The impact of rising energy costs on the construction industry

The energy crisis has impacted the construction industry

The impact of rising energy costs on the construction industry included eye-watering fuel prices that led to a spike in material costs. Ultimately resulting in many projects being postponed.

On the plus side, the energy crisis has brought forward infrastructure projects and encouraged energy efficiency improvements. The February Glenigan index mentioned that the promised government investment in large-scale infrastructure projects may help to boost Q2 and Q3 performance.

Energy security and renewable energy have become more important

Zero carbon power in Britain’s electricity mix has grown from less than 20% in 2010 to over 50% in October, November and December 2022.

Renewable energy can help mitigate climate change, build resilience to volatile prices and lower energy costs. This is especially critical now with the spiking fossil fuels, triggered by the war in Ukraine. In the spring budget 2023, energy security moved up the list of priorities.

Nuclear reclassified as environmentally sustainable energy

In March 2023, the government announced the reclassification of nuclear energy to give it the same investment incentives as renewable energy projects.
Hoping to boost investment, Jeremy Hunt stated nuclear was a ‘critical source of cheap and reliable energy’ to meeting the UK’s net zero obligations.

Hunt said that this was aiming towards nuclear power providing 25% of the UK’s electricity generation by 2050. The UK is not the first country to reclassify nuclear energy as environmentally sustainable. The European commission decided to label nuclear as ‘green investment’ last year.

Reducing fossil fuel energy in construction projects

Burning fossil fuels is the largest source of greenhouse gas emissions from human activities. Therefore, the construction industry investigates more sustainable alternatives.

Balfour Beatty trial concluded that the future of construction is hydrogen.

Balfour Beatty trialled a 100% electric-powered fleet at a site in Edinburgh. It highlighted the lack of advance electric vehicle charging infrastructure presented challenges. Balfour Beatty concluded that the required infrastructure does not currently exist to accommodate a fully electric fleet on a large scale. They think that the future of construction is hydrogen energy rather than fully electric fleets.

Greener steelmaking processes

British Steel is planning to replace a blast furnace with an electric equivalent that uses up to 100% scrap steel. This method produces fewer carbon emissions than BOS, which runs on gas and uses raw materials. British Steel is said to be looking into using green hydrogen in their steelmaking plant.

ArcelorMittal already supply EAF steel that is made with renewable energy from locally generated wind and solar power. Speak to one of our experts to see how you can maximise EAF steel in your structural steel design to lower the embodied carbon emissions in your project.

Will steel prices increase due to rising energy costs?

Steel will continue to see price fluctuations throughout the rest of 2023. In January, British Steel increased their price by £75 per tonne. Luckily it wasn’t a huge spike like the shock that we experienced at the start of last year. Under the current ownership, customers don’t get a pre-emptive warning. There are no known reasons for another shock price increase, even with increasing energy costs, the pricing shouldn’t sky-rocket like 2022…Unless there is another war, then all bets are off.

Energy Bill Discount Scheme

The Energy Bill Relief support package has been replaced with Energy Bill Discount Scheme from 1st April for 12 months. Not offering as much discount for businesses as the previous bill relief, it has slashed support by 70%. According to Energy market intelligence consultancy Cornwall Insight, the energy price cap is forecast to fall below the EPG in the second half of 2023.

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Construction site with crane

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