IPPs to gain share in coming decades

Independent power producers (IPP) are expected to account for 16 percent of global investment in power generation in the next 25 years, according to “The Future of the Electric Power Industry Around the World,” a new study from DRI/McGraw-Hill. According to the study, Brazil will be the number-one country for investment in the coming years, followed by the US, India and Spain, with Portugal rounding out the top five (see table).

Both structural and institutional changes are coming, with global electricity demand growth projected at 3.1 percent per annum on average. There is a sharp difference in projected growth in developing economies–such as Asia or Latin America, where demand should average 5-percent growth annually–and that of mature economies–such as Western Europe or North America, where demand growth will average only 1.5 percent per year.

The study estimates that almost 125 GW per year on average will need to be constructed through 2020 to replace aging plants and to cope with demand growth. Total world installed capacity is expected to top 5,400 GW in 2020, up from 2,900 GW in 1995. Asia will be the largest in terms of capacity by 2020, with 50 percent of the world`s capacity additions.

Most of the new capacity will be either gas-fired or coal-fired, with natural gas preferred in liberalized market (see figure). Moderation in coal prices should ensure coal`s spot as an important competitor, with coal-fired capacity expected to remain the leading source of power in 2020.

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