Monday, April 14, 2008

Surge in the Transmission and Distribution Industry

Recent times have revealed a surge in the global transmission and distribution market and I predict that the market will remain strong for up to five years. The electricity utilities report a significant expansion of their capital expenditure budgets, some doubling 2005/6 levels for a five year period. The transmission and distribution equipment suppliers have reported considerable growth in the last two years.

Two exceptional factors account for this optimistic outlook for the transmission and distribution industry. In the industrialised countries with mature electrical systems, liberalisation of markets has put pressure on margins and the competitive environment has constrained costs. The electricity utilities have been unwilling to invest in the regulated segments of the electricity industry and have channelled money to the more speculative unregulated segments where profits are to be made. At the same time, regulators have exerted pressure to keep costs down in the interests of the consumer. Operators have been able to keep systems running with sophisticated asset management techniques, avoiding replacement costs. However, a series of embarrassing outages through out the industrialised world in recent years has served a warning that aging systems, many of them 40 years old, cannot soldier on forever. Most of the industrialised countries have announced large increases in capital expenditure budgets.


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