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Cheap Imported Solar Panels and Modules Have Harmed Domestic Panel Manufacturers Says USITC

Posted on October 18, 2017 in Energy Utility & Pipeline - 0

The recent decision by the United States International Trade Commission, in which the commission found that cheap imported solar panels and modules have harmed domestic panel manufacturers, is creating a good deal of uncertainty about the future of the solar market in the US.  Our team at Continuum Advisory Group completed some research on the Utility Scale Solar business this summer for a client.  Despite a recent slowdown in Utility Scale Solar projects in 2017, there is a large amount of work in the pipeline.  As shown in this data from the Solar Energy Industries Association, the current pipeline of Utility Scale Solar is greater than the current amount of Utility Scale Solar installed.

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Pipeline Construction Waves: Will You Thrash or Crash?

Posted on May 1, 2014 in Energy Utility & Pipeline - 0 comments - 0

Mark Bridgers kicked off the AGA’s Utility Contractor Workshop on Tuesday, April 29 in Chicago with a speech entitled “Pipeline Construction Waves: Will You Thrash or Crash?” The speech outlined the drivers of the next several waves of pipeline construction through 2030. A highlight of the speech included a look at the large amount of bare steel and cast iron gas main that still remains to be replaced in the next decade.

BareSteelCastIronMainReplacementNeedbyStateThis map, developed from proprietary Continuum Advisory Group analysis of PHMSA data, illustrates the miles of bare steel and cast iron main in need of replacement by state. Despite accelerated replacement programs underway for several years in the North East there is still years of work ahead. Looking beyond the states with over 5,000 miles needed there will be significant opportunities for replacement work in the South and Midwest where many of the major utilities have not yet begun accelerated replacement programs.

Another interesting point of data illustrates the effect that the shale oil and gas industry is having on local unemployment. This map provided by the Bureau of Labor Statistics show the average unemployment rate by county for 2013.

LocalJobCreationCounties with significant shale E&P activity continue to demonstrate the lowest unemployment rates relative to the national average. As the overall economy continues to improve the competition for labor will continue to increase in these markets.

Later in the day, Mark led a panel of utility executives and utility contractor executives focused on work procedure changes and how to document them, roll them out effectively, and how to ensure compliance with them. During the panel, Utility and Contractor staff shared experiences on practices that have been implemented to share updated work procedures and mechanisms to communicate changes in procedures to their organizations. Panel participants included the following:

Some of the questions addressed included:

  • [themecolor]Q:[/themecolor] There is evidence that there are more work procedure changes taking place today than in the past. Do you agree that frequency is increasing and if so, can you describe what you see as the drivers of change and the degree of contribution of each driver?
    • [themecolor]A: [/themecolor]All of the panel members described an environment that is experiencing many more changes where the majority of them are being required by regulatory and other bodies. The drivers quoted ranged from regulatory authorities, environmental compliance, municipal inspection and permitting authorities, material changes, etc.
  • [themecolor]Q: [/themecolor]Describe the range or types of roll out approaches you have observed? Describe what type of support activities you either undertake yourself or would like to see from utilities during a roll out?
    • [themecolor]A:[/themecolor] The approaches ranged from: Hands-Off & Passive – where process or procedure updated materials and shared in hard copy or electronic form with little or no instruction as to what was changed; to Hands-On & Face to Face – where process and procedure changes are reviewed in detail through a training or education environment. All parties agreed that electronic documentation distributed in an electronic fashion with details on specific changes noted is the most efficient method to distribute changes… but not necessarily the most effective.
  • [themecolor]Q: [/themecolor]What are the approaches, in your opinion, to ensure compliance with new work procedures? What is the most appropriate role of the utility in ensuring compliance? What is the most appropriate role of the contractor in ensuring compliance?
    • [themecolor]A:[/themecolor] “Tell what you are going to tell em; Tell em; Tell em what you told em!” Followed by a “trust but verify” approach. All parties described the critical but distinct roles of supervision, inspection, quality assurance, and quality control. The panel then went on to describe their perspectives of how to apply the functions of supervision, inspection, quality assurance, and quality control most effectively to yield compliance.

About Mark Bridgers

Mark Bridgers is a consultant specializing in driving performance improvements through the capital construction process for owners or developers and helping architects, engineers and contractors generate reasonable returns for the risk undertaken. Continuum Advisory Group provides management consulting, training, and investment banking services to the worldwide utility, infrastructure, and homebuilding industry.

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Energy Megatrends April 2014

Posted on April 4, 2014 in Energy Utility & Pipeline - 0 comments - 0
An update on Trends Related to the Shale Oil/Gas Revolution – Power Production & Crude Oil Transport

Continuum Advisory Group is continually tracking trends that will drive your business now and in the future. In this blog post I’ve provided a summary of the latest data and shared my insights on what it means for the future.

The rapid development of shale oil and gas resources has been a major driver of market changes affecting a wide range of industries including utilities, pipeline owners and operators, pipeline contractors and other service providers, power producers and petrochemical manufactures, to name a few. The latest data from the US Energy Information Administration (EIA) (@EIAgov) and the United States Census Bureau (@uscensusbureau) provides some new insight into how key trends driven by shale are developing. Highlights include the following:

  • The three year decline in US electric power demand stopped in 2013. It is unclear if electric power demand growth is back or if this is a short term pause in the decline. Demand numbers for the second half of 2014 will provide clarity.
  • The five year decline in coal fired electric generation also stopped in 2013. This is more likely a short term pause as continuing coal plant retirements will reduce overall coal generation. Increased natural gas fired electric generation will continue through the decade with a strong focus on the Southeast.
  • The initial phase of shale oil development characterized by production exceeding local takeaway capacity and bottlenecks in midstream infrastructure leading to supply gluts is passing. The liquid transportation market will continue to stabilize though significant investment in new liquid transportation infrastructure will continue for another three to five years.
  • Shale oil & gas was by far the largest driver of new US employment from 2007 to 2012. The mining, quarrying, and oil and gas extraction sector grew employment by 23.7% with payroll up 51% from 2007 to 2012. As other sectors of the economy continue to recover, the war for talent among companies operating in this space combined with other companies seeking individuals with similar skills will intensify. Finding and retaining employees, particularly engineers, managers and skilled trades, will be a key element of success over the next decade.
Electric Power Trends

Trends in Power Generation by Fuel Type

Shale gas, in combination with increasing regulation of coal and falling electric demand, is reshaping the electric power industry. The winning fuels in this environment have been Natural Gas and Renewables. Beginning in 2008, net generation provided by Coal began to fall rapidly. At the same time net generation from Natural Gas began to accelerate. Generation from renewable sources has experienced steady growth for the last decade.

Total Power Generation in the US fell rapidly in 2009, before recovering in 2010, only to begin a slow decline over the next two years. The EIA’s Electric Power Monthly provides detailed data around these issues. The latest update provides final numbers for 2013 along with January 2014 data. This year appears to be a reprieve for a few industries (Coal & Electric Power) that have been down lately.

Recent Total Power Gen

Coal had a strong winter in 2013, followed by a summer with generation holding near 2012 levels. December 2013, and January 2014, again saw Coal outpace its performance in previous years.

Total electric generation also improved in 2013, with generation up 0.26% after declines in 2011 & 2012. This return to slow electric demand growth would appear in line with EIA projections for future electric growth. The trend appears to continue with January 2014 generation up 8.2% from January 2013.

Electric Demand Forecast
A closer look at the data raises some doubts that we are moving beyond the period of electric demand decline. During the first 8 months of 2013 electric demand continued to fall, down 0.9%. It was only during that last four months of 2013 that generation increased, up 2.7%. Anyone living east of the Rockies is painfully aware of the potential driver of this demand. The winter in the east has been brutal, particularly in the heavily populated Midwest.

 

 

 

9_13 to 2_14 Temp

 

1_14_Temp

 

January in particular was very cold with several states recording temperature averages that ranked in the top ten coldest Januarys since 1894. This was particularly disruptive to energy markets, and those unfortunate enough to live there, as the last decade has typically seen winters well above the long term averages in terms of temperatures.  A good example of this disruption is natural gas prices over the last few months.

 

 

Henry Hub Gas

The details behind the growth in electric demand also offer some insight into the cause to the growth experienced over the last several months. In January 2014, generation to residential customers was up 11.5%, commercial was up 6.4% while industrial was down 0.7% relative to January 2013. Like the EIA, we do expect electric demand in the US to stabilize soon and resume very slow growth. What is not clear is if this stabilization is already occurring. The spring/summer/fall numbers from EIA will be very telling in terms of the future outlook for the power sector.

 

EIA Planned Capacity

The stemming of the decline in coal power generation in 2013 is much more likely to be short lived. The most recent EIA projections for new power plants and retirements through 2018 heavily favor natural gas and renewables. In excess of 20,000 megawatts of coal generation is scheduled for retirement by 2018. The vast majority of this will be replaced by a combination of Natural Gas and Solar/Wind.

 

Despite the recent volatility in natural gas prices, long term forecasts of low (below $4) gas prices are still valid, making natural gas the most cost effective replacement for utilities forced to retire coal generation assets. The somewhat uncertain future of electric demand will have little effect on the future of coal, as regulation is the primary driver of the decline. Future electric demand will have some effect on the level of opportunity related to new natural gas fired power plants and the pipeline activity necessary to support them. Overall the long term trend of power generation being the primary driver of increased natural gas demand will continue.

Shale Oil Trends

The rapid drop in natural gas prices in combination with sustained high oil prices led to a historic shift in the focus of US energy exploration in 2009. Data from Baker Hughes rig count database shows the change.

 

Shale Gas Trends

 

The rapid shift in focus to oil has created many opportunities related to crude oil production, transportation and refining. Moving this oil to refineries has been a challenge that is reflected in the price spread between WTI and Brent Crude.

WTI vs BrentStarting in early 2011, as the shale oil boom accelerated, rising inventories in places like Cushing, OK led to falling WTI prices and a persistent spread between WTI and Brent Crude pricing. A recent report by the EIA indicates that the significant investment in midstream infrastructure is beginning to have an effect as Cushing inventories have fallen below recent peaks.

The report highlights the following reasons for declining Cushing inventory:

  • The startup of TransCanada’s Cushing Marketlink pipeline, which is now moving crude oil from Cushing to the US Gulf Coast
  • Sustained high crude oil runs at refineries in Petroleum Administration for Defense Districts (PADD) 2 (Midwest) and 3 (Gulf Coast), which are partially supplied from Cushing
  • Expanded pipeline infrastructure and railroad shipments that have made it possible for crude oil to bypass Cushing storage and move directly to refining centers in PADDs 1 (East Coast), 3 (Gulf Coast), and 5 (West Coast)

This data indicates that we are catching up with takeaway capacity needed to service the largest US shale plays. New rail facilities, new pipelines, and gas to liquid pipeline conversions, such as Energy Transfers Trunkline and Kinder Morgan’s Pony Express, will continue to improve crude oil transportation capacity regardless of the decision to approve KeystoneXL. For contractors and service providers focused on new liquid transportation projects there is still likely 3 to 5 years of strong activity ahead. Beyond that, activity will likely shift to smaller lateral, capacity expansion, and O&M work to support continued high levels of domestic crude production.

One last item on the overall effect of the Shale Oil/Gas Boom comes from Ben Casselman (@bencasselman) writing for Nate Silver’s new FiveThirtyEight site. Casselman looks at the latest census data and notes:

Oil and gas states dominated the list of fastest-growing cities: Six of the top 10 were in Texas, North Dakota or Wyoming, where an oil and gas boom has brought unemployment rates below 5 percent. A separate census report on Wednesday showed just how powerful an economic engine the drilling bonanza has been. Employment in the mining sector grew 23.7 percent between 2007 and 2012, and total payroll by 51 percent, by far the fastest growth of any industry.

 

Continuum will continue to monitor the major trends related to the shale oil & gas revolution and provide periodic updates to keep you informed.

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A Post Shale Oil/Gas US: What is the source of the next pipeline construction wave?

Posted on March 27, 2014 in Energy Utility & Pipeline - 0 comments - 0

Mark Bridgers spoke on Tuesday, March 24 in Houston at the Pipeline Opportunities Conference, sponsored by Oildom Publishing. This speech focused on the outlook for pipeline construction through 2035. Continuum has identified three waves of pipeline construction: one that is concluding, and two waves that will occur over the next 20+ years.

Wave Graphic

The first wave of construction has led to a very strong pipeline construction market. Upcoming waves will reinforce this market creating both opportunities and challenges for industry participants over the next 20 years. By late in the next decade the pipeline market is likely to approach $80 billion dollars annually – this is quite a bit of growth for a market that was less than $10 billion as recently at 2003.

Table

Another highlight of the conference was the release of the INGAA Foundation’s updated 2035 Infrastructure Outlook Study. This comprehensive report was first completed in 2011 and contains a wealth of information for industry participants who are seeking data to help them plan strategically for the future. One of many examples of great data, which also supports Continuum’s outlook on the next wave of pipeline spending growth, was the INGAA forecast for natural gas demand growth.

INGAA Report GraphThe graph at the left from the INGAA report shows forecast gas consumption through 2035. Seventy-five percent of this growth comes from the power sector (much of this in the southeast). The bulk of the remaining growth comes from industrial markets.

As noted above, supplying gas to these new power and industrial facilities will be a significant driver of pipeline spending in the next several years.

These waves of construction activity Continuum is forecasting and the consumption growth anticipated by INGAA will create opportunities and challenges for pipeline operators and utilities as well as their service providers. In response, Continuum has outlined a series of strategies and actions that pipeline operators, utilities, contractors, engineers and service providers can take to overcome the challenges and seize the opportunities created by each upcoming wave of pipeline construction. Examples of some of these strategies are listed below:

For pipeline operators & utilities

  • Upgrade Service Providers: Lock in effective and efficient service provider resources with 5-7 year contracts
  • Project Delivery: Develop a structured project delivery system selection for type, geography, and pace of work
  • Upgrade Skills: Improve talent acquisition and retention for the replacement of baby boom generation
  • LEAN Construction: Develop partnering, collaboration, and integration skills with service providers to drive out waste

For contractors, engineers and service providers

  • Differentiate: Increase business development and differentiation capabilities versus competitors to secure more numerous, diverse, one-off, and potentially smaller projects across a range of industries
  • Integrated Project Delivery:  Build capability to delivery under multiple sourcing strategies and among various project delivery systems
  • Invest in Training:   1) Technical – To sharpen skills and meet quality specifications; 2) Management – To drive production improvement and waste elimination; 3) Cross Functional – To thrive in an environment that demands more than simply construction
  • Language of LEAN: Learn the language of LEAN construction and apply the concepts through partnering, collaboration, and integration with customers to drive out waste
  • Embrace Innovation, Disruption, and Scarcity: Focus on thriving with change in regulation, resource scarcity, etc

[youtube_video] sTQUOZzJ4DM [/youtube_video]

View or download a PDF of Mark’s presentation here: A Post Shale Oil/Gas US

MBridgers Headshot BW

Continuum’s staff has years of experience in helping pipeline operators & utilities, as well as their contractors, engineers and service providers in adapting to a dynamic environment like the pipeline energy and utility space. Contact Mark Bridgers at Continuum to learn more about how he can help your organization navigate the waves of the pipeline market to achieve success.

 

Mark can be reached via:

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Phone  919.345.0403  |  Skype  mark.bridgers.continuum

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