The Best of Times for Power Industry Construction

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Researched by Industrial Info Resources (Sugar Land, Texas)--Recently released reports about the capabilities of U.S. electrical utilities to invest in the modernization of transmission and distribution systems, as well as to add generation, bode well for the industry. Utility costumers will need more electricity, and even with strict efficiency standards, they will consume more power. A diverse fuel mix of newly constructed power plants will hold down costs to an expectable level as renewable power projects increase their percentage of total generation as mandated by federal and state lawmakers.

Near-term costs will rise to build new generation, putting upward pressure on retail rates, but long-term customers will have increased reliability and lower, more stable electricity prices. The Edison Foundation, a nonprofit research organization whose goal is to encourage a greater understanding of the production, delivery and use of electric power, has released a report that confirms these assessments. Load growth and a growing worldwide population have attributed to a growing backlog of project contracts at large engineering, procurement and construction firms.

The Edison Foundation report, conducted by Brattle Group, stated that U.S. electrical utilities will need to spend $1.4 trillion in the next two decades to meet needed power demand. The report also stated that power producers must build 150 gigawatts (GW) of new generation over the same time frame to meet electrical demand in the U.S. alone. Industrial Info Resources recently released a report on the cost to build 50 nuclear power plants across the country before 2020 at a cost of $300 billion dollars, which would address 64,500 MW of this figure. For details, see April 17, 2008, article - U.S. Developers Face Price Tag of $300 Billion for 50 New Nuclear Units by 2020.

Internationally, China's peak electrical demand has outstripped supply by 70 GW, the total equivalent of most of Great Britain's electrical generation, resulting in frequent brownouts throughout the country. China builds an average of 1,000 megawatts (MW) per week of generation in an effort to keep up with demand. In India, power-production shortages demand an increase of 160,000 MW over the next 10 years to meet growing demand and a phenomenal growth rate in one of the most populous countries in the world. Hydropower projects alone will account for 16,553 MW of this total by 2012. India has a rural population of 500 million that goes not have access to electricity.

Globally, electrical generation will increase an average of 2.4% per year over a projected period ending in 2030, according to the 2007 International Energy Outlook report prepared by the U.S. Energy Information Administration.

Britt Burt, Vice President of Industrial Info's Power Group, recently said that the costs to build a power plant has increase 130% since 2000 and that those costs will continue to climb. He attributes this to the rising costs of raw material and the competition for equipment, engineers and skilled labor used in the construction process. Industrial Info is tracking 185 power-generation projects representing 49,000 MW and $46 billion that are slated to start construction during 2008. Beyond next year, there are 584 power-generation projects (200,000 MW) with a cost of $310 billion dollars scheduled to start construction from 2009 to 2012. These projects represent new generation and existing plant uprates, upgrades and additions in the U.S. It is expected that many of these projects could be delayed or canceled because of permitting or financial obstacles.

A rising demand for electricity in industrialized countries and the need for larger and increasingly more efficient power plants in spite of associated costs will be at the forefront of Power Industry news stories for years to come. By 2025, we will look back on this decade and the next as a golden age in the construction of electrical distribution, transmission and power generation, not only in the United States but internationally, as well.

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.