Global investments planned in power generation total US$4.7 trn
Asia-Pacific has the largest power generation construction pipeline out of the major regions, with $1.67 trillion worth of investments, according to a new report.
Timetric’s Construction Intelligence Center (CIC) new report, Power Generation Construction Projects: Global, concludes that the global power generation construction pipeline is worth US$4.7 trillion.
Asia-Pacific leads with US$1.67 trillion worth of investments, followed by the Middle East and Africa withUS$1.16 trillion each. Europe and the Americas have similar values for power generation projects with US$921bn and US$913bn respectively.
Based on the projects tracked by the CIC, coal power generating projects have the highest combined generating capacity, at 652.9GW, while the nuclear sector has the highest value project pipeline, with projects worth a total of US$1.26 trillion. India has the highest value of projects from the countries tracked worldwide, with projects valued at US$454.5bn, followed by China with US$393.5bn.
Construction Projects Pipeline, Generating Capacity by Region and Type (GW)
The population growth in Asia-Pacific together with its impressive economic performance in the last decade has driven the need for increased capacity in power generation.
Although the pace of China’s economic expansion has slowed in recent years, it is still the pre-eminent engine for growth in the region and for much of the global economy. Vibrant economies such as India, Vietnam and Myanmar have already eclipsed China in terms of GDP growth — this is expected to continue until the end of the forecast period in 2021. The growing population has increased the demand for energy for domestic use.
The booming industrial activity in the region has also increased demand for energy. Consumption of energy in Asia-Pacific is expected to rise by 30% from 5498.0 MTOE (million tonnes of oil equivalent) to 7193.0 MTOE in the period between 2015 and 2025. Total energy production in Asia-Pacific will grow by 15% in the 2015-2025 period, according to projections from BP, and coal will be the main fuel source. China is investing in renewable sources to be less dependent on coal and other fossil fuels in the future. According to the International Energy Agency (IEA), consumption of coal in China peaked in 2013 and it is now in decline as other energy sources are being used.
The need to reduce air pollution in its major cities, which has received widespread publicity in recent years, has contributed to the country’s investment in renewable energy. China is the world’s major investor in renewable energy with an investment of US$103bn in 2015.
China’s Five Year Plan produced in November 2016 sets out the strategy to reduce the use of coal in energy production from 64% in 2015 to 58% in 2020. The decline in industrial production due to reduced worldwide demand will contribute to meet this target. China’s investment in power generation is US$395bn, with the main investment being in nuclear power and coal.
The new report also shows that India is the main investor in power generation projects with a value of $454.5bn — the highest value of projects is in the coal sector. India is looking at its short term energy needs to drive its economy and coal and other fossil fuels provide this. Nuclear power projects have a pipeline of investment of $87bn, followed by hydroelectric with $65bn. The power generation capacity provided by the investment in coal plants is estimated to be 219GW, compared to the 37GW for nuclear power.
Middle East and Africa
The Middle East has little investment in coal power, as gas is the main fuel provider. Saudi Arabia is the leading investor in gas power generation projects in the region.
Oil prices are expected to recover in 2017 to average US$55/bbl. This is expected to help the GCC countries generate revenue to fund large infrastructure projects, including power generation projects. The highest value project in the sector is the $209bn King Abdullah City in Saudi Arabia, which will include the construction of 16 nuclear reactors.
The developing countries of sub-Saharan Africa are experiencing a need for reliable sources of energy due to its population growth. Nigeria with a population of over 190M and home to Africa’s most populous city, Lagos, requires massive investment in power infrastructure.
Frequent electricity outages are a feature of Nigeria’s power supply and rural communities often do not have access to the power grid. Nigeria has embraced solar energy as part of the solution to its power supply problem and leads investment in the region with solar power generation projects valued at US$40.0bn. Nigeria is followed by South Africa with projects worth US$31.5bn.
In Europe the move away from fossil fuel power generation is well advanced, as renewables make a more significant contribution to the power mix in the region.
Total energy production in Europe will edge down to 1,024 MTOE in 2025, from the 1,041 MTOE in 2015, according to data from BP. Natural gas will continue to account for the largest share of power generating capacity, at around 38% in 2025, while that of renewables will rise to around 9% by 2025 from the 5.5% in 2015.
Power generation projects in Europe, according to the CIC report, have a total value of US$920.8bn. The UK has the highest value of projects pipeline with US$311.5bn, followed by Russia with US$106.0bn and Turkey with US$94.4bn.
Nuclear power projects account for the highest value with $366.1bn, followed by wind generation projects with $302.9bn.
The UK has the highest value project pipeline in Europe, having a number of large-scale projects, such as the US$35bn East Anglia Offshore Windfarm Development and the US$23.8bn Hinkley Point C Nuclear Power Station.
The Americas, comprising the developed North America and the developing Central and South America, account for projects valued at US$912.9bn. The region is led by the US with a total project pipeline valued at US$381.1bn.
Data from BP shows that the total energy production is expected to rise in the Americas from 3607 MTOE to 4101 MTOE in 2025, a rise of 13.7%. The US is expected to account for 77% of this energy production by 2025.
The US and Canada are major oil producers in the global market. However the projects pipeline for both countries shows that wind power and hydroelectric are the leading project investment sectors.
Brazil, with its developing economy, has the second highest value of power generation projects in the region with US$120.5bn and is the leader in hydroelectric investment. Chile leads investment in the solar power generation sector, but over capacity and a disjointed power grid is keeping investment returns low. The highest value project in the Americas is the US$22.0bn Mariah Wind Farm in Texas, US.
About this report
This information is taken from the Timetric report: ‘Project Insight - Power Generation Construction Projects: Global'.
CIC clients can access the report here
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