Gas Turbine Supply Constraints Threaten Grid Reliability; More Affordable Near-Term Solutions Can Help

With waitlists for gas plant turbines extending to 2028 and beyond, a new era of electricity demand growth will require faster, cost-efficient solutions for a more flexible grid.

After years of flat or declining electricity demand, US utilities are projecting rapid growth driven by AI, electrification, and industrial expansion. The North American Energy Reliability Corporation (NERC) expects national peak demand to increase by 150 GW over the next decade. This represents 18 percent growth over current levels — nearly the equivalent of adding a new California, Texas, and New York to the bulk power system. At the same time, more than 120 GW of existing power generation — over 10 percent of the United States’ total fleet — is expected to retire as mid-20^th century coal plants reach the end of their operating lives and are replaced by cheaper and cleaner resources. While expectations will change over time, the projected 270 GW gap means that decision-makers at all levels will need to act swiftly to maintain reliable, affordable, and sustainable electricity.

Power providers across the country have turned to gas-fired power plants as their first-choice technology to fill the impending gap. Exhibit 1 shows that across the nation, utilities and independent power providers plan to build an average of 19 GW of new gas-fired capacity each year through the rest of the decade, double the recent rate of construction.

Exhibit 1

Yet, there is a perfect storm of uncertainty brewing: surging global demand for gas turbines is creating supply chain constraints, which create timeline and cost risks for recently announced projects. At the same time, global economic turbulence makes it difficult to predict where new load will be located, how large it will be, and how fast it will grow. All this uncertainty, added together, spells massive risks to system-wide reliability and affordability for ratepayers. Fortunately, there are fast and affordable alternatives.

Turbine supply is already falling short

Three companies will need to supply most of the historic demand for new gas plants: GE Vernova, Siemens Energy, and Mitsubishi Power — who together serve over 75 percent of projects under construction. Booming demand for turbines has led each of these companies to report extended delivery timelines. Mitsubishi states that turbines ordered today will not be delivered until 2028–2030. Siemens reports a record backlog of €131 billion (US$148 billion). And GE Vernova has announced new turbines will not be available until late 2028 at the earliest. When delivery backlogs exceed the expectations of developers and utilities, they can create unexpected delays and project cost overruns.

Rapid increases in planned gas are out-of-step with supply chain constraints

At the same time as manufacturers are reporting growing lead times for gas turbines, utilities across the United States are increasing their planned near-term gas procurements. Using RMI’s Engage & Act dataset, we analyzed planning data from 104 utilities — just over half of US electricity demand. Exhibit 2 shows that at the end of 2021, these utilities had collectively planned to build just under 25 GW of gas-fired capacity through 2030. By the end of 2024, utilities’ planned gas turbine deployments in 2030 doubled to over 45 GW. If project developers can’t procure turbines, these new gas projects will face delays and utilities across the nation could face near-term reliability risks.

Exhibit 2

If you can get a turbine, it’ll cost you

With demand for gas turbines reaching new heights and tariffs further threatening international supply chains, costs for new gas plants are soaring. Exhibit 3 shows recent cost estimates from industry benchmarks, utility plans, and utility procurements. We see that the cost assumptions used in planning are growing year-over-year, and exceeding the levels commonly assumed in industry benchmark studies. Procurement costs are reaching even greater heights.

The sudden increase in cost means that the price of a gas turbine when contracts are signed may be significantly higher than the price estimated during planning. For example, Duke Indiana’s latest estimated procurement cost for the Cayuga combined-cycle plant is $2,340 per kilowatt, 36 percent higher than expected in the utility’s past year resource plan. For a 1,476 MW power plant, this translates to a $900 million increase over planned costs.

Exhibit 3

Gas turbine manufacturers have already indicated that they’re ramping up their manufacturing capacity to meet new demand. What’s not clear is whether they can do that in time to meet utility forecasts at prices that ratepayers can afford.

There are fast, affordable, flexible alternatives amid the turbine supply crunch

Utilities need more options. Instead of making investments that exacerbate the risks of uncertain load growth, utilities can employ solutions uniquely suited to the urgency and uncertainty of load growth. While utilities often prioritize gas due to a range of factors from habit to incentives, there are ready-to-deploy solutions that can rapidly scale to meet demand — and often at lower cost. Incorporating these resources into utility and system operator plans can reduce exposure to turbine shortages, maintain reliability, and shield customers from cost shocks. Exhibit 4 provides examples of states, utilities, and market operators leading in the deployment of alternative near-term solutions to load growth: energy efficiency, virtual power plants (VPPs), grid-enhancing technologies, clean repowering, and hybrid “power couples” sited at existing fossil generator points of interconnection. Exhibit 5 demonstrates that these resources, combined, could meet nearly all projected near-term load growth.

Exhibit 4

Exhibit 5

We need to be making investments right now that can strengthen the grid and enable even greater affordable generation to come online in the future. The alternative near-term solutions above can offer ratepayers, utilities, and their regulators the ability to support economic growth without risking expensive, dangerous shortfalls while waiting for gas turbines that may not come in time.