The energy market is quickly evolving and remains one of the most discussed markets globally. The Infrastructure Investment and Jobs Act (IIJA) will allocate $65 billion to the power and grid market. The Inflation Reduction Act (IRA) will provide tax credits, rebates, and $9.5 billion for clean hydrogen initiatives. This market is expected to see exponential growth and change over the next 30 to 50 years. The following are the most impactful trends expected in the transition to clean energy.
Petroleum, natural gas, and other liquids led energy consumption in the U.S. from 1990 to 2021, and continued growth is projected through 2050, according to the U.S. Energy Information Administration. Globally, though, demand for natural gas is expected to have declined in 2022, made tighter by the 2022 Russian invasion of Ukraine and Europe’s desire to replace the gas supply it receives from the Russian pipeline, according to the International Energy Agency. Renewables are globally poised for long-term growth. They are the fastest growing consumed sources, with consumption rates projected to double by 2050.
Historically, coal has been the least expensive energy source in the U.S., and more than one-fourth of the total known world coal reserves are in the country, according to the National Academies of Sciences, Engineering, and Medicine. Renewables have become the cheaper option, however, propelling the energy transition away from fossil fuels. Renewable power alternatives would bring $156 billion in savings to emerging economies, according to the International Renewable Energy Agency. Funding from the IRA and associated tax credits are also expected to double domestic wind and solar generation through 2030 with $370 billion more in funding, according to a report from Energy Innovation.
The water supply market became one of the top five hottest markets in 2022 with 12.8 percent year-over-year growth, according to August 2022 construction-put-in-place data released by the U.S. Census Bureau in October 2022. The need for water infrastructure has accelerated in recent years due to the aging infrastructure of pipes and new funding from the IIJA. The IIJA will provide $55 billion toward clean drinking water initiatives including replacement of all lead pipes and service lines. “Water pipe replacement rates will peak in 2035 at 16,000 to 20,000 miles of pipes replaced per year, four times the current annual replacement rate,” according to the U.S. Environmental Protection Agency and McKinsey.
The IIJA allocated $9.5 billion for clean hydrogen initiatives. According to the U.S. Department of Energy (DOE), funding is allocated as follows: $8 billion for six to 10 regional clean hydrogen hubs throughout the U.S., $1 billion for a clean hydrogen electrolysis program, and $500 million for clean hydrogen manufacturing recycling initiatives. According to the Great Plains Institute, the potential selection of hydrogen hub regions may be based on core emission areas including the Pacific Northwest, Northern California, Southern California, Utah, the Rockies, the Permian Basin in Texas and New Mexico, Houston, Louisiana, Illinois, Michigan/Ohio, Kansas/Oklahoma, and Western Pennsylvania. The DOE will oversee the location selection. ACEC is also tracking other key programs of interest, including: $10.5 billion for grid resilience, $4.9 billion for carbon management, $2.1 billion for carbon dioxide transportation infrastructure, and $1 billion for rural energy systems.
Utilities are expected to place more emphasis on resilience strategy in the immediate future due to the recorded frequency of extreme weather events and historic climate change, according to Deloitte’s 2022 Power and Utilities Industry Outlook. The survey reported weather-related losses exceeding $1 billion per event in the first three quarters of 2021, and 51 percent of respondents reported extreme weather impacting the reliability of electricity delivery. This is where public-private partnerships (P3s) can be a positive source of funding in the market. One example of this type of P3 in action is the District of Columbia Power Line Undergrounding project, which is a partnership between the District and Pepco to provide reliable and resilient electricity to D.C.’s consumers. Dry utility engineering, subsurface utility engineering, transportation, and surveying are a few services required for this type of project.
Increasing pressures from climate change, geopolitical conflict, and netzero goals, combined with billions of dollars in funding, has rapidly accelerated the clean energy transition. Regions in the U.S. are racing to set their own net-zero goals and positioning to win some of the $65 billion in funding coming to the power and grid markets from the Bipartisan Infrastructure Law.
ACEC recently traveled to Houston to host its first-ever Private Market Energy Symposium, the final stop on its 2021-2022 symposium tour. Houston has been called “the Energy Capital of the World.” Attendees heard from experts from the Center for Houston’s Future, ProgressRail, Jupiter Power, Evolve Houston and the Greater Houston Partnership; scholars at Rice University, the University of Texas at Austin, and the University of Houston; and other industry professionals from Blueprint Power, the Energy Corridor, Lane Power & Energy Solutions, and Black & Veatch.
“Business opportunities in the energy sector continue to grow,” said ACEC President and CEO Linda Bauer Darr. “With this Private Market Energy Symposium, we are helping member firms prepare for the influx of federal investment in American energy projects.”
The IIJA will provide clean hydrogen initiatives with $9.5 billion in funding, with $8 billion specifically for six to 10 regional hydrogen hubs. Chief Executive Officer of the Center for Houston’s Future Brett Perlman joined the “Future of Hydrogen” panel at the Energy Symposium and shared the company’s strategy and efforts to procure one of the hydrogen hubs for Houston. Perlman discussed how Houston has the largest transmission, associated infrastructure, and distribution pipelines in the U.S. with favorable proximity to industrial demand centers and access to acres of salt cavern storage—one of the best options for storing hydrogen. Perlman further laid out the benefits of the Gulf Coast region as a thriving hydrogen ecosystem with a high degree of location-based mobility. The Houston landscape possesses the necessary supply and production for a hydrogen hub, providing a competitive advantage over other regions—one of the reasons for hosting the first Private Market Energy Symposium in Houston.
The Private Side column in Engineering Inc. focuses on the private-sector markets listed above, and information and insights on economic data relevant to the industry. For more on these topics, subscribe to ACEC’s bimonthly Private Industry Briefs: https://programs.acec.org/industrybrief.
Diana Alexander, CPSM, is ACEC’s director of private market resources. She can be reached at email@example.com.