U.S. TOPS GLOBAL LNG EXPORTS
In October 2023, the United States became the world’s number one exporter of liquefied natural gas (LNG) for the first time. Although the Department of Energy did pause LNG export approvals in January, that brief hiatus should only affect those countries without free trade agreements with the U.S. The White House released a statement saying that the pause should not affect existing exports.
U.S. LNG export facts:
92.9 million metric tons of LNG export capacity per year was reported for the U.S. in October 2023, the largest in the world (Statista).
8.6 million tons of LNG was exported in December 2023—an all-time monthly high.
In 2022, the U.S. exported 34 percent of its LNG for global spot and short-term volumes, the largest of any country (U.S. Energy Information Administration).
What caused this shift to make the U.S. number one? Here are a few causes:
The “Shale Revolution” in the U.S., hydraulic fracturing technology, and horizontal drilling stimulated by public and private innovations and investments.
Freeport LNG returning to normal operations and the opening of Calcasieu Pass in 2022, both of which are major LNG exporters.
Geopolitical tensions between Russia and other parts of Europe in 2022, which drove demand for global spot and short-term volumes (immediate and day-to-day transactions) of LNG.
BATTERY STORAGE CAPACITY TO DOUBLE IN 2024
Extreme growth in the battery storage sector is projected over the next three years; it is an essential element for diversifying a clean energy mix. Battery storage is an enabler of renewable sources, allowing power generated by solar and wind to be used later.
Battery storage capacity facts:
7,322 megawatt storage hours were reported in Q3 2023, hitting a new operational capacity high (Wood Mackenzie).
Storage capacity is expected to increase from 7.8 gigawatts to 40 gigawatts from 2022 to 2025 (U.S. Energy Information Administration).
$370 billion was allocated to clean energy and energy efficiency investments through the Inflation Reduction Act (Department of Energy & Environment).
Solar power generation is expected to grow by 75 percent, and wind power generation by 11 percent, by 2025 (U.S. Energy Information Administration).
RAPID EXPANSION IN THE DER MARKET
Quick growth is anticipated in the distributed energy resource (DER) market. In the wake of the energy transition, the demand for DERs is growing fast. DERs are small-scale energy resources such as rooftop solar panels, battery storage, and electric vehicles. Virtual power plants, also growing in popularity for their ability to generate power and for being a low-cost alternative, are a cloud-based coalition of DERs.
DER facts:
The value of the DER market from 2022 to 2027 is projected to be $68 billion per year (Wood Mackenzie).
The Federal Energy Regulatory Commission issued Order No. 2222 to provide opportunities and compensation in the DER market by allowing DERs to compete against traditional generation sources.
Last year, the National Association for Business Economics (NABE) reported a mixed outlook for the economy. Some respondents reported tepid GDP growth expectations for 2023 with a rebound projected for 2024, while others reported an imminent recession looming. NABE President and Morgan Stanley Chief U.S. Economist Ellen Zentner summarized the latest NABE survey results, stating that they “sharply revised upwards their projections for U.S. economic growth in 2024.” Strong economic growth is now forecasted for 2024. Optimism is running high, yet respondents continue to agree that “too much monetary policy tightness” is the greatest downside risk to the economy.
WHAT DOES THIS MEAN FOR THE AEC INDUSTRY?
In 2023, the economy of the AEC industry was affected by supply chain disruptions, rising interest rates, inflation, labor shortages, geopolitical tensions, and a post-COVID-19 environment. According to FMI’s Q1 2024 report, “despite the economic uncertainty, total engineering and construction spending for the U.S. is forecasted to end 2023 up 10 percent.”
According to data reported by the U.S. Census Bureau, these five sectors had the highest design and construction spending for 2023 (see pie chart for all nonresidential sector standings):
Transportation: $198 billion
Manufacturing: $196 billion
Commercial: $132 billion
Power: $122 billion
Education: $116 billion
Manufacturing moved up from spot number four in 2022, from 12 percent of spending to 18 percent, while the top five markets remained the same in the nonresidental sector. Government spending continues to be a primary driver for the transportation sector. The single-family residential sector took a hit in 2023, while nonresidential markets carried the industry. And the office sector is seeking new ways to utilize its space.
WHAT TO EXPECT FOR 2024, ACCORDING TO NABE PANELISTS:
Anticipation that the Fed will cut rates by June with a return to 2 percent by 2025
30-year fixed mortgage rates are not expected to fall below 6 percent in 2024
3.9 percent average annual unemployment rate
A soft landing for the U.S. economy
The Private Side column in Engineering Inc. focuses on the markets listed above, and information and insights on economic data relevant to the industry. For more on these topics, subscribe to ACEC’s quarterly Market Intelligence Briefs: https://www.acec.org/resources/market-intelligence/#newsletter.
Diana O'Lare, CPSM, is ACEC’s director of market intelligence. She can be reached at dolare@acec.org.
