Will UK Power Availability Silence The Warehousing Boom?

News Warehousing

By Rees Westley, Head of Utilities, BCS (Business Critical Solutions)
The ongoing growth in ecommerce fulfilment services, combined with supply chain challenges, increased consumption and demographic growth has caused investors to flock to warehouses as the latest real estate boom. In fact, according to the procurement intelligence service Beroe Inc, the market was valued at circa $245bn in 2020 and is expected to grow at a CAGR of 7 percent over the preceding four years, hitting $326bn at the end of 2024.

So happy days, except that there is a problem! The construction of major warehouse developments are inextricably linked to the ability to source and utilise power. The impact of power availability runs across every aspect of the market from informing decisions on site selection, through the design and construction phases and the operation of such facilities. With forecast growth for warehousing likely to remain substantial, we are fast approaching the crunch point where we have to accept that in the UK we simply do not have enough power to continue as we are. In simple terms, the ‘magic pot of power’ is running dry.

Of course, many of us in the industry have been aware that this time was coming and, well here it is. Unfortunately, many overseas investors, predominantly from the US and China, and to a certain extent Europe, are not so well informed, particularly as they do not suffer from the same restraints domestically. Here in the UK others have been, at best, complacent.

But for now, here are the bald facts: the National Grid is severely depleted; there is little or no capacity for importing or exporting power to other areas; our infrastructure is not really fit for purpose; in certain geographical areas, there will be no significant power availability for the next seven to nine years. The last point refers to planned investment into areas such as sustainable energy and is part of the Government’s plans for a more decentralised energy model that also relies heavily on renewables.

Currently we have a scenario where we have a concentration of demand in West London and as a result the National Grid is so constrained that it is unable to import or export power. On the other hand the Scottish power networks are underutilised and sustainable power sources such as on and offshore wind turbines are being switched off due to over-supply and lack of demand.

The issue is that the transmission lines that run from North to South are constrained and are unable to move power between them. There is currently subsea transmission infrastructure (four circuits) being constructed that are due to come online towards the end of the decade that will carry this renewable energy southbound.

So what are the options in the meantime?

We are currently advising clients on a number of solutions to reduce their reliance on distribution and transmission networks including creating more efficiency and rationalising demand. In some cases there is the option to consider generating their own power to supplement any shortfall utilising renewable power such as wind, hydro, solar and waste to energy. This can work well in outer urban areas that have

the space to build power generation facilities or in the North of the country where there is a greater availability of power. Power generation plants can be built by the client developer or funded by one of the growing number of financial institutions that are starting to invest in power generation as they see the demand and resulting opportunities. However, the reliability of this type of renewable energy is not guaranteed as it isn’t always sunny or windy, so this often needs to be supplemented with other technology such as lithium and hydrogen power storage and smart grid technologies.

In conclusion, the surge in demand for warehousing that we have witnessed over the past decade poses a major power challenge to the industry in the UK. There is now a real requirement for participant companies to evolve their power strategies to align infrastructure, availability and demand, whilst considering their corporate and social responsibility and adherence to strict sustainability targets. With such risks and opportunities it is important for developers to carefully consider their power strategies. The time has come to act.

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