The government’s focus on renewable energy solutions means that planning ahead is more important than ever. Brian Moone surveys the scene
In the current market it would appear that the government strategy to invest in infrastructure is having the only real noticeable impact on increases in lead times. As previously reported, Crossrail projects have been absorbing capacity in material, plant and labour in work associated with tunnelling, piling and other concrete trades.
Although this situation has improved, the latest increases seem to be attributed to the ongoing focus on renewable energy solutions. This report looks at the impact this is having on lead times in the wider construction industry.
As forecasters predict that the UK is heading towards a triple-dip recession, many specialist contractors in the London commercial offices or infrastructure projects market remain upbeat and are reporting increases in current workload and enquiry levels. However, there is very little sign of this affecting their current and future lead times forecasts. It appears that many contractors are tempering their optimism about enquiry levels as they speculate that the increases are due to clients testing the market to assess the viability of their projects. They also believe that more companies are being placed on bid lists by clients keen to seek lowest prices.
Despite the reported increased order book, there are very few reports that their lead times are increasing either now or in the next six months. This may be due to the companies absorbing residual capacity or simply increasing resources to remain competitive. This is resulting in a continuation of the significant spike in activity to break this cycle and this has come in the form of a worldwide focus on sustainability, with targets for the UK to improve its carbon footprint.
The government targets towards renewable energy have been driving the construction of a large number of onshore and offshore wind farms in the UK. The current wind farm programme has been around since early in 2000 and according to the policy brief document, The Case For and Against Onshore Wind Energy in the UK, by Grantham Research Institute and the Centre for Climate Change Economics and Policy, the investment required for transmission of electricity from renewable sources from now until 2020 from offshore and onshore wind is estimated at £8.8bn, or roughly £1bn a year. The report estimates that the transmission costs are only 20% of the total costs of wind generation therefore potentially the total spend could be as much as £44bn by 2020 or about £5bn a year. However, it is not just the construction of the wind turbines that has increased, it is also the infrastructure necessary to distribute the generated power. For example, officials say the cost of linking new power generation to the national distribution network has increased from £4.7bn to £8.8bn in two years.
One of the knock-on effects of this has been a significant increase in the demand for high-voltage cables as utility companies place large orders to meet their infrastructure requirements. For example, one supplier reported that, in the period from the end of December through to the middle of January, the lead-in periods for the supply of 33kv cables extended threefold from a typical six to eight weeks, with a maximum of 12 weeks increasing to 23 weeks. It is believed that this spike in demand could extend through to March 2013 as utilities strive to meet output targets. Feedback from the suppliers suggests that these increases can be exacerbated if the high-voltage cables are being purchased in small quantities as priority is given to larger orders.
A previous Spotlight article (24 October 2008) highlighted how utilities work could typically generate up to 18 months lead times on a construction project and without proper planning a large percentage of this could be on the critical path. Clearly any increases in the availability of the high-voltage cables used in these works could affect projects even more.
As with all lead time issues, the key to this is planning ahead. The cable manufacturers will obviously be monitoring the demand for their products and gearing up for production capacity to meet it, so it is important to identify what the high-voltage cable requirements are for the project and ensure that conversations are held early on with the various suppliers and distributors to ensure that there are no shortages.