Can we deliver the infrastructure we need to reach Net Zero? Janet Wood talks to ICE vice president Jim Hall about where the gaps are in delivery
If the UK is going to be a Net Zero society by 2050 it has a huge infrastructure challenge to meet.
The scale of the renewable energy generation that is required is beginning to reach the public consciousness, as they see not just the rollout of solar and wind farms but also the wires and other infrastructure needed to transport that power and balance it with usage. So my question when I speak to Jim Hall, vice president of the Institution of Civil Engineers (ICE) and Professor of Climate and Environmental Risks at the Environmental Change institute at the University of Oxford, among other roles, is whether our national framework for infrastructure delivery is fit for purpose.
He first talks about the energy market framework, which he says, “has got us to a good position so far – in particular what it has done for getting renewables onto the grid. … with a dramatic reduction in costs, as reflected in auction prices.” But it is “generally agreed that the mechanism is not going to get us to Net Zero because of the nature of the other types of investment that are going to be needed alongside a growing amount of offshore renewables”.
He notes the government’s 40GW offshore wind target and the recent announcement of more very large wind concessions in ‘ScotWind’ – whose emphasis on floating wind will be “a great bit of civil engineering coming up”. But “that needs to be accompanied by more action on storage, there is the question around how hydrogen and carbon capture and storage (CCS) are going to come through, as well as grid investments.”
Supply side constraints
Next he addresses the capacity of industry to deliver. He notes that we have “a lot of big construction” under way, including Thames Tideway and HS2, “so I think there is legitimate concern about the capacity of the industry to deliver – whether the skills are there, and whether there are big enough players.”
To build the necessary infrastructure the supply side needs the right investment, and the right companies, products and skills. Do we have them?
Hall says the first requirement is capital. For him, that is not a concern. “There is finance available from a number of investors who for different reasons want to be putting their money into green investments.”
Second is the question of whether we have the right companies, and here he is not so confident. “In this country we are going from quite a small base,” he says, as revealed by which big firms have moved first in offshore wind.
The new sector has been dominated by firms such as Ørsted and Vattenfall, who have moved in from elsewhere, “So there is an issue, and I think it is a general issue with the construction industry in this country, which is that for a number of reasons – and partly because the domestic market is really competitive – large construction firms haven’t been able to grow in the way that they have in continental Europe. We can think of big French, Spanish or German construction firms, but the only British firm in the top ten is Balfour Beattie and last time I looked it was number ten.”
Similarly, US companies have been able to grow very large: “for a place that is supposed to be the global home of capitalism, it’s been a pretty soft market, with lots of very big defence and federal-related projects… Firms have grown very big and a number of them have ended up taking over British firms because they have a pile of cash.
“Sometimes it has been a bit of a shock when they move into this market to find out how competitive it is.”
“There isn’t the scale of capacity within the UK domestic construction sector that one would need in order to make the most of this thing that is happening on our doorsteps”
That’s not to say the large companies are unwelcome. In practice offshore wind projects are so big that they have to be done in joint ventures anyway: “We want large capable firms for these projects and it is in our interest to draw on the European market at least to get the expertise to do the things we need to do.” But, “it reveals that there isn’t the scale of capacity within the UK domestic construction sector that one would need in order to make the most of this thing that is happening on our doorsteps,” he says.
That lack of ‘fat’ in UK companies has knock-on effects on skills availability, he says. The UK has been grappling for years with a lack of mid-range skills “and the hollowing out of vocational education and support for those skills.” He says, The underinvestment in skills is absolutely a limit to growth and a limit to profits in this sector. But if [as a company] you are living a hand to mouth existence [around projects with big risks] then much as you might love to invest in the long term skills development of your workforce there are other things keeping you awake at night.”
“The UK has been grappling for years with the hollowing out of vocational education and support for those skills.”
At this point I have to ask whether the supply chain has been affected by our exit from the EU. “I’m not seeing much of a difference in terms of the number of joint ventures and the participation of European companies in the UK market,” he says, but “We know that further down the supply chain – including quite mundane cross-channel material supplies and so on – that is getting blocked up.” The industry is also feeling the new friction in using workers from across Europe easily. “And some of these things are very specialists skills, eg tunnelling is a mobile workforce that follows the machines all over Europe. People used to just come and go“.
Overall, his assessment is that “At face value offshore wind has done very well in terms of putting capital into facilities for fabrication, and all the kit that is needed for offshore installation, and a lot of the investment for that has come through very well. But I think that we do need to keep our eye on those types of supply side constraints.”
Part of this is a positive feedback loop – if the industry knows it will have a pipeline of projects and the framework to deliver them it can invest. Is our institutional framework able to deliver?
Hall says the government’s Net Zero strategy and Energy White Paper provide a very clear overarching framework, but “the question now is one of delivery – translating those frameworks into mechanisms that will bring through the investment on the right timescale”. The government has added Net Zero to the National Infrastructure Commission’s (NIC’s) guiding directives and the NIC has “done a good job in challenging some of the orthodoxies around the way the energy sector might look in future” such as presenting a simulation that showed the power system could operate with very high levels of renewables.
He says if you have to expand the infrastructure, “you really need to challenge everyone’s assumptions and kick the tyres very hard, particularly in relation to cost. That is partly what has motivated the NIC’s position around renewables and around nuclear – they have reached very different conclusions about what will happen to the cost of nuclear versus what will happen to the cost of renewables.” The NIC recommended the UK limit its nuclear investment to one additional power plant for the near future.
Does the NIC have strong enough powers? Hall says he would like it to have more. “The government does respond to the NIC’s advice” and the National Infrastructure Strategy was “nice to see”, although “it wasn’t as specific as I would have liked”. He says what is lacking is “join-up between the NIC and the National Infrastructure Strategy and what is brought forwards within government departments around infrastructure.”
“What is lacking is join-up between the NIC and the National Infrastructure Strategy and what is brought forwards within government departments around infrastructure.”
He compares it with the Climate Change Committee: “the mechanics of that works better, in the sense of how the carbon budgets respond to the CCC’s advice. There is a bit of latitude, government makes its own choices in terms of the way in which it chooses to meet the carbon budgets but it is quite tightly tied into what the CCC recommends. We don’t have quite such a tight piece of government architecture for infrastructure.”
He thinks the NIC should be statutory – although “I am not pretending that would make everything perfect …. even if you are statutory it is still a process of persuasion as well across government.” Nevertheless, “Statutory existence provides some status and it provides persistence” as government needs legislation to remove it.
More broadly on where government is going on Net Zero and the Energy White Paper – “that all looked good on paper and I was quite encouraged by the analysis of the CCC … and it does more or less add up. But it’s the next step… it’s to do with implementing lots of bits and pieces now.”
The planning framework is also under review, including the energy strategy document which had been overtaken by the Net Zero legislation. Hall says that framework “has a certain logic to it, providing an overall sense of direction which means there are certain presumptions from a planning perspective”. In the ICE’s submission to the consultation it said the framework had to be more consistent with the National Infrastructure Assessments, the National Infrastructure Strategy and Net Zero.
I ask about the delivery partners and whether there should be more emphasis on localism. He says, “There are lots of things that are naturally local and it would be great to see more experimentation, more devolution, and more responsibility being held by local authorities and local bodies around those parts of the energy story.
“I would like to see a bit more empowerment and experimentation to enable them to take initiatives.”
“I would like to see a bit more [local] empowerment and experimentation”
The UK is seeing industrial clusters that have cross industries such as CCS, hydrogen and offshore wind manufacturing and these are moving at pace. Localism might also address any issues of interdependencies between different parts of the infrastructure such as energy and water, and help get the type of local buy-in for projects that is seen in other countries.
In contrast to these focused developments, there have been concerns in some areas over the cumulative effects works associated with major projects over the horizon – objections to onshore substations on the east coast to serve offshore wind and interconnectors being an example. Hall says “the Strategic Environmental Assessment process should be there to deal with these cumulative effects and look at programmes of investment rather than individual projects. But I think there has been a real reluctance in this country to doing them. The sense I get is that they will avoid SEA as much as they possibly can.” SEAs had been required under a European Protocol. “The whole point of it is to take a systems view and … that’s not something they would naturally do.”
Ready for the next step?
What should be top of the agenda for the next phase of delivering this new infrastructure? “I would focus on storage and CCS as being the important and tricky parts of this,” says Hall. The White Paper commitment has to be scaled up, he says, and it is important “not only because there will be an element of gas in the system for a while, but because it is a great fuel for producing dispatchable power. We’ll also need CCS for hard to abate industries – cement and steel.”
More energy market reform is also needed for new types of renewables but he is fairly confident that can happen – “the industry capacity is there and the technology is there”.
What frustrates Hall is the demand side, including energy efficiency. “It has been such a sorry story and there just needs to be certainty with a reasonably approachable mechanism that people can get their heads round and a market of fairly regular providers.”
Although he says, “The problem is that these conversations pop up at times of crisis when we should be thinking about it all the time”, he is afraid we have missed another opportunity to get it right. That was “When we were talking about Covid recovery and people were thinking differently about their homes and working from home and about their localities and communities. That would have been the perfect time.”