Emerging nations will need to invest twice as much in electricity than developed countries over the next two decades in order to power fast-growing economies and meet emission-reduction targets, according to consultants Bain .
Brazil, China and India are among countries that will need about $13 trillion through 2040 to meet the demand for fuel supply, generation and networks, Bain said in a report for the World Economic Forum in Davos, Switzerland.
That compares with about $7 trillion for countries in the Organisation for Economic Cooperation and Development. Emerging nations will probably seek about 70 per cent of the funding from private investors, up from about 30 percent now, as wind and solar power typically requires higher up-front investment than conventional generation, according to Bain.
Non-OECD countries may struggle to convince global investors to stump up money amid competition from more predictable, transparent and mature markets, the Boston-based management consulting firm said.
“There’s a huge wave of capital that’s required,” Julian Critchlow, a partner at Bain, said . “Effectively, if you put in a windfarm or a solar plant, you’re buying the electricity for 20 years up front, as opposed to when you put in a more conventional plant, when you are paying 30 per cent up front” and spending the rest on fuel over the life of the equipment.
As an example of how countries can attract investment, Bain said India could install more free-market pricing consistent across its various states and simplify its land-acquisition rules.
- Bloomberg
