Electricity transmission owners hold key to UK’s energy transition

The shift from electricity generation from gas to offshore wind has implications that go well beyond geography. Grids based on renewables are typically more complex, have a larger number of smaller, transmission and distribution connections and are less stable due to production variability. Modern electricity networks have a greater reliance on ancillary services to maintain stability and resilience, such as the Greener Grid Park model, which combines multiple, standardised, grid connections for a variety energy sources, including battery storage, as well as large-scale inertia devices that maintain grid stability.

Geography also adds complexity. With new capacity being developed to the North and West of Scotland as well as in the North Sea, many schemes will be delivered in remote locations, creating additional logistical challenges including access provision, materials delivery, and accommodation for a large, imported workforce. The sheer scale of development also presents problems for the developers and stakeholders. The 400kV network extensions under development, often replacing existing 132kV infrastructure, typically require larger and more visible towers and sub-stations. Similarly the converter stations for high capacity HVDC links are enormous - typically 200m long by 40m wide. All options, overhead line (OHL), underground cable and HVDC links have visual and environmental impacts that can be difficult to mitigate.

Components of the grid have distinct functions which in turn can affect the regulatory model and the parties involved in development. The NESO’s Holistic Network Design document (2022) set out a range of transmission network developments to facilitate the connection of the 23 GW of new offshore wind projects. The evolving transmission system will comprise significant enhancements to the legacy onshore transmission networks as well as the expansion of legacy networks with offshore HVDC links including those between Scotland and England. Other additions will include dedicated offshore transmission wind farm connections, integrated offshore transmission solutions that connect multiple offshore generators and HVDC interconnectors linking neighbouring European transmission grids that enable the efficient transfer of energy surpluses and deficits. As a result, a range of parties are involved in the delivery of different components of the future transmission system with the potential to disaggregate demand for cable, equipment, and contractors.

With the world racing towards a single net zero transition date, every grid requires transformation. Although the transformation has been anticipated for at least a decade, in practice, actual demand only crystalised from 2019 onwards. Manufacturers (OEMs) serve other markets including distribution networks and must allocate investment across all voltage levels. Without a visible pipeline, equipment, and cable manufacturers (OEMs) chose to invest incrementally into new HV capacity and were caught out by a 3 to 4 times increase in demand. Lead times for equipment such as transmission voltage transformers are up from 30 to 60 weeks to 120 to 210 weeks according to Wood McKenzie.

High levels of demand affects the wider delivery model. OEMs are focusing their operations solely on the manufacture and installation of their equipment. Turnkey contracts for converter stations and other major works are becoming harder to secure with Civils Contractors increasingly being engaged directly to undertake the building and Balance of Plant (BOP) works.

Supply chain constraints will also affect the pace of installation. Ground investigations require a significant increase in the availability of mobile drilling rigs and marine cable laying will be dependent on access to scarce specialist vessels. A rapid explosion in demand could result in TOs competing to secure capacity. Consolidated programmes and regulatory models that permit early procurement to secure capacity are an important aspect of comparative advantage in energy markets. Ofgem’s ASTI model facilitates this by allocating pre-construction and early construction funding.

The cable and equipment markets are highly concentrated and have extremely high barriers to entry meaning that new sources of competition is rare. Three manufacturers each separately dominate the UK and European Cable and Transformer markets with a share of 75% of capacity. It is forecast that by 2025, there will be a 1,000km pa shortfall in HVDC cable manufacture. TOs and their regulators have had to adapt their procurement strategy in response – for example by funding early payments to secure manufacturing slots. As an illustration of an extreme response to the constrained supply chain, X Links, the UK-Morocco power project, proposes to develop its own manufacturing facility in Scotland to deliver 4,000 km of HVDC cable to the project before serving the wider interconnect market.

Planning reform is a key element of the changes identified by in the 2023 Winser Review to reduce project durations to an average of 7 years. The review highlights multiple issues in the planning system including a lack of guidance for trade-offs and the need for rules on public benefit and compensation. The pace of reform to the planning system continues to accelerate with the forthcoming Planning and Infrastructure Bill and updates to the Energy National Policy Statements (NPS). The EU has already adopted a ‘presumption of overriding public interest’ to simplify the approvals processes for grids and in the UK, the grid is defined as Critical National Infrastructure. Further measures are likely to be needed to meet connection deadlines.

Construction’s transmission sector has a well-known skills shortage that could be difficult to resolve. The critical skills requirements, design engineering, field engineering, tower erection, OHL stringing and electromechanical engineering require relatively few specialists compared to the wider, general workforce but are all under high demand and have a long-lead in period for training and skills acquisition. Arcadis undertook a labour market study in 2022 with Contractor Murphy which highlighted that an industry-wide response, including the provision of training opportunities and mid-career development, would be needed to ensure growth in the workforce in line with demand. A particular problem is the supervisory constraint on on-site training, particularly in live environments. One option available to delivery organisations will be to access an overseas labour force. Currently the UK’s points-based system supports this based on qualifications and earnings thresholds. TOs in Europe are already exploiting open borders in the EU to access specialist labour, and UK employers will need a compelling offer to attract the best people whilst building a domestic workforce.