Utility System Construction
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 17,700 utility system construction firms in the US are specialty contractors that develop buildings, structures, and distribution networks associated with water, sewer, petroleum, gas, power, and communication systems. Firms provide new construction, reconstruction, rehabilitation, and repair services. Companies may specialize in a utility sector or offer services across multiple utilities.
Difficult Work Site Conditions
Utility construction projects can involve complex site conditions, including difficult to reach terrain and underground locations.
Seasonality and the Weather
Seasonal demand for utility system construction services creates uneven cash flow.
Industry size & Structure
The average utility construction firm employs 36 workers and generates about $9 million in annual revenue; the average water and sewer line construction firm employs 15 workers and generates $4 million annually; the average oil and gas pipeline construction firm employs 103 workers and generates about $27 million annually; and the average power and communication line construction firm employs 44 workers and generates about $12-13 million annually.
- The utility system construction industry consists of about 17,700 companies that employ 579,000 workers and generate about $158 billion annually.
- The oil and gas pipeline segment and the power and communications segment are concentrated at the top with the 50 largest firms representing 64% and 59% of the segment's total revenue, respectively. The water and sewer segment is more fragmented with the 50 largest firms representing just 20% of the segment's total revenue.
- The utility system construction industry includes several large players with national to near-national scope, regional firms, and many small independent firms that often serve as subcontractors to larger firms and operate within a limited geographical market.
- Large companies include MasTec, Dycom Industries, and Granite Construction. Some large firms have international operations.
Industry Forecast
Utility System Construction Industry Growth
Recent Developments
Sep 19, 2024 - Rising Electricity Demand Expected to Drive Prices Higher
- A surge in US electricity demand – driven by data center growth, cryptocurrency mining, building and vehicle electrification, and battery and fuel cell manufacturing could boost the costs utilities pay for electricity by 19% by 2028, according to a report released in September by consulting firm International Finance Corporation (IFC). Some parts of the country - including Texas, New England, and the Southeast – could see prices rise even more. The IFC report predicts electricity demand will increase by 9% by 2028 and 18% by 2033, or an annual average of about 2% per year compared to 2024 demand levels. To meet the rise in demand, the IFC says utilities will need to leverage new technologies, including AI-enabled efficiencies, along with a balanced mix of new supply.
- In the effort to reduce greenhouse emissions, a handful of US gas-fired power plant operators have taken steps to integrate hydrogen into their fuel mix, according to the US Energy Information Administration. Hydrogen combustion doesn’t create CO2 emissions. Five power plant operators have already performed hydrogen cofiring testing, and two others have planned cofiring upgrades to existing plants. Three power plant operators have new plants under construction that are expected to have hydrogen cofiring capability. Recently updated EPA power plant emissions rules and production tax credits through the Inflation Reduction Act are prompting some operators to add hydrogen to their fuel mixes.
- Steady government investments in infrastructure, and building and transportation electrification are expected to drive robust growth in utility system construction spending in 2024, according to construction consultancy and investment banking firm FMI. Grids expect strong electricity load growth in the coming years amid increased investments in manufacturing, data centers, and the electrification of transportation and buildings. Power project spending is forecast to rise 8% in 2024 over 2023 levels. Population growth and Infrastructure Investment and Jobs Act funding are boosting spending for sewage and water systems. Construction spending for sewage and waste disposal projects is expected to rise 8% in 2024, and water supply expenditures will grow 9%.
- US electricity demand declined 1.6% in 2023, partly due to mild weather, but electricity consumption is expected to rebound to 2.5% growth in 2024, according to a recent report by the International Energy Agency (IEA). US electricity consumption is projected to grow by an average of 1% annually in 2025 and 2026 amid continued electrification efforts and robust electricity demand from data centers. Between 2024 and 2026, data centers are expected to account for one-third of new US electricity demand.
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