In the Cambridgeshire countryside, a new British semiconductor company was ready to expand beyond its laboratory and open a manufacturing base. But the company’s ambitions came with unexpected costs to bring enough electricity to the new site. The possible bill? One million pounds.
The company Paragraf makes chips using graphene, an ultra-thin carbon. Their devices can be used to check for defects in electric vehicle batteries to prevent fires or run quantum computers. After acquiring the site in 2023, Paragraf made plans to increase its weekly manufacturing capabilities from tens of thousands of devices to millions.
But the cost of increasing power supply to the site, a result of years of underinvestment in Britain’s electricity grid, is diverting money (and time) from contracting and purchasing equipment, said Simon Thomas, chief executive of Paragraf.
“Our biggest advantage when you are a company like ours is the pace at which you can move forward,” he said. Delays “not only affect what can be done now, but also how successful you will be in the future,” she added. “It’s extremely frustrating.”
Across the country, complaints about a lack of investment in Britain are peaking after more than a decade of low economic growth and wage stagnation.
There is a “prevailing sense that things are not working” in the economy, said Raoul Ruparel, director of the Center for Growth at the Boston Consulting Group and a former special adviser to the British government. That includes a lack of affordable housing, poor public services, including transportation, and long wait times at hospitals.
With the economy expected to essentially stabilize this year, two ideas have been highlighted to revive it: speeding up upgrades to the electricity grid and making it easier for new builds to gain planning approval. Analysts and policymakers hope these initiatives can unlock infrastructure investment, reduce carbon emissions and generate much-needed productivity growth.
Address traffic jams
The problem is substantial: in the last five years, the number of applications to connect to the electrical grid (many of them for solar energy generation and storage) has increased tenfold, with waits of up to 15 years. Underinvestment is restricting the flow of cheap energy from Scottish wind farms to population centers in England and increasing delays for those with high energy needs, such as laboratories and factories. Laws giving local planning authorities considerable power are blamed for Britain’s housing shortage and blocking the construction of pylons needed to transport electricity from offshore wind farms. Resident objections to noisy construction and landscaping changes have been an obstacle.
Planning and grid connections are the foundations on which everything else is based, Ruparel said. A functioning grid that provides reliable, low-cost energy and a planning system that allows all types of infrastructure to be built are “fundamental to having a productive economy and a more efficient economy,” he added.
Grid planning and connections, once relatively niche interests, have gained widespread importance. At the opposition Labor Party’s annual conference this autumn, Keir Starmer, the party’s leader, promised to “tear down” Britain’s “restrictive” planning system and make the electricity grid run “much faster” if he wins the race for prime minister. in the United Kingdom. The next general election, due in 2024. Planning and network reforms were two of the most crucial changes in the latest Budget update to revive growth, Chancellor of the Exchequer Jeremy Hunt said.
At Paragraf, which spun out of Cambridge University six years ago, “we want to go faster than some of the infrastructure allows us,” said Natasha Conway, the chipmaker’s research director.
The company, with about 120 employees, makes sensors used to measure magnetic fields. Attracted by the CHIPS Act, which provides subsidies to semiconductor manufacturers, he had considered establishing production in the United States. However, in the end, Thomas decided to stay in Britain and establish a domestic manufacturing business.
“Graphene was isolated and invented here in the UK,” he said. “Are we going to let all the value go somewhere else?”
But getting enough electricity hasn’t been easy.
After months of searching for a site that had the power they needed, Thomas said, they settled on a warehouse 10 miles from the lab that would need power upgrades. Instead of waiting for a city-mandated upgrade, the company went ahead paying a network operator to install a connection to the main network. That solution will allow work to start sooner, but will carry costs of £1 million ($1.27 million), including the price of upgrades to the first lab, the company said. Paragraf expects to have initial production underway by the second half of 2024, approximately a year and a half after acquiring the site.
In November, the government announced measures to speed up planning approval for major projects and deter NIMBYism. The measures would, among other things, give communities financial benefits for approving network infrastructure projects in their area and shake up the queue for first-come, first-served network connections to eliminate stalled projects.
The plans have been welcomed by the National Infrastructure Commission, which advises the government. Many of the reforms have been drawn from the commission’s own recommendations, but the group wants the government to go further by compensating people when major projects such as housing developments or electricity transmission facilities are built nearby.
The country needs to overcome the “desire to maintain an image of Britain as a chocolate box, which is pleasing to tourists who come and see the picturesque old towns,” said John Armitt, chairman of the commission. “There has to be more to Britain in the future than that.”
The inability to build major projects (such as the government’s decision in October to cut a key part of a planned high-speed rail line, citing delays and overspending) affects “investors’ view of whether or not the UK is a worthwhile place.” to come,” Mr. Armitt said.
And Britain needs more investment: the commission estimates at least £70bn a year in the 2030s, up from an average of around £55bn a year over the last decade.
Rules discourage investment
One way the British government discouraged investors was by changing planning measures in 2015 and tightening them further in 2018, so that a single objection could quash a planning application, effectively banning onshore wind power in England. John Fairlie was a consultant in the wind industry at the time.
Mr Fairlie is currently CEO of AWGroup, a land development and renewable energy company that recently commissioned an onshore wind turbine in Bedfordshire, eastern England, which will generate enough electricity to power 2,500 homes. Due to planning restrictions and grid connection delays, the project took seven years to complete.
In recent months, “the policy has changed, but not enough,” Fairlie said.
The turbine, which was in the planning process when the rules were tightened, managed to gain approval in 2017. Since then, the main source of delays has been the connection to the grid. Advances in wind energy technology allowed the company to install a more powerful turbine, which needed a larger grid connection. “It just takes a long time to do it,” Fairlie said.
Next year, the turbine will be used to directly power an electric vehicle charging station, and the company is planning more projects where it builds housing developments that run directly on local renewable energy sources, avoiding grid delays.
As Britain seeks to escape a long streak of slow growth and lost productivity while meeting targets to reduce carbon emissions, businesses, economists and other experts say the government needs to urgently commit to these reforms.
“There’s a lot of recognition” of the problems, Armitt said. “We’re big on ambition,” but we’re not turning it into action, he added, which is particularly worrying around net-zero emissions targets.
What’s “increasingly becoming the fear of a lot of people is that we’ve set some tough goals for ourselves,” he said, “and as long as we’re about 10 years away, well, it’s very easy to throw the can down the road.” path.”