Major Investments Needed in Transmission and Distribution Infrastructure Globally

Transmission and distribution infrastructure investments are expected to reach US$198 billion by 2024
Published: Tue 19 Aug 2014

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Over the next 10 years, countries around the world will have to invest between US$140.2 billion to US$170.5 billion per year on traditional transmission and distribution infrastructure in order to keep up with growing electricity needs.

An additional US$8 billion to US$27.3 billion will be invested annually in smart grid infrastructure to improve the efficiency and reliability of transmission and distribution grids, according to the latest research carried out by Northeast Group, LLC.

"The significant need for new power generation capacity makes the headlines on a daily basis. But what is seldom discussed is the equally important need for new transmission and distribution infrastructure, which needs an enormous US$1.9 trillion in cumulative investment by 2024. This includes substations, power lines and associated equipment and new technology. Transmission and distribution investment typically represents about 40% of total power infrastructure spending," said Ben Gardner, president of Northeast Group.

Cumulatively, the world will invest US$230.2 billion in distribution automation between 2014 and 2024. This will include spending on substation automation; fault detection, isolation and restoration (FDIR); volt/VAR optimization (VVO); and additional grid monitoring and control technologies in the distribution grid.

Increasing electrification rates

Regions around the world will vary in their rates of investment. However, the research shows that emerging markets will represent the largest growth in transmission and distribution spending. Africa and Southeast Asia will be the fastest growing regions as they develop new infrastructure to increase their electrification rates. [Southeast Asia’s Grid Expansion Plans Underway.]

Africa is suffering from a power crisis. Despite abundant low-carbon, low-cost energy resources, Africans face chronic energy shortages. The combined power generation capacity of Sub-Saharan Africa’s (SSA) 49 countries, with a total population of around 800 million people, is 80 GW—no more than that of the Republic of Korea, whose population numbers roughly 50 million people and the total area of which is slightly smaller than that of Benin. Africa’s electricity access rate is amongst the lowest in the world. Almost 70% of the continent’s population (nearly 600 million people) and 10 million small- and medium-sized enterprises have no access to electricity. Sub Saharan Africa accounts for nearly 45% of people lacking electricity across the globe. Lack of access to modern energy services that are efficient and sustainable is an obstacle to economic growth, poverty reduction, and achieving the Millennium Development Goals (MDGs).The power sector’s weakness constrains economic growth and development in the region.[Engerati-Securing Sub-Saharan Africa’s Energy Future An Agenda for Transformational Impact.]

Engerati member Philipp Gruner, President and CEO of KG Technologies, points out that Africa should start building their infrastructure today for tomorrow’s economic boom. Says Gruner, “Demand side management and prepaid meter technology is growing but the infrastructure is not yet in place. This largely untapped African market is a definite opportunity for growth. Investors should endeavour to gain more of the market.” [Engerati-Africa Must Prepare for Future Growth Opportunities.]

India is expected to invest the largest amount in traditional transmission and distribution development investment. This is mainly in response to the country’s non-technical losses which in certain areas average 25% - 55%. [Engerati-Power Losses-A Thing of the Past?]

The country is expected to outpace China by 2024 with its transmission and distribution developments. [Engerati-The achievements and lessons learnt by India compared with other developing markets.]

Smart grid investments

Investment in grid automation— or smart grid — is accounting for a growing share of the overall market. In 2014, distribution automation investment is projected to account for 5.4% of total transmission and distribution spending. This is expected to grow to nearly 14% by 2024, with a compound annual growth rate exceeding 13%.

The US and Europe will see a slower growth in traditional transmission and distribution infrastructure spending of around 1%, but these regions will spend the most on smart grid investments and development.

Europe will spend US$11.5 billion per year on smart grid and distribution automation, followed by the US at US$7.5 billion [Engerati-Greenhouse Gas Emissions May Boost Smart Grid Investments in the US] and East Asia at US$6.1 billion.