With increasing mechanization, manufacturing industry comes to depend more and more upon local power facilities. Although large concerns may be capable of generating their own power, this procedure is usually inappropriate to less developed countries, partly because it involves new establishments and larger capital charges; partly because the resulting energy is more costly; and partly because it is the lighter industries and smaller units which are usually pioneers in the industrialization process.
One-third of the world's population is "off-grid".
The development of power-equipment manufacturing in several developing countries tends to be limited by small internal markets. The plant scale required for efficient operation has particularly influenced the power-generation sector. In contrast, large demand and the relatively small scale required for the efficient operation of transmission and distribution equipment offers more possibilities for domestic production. While in a considerable number of developing countries the demand has increased dynamically, the development of local power-equipment manufacture has fallen short of the production potential.
The important resources required for investment in special machinery and testing equipment as well as the long gestation period involved in capitalizing such investments have evidently discouraged the entry of domestic companies. In addition, the technology is largely controlled by a few large transnational corporations, and difficulties in adapting and assimilating this technology to local conditions within the framework of licensing agreements have not provided incentives to domestic manufacturers to move into the production of more sophisticated equipment.
A survey of regional power requirements for the developing regions of Asia showed that average reserve capacity (the margin by which installed capacity exceeds maximum demand for electricity) decline across the region from 68% in 1985 to 21% in 1991. It also identified an almost 50% undercapacity in 1993 electricity generation capability when compared with projected needs in 1998. The World Bank estimates that in the 1990s alone, developing Asian countries will require about $455 billion to expand power supplies to keep up with surging demand for electricity.