The economic downturn has delivered a heavy blow to the industrial manufacturing sector in North America. Manufacturers are indicating sales drops of 30 percent to nearly 60 percent compared to that of 2008. Despite the economic downturn, the continued threat of manufacturing moving offshore, low priced imports and the technology's general maturity, the North American motors market has several key factors that should allow it to quickly return to pre-2008 growth levels.
As presented in two recently published research studies, North American AC Integral Horsepower Low-Voltage Motors Market and North American AC Integral Horsepower Medium-Voltage Motors Market, the North American AC integral horsepower motor market is expected to experience a compound annual growth rate of 2.5 percent (2009-2015), on 2008 base year revenues of approximately $3.3 billion.
Key Growth Factors
While a number of challenges exist for revenue growth in North America, several compelling factors are expected to support growth:
- Government incentives encourage early adoption of energy efficient motors
- Increasing demand in the water and wastewater industry spurs demand for motors for public utilities
- Varying process requirements and product feature enhancements demand customized solutions
Figure 1 shows the forecast for the total low- and medium-voltage AC integral horsepower motor market.
Despite the growing trend toward improved energy efficiency, a key barrier to the adoption of NEMA (National Electrical Manufacturers Association) premium efficiency motors has been the higher initial cost of the motors. The U.S. government's vision toward energy independency and security has enabled new growth potential in a mature electric motors market. Electric motor users are required to replace inefficient motors with NEMA premium motors to adhere to the U.S. Energy Independence and Security Act of 2007 (EISAct 2007). This legislation mandates that all general purpose electric motors manufactured after the three-year period beginning on the date of enactment of EISAct 2007 shall have a nominal full load efficiency, which is not less than that defined in the NEMA premium efficiency standards.
While the adoption of such motors is expected to produce long-term benefits, the initial cost puts an immediate strain on companies already struggling because of the negative economic situation. To offset the price factor, the U.S. Senate's Energy and Natural Resources Committee has adopted a NEMA-advocated provision to accelerate the pace of a premium energy-efficient motor rebate program. This program is expected to provide $25 per horsepower rebate for the purchase of NEMA premium motors, as well as $5 per horsepower for the disposal of old inefficient motors. The federal government is likely to spend $350 million as an incentive to accelerate the adoption of NEMA premium motors.
As water is increasingly viewed as a precious resource, there will be continued pressure-in spite of economic trends-for water system operators to adequately maintain and expand their systems. These converging factors are expected to support continued spending in critical components that require motors, such as submersible pumps. These pumps may be used for drinking water purification facilities, movement of raw water or in the pretreatment of wastewater. Depending on the application, the pumps and motors are designed to be submerged in water, handle large solid particulates or maintain the mixed proportions.
Electric motors used as part of the water and wastewater treatment segment were witnessing significantly higher growth (approximately 4 percent in 2008) compared to the overall AC IHP motor market (approximately negative 0.2 percent in 2008).
Stringent environmental regulations such as The Safe Water Drinking Act, which was reauthorized in 1996, facilitated the establishment of advanced water and wastewater treatment infrastructure in the United States. The investments involved in replacing aging water system across the nation are estimated to be around $1 trillion and will be spent by the end of 2020. Such investments are expected to drive the market in the long term.
Figure 2 compares the growth rates for the total low and medium voltage AC integral horsepower motors market with the growth for the same motors for water and wastewater applications.
In addition, major end-user industries, such as power generation, petrochemicals and HVAC, have immense potential for retrofits and upgrades of their electric motors. It is estimated that 35 percent of the power plants involved in the continuous power generation process have been in operation for 30 years or more. Stringent time bound regulations by the EPA are seeking to reduce Nitrogen Oxide emissions (2009-2015) and Sulfur Dioxide emissions (2010-2015).
Due to the stringent regulations, the U.S. Department of Energy (DOE) has made $38.5 billion available for upgrades to reduce greenhouse gas emissions. As these plant retrofits occur, replacement of older motors is expected to occur as well, offering increased potential for the early adoption of NEMA premium efficiency motors.
According to the DOE, 45 percent of the total energy consumed in commercial and residential buildings in North America is attributed to HVAC systems. It is estimated that 30 percent of these systems operate inefficiently. By optimizing the energy consumption in commercial and residential buildings it is possible to reduce the increasing demand for energy by 80 to 90 percent.
The manufacturing, installation and servicing of HVAC products are strictly governed by standards, regulations and codes such as the Energy Star Program, Leadership in Energy and Environmental Design (LEED) and American Society for Heating, Refrigerating and Air Conditioning Engineers (ASHRAE) standards, to ensure that highly energy efficient HVAC systems are in operation. The federal ban and phase-out directives concerning hydroflurocarbons (HFC) and impact-prone refrigerants in air conditioning units are forcing the need for replacements of energy-consuming HVAC systems with certified energy efficient HVAC systems. These replacements will in turn require more energy efficient motors and provide additional opportunities for growth in the motors market.
The North American AC integral horsepower motors market, though mature, still demands custom motors to meet varying process requirements. For example, medium voltage motors used for mining applications should be totally enclosed and compact, with the same level of power delivered by larger motors. They have to be explosion proof and dissipate heat energy only through the frame. Space constraints and extreme operating conditions also contribute to specialized needs. These types of customized motors garner premium prices, thereby increasing revenues and the market's growth rate. Though the market for standard motors is expected to decline in the short term, the demand for custom made products will continue to sustain the market, due to the need for higher operational excellence and enhanced return on investments.
As the economy improves and customer and OEM confidence levels increase, the North American motors market should quickly experience its own recovery and rapidly return to pre-crisis demand levels.
