To meet the expected growth in electricity demand through 2030, cumulative investment of $10 trillion in power-sector infrastructure will be needed - equivalent to 60% of total energy-sector investment. If the investments in the oil, gas and coal industries that are needed to supply fuel to power stations are included, this share reaches more than 70% and total power-sector investment over $11 trillion. That is nearly three times higher in real terms than during the past thirty years. As demand for electricity increases, investment needs will gradually rise, from $2.6 trillion in the current decade to $3.9 trillion in 2021-2030 (see Figure 2).
The power sector in developing countries will require more than half of the global investment, exceeding $5 trillion. Two-thirds must flow into developing Asia. China's investment needs will be the largest in the world, approaching $2 trillion (see Table 2). India will need investment close to $700 billion, while East Asia and Latin America each will need investments approaching $800 billion. The electricity industry in OECD countries will need investment of around $4 trillion, while that in the transition economies will need $700 billion of investment, more than half of it in Russia.
Generation is the largest single component of total power infrastructure investment. Investment in new plants over the next thirty years will be more than $4 trillion, accounting for 41% of the total. Most of this investment will go into the development of gas and coal-fired power plants.
Refurbishment of existing power plants over the next 30 years will need investment of $439 billion. Investment in transmission and distribution networks together will take 54% of the total. Network extension, as a component of investment, is more important in developing countries, because of population growth and an increase in the rate of electrification.
In OECD countries, where networks are more developed, most network investment will be needed for refurbishment and replacement of existing equipment. In the European Union, as in the rest of the OECD, investment in new power stations to replace those built in the 1970s and 1980s will need to rise in the coming years (see Figure 3). In developing countries, priority is often given to investment in generation, but a growing share of capital will need to go to transmission and distribution in the future.
Power-sector investment now accounts for less than 0.5% of GDP in most OECD countries, and that figure is expected to drop to an average of 0.3% over the next three decades. Investment has declined somewhat since the mid-1990s for a number of reasons, including high reserve margins in some countries, the lower capital costs of new power plants, low demand growth and uncertainty caused by environmental policies and market liberalisation.