Power Projects Put the Squeeze on Southern California Labor

As Industrial Info Resources (Sugar Land, Texas) continues to track craft labor supply and demand throughout the U.S., certain trends in the labor market almost leap off the page. Some of the loosening and tightening of the labor market in various geographic regions comes as no surprise: For example, the Gulf Coast region from Texas to Mississippi, because of significant liquefied natural gas (LNG) projects, gas-to-liquids (GTL) projects, and other activity, could experience a 51% increase in labor demand for 13 skilled crafts, including welders, pipefitters, ironworkers and more. As the automotive and manufacturing sectors gain traction, labor demand in the Great Lakes region could increase by 24% through 2016.

So what other trends are on the horizon? The latest update of Industrial Info's Labor Assessment Annual Subscription shows that an area of Southern California, specifically a 200-mile radius around Palmdale, located north of Los Angeles, is set to experience a significantly tightened labor market. Labor demand in this area is already on the rise, and is forecast to spike in 2015, followed by a gradual falloff, possibly rising again from 2017 through 2020.

The reason? Anyone who knows about California's rigorous renewable portfolio standard (RPS) could easily surmise the cause of this uptick in labor demand: renewable energy projects. The California RPS stipulates that utilities and electricity providers must procure 25% of their energy from renewable sources by 2016 and 33% by 2020.

Click on image at left for a map showing project activity around Palmdale, California.

Within this 200-mile radius, Industrial Info is tracking 143 Power Industry projects worth a whopping $62.1 billion that are already under way or are planned to begin by 2022. While not all of these projects will actually make it to the construction stage, the fact that such a large number and high value of Power Projects are on the drawing board suggests that the amount of Power Industry project activity coming to the area is significant. Of these Power Projects, more than 90 are renewable energy projects (mostly solar), carrying a combined total investment value of approximately $37 billion.

A sterling example of this is the $1.875 billion construction of the Antelope Valley photovoltaic solar power plant near Rosamond, California. The 579-MW project kicked off earlier this year and is being developed by a subsidiary of Berkshire Hathaway Company's (BRK.B) MidAmerican Energy Holdings Company, with SunPower Corporation (NASDAQ:SPWR) (San Jose, California) acting as EPC firm. MidAmerican Solar acquired the facility from SunPower at the beginning of the year.

The solar farm is being constructed at two locations near Rosamond: a 462-MW section costing an estimated $1.5 billion, and a smaller 117-MW section with a $375 million price tag. The project is expected to be completed in late 2015/early 2016. Southern California Edison (Rosemead, California) has a long-term power purchase agreement for power from the plant, which will help the company meet California's renewable portfolio standard deadlines.

So how do these projects affect the scenario for craft labor in the region? Industrial Info's Labor Assessment Annual Subscription shows that the area's demand for eight major craft labor segments will increase approximately 97% from now through 2015, rising from 8.36 million man-hours this year to 16.49 million in 2015. While demand for all crafts shows significant increases, because of the nature of the projects kicking off, some of the sharpest upticks are for pipefitters (+108%), carpenters (+165%) and boilermakers (up more than 1,100%).

Click on image at right for an illustration of forecast labor demand in the Palmdale area.

Because of the substantial scope of these projects (many requiring investments of $750 million or more), these projects show an overlapping of construction activity, causing labor demand to peak in mid-2015, followed by a consequent decline.

Industrial Info's Labor Assessment Annual Subscription for recruiters and employment executives provides insight into where the highest and lowest craft labor populations exist, and the percentage rates of historical and forecast growth and contraction. To learn more about this product and the shifting labor market, contact Tony Salemme, vice president of Industrial Info's Craft Labor Group, at tsalemme@industrialinfo.com or by calling (209) 547-9878.

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Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.