U.S. POWER
An Industry Slowly on
the Rebound
The U.S. power industry is currently
faced with a myriad of challenges,
including dealing with the increased
cost of capital and shortened loan
terms, environmental and regulatory
uncertainty, and a drop in overall electricity consumption. However, longer-term market fundamentals point to an
improving market picture for industry
players, including the valve and pump
industry, according to Keith Small, senior marketing manager & proposals of
Black & Veatch’s Energy business.
Small said the power generation
industry is slowly beginning its rebound
following a “trough.” Many power
providers are taking steps to preserve
liquidity and maintain their overall
financial health, he said, and the result
has been an increase of plant upgrade
and efficiency improvement projects to
enhance existing operating fleets.
Small also shared how clients’ focus
on sustainability (economic, environmental and community benefits) has
exacerbated the power generator’s
conundrum—“it’s not just about adding
additional megawatts to the grid, but
rather what kind of megawatts and at
what cost,” Small said.
Power generation technology deployment is changing, he said. “Coal has a
difficult road ahead, at least in the
short-term,” Small said. Environmental
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water equipment and construction, he
said.
While the stimulus package may
affect the industry somewhat (more than
$6 million is slated for state revolving
funds, for example), the package was
put together to get people working and
the economy moving. Because of that,
the types of projects that will get some
funding are those that can meet the very
tight design time frames involved. (A
quarter of the money that goes into
revolving funds has already been distributed, he pointed out).
Fortunately, some agencies and utilities already had big projects in the
works, because otherwise, the stimulus
package would affect mostly just
smaller projects.
A few of the key areas in this industry to keep on eye on include:
; The bond and credit markets.
Decker said these markets must stabilize before the industry can see significant project growth. He said to
watch private dollars and pointed to
a new Citigroup program providing
loans to municipalities for financing
infrastructure projects.
; New opportunities. The world currently has only a 90-year supply of
phosphorous, and while methods for
removing it from wastewater exist,
ways to process the results have not
been refined. Desalination remains
one of the hottest new segments in
the industry. Decker said projects in
this area are starting to break loose
and that the next 1 to 5 years will
see a number of U.S. projects built.
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; Piping. Decker pointed out that in
the U.S., we lose 15% to 17% of
drinking water through bad pipes
Total US Renewables Market Size ($Billions)
$30
$25
(leaks) and in the world, that number is 26%. Nearly half of the pipes
that currently exist will reach their
life expectancy by the year 2020, he
pointed out.
$20
$15
$10
$5
Trillions of Constant 2007
Dollars by Quarter 59
3Q08
4Q11
4Q10
2+ year Loss in Growth Curve
- 3.5%
Decline
2007 2008 2009 2010
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Global Economic Power Outlook
Source: CMAI
2011
and political opposition have intensified
and new coal plants in the U.S. going
forward will likely need to be carbon
capture ready.
Meanwhile, “Renewable energy is
the growth market today,” Small said,
as clients embrace alternative fuel
sources to meet renewable portfolio
standard (RPS) mandates (requiring a
percentage of electricity to come from
renewable sources). Wind has peaked,
but it will rebound; solar is expanding,
and interest in biomass (co-firing and
new build) is growing.
The Combustion Turbine (CT) market is expected to “begin its revival
sometime in 2010” (assuming low to
moderate natural gas prices prevail),
he said. New CT projects will, at some
point, again include baseload facilities
(those that go beyond addressing peak
Source: Black & Veatch
Wind
Solar Thermal
FORECAST: The market for
water/wastewater will not contract in
2009 and will see a 4% growth overall.
There also will be no contraction in 2010
because of sufficient demand and funding
mechanisms, as well as a steady backlog
of projects.
$-
2006
2007
2008
2009
2010
2011
Solar PV
Biomass
Geothermal
Growth in Renewables: Mandated RPS, tax incentives and desires to reduce CO2 are
expected to drive continued growth.
