2021 Outlook for the Electrical Industry
Recently, we covered the 2020 recovery process in the electrical industry and how that impacted electrical professionals. (We also included the original pre-pandemic forecasts to help put the 2020 recovery into perspective.)
All in all, it appears we’re back on track. Residential appears to be back to pre-pandemic levels — and even growing. Commercial construction is slowly returning and forging ahead. Utilities are expected to make a comeback in 2021 to make up for lost time.
So, with 2020 officially behind us, we’re looking ahead to 2021 to see what the new year will bring!
Where are we expected to see some of the biggest opportunities for electricians? What areas will grow the most post-pandemic over the next few years? In this forecast, we’re looking at five of the fastest-growing markets in the electrical industry and seeing how these opportunities will impact electrical contractors in 2021.
1. Renewable Energy
Great news, renewable energy isn’t expected to go anywhere but up. Between 2021 and 2025, about 80% of new energy generation is expected to be renewables, mainly solar and wind.
As battery energy storage systems (BESS) continue to improve each year, new renewable construction should continue to outpace coal and natural gas. As of right now, over 170 GW of new renewable capacity is scheduled for construction by 2025.
In addition to the energy transformation from coal to renewables, non-utility companies like Google, Amazon, Apple, and Walmart are investing heavily into their own renewable energy projects.
Over the next 36 months, more than $10 billion of renewable energy projects are expected to be added to industrial energy production (IEP). Which sectors have the greatest interest in IEP? Universities, airports, and transit systems, just to name a few. Thanks to renewable energy goals and a commitment to smaller carbon footprints, the U.S. energy and transportation sectors appear to be driving each other forward in the early 2020s.
So, what does this mean for the electrical contractor and the electrical industry in 2021? One word: opportunity. If you work with PV panels or battery storage solutions, the sky’s the limit. If you haven’t worked with these systems yet, you might want to start looking into it.
And, if you ever need assistance on a renewable project, we have even better news. Our Renewable Energies division is ready to help anyone with anything, from sourcing materials to handling financing.
Across City Electric Supply, we’re seeing more traction in the solar sector every year with the help and support of our Renewable Energies division. Northern Indiana District Manager Jeff Williamson has seen a strong push in renewables within his own branch network.
“All of our branches are working on increasing their presence within the solar market,” he said. “Rob Smith and the renewables team work with us on any solar application that comes across our counters. Solar is a huge avenue for growth, and we expect it to continue growing not just for City Electric Supply but also across the electrical industry in 2021.”
2. Energy Storage
When it comes to energy — no matter how it’s generated — energy storage is a huge application. It supports wind and solar farms, it supports renewable microgrids, it even provides grid stability. What was once an expensive technology is now a multibillion-dollar market for an electrical industry already in transition.
Over the next five years, 200 U.S. energy storage projects are currently being tracked, totaling more than $20 billion.
As research, development, and end-user adoption continues to grow, battery energy storage systems (BESS) will become a massive part of a net-zero future and a much more resilient, stable energy grid in 2021 and beyond.
BESS is also becoming a popular add-on for energy-conscious homeowners.
For homeowners looking for scalable battery storage systems to go along with their newly installed solar panels, Generac already has a solution ready to go with their new Generac PWRcell. Now, energy generation and energy storage can go hand-in-hand, providing homeowners with the best return on their solar energy investment.
Retrofits are a quick win for homeowners, building managers, and contractors. It’s cheaper than building new (in most cases), and it typically covers its original investment within the first few years.
On the residential side, remote work should continue into 2021 (and some businesses are outright transitioning to fully remote workforces). Residential retrofits, like replacing old lamps with new LEDs and smart home products, could become much more popular, especially as homeowners see higher electricity bills from being home more often.
Retrofit incentives and tax credits only make this option more appealing to homeowners in the new year. Combine the year-over-year savings with seamless plug-and-play smart home products, and homeowners no longer need to be convinced if they should update their home, but when.
If all this is happening inside the home, why does it matter to electrical contractors? For starters, residential development was one of the few markets least impacted during 2020. Service calls decreased at first but rebounded once contractors figured out a contact-free workaround. Electricians should also always be aware of what products are on the market. Pitch easy smart home upgrades during a service call and that one-day job could turn into a much bigger project.
As an added bonus, post-pandemic retrofits in commercial spaces could feature new technologies, like UV light sanitization.
In their mid-year report, the American Institute of Architects forecasted that post-pandemic design will “drive a surge in building retrofits, which will benefit the design and construction industries.”
Although commercial expansion is slowing, companies will need to retrofit outdated facilities to improve their bottom line when it matters more than ever. For commercial electricians, these retrofits will likely integrate smart technologies, lighting controls, and LED lighting improvements across the board.
“Even though there may not be a lot of expansion happening right now, we’re seeing retrofit opportunities within our branches all over the Northern Indiana market,” said District Manager Williamson. “The commercial sector will always need supplies for improving their facilities, for completing retrofits, and for boosting their bottom line.”
And, he even has specific branches to back this up.
“CES Valparaiso has been open for almost two years, and they’re making a huge impact in the lighting retrofit market. CES La Porte just opened their doors in late 2019. Already, we’ve seen them heavily involved in supplying commercial bakeries, packaging companies, food processing plants, and more. CES Chesterton is finishing up a huge project for their local water treatment plant which consisted of four new switchboards. CES Crown Point is up in sales and profitability along with every other branch in Indiana thanks to their business with residential and commercial contractors.”
In short, there’s a massive opportunity for retrofits. Even if experts may say there isn’t a lot of growth happening in different sectors.
“It’s just about stocking the right products, listening to your customers, and delivering on your promises,” Williamson added. “Customer service goes a long way in continued growth.”
We covered retrofits for commercial and residential, but what new development could shape the electrical industry for years to come? Microgrids.
In recent years, microgrids have become an important topic in the United States’ energy infrastructure, especially for non-residential customers. Commercial and industrial operations, healthcare organizations, and even airports are all looking at investing in microgrids to sustain their own energy supply separate from the grid.
The main reason? Resilience.
In the face of power outages, disasters, or worse, a microgrid helps to weather these events. It can operate as a back-up for grid-supplied power, a cost-effective storage solution to avoid peaks in utility costs, or an energy-generating grid on its own.
Better yet? It can work alongside renewable energy plans, which makes it an attractive add-on for companies and facilities looking to generate energy for their own operations.
In 2020 alone, utilities and commercial & industrial customers had over $1 billion of microgrid construction scheduled. With increased interest from healthcare organizations, manufacturers, and power-sensitive companies, microgrids should continue to grow in the new decade.
5. Residential Growth
One of the more surprising developments of 2020? How stable residential construction finished. At the beginning of 2020, the NAHB predicted 900,000 new homes. By year’s end, we actually saw closer to 1.5 million homes.
With residential construction finishing the year strong, how will that affect future growth in 2021? Dodge estimates that single-family housing starts will rise 7% in 2021, up to $254 billion.
For electricians, that’s a stable market. And the even better news? Well, we’ll let District Manager Jeff Williamson handle this one.
“Where there is residential growth, commercial buildings tend to follow,” he said. “We’re always partnering up with residential contractors, and we’ll continue to do so as long as houses continue to be built.”
But there is one concern across residential construction. Mainly, material cost.
“The cost of lumber has more than doubled between January and September of 2020. This, along with the rising cost of commodities like steel and copper, will continue to drive new home costs up.”
Fortunately, the demand for homes continues to be high thanks to lower mortgage rates. Although that may drive home costs up, there could still be consumer-friendly prices to help drive residential growth forward in 2021 and beyond. That’s a bright spot for electrical contractors and the electrical industry as a whole.
The 2021 Forecast Recapped
- Renewable energy continues to outpace coal and natural gas with 170 GW of new energy construction scheduled for completion by 2025.
- Energy storage is being adopted rapidly and is all but required at new energy-generating sites, from huge utility-scale operations to residential applications.
- Retrofits, still very much a thing worth doing.
- Microgrids are a multibillion-dollar industry and should see even more interest in 2021 (driven by utilities and C&I customers) after the challenging year we all just had.
- Residential growth should continue to increase in the new year.
How City Electric Supply Can Help You
City Electric Supply can help with everything you’ve read about here. Visit your local CES branch or shop online at cityelectricsupply.com. With over 500 branches nationwide, more than 30,000 products available online, and a national distribution network that stretches from coast to coast, we have whatever you need in 2021 in stock and ready to go.