If it seems like new electrification projects are everywhere these days, you’re not imagining things. According to Electrical Construction & Maintenance Magazine (EC&M), the electrical industry is closing out a banner year in 2024.
“Combined, the 2024 EC&M Top 50 (contractors) logged a record $51.737 billion in revenue… Up nearly 18%... That was the sharpest year-over-year revenue increase on record for the cohort.” – EC&M Magazine
Led by the continued surge in new data center construction (for the seventh year running), 93% of the Top 50 contractors reported either meeting their revenue expectations (36%) or exceeding expected earnings (57%). Just 7% of the top electrical contractors in the U.S. say they did not meet their revenue goals, and a full 60% said they kept their profit margins steady through 2023.
Rounding out the top five electrical market segments were manufacturing, health care, wind and solar renewable energy, and power utilities/transmission/delivery. Manufacturing and health care were repeats in the top sectors category, but renewables and utilities crept into the top five. This shift could represent more seismic movements in the industry, as retail, private office, and hotels were dead last, oil, gas, and chemical “fell away,” while renewables saw a sizeable uptick and residential and government projects made their presence felt.
Many of the top contractors cited their ability to maintain flexibility and diversity in project scope as a key to their success. For instance, several contractors feel that data centers now qualify as “core infrastructure” projects and remain bullish on that front. However, they are pushing to diversify, in both project and geographical scope. One top contractor has invested their energies into the municipal water and wastewater space in Texas, citing a lighter labor load and longer-running jobs as part of the attraction.
Another is diversifying into battery production facilities, automotive, and other hyperscale (in excess of 100 MW) projects as they move away from health care. And one of New York’s biggest contractors is replacing its sluggish commercial construction portfolio with renewables and green energy projects.
“We’re seeing clients consider more initiatives, like microgrids, fuel, cells, solar, hydro, and fully electric buildings.” – Anthony Mann, President and CEO of E-J Electric Installation Co.
With all this electrification going on, the #1 challenge cited by top contractors is attracting and retaining a talented, skilled workforce. 82% of electrical contractors added workforce in 2023 and 91% expected to continue increasing their team in 2025. 86% agree that labor shortages are complicating their efforts to scale and diversify, which tracks with the rest of construction industry overall.
The biggest of the hiring challenges is finding and retaining skilled electrical foremen. Some of the contractors cite the retirement of older workers and difficulty in retaining a greener workforce to season them.
“The skill set on the job site is not what it used to be. We have a history in the industry of rewarding great craftsmen with supervisory roles, and now we’re losing more of those foremen and adding lower-skilled people. The weakest link is the front-line field supervisor.” – Greg Padalecki, CEO, Alterman, Inc.
“Our approach to mitigating the shortage is organic development of a diversified workforce. There’s a general lack of awareness of opportunities in the industry, so we’d like to make underutilized groups more aware of them. The industry has outgrown the traditional avenues for hiring for electrical roles.” – Ron Mortimer, Senior Vice President Commercial Strategy, ArchKey Solutions
Many of EC&M’s Top 50 are undertaking new initiatives to draw new tradespeople to the craft in an attempt to “bridge the gap… and produce a steady supply of skilled professionals to meet our project demands,” says Gaylor Electric’s CEO, Chuck Goodrich.
No one sees those demands easing anytime soon. Plus, the requirement for project labor agreements (PLAs) on any federally funded project exceeding $35 million adds another layer complexity to recruiting and retention and could increase labor costs. But the top contractors are evenly split as to whether the impact of PLAs will be positive or negative on their bottom lines.
Another federal initiative that is being met with enthusiasm is the outpouring of Infrastructure and Jobs Act moneys into the sector. EC&M found that 2023-2024 saw a “change in thinking” about how infrastructure spending would impact revenue. Fewer companies cite infrastructure monies as driving new project revenue, but 61% report a 0-5% impact on their bottom line, up 13% from 2022.
Of those anticipating an infrastructure impact, EV charging installers lead the pack, along with renewables and electrical grid improvements. 56% of contractors expect to enter the EV and renewables markets in 2024-2025.
“The level of activity being talked about is higher than in the past, and we’re at our high in terms of revenues,” he says. “Not too many developers are saying the cost of money is giving them pause.” – John Axelson, Hunt Electric, Inc. President and CEO.
While supply chain issues have finally eased, “the situation requires adaptations on all ends,” according to EC&M, including the need to adapt to income AI applications. At present, most in the industry are studying AI “from a more rudimentary angle,” and are mainly using it for analyzing data. The sector seems more interested in how other technologies, like augmented reality (AR) and virtual reality (VR) might impact their jobsites.
The biggest use for AR and VR technology as the contractors see it is in training, planning, and collaboration.
Overall, the biggest takeaways from 2023 moving into 2024 for the electrical industry look like a changing landscape re: types of projects requiring updated, more technical skill sets, retaining experienced workers, and attracting new tradespeople who want to be in the electrical contracting space long-term in their career.
It seems, at least for the top contractors on EC&M’s list, they’re going with the flow into a more prosperous future.
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