Samjong KPMG: "Energy Transition and AI Proliferation... Power Infrastructure Market Opportunities in Focus"

As global electricity demand surges due to the energy transition and the proliferation of artificial intelligence (AI), promising business opportunities are emerging in the power infrastructure market.

On April 29, Samjong KPMG released a report titled "The Era of Electricity Completed by Power Infrastructure," highlighting direct current (DC) transmission and distribution, transformer exports, and grid modernization as core growth areas.

According to the U.S. Energy Information Administration (EIA), global net electricity consumption in 2023 reached 27,047 TWh, more than tripling since 1980. The International Energy Agency (IEA) reported that global electricity demand increased by 4.3% last year and is projected to grow at an average annual rate of about 4% through 2027.

The report divides the power industry value chain into five stages: generation, transmission, substation, distribution, and consumption, and outlines key issues and opportunities at each stage. In the generation stage, the report identifies the increased burden on the grid resulting from the expansion of renewable energy as a major issue. In particular, South Korea is expected to see an average annual growth rate of 13.8% in renewable energy through 2030, making it essential to ensure grid reliability and safety.

In the transmission and distribution stages, the report points to insufficient infrastructure investment, aging facilities, and a lack of flexibility as major problems. Seventy percent of transmission lines in the United States have been in use for more than 25 years, while in Europe, 40% of the power grid is over 40 years old, increasing the risks associated with aging infrastructure.

In the substation stage, rising demand for data centers driven by the spread of AI, combined with the need to replace existing equipment, has led to supply-demand imbalances and longer lead times for large and distribution transformers. In the consumption stage, the report notes that the expansion of energy prosumers is accelerating changes toward a more consumer-centric structure of electricity demand.

The report explains that overcoming these power infrastructure challenges is creating promising business opportunities in three key areas: direct current transmission and distribution (HVDC, MVDC, LVDC), expanded transformer exports, and grid modernization and digitalization. Each of these markets is expected to have high growth potential.

In particular, the high-voltage direct current (HVDC) market is expected to grow at an average annual rate of 5.5% through 2028, driven by energy policy. The DC distribution market is also projected to reach a similar level of activity as the HVDC market by around 2030. Last year, exports of medium-to-large transformers and distribution transformers increased by 38.5% and 58%, respectively, compared to the previous year, making them noteworthy export items.

The report suggests that companies should strategically respond to power infrastructure business opportunities by categorizing them into three types based on technological maturity and market potential. In the short to mid-term, the transformer, high-voltage cable, and submarine cable markets are expected to drive growth. Companies should focus on the United States as a key export market while also pursuing market diversification. To prepare for a future shift to a buyer's market, companies should enhance design capabilities and technological sophistication, collaborate with the government, and establish strategic regional portfolios to avoid cutthroat competition with China.

In the mid- to long-term, the smart grid and voltage-source HVDC markets are expected to drive growth. Companies should leverage domestic demonstration experience to expand into overseas markets and prioritize the establishment of strategic partnerships and public-private collaboration ecosystems. In addition, the report recommends that since the medium-voltage direct current (MVDC) and low-voltage direct current (LVDC) markets are still in the early stages of technological maturity, companies should secure global competitiveness in advance through technology development and leadership in setting international standards.

Kim Hyojin, Deputy CEO and leader of the Infrastructure and Energy Industry at Samjong KPMG, stated, "While power infrastructure suppliers are benefiting from the current surge in electricity demand, domestic power infrastructure companies must continue to achieve sustainable growth by securing advanced technologies and preemptively capturing future growth opportunities."

This content was produced with the assistance of AI translation services.