Latin America fuels demand for large hydro turbines

Paul Boughton

The large hydro turbine (LHT) market in Latin America is all set to soar on the back of economic growth in developing countries and use of the hitherto untapped resources of tropical and subtropical rivers. The biggest push for the LHT market will come from Brazil's concerted energy planning and the ongoing construction of large hydropower projects aimed at sustaining the economic and demographic growth.

New analysis from Frost & Sullivan finds that the market earned revenues of $112.6 million in 2012 and estimates this to reach $341.5 million in 2017, at a compound annual growth rate of 16.9 percent.

"Infrastructure improvements in the form of large hydro power plants (HPPs) are vital to not only meet the electricity demand of a growing economy, but also to generate jobs and usher in development in remote areas," said Frost & Sullivan Energy & Environmental Research Analyst Gustavo Stainoh. "Government policies that promote hydropower generation have given a fillip to the hydropower market and consequently, the LHT market."

Further, the competitive structure and flexibility of manufacturers in Latin America enable them to form partnerships and keep prices competitive in the electromechanical components segment, especially for turbines and generators.

Despite the encouragement from the government, the hydropower market's long-term prospects are uncertain due to the volatility of financing for projects in the early planning phase. Financing difficulties also restrain renewable energy developments in Latin America.

Once the energy market obtains steady funding, governments might seek greater representation from the wind power segment instead of restricting itself to hydropower. Naturally, some hydro turbine manufacturers are already making forays into the wind turbine market.

Large hydro power projects attract higher investments, multilateral loans as well as political focus. Brazil is expected to control 53 percent of the large hydro turbine market growth until 2017, with 14.7 gigawatts (GW) of commissioned installed capacity. It is expected to gain an additional 14.3 GW in the long term and bolster the turbine market.

Once HPP construction stabilizes in Brazil, LHT procurement will move to the Andean Region and Central America, followed by Mexico and the Southern Cone countries.

"To succeed, LHT original equipment manufacturers have to possess the ability to self-finance, a solid and local structure of suppliers, as well as flexible production by means of differentiated capabilities in the region," noted Stainoh. "As hydropower projects are scarce, it is crucial for turbine suppliers to offer a wide portfolio of products and services, namely electromechanical and civil engineering contracts."

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