The global power generation EPC market is expected to grow at a CAGR 6.9% during the forecast period (2020-2027).
The global power generation EPC market value is likely to reach US$ 6,48,408.99 million in 2027.
The term EPC stands for ‘Engineer, Procure and Construct.’ The key to this concept is that one organization, namely the contractor, undertakes virtually all aspects of the project and provides a single point of communication and responsibility for the owner. The use of EPC contracts in the power generation industry has been continuously evolving over the last few years as a result of tremendous changes happening in the business and technology areas of this industry. Almost all power generation projects use EPC contracts. All projects have to be time bound to be profitable; however, the market still suffers from inherent delays owing to various reasons, especially for the larger, complex projects that are delayed because of land acquisition complications or environmental clearance issues. EPC contracts in renewable energy production sources are escalating because they are environmentally friendly and do not deplete natural resources. Population expansion and urbanization have increased the need for electricity. Additionally, increased industrial development around the world has stimulated demand for electricity.
In a bid to reduce greenhouse gas (GHGs) emissions and to encourage the production of electricity from cleaner energy sources, several counties have been actively promoting renewables and gas-based power generation. Moreover, the global installed renewable capacity increased from 1,226 GW in 2010 to double to almost 2,536 GW by 2019. This, in turn, is expected to drive the global power generation EPC market.
Asia-Pacific power generation EPC market is expected to grow with a highest CAGR of 8.4% during the forecast period, owing to governmental support, numerous incentives and national targets.
Market Dynamics
Drivers
- Increasing investment in power generation
- Increasing power related projects especially in Asia-Pacific countries such as China, India and Vietnam
Restraints
- Lack of productive output
Increasing investment in power generation
Countries are becoming more concerned about energy supply and are investing massive capital in the power generation sector. With the increase in economic growth and population, the demand for more power output continues to increase and as a result, the power generation sector is attracting huge investments globally. The high stakes in the power sector will boost the market for EPC contracts in the power generation industry. The developing power generation alongside energy utilization interest drives the power generation EPC market's interest. The power generation benefits, including increasing government investment in renewables energy, are also expected to support the market. The government of India estimates that an investment of around Rs 9,56,214 crore will go into setting up the targeted 1,65,220 Mw generation capacity between 2022 and 2027. This consists of 1,00,000 MW of renewable energy projects.
In 2019, India’s state-owned National Thermal Power Corporation (NTPC) commissioned unit-1 of Khargone Super Thermal Power Station in Madhya Pradesh. Khargone thermal power station is India's first coal-fired ultra-supercritical plant that operates at an efficiency of 41.5% and an installed capacity of 660 megawatts (MW). The principal contractors of the projects include Larsen & Toubro Limited (L&T) and Sterlite Power Grid Ventures Limited. As of July 2020, the total power generation installed capacity in India was 371.97 Gigawatts (GW), out of which 231.45 GW is conventional thermal power capacity, which is about 62.2% of the total capacity in the country’s power generation mix.
According to IEA, between 2015 and 2020, investment was highest in solar PV and wind energy on a cost-adjusted basis; hence numerous new projects are in the pipeline, which will be commissioned during the forecast period.
For instance, ConnectGen anticipates commencing construction of its Pecan Prairie Solar Project in 2021 and beginning operations in 2022. The project expects to install approximately 500MW of solar energy, enough to power over 50,000 Texan homes.
Geographical Analysis
Asia-Pacific region evolved as the most lucrative market for EPC solutions in power industry globally, led by the growth in power generation in countries such as China, India and Japan.
Asia-Pacific power generation EPC market valued US$ YY million in 2019 and is estimated to grow at a CAGR of 8.4% over the forecast period to reach US$ YY million by 2027. Asia-Pacific market is expected to grow with a high CAGR rate in the forecast period. Economies in the Asia-Pacific are moving to power generation EPC to meet the rising demand from effective power generation infrastructure from generating firms and governments alike, meeting the economical, environmental and quality standards.
Many companies are reluctant to enter into the EPC contracts for power generation because of the heavy losses suffered by the contractors in the past due to individual jurisdictions. Thermal power generation also requires a high amount of water, which is also limiting the use of it. The EPC contracts for renewable power generation sources are increasing because they are eco-friendly and do not deplete the natural resources.
In December 2019, Doosan Heavy Industries & Construction (DHIC) and Korea Western Power Co signed an agreement in which Doosan will supply gas turbines to Korea Western Power Co to construct a new power plant which will be located at Gimpo city, Gyeonggi, China. The construction commenced in 2020 and is expected to be completed by the end of 2022.
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