Global power industry outlook survey 2011–2012


20 December 2011


A shift in global opinion towards power and the rising price of oil have increased the demand for sustainable energy, leading to growth of optimism in the industry. Using survey information compiled by ICD Research, energy-construction-insight.com uncovers the outlook for the global power industry in 2011-2012.


A shift in global opinion towards power and the rising price of oil have increased the demand for sustainable energy, leading to a growth of optimism in the industry.

According to a survey conducted by ICD Research, companies are looking to invest in increasing efficiency, expanding into current and new markets and entering into mergers and acquisitions (M&A) to reduce costs and increase production.

While investment into the industry is expected to increase, particularly in emerging markets such as India and China, companies will face pressure to reduce prices to attract custom from buyers while adhering to increasingly strict government regulations.

Increases in revenue, expansion and consolidation predicted for 2011

"According to a survey conducted by ICD Research, companies are looking to invest in increasing efficiency."

The majority of respondents from the power industry are more optimistic about revenue growth for their company over the next 12 months than during 2010.

This is largely due to significant investment in clean energy as a result of a sharp rise in international oil prices, population growth and concern over carbon emissions.

The improvement of operational efficiency and expansion in current markets and abroad will be key aims for power companies in 2011.

Companies are therefore investing in research and development to minimise waste and re-use spent fuel in order to contain costs and increase efficiency. They are expanding their product lines and facilities at present locations in order to increase production and drive sales.

More than half of buyer respondents expect increased levels of consolidation in the power industry over the next 12 months. High growth in emerging markets and overcapacity in developed regions, along with the need to develop new, efficient technology solutions, is expected to drive M&A activity.

Key challenges will affect even the emerging markets

India, China, the Middle East, Brazil and Eastern Europe were identified as key regions for growth by power industry professionals.

"The majority of respondents from the power industry are more optimistic about revenue growth for their company."

The expansion of business activities in emerging markets, changing consumer lifestyles and rising consumer disposable income will stimulate industrial activity and the demand for electronic goods, which will increase power consumption.

India is expected to add 82 gigawatts of capacity to its power sector over the next five years, with total investment reaching US$200bn, including the US$120 bn earmarked for power generation alone.

However, across all markets, uncertainty, responding to pricing pressure and the retention and recruitment of staff are the most pressing immediate business concerns for the global power industry.

Limited fossil fuel resources, high exploration costs, the high cost of building renewable energy plants, stringent market regulations and rising competition in the market have all contributed to market uncertainty.

Annual procurement budget increase in 2011

The average size of the global, annual procurement budget for power industry buyer respondents is just less than US$170 million for 2011. Furthermore, this is expected to rise by more than 7% over the next year.

Companies are seeking to invest in clean power due to growing environmental concerns and stringent government regulations. The construction of power plants, renewable generation systems and safety systems and equipment are expected to register the strongest growth in investment.

Conversely, industrial gearboxes, materials handling, storage, lifting equipment, expansion joints and fasteners are expected to achieve the least growth.

More tha two-thirds of buyers expect an increase in supplier prices in 2011. To counteract rising costs due to soaring fuel oil prices and other raw material prices, and to stay competitive in the market, many power industry suppliers have introduced innovative solutions such as smart grids, which optimise power flows, reduce waste and maximize the use of low-cost generation resources.

Suppliers must offer quality and reliability at a low price for selection by buyers

"Investment into the industry is expected to increase, particularly in emerging markets such as India and China."

Quality, price and the supplier's record for reliability are considered to be the most important factors for supplier selection by buyers in the power industry, while the supplier's proximity of operations, corporate social responsibility (CSR) reputation and environmental record are considered least important.

Buyer companies are also more willing to form partnerships with suppliers to reduce operating costs and increase efficiency.

The top three future procurement priorities for buyers are internal operating cost reductions, the implementation of technology and the location of lower cost sources of supply.

However, less than half of buyer respondents said they intended to implement deployment of e-procurement initiatives, while less than 10% were in the actual process of evaluation or pilot use of the process.


iCD Research

To purchase the full version of, 'Global Power Industry Outlook Survey 2011-2012: Industry Dynamics, Market Trends and Opportunities, Buyer Spend and Procurement Strategies', please click here.

ICD Research is a full-service market research consultancy providing both online and offline research capabilities. Our areas of expertise include online research, qualitative and quantitative research, custom approaches and actionable insights.

Image courtesy of Stefan Kühn.