The steady increase in population in both Peru and Uruguay, along with the rising urbanization rates (above 95 percent) and rural electrification programs have intensified the demand for electricity in both countries. While Peru's annual growth in electricity demand is 7.57 percent, Uruguay's is 4.35 percent. To meet the higher demand, utilities in both countries are expanding and adding generation capacity, which, in turn, creates a vibrant market for high voltage (HV) transformers.
New analysis from Frost & Sullivan (energy.frost.com), The Peruvian and Uruguayan HV Transformer Market, finds that the market earned revenues of $89.4 million in 2012 and estimates this to reach $152.0 million in 2016.
"By increasing the number of centralized generating plants, the demand for HV transformers rises due to the additional step-up and step-down required in different locations of the grid," said Frost & Sullivan Energy & Environmental Industry Analyst Martín Cataife. "Utility expansion plans also reveal an ongoing need for HV transformers to deal with supplementary nodes, supporting infrastructure, and replacement of the exhausted installed base."
The demand for HV transformers is expected to peak in 2016, as the economic boom in both countries translates to greater demand for electricity and boosts the overall transmission and distribution equipment market. Yet, the local participants are vulnerable to price wars due to stiff competition from low-cost countries such as China, Brazil and Korea.
In Uruguay, the average spot price was $209 in 2012, a huge hike from the average price of $184 in 2011. This is due to the spiraling cost of fossil fuels, the low hydro production caused by extensive droughts, and the political decision to maintain the current tariff structure.
Meanwhile, the low production costs in Peru (average cost of energy reached $25 per MW/h in some cases) create excellent opportunities for domestic utilities to export to the inter-regional markets of Chile, Ecuador and Brazil. Either by exporting to regional markets or producing electricity to satisfy the local demand, Peru will increase its actual capacity over the next four years and consequently create a wider market for HV transformers.
"Peru made a sound decision to sell electricity, a value-added product, instead of gas, a raw material. However, the success of this strategy depends on the completion of all the commissioned hydro power projects in the western area, which is under cooperation treaties with Brazil," noted Cataife. "The Uruguayan HV transformer market too will benefit from its collaboration with Brazil, which is expected to import up to 500 MW of additional power this year, when the international grid interconnection with Uruguay will completed."
If you are interested in more information on this research, please send an e-mail to Francesca Valente, Corporate Communications, at francesca.valente[.]frost.com, with your full name, company name, job title, telephone number, company e-mail address, company website, city, state and country.
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The Peruvian and Uruguayan HV Transformer Market / NB78-14