Focus on Energy

At over £117 billion of capital investment, the energy sector assumes by far the biggest share (approximately a quarter) of the total investment, while £19. 3 billion will be spent in the water sector. Looking beyond 2020-2021, the total value of the energy infrastructure pipeline is £255.7 billion (up by £10.7 billion from the July 2015 pipeline), with 109 projects identified (approximately 35% of the pipeline) and 58 programmes (approximately 20% of the pipeline).

Priority Energy Investments

The NIDP sets out the government’s priority infrastructure projects and programmes to 2020-2021, a full list of which can be found here

Priority investments have been designated as such based on their national significance and ability to enhance the quality, sustainability and capacity of substantial new or replacement infrastructure. Further criteria include the potential to promote economic growth and unlock substantial private investment, as well as making a significant contribution to the government’s strategic objectives. 

The list included in the NIDP builds on the previously released Top 40 priority investments, The majority of priority investments remain the same; however completed projects have been removed from the list, as well as those that are stated to be no longer reflective of government policy. 

In the energy sector, the priority investments are clearly stated as:

  • New nuclear
  • Gas
  • Offshore wind
  • Interconnectors
  • Smart Meters
  • Transmission and distribution

Notably, carbon capture storage, onshore wind, solar and biomass have been removed from the priority list. No surprises there and this approach align with the direction of travel for energy policy since Amber Rudd’s recent speech in November 2015. 

In new nuclear, Hinkley Point C gets another mention as the most developed new nuclear project, alongside the Horizon Nuclear Power and NuGen consortia projects. On gas-fired generation, the NIDP includes a general reference to new plant coming forward, but only one specific reference to the Carrington CCGT plant. Further developments are keenly awaited on this front. The NIDP expects that the Dudgeon, Hornsea 1, Beatrice, Walney Extension, Burbo Bank Extension, East Anglia 1 and the Neart na Goithe Offshore Wind Projects will come forward during this Parliament. A timely reminder is made in relation to Ofgem’s second cap and floor window for new interconnector projects which is due to open shortly and the government reiterates its support for these projects by committing to work with its international counterparts, developers and regulators to support further delivery. Following the successful energisation of the Beuly-Denny line, the Western HVDC Link and London Power Tunnels Projects are identified as two further priority transmission projects expected to complete this Parliament, out of a total £19.4 billion investment that Ofgem has approved across the gas and electricity transmission networks over the current eight year price control period (2013-2021).

A commitment to Smart Power

Following the National Infrastructure Commission’s report on Smart Power, the NIDP notes that the government will lay the foundations for a smart power revolution by:

  • allocating at least £50 million for innovation in energy storage, demand-side response and other smart technologies over the next 5 years;
  • noting that Ofgem will consult on opening up £100 million of funding innovation competitions to better enable innovation by non-licensed companies from 2017; and
  • increasing its ambition for greater electricity interconnection (with the delivery of up to 9GW of additional capacity).

The report also states that over 53 million smart meters are expected to be installed by 2020. In addition, small modular reactors and tidal lagoon projects are specifically referenced in the NIDP. As mentioned in the Budget 2016, the government is launching the first stage of a competition to identify a SMR to be built in the UK, and will publish an SMR delivery roadmap later this year. The government’s upcoming tidal lagoon review will help establish an evidence base of value for money before further policy is established.

The Water Sector

Chapter 9 Water and Waste highlights that water services may come under increasing strain due to climate change and population growth; adequate wastewater treatment infrastructure will also be important. Government policy, through Ofwat, is aiming to ensure ‘resilient, sustainable and affordable’ water service provision by the private sector. 

The NIDP reminds us that Ofwat will begin consultations on its next five-year price control period in 2017 in anticipation of the 2019 price review. Further, water companies are expected to explain how they plan to balance long-term supply and demand for water with regard to population and economic growth, and climate change in Water Resources Management Plans. These plans are subject to government approve and public consultation, with companies due to begin consulting on their next plans in 2018. 

Overall, the NIDP places a softer emphasis on water aside from the Thames Tideway Tunnel project, which is the water sector’s one priority investment project. However, there are 28 programmes in the water sector, and it has a pipeline value of £19.3 billion. Nonetheless, as new price control periods loom and the water companies draft their Water Resources Management Plans, this emphasis is likely to increase.

Tracking Progress

To boost confidence and ensure that priority projects and programmes remain on track, from 2017 the IPA will provide annual updates on progress against the NIDP. Reporting will take place in the key areas of updates to the Infrastructure Pipeline, policy milestones, accelerating delivery and performance, priority project and programme milestones and major projects in development.