In rural Cambridgeshire, a British semiconductor start-up is poised to expand beyond its lab and open a manufacturing base. But the company’s ambitions came with unexpected costs to bring enough electricity to the new site. The potential bill? A million pounds.
The company, Paragraf, makes chips using graphene, an ultrathin carbon. Its devices could be used to check for defects in electric vehicle batteries to prevent fires, or work on quantum computers. After acquiring the site in 2023, Paragraf plans to increase its weekly manufacturing capacity from thousands of devices to millions.
But the cost of increasing on-site electricity supply, a result of years of underinvestment in Britain’s electricity grid, is diverting money — and time — from acquiring and buying equipment, said Simon Thomas, chief executive of Paragraph
“Our biggest kind of advantage when you’re a company like ours is the speed at which you can move,” he said. Delays “not only affect what you can do now, they affect how successful you will be in the future,” he added. “It’s very disappointing.”
Up and down the country, complaints about the lack of investment in Britain are reaching an all-time high more than a decade of low economic growth and wage stagnation.
There is an “overwhelming sense of things not working” in the economy, said Raoul Ruparel, the director for the Boston Consulting Group’s Center for Growth and a former special adviser to the British government. That includes a lack of affordable housing, poor public services including transportation and long hospital wait times.
With the economy expected to flatline this year, two ideas will reignite it: Speed up electrical grid upgrades and make it easier for new construction to win planning approval. Analysts and lawmakers hope these initiatives will unlock infrastructure investment, reduce carbon emissions and deliver much-needed productivity growth.
Dealing with logjams
The problem is big: Over the past five years, the number of applications to connect to the electricity grid — many of them for generating and storing solar energy — has increased tenfold, with waits of up to 15 years. Underinvestment is restrictive the flow of cheap energy from Scottish wind farms to population centers in England and adding to delays for those with high electricity needs, such as laboratories and factories. Laws giving local planning authorities huge powers have been blamed for Britain’s housing shortage and blocking the construction of pylons needed to bring electricity from offshore wind farms. Residents’ objections to noisy construction and changes in landscapes have become obstacles.
Planning and grid connections are the very basic basis on which everything is built, said Mr. Ruparel. A functioning grid that delivers reliable low-cost energy and a planning system that allows all kinds of infrastructure to be built are “key to having a productive economy and having a better economy,” he added.
Planning and grid connections, which used to be a relatively niche interest, have taken on major importance. At the opposition Labor Party’s annual conference this autumn, Keir Starmer, the party’s leader, pledged to “bulldoze” through Britain’s “rigid” planning system and make the electricity grid “faster” if he will win the race for prime minister in the next general election, expected in 2024. Planning and grid reforms are two of the most important changes in the latest re-growth budget update, said Jeremy Hunt, the chancellor of the Exchequer .
At Paragraf, which was spun out of the University of Cambridge six years ago, “we want to go faster than some of the infrastructure will give us,” says Natasha Conway, the chipmaker’s director of research.
The company, which has about 120 employees, makes sensors used to measure magnetic fields. Attracted by the CHIPS Act, which provides subsidies to semiconductor makers, it considered setting up production in the United States. However, in the end, Mr. Thomas chose to stay in Britain and establish a domestic manufacturing business.
“Graphene was isolated and invented here in the UK,” he said. “Shall we just let all the money go somewhere else?”
But securing enough electricity has not been easy.
After months of searching for a site that would come with the power they needed, Mr. Thomas said, he settled on a warehouse 10 miles from the lab that would need electrical upgrades. Instead of waiting for an upgrade arranged by the local council, the company went ahead by paying a grid operator to install a connection to the main grid. That solution would allow work to start sooner but carries costs of up to £1 million ($1.27 million), including the price of upgrades to the first lab, the company said. Paragraf expects to have initial production in the second half of 2024, about a year and a half after acquiring the site.
In November, the government announced measures to speed up planning approval for major projects and curb NIMBY-ism. The measures will, among other things, give communities a financial benefit for approving grid infrastructure projects in their area and shake up the first-come-first-served queue for grid connections to clear stalled projects.
The plans have been accepted by the National Infrastructure Commission, which advises the government. Many of the reforms are drawn from the commission’s own recommendations, but the group wants the government to do more to pay people when important projects such as housing developments or power transmission facilities are built. nearby.
The country needs to overcome a “desire to maintain a chocolate box image of Britain, which is good for tourists coming in and looking at quaint old villages,” said John Armitt, the commission’s chairman. “There needs 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 cost overruns — affects the “view of investors whether the UK is a profitable place or not. coming,” said Mr. Armitt.
And Britain needs more investment: The commission estimates at least £70 billion a year in the 2030s, an increase from an average of around £55 billion a year over the past decade.
Rules restrict investment
One way the British government turned off investors was by changing planning measures in 2015, and further tightening them in 2018, so that a single objection can change a planning application – effectively banning onshore wind in England. John Fairlie was a consultant to the wind industry at the time.
Mr. Fairlie is currently managing director at AWGroup, a land development and renewable energy company that recently built and operates an onshore wind turbine in Bedfordshire, in the east of England, which will generate enough electricity to power 2,500 homes. Due to planning restrictions and grid connection delays, it took seven years to complete the project.
In the past few months, “policy has changed, but it hasn’t changed enough,” Mr. Fairlie said.
The turbine, which is in the planning process as regulations tighten, got approval in 2017. Since then, the main source of delays has been securing grid connection. Advances in wind energy technology allow the company to install a more powerful turbine – which requires a greater connection to the grid. “It just takes a long time to achieve that,” said Mr. Fairlie.
In the coming year, the turbine will be used to directly power an electric vehicle charging station, and the company is planning more projects where it is building housing developments powered directly by local renewable sources. energy, avoiding the grid being hampered by interruptions.
As Britain seeks to escape a long period of slow growth and productivity losses, while meeting targets to cut carbon emissions, companies, economists and other experts say the government urgently needs to commit to these reforms.
“There’s a lot of recognition” of the problems, Mr. Armitt said. “We’re good at ambition” but not turning it into action, he added, specifically about net zero emissions goals.
What “more and more people fear is that we set tough targets,” he said, “and as long as you’re 10 years out, well, it’s very easy to drop the can.”
