John Chevrette was recently named President of Black & Veatch's management consulting division. In his new role at the nearly 100-year-old global engineering, consulting and construction company, Chevrette will lead a group of professionals focused on providing solutions within the energy and water industries, both of which are extensively served by the firm. Chevrette says the utility industry is in the midst of a "historic shift", and that the recent economic downturn and other major factors have slowed much-needed improvements to the United States' utility infrastructure, which in turn stymies increased efficiency and sustainability. Chevrette shared some of the firm's insight about a way forward, the future of renewable energy adoption, and what's holding it back.
Consulting: What has been keeping you busy at your new role as president of the management consulting division?
Chevrette: Black & Veatch is a terrifically exciting place—we are fortunate to be part of a firm with such deep technical expertise, global reach, and steadfast commitment to excellence in delivery. And yet, we also enjoy a great deal of latitude in defining our consulting strategy and operating model. So it has been a very busy time for all of the professionals on our team in terms of finishing the integration of prior acquisitions, aligning on a common vision for the future of our business, and executing organizational and process changes as we grow our business. We have also been intensively engaged in understanding what types of clients realize the greatest value from the unique strengths of the entire Black & Veatch organization.
Personally, I have been consumed with getting to know one of the most diverse and capable consulting teams I have ever encountered. The know-how and experience here is humbling and building the right culture and work experience for our professionals is "job one".
Consulting: Could you speak a bit about the results of your recent utility and water market reports?
Chevrette: The Black & Veatch Strategic Directions in the U.S. Electric and Water Utility reports focus on the issues related to aging infrastructure and funding challenges facing U.S. critical human infrastructure systems. Though once the envy of the world, these aging systems require massive capital infusions and new asset management practices to pave the way for improvements in efficiency and sustainability. Based on our research, many water utilities have increasing concerns about their ability to fund necessary capital improvements and routine water system maintenance. Similarly, the electric utility industry is in the midst of an historic shift in generation fuels from coal-technology to natural gas that is being driven by evolving regulatory standards and natural gas market dynamics.
Though many operators are moving forward with projects driven by the need to meet regulatory requirements, the impact of the recession on utility balance sheets and regulatory uncertainty in the power sector has slowed investments in next-generation technologies that can drive efficiencies, such as smart grid solutions.
Consulting: How will client needs be affected going forward by what the reports show are on the horizon for the utility markets?
Chevrette: We are seeing electric utilities involved in multi-year efforts to redefine their relationships with customers to be more interactive and enabling. This transition is changing how utilities communicate with customers as well as the content of those communications. Customer communication, particularly as it relates to smart grid initiatives, is an area of tremendous opportunity for utilities. Our report indicates the greatest impediments to smart grid deployment are a lack of customer engagement, and regulatory uncertainty about whether utilities can recover their investment costs. At the same time, nearly half stated they have made no attempt to promote customer benefits of smart grid programs. To facilitate the widespread adoption of these leading-edge technologies, customer education will be critical as there is some concern over the deployment of smart technology. Left unheeded, rising customer concerns could influence legislation and regulation and derail this innovation.
In the water industry, customer education and awareness is also a concern, yet for very different reasons. There is a general sense that water should be free because it falls from the sky and is a basic human necessity. However, the infrastructure that conveys, purifies and delivers safe and reliable water to households and businesses is very expensive to implement and maintain. In today's economy, municipal budgets cannot cover the necessary maintenance requirements and, as a result, we have record levels of deferred maintenance that has built up over decades. This is complicated as elected officials, always hesitant to raise water rates, are particularly reluctant in a soft economy. This is why it is important that these leaders and their constituents understand the value of water as well as the true cost of providing safe and reliable water services. It is much more cost-effective to maintain your existing infrastructure than it is to repair and replace it.
Consulting: When will solar and other alternative energy become a viable option the American public is ready for, what's holding it up, and what will Black & Veatch and other firms' response need to be to meet the demand in the future?
Chevrette: Over the past several years, the United States has seen a tremendous increase in renewable generation capacity, including wind and solar. While renewables may only comprise five percent of our generation mix today, they make up almost half of the new generation capacity installed in the past few years. However, historically low natural gas prices and flat electric load growth, coupled with challenges associated with bringing renewable energy to market, create significant barriers to its broader adoption.
For utilities, generation decisions come down to economics, ensuring reliability and meeting regulatory requirements. The recent mid-year Black & Veatch Energy Market Perspective projected that approximately 61,500 megawatts of coal-fired generation will be retired by 2020. However, due to the previously mentioned factors, the majority of this generation will likely be replaced with natural gas-fueled capacity. Without some form of carbon regulation to level the cost-competitiveness playing field, renewable capacity will likely be expanded solely to meet state renewable portfolio standards.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.