NEWS RELEASE September 2017
The Role of Engineering Design Firms in Coal-fired Power Generation
McIlvaine is now tracking the expenditures for Guide, Control and Measure plus all Combust, Flow and Treat products and services for the 50 largest power plants, and 50 largest designers and EPC’s. Profiles of each are being posted in the Utility Tracking System. Purchases of specific components by each are included in the Market Reports e.g., Pumps, Valves, FGD, DeNOx, IIoT (automation and analyzers), Liquid Filtration, RO-UF, Sedimentation, Fabric Filters and Treatment Chemicals On a custom basis, McIlvaine is providing purchase forecasts for fans, compressors, nozzles, and linings.
The engineering design firms are losing the race in coal-fired power generation. EPCs and OEMs are winning by default. The large engineering design firms are not competing effectively in Asia and Africa. The leading design firm, AECOM had only $393 million in fossil revenues and the top five combined were just over $1 billion. Total expenditures worldwide for new fossil plants were close to $150 billion. Upgrades and renovations added another $50 billion in purchases. Chinese and Japanese EPC contractors were among the biggest winners.
Revenues for design firms are not easily quantified. They can include value-added (engineering services) plus pass-through purchases. In cases where the design firm partners with an EPC, the entire cost of the plant may be reflected in revenues.
Much of the low level design work in Asia can be provided by low cost locals. The high level knowledge needs to be constantly refreshed with the latest developments. When China reached an installed base of coal-fired power plants which was four times the U.S. capacity, U.S.-based design firms lost much of their lead in high level knowledge. In fact, the U.S. experts on subjects such as flue gas desulfurization are losing their jobs because their companies do not have enough contracts to support them.
High level knowledge has not been prioritized by U.S. design firms. In fact, the guiding light of only utilizing people who generate billable hours precludes the development of experts to support the billable hour people. The duplication of effort by multiple project managers has been seen to add to revenues rather than to reduce them.
In the new world of IIoT, with every slurry valve being monitored and analyzed continually, the amount of valuable information will expand exponentially. Only companies who recognize the value of niche expertise and create ways to acquire and leverage it will prosper.
McIlvaine believes that the U.S.-based design firms can play a big role in the world’s coal-fired power decisions, but only if they focus on providing fewer hours of expert advice at high hourly rates rather than providing more hours of work by less knowledgeable individuals. The profit margins per hour can be high enough to offset the loss of hours. If decision systems are developed for NTPC, Shenhua/Guodian, EVN, and Eskom similar to the one developed for BHE, there will be a platform for the design firm experts. 4S01 Berkshire Hathaway Energy Supplier and Utility Connect
Information on the Utility Tracking System with profiles of the end users, EPC’s and AE’s is shown at 42EI Utility Tracking System