Green generation stimulates control systems market

Edited by the Engineeringtalk editorial team Sep 21, 2006

The EU's commitment to reduce carbon emissions across member states is likely to support increased investment in more environmentally friendly power generation systems.

The European Union's (EU) commitment to reduce carbon emissions across EU member states is likely to support increased investment in more environmentally friendly power generation systems.

Accordingly, the implementation of the emissions trading scheme in 2005, which has provided power plants and factories with allowances related to permissible carbon dioxide levels, is gaining importance and this is projected to be an significant driver for automation and control solutions (ACS) in the European power generation sector over the next few years.

Frost and Sullivan finds that revenues from automation and control solutions in the European power generation sector, which reached $1272.4 million in 2005, are estimated at $1595.7 million by 2012.

"The emissions trading scheme, together with reduced subsidies for less environmentally friendly power generation, are expected to boost demand and generate new investment opportunities for automation and control solutions", remarks Frost and Sullivan Industry Analyst Jonas Westlund.

For example, investment in hydroelectric plants and wind farms is expected to generate demand for control and monitoring systems such as supervisory control and data acquisition systems (Scada) whereas increased demand of gas-fired plants and combined cycle gas turbines should generate new investment opportunities for distributed control system (DCS) systems.

Other drivers for growth in ACS include the deregulation of the European energy markets.

Although this driver is expected to have less impact over the forecast period it is still expected to have a relatively high impact in Italy, Spain, France and also amongst EU accession countries.

In terms of geographical growth markets, the EU accession countries are expected to see increased investment levels in new power generation facilities.

Existing power infrastructure is outdated and further investment is needed to comply with targets on carbon emission as well as achieve greater efficiency in power supply.

Although the main source of energy is expected to remain coal over the forecast period, a gradual shift towards more environmentally friendly power generation investment is nevertheless expected.

An important trend in the European power generation sector will be the increasing importance of total system suppliers.

As the power sector is operated by fewer but more influential power utilities, pressure will increase on ACS manufacturers to meet the evolving supply needs of the power utilities.

Through forward integration, many power utilities now control the complete product value chain from downstream generation to upstream distribution.

Consolidation in emerging markets such as Eastern Europe has provided the major power utilities with opportunities to tap into organic growth.

"The trend towards provision of complete solutions will also mean that smaller suppliers will lose out on new greenfield projects as they do not necessary have the expertise in providing complete system solutions as well as the ability to provide services over a wider geographical region", remarks Westlund.

"The net effect will increasingly include major sector suppliers who are not only able to provide ACS but complete plant solutions".