Green Energy Project Construction Driving Shortages of Skilled Craft Labor in North America, a "Navigating the Currents of Change" Webcast on Industrialinfo.com

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Regulators can set deadlines. Companies can issue bids. But if local labor markets have a shortage of skilled craft labor, projects won't get done on time or on budget.

That's a reality gradually becoming apparent across North America. In the electric power industry, tens of thousands of megawatts (MW) of renewable energy projects have been announced in recent years. Right now, Industrial Info is tracking 688 renewable energy projects that are scheduled to begin construction in 2010 across North America, totaling slightly less than 60,000 megawatts (MW) of generating capacity. These projects carry a total investment value (TIV) of $125 billion. Not all of these projects will kick off as scheduled, and a portion will be delayed or cancelled outright.

But a shortage of skilled craft labor in some North American metropolitan statistical areas (MSAs) threatens some projects' start dates, completion dates and costs, warns Anthony Salemme, vice president of the Craft Labor Group at Industrial Info. The imbalances are likely to get worse as the U.S. continues its slow exit from the recession and billions of dollars in federal stimulus funding is released.

Industrial Info's Manpower Market Analyzer service currently is being used by cost estimators and construction managers to forecast demand for skilled craft labor and to better estimate the cost for that labor in MSAs across the U.S. and Canada. Industrial Info produces a supply/demand forecast based on active projects in a specified geographic area. Having current and accurate market intelligence about the demand for skilled craft labor and its costs in a given market can prevent unpleasant surprises that could delay projects or cause costs to escalate.

Manpower projections are based on Industrial Info's current and confirmed project spending information across 13 separate industries in the U.S., including Electric Power, Petroleum Production, Transmission, Refining, Alternative Fuels, Chemical Processing, Industrial Manufacturing, and Metals & Minerals.

The Manpower Market Analyzer service captures and analyzes data by craft and MSAs across North America. Users can also use the service to identify the locations within those areas that have the greatest supply/demand imbalances, which indicate craft labor shortages and therefore potential wage rate increases.

"Already local labor imbalances are becoming evident," Salemme said. In Ohio, demand for boilermakers' man-hours is expected to surge by about 40% this year compared to last year, according to Industrial Info's Manpower Market Analyzer service. California is expected to need 53% more boilermaker man-hours this year compared to 2009. Some of this surge in demand is attributable to construction of concentrated solar power projects, which have extensive piping requirements to carry gases or heated steam to and from the solar arrays. California is also home to the $1.3 billion Lake Elsinore hydropower plant and the Hayward Natural Gas Energy Center, both of which are scheduled to start construction later this year.

Demand for boilermaker man-hours is expected to nearly double in Massachusetts and South Dakota compared to 2009, Salemme continued. In Massachusetts, the $400 million Westfield Gas-to-Oil Center and the $150 million Russell Biomass project are scheduled to kick off this year. The two projects highlight the diversity of new projects that are helping this area's industrial sector recover.

"Make no mistake--there will be economic growth in the industrial construction markets in 2010," continued Salemme, saying that there was a 4% decline in demand for skilled craft labor in 2009 compared to 2008. "Cost estimators will need to begin looking harder for skilled craft labor supply in certain areas of the country."

Although the demand for skilled craft labor is not what it was at the peak of the boom cycle three years ago, there were nearly $150 billion in new construction projects started in 2009, according to Industrial Info. The complexity of these projects and the skills needed to complete these projects will continue to fuel the need for skilled craft labor for many years to come.

Already some leading firms have identified potential supply-demand problems with skilled craft labor in the foreseeable future. Fluor Corporation (NYSE:FLR) (Irving, Texas) is the EPC contractor responsible for the addition of units 3 and 4 at the South Texas Project, a nuclear power project with an estimated price tag of between $10 billion and $13 billion. Ed Wynne, P.E., a nuclear power procurement manager for the project, told Industrial Info: "For new-build nuclear generation, skilled craft labor will be a major issue. There's not enough skilled labor in the market to build more than a few reactors at the same time. When we have four active [nuclear] projects under way at the same time, things will be interesting. I expect that labor costs will go up, perhaps sharply, around 2014."

Industrial Info has used the Manpower data and analytics to produce the first issue of a periodical titled Skilled Labor Digest. The first issue of Skilled Labor Digest will focus on boilermakers; future issues will focus on electricians, tube welders, mill wrights and iron workers. Email manpower@industrialinfo.com to subscribe to the Skilled Labor Digest and stay current on the supply/demand balance for labor across all 110 MSAs across the U.S. and Canada.

Join Tony Salemme, vice president of the Craft Labor Group at Industrial Info, for a discussion on the changing demand for skilled craft labor in North American and Industrial Info's Manpower Market Analyzer service.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy related markets. For more than 26 years, Industrial Info has provided plant and project spending opportunity databases, market forecasts, high resolution maps, and daily industry news.