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 17,660 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 17,500 companies that employ 543,700 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 Layne. Some large firms have international operations.
Industry Forecast
Utility System Construction Industry Growth
Recent Developments
Mar 19, 2024 - Strong Utility Construction Spending Growth
- 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 11% in 2024 over 2023 levels. Population growth and funding from the Infrastructure Investment and Jobs Act are boosting spending for sewage and water systems. Construction spending for sewage and waste disposal projects is expected to rise by 11% in 2024, and water supply expenditures will grow by 8%.
- There are currently about 22 gigawatts (GW) of small modular reactor (SMR) projects worldwide in various stages of development, up 65% compared to 2021, according to a recent report by Wood Mackinzie. The US leads with nearly 4 GW in announced SMR projects and another 3 GW in early development or pre-development. While most SMR projects are not yet under construction, the world’s first commercial SMR project came online in 2023 in China. In its global net zero outlook, Wood Mackinzie expects SMRs will account for about 30% of the world’s global nuclear fleet. While most SMR deployments are expected to provide power to grids, energy-intensive industries – including oil & gas extraction, data centers, and petrochemical manufacturers - are also making SMR investments. Support for SMR projects is gaining momentum after the US and 24 other countries pledged to triple nuclear power capacity by 2050 during a United Nations climate summit in Dubai in December 2023.
- The US installed a record 32 gigawatts of new solar generation capacity in 2024, according to a March report by the Solar Energy Industries Association (SEIA) and Wood Mackenzie. Solar installations in 2024 increased 51% over 2022, marking the first time capacity additions surpassed 30 GW in a single year. Solar energy also accounted for 53% of all new electricity-generating capacity added in 2023. The SEIA’s CEO said the incentives included in the Inflation Reduction Act have helped unleash solar investments. While solar additions are expected to continue, the pace of growth will slow as much of the capacity added in 2023 was due to projects that were delayed in 2022 due to trade restrictions and supply chain disruptions.
- After the passage of the Inflation Reduction Act (IRA) in 2022, several research groups created projection models for anticipated gains in renewable energy and electric vehicle (EV) deployments, according to Utility Dive. Researchers have found that while 2023 solar installations, EV purchases, and battery storage kept pace with or surpassed projections, wind development fell behind, according to Anand Gopal, executive director of policy research at Energy Innovation. Wind generation capacity additions fell to 6.3 gigawatts (GW) in 2023 compared to 14.5 GW deployed between 2020 and 2021. A lack of transmission availability near ideal wind farm locations and higher costs have hindered wind development.
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