Competition from other renewable energy sources has hindered industry growth
Los Angeles, CA (PRWEB) January 05, 2013
The Hydroelectric Power Plant Construction industry has stalled over the five years to 2013. According to IBISWorld industry analyst Radia Amari, “Different factors, including declining demand for hydroelectric power, rising awareness of the environmental impact of hydroelectric power plants and drought conditions, have supported declining revenue over the past five years.” External competition from other energy sources, including fossil fuels, wind power and solar power, has further hindered the industry. Over the five years to 2013, industry revenue has declined at an estimated average annual rate of 2.4% to $894.9 million. Returning demand for hydroelectric power and improving precipitation levels in 2013 will support an industry turnaround; revenue will grow about 0.6% during the year. Profit will amount to about 32.0% of revenue in 2013, down from an estimated 34.0% in 2008.
Hydroelectricity uses water to generate electricity, and thus is considered a renewable fuel. “Heightened environmental awareness has supported the use of renewable fuels, which include hydroelectricity, wind power and solar power,” says Amari. Over the past decade, the federal government has increasingly provided tax incentives to renewable energy sources. The Production Tax Credit, which provides a tax credit to industry operators, is a good case in point. At the same time, the same legislation provides tax credits to other external competitors, including solar and wind power plant builders and operators. Facilities related to hydropower receive half the credit available to other energy sources. Lower government consumption and investment into industry operations is significant given that the federal government owns a number of hydropower facilities and government contracts constitute a substantial part of industry revenue. For example, the US Army Corps of Engineers, a federal agency, generates about 23.9% of industry revenue, operates 75 power plants and produces 25.0% of the nation's hydroelectric power.
The Hydroelectric Power Plant Construction industry has a low level of concentration. In 2013, the top four industry firms have less than half of market share. Despite this low concentration, the US Army Corps of Engineers has by far the largest share of industry revenue. In general, the federal government and state governments have built and operated major hydroelectric facilities. The US Army Corps of Engineers will continue to be a major player in the industry. In the past five years, greater levels of competition have forced many companies out of the industry. Over the five years to 2013, the number of firms in the Hydroelectric Power Plant Construction industry is estimated to fall at an average annual rate of 5.8% to 20. Competition will remain strong in the coming five years, reducing the number of enterprises to 17.
During the five years to 2018, industry revenue is forecast to increase. Demand for hydroelectric power will rise, increasingly supporting demand for new hydroelectric power plants. While industry revenue is projected to grow, company numbers are anticipated to decrease through 2018 because of consolidation. High operating costs stemming from environmental compliance will force small players out. From 2013 to 2018, the number of firms is forecast to decline.
For more information, visit IBISWorld’s Hydroelectric Power Plant Construction in the US industry report page.
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IBISWorld industry Report Key Topics
Industry firms construct hydroelectric power plants. These plants produce electricity from water flow. Firms that operate hydroelectric power plants are included in the Hydroelectric Power industry (IBISWorld report 22111c).
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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