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PCCA Journal|1

st

Quarter 2015

12

markets produce 5- to 7-year cycles that coincide with the

economy. This market has resisted these cycles because

growth is not solely derived from economic factors but a

combination of economic and “derived demand” incentive.

Derived demand is produced through government regulation,

safety, environmental, or other actions. The drivers of electric

and gas growth include improving housing starts, tax credits,

continued pipeline replacement, pipeline safety regulation,

environmental regulation and concerns, distributed genera-

tion

1

, electric transmission expansion, and the beginning of

an industrial and power generation renaissance.

Electric Transmission & Distribution

The most disruptive, long-term

driver in the electric T&D market is

distributed generation. Why does

distributed generation impact the

electric T&D segment? Simply put,

it will reshape how the entire elec-

tric industry operates.

In Exhibit 3, we offer a forecast

of the development of the power

generation market. This market

completed a current wave of

activity marked by replacement

transmission construction driven

by aging infrastructure and bring-

ing remote wind power into the

grid. Distribution spending follows the economic cycle and

housing starts, peaking in 2007 and slow since then. By the

2030s, we anticipate a market that is deemphasizing tradi-

tional utility-centric power generation and expanding the

“smart” distribution and transmission grid infrastructure to

serve as a form of “insurance” capacity for sites that produce

too much or too little distributed generation power. We see a

market similar to the buying of insurance, intended to cut the

downside of loss, where sites are protected from producing

too little or too much power by purchasing capacity and ac-

cess to the grid. This transformation will demand a nation-

wide upgrade of the distribution and transmission grid. Can

distributed generation truly drive this type of change?

6UJMJUZ 0VUMPPL

Continued from page 11

Exhibit 2

Exhibit 3