Analysis

Powerful thinking: MWH Global on energy in the UK

Craig McMaster, business director for energy, industry & infrastructure, MWH Global

Given the unexpected power station issues that have beset the UK electricity network in recent months, National Grid’s winter outlook published this week will be scrutinised more than ever before. “There is a percentage spare capacity there but the more that time goes on the smaller that percentage becomes,” says Craig McMaster, Business Director for Energy, Industry and Infrastructure, at MWH Global.

The firm, headquartered in Denver, US, specialises in power and water, and has 2000 staff in the UK and 8000 worldwide.

Scottish born McMaster points to the Longannet power station in Fife as being symptomatic of the challenge facing the UK when it comes to meeting future demand. The 2.4GW station is reaching the end of its life having been operational since 1972. “There is more and more coal coming offline and there are some very big generators right at the end of their life,” he says explaining that prolonging the life of these and bringing old plants into the system as a back-up to deal with winter peaks is not a sustainable long term plan. “We do need new generation in the UK and this needs to be a mix of sources.”

"I am seeing schemes being released for design and construction. They won’t replace all the big power stations coming offline, but the will take up a good proportion of that” 

Fortunately for the UK McMaster says that there are signs of movement from investors in new capacity, particularly in the decentralised energy markets. “Energy from waste and biomass are starting to show some real movement and there are a lot more projects in that pipeline yet to come,” he says.  

Changes to the financial mechanisms underlying such schemes see Contracts for Difference (CfDs) replacing the traditional Renewable Obligation Certificates (ROCs) and the evolution of this process has involved extensive consultation since 2012, creating uncertainty among investors, however final strike prices were published in December 2013 giving much needed market surety. 

Furthermore the most recent iteration of the CfDs has seen the government place more emphasis on the need for energy projects to promote more local content such as job creation, a move away from earlier plans where technical quality was the main driver. “It is all down to confidence in the market place. There is much more clarity and investors are warming to that. I am seeing schemes being released for design and construction,” says McMaster. “They won’t replace all the big power stations coming offline, but the will take up a good proportion of that,” he adds.

This same certainty is also encouraging more investment in wind power which he says will drive more need for pumped storage such as two major hydropower schemes that MWH has designed for Scottish and Southern Energy (SSE). Private developers are also eyeing this sector of the power generation market, says McMaster.

Nuclear too is moving forward and McMaster says that this will play a vital role as a baseload generation. He also points to European interconnectors as playing and increasing role with electricity imports becoming more common in the future.

Another future trend will be the extraction of shale gas, says McMaster with the political will being clear and the technical accessibility proven.  Bids for the 14th licensing round which opens up prospective shale areas in the UK, are due in next week.  At the same time existing license holders are making planning applications for test wells in the North West of the country. 

Environmentally however the arguments against hydraulic fracturing for shale gas are raising concerns, making it vital that lessons from overseas, and best practice, is brought to the UK for any new industry.  “One of the big technical issues is water. The biggest lesson that we have learned in the US is that you shouldn’t deliver hydrocarbon infrastructure in isolation from water. How do you get water into those wells, how do you get it down there and how do you get it back out again? What do you do with that water once it has been produced?” he says.  “At the same time you have pipes taking gas and oil out, don’t look at those things in isolation. Look at water and hydrocarbon infrastructure in parallel.”

But before this industry can get going the UK will of course face the 2015 general election and McMaster urges all parties to provide consistency to the UK energy market. “Investors want to know that the UK is a good place to do business. The most important thing that the government can do is set policy, maintain it, agree strike prices and give investors the confidence that they need to invest. The UK people, industry, business and commerce need to know that the lights are not going to go out.”