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.
wind and solar for sure.
John Olander, Vice President (T&D), Burns & McDonnell: We see continued development of long-haul transmission projects and possibly HVDC [high-voltage direct current] systems. There was a push toward HVDC that started about 10 years ago and it didn’t really move in the U.S. market, but now the need to move power from large wind and solar plants is driving HVDC.
Also everybody is doing something with smart grid, and that will increase with time as utilities work through how to get value for customers. We see substation projects, putting in smart relays and metering applications, as well as telecom systems to collect the information and get it back to utilities.
Fortnightly: What do you see as the main factors driving changes in the U.S. electric power industry? And how are those changes affecting your role and the way you approach the business?
Oskvig, Black & Veatch: The same factors have always been in play, and those are regulation, economic growth or shrinkage, and technology changes. The move toward air quality work is driven by regulation, and now the technology is there to clean up flue gas streams and deal with things like mercury and ash. The move toward renewables has to do with economics and regulation, as well as technology advances. The growth of natural gas and continued reliance on coal assets has to do with economics.
There’s a lot of focus these days on the financial consequences of certain generation technologies, transmission projects, and regulatory compliance investments. There’s a lot of sensitivity about what it ultimately means to the electric customer and uncertainty about how regulators will treat it. Also since 2008 there’s been a lot of economic uncertainty.
Having so much uncertainty causes things to freeze up. It’s a multi-faceted picture, and that’s one reason we undertake our strategic directions survey every year, where we gather information from our clients, as well as suppliers and regulators, to learn what they’re thinking. That’s the basis of how we set our strategy for serving the industry.
Developers and utilities are trying to figure out what are their potential options and outcomes. We’re helping them with that thinking, and developing options.
Olander, Burns & McDonnell: There’s a lot of uncertainty ahead for the industry, and that also applies to the electric transmission business. The FERC 1000 ruling effectively takes away the right of first refusal for incumbent utilities, and FERC is giving incentive returns for new technologies and projects in national interest corridors. But multi-state projects are difficult to get permitted, because you have to deal with multiple state PUCs and permitting agencies.
This high level of uncertainty makes it almost impossible for utility clients to plan and build transmission projects. For us, that’s an opportunity. Once a project gets a green light you have to move fast. That lends itself to EPC and fast-track delivery. And we already have a national footprint, so if one market is moving ahead and another is stalled, we can move our resources to the hotter market.
Eppinger, Fluor: For an