An Investment Megatrend

In order to meet global electricity demand, we’ll need to build the equivalent of one large power plant every week for the next 20 years. And that says nothing for the infrastructure that goes with that — such as the miles of transmission lines.

The big emerging markets are still in the early stages of a kind of second Industrial Revolution. There is a massive migration to the cities as workers go where the jobs are. These are ongoing and long-term trends, nearly unstoppable, akin to financial glaciers or tectonic plates shifting beneath the earth’s crust. The current economic woes only slow that process down for a time.

Today, you have a chance to pick up the companies that will make all that goes into power generation. In a few years, some of them could be two-four times as large as they are today. In hindsight, the opportunities such a build-out creates will seem obvious.

Look at the big emerging markets, which really drive this story. The electricity use per capita is still well below the global average for China, India and Brazil. Never mind trying to catch up with the Western countries. I’m just talking about getting to the global average. Take a look at the nearby chart ‘Lots of Room to Grow.’

Global Electricity Consumption

Those are the per capita numbers. We can break it down another way by looking at total consumption and growth rates. The OECD — broadly, the ‘Western’ countries — has the larger current demand, but will grow only at a rate just above 1% annually. Most of the growth in demand will come from the non-OECD countries, or emerging markets. In another 20 years, the non-OECD countries will consume more than the OECD counties.