New approach to UK grid investment targets stop-start obstacles

UK energy regulator Ofgem’s new accelerated strategic transmission investment (ASTI) framework represents a huge opportunity to update the country’s grid to make it capable of connecting increasing numbers of renewable assets. If the UK, and by inference the transmission network operators (TNOs), are going to hit the government’s ambitious target of fully decarbonising the power system by 2035, then significant upgrades need to take place, at pace.

The existing process - the large onshore transmission investment (LOTI) framework - simply wasn’t going to allow the sector to evolve at the necessary speed. Rather than a project-by-project approval process, ASTI’s programmatic and proactive approach will mean that TNOs can accelerate the pace of investment into the grid at a time when it is desperately needed.

Ofgem has identified 26 projects to be taken on under the streamlined framework. The projects will be eligible for pre-construction funding, which allows developers to spend 2.5 per cent of the project’s forecasted total cost on activities undertaken before a planning permission application is submitted; 20 per cent of the project’s value will also be available as early construction funding for certain pre-agreed activities, such as land purchase and early procurement commitments. This will help the TNOs develop outline solutions and prepare the required planning applications more quickly, reducing the risk of delay and refusal.

The ASTI framework should be seen as a positive step forward, both for the supply chain and for the grid itself. It will allow TNOs to be more proactive in enabling developments to go ahead, while minimising the number of hurdles and barriers towards investment in grid upgrades. The ASTI framework will increase certainty of investment, which will create more space for the supply chain to grow.

What many in the industry were struggling to handle was the stop-start nature of projects. Under LOTI it could be two years before projects were sanctioned. That simply isn’t sustainable if you want to build up meaningful capacity in the supply chain - 2.5 per cent and then 20 per cent may not sound like an enormous amount on the face of it, but it will be really helpful in addressing those issues. It will be much easier to do enabling work that previously had to be done ‘at risk’ before approval and with no guarantee that the initial spending would be recouped.

For those of us in the supply chain, it will mean that we can be engaged earlier in the process, putting us in a better position to offer more innovation and more constructible solutions.

Overall, the whole process will be more streamlined. Before ASTI, TNOs would develop a concept design before asking a contractor to complete the detailed design and then build it. With ASTI, the supply chain will be in a position to be engaged much earlier and develop an optimum design that considers every aspect of the project, including the visual impact on the landscape and the community hosting the new assets. This is a much smoother, more efficient and integrated way of working, meaning everyone will be better aligned.

ASTI will play to the strengths of the most innovative firms which develop engineering-led solutions. It is only through better engineering that the ASTI projects can be delivered more efficiently and at lower outturn cost. The earlier that firms like Burns & McDonnell can be involved in the scoping and design of a project, the more value we can unlock for the client, as innovation maximises efficiency. The only way to deliver lower costs and faster builds is to design a different solution, use the latest digital approaches and take this engineering-led approach into the construction phase.

One example of a benefit from this engineering-led model is greater environmental sustainability. Reducing carbon is a case in point. We have to consider carbon during the design phase, but if we are involved too late we have limited options for adjusting the design to incorporate a low-carbon solution. Now, we can be more involved in considering carbon earlier in the process, giving us more time to develop ways to both reduce carbon in terms of scope 1, 2 and 3 emissions.

Meaningful decarbonisation of the whole power sector will only take place if the grid is ready to accept new renewable forms of energy. New projects for generating electricity often dominate the headlines, and they are hugely important, but if there is no way of allowing people and businesses to access that power, then it won’t be much use. ASTI will mean that all the talent and ingenuity within the supply chain will be available to get the grid ready for net zero.

Jonathan Chapman is UK managing director of Burns & McDonnell.