The T&D Industry and Grid Modernization Efforts in the second half of 2015 – A Middling Performance – So What Lies Ahead for 2016?
While a number of energy industry pundits suggest that the T&D markets for infrastructure equipment and control systems always go up, I will revert to what another Newton stated a few centuries ago in his Third Law of Motion (“What goes up must come down”).
An informal survey of marketing/product managers being undertaken concurrently with the development of this article strongly suggests that we are in a “down” or at best, a “flat” year for much of T&D infrastructure and for the systems that monitor and control distribution networks. There are some exceptions as noted below.
A more formal study of CAPEX and OPEX plans among the world’s utilities will follow in the fourth quarter. The findings from this scheduled study will enable suppliers of equipment, systems and services to plan more appropriately for the coming two years. This will be the sixth edition of the Newton-Evans CAPEX/OPEX report that began with the financial crisis of 2008 and continued through 2013. Now that low load growth and low capital investments have again hampered the bumpy road to grid modernization, the timing for this study will be helpful.
In preliminary discussions with U.S.-based manufacturers, integrators and industry observers, it is clear that we have entered into a period of further uncertainty and limited investment capabilities for utilities, with some major infrastructure and grid modernization projects being delayed or deferred for months or even years. The significant industrial consumers of electric infrastructure products and smart grid equipment and systems are, in some cases, in a more difficult position than are electric utilities. With falling commodity prices, and the widening spread of corporate bond costs versus Treasury bond costs, the ability of many companies and utilities to source capital for investment is not as “low-cost” as current interest rates would have it.
All is not lost however, as a “flat lining “outlook in economic terms (but not in medical terms, however) is not as dismal as it sounds, and is a lot better than actual declines in product shipments or in systems and services. As several market participants and observers have reported to us in September and early October, the T&D equipment market performance this year and the outlook for next year will vary by product type, by voltage ranges, by application and by unanticipated events. Equipment such as inverters, MV cable and MV switchgear equipment related to renewables projects is still likely to show moderate growth. It is our contention that security concerns and related technical and technological solutions remain at the top of the list for near-term investments as well. If the several significant transmission projects on the drawing board receive final approvals from authorities, then sales of HV equipment, cable, towers et al will also benefit.
As the result of recent assignments working on projects related to the role of T&D equipment testing in a laboratory setting and the various commercial, university and utility labs that provide tests for T&D equipment, we have learned much about the vital role played by such facilities. In effect, the commercial equipment test labs serve as harbingers – leading indicators – of new product introductions and relatedly, to the level of market activities. To date, two-thirds of the major labs surveyed have indicated a downturn in lab testing business activities this year.
Maybe we can add this final observation to Sir Isaac’s list of Laws of Motion. The squeakiest grid modernization “wheels” will get the grease (the funding) in the coming year. At this time the squeakiest wheels that resonate with us appear to be the requirement to shore up cyber and physical defenses and the push to keep those renewables coming onstream!
– Chuck Newton
summary reviews and highlights from completed studies
