Electricity Generation Shifts Toward Steam-First Plants
Summary
Babcock & Wilcox and Terrestrial Energy say multi-year gas turbine waits are pushing utilities, manufacturers and data centers toward steam-first power plants.
A shortage of large gas turbines is pushing power buyers toward steam generation. On their third-quarter 2026 earnings calls on November 9 and 10, 2026, boiler maker Babcock & Wilcox (BW) and nuclear developer Terrestrial Energy (IMSR) both said that buyers who need firm power are switching to designs that install a boiler and steam turbine first, so the plant can start producing electricity years sooner[1][2].
Why the gas turbine shortage favors steam turbines
For customers that need reliable round-the-clock power, the usual choice has been a combined-cycle gas plant. A large gas turbine burns natural gas to make electricity, and its hot exhaust then boils water into steam that drives a steam turbine for a second round of generation. The bottleneck is the first step. Terrestrial said on its call that large gas turbines come from only a few manufacturers worldwide, that supply has not kept up with demand, and that a conventional gas plant takes five to seven years or more from order to power[2]. GE Vernova, the industry leader, signed another 11 gigawatts of orders and slot reservations in the third quarter, lifting its gas power equipment under contract from 116 to 122 gigawatts[3].
Steam turbines sit outside that bottleneck. A boiler turns the heat from burning fuel into steam, a steam turbine turns the steam into electricity, and the gas turbine can be added later once it arrives. Babcock & Wilcox calls this reversed sequence "enhanced combined cycle": build the steam side first and add the combustion turbine at a later date[1]. The longer buyers cannot wait for gas turbines, the more likely new plants are to adopt this design.
Both companies quote timelines years shorter than combined cycle
Babcock & Wilcox's customer base for the design widened in the third quarter from data centers to utilities and manufacturers. In the second quarter it pitched the design only to data center customers and reserved 1 gigawatt of steam turbines from Siemens Energy on 12- to 14-month delivery[4]. In the third quarter it said inquiries also come from mid-sized utilities and from manufacturers expanding or building plants, typically for 200 to 400 megawatts, and that its focus is delivering units within 18 to 20 months[1]. Its pipeline exceeds $16 billion, including more than $10 billion of non-data-center power generation opportunities, and several projects worth $200 million to $500 million or more are in final negotiations[1].
Terrestrial Energy gave the same reason from the nuclear side. Its reactor still needs regulatory approval, but the part of the plant that makes steam and electricity can run first on natural gas heat. The company expects this "natural gas bridge" plant to be operational within three to five years, faster than a combined-cycle plant[2]. Preliminary work by engineering firms Hatch and Worley points to power two to three years sooner, and management stressed that the plant uses steam turbines, which come from a broad supplier base and largely avoid the gas turbine bottleneck[2].
Orders return to boiler makers and old coal units come back
The shift puts boiler and steam turbine suppliers back on the shopping list for large power projects. Babcock & Wilcox booked $228 million of new orders in the third quarter, up 112% year over year, and its backlog grew to $2.5 billion[1]. A second route runs through existing coal-fired steam units. The company said utilities are spending more to refurbish coal plants and return units that ran only at peak demand to round-the-clock operation, with demand in North America, India and Southeast Asia, which supports its parts and services business[1].
The limits are clear. Babcock & Wilcox's large orders are not yet signed, management said there is always risk until they are, and the company does not split its pipeline by technology[1]. Steam is also not the only way around the gas turbine queue: Fuel Tech (FTEK) said data centers are moving to smaller turbines adapted from aircraft engines and to reciprocating engine generator sets[5]. The next thing to watch is whether the $200 million to $500 million-plus projects sign as expected between the fourth quarter of 2026 and the first quarter of 2027[1].
Companies exposed to this shift
- Hallador Energy (HNRG): It owns the roughly 1-gigawatt Merom coal-fired steam plant in Indiana. When new gas plants are slow to arrive, existing steam capacity becomes scarcer, and its contracted capacity price rises from $262 per megawatt-day in 2027 to $478 in 2029[6]. Whether such prices hold depends on how quickly new generation closes the gap.
- Alliance Resource Partners (ARLP): It supplies thermal coal to US coal-fired plants. Management, citing outside data, said GE Vernova is sold out of new turbine deliveries until 2031 and that this will extend the runway for the existing coal fleet[7]. How much more coal those units burn once they return to round-the-clock operation remains to be seen.
Sources
[1] Drillr · Babcock & Wilcox (BW) · 2026-11-09 · Earnings call
[2] Drillr · Terrestrial Energy (IMSR) · 2026-11-10 · Earnings call
The non-nuclear steam turbines, not gas, steam turbines, that the IMSR plant utilizes sit in a far broader manufacturing base where they are largely avoiding such supply constraints and cost escalations.
[3] Drillr · GE Vernova (GEV) · 2026-10-28 · Earnings call
[4] Drillr · Babcock & Wilcox (BW) · 2026-08-10 · Earnings call
[5] Drillr · Fuel Tech (FTEK) · 2026-08-05 · Earnings call
[6] Drillr · Hallador Energy (HNRG) · 2026-11-09 · Earnings call
[7] Drillr · Alliance Resource Partners (ARLP) · 2026-10-26 · Earnings call
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