The privatisation of the utility market has created many opportunities, but the demand for companies that can connect power generators and industrial consumers to the grid is particularly buoyant, as the case of Smith Brothers demonstrates.
A specialist in high-voltage power engineering, this Yorkshire contractor has just landed its biggest contract yet, a £6m commission to carry out all civil and electrical engineering aspects required to connect a new polymer factory to the Northern Powergrid (NPg).
This all stems from the company gaining Independent Connections Provider (ICP) status in 2010, a move that has seen its turnover rise from £12m to £30m in the past four years. It now employs 65 full-time staff and has started a division in the Republic of Ireland (Smith Brothers Power Engineering) working with Eirgrid, because of its expertise in this specialism.
The trigger for this growth is ICP status. This means that the company is accredited to build electricity networks to the specification and quality required for them to be owned by either a Distribution Network Operator (DNO), such as UK Power Networks or SSE, or an Independent Distribution Network Operator (IDNO), a company licensed by Ofgem to own and operate electricity networks.
To become an ICP, you must be recognised through the National Electricity Registration Scheme (NERS), which is operated and audited by the Lloyds Register to ensure that all ICPs’ works are in accordance with rigorous quality, environment and specification guidelines.
This is where it comes down to ‘contestable’ and ‘non-contestable’ works. Contestable works mean that whoever wants a connection to the National Grid can choose between a DNO or an ICP, whereas ‘non-contestable’ works can only be carried out by the DNO.
There are two sides to this business: generation – windfarms, biomass or hydro-electric schemes, for instance – and demand, which could be anything from a housing development to a factory. They all can choose between the DNO and the ICP but most choose an ICP, partly because of costs, but mainly because it is faster, the process is more transparent and there is far greater control over the design.
The result is a highly regulated market, tough barriers to entry, and a constant round of inspection, as Dave Ogden, commercial director for Smith Brothers, points out:
“We’re monitored and audited all the time by the DNO, Ofgem and Lloyds. We have to submit designs to the DNO and they come out and inspect because they have to adopt our work which, if it’s a substation, could be for anything up to 30 years.”
But there is a very large incentive, he says: a massive pipeline of demand. “The market for the foreseeable future is never-ending. Out of all the three utilities – gas, water and electric – electric is the most buoyant. All the coal-fired power stations will be shut down in the next 20 years and their replacements will need companies like us to connect them to the grid, whether it’s wind, solar or battery power.”
Even in the short-term, Ogden predicts that his company’s turnover will rise to £50m in the next 24 months as demand grows. But the business is not without its risks, as its latest prize shows. The contract to connect the new polymer factory in Billingham for SNF – the world’s leading manufacturer of water soluble polymers – is its biggest yet but has significant challenges, not least the completely immovable deadline in July, as project manager Iliana Malatra is only too aware.
“There is a deadline for energising the site, when Northern Powergrid connects all the work we have done to the grid. To do this they’re going to cut into their own network and all the companies that are connected into it have been given an outage period,” explains Malatra.
“These companies have organised their yearly maintenance around this two-week outage window and if we’re not ready then, we will have to arrange another. And that would be whenever Northern Powergrid decides, and that could be up to a year later.”
The project relies very heaviliy upon Smith Brothers’ in-house team as the company is responsible for all civil and electrical engineering aspects of the connection assignment, from initial design through to final commissioning.
As project manager, Malatra has been closely involved from the start, responsible not just for liaising between SNF and the design office, but also carrying out geotechnical and topographical surveys of the site before design work even began.
The scheme requires both electrical and civil engineering skills to cover the full package of works required: laying a 3.5km dual 66kV cable route to the point of connection provided by the NPg; building and commissioning an outdoor 66kV substation, complete with control room; constructing two transformer bunds; building a private substation building and equipping it with switchboard, automatic voltage control panels, transformer protection panels and battery chargers.
The complexity of this design is challenging but then the site itself presents unexpected issues because it is a brownfield site with its own industrial legacy. When civil works started on site in December last year there were a couple of surprises, including the concrete foundations of a long-forgotten factory, which took an extra three weeks to break out, and what first appeared to be a UXB – a WWII bomb. It turned out to be just the detonator but not before the site was brought to a halt as the bomb disposal squad had rushed to the scene.
“You can’t really plan for these things,” Malatra comments. “But the technical complexities are more critical.” On a project of this size both the client and the design engineers will specify components that are manufactured for this project alone, she explains, so attention to detail is critical. Indeed, this is one of the selling points for using an ICP: commissioning a bespoke electrical system that is designed precisely to meet the client’s needs.
As a result, the lead times for bespoke components are quite long, so these have to be factored into the critical path so they are tested and ready to install when needed. For instance, the 66/11kV 20MVA transformers had a lead time of 22 weeks, so they were ordered in August last year, four months before work started on site. To give some idea of the scale, these transformers are 3.5m high and weigh 38 tonnes each.
Malatra and the operations manager from SNF visited Turkey together to test them at the factory for quality before they were shipped, which shows how closely the project manager works with the client to ensure that its criteria are met.
The Billingham project is the biggest that Smith Brothers has tackled yet and illustrates both the opportunities and the challenges that this market offers.
Entering this market has propelled the company’s growth from a small, family-run business founded by twins Richard and John to become a high-voltage electrical contracting specialist with a staff of 65.
Smith Brothers appears to have excellent prospects for the future, but anybody else interested in pursuing this line of work needs to know that it’s not for the risk-averse.
This article was first published in the April 2018 issue of The Construction Index magazine, which you can read for free at http://epublishing.theconstructionindex.co.uk/magazine/april2018/
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