POWER January 2014 - 24

2014 industry forecast
Black & Veatch Foresees U.S.
and Global Opportunities
Dean Oskvig
B
lack & Veatch expects sustained
growth across global energy markets
in 2014 with several ongoing themes
continuing. Key market drivers supporting
power infrastructure spend remain
the same, centering on emerging market
growth, regulations (including clean air
and water), aging infrastructure, and the
advancement of unconventional gas technologies.
Competition will continue globally
as engineering and construction companies
grow backlog in traditional markets
and with global expansion.
The U.S. Outlook Is Improving
In the United States, modest demand for
new generation capacity will primarily be
met with natural gas and solar photovoltaic
generation given regulations, renewable portfolio
standards, and other market dynamics.
U.S. transmission market investment will
be strong at nearly $200 billion from 2014
to 2023. The continued upgrade and expansion
of existing infrastructure, presence of
renewable resources, and Federal Energy
Regulatory Commission Order 1000 are key
contributors to sustained growth.
Opportunities to support clients in their
efforts to improve reliability and efficiency,
as well as upgrade facilities and expand the
use of renewables/distributed generation-
all while keeping costs competitive-will
be significant. The air quality control retrofit
market will be driven by owners' decisions to
upgrade assets or retire them altogether.
Industry observers anticipate that 2014
will bring improved economic growth in the
U.S. as well as a collision between coal-fired
plant shutdowns and system-supply reliability.
Several years of weak overall demand
growth, hindered by the slow pace of economic
recovery, have held reserve margins
in check. Without GDP recovery, margin
overhang will persist through 2020 in most
regions of the U.S., except the Electric Reliability
Council of Texas.
Projections of exactly how many gigawatts
of coal-fired capacity will come of24
fline
through 2020 in the U.S. vary, but one
thing is certain: The economics associated
with continuing to operate coal assets and
upgrades to preserve life will remain in focus.
A large-scale shift away from coal to
natural gas and renewables will require solutions
ranging from new pipeline and transmission
development to energy storage and
increased use of on-site liquefied natural gas
(LNG) storage to ensure system reliability.
Global Factors
Globally, there are several factors shaping
the 2014 power outlook. While estimates
vary, roughly $12 trillion will be spent on
power infrastructure around the world from
2014 to 2020, according to IHS Global Insight.
Worldwide, we are witnessing the largest
economic transformation ever seen as
the population of cities in emerging markets
expands and incomes rise-producing a sizeable
wave of middle-class consumers with
spending power. As such, rapid urbanization
will be the biggest worldwide driver of
infrastructure spending over the next several
decades as urban populations expand by 1.5
billion, to 60% of the world's population.
On the demand side, the tsunami-related
Fukushima Daiichi event in March 2011 continues
to impact the future of many nations'
energy mixes. From Germany to Japan, nuclear
power remains under scrutiny. Although
safeguard efforts continue at many existing
U.S. facilities for Nuclear Regulatory Commission
compliance, new build programs are
proceeding with caution in the U.S. and elsewhere.
Economics-based retirements are also
a consideration.
Gas, as a cleaner alternative to coal and
oil, and more suited to baseload power generation
than renewables, likely has the most
potential for sustained long-term growth.
Worldwide interest in reducing greenhouse
gas emissions and improving air quality, as
well as global efforts to increase fuel diversity,
will drive continued investments in exploration,
LNG import terminals, and supply
contracts. Gas-rich regions, the countries that
www.powermag.com
produce gas cheaply, prefer to sell it at high
value rather than generate electricity with it.
Therefore, gas processing and LNG export
projects represent a strong market opportunity
as gas moves from those who have it to
those who need it.
In addition, $3.50 to $4.00 per MMBtu
for U.S. shale gas means domestic project
opportunities in gas processing, floating
LNG/LNG storage, ammonia processing,
and continued growth in the transportation
LNG market.
Yet, natural gas alone will not meet the
world's power generation needs, particularly in
developing regions experiencing load growth
ranges from 3% to 5% and more. As such,
significant new generation opportunities, primarily
low-cost coal fuel, will be sought near
term. These new capacity opportunities also
carry follow-on opportunities to expand power
delivery services in transmission, distribution,
and grid stability.
Workforce Trends
In addition to project work, two other trends
to monitor in 2014 include the pace of personnel
retirements across the energy industry
and continuing skills and knowledge transfer
(SKT) efforts. A large number of workers in
developed regions are at or nearing retirement
age, and their departure will mean experience
gaps in many critical positions. Conversely,
developing regions are furthering SKT programs
to grow the pipeline of technically
trained, indigenous workers, thereby reducing
expat dependence.
Whatever 2014 may bring, Black &
Veatch is optimistic about the global power
industry and the company's future. Planning
and implementing the world's most
complex infrastructure projects and managing
the significant realignment of resources
and infrastructure needs will create
opportunities for engineering and construction
firms capable of providing sustainable
energy solutions. ■
- Dean Oskvig is president and CEO of
Black & Veatch's Energy Business.
POWER | January 2014
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POWER January 2014

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