Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to the newest version of your browser.

Your browser appears to have cookies disabled. For the best experience of Construction News, please enable cookies in your browser.

Welcome to the Construction News site. As we have relaunched, you will have to sign in once now and agree for us to use cookies, so you won't need to log in each time you visit our site.
Learn more

Electricity reform to kickstart the market across suffering regions

The growing energy market is set to drive a massive overhaul of the UK’s infrastructure map, helping a tier of medium-sized contractors compete for major contracts.

Industry experts told CN that the UK’s energy infrastructure will shift as the electricity market creates work outside the south and London, helping to offset falling revenues in these regions.

The government’s Electricity Market Reform (EMR) white paper and Renewables Roadmap have been released to help provide an expected £110 billion boost to low-carbon energy investment within the next decade, by providing price guarantees for low-carbon energy and a carbon price floor for hydrocarbon power generation.

Both nuclear and alternative energy sources are set to benefit.

Davis Langdon head of energy Jon Dedman said that while nuclear and offshore wind projects worth billions would be targeted by tier one contractors, smaller contractors have the chance to win work worth up to £100 million as a result.

“You will see major contractors moving towards the major infrastructure projects like nuclear and wind projects and leaving space for medium-sized contractors to pick up work in projects like biomass and energy from waste,” he said.

“These will be £10m to £100m schemes, so while contractors like Balfour Beatty or Carillion may be chasing jobs that could run to billions, medium-sized firms will have the chance to win work, providing they start upskilling and learning about the technologies.”

The Civil Engineering Contractors Association is researching opportunities for members in the energy market as it waits for major nuclear and offshore wind projects to start construction post-2015.

CECA director of external affairs Alasdair Reisner said: “Everyone is going to have an interest in where the market is going; the energy sector offers considerable opportunity at a time when other parts of the infrastructure sector are declining.

“This is also a chance to rebalance the infrastructure workload across the UK because there is a perception that there is a lot of work out there in the south but the rest of the country is looking fairly barren.”

He added: “As long as there is a pipeline of visible work, the industry will start to invest in training. This industry has historically adapted quite well, but contractors need good foresight.”

The latest Department of Energy and Climate Change figures show that 1,366 renewable energy projects have been approved and are awaiting or undergoing construction, while there are a further 417 currently under consideration.

Of the projects under consideration, 210 are in England while 138 are in Scotland, 37 in Wales and 32 in Northern Ireland.

EDF Energy is set to apply for a multi-billion development consent order for its Hinkley Point C (pictured) nuclear plans later this year, underlining the commitment to large-scale construction from energy players.

But, on a smaller scale, two major energy-from-waste (EfW)applications from Covanta UK are already with the IPC, including the £400m Brig y Cwm development at Merthyr Tydfil.

Business intelligence unit Glenigan said the total value of EfW projects currently stands at around £11bn (see p56/57), with contractors such as Interserve and Kier among those to have recently won work in the sector.

German developer MVV showed that total cost will continue to be a major factor when it said Kier was chosen to build its £40m EfW plant in Plymouth, due in part to its innovative approach to cutting costs while delivering the project.

Another aspect of the EMR, ensuring back-up supply to mitigate fluctuation in wind power, could offer a lucrative short-term market in gas-fired power stations, said Duncan Sinclair, director of Redpoint Energy, which provided analysis for the government’s original EMR consultation.

Mr Duncan said: “The government is really committing to long-term targets and as soon as we see more clarity you will see projects start to come on-stream quicker.

“There needs to be investment in skills and technology and we are already seeing more academic courses in nuclear.”

Mark Stewart, EC Harris partner for energy, manufacturing

So who were the real winners from the government’s long-anticipated Electricity Market Reform last week? In truth, the report contained something for everyone although many received less certainty than they would have liked.

Crucially however, it now looks clear that the UK is working towards a 2030 timeframe. This is to be welcomed as it offers a realistic window in which to secure the levels of funding required to decarbonise the electricity market and also provides greater visibility that will enable the supply chain to get in place.

Low-carbon nuclear was the undoubted winner and with mechanisms including a carbon floor price and Contracts for Difference in place, we’re likely to see phase two of nuclear new-build accelerate to try and deliver 30GW by 2030. 

On a more near-term basis we can expect to see a dash for gas with CCGT a proven technology that will attract funding and which can quickly fill the capacity gap between 2012 and 2018 when new-build nuclear and renewable projects are expected to come online.

Offshore wind also received support that it’s part of the equation although the immediate emphasis is likely to be elsewhere until the industry finds a way to reduce its costs by at least 30 per cent over the next decade.

With greater visibility now on offer, the construction industry needs to focus its efforts on ensuring it can service the work on offer over the next twenty years.

In areas like gas and gas storage there is already sufficient knowledge but immediate action is needed to try and increase the talent and skills that will be needed to build the next-generation of nuclear plants.

 

Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions. Links may be included in your comments but HTML is not permitted.