The lights will be on but will anyone stay home to invest in UK infrastructure?

The search for low carbon must lead us to the become more attractive to investors, says Antony Oliver.

Antony Oliver
29 October 2014

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Energy

Will the lights stay on this winter? It is a question that has provided the national news media with a stock story at this point in the year most years for the last decade and a half.

So far the answer has been yes. And so it remains once again this year as National Grid invokes it contingency arrangements. 

Smoothing out planning is of course  critical. But so is the need to ensure that infrastructure professionals are constantly seeking and delivering new innovative ideas that drive down construction costs and build in the resilience and reliability that cuts operational expenditure.

As we discussed in September, it has put in place the new so-called Supplemental Balancing Reserve (SBR) measures to provide additional electricity generation capacity to call on if needed, on top of the Demand Side Balancing Reserve scheme that was already in place to incentivise large users to switch off at critical demand periods. 

So while I am confident that the UK will, despite power station closures, fires, nuclear shut downs and a generally aging generation fleet, continue to manage its electricity supplies across the winter months, I am increasingly concerned at our continued inability to tackle the overaching problem of lack of investment in new capacity.

Of course the talk remains very positive – perhaps rightly so as cross party support remains strongly behind investment in infrastructure across the board from housing to rail to roads to energy supply.

Interviewed in the latest issue of Infrastructure Intelligence, Treasury minister Lord Deighton again makes clear his view of the part that infrastructure plays and must continue to play in driving the UK economy forward. 

“Infrastructure strengthens and drives the economy, and improves living standards,” he says. “It creates jobs directly; £36bn of investment planned this year could support over 150,000 construction jobs. And it acts as a key enabler for future economic development, driving broader growth and regeneration.”

The challenge, as he also accepts, is in the delivery. 

Unless the UK’s infrastructure becomes more investable we risk relying on outdated assets and so at risk from the annual round of media black out stories – which will, one day, bear truth.

Whether it is tackling an affordable housing crisis, driving economic growth across the regions with high speed rail or solving an energy crisis with new nuclear power stations or offshore wind turbines, the critical issue remains providing investors with the confidence that these projects will move at sufficient pace from idea to reality.

Smoothing out planning is of course critical. But so is the need to ensure that infrastructure professionals are constantly seeking and delivering new innovative ideas that drive down construction costs and build in the resilience and reliability that cuts operational expenditure.

It was a point well made at this week’s Infrastructure Carbon Review One Year On conference as speakers underlined the need for strong leadership coupled to innovation, new thinking and procurement incentives to really push change towards a lower carbon industry.

Because with carbon really acting as a proxy for energy and resource use, it is clear that the required measures to embrace a lower carbon future will also drive us towards a more investable infrastructure project portfolio.

We must remember that, for all the government support for infrastructure, most of the money will come from private investors. And so unless the UK’s infrastructure becomes more investable we risk relying on outdated assets and so at risk from the annual round of media black out stories – which will, one day, bear truth.

Not an attractive proposition. Clearly a lower carbon future must therefore be the place to start.

Antony Oliver is the editor of Infrastructure Intelligence