The structural changes necessary to achieve decarbonisation in infrastructure

Out-Law Analysis | 13 Jul 2021 | 11:40 am | 11 min. read

The decarbonisation of the infrastructure sector depends on a complete transformation of the way the sector works and the level of priority it gives to innovation.

There is one place where construction companies can look when figuring out how to introduce innovation and efficiency into their processes, and that is manufacturing.

There is a role for governments to play in incentivising the industrialisation of the construction market. The support given to facilitate growth in the UK’s offshore wind industry is a blueprint for how governments can drive change and deliver decarbonisation at a cost industry can afford.

The problem with existing business models

Industry around the world emits too much carbon into the atmosphere. Scientists have warned of the potentially catastrophic effects of climate change if carbon emissions are not severely curbed. Construction and infrastructure face their own pressures to decarbonise.

Many global leaders have committed to achieving ‘net zero’ emissions by 2050. In the UK, the government has said that "extensive, systematic change across all sectors" is necessary for this target to be meet. For UK industry, it means the level of emissions will need to fall 90% on 2018 levels by 2050, and by at least two thirds by 2035 if the country is to be on track to meet its later target.

To achieve the scale of decarbonisation required, existing ways of operating in the infrastructure sector will need to be transformed. An industrialised construction approach is required.

Currently, construction business models face challenges related to a lack of productivity growth, lack of profit margin growth and a hierarchical, top-down approach to allocating risk. Design and construction are often considered in isolation from one another, there is a focus on producing bespoke assets for each project, supplier relationships can be more adversarial than collaborative, and processes can lack the efficiency that automation and other digital technologies can provide.

nced Manufacturing Research Centre (AMRC) at The University of Sheffield. Traditionally, AMRC has worked closely with the aerospace and automotive industries but has recently turned its attention to the construction industry. Advanced construction businesses are working with AMRC to improve processes and innovate.

There is scope to rapidly learn about more efficient production from other industries. It is not enough to tinker at the edges in the move to an industrialised construction approach as set out in the Construction Playbook. The construction industry requires wholesale change. There is a big opportunity to accelerate the process in construction by leveraging off what other sectors are doing using rapid learning. There is a huge urgency to decarbonise which cannot wait for decades of small incremental improvements. A much flatter, wholly integrated and coordinated supply chain where built assets are developed using technologies like Building Information Modelling (BIM) is needed. Ultimately, industry should be working together to create a digital twin of each infrastructure asset. This can help disclose the carbon footprint of the asset before construction.

Lessons can be learned from the automotive industry, which uses standardised platforms of components and assemblies that can be reconfigured in different ways depending on customer needs.

Lessons to learn from manufacturers

Manufacturers are well placed to deal with the decarbonisation agenda. The sector has largely implemented digital transformation programmes, while horizontal supply chains and targeted collaboration between competitors enable companies to innovate and build strategic intellectual property.

There is also a long tradition within manufacturing sectors of working with start-up companies in the digital sector and, more recently, with green start-up businesses.

Standardisation is also commonplace. High-end manufacturing industries are used to producing goods and components in accordance with recognised standards and common industry practices. Standard operating procedures are a part of the DNA of the manufacturing sector and enable efficiency and make it easier to scale up.

There is also a general willingness and appetite in the manufacturing sector for innovation, research and development, the use of new production methods like 3D printing or connected factories, and the use of data in the production process.

A strategic approach is taken to procurement, with specialist procurement teams often operating across companies in the manufacturing sector.

These are the factors that make the manufacturing industry an excellent example for construction to learn from. However, the manufacturing sector still faces challenges of its own.

Friel Anne-Marie July_2019

Anne-Marie Friel

Partner

To achieve the scale of decarbonisation required, existing ways of operating in the infrastructure sector will need to be transformed. An industrialised construction approach is required.

The cost of decarbonising production is still a major barrier, and a lack of transparency of supply chain emissions and lack of data sharing between suppliers remain. Supply chain complexity is a further potential barrier to change – Volkswagen, for instance, has 40,000 direct suppliers, many of which are SMEs.

There is still concern around the 'first mover' principle, where those that innovate first see themselves as effectively subsidising change which competitors benefit from.

Procurement incentives are often not aligned with climate objectives either, to the extent that procurement teams often still do not see this as a real priority.

What needs to change

Those behind infrastructure projects need to build a ‘one team’ approach to deliver decarbonisation. Alliances are vitally important in bringing together designers, contractors and investors to focus on building solutions that decarbonise infrastructure. Alliances need to be supported by appropriate contractual frameworks that drive collaborative behaviours.

Alliances also need to spend more time on designing the asset upfront. Early engagement of the supply chain is vital. If alliance partners spent more time on the design and planning for whole life performance at the start, there is a better chance to design out carbon, reduce time on site and ultimately reduce costs.

Procurement models can also drive decarbonisation if they are modernised. They need to encourage the construction industry to propose materials and processes that support decarbonisation and facilitate greater innovation, digitalisation and industrialisation. There needs to be a transformation of the whole value chain. In the UK, the approaches outlined in the government’s Construction Playbook must be implemented to ensure that innovation can happen and drive decarbonisation.

The UK has also issued a new procurement policy note which says that contractors with UK government contracts worth more than £5 million a year must commit to achieving net zero carbon emissions by 2050 and detail their environmental management measures during the performance of the contract.

Centuries-old payment practices also need to be updated as they do not help achieve an industrialised approach. Whey you buy a new car you normally pay a sizeable deposit to secure a production slot and then make final payment some six or so weeks prior to delivery, but this practice is not common in infrastructure where payment is made contingent on the achievement of milestones. Cash flow problems can result, particularly for smaller suppliers, and this can delay the purchasing of materials or even contribute to insolvency.

The role of governments

Tackling issues such as decarbonisation on a massive scale needs government support and intervention in the market. The industrialisation of the UK offshore wind industry, through government and the industry working closely together, is a blueprint for achieving industrialised construction.

About 15 years ago government and the industry started to work together to deliver a transformational change which relied upon an industrialised approach. This helped build confidence to enable investment which was costly.

Contractors invested in equipment to efficiently assemble offshore wind turbines and turbine manufacturers invested in creating more efficient turbines with greater output. This process reduced the cost of producing offshore wind power from £200 per megawatt hour to an expected £40 per megawatt hour in the latest set of projects. Affordability is a big part in the process of decarbonisation.

Action needed on innovation

Innovation is costly but essential in making rapid change. Work is underway through the Advanced Manufacturing Research Centre (AMRC) at The University of Sheffield. Traditionally, AMRC has worked closely with the aerospace and automotive industries but has recently turned its attention to the construction industry. Advanced construction businesses are working with AMRC to improve processes and innovate.

There is scope to rapidly learn about more efficient production from other industries. It is not enough to tinker at the edges in the move to an industrialised construction approach as set out in the Construction Playbook. The construction industry requires wholesale change. There is a big opportunity to accelerate the process in construction by leveraging off what other sectors are doing using rapid learning. There is a huge urgency to decarbonise which cannot wait for decades of small incremental improvements.