8: Power Demand Growth by Exhibit 9: Average Annual Decline in

Region, 2006-2016 and 2011-2016 CAGRs Electricity Use per Dollar of GDP, 2011-20161

 

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1. Constant 2010 US$; GDP calculated at purchasing power parity

Source: U.S. Energy Information Administration, Organization for Economic Cooperation and Development (OECD)

To forecast annual retirements of existing generation capacity, we have estimated the age and technological composition of global generating fleets based on data compiled by the IEA (International Energy Agency).[3] We then estimated the likely retirement dates of existing power plants assuming, as we did in the United States, that steam turbine generators have a useful life of 60 years, and that GTs and CCGTs have a useful life of 35 years.

Our analysis suggests that wave of retirements forecast for the United States over 2025-2040 will be paralleled by rising retirements in Europe, Japan, Eurasia and major economies of the Asia Pacific region such as South Korea, Taiwan, Australia and New Zealand, reflecting broadly similar trajectories of economic growth in these regions over the post-war decades (see Exhibit 10). In these regions, power demand growth has slowed markedly in recent years (see Exhibit 8), so much so that capacity retirements are expected to become the primary driver of gross additions of fossil generating capacity.

Exhibit 10: Estimated Retirements of Fossil Generation Capacity by Region (GW)

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Source: Energy Information Administration, International Energy Agency, Organization for Economic Co-operation and Development, SSR analysis and estimates

By contrast, in emerging markets whose economic development has accelerated in more recent decades, such as China, India and the Middle East, generating fleets are relatively young and expected capacity retirements remain low. Power demand growth in these regions remains strong (see Exhibit 8), and the need for net new capacity to meet the growth in load will be reflected in capacity additions well in excess of that required to offset retirements. By the late 2020s, however, net additions of new firm capacity are likely to slow in these rapidly developing regions, reflecting (i) the gradual deceleration of economic growth in China, India and the Middle East (see Exhibit 6), and (ii) increasing energy efficiency in these economies, where the ratio of power demand growth to GDP growth is currently five to six times that of the developed economies of North America, Europe and Japan (see Exhibits 7 and 9.)

Having estimated the gross additions of firm generating capacity required to meet the growth in power demand and offset the loss of retiring capacity, we then estimated what portion of this requirement is likely to be met by new fossil fuel generating capacity. To do so, we subtracted from our estimate of gross required additions of firm generating capacity the IEA’s forecast of (i) planned additions of nuclear capacity, and (ii) the firm capacity value of new renewable resources. [4] Our forecast of global gross additions of fossil generation capacity over the next two decades is presented in Exhibit 11.

Exhibit 11: Gross Annual Additions of Fossil Generation Capacity by Region (GW)

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Source: Energy Information Administration, International Energy Agency, Organization for Economic Co-operation and Development, SSR analysis and estimates

Our analysis suggests that by the late 2020s capacity retirements will become the primary driver of gross additions of fossil generating capacity on a global basis. Until the mid-2020s, we expect the pace of global capacity retirements to rise slowly, and its impact on the global demand for fossil fuel power plants to be attenuated by (i) the existence of excess generation capacity in North America and Europe, allowing these retirements to be absorbed without replacement, and (ii) the rapid growth of renewable generation. By the late 2020s, however, the accelerating pace of capacity retirements in the developed economies, and slowing demand for net capacity additions in the rapidly developing regions, will cause gross additions of fossil fuel capacity to track more closely the pace of global capacity retirements. One important implication of these trends is that the demand for new capacity in North America, Europe and Japan is expected to exceed that in the emerging markets of the Middle East and Asia (see Exhibit 9).

Our forecast of global power plant retirements points to a sustained recovery in gas turbine orders over the coming decade.

To break down our forecast of fossil fuel capacity additions into its component parts — coal fired power plants, GTs and CCGTs — we made the following assumptions. First, we assumed that coal fired capacity will continue to grow, in those regions that have historically relied upon it, in the same proportion to gross capacity additions as seen over the last 25 years, except in cases, such as China, where a government policy has been implemented regarding the future additions of coal fired capacity, in which case, we modelled the implementation of that policy. Second, based on the ratio of peaking capacity to total capacity in the United States, we assumed that gas turbine peakers will constitute 20% of gas turbine capacity additions. Finally, we assumed that any remaining additions of fossil fuel capacity would comprise combined cycle gas turbines generators.

To translate this forecast of GT and CCGT capacity additions into gas turbine orders, we first excluded the capacity supplied by the heat recovery steam turbine generators of the CCGTs (generally equivalent to approximately one third of CCGT capacity). We then estimated gas turbine orders in year t as the average annual gas fired capacity additions forecast for years t + 2, t + 3 and t + 4.

Our base case forecast, reflecting the assumptions set out above, is consistent with gas turbine orders rising from 31 GW in 2020 to 49 GW in 2025 and 70 GW in 2030 (see Exhibit 12), implying 5-year growth rates of 9.4% p.a. over 2020-25 and 7.6% p.a. over 2025-30.

We have also modeled four alternative scenarios, and two combinations thereof. Specifically:

    • Scenario B assumes a 50% increase in the annual pace of wind and solar capacity additions;
    • Scenario C assumes that from 2025 on, electric energy storage is substituted for 50% of annual additions of gas turbine peaking capacity;
    • Scenario D assumes that annual additions of coal fired generation capacity are cut by 50%;
    • Scenario E assumes a recovery in the ratio of power demand growth to GDP growth to the level seen over the last ten years by 2030.
    • We have also modeled a combination of B and D (a 50% increase in wind and solar capacity additions and 50% decrease in coal fired capacity additions) and a combination of B, C, and D (adding the substitution of electric energy storage for 50% of gas turbine capacity additions).

In no scenario do we see a significant reduction in GT orders from current levels. The scenarios that pose the greatest risk (the substitution of electric energy storage for 50% of peaking capacity additions from 2025 on, and the combination of this scenario with a 50% increase in wind and solar capacity additions and a 50% decrease in coal capacity additions) are consistent with annual gas turbine orders of at least 26 GW, with growth to 33 GW by 2025 and to over 50 GW by 2030.

Exhibit 12: SSR Forecast of Global Gas Turbine Orders and Alternative Scenarios (GW)

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Source: Energy Information Administration, International Energy Agency, Organization for Economic Co-operation and Development, SSR analysis and estimates

Exhibit 13: Base Case and Alternative Scenarios (GW)

 Source: Energy Information Administration, International Energy Agency, Organization for Economic Co-operation and Development, SSR analysis and estimates

In summary, the nuclear, coal-fired and gas fired generating fleets built over the last 50 years in the developed regions of the world are prone to accelerating capacity retirements over the coming two decades. Despite slowing global growth in power demand, and rapidly expanding renewable generation capacity, the need to offset these retirements with new, firm generating capacity is likely to drive a sustained recovery in the demand for fossil generation capacity. Even allowing for the continued expansion of coal fired generation capacity in regions that have historically relied upon it, the implication appears to be one of sustained growth in gas turbine orders over the coming decade.

In our next note in this primer series we will trace shifts in the mix of generation over time, how these have affected the operating profiles of existing power plants and the implications for utilities’ choice of generation technology for new capacity additions. In particular, we will examine how the increasing reliance on non-dispatchable renewable power and the accelerating pace of capacity retirements will influence the mix of gas turbine orders by generation type (e.g. CCGT vs peaking gas turbine) and turbine class (e.g. H-class, F-class, aeroderivatives). Finally, we will examine the data on turbine capacity factors and hours of usage by generation type and turbine class to estimate the impact of retirements on turbine manufacturer service revenues.

©2018, SSR LLC, 225 High Ridge Road, Stamford, CT 06905. All rights reserved. The information contained in this report has been obtained from sources believed to be reliable, and its accuracy and completeness is not guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein.  The views and other information provided are subject to change without notice.  This report is issued without regard to the specific investment objectives, financial situation or particular needs of any specific recipient and is not construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results.

  1. Combined cycle gas turbine plants capture the exhaust heat of one or more gas turbines for use in a heat recovery steam generator, or boiler, which in turn powers a steam turbine generator, adding on average some 50% to the power output of the gas turbines. 
  2. The Energy Information Administration of the Department of Energy maintains data on the capacity, primary fuel, prime mover, and commercial operation date of the approximately 16,000 generating units in operation in the United States. Based on the primary fuel and prime mover of these units, we have estimated their likely retirement dates, assuming average useful lives of 60 years for nuclear, coal, gas and oil fired steam turbine generators and 35 years for gas and oil fired combustion turbines and combined cycle gas turbine generators. Rather than assume that each steam turbine generator is retired on the 60th anniversary of its in-service date, and each gas turbine generator on its 35th anniversary, we have constructed distributions of potential retirements dates around these expected dates. For example, for all the steam turbine generating units whose 60th year of operation falls in 2030, we have assumed that the actual retirement dates of this cohort of units is distributed over 19 years centered on 2030, i.e., from 2021 through 2039. We assigned the highest probability (10%) to retirement in 2030, the 60th year of operation, and declining probabilities for each year above and below 2030 (i.e., 9% probability of retirement in 2029 or 2031, 8% probability in 2028 or 2032, 7% in 2027 and 2033 and so forth). 
  3. Outside the United States, granular information on the existing generating fleet was not readily available to us. However, IEA data on the growth in power generation capacity by region is available from 1980 on. In the years from 1980 to 1990, we assumed that these capacity additions comprised steam turbine generators, whether powered by coal, oil, gas or nuclear fuel. After 1990, we assumed the required capacity additions comprised a mix of steam turbines, gas turbines and combined cycle gas turbine generators. We modeled the mix of steam turbines, GTs and CCGTs added each year so as to arrive at a mix of these generation technologies in 2015 that reflected the actual mix of generation technologies reported in the IEA data for that year. As in the United States, we assumed that steam turbine generators have a useful life of 60 years, and that GTs and CCGTs have a useful life of 35 years. Finally, to estimate the retirement dates of plants brought on line prior to 1980, we assumed that the age profile of each region’s generating fleet in 1980 paralleled that of the U.S. generating fleet in 1980. We then estimated the retirement dates of these units by assuming that the units are retired 60 years after their estimated date of commercial operation. 
  4. As discussed above, the growth of renewable generation, supplied by intermittent renewable resources such as wind and solar, cannot supply the firm capacity required to meet the growth peak demand or to replace retiring conventional power plants; however, across large fleets of wind and solar generating units it is possible to predict the minimum levels of generation that are likely to be continuously available across 24 hours (equivalent, generally, to ~10% of the nominal capacity of wind plants) or predictable during the hours of highest demand (~40% of the nominal capacity of solar plants during daytime hours). The continued growth in renewable generation will thus offset to a degree the need for net additions of fossil generation. 
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