January 2017, Vol. 244, No. 1
Features
Deal-making, Increased Pipeline Safety on Tap for 2017
Construction management and consulting firm, TRC Companies, released its top 12 predictions for the energy, utility, and oil and gas sectors for 2017, which included robust funding for utility mergers, acquisitions and infrastructure upgrades, along with big shifts in power plant and pipeline construction focus.
“Even as oil and gas prices fluctuate and regulatory policies evolve, we see market drivers remaining very strong for investment in energy system upgrades and environmental and infrastructure work for the ongoing expansion of renewables,” said TRC CEO Chris Vincze. “Our country has a tremendous need to update antiquated and deficient infrastructure, and that combined with available capital means investment will remain robust in 2017.”
With national emissions and climate-change regulations likely to change significantly under the new president and Congress, TRC’s top predictions for 2017 are:
- Robust power-generation deal-making and M&A activity: Private equity funds have billions of dollars looking for returns, and slow load growth has investor-owned utilities interested in expanding both geographically and from electricity into gas and vice versa.
“Interest will remain high in deals for gas-fired generation, wind and solar projects, and even existing coal-fired generation when the price and potential returns are right,’’ said Mark Hall, TRC vice president of power development.
- Pipeline construction and maintenance focus shifts: Given current oil and gas supplies and prices, expect pipeline construction activity in the U.S. in 2017 to focus much more on optimization than unbridled expansion: 30-, 40-, and 50-mile projects in various areas to improve the efficiency of delivery networks or meet the needs of specific end-use customers, not proposals for 300-, 400-, and 500-mile projects to open major new supply flows.
Two exceptions: TRC expects a big push to increase gas pipeline capacity from the Southwest to and through Mexico as the country continues to replace oil-burning electric generating stations with units fired by U.S.-exported gas. Also, with the new White House administration, the Keystone XL pipeline will likely be back on the table. Finally, 2016 incidents will drive stricter regulations and more aggressive inspection regimes by pipeline operators in 2017.
- For pipeline developers, new rules for public engagement: As dramatized by the protests over the Dakota Access Pipeline Project and environmentalist backlash against pipeline projects generally, TRC anticipates more proactive public outreach and engagement during the pipeline development process, along with greater adoption of pipeline routing optimization technology to identify the least controversial, most buildable pipeline routes.
“Regulatory agencies are under more scrutiny and litigation pressure, so pipeline developers and their technical consultants will have to back up routing optimization with smarter, more proactive communication and education efforts to win public and regulatory support to get projects built,’’ said Scott Reed, TRC vice president of oil and gas.
- States will serve as drivers for efficiency and renewables: With the new administration taking energy policy in a new direction, look for most momentum for green energy/energy efficiency/demand response policy change to come from states like California, New York, Massachusetts and New Jersey in 2017.
- Microgrids go social, buildings go all-electric: As the transition to an advanced energy system accelerates, TRC expects a growing numbers of end users to team up in community microgrids that combine multiple, diverse customers – municipal, commercial, residential, and institutional – as unified “islands” of electric load to improve overall reliability, increase the impact of shared energy and efficiency sources, and reduce energy costs.
- Some regional gas generation plateaus: With gigawatts of new gas-fired generation in markets including Pennsylvania, Ohio and Texas, look for proposals for new gas generation in the PJM and ERCOT grids to taper down by the end of 2017. As this wave of new capacity there taking advantage of abundant shale gas comes online, installed generation is approaching economic oversaturation.
- More program partners for utility upgrades: In the year ahead, more utilities will recognize the need for a program partner to manage massive upgrade/modernization programs, including replacement of aging infrastructure, compliance with regulatory and emissions mandates, and securing the grid against terrorism and sabotage.
The top 15 utilities face $30 billion worth of necessary upgrades, well beyond their in-house capabilities to manage. Partnerships with entities that have deep program management experience will be critical.
- On the grid, communication is key: Next year will see significantly increased investment in communications capabilities on the grid, at both the system and substation level, to enable more kinds of electrical equipment to report problems and communicate with other devices to address heightened concerns about grid vulnerability to terrorism and sabotage. Expertise in managing the integration of these devices and technologies into electrical facility design will become more important than ever in 2017.
- Decommissioned generator site redevelopment: As more communities see former power plant sites redeveloped into industrial, commercial, retail, maritime and recreational facilities, interest will grow in reforms – such as what’s now under way in Pennsylvania – to define and cap the environmental legal liability for successor plant site owners for contamination related to past generation activity.
- Coal ash cleanups: As the EPA’s final rule on “management of coal combustion residuals from electric utilities” has taken effect, lawsuits challenging utilities on their self-certification plans to secure and close coal ash ponds and other disposal facilities have increased. TRC expects a growing chorus calling for more uniform and predictable federal and state regulations that can lead to faster, more successful and cost-effective closures without the uncertainty, expense, and delay of litigation.
- Forecasting the price of oil will remain an uncertain science: The anticipated production cuts by OPEC and Russia will have a small but positive impact on oil prices. Domestically, U.S. crude oil will likely remain close to $50 per barrel in 2017, barring major geopolitical events that traditionally have caused significant price volatility.
- Energy storage. Many electric utilities will ramp up work with microgrids and battery storage. But the major factor limiting widespread adoption will be whether and when utilities can get regulators’ approval for ratepayer-funded investments in the technology.
“Energy storage raises so many questions for rate design, cost-shifting, impacts on generators, integration with grid operations, and technical compatibility issues that we do not see 2017 being the year of widespread utility-scale adoption, although we do foresee continued pilot storage projects to gain operational experience,’’ said Steve Persutti, TRC vice president of utility development.
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