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The global gas engine market size stood at over USD 4.34 billion in 2019 and is projected to surpass USD 6.05 billion by 2027, exhibiting a CAGR of 5.6% during the forecast period.
A gas engine is a reciprocating internal combustion engine, which primarily runs on natural gas and other special gases such as shale gas, mine gas, biogas, landfill gas, sewage gas, and syngas. These engines generally achieve more than 90% efficiency due to their high electrical and thermal efficiency, low operating and service costs, and high reliability. They are used for various applications, including power generation, cogeneration, mechanical drive, and tri-generation applications, such as district heating schemes, hospitals, universities, or industrial plants.
COVID-19 Pandemic to Hamper Growth Fueled by Rising Project Delays
The COVID-19 pandemic struck the world economy very hard. Its impact on several business sectors such as manufacturing, oil and gas, aviation, hospitality, and others have been explicit and unprecedented. Measures such as lockdowns & restrictions in the wake of the pandemic have made economies squelch across the globe. They have further disrupted supply chains, delayed projects, and created a labor shortage.
In several countries, the renewable sector is mainly dependent on imports from other regions, primarily China. Around 60% of engines and gen sets are produced in the U.S. and are supplied across the globe. Gas-based engines project developers worldwide are worried about project delays due to the slowdown of manufacturing in the U.S. Major suppliers are also observing production delays due to COVID-19, thereby causing a huge backlog for fulfilling orders. These factors are likely to hamper the growth of the market in the forecast period.
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Growing Demand for Distributed Power Generation is a Crucial Trend
The construction of new power plants and transmission lines requires massive investment and high maintenance. Most government companies prefer cost-effective ways to fulfill electricity demand. According to the World Energy Council (WEC), the global electricity demand is expected to double by 2060 from the present level. Because of the rising quest for integrating natural gas into the electricity generation mix and improving natural gas associated infrastructure, gas engines-based distributed power generation is fast emerging as an economical solution for government companies.
Major players in the market, such as Caterpillar Inc. and MAN SE are offering low pollution engines with fuel type natural gas, having ultimate reliability and the highest energy efficiency. Natural gas-based engines deliver better functioning than coal plants because they can be turned up and down rapidly. For instance, according to the International Energy Agency (IEA), the total fossil fuel supply will be up to 80% by 2040, making natural gas-based engines the most preferred fuel for the future.
Ongoing Development of Power Generation Technology to Propel Growth
Power consumption in developing countries such as China, India, Brazil, and Mexico has increased considerably from the last few years. The strong growths of the economy, flourishing manufacturing sector, and the rising population have led to an increase in power consumption. Furthermore, due to the expansion of emerging countries and improvements in living standards, there is a greater demand for energy consumption.
As the demand for electricity surges, several counties worldwide are increasing their power generation capacities by expanding the capacity of the existing ones or by installing new plants. Due to stringent government regulations regarding carbon emissions, companies are rapidly inclining towards the usage of renewable energy sources for electricity generation. They particularly prefer gas-based engines that use natural gas as fuel sources.
Implementation of Stricter Emission Regulations to Drive Growth
Various factors driving the growth of the global market are the rising demand for gas-fired power generation technology and the increasing focus on reducing carbon emissions. According to the U.S. Energy Information Administration (EIA), natural gas production grew by 9.8 billion cubic feet per day (Bcf/d) in 2019, a 10% increase from 2018. These engines are extensively used in power plants to supply power to drive the generator for producing electricity and supply power to various utilities. They also provide a high operational rate, quick start-up, and flexible load efficiency as per the power demand. Such factors are expected to increase the establishment of natural gas-based engines for electricity.
Many countries across the world, including Canada, India, and Germany, are focusing on developing natural gas-based engines for power generation plants. For instance, as per the Intended Nationally Determined Contributions (INDC), Canada aims to reduce its greenhouse gas emissions by 30% below 2005 levels by 2030. Such factors would lead to increasing installation in power plants as these engines produce lower carbon emissions than coal and diesel engines.
Limited Natural Gas Reserves and Price Differences across Countries to Hamper Growth
The irregularities in natural gas reserves and their varying prices are expected to hamper the market growth. According to the BP Energy Outlook 2019, two-thirds of the global natural gas reserves are located in the former Soviet Union countries, such as Iran and Qatar. Additionally, the exploration and supply of most of the world’s natural gas are concentrated in a few countries, which have further resulted in price inequality for distributors.
According to the U.S. Energy Information Administration (EIA) report called Short-Term Energy Outlook (STEO), in August 2020, the natural gas price stood at an average of USD 2.30 per million British thermal units (MMBtu), up from an average of USD 1.77/MMBtu in July. The Energy Information Administration (EIA) also expects that the rising domestic demand and increasing natural gas exports, combined with reduced production, will cause natural gas prices to rise to a monthly average of USD 3.40/MMBtu in January 2021. This factor is likely to hamper the gas engine market growth during the forecast period.
Natural Gas Segment to Hold Significant Share Because of its Ability to Lower Carbon Emissions
Based on type, this market is categorized into natural gas, special gas, and others. Natural gas is the major segment of the market, as it is the cleanest burning fossil fuel and has low carbon emission, as compared to the other types of fuels such as biogas, producer gas, and sewage gas. Natural gas also has the absence of particulates matter, which helps to reduce engine wear and tear.
1–2 MW Segment to Grow Rapidly Fueled by Rising Usage in Power Generation & Cogeneration
Based on power output, the global market is categorized into 0.5–1 MW, 1–2 MW, 2–5 MW, 5–10 MW, and 10–20 MW. The 1-2 MW segment accounted for the major gas engine market share in 2019 and it is expected to grow, as these generators are primarily used in power generation and cogeneration. In cogeneration, engines produce power along with energy for space heating and water heating, which enables energy saving of up to 60%.
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Increasing Expenditures on Power Generation to Augment Growth of This Segment
Based on the application, the market is segregated into power generation, mechanical drive, cogeneration, and others. The power generation segment accounted for the major share in 2019 and it is anticipated to retain its dominance during the forecast period. These engines are primarily used for power generation by manufacturing plants, commercial buildings, public buildings, and utilities for on-site power generation. Governments of developing nations across the globe are spending heavily on the construction of new gas-fired power plants, due to the rising demand for clean energy.
North America Gas Engine Market Size, 2019 (USD Billion)
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The market of gas engine has been analyzed across five key regions, namely, North America, Europe, Asia Pacific, the Middle East & Africa and South America. North America accounted for the major share in 2019 and it is expected to maintain its position during the forecast period, as natural gas-fired power is widely distributed across the U.S. According to the U.S. Annual Energy Outlook 2018, natural gas-based engines are estimated to account for more than 35% of the total electricity generation by 2050.
Europe is also a prominent region in the global gas engines market. The majority of European countries always experience cold climates. Hence, they require heat for residential and commercial spaces, thereby resulting in huge demand for cogeneration applications.
Asia Pacific is anticipated to be the fastest-growing region in the global gas engines industry during the forecast period. The growing demand for electricity across the region is expected to drive the growth of this region. Many countries, such as India, Japan, and South Korea, are constantly focusing on adopting clean and reliable energy sources. These factors are expected to drive market growth across the region during the forecast period.
Latin America holds potential growth opportunities owing to the new investment projects and innovations. At the same time, governments and numerous other companies are planning to implement investment projects on the construction, expansion, and modernization of power generation plants. As per Vostock Capital, a B2B event company, various countries in Latin America are experiencing a 1.9% growth rate in energy demand, which will surge the demand for gas-based engines in this region.
The Middle East & Africa is a prominent region indulged in the business of oil & gas as it holds 50% of the world's proven conventional natural gas reserves. Gulf countries in the Middle East are the fastest-growing in terms of energy demand. This is attributable to the increasing consumption of power, seasonal volatility, and rapid industrial growth. Hence, these factors are likely to drive the application of these engines in the region.
Caterpillar Inc. is Focusing on Expanding its Product Line and Utilizing its Channels to Distribute New Products
The market houses a large number of small and large players delivering products for numerous applications, thereby shaping the competitive landscape. These key players are significantly operating at the country and regional levels, limiting them to cater to the overseas needs effectively. However, some companies, such as Caterpillar Inc., Cummins Inc., Wärtsilä, Rolls-Royce plc, INNIO, MAN SE, and Siemens Energy, possess a significant integration with local sales partners to hold a substantial presence globally.
Caterpillar Inc. is the leading manufacturer of construction and mining equipment, diesel and natural gas based engines, industrial gas turbines, and diesel-electric locomotives. The company principally operates through three segments: construction industries, resource industries, and energy & transportation. It is constantly engaging in mergers and acquisitions and new product launches.
An Infographic Representation of Gas Engines Market
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The global gas engine market research report presents a comprehensive assessment of the industry by offering valuable insights, facts, industry-related information, and historical data. Several methodologies and approaches are adopted to make meaningful assumptions and views to formulate the market research report. Furthermore, it covers a detailed analysis and information as per key market segments, including product types, power output, applications, and regions, helping our readers to get a comprehensive overview of the global market.
Value (USD Billion)
By Product Type
By Power Output
Fortune Business Insights says that the global market size was USD 4.34 billion in 2019 and is projected to reach USD 6.05 billion by 2027.
In 2019, the North America market value stood at USD 1.80 billion.
Registering a CAGR of 5.6%, the market will exhibit steady growth over the forecast period (2020-2027).
In terms of product type, the natural gas segment is anticipated to dominate the market.
The growing demand for clean and efficient power generation technology, coupled with the increasing investments in distributed power networks would drive the market.
Caterpillar Inc., Cummins Inc., Wärtsilä, Rolls-Royce plc, MAN SE, and Siemens Energy are the key participants operating in this market.
North America dominated the market in terms of share in 2019.
Gas engines produce electricity & energy for space heating and water heating. Cogeneration is used mainly in steel mills, chemical & food processing plants, paper & pulp mills, and district heating plants.
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