Engineering, procurement and construction (EPC) contracts are evolving as utilities seek to spread risks, contain costs, and execute their business strategies. As a result, turnkey contractors are...
Engineering and construction firms adapt to a changing market.
industry that isn’t known for rapid change, the electric power industry is changing fairly rapidly. We have to be agile to anticipate market trends. The market increasingly is driven by changing regulations and stimulus bills rather than straight market economics. There’s opportunity in the changes that are happening, if you’re nimble and can respond to them.
EPA regulations are an example. They’re driving clients to evaluate options like coal plant retirements, retrofits, and fuel switching. We have expertise in those areas. We can help clients evaluate their options, almost like a consultant. We have what we call an environmental road show where we talk to clients about what they might need and the possible solutions.
Another example is the changing mix of resources. The challenges of integrating wind and solar are increasing, and that creates opportunities. That’s why we’re interested in storage projects.
Champagne, CH2M Hill: There are a lot of solar projects, many of them in California where owners face a lot of requirements and restrictions in terms of wildlife and other environmental concerns. There’s a lot more planning and preparation involved in supporting some of those projects. You have to watch out for endangered species. We’ve had projects sited near habitats of the burrowing owl and desert tortoise, and that had an impact on permitting. Also you have to perform more civil design on a project, because of permitting requirements and the potential disruption of property. But once you get through the permitting process, solar projects are pretty simple stuff. It’s kind of repetitive building.
PV especially is a supplier-led business. If suppliers have financial stability, their product represents at least half the cost of the project, so they have the most to gain or lose. The labor on a PV project is 15 percent of the cost. If the EPC contractor miscalculates the cost by 10 percent, you’re only talking about 1.5 percent of the project cost.
Fortnightly: What differentiates your company from other EPC firms? How are your services changing or expanding to serve the industry’s needs?
Oskvig, Black & Veatch: We’ve evolved from being a consulting, design, and construction management-only company to being a full-service EPC firm. Lots of companies have gone from being construction-only and added engineering, almost as a necessary evil to capture the construction projects they want. We approach it from a completely different direction. We think more about the complete solution for the client, from conception to turning it over.
Also our management consulting business unit has grown and extended our services further up the value chain to the early planning phase, where clients are making decisions about where to take the company. We’ve added capabilities like fuel price forecasting and economic modeling. And we’ve also extended services further along the value chain into areas like workflow and enterprise IT. [Editor’s note: During the past several years, Black & Veatch acquired several consulting and analysis firms, including R.J. Rudden, Lukens Energy Group, Fortegra and Enspiria Solutions.] The emphasis has been on providing strategy formation services to our utility clients.
Organizationally, our management