4.4 Infrastructure in the UK is a network of networks. An interdependency is where the impacts of change in one network are felt in other networks in addition. There are three broad kinds of interdependency:
• geographic co-location (e.g. a water pipe and a gas main passing close together underground, or a data processing centre built near an energy from waste plant);
• shared use of equipment/resource (e.g. a railway embankment also being part of a flood defence, or electricity cables being used for data transfer); and
• reliance on another network's function (e.g. transport monitoring and control relies upon a functioning data/communications network, and the drinking water supply relies on energy for pumps).
4.5 As infrastructure networks become more complex, these interdependencies are likely to increase substantially. Infrastructure systems are evolving and in some cases converging. Large scale infrastructure assets are increasingly relying on flows of information and other communications technologies. For instance, the electricity network is moving towards smart meters, active traffic management systems using real-time information are increasingly common, and water companies now use remote sensors to identify leaks.
4.6 It is easy to see how a problem with one network can impact on and be multiplied by other networks (for example a power cut can cause water and telecoms services to fail), but interdependencies do not only present co-ordination challenges and risks to resilience. They can also present opportunities for improving the performance or reducing the costs of infrastructure networks in construction and operation.
4.7 This means there is now a valuable opportunity to consider options to:
• decrease costs of infrastructure projects, by using one piece of equipment or land to do more than one job;
• increase the value of infrastructure projects, by designing projects such that one facility or project can do more or have better impacts; and
• improve future flexibility of infrastructure projects, by leaving the option open for future upgrades with less cost or for choices to be made later about which technologies may be relevant.
4.8 The Engineering and Interdependencies Expert Group (EIEG) has contributed to the Government's work in this area, contributing their valuable time and expertise to studying this issue. The Group is chaired by Professor Brian Collins of University College London and comprises a range of academics, industrial engineers and others.
4.9 In addition, Frontier Economics was commissioned by the Treasury to test whether consideration of interdependencies could add economic value to projects or programmes. Frontier proceeded on the basis of six case-studies, which were selected to cover a range of types of infrastructure interdependencies. These case studies were: Kings Cross Central, an urban regeneration project; the West East Link Main, a link between two water reservoirs in Merseyside and Manchester; ElecLink, an interconnector between France and the UK; the coordination of street-works at Borough High Street in South London; the previously proposed upgrade to the A14 in East Anglia; and how Low Emissions Vehicles could interact with the smart grid.
4.10 The case studies were explored in detail to identify the extent to which interdependencies had been considered. Economic opportunities were identified relating to the extent to which the interdependencies were harnessed or not.
4.11 Frontier Economics's analysis indicates that there are substantial direct one-off and on-going economic opportunities which could arise from well-targeted interventions to take advantage of interdependencies. By thinking about interdependencies at the right stages in a project (whether maintenance, upgrade or new build), they can be properly harnessed. For example, Transport for London calculated that coordinating street works on Borough High Street saved 384 work days (out of 669) compared with the estimated total time required for carrying out the gas, water and electricity projects in sequence. Similarly, by using the service tunnel within the Channel Tunnel to lay a new electrical interconnector, rather than running it across the sea bed, a potential 25% cost saving could be made (detailed in box 4.A).
Box 4.A: Channel Tunnel Interconnector case study This case study describes ElecLink, a cross-Channel electricity interconnector. Eurotunnel has signed a joint venture deal with London-based investment fund STAR Capital to build this 500 megawatt electricity interconnector between the UK and France using the service tunnel in the Channel Tunnel.1 The link, which is subject to national and European regulatory approval, is approximately 75km in length and is provisionally estimated to require an investment of around £216 million (€250 million).2 By increasing cross Channel capacity by some 25 per cent to 2500MW (enough to power approximately 350,000 homes)3, the link is expected to benefit the UK by facilitating greater competition in electricity supply and enhancing energy security. Frontier's analysis demonstrates how taking advantage of interdependency between transport and energy infrastructure creates the opportunity to achieve these benefits at lower capital investment costs. Using the 4.8 metre wide service tunnel to carry the link, while ensuring safety and operational design requirements are fully implemented, allows energy capacity to be enhanced at a lower cost than laying a cable on the sea-bed. For the latter, higher costs would be expected, owing to the complexities associated with laying the cable under the sea-bed and to ensure its continued safe and efficient operation given its location. On the basis of engineering industry norms, indicative estimates suggest that to deliver an interconnector of a similar length under the sea-bed might cost in the region of £280-420 million.4 Although final investment costs for ElecLink have yet to be estimated, at an assumed cost of £216 million this suggests that taking advantage of this interdependency opportunity could lead to cost savings of the order of 25 per cent or more. |
4.12 There are barriers to achieving these opportunities, such as the need for cross-sector co-ordination and overcoming risk aversion in project management. Any such behavioural and organisational change will take considerable time, but the potential gains include significant economic and growth opportunities. Therefore, a series of recommendations to counteract these barriers are being taken forward:
• the Government will work with major infrastructure project teams to pilot reviews during the design and engineering phase of these projects, to consider what opportunities for interdependencies may exist and how they may be exploited. The following projects will be included as they reach the appropriate phase: the proposed High Speed 2 rail network, the A14 upgrade, the Northern Line extension to Battersea, and the new lower Thames crossing;
• led by Infrastructure UK at the Treasury, the Highways Agency, Network Rail, British Waterways, National Grid and British Railways Board (Residual) Ltd will jointly review and examine the potential for additional use of land already owned by infrastructure providers and utility owners;
• the Engineering and Physical Sciences Research Council and the Economic and Social Research Council will jointly invest £7 million to support two interdisciplinary centres exploring innovative business models around infrastructure interdependencies; and
• led by the Joint Regulators Group, regulators in relevant sectors will ensure regulatory frameworks do not discourage shared works, shared facilities or revenue sharing and will support mechanisms for this where consistent with regulators' statutory duties. A report on progress will be made by the end of 2012.
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1 Eurotunnel manages the infrastructure of the Channel Tunnel and operates a truck and passenger shuttle between the UK and France; in addition Eurotunnel holds the concession until 2086 to operate the Channel Tunnel. STAR Capital Partners is an investment fund with €1 billion under management.
2 Euro tunnel press release, 26 May 2011; http://www.eurotunnelgroup.com/
3 This is based on the energy provided by the East West Interconnector, which will connect the Irish power system to the electricity grid in Britain through undersea and underground cables.
4 The cost of the cable is estimated to be around £210 million and 2 converters are needed - one at each end - at an estimated cost of some £70 million each. To reflect the uncertainty in these estimates, a sensitivity range of plus or minus 20 per cent has been applied.