The new National Infrastructure Commission (NIC) could change everyone’s life. Set up at the end of 2015 to plan strategically for a surge in infrastructure investment, its first goal is to equip the UK with a modern energy network capable of saving taxpayers some £8 billion annually up to 2030. An effective London transport system and a well-connected North of England are also within its remit. Now the independent NIC is being placed on statutory footing, says Jon Herbert.
One of the less headline-grabbing announcements in the Queen’s May speech to Parliament was statutory backing for an independent quango created last autumn by the Chancellor. Mr Osborne’s aim is to ensure sound strategic planning for the cost-effective and efficient creation of “nationally significant infrastructure” he believes the UK needs urgently to compete in modern interconnected world markets. Success will mean jobs and opportunities for the extended UK supply chain.
Chaired by the former Labour Energy Minister and peer, Lord Andrew Adonis — who has elected to sit as a neutral cross-bencher in the House of Lords — the new NIC is tasked with examining three vital aspects of UK infrastructure that could help or hinder economic prosperity up to the mid-century point.
The trio are a fit-for-purpose modern energy network, an efficient London transport system and Northern Powerhouse connectivity, including HS3.
Far-reaching changes envisaged for the energy sector alone could help to save consumers and taxpayers circa £8 billion a year up to 2030, while also helping the UK to meet its 2050 carbon targets and secure future power generation.
The Chancellor has now given the Commission two further urgent tasks to help put the UK on a sound commercial footing as the NIC prepares to present its first National Infrastructure Assessment.
The first is to advise the Government on how best to maximise the potential of a Cambridge-Milton Keynes-Oxford corridor as a single, knowledge-intensive cluster. The aim is for the cluster to compete at an international level while also safeguarding a high-quality environment, homes and jobs. The NIC is being asked to assess and make the economic case for which investment strategy could generate the most growth.
The second is to recommend what the UK must do to be a world leader in 5G infrastructure deployment so that Britain can take early advantage of future 5G services. The Government’s own 5G strategy will be announced in Spring 2017.
Early track record
With some 25–30 permanent staff, plus statutory powers to draw on the expertise of regulators and national delivery bodies, the NIC has been given responsibility for providing an unbiased analysis of long-term UK infrastructure needs and a matching implementation plan. It must also present an assessment of national infrastructure needs early in the life of every Parliament.
Looking 30 years ahead, it will report at five-year intervals on the status of the energy sector, roads, rail transport, ports, airports, water, waste, flood defences, plus digital and broadband provision. At the same time, it will focus on how investments can support housing development. The Government must listen to its findings, accept them, or set out detailed alternatives.
In its short life, the Commission has made a flying start in examining critical issues, calling for key evidence in December and launching a 10-week consultation in January that closed in March. January also saw the appointment of a panel of academics, lobbyists and business leaders chaired by Sir John Armitt, who will undertake the first “national needs assessment” due to be published in autumn 2016. It will offer a vision for UK infrastructure up to 2050.
Also in March, the NIC published two early studies — “High Speed North”, plus “Transport for a world city”, a report suggesting that Crossrail 2 should be funded and developed as a priority to open in 2033.
“Infrastructure affects everyone,” says Lord Adonis. He stresses that ordinary daily events, such as how we all work, warm our homes, meet or stay in touch with friends, plus our own fundamental quality of life, depend on a national infrastructure which is currently not as fit-for-purpose as it should be.
Better decision-making, planning, and infrastructure delivery is a national priority that must be based on clear-thinking, dispassionate analysis and impartial advice. This is exactly what the NIC has been founded to do, he says.
The NIC began its work early this year with studies into the UK’s electricity sector, connectivity between the great cities of the North and London’s transport. It has already published, Smart Power, a study that considers the energy sector.
Nuclear power, it notes, is inflexible. Nuclear plants run best at a continuous rate and deliver a stable base load. They are not suited to ramping power supply up and down in line with demand. By contrast, the shift to low-carbon technologies will mean more smaller-scale power generators — such as onshore wind, solar power, and combined heat and power units. These must be connected to an advanced distribution network.
A further inevitable development will be for heating and transport to move away from gas, oil and nuclear in favour of renewables. This poses a dilemma for the power industry. Minute-by-minute, it must ensure that power supply always meets demand through a stable network that avoids blackouts. Extra power has to be brought online each time the nation pops on the kettle during a Coronation Street break. The network needs to be resilient in the event of demand surges or individual power stations falling offline. Therefore, a smarter way is needed to control generating capacity and demand, says NIC.
The first solution it foresees is a greater number of interconnectors linking electricity markets physically across national borders. Referendums aside, Britain’s historically low number of interconnectors (subsea cables) to neighbours is set to increase.
Interconnector cable technology is said to be one of the few capable of moving large amounts of electricity from “where it isn’t needed to where it is” securely at low cost. Power is imported at peak demand times and exported profitably during lows.
Britain currently has 4GW of international interconnector capacity — two with Ireland, one with France, and one to the Netherlands — accounting for some 5% of supply. By the 2020s, new links to France, Norway, Denmark, Ireland and Belgium will be under construction, totalling some 11.3GW. There may also be future links to Norway and Iceland.
NIC urges the Government to encourage the construction of beneficial links to other European countries. Investments should be made by the private sector with the Government diplomatically unlocking new markets, it says.
Historically, electricity has been difficult and costly to store. However, the Commission envisages a storage sector based on new advanced technologies that have huge potential but will require no subsidies — business is already queuing up to invest in them.
The development of many innovative electricity storage technologies has been driven by consumer electronics, including mobile phones and electric vehicle investments. As an example, lithium ion batteries cost $3000/kW in 1990. Today they cost less than $200/kW.
However, while subsidies cause no problems, regulations do need amending. The status quo works against storage providers, NIC says, blocking them out of various markets. As an example, some storage assets face “double-charging” from two Government levies. This acts against investors and investment. The result is barriers against technology that could replace the building of more power stations. They also threaten energy security and the UK’s ability to meet legally-binding climate change targets.
On the positive side, there is enormous potential for integrating high-capacity storage technologies into the grid as much cheaper options than building new stations or laying cables. Therefore, NIC wants the Department of Energy and Climate Change (DECC) and Office of Gas and Electricity Markets (Ofgem) to review the regulatory and legal status of storage systems and open up the market, with reforms proposed by Spring 2017 ready for early implementation. It also wants Ofgem to incentivise network owners to use storage and other flexible energy sources to increase capacity and resilience as part of more active management systems. To put this into context, wind farms were paid £90 million in 2015 not to generate power that could have been stored instead.
Demand flexibility includes changing the behaviour of households and businesses. Encouraging people to use domestic appliances off-peak is one option. However, automation in the home, office and workplace can also save consumers money and cut emissions without inconvenience.
In Australia and the USA, 15% of peak power demand is met with demand flexibility. The roll-out of smart metres into every home during the 2020s could point the UK in the same direction. However, without regulatory and cultural changes, the potential benefits will not be seen.
Which is a shame, says the NIC, because the UK is also a world leader in data analytics and software development that is central to managing energy demand seamlessly. It has four conclusions.
- Ofgem must review regulations and commercial arrangements around demand flexibility to make participation easier and clarify the role of energy aggregators.
- DECC should continue to change the energy capacity market to reduce costs and barriers.
- DECC, Ofgem and the National Grid must ensure larger users and opinion-formers know about the many saving opportunities available to industrial and commercial consumers.
- Pilot schemes of business models making demand flexibility easy and attractive should be run and evaluated, leading to best practice on the Government’s estate.
The National Grid’s independent role as system operator should also evolve and be reviewed, with the National Grid as a private company encouraged to invest in new digital infrastructure. The Commission also noted that private firms now run lower voltage local distribution networks.
Published by Croner-i on 4 July 2016