Q3 2023
Infrastructure’s role in tackling climate change
As the global transition to net-zero emissions gains momentum, the infrastructure sector will experience big changes, ranging from the buildout of renewable-power capacity and electricity grids to the decarbonisation of existing assets around the world. In striving to meet the ambitions of the Paris Agreement, the speed and the scale of the transformation is already presenting significant capacity challenges to the supply market.
New technologies
Carbon Capture Usage Storage (CCUS) is one of the technologies that can play an important role in tackling global warming.
The Intergovernmental Panel on Climate Change (IPCC) highlighted that, if we are to achieve the ambitions of the Paris Agreement and limit future temperature increases to 1.5°C (2.7°F), we must do more than reduce emissions – we also need to deploy technologies to remove carbon from the atmosphere.
CCUS is a suite of technologies that enables the mitigation of carbon dioxide (CO2) emissions from large point sources such as power plants, refineries and other industrial facilities, or the removal of existing CO2 from the atmosphere and storing it underground.
There are three steps to the CCUS process:
- Capturing the carbon dioxide for storage. The CO2 is separated from other gases produced in industrial processes, such as those at coal and natural-gas-fired power generation plants, steel or cement factories.
- Transport. The CO2 is then compressed and transported via pipelines, road transport or ships to a site for storage.
- Storage. Finally, the CO2 is injected into rock formations deep underground for permanent storage.
Leading organisations including the International Energy Agency (IEA), International Renewable Energy Agency (IRENA), IPCC and Bloomberg New Energy Finance (BNEF) have all produced long-term energy outlooks that rely on a rapid expansion of CCUS to limit global temperature rise to 1.5°C.
The UK’s position
The CCUS Net Zero Investment Road Map was published this year by the UK Government confirming commitment to carbon capture schemes:
"Carbon capture, usage and storage (CCUS) will play a critical role in the transition to net zero by 2050… The UK is a first mover; we are aiming to support the establishment of two CCUS clusters by the mid-2020s and a further two by 2030, through which we aim to capture 20-30MtCO2 per year"
This could provide opportunities for the construction industry to respond to a new market, with the Secretary for Energy Security and Net Zero, announcing £3bn of Net Zero projects in March 2023, including the Net Zero Teesside project which G&T is currently delivering.
G&T Experience
Net Zero Teesside will become the world’s first gas-fired power plant with carbon capture and storage facilities, producing up to 860 megawatts of electricity, enough to power around 1.3 million homes. Up to two million tonnes of CO2 emissions from the power station will be captured per year and transported offshore for storage.
It is estimated this multi-billion-pound mega project will create up to 5,500 jobs during construction with the plant coming online in 2028.
G&T is providing specialist cost estimating services to our client for the Net Zero project, as well as providing insights into the tier 2 market which is critical to successfully delivering a project of this scale.
Market Context
Recognising the significance of electrical and mechanical components in energy-related projects, it is important to understand how these components prices are moving in the context of the wider global market. Projects are subject to price adjustment formula, so it is vital to select appropriate indices that will be representative of commodities in their relative proportions, on which G&T can assist.
Labour
The graph below shows the difference between the increase costs between general construction labour and mechanical and electrical specialist labour over the past five years.
General labour increased by 12%, mechanical and electrical labour increased by 17%.
Products & Materials
A similar trend can be seen in products and materials used in energy related projects, the graph below details a range of specialist components and assemblies, all outstripping general materials inflation.
General construction material and plant (according to BCIS) increased by c34%-39% over the past five years. By comparison, examples of the specialst components which are critical to the energy sector, as listed below, have all outstripped the general materials results.
- BEAMA Distribution Transformer – 62%
- BEAMA Basic Iron & Steel – 65.5%
- BEAMA BISPA Index for Materials – 76%
- BEAMA Factory Built Assembles – 93%
- TDE GOES Super High Grade Steel – 116%
Understanding the materiality of these project components along with how risks and opportunities are managed is an essential part of our advice at G&T in project development and delivery.
Conclusions
There are significant supply constraints within the mechanical and electrical market - which can represent as much as 70% of capital investment for energy programmes such as Carbon Capture.
The scale of programmes will require the expansion of current market capacity and the adoption of new delivery methods and technologies. Maximising market appetite for these upcoming significant opportunities will therefore be vital in securing the capacity needed to deliver the forecast demand, through early engagement and transparency of programmes.
With a potential downturn in traditional sector workloads given economic uncertainties, the growth of carbon capture can be a significant new opportunity.