Power construction spending will decline less in the current recession than the one-third drop in the 2000-02 recession. This spending, mostly for electric generation and electricity and gas distribution, will be boosted in the next few years by tax credits for producing and consuming energy from renewable sources, economic stimulus funds for upgrading power grids to reduce peak loads and transmission loss, new transmission lines to bring wind and solar generated electricity to market and the revival of nuclear power.

The recession in the power construction market appears to have begun in January. Power construction spending declined 12% from the December peak after a 160% rise over the last business expansion. The decline is projected to reach 22% and continue through 2009.

At 85% in the last two years, generating station capacity utilization is slightly below the several decade average of 87% and has already caused a slowdown in new project starts. This will accelerate for much of the year as capacity utilization continues to fall with declining consumption of electricity. The US Energy Department estimates that consumption fell 0.7% last year and will drop a further 1.7% in 2009 and rise 1.2% in 2010. The Energy Department expects a peak in new generating capacity startups in early 2009.

The generating mix is changing. Although coal provides 50% of current electricity generation, it will provide only one-third of the new capacity expected to be completed through 2012. The natural gas share rises to 50%. Wind generated electricity is already significant, accounting for nearly half of the new capacity added in 2008. The extension of tax credits for renewable energy through 2012, instead of the usual one year extension will spur wind and solar projects in the next few years. Solar generated electricity reach over 5% of new capacity in 2011. Nuclear reaches 5% of new capacity in 2012 with the completion of the first of the 19 pending applications for nuclear generating stations.