21 Mar 2011 10:03:26
Reforms should consider infrastructure
ICE: Reforms to energy market must also consider practicalities of infrastructure delivery
March 21—Government must consider the practical delivery of a new generation of low carbon energy infrastructure alongside measures to enable future investment ICE has said in its response to the Electricity Market Reform consultation.
In its official response, ICE said that the market reforms must complement other relevant reform processes and demand-side measures such as the planning reforms, Green Deal, and regulatory reviews to take into consideration the wider issues associated with constructing a new generation of low carbon energy infrastructure.
ICE vice president Richard Coackley said: "While reducing the risk for investors is crucial if we are to deliver on the £200bn challenge of overhauling and decarbonising our energy sector, equally important will be facilitating the practical delivery of this infrastructure.
"There are associated issues such as skills shortages, industry capacity, the supply chain and an ongoing stop-start approach to infrastructure development that pose serious threats to the success of the reforms currently being considered. Government must recognise that even the most theoretically robust reforms to the investment environment will fail to be effective if construction is hindered by these ongoing practical issues."
ICE identified four key areas where Government must take a lead on policy to ensure prompt and efficient delivery of the massive construction programme needed:
• The supply chain
The availability and cost of raw materials may prove a major issue for the huge investment programme required. Steel manufacturing (capacity and cost) and ports capacity may prove major barriers to a massive expansion of offshore wind, for example.
• Skills and training
Some engineering and construction skills are in ready supply, or can be quickly developed. Others – generally highly specialised skills – are already in short supply, cannot be quickly developed, and are in heavy demand internationally.
• Construction industry capacity
The UK has a finite capacity for delivery of major heavy engineering projects, large scale projects in other sectors will be competing directly for programme delivery resources with the necessary expansion of the energy market.
• Phasing and timing
The recently-published Infrastructure UK cost review (to which ICE made a major contribution) highlighted the stop-start nature of infrastructure development in this country as a major factor in relatively high development costs.
Coackley concluded, "Government's role is not only to ensure the market reforms are effective in attracting long-term commitments in renewable energy projects, but also to ensure wider policy and regulation enables the construction sector to deliver efficient, timely solutions.
"We acknowledge that Government has already set in motion several programmes of work aimed at addressing these issues, but hope to see more tie up between these and the ongoing electricity reform market review.
"The challenge of overhauling our current electricity framework is daunting however with the right policy, regulatory and investment framework in place, the contribution of a successfully decarbonised system can be our legacy for generations to come."
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