Electricity blackouts made news in Europe and North America not long ago. Behind the headlines, too much of the world lives with blackouts everyday. About one in four people still have no electricity. How much will it cost to bring the needed power to more people?
Energy analysts are looking at the pace and price of progress - at a time when electricity demand is rising ever higher.
Total investment required for the energy-supply infrastructure worldwide over the period 2001-2030 is expected to amount to $16 trillion, or $550 billion a year. This investment is needed to replace existing and future supply facilities that will be exhausted or become obsolete during the projection period, as well as to expand supply capacity to meet projected primary energy demand growth of 1.7% per year.
Capital needs will grow steadily through the projection period. The average annual rate of investment is projected to rise from around $450 billion in the current decade to $630 billion in 2021-2030. This compares with estimated investment of $410 billion in 2000. Actual capital flows will fluctuate around these levels according to project and business cycles. The power sector will account for the bulk of energy-investment needs, and oil and gas in almost equal measure for most of the rest (see Figure 1).
These are some of the key findings of the World Energy Investment Outlook of the International Energy Agency (IEA), based in Paris, France. This article focuses on the power sector. The award-winning report, released in late 2003, assesses, fuel by fuel and region by region, the prospects for and possible barriers to investment in the global energy sector to 2030. The core analysis of investment needs is based on the reference scenario projections of supply and demand contained in the IEA's World Energy Outlook 2002.
Although the total sum of investment needs is large in absolute terms, it is modest relative to the size of the world economy, amounting to only about 1% of global GDP on average over the next thirty years.1 The proportion is expected to fall slightly over the projection period, from 1.1% in the current decade to 0.9% in the decade 2021-2030. But the extent of the challenge differs among regions, ranging from only half a percent in countries of the Organisation for Economic Cooperation and Development (OECD) to 5% in Russia.
World electricity demand is projected to double between 2000 and 2030, growing at an annual rate of 2.4% (see Table 1). This is faster than any other final energy source. Electricity's share of total final energy consumption rises from 18% in 2000 to 22% in 2030. Electricity demand growth is strongest in developing countries, where demand will climb by over 4% per year over the projection period, more than tripling by 2030. Consequently, the developing countries' share of global electricity demand jumps from 27% in 2000 to 43% in 2030.
The next three decades will see a pronounced shift in the generation-fuel mix in favour of gas and away from coal - the most widely used fuel today worldwide. The role of nuclear power is also expected to decline markedly, because few reactors will be built and some existing ones will be retired. Nuclear production is projected to peak at the end of this decade and then decline gradually. Its share of global power generation will, therefore, drop sharply from around