Table of Contents
Executive Summary
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- Capital expenditure in water and sewerage sector
- Capital investment across industry rose by 9% to £5.7 billion in 2017/18
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- Figure 1: UK capital expenditure on water and sewerage services, 2015/16-17/18
- English water companies plan to spend a record £50 billion+ in AMP7 (2020-25)
- Capital expenditure in electricity transmission and distribution sector
- Capital investment in distribution networks expected to be lower in current price control
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- Figure 2: UK gross capital expenditure by electricity distribution network operators, 2012/13-2017/18
- Change in energy mix is a key driver for investment in transmission network
- Capital expenditure in gas transmission and distribution sector
- Capital spending picks up as current price control period progresses
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- Figure 3: Total gas transmission and distribution capital expenditure, 2013/14-2017/18
- Companies and brands
- Utility operators are adopting a more collaborative approach and closer relationships with the supply chain
- What we think
Issues and Insights
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- English water companies plan to spend a record £50 billion+ in AMP7 (2020-25)
- The facts
- The implications
- Innovative smart grid technologies will help enable the transition to a smarter and more flexible energy system
- The facts
- The implications
Water and Sewerage Sector – What You Need to Know
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- Focus on total expenditure (totex) in AMP6 (2015-20) set to reduce bias towards capital spending
- Move towards long-term alliances and frameworks across industry
- English water companies plan to spend a record £50 billion+ in AMP7 (2020-25)
Water and Sewerage Industry Capital Expenditure
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- Overview
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- Figure 4: UK capital expenditure on water and sewerage services, 2015/16-17/18
- Sewerage-related capital expenditure
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- Figure 5: Analysis of sewerage-related capital expenditure, by water and sewerage companies in England and Wales, 2015/16-2017/18
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- Figure 6: Analysis of sewerage capital expenditure in England and Wales by water and sewerage companies, by type, 2015/16-2017/18
- Water-related capital expenditure
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- Figure 7: Analysis of water-related capital expenditure in England and Wales by water and sewerage companies, by type, 2015/16-2017/18
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- Figure 8: Analysis of water capital expenditure in England and Wales by water and sewerage companies, by type, 2015/16-2017/18
- Figure 9: Analysis of water capital expenditure in England and Wales by water only companies, by type, 2015/16-2017/18
- Scottish Water capital expenditure
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- Figure 10: Analysis of Scottish Water capital expenditure on water and sewerage services, 2013/14-2017/18
- Northern Ireland capital expenditure
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- Figure 11: Analysis of Northern Ireland Water capital expenditure on water and sewerage services, 2013/14-2017/18
Water and Sewerage Future Capital Investment
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- Future challenges facing the water and sewerage sector
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- Figure 12: UK population, by region, 2014-36
- Move towards totex in AMP6 and beyond set to reduce bias towards capital spending
- Move towards long-term alliances and frameworks across industry
- Total expenditure plans for AMP6
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- Figure 13: Total expenditure (totex) allowance for AMP6 in England & Wales, by water & sewerage company, 2015/16-2019/20
- Thames Tideway Tunnel
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- Figure 14: Estimated cost of Thames Tideway Tunnel, 2016/17-2021/22+
- Next price control process (PR19) to be substantially more challenging
- English water companies plan to spend a record £50 billion+ in AMP7 (2020-25)
- Opening up of non-household retail market in England to provide new opportunities for water and sewerage companies
Water and Sewerage Industry Legislative and Regulatory Environment
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- Industry regulation
- Legislative environment
- European Water Framework Directive (WFD)
- Urban Waste Water Treatment Directive (UWWTD)
- The Drinking Water Directive
- Revised Bathing Water Directive
- Implications of Brexit on the UK water and sewerage sector
- Transfer of private sewers in England and Wales
- The Flood and Water Management Act 2010
- Water and sewerage retail competition opens up for all business customers in England in April 2017
Electricity Distribution and Transmission – What You Need to Know
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- New RIIO model for electricity network regulation sees shift in focus from capital expenditure to total expenditure
- Change in energy mix is a key driver for investment in transmission network
Electricity Distribution Capital Expenditure
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- Introduction
- DNOs spent a record £4 billion on asset replacement in last five-year price control period DPCR5 (2010-15)
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- Figure 15: Breakdown of total expenditure by DNOs during DPCR5, by area, 2010-15
- Current price control period RIIO-ED1 runs for eight years from April 2015 to March 2023
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- Figure 16: Total expenditure versus allowance, by DNO, 2015-16-2016/17
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- Figure 17: Total expenditure by electricity distribution network operators in Great Britain, by type, 2015/16 and 2016/17 cumulative total
- Capital expenditure expected to be lower in current price control
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- Figure 18: UK gross capital expenditure by electricity distribution network operators, 2012/13-2017/18
- Figure 19: UK gross capital expenditure by electricity distribution network operators, 2012/13-2017/18
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- Figure 20: UK gross capital expenditure by the electricity distribution network operators, by company, 2013/14-2017/18
Electricity Distribution Future Capital Expenditure
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- Forecast Total Expenditure in RIIO-ED1 (2015-23)
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- Figure 21: Actual total expenditure in 2015/16 and 2016/17, totex allowance and forecasts for RIIO-ED1, by company
- Ofgem slashes £200 million from RIIO-ED1 DNO spending allowances in September 2017
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- Figure 22: Total expenditure forecast for RIIO-ED1 in Great Britain, by company, 2015/16-2022/23
Electricity Transmission Capital Expenditure
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- Overview
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- Figure 23: Size of electricity transmission network in great Britain, 2018
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- Figure 24: Capital expenditure by the electricity transmission industry in Great Britain, 2013/14-2017/18
- Figure 25: Capital expenditure by the electricity transmission industry in Great Britain, 2013/14-2017/18
Electricity Transmission Future Capital Expenditure
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- New Price Control Period RIIO-T1 2013-21
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- Figure 26: NGET annual capital expenditure, Actual 2014-18 and Forecast 2019-21
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- Figure 27: SHET annual capital expenditure, Actual 2014-18 and Forecast 2019-21
- Figure 28: SPTL annual capital expenditure, Actual 2014-18 and Forecast 2019-21
Drivers for Investment in Electricity Distribution and Transmission Infrastructure
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- Decarbonisation of UK energy system
- Change in energy mix is a key driver for investment in transmission network
- Smart grid development to support low-carbon economy and aid transition to a more flexible energy system
- Ofgem supported innovation schemes to drive smart grid market and transition to low carbon economy
- Growth in distributed generation
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- Figure 29: Distributed generation connected to the distribution network during DPCR5, 2012-17
- Figure 30: Distributed generation connected to the distribution network, 2016/17, (MW)
- Renewables capacity development pipeline
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- Figure 31: Renewable energy projects in pipeline, by technology, as of August 2018
- Growth in decentralised and renewable electricity generation will increase the complexity of operating a secure and cost-effective energy system
- Energy storage to play key role in transition to clean electricity supply system
- BEIS and Ofgem unveil plans for major upgrade of the UK’s energy systems, including the removal of barriers to storage
- Government unveils £246 million battery investment strategy in July 2017
- Electrification of transport creates new opportunities
- Despite Brexit uncertainty, interconnector capacity between Britain and Europe is set to increase
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- Figure 32: Existing and planned interconnectors, as of November 2018
Gas Distribution and Transmission – What You Need to Know
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- Capital spending picks up as current price control period progresses
- Gas network operators to face tougher price controls from 2021
Gas Capital Expenditure
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- Capital spending picks up as current price control period progresses
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- Figure 33: Total gas transmission and distribution capital expenditure, 2013/14-2017/18
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- Figure 34: Total gas transmission capital expenditure, 2013/14-2017/18
- Figure 35: Total gas distribution capital expenditure, 2013/14-2017/18
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- Figure 36: Total gas transmission and distribution capital expenditure, 2013/14-2017/18
- Replacement expenditure dominated by iron mains replacement programmes
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- Figure 37: Length of iron gas mains replaced, by distribution network operator, 2012-17
Gas Future Capital Expenditure
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- Ofgem has introduced new regulatory framework for current price control period 2013-21
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- Figure 38: Ofgem’s required expansion of the number of properties to alleviate fuel poverty, 2013-21
- Innovation at centre of new price control model for gas distribution and transmission network
- Gas network operators to face tougher price controls from 2021
- Transmission network
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- Figure 39: Annual capital expenditure plans by National Grid Gas Under RIIO-T1, by category, 2014-21
- Distribution network
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- Figure 40: Annual capex plans under RIIO-GD1, by GDN, 2014-2021
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- Figure 41: Annual repex plans under RIIO-GD1, by GDN, 2014-21
- Figure 42: Forecast total capex and repex during RIIO-GD1, 2013/14-2020/21
Gas Industry Market Factors and Drivers
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- Social factors
- Economic factors
- The UK’s increased reliance on gas imports
- Government push for shale gas exploration to reduce reliance on imports
- Wholesale gas prices
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- Figure 43: Average wholesale gas prices, 2006-18
- Environmental and legislative factors
- UK energy policy
- UK committed to reducing carbon emissions by 80% below 1990 levels by 2050
- UK currently on track to miss emission reduction targets between 2023 and 2032
- Policies to decarbonise electricity
Companies and Brands – What You Need to Know
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- Kier acquires McNicholas Construction to strengthen their combined market positions and meet demand in the UK infrastructure sector
- Balfour Beatty’s transformation programme is delivering results, with the group now focused on selected markets, winning new business on terms and conditions that balance risk and reward
- Laing O’Rourke establishes a more focussed business structure
Industry Structure
Company Profiles
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- Balfour Beatty
- Build to Last transformation programme launched in 2015
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- Figure 44: Financial analysis of Balfour Beatty, 2013-17
- Figure 45: Turnover analysis of Balfour Beatty, by segment, 2015-17
- The Costain Group
- Group strategy
- Company performance and outlook
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- Figure 46: Financial analysis of Costain Group, 2013-17
- Figure 47: Turnover analysis of Costain Group, by segment, 2015-17
- Laing O’Rourke
- Following a Strategic Review in 2015-16 Laing O’Rourke has established a more focussed business structure
- Company performance and outlook
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- Figure 48: Financial analysis of Laing O’Rourke, 2013-17
- Morrison Utility Services
- Company performance
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- Figure 49: Financial analysis of Morrison Utility Services, 2013-17
- McNicholas Construction Holdings
- Kier acquires McNicholas Construction (Holdings)
- Company strategy performance
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- Figure 50: Financial Analysis of McNicholas Construction (Holdings), 2013-17
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Methodology
Further Sources and Contacts
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- Trade associations and regulatory bodies
- Energy UK
- Energy Networks Association
- Energy Industries Council
- Office of Gas and Electricity Markets (Ofgem)
- Office of Gas and Electricity Markets - Scotland (Ofgem Scotland)
- Office of Gas and Electricity Markets - Wales (Ofgem Wales)
- Association of Consulting Engineers
- British Water
- Chartered Institution of Water & Environmental Management
- International Water Association
- OFWAT
- Street Works UK
- Trade magazines
- The Engineer
- European Process Engineer
- Plant and Works Engineering
- Utility Week
- Trade events
- edie live 2019
- Utility Week Live 2019
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