According to a new Bluefield Research report, municipal utilities in the United States could be investing over $104 billion in hardware and equipment by 2030.
The myriad of network assets, including pipes, valves, manholes, and fire hydrants, currently makes up approximately 45 percent of utilities’ capital expenditures, when including labor.
The ten-year outlook report, titled U.S. Water & Sewer Pipe Network Infrastructure: Market Trends and Forecasts 2022–2030, attributes the new spending to new housing, low interest rates, and the Bipartisan Infrastructure Law.
Bluefield’s 50-state analysis shows the majority (64 percent) of hardware equipment spending by utilities will go towards serving new, greenfield network infrastructure. The remaining 36 percent will be allocated to equipment replacement and rehabilitation of existing underground assets.
“Most people don’t think about the four million miles of pipes and equipment delivering clean water and collecting wastewater from residences, commercial buildings, and industrial facilities,” says Bluefield President & CEO Reese Tisdale. “From aging pipe network infrastructure to lead service lines, the spotlight is strengthening on what is traditionally an out-of-sight, out-of-mind utility pipe segment.”
With a majority of the expenditures going to new builds, particularly in the Sunbelt states, the overall share of pipe materials will continue to shift toward newer materials like plastic pipes (e.g., PVC, HDPE).
At the same time, older, more densely populated urban areas — where aging infrastructure is of greater concern — will continue their reliance on more traditional, legacy materials, like ductile iron. Newer material types are growing faster than the water sector as a whole, with average annual growth of 10 percent in plastic pipes, compared to 6 percent average annual growth for legacy materials.
The municipal utility market, like many others, also faces uncertainty ahead with respect to inflationary pressures. Acute supply chain constraints stemming from pandemic shutdowns, workforce disruption, and climate volatility (e.g., Texas Winter Storm), are driving record inflation in water and sewer pipe material prices. In some instances, prices for plastic, steel, and iron pipes have shot upwards by more than 75.1 percent from October 2020 to October 2021.
“Rising labor, transportation, and hardware & equipment prices are exposing both buyers and sellers to potential project deferments until the market stabilizes,” says Tisdale. While it is still too early to tell whether utilities will begin deferring equipment purchases to wait for declines, the impact is going to be felt one way or another. It just might be the next capital budget cycle.”
Given the scale of distribution and collection networks, there remains significant opportunity to capture efficiencies. Utilities and their service providers are increasingly deploying digital technologies to more effectively target investment spend in their most critically underperforming underground assets.
The ten-year outlook varies widely by state; Texas’s robust $18.3 billion forecast points to key differentiators separating it from other regions. The nation’s largest installed base of water & wastewater pipe miles, a 161 percent increase in housing starts from 2010 to 2020, and continued population growth are all propelling pipe network investments forward. Texas is followed by California, Florida, and North Carolina with a combined $20.18 billion growth forecast.
