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Energy in 2019: Nuclear, smart grids and renationalisation

Tim Cooper

The energy market is going through a period of disruptive change, with the adoption of new technologies and arrival of new entrants all shaking-up the industry.

Yet despite near-term uncertainty over an ability to invest, there are a world of potential opportunities as cities respond to energy challenges in a more holistic way.

Market disruption

The UK is part of a global change in the energy market ,which is being largely driven by rising investment in renewable energy sources challenging the role of hydrocarbons.

Meanwhile, global trends in the electrification of transport and heating, increasing use of energy storage and development of smart grids should provide the UK construction sector with significant opportunity in 2019 and beyond.

Market uncertainty

However, the real opportunity in the UK energy market remains uncertain.

The impact of Brexit should be limited as EU members have been ’re-nationalising’ their energy policy. For example, in the UK the government has been increasingly interventionist in several ways, including Energy Market Reform, state-determined contracts for renewables and new nuclear energy, and a proposed cap on energy bills.

As a result, our overall direction is likely to remain unchanged, but there are headwinds to investment that must be overcome. 

One area of potential impact is interconnectors investment, which enables energy to flow between networks and is planned to fill much of our energy gap.

“The changing role of our cities in developing a holistic view of the needs of their citizens and the environment in which they live”

It is supported by market as well as physical coupling; and while longer-term there are enough global examples of gas and electricity connections between countries to suggest no lasting problems, we can still expect some near-term challenges to investment.

Similarly, a recent report by EY highlighted a 46 per cent fall in renewables investments in the UK during Q3 2018, largely due to speculation around the impact of Brexit.

Consequently, the UK fell to eighth in its Renewable Energy Attractiveness Index (RECAI). Clearly some impact on investment and hence projects can be expected.

Opportunity in 2019

Nevertheless, the UK commitment to a low-carbon economy will continue, Hinkley Point C should progress, and hopefully be followed by Horizon committing to its new-build at Anglesey, thereby creating thousands of jobs over the medium-term.

It was also pleasing to see government looking to secure £5bn in new money for energy-related capital investments across low-carbon energy, energy storage, hydrogen and electric vehicle (EV) infrastructure.

Overall, we can expect to see national commitment to clean air obligations continuing to deliver opportunities, particularly in the near-term for EV and smart grids as well as major programmes. 

Old and new worlds meet

The changing role of our cities in developing a holistic view of the needs of their citizens and the environment in which they live is an exciting development.

We see new business opportunities in strategic development of land, which for the first time integrates energy, transport and water needs into a single developable package delivered through both existing players and new entrants as the ’Urban Tech’ sector continues to expand.

While there are challenges ahead, 2019 will also mark a critical step in the move to a new era in the energy and wider utilities market.

Tim Cooper is client development director at Arcadis

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