The Energy Industry Outlook 2012

By Claire Swedberg | Jan 15, 2012
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Energy projects currently underway across the United states reflect several trends—new construction in the alternative-energy sector and renovation at traditional power plants to update aging infrastructure. Even as more alternative-energy wind farms are built and solar is installed, the existing nuclear, coal and natural gas facilities are responding to increased demand with expansions and refurbishments of facilities that, in some cases, are aging to a point that major renovations and replacements are necessary.

Contractors who meet these needs are spread throughout the country in locations where such plants provide the greatest benefit. They focus on hiring skilled staff and developing partnerships with mechanical and other crews who can provide the equipment and manpower necessary to install, replace or renovate equipment that is often of staggering size.

Although the recession that began in 2008 generated a lull in the energy market, construction for the industry is expected to grow rapidly at least to 2015, while the fastest growing energy sector worldwide between now and 2035 is, without question, renewable energy. According to Energy Information Administration (EIA)’s International Energy Outlook 2011, the growth of hydroelectricity and other renewables is projected to rise 2.7 percent every year through the next two decades.

Despite that, coal-fired plants are and will remain the largest source of electricity generation. EIA projects that few new central-station coal-fired power plants will be built beyond those already under construction or supported by clean coal incentives. However, generation from coal is expected to increase by 25 percent from 2009 to 2035, as a result of increased use of existing capacity, which equates to more renovation and maintenance work in these plants for electrical contractors (ECs).

The role of natural gas also is growing, due to low prices and relatively low capital construction costs that make it more attractive than coal, which also means more EC work.

On the other side of the coin, electricity generation from renewable sources is forecast to grow by 72 percent to represent 14 percent of the total electricity generation in 2035, up from 11 percent today. Most of the growth in renewable--electricity generation in the power sector consists of generation from wind and biomass facilities. The growth in generation from wind plants is driven primarily by state renewable portfolio standard (RPS) requirements and federal tax credits. Power generation from biomass comes from both dedicated biomass plants and co-firing in coal plants. Its growth is driven by state RPS programs, the availability of low-cost feedstocks and the federal renewable fuels standard, which results in significant cogeneration of electricity at plants producing biofuels. However, despite the rosy predictions related to alternative-energy production, any of these predictions could be altered by politics, environmental regulations and incentives.

Hydroelectric projects
Hydroelectric power plants are another area in which renovation is pivotal. For example, Southern Contracting Co., San Marcos, Calif., provided power for the San Diego County Water Authority’s Olivenhain/Lake Hodges Pump House project to pump water back and forth between the Olivenhain and Hodges reservoirs. The project, valued at more than $60 million, included power-generating turbines, metering gear and a 69-kilovolt (kV) switchyard.

In the past decade, Southern Contracting made a strategic decision to expand its business by becoming one of the San Diego area’s leading energy-solutions contractors. The pump house project is an example of the company’s renewed focus.

When water is transferred downhill from the Olivenhain Reservoir to Lake Hodges during high usage times, the plant generates hydroelectricity and sells it to local utility San Diego Gas & Electric (SDG&E) at higher peak rates. The water authority can generate up to 40 megawatts (MW) of peak hydroelectric energy, which it indicates can provide enough energy to power up to 26,000 homes each year.

To provide the pump station for this operation, Southern Contracting worked closely with SDG&E to connect to the power grid. Southern Contracting installed the metering gear and then coordinated with solar metering company Trimark Associates to have the meter and CAL-ISO grid connection certified to meet SDG&E requirements.

Southern Contracting also installed two Francis turbine generators with a combined capacity of 95 MW of electricity. It installed the switchyard, in partnership with Engineering Partners Inc., which ties into SDG&E’s existing 69-kV switchyard. Southern Contracting worked closely with Archer Western Contractors, the general contractor, to develop the plans that fit into the overall project.

Conventional hydroelectric generators like the one installed by Southern Contracting—of varying capacity—currently operate in 48 states. Operating expenses for hydroelectric generators are lower than for most other forms of electricity generation; however, the facilities are more plentiful in some regions and are subject to seasonal variations. There is a large concentration of capacity in the Pacific Northwest, contributing to low wholesale and retail electricity prices throughout that region, especially in the spring runoff season.

Nuclear power renovation
Nuclear power is an area of heavy maintenance and renovation and is managed by a handful of skilled contracting companies that have the clearance to send their workers into those facilities.

While in previous years, nuclear energy work centered on new construction, today much of the work done by specialty nuclear-focused electrical workers is in power plant upgrades, such as for steam generator replacements, reactor heads and nuclear outages, said Duncan Abrams, business agent for International Brotherhood of Electrical Workers (IBEW) Local No. 569, in Southern California. For example, last year, about 125 men were employed for a 100-day scheduled outage at a nuclear plant for renovations and maintenance. The next project will be replacing reactor heads. Abrams said that the IBEW provides training for journeymen working in nuclear facilities, helping them get through background checks and obtaining clearances to work in the high security areas.

Matrix Service Industrial Contractors Inc. (MSICI) is an industrial service contractor that provides electrical and mechanical services for power plants and alternative energy, natural gas, and refining and petrochemical facilities. The Philadelphia-area-based company provides services for major energy companies, including nuclear power generating stations. The company’s electricians continue to provide maintenance, upgrades and renovations at various Mid-Atlantic-area nuclear power plants.

Recently, MSICI replaced three main power transformers in one nuclear unit, with another unit scheduled for the same services during a planned upcoming outage. Similar main power transformer replacements have been performed at other dual- and single-unit area nuclear power generating stations.

The recent work, said Chris Tupper, MSICI electrical and instrumentation project manager, has provided the utility with needed upgrades as facilities age. Some of the plants are more than 30 years old and, therefore, require reliability and periodic renovation and replacements. Currently, MSICI also is providing security improvements and civil and process upgrades, while delivering both the electrical and mechanical services.

MSICI also provides support for scheduled nuclear outages for various utilities and has completed substation installations related to electric power generation and delivery. For the massive installations and transformer replacements, MSICI subcontracts the rigging support from other companies.

Wind generation
According to the American Wind Energy Association, the third quarter of 2011 saw more than 1,200 megawatts (MW) of wind power capacity installed, bringing installations through the first three quarters of the year to 3,360 MW. The U.S. wind industry now totals 43,461 MW of cumulative wind capacity through the end of September 2011. The U.S. wind industry has added more than 35 percent of all new generating capacity during the past four years, second only to natural gas, and more than nuclear and coal combined. Today, U.S. wind power capacity represents more than 20 percent of the world’s installed wind power. However, at this time, a limited number of contractors provide nationwide support to the large wind farms through the country.

MSICI does get involved in wind farm work. One example is the Atlantic City wind farm where the company built the 26,000-volt collection system to include the turbines, wiring and controls as well as substation modification to provide power to the grid, with its subsidiary S.M. Electric Co. Inc. (SME) of Rahway, N.J. SME has also installed multiple photovoltaic panel projects in and around New Jersey.

The current U.S. wind industry represents not only a large market for wind-power capacity installations but also a growing market for American manufacturing. More than 400 manufacturing facilities across the United States make components for wind turbines, and dedicated wind facilities that manufacture major pieces, such as towers, blades and assembled nacelles, can be found in every region.

More power is needed
Currently, the need for construction at energy plants is being weighed against soaring costs. Construction costs for new power plants—all types, including coal, nuclear, natural gas and wind—have increased at an extraordinary rate during the past several years. One study, published in mid-2008, reported that construction costs had more than doubled since 2000, with most of the increase occurring since 2005.
Financing large projects will be more difficult with the slow economy. Fluctuating commodity prices, combined with the still uncertain financial environment, have raised the challenge for customers trying to project future capital costs. In some cases, higher construction costs have led to higher energy prices and thereby, lower energy consumption. So, we all may have to wait awhile for the energy industry to meet the projected rosy expectations.

SWEDBERG is a freelance writer based in western Washington. She can be reached at [email protected].

About The Author

SWEDBERG is a freelance writer based in western Washington. She can be reached at [email protected].





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