Over $6 trillion will be invested in new energy facilities over next 20 years

NORTHFIELD, IL, March 7, 2006 -- The era of cheap energy is over. As a result the yearly capital investment to provide the world's energy will average $304 billion per year over the next 20 years. This is the new forecast in the online continually updated "World Market for Your Products" report published by the McIlvaine Company.

The largest investment category will be new coal-fired boilers with an average investment of $48 billion/yr. However the trend for coal will be down. This means that the investment in the first 10 years will be greater than in the last 10 years. In the first 10 years the average investment in coal plant upgrades will be $10 billion/yr but average only $6 billion in the final 10 years.

[See Table 1 above.]

Water market impact
This competition among energy sources has significant implications for the sale of water and wastewater equipment. The large investment in coal fired power plants will create large markets for slurry pumps, and valves treatment chemicals, hydrocyclones, basket centrifuges and belt filters.
-- The ultrapure water systems required in the steam cycle will generate substantial investments in reverse osmosis and other membrane systems.
-- The investments in ethanol, biomass, synthetic fuels, nuclear and coal gasification will also entail large investments in water and wastewater treatment equipment.

On the other hand the substantial investments in wind and solar will have a negative effect on the water markets. On balance, energy will represent a large and growing segment of the entire market.

Other energy sources
Also the trend will be down for gas turbines, refineries, and production of oil and natural gas. Investment will instead turn to newer alternatives such as fossil synthetic fuels including tar sands and coal liquefaction.

Planned investments in LNG liquefaction plants, tankers, and regasification terminals already represent close to $100 billion in capital expenditures. The U.S. will be increasingly dependent on LNG to replace its shrinking natural gas production.

Coal gasification and nuclear power will take a larger market share of electricity generation over the next two decades. However, achievements in improving efficiency of conventional coal plants and therefore minimization of CO2 will slow the transition.

Hundreds of ethanol plants are now in planning and construction. The promise of new technology to make ethanol from grass instead of corn will make this fuel competitive with a shrinking supply of petroleum.

Cost of wind power is now attractive and there's already a booming market for this category of power generation. Solar power promises to be an attractive option longer term, but costs are still relatively high. Biomass including waste-to-energy is already a big business and will grow modestly throughout the period.

Crossover effects
The trend in each of these categories is shaped by developments in the others. Negative developments in one category will lead to positive growth in others. But in some cases the opposite is true. If oil production peaks in 2010 instead of 2020 and production declines faster than anticipated, then ethanol will be bigger. But conversely, if coal is more attractive, ethanol also increases. This is because the cost of ethanol production falls if cheap coal is used to generate steam.

There are a number of uncertainties which will lead to continuing adjustment of these forecasts as better insights are gained. The global warming issue is a big wild card. Technology developments in coal-to-liquids and solar power are also two big variables. New technology will play a big role in shaping this market.

The economic and political variables are major ones. If GDP in China continues to grow at its present rate, China would become the largest consumer of electricity and transportation fuels during the period. The average American uses 10 times as much energy as people in other countries. The demand impact of major increases in per capita energy consumption could be substantial.

The political variable is the largest. Dependency on the Mid-East political stability is a major risk. The vulnerability of nuclear, LNG oil and gas production, and refining facilities contrasts with the relative security of coal, wind, solar, biomass, and ethanol.

Suppliers of equipment, steel, plastics and other materials, pumps, valves, piping and other components, information technology including instrumentation and software, consulting services and chemicals are finding opportunities in all these segments. Some represent bigger opportunities than others. So the size of the future market is going to be shaped by the competition among these alternative energy supply sources.

In "World Market for Your Products" there are not only long-term forecasts for each country in each energy segment, but also tracking of the individual projects. For more information, click here.

The McIlvaine Company (www.mcilvainecompany.com) is based in Northfield, IL, with a staff of 35 people that includes engineers, scientists and market researchers.

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