The power generation in Southeast Asia is expected to grow at a CAGR of more than 5% in the forecast period of 2020 - 2025, driving the market of power EPC considerably. Factors such as increasing population and power consumption are resulting in the growth of the power market. With growing power demand, several new projects are under construction and planning stages, which, in turn, is expected to drive the market. In addition to this, the increasing deployment of renewable energy sources in large-scale is likely to further drive the EPC market in the region. However, due to the ongoing COVID-19 pandemic, delay in multiple power projects is expected to hinder the growth of the market.
- With upcoming projects in different Southeast Asian countries and along with supportive policies, renewable energy is expected to grow at a significant rate.
- The energy demand in the Southeast Asian region is expected to grow by two-thirds between 2019 and 2040, thereby leading to massive investment in new energy generation and transmission, creating ample market opportunities for the EPC companies in the near future.
- Indonesia, the largest economy in Southeast Asia has witnessed the highest power generation in 2019. With planned projects during the forecast period, the nation is expected to dominate the power generation EPC market.
Key Market Trends
Renewable Energy to Witness Significant Growth
- The Association of Southeast Asian Nations (ASEAN) has set an ambitious target of securing 23% of its primary energy from renewable sources by 2025 as energy demand in the region is expected to grow by 50%. This, in turn, is expected to provide a significant boost to the Southeast Asia region’s renewable EPC market.
- The share of renewable energy in power generation is increasing in Thailand significantly with the upcoming of multiple projects. With 7406 MW in 2014 and 11860 MW in 2019, the installed capacity of renewable projects is continuously growing.
- With Renewable Energy Map 2036, Thailand is aiming to install 17 GW of solar power. With such ambitious goals, vast opportunities for EPC companies can be witnessed in the forecast period.
- Further, the recent power generation projects in the region are expected to boost the power generation EPC market. For instance, in March 2020, Trung Nam Group started building a 450 MW solar farm in central Vietnam that is expected to be one of the largest of its kind in Southeast Asia. The USD 593.22 million facilities in Ninh Thuan province is scheduled to start power generation in the fourth quarter of 2020.
- From 2020, Electricity Generating Authority of Thailand (EGAT) is planning to build 2.7 GW of floating solar power capacity on the dam reservoirs by 2037. The goal will be generating ample opportunities to drive the EPC market considerably.
- However, on the flip side, there is a lack of experience and expertise in some Southeast Asia countries, particularly in Malaysia, Indonesia, and Vietnam. Moreover, the lack of a regulatory framework can be another major hurdle when it comes to the introduction and development of renewable energy projects.
Indonesia to Dominate the Market
- Indonesia is one of the largest economies in Southeast Asia. The electricity sector of the country is highly reliant upon fossil fuels for electricity production, in particular on lignite and bituminous coal. Although not the same as coal, natural gas is also expected to remain an integral part of the country’s energy mix.
- On the other hand, the hydropower sector has seen substantial growth over the past years, with planned projects worth more than USD 2.5 billion by 2019. The current hydropower projects are in Kalimantan, where the Kayan Hydropower station is likely to have a capacity of 9,000 MW.
- Moreover, in 2018, Mitsubishi Hitachi Power Systems, Ltd. (MHPS) completed unit 1 construction of a natural-gas-fired power generation power plant that was built in Indonesia. Under the Jawa-2 Project, PLN planned to construct an 880 megawatts (MW) plant comprising two gas turbines combined cycle power generation systems. Thus, such projects are expected to boost the power generation EPC market in the country.
- In a bid to further encourage development in the other type of energy generation, The Indonesian Ministry of Finance, in September 2019, introduced a geothermal drilling program that aids in risk mitigation of projects, with the eventual goal of attracting more private investment. A deal has also been struck between the World Bank and Indonesia for a USD 150 million loan to support the growth of the country’s geothermal energy sector.
- In 2018, PLN planned to invest USD 6.26 billion in 2019 in the Indonesian power sector, with the most investment for the 35 GW project. In 2019, to secure the raw materials for its power plants, it planned to acquire a coal mine, as it is targeting to obtain 30% to 40% of its source coal supply from itself in the coming future.
- With increasing power demand, power generation is also growing. Indonesia generated 279 TWh of electricity. To meet the growing demand, new projects are expected during the forecast period and drive a considerable market.
The Southeast Asia power generation EPC power market is moderately fragmented. Some of the major companies include Mitsubishi Hitachi Power Systems Ltd, Hyundai Engineering and Construction Co, Ltd, Sumitomo Corporation, Poyry PLC, and Indika Energy.
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