Benchmarks
U.S. Glut, Global Opportunities
Where will the next development opportunities occur?
February 2004
By Steve Piper and Wendy Mitts
With the current surplus of generating capacity across most power markets in the United States, what are the more attractive regions for power generation development around the world? Potential near-term opportunities exist in Latin America and the countries of the former Soviet Union based on critical infrastructure needs, but Asia, driven by China's explosive growth, is expected to be the largest source of turbine orders over the next decade. Forecast capacity additions-as shown in Platts Research & Consulting's WorldCap 2003: The Strategic Guide to Global Power Markets, a 10-year forecast of supply and demand balances in 26 power markets around the globe-are based on megawatts currently under construction and what is deemed "opportunity" development-the need for capacity over and above what is currently under construction to meet forecast levels of peak demand and reserves.
Near-term development opportunities (through 2008) exist in the former Soviet Union and Eastern Europe, mostly due to the age and obsolescence of equipment as opposed to a significant increase in demand. North America, on the other hand, will continue to constitute a large portion of the new capacity additions forecast in 2008 because of its market size and relatively high demand forecast. Latin America needs generating capacity in the near term but is fairly limited in the long term. Western Europe and Africa, which as a region includes Turkey and the Middle East, are projected to be slow-growth markets over the entire forecast period. Total growth in opportunity megawatts is estimated to be approximately 1.5 percent per year through 2008.
Through 2013, development opportunities in Asia surpass those in other regions because of expected higher demand growth over the long term relative to other regions. Development opportunities in the former Soviet Union, Eastern Europe, and North America remain strong through the end of the forecast period. Total growth in opportunity megawatts is estimated at 1.7 percent per year through 2013.
Forecast Growth of Turbine Technologies
Combined-cycle gas turbines (CCGTs), at 56 percent of the opportunity megawatts, are expected to dominate technology development in the next decade. Reasons for CCGT dominance include low capital cost and high efficiency. Large gas turbines (150 MW and greater) are projected to be the fastest-growing technology, at 5.8 percent growth per year. Latin America and the former Soviet Union are two of the most prominent markets expecting growth in this particular sector. Small gas turbines are projected to grow at 1.8 percent per year. This segment is the most universal in that its growth is projected virtually around the globe: China, the former Soviet Union, Brazil, and Western Europe.
Coal is the next largest sector of development at 17 percent of opportunity megawatts, on the strength of growth in the former Soviet Union in the near term and Asia in the long term. Nuclear and other steam turbine growth add another 1 percent to that. All steam turbines-coal, nuclear, and other-are projected to grow at approximately 2.3 percent annually throughout the forecast period. China, India, and Turkey are the three power markets that make up the majority of this growth.
Hydroelectric power development, which is expected to make up approximately 8 percent of the opportunity megawatts through the next decade, is forecast to grow at nearly 2 percent per year, based heavily on expected growth in China and South Asia.
Naturally, many uncertainties cloud the forecast of regional and technological growth. China appears poised to accelerate orders for steam coal plants over the next two years. Issues of financing and market transparency may stifle needed development in Latin America and the former Soviet Union. Finally, today's high natural gas prices, if sustained, may undercut the CCGT as the most economical power generation choice.
Steve Piper is a principal and Wendy Mitts is a senior associate in the Platts Research & Consulting power group. Contact Piper at Steve_Piper@platts.com and Mitts at Wendy_Mitts@platts.com.
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