The Environmental Protection Agency's impending regulation to lower power plants' carbon emissions is projected to shape demand for transmission and distribution (T&D) services.
Working towards the goal of cutting power plant emissions by 30 percent by 2030 from the 2005 levels, utilities have already achieved reductions of 14 percent. Ongoing work in terms of network renewal, new generating capacity, and reconfigurations will translate into revenue growth for the T&D services market.
Services for distribution projects will become important as this sector benefits from higher investment and outsourcing to contractors.
New analysis from Frost & Sullivan, Analysis of the North American Transmission and Distribution Services Market, finds that the market earned revenues of $20.43 billion in 2013 and estimates this to reach $20.94 billion in 2018. Key market segments of T&D services are engineering and consultancy, construction, and operations and maintenance.
The North American T&D services market has benefitted from major investments in generation, transmission, and distribution infrastructure in both Canada and the United States. These investments are driven by the need to: Renew aging equipment, improve reliability and performance of electrical networks and ease grid congestion.
Utilities are making considerable investments to protect T&D infrastructure from natural and manmade disasters. For instance, in the wake of devastation caused by Hurricane Sandy in October 2012, utility companies redoubled their efforts to stormproof the distribution network. This proved to boost the T&D services market.
"Despite greater outsourcing of T&D tasks, the market has remained conservative in certain areas," said Frost & Sullivan Energy & Environmental Principal Consultant Farah Saeed. "Small electrical jobs and support for distribution voltage projects are still offered in-house; however, there is growing demand for external support for numerous transmission projects."
With utilities, especially investor owned utilities, increasingly evaluating financial performance, there is a keen desire to slash non-critical investments and outsource non-core activities to save on all aspects of maintenance. While this bodes well for T&D players, they are also diversifying their operations in new verticals and acquiring companies to counter the sluggish investments over the last decade.
Nevertheless, the revenues from transmission services are expected to fall until 2018, as major projects near completion. In contrast, services for distribution projects will become important as this sector benefits from higher investment as well as outsourcing to contractors.
"Although transmission infrastructure will continue to attract the headline projects, developments in the distribution sector will provide more diverse opportunities, especially in areas such as data management and environment conservation," noted Saeed.