Power Projects Fuel Construction Industry Growth

August 9, 2013

By: Gray T. Slocum

Currently, overall construction spending is increasing globally after a prolonged slowdown. In the United States, Interface Consulting expects the increasing demand for energy and the retirement of older, less efficient power plants to drive investment in power projects. In recent years, the quantity and size of power construction projects has reflected considerable growth in that subsector. Based on Interface Consulting’s research and experience, this trend is expected to continue for several years. While there are several factors that contribute to this industry growth, some of the most significant factors include:

A rebound in the residential and commercial sectors

  • Continued population growth
  • Slowing advancements in energy efficiencies
  • Shifts in the selection of fuel sources for power generation

The following chart shows the projection of electricity generation by fuel as analyzed by the US Energy Information Administration. Almost all fuel sources aside from nuclear and coal are expected to increase in market share and will require even more generation facilities to meet the demand.

Electricity Generation by Fuel, 1990-2040 Source: http://www.eia.gov/forecasts/aeo/er/early_elecgen.cfm

While coal is, and looks to remain, the top fuel used in the production of electricity, other fuel sources will slowly cut into the market share. This is largely due to the phase out of environmentally unfriendly power plants. Coal-fired generation is expected to reduce its market share because of continued concerns regarding the release of greenhouse gases.

Fuel sources likely to gain from the decline in coal use are natural gas and renewables. Nuclear power is expected to experience a slight decrease in the market share during a period of decommissioning of old plants and the construction of new plants.

Interface Consulting Project Data

Interface Consulting tracks data on its consulting engagements and categorizes them according to industry sector. Power-related assignments are grouped within the “Power, Process, and Industrial” industry sector. Since 2005, Interface Consulting has seen a significant increase in the quantity of these assignments. When it comes to power, process, and industrial projects; owners, contractors, and attorneys are looking to Interface Consulting due to the growing size and complexity of these projects. Interface Consulting’s scope of work on these engagements includes project management, claims management, and litigation or arbitration assistance.

As shown in the following charts, the percentage of Interface Consulting Power, Process, and Industrial engagements has more than doubled over the past eight years.

Concentration of Interface Consulting Engagements by Industry Sector, 2005-2013 Source: Interface Consulting International, Inc., Project Data

Large and complex power projects will continue to see significant construction growth in the near future. The rebound in residential and commercial sectors, continued population growth, slowing advancements in energy efficiencies, and shifts in fuel sources for electricity generation will continue to drive power industry construction for years to come.

For the complete Construction Outlook click the following link.

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