Robust Dealmaking and Investment, Increased Pipeline Safety and Grid Security
LOWELL, Mass. - [December 12, 2016] - TRC Companies Inc. (NYSE: TRR), a recognized leader in engineering, environmental consulting and construction-management services, today released its top 12 predictions for the energy, utility, and oil and gas sectors for 2017, including robust funding for utility mergers and acquisitions and infrastructure upgrades as well as big shifts in power plant and pipeline construction focus.
TRC CEO Chris Vincze said: "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. 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 for everything from renewable power and energy efficiency to utility consolidation and upgrading distribution systems.''
With national emissions and climate-change regulations likely to change significantly under the new president and Congress, TRC's energy/utility/oil and gas predictions for 2017 include:
1 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.
2 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 ("demand pull"), not proposals for 300-, 400-, and 500-mile projects to open major new supply flows. Two exceptions: We anticipate a big push to increase gas pipeline capacity from the U.S. 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 (like the U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration "Mega Rule") and more aggressive inspection regimes by pipeline operators in 2017.
3 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, we anticipate 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.
4 States are the drivers for efficiency and renewables. With the new administration in Washington 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.
5 Microgrids go social, buildings go all-electric. As the transition to an advanced energy system accelerates, we expect to see growing numbers of end users 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. ""Another emerging energy trend in 2017 is with technology maturing and costs declining, more developers of high-performance and zero-net-energy buildings will consider making them all-electric, using solar PV as a major energy source, evaluating integrating energy storage and using heat pumps to replace fossil fuels for heating needs,''said Carmen Hendrickson, Associate Vice President, TRC Energy Services.
6 Some regional gas generation plateaus. With gigawatts of new gas-fired generation under construction and development 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 on line, installed generation is approaching economic oversaturation.
7 More program partners for utility upgrades. In the year ahead, more utilities will recognize they need to turn to 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.
8 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.
9 Decommissioned generator site redevelopment. As more communities see former power plant sites successfully redeveloped into industrial, commercial, retail, maritime and recreational facilities, interest will grow in 2017 in reforms -- like 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.
10 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. We expect to see a growing chorus in 2017 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.
11 Forecasting the price of oil will remain an uncertain science: The anticipated production cuts by OPEC and Russia in late 2016 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
12 Energy storage. Many electric utilities will ramp up work in 2017 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.
TRC and its over 4,000 employees in 120 U.S. and U.K. offices are excited about what promises to be a busy, innovative year for the utility, generation, and oil and gas sectors. Vincze said, "TRC enters 2017 with strong capabilities to deliver solutions for clients throughout the power and oil and gas markets, and we're continuing to invest in strategic hiring, evolve our service offerings, and identify acquisition opportunities that enhance our technical capabilities and geographical footprint.''
A pioneer in groundbreaking scientific and engineering developments since the 1960s, TRC is a national engineering, environmental consulting and construction management firm that provides integrated services to the power, environmental, infrastructure and oil and gas markets. TRC serves a broad range of commercial, industrial and government clients, implementing complex projects from initial concept to delivery and operation. TRC delivers results that enable clients to achieve success in a complex and changing world. TRC trades on the NYSE under the symbol TRR. For more information, visit TRC's website at www.TRCsolutions.com, follow us on Twitter @TRC_Companies or find us on LinkedIn.