SIC 3511
STEAM, GAS, AND HYDRAULIC TURBINES, AND TURBINE GENERATOR SET UNITS



This industry covers establishments primarily engaged in manufacturing steam turbines; hydraulic turbines; gas turbines, except aircraft; and complete steam, gas, and hydraulic turbine generator set units. Also included in this industry are manufacturers of wind and solar powered turbine generators and windmills for generating electric power. Establishments engaged in manufacturing nonautomotive type generators are classified in SIC 3621: Motors and Generators; those manufacturing aircraft turbines are classified in SIC 3724: Aircraft Engines and Engine Parts; and those manufacturing windmill heads and towers for pumping water for agricultural use are classified in SIC 3523: Farm Machinery and Equipment.

NAICS Code(s)

333611 (Turbine and Turbine Generator Set Unit Manufacturing)

Industry Snapshot

Roughly 85 establishments operated in this industry in the late 1990s. They employed almost 17,500 people in 2000. Of this total, 9,600 were production workers who earned an average hourly wage of $24.24. The value of industry shipments increased steadily throughout the late 1990s, growing from $5.8 billion in 1997 to $7.9 billion in 2000.

Nearly all of the companies that entered the wind turbine business in the early 1980s—when the industry was in its heyday—have simply disappeared. By 1987 only three manufacturers of the larger-scale turbines used by utilities were still in business, and only one was producing turbines in significant numbers. The number of companies making small wind turbines for stand-alone power has also contracted substantially. In March 1995 the U.S. wind power industry received a fatal blow: the Federal Energy Regulatory Commission (FERC) overturned a decision that had forced utilities in California—the key U.S. market—to buy wind-generated power. Overseas demand presented a much brighter picture, however. The European wind power industry was doing well in the late 1990s because of the European Union's encouragement of renewable energy resources. China also was looking to wind power as a way of reducing the pollution generated by its utilities.

Background and Development

While early steam engines were reliable generators of electricity, they were big, heavy, inefficient devices. The modern steam turbine was developed in the late nineteenth century to replace them. Westinghouse shipped its first steam turbine in 1897, a few years before rival General Electric. By 1910 the largest steam turbine-generator unit could produce 30,000 kilowatts, compared with just 1,200 kilowatts ten years earlier. By 1940 single turbine units with a capacity of 100,000 kilowatts were in general use. During the 1950s and 1960s, steam turbines continued to dominate an expanding power-generation market, as fossil fuel prices remained low and ever-larger steam turbines were brought on line. In the 1980s, however, additions to the power capacity of utilities slowed because of erratic growth in consumption and the difficult political climate for utilities in many states.

In 1986 General Electric introduced a new series of advanced gas-fired turbines that turned around its faltering power systems segment. GE's relatively small and inexpensive gas turbines were ideal for utilities seeking to adjust to fluctuating demand by adding capacity selectively. In 1994 operating profits of its power division business reached a record $1.2 billion on $5.9 billion in sales.

Just one year later, however, profits had fallen about one-third, to $770.0 million, owing to several factors. Because of design flaws that could lead to cracks, GE had to make one of the biggest and most expensive recalls in the electric power business. In total, 22 GE turbines in the United States and overseas had to be shut down to be fixed; an additional 28 being shipped or installed required retrofitting with new components. GE has also lost some orders to competitors in Asia, including a key contract in China.

In the industry downturn of the 1980s, Westinghouse nearly exited the business, but by the mid-1990s it was doing better. In 1996 Westinghouse won a coveted partnership with Shanghai Electric Corp. of China, which is expected to be the largest market for power equipment over the next decade. Westinghouse Vice President Randy Zwirn told the Wall Street Journal in 1996 that, with an equity interest in Shanghai, "we've got the crown jewel." Westinghouse also won contracts in April 1996 valued at nearly $300.0 million to build power plants in South Korea and Pakistan.

Wind Power. Small wind turbines were set up in rural areas of the Midwest during the early twentieth century, but power from utilities largely displaced them during the 1930s. As oil prices surged in the 1970s, however, renewable energy resources became popular, and the wind industry was resuscitated. Tax relief was offered for wind farms, and research was greatly expanded. About 14,000 wind turbines were installed between 1980 and 1985, the vast majority of them in California. When oil prices dropped below $20 a barrel and tax incentives were eliminated, however, much of the domestic wind industry collapsed.

In the wind power segment, the biggest U.S. company has been Kenetech of Livermore, California, founded in 1979 as U.S. Windpower. In early 1995 the company seemed to be poised for a turnaround. It made major sales to India and South Wales as well as to Palm Springs and Minnesota. However, a March 1995 decision by the FERC that freed California utilities from the requirement that they buy wind power cost the company contracts worth $945.0 million. Wind power needed this regulatory support because it remained uneconomical, in part because of the short fatigue life (five years) of a wind turbine's major components and their expensive replacement costs. At best, Kenetech, the world's leading producer of wind-generated electricity, could produce power at five cents per hour, compared with three cents per hour for conventional natural gas plants. In the wake of this regulatory change, Kenetech first laid off 115 employees, or about 12 percent of its work force. By June 1996 the company had filed under Chapter 11 of the U.S. Bankruptcy Code.

Overseas markets, however, were healthier. The European Union (EU) set a target for renewable resources to account for 8 percent of Europe's primary energy by 2005. More specifically, the EU plan forecast that wind power would meet 2 percent of Europe's electricity demand by the same year. China, too, was encouraging the growth of wind power to satisfy its domestic energy needs.

Current Conditions

Due in part to the growth of overseas markets in the late 1990s, the value of industry shipments increased significantly during this time period. Between 1997 and 2000, shipments grew by more than $2 billion, increasing from $5.85 billion in 1997 to $7.95 billion in 2000. The cost of materials jumped from $2.86 billion in 1997 to $4.56 billion in 2000. Employment in the industry declined to 17,494 workers in 2000, compared to 19,529 workers in 1997. Production workers in 2000 numbered 9,671; they earned an average hourly wage of $24.36.

Industry Leaders

The list of industry leaders in the late 1990s represented a shift from earlier configurations of market share domination. Gone were General Electric and Westinghouse Electric from direct control of the market, and in their place was Foster Wheeler Corp., with Cooper Cameron Corp., Sequa Corp., and McDermott Inc. vying for control of the industry.

Clinton, New Jersey-based Foster Wheeler outpaced its rivals with 1998 sales of $4.6 billion. In 1998 Foster Wheeler won a design/build/operate/transfer contract with the University of Minnesota to renovate its historic Southeast Steam Plant, built in 1903, by installing a pollution-reducing boiler capable of burning 30 different fuels. ENR magazine named this one of the "Best Projects" of 1998.

Houston-based Cooper Cameron generated 1998 sales of almost $1.9 billion, up from $1.8 billion in 1997 sales. Sequa, based in New York City, followed closely, with more than $1.8 billion in 1998 sales, and McDermott's sales amounted to just under $1.8 billion for its fiscal year ended March 31, 1997. Rounding out the top five was Teleflex Inc. of Plymouth Meeting, Pennsylvania, with 1998 sales of over $1.4 billion, up from 1997 sales of $1.1 billion.

America and the World

During the 1990s the turbine market increasingly became international in scope. Major American and European manufacturers strengthened their presence in each other's backyard. For example, the German industrial conglomerate Siemens AG took over a spin-off of Allis-Chalmers Co., known as A-C Equipment of Wisconsin and invested $30.0 million in its Milwaukee plant.

More than 60 percent of Westinghouse's new orders in 1996 were coming from customers outside the United States. "Asia is the biggest power market in the world," Westinghouse's Mike Asquino told the Orlando Business Journal in 1996. "That's where we're seeing significant growth." Indeed, China was expected to be the world's fastest-growing market. In 1996 it had a total installed generating capacity of 200,000 megawatts, which was being expanded by 10,000 megawatts per year.

Wind Power. In overseas markets, Denmark, Germany, and Britain have been in the forefront of developing wind energy. Wind energy accounted for less than 0.1 percent of Europe's total power generation in 1992. However, under a European Community directive, that figure is slated to rise to 2 percent by 2005. In 1996 the European wind power market was the world's largest, with installed capacity of 2,420 megawatts. The wind industry in Europe enjoys government subsidies and is growing quickly; it has also been a pioneer in developing wind farms offshore.

China also offered excellent opportunities for the wind industry. It has a set a target of 1,000 megawatts of installed wind power by the year 2000, more than 20 times the 1996 level of 44 megawatts. While 1,000 megawatts would still only represent 0.3 percent of China's anticipated capacity at the next millennium, it would still require 2,000 to 3,000 large wind turbines. Chinese authorities were eager for a more environmentally friendly source of power, since three-quarters of its generating units were powered by coal.

Research and Technology

Many of the advances in gas turbines over the past decade have their roots in jet engine technology, as manufacturers have adopted techniques perfected for the airlines and the Pentagon for power generation. Older gas turbines have a thermal efficiency of 25 percent—they capture and convert to electricity about one-quarter of the energy value of their fuel—versus a 33 percent thermal efficiency posted by steam turbines. Using the technologies developed for aircraft, however, some newer gas turbines have reached thermal efficiencies of 40 percent. Other recently developed gas turbines have achieved even higher efficiency levels through combined cycle generation, in which the turbines use the exhaust gases from the turbine to boil water into steam, which is then used in a steam turbine to generate additional electricity. A variation of this method is to boil water with the exhaust gases and inject some of the steam back into the gas turbine, so it is running on a combination of gases and steam. Some industry participants believe that gas-fired and combined-cycle power systems will be the leading technologies of the 1990s, representing about half of all new capacity additions worldwide. Fossil-fueled steam turbines, hydroelectric power, and nuclear plants will account for the balance.

The wind industry has made progress on several fronts that have historically hampered its growth. One major problem for the industry has been the variability and intermittent nature of wind. Traditional, fixed-speed wind turbines have had a relatively low capacity factor compared with other energy sources because they have not been able to take advantage of the full range of wind velocities. Improvements in wind turbine design and technologies, however, have allowed finer control of power output at both low and high wind speeds. Other advances, including more accurate weather forecasting, improved methods of picking the best sites for wind farms, and blades that can better cope with the destructive effects of dead insects have contributed to more efficient wind energy production.

Further Reading

"California's Kenetech Windpower Inc. to Serve Customers During Chapter 11." Knight-Ridder/Tribune Business News , 5 June 1996.

Cole, Benjamin Mark. "Generating Power Without Much Fuss (Capstone Turbine Corp.'s Small Turbine Power Plants)." Los Angeles Business Journal , 28 October 1996.

"Cooper Cameron Profits Fall." Oil Daily , 29 January 1999.

Demoss, Timothy. "Modern Technology Breathes New Life Into Old Turbines." Power Engineering , August 1996.

Dillon, Paul. "Westinghouse Becomes Bigger in Asia." Orlando Business Journal , 26 April 1996.

Foroohar, Kambiz. "Blowing in the Wind." Forbes , 4 December 1995.

General Electric 10-K, 1996. Fairfield, CT: General Electric, 1997.

Hindley, Angus. "Thinking Long-Term in the Gulf." Middle East Economic Digest , 31 January 1997.

"Historic steam plant goes hi-tech with option to burn 30 fuels." ENR , 21 December 1998.

"Teleflex Incorporated." Barron's , 15 February 1999.

United States Census Bureau. "Statistics for Industries and Industry Groups: 2000." Annual Survey of Manufacturers. February 2002. Available from http://www.census.gov .

United States Census Bureau. Survey of Manufacturers , 10 February 2000. Available from http://www.census.gov/prod/www/abs/97ecmani.html

Zhang, Don. "China Sets 1000 MW Wind Power Goal." Modern Power Systems , June 1996.

Zink, John. "Steam Turbines Power an Industry: A Condensed History of Steam Turbines." Power Engineering , August 1996.



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