Electrical contractors may want to grab a pair of sunglasses. Government legislation, growing demand for the use of environmentally friendly fuels, and America's insatiable appetite for energy are making the power plant construction outlook brighter than ever. By the end of 2007, the construction put in place power market will increase 5% to approximately $42.8 billion, according to FMI Corp., a management consulting and investment banking firm headquartered in Raleigh, N.C. For 2008, that figure is expected to rise another 6% to more than $45.3 billion and reach a projected $56.6 billion by 2011.
One of the driving forces behind the escalating power plant industry is the Energy Policy Act of 2005, which provides tax incentives and loan guarantees for energy production of assorted types, including nuclear, wind, and biomass. “Green power is a hot topic right now, and federal regulations are forthcoming,” says Heather Jones, construction economist for FMI Corp. “Current legislative activity involving green power includes the House committee's recent changes to the Energy Title of the Farm Bill. It comprises $2 billion in loan guarantees for biofuel production plants and biorefineries, along with $15 million for the Forest Bioenergy Research Program.”
Furthermore, this past May, President Bush directed the Environmental Protection Agency (EPA) and Department of Energy (DOE) to begin taking action to increase the Corporate Average Fuel Economy (CAFE) and to implement an Alternative Fuels standard. In June, the Senate passed legislation that expands the production of renewable fuels to 36 billion gallons by 2022 — with 15 billion to come from corn-derived ethanol.
This push toward alternate energy sources will translate into the construction of new power plants. In its report, “Energy and Efficiency: Utilities Global Survey 2007,” PriceWaterhouseCoopers states that “utility companies worldwide expect wind and nuclear power to provide an increasing share of their market's energy consumption over the next five years.” Currently, wind farms are realizing the fastest growth. According to the American Wind Energy Association (AWEA), Washington, D.C., the industry is on track to install more than 3,000 MW in 2007 — surpassing a record-setting 2,400 MW in 2006.
Another energy source garnering interest is nuclear power. After a 28-year construction lag, the Nuclear Energy Institute (NEI), Washington, D.C., reports that approximately 17 companies and consortia are pursuing licenses for more than 30 nuclear power plants.
Despite all the hype being given to green power, Jones says that coal plants will likely remain the largest source of energy. Figures released by the National Energy Technology Library (NETL) support this claim, stating that there are currently 151 proposed and new (on-line) coal-fired power plants in the United States. “According to the DOE's Energy Information Administration (EIA), the percentage of power from coal is expected to decrease slightly from 50% in 2005 to 49% in 2020, before increasing to 57% in 2030,” Jones adds.
Much of the power plant construction will occur in the Rocky Mountain and Southwest market regions. Sugar Land, Texas-based Industrial Information Resources (IIR) reports that in 2009, the Rocky Mountain region — comprised of Arizona, Colorado, Idaho, Montana, New Mexico, Nevada, Utah, and Wyoming — will see the construction of 22 energy projects, totaling approximately $12 billion. During 2007, the states of Texas, Arkansas, Oklahoma, and Louisiana, which make up the Southwest market region, are scheduled to begin an estimated $4 billion worth of capital spending in the alternative fuels industry.
Along with the need for additional sources of power generation comes the call for major reinvestment in the nation's electricity grid. “Transmission is just as an important part of the power market as generation,” says Jones. “But there have not been significant outlays on transmission lines for the past 20 or 30 years.”
To address this issue, the DOE recently announced it will provide up to $51.8 million for five cost-shared projects designed to speed modernization of the grid. According to the DOE, this research will further the development and application of high-temperature superconductors, which have the capability to relieve congestion on the electricity grid.