Q&A: Why is grid capacity holding back development, and what can we do about it?

22 March 2024

Electrifying buildings is key to meeting the UK’s Net Zero target – but a lack of grid capacity threatens to constrain new development, with schemes in some areas in a 15-year queue for connection. Phil Kelly from the Sustainability team at Ridge explains why electricity is suddenly in short supply, and what developers can do to make sure their projects go ahead.

What’s behind the grid capacity crunch? Why is this happening now?
In a nutshell, it’s because we don’t have enough electrical capacity in the UK, and the building and car industries are demanding more and more at a rate that we can’t keep up with. We’ve been closing down coal-fired power stations to meet the government’s October 2024 deadline, but we’re not adding new generation capacity at the same rate. On top of that, there’s a boom in data centre construction, and demand for electricity to power and cool them is going through the roof.

When you put all those things together, electricity is the UK’s primary route to zero carbon, but we just don’t have enough of it.

Is this a UK-wide issue, or just in certain areas?
It’s definitely UK-wide, but to different extents. There are very specific areas where it is a massive problem – certainly around Reading and Slough where there are a lot of data centres. In some cases across the UK, commercial or residential developments trying to reserve grid capacity are being told they may need to wait 10 or 15 years.

“Zombie” applications are becoming a real problem. This is where developers submit a planning application and reserve grid capacity before they’ve fully worked up a scheme or got funding for it. There are a lot of reservations not being followed through, and developments that are viable can’t get capacity.

What’s behind the rise in zombie applications?
Capacity has always been a consideration. One of the very first things that our engineering teams at Ridge always do is contact the utilities providers to check how much capacity there is on site, before even thinking about design. You might only be able to deliver 150 homes rather than 300, unless you install a new substation which can add millions to the cost of a scheme.

But in the past, you only needed enough electricity for lighting and air-conditioning, not for heating, hot water and electric-vehicle charging too. Suddenly, electricity demand is much higher – and it’s become a bigger risk for developers. Even if you lose a few thousand pounds paying to reserve capacity that you don’t ultimately need, that’s better than not being able to start your £100m development for 15 years.

What could this mean for new projects?
The implications are as grave as not being able to undertake development. A scheme might tick all the boxes and be in an area where housing is needed, but it just can’t happen because there isn’t enough grid capacity.

And it’s not just new projects. Around 80% of the buildings that will be around in 2050 are already in operation today. So we have to reduce the emissions of existing buildings too, or the UK is going to miss its Net Zero target by a substantial margin.

In simplistic terms, the easiest way to decarbonise is to strip out gas and replace it with electricity, ready for when the grid is zero-carbon. If one, two, three homes switch to heat pumps, you would hope that the capacity of the local substation isn’t an issue. But if 200 homes want to convert at the same time, I think we’ve got a challenge. If we continue on the same trajectory, power cuts and blackouts may well become part of everyday life.

What can we do to make sure there’s enough grid capacity for new development, and avoid a future of power cuts and blackouts?
The industry needs an energy efficiency target to work to, as well as a carbon emissions target, because there isn’t unlimited electricity. It’s not enough to just go all-electric and call yourself zero-carbon-ready. The office sector has been one of the first to articulate that, saying that a building can only be called Net Zero if it is void of fossil fuels and uses no more than 55kWh of electricity per square metre per year. Ridge is also a member of the working group for the UK Net Zero Carbon Buildings Standard which is now trying to come up with limiting values for all the other building types.

The government should also incentivise battery storage, as a way to use all the renewable energy that’s generated when the sun is shining or the wind is blowing. There’s a lot of science behind the idea that we just need to balance out the peaks and troughs in electricity demand. On many days of the year, there’s a double-hump, when everyone gets up, and when they get in from work. We probably can’t get rid of those two peaks, but we could encourage people to change their behaviour. The smart meter roll-out could be the first step towards introducing dynamic pricing, where energy is more expensive at peak times.

I think a combination of all those things is going to help.

What about right now? How can developers make sure their schemes are viable?
The challenges are not insurmountable, but a lot of this is quite detailed and nuanced. The conventional approach has been to get an architect and perhaps a cost consultant on board at the outset to see what you can do with a site. But developers thinking about schemes today need a much wider range of advice as to whether something is technically feasible and financially viable, so they may need to engage a broader range of consultants much earlier in the process to get a clear picture.

The industry is gradually waking up to the fact that sustainability has to be thought about right at the start before everything else, not at the end of the design process. Grid capacity needs to be part of that conversation.

Phil Kelly is a Partner in the Sustainability team at Ridge. Working closely with all disciplines, Phil brings an expert focus to Sustainability, Net Zero and Circularity.
Contact him at: philkelly@ridge.co.uk.

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