Written evidence submitted by BRUSH Group (SUP0009)
 

About BRUSH Group

BRUSH Group is a global engineering company that provides innovative, integrated and sustainable solutions for power distribution and power network sectors. We manufacture transformers, switchgear and other components essential for anything and everything that needs to connect to the electricity grid. We also provide consultancy services, design and project management as well as award-winning technologies, to a wide range of projects and customers in the domestic energy supply chain. A chosen partner for national and regional power generation and distribution network operators, through innovation and a commitment to delivering solutions that address grid-resilience and drive system change, BRUSH supports the global drive to net zero, helping to create a future-proof infrastructure that meets the needs of today’s changing energy landscape. Find out more at www.brush.eu.

(1) How can UK PLC capture its fair share of the economic potentials of emerging or less developed energy technologies?

The UK has a solid foundation to capture the economic potentials of new energy technologies. Innovative UK-based firms like BRUSH Group have a long history of investing in the infrastructure, equipment and people so we are best placed to realise the potential of new technologies. However, to allow us to position ourselves to seize upon opportunities as they arise, we need more clarity and visibility of the pipeline of projects and initiatives. And a huge effort is needed to develop the next generation of engineers who will deliver energy security and net zero for the UK.

Visibility on future policy

Today there's no quick and efficient process to understand what will go through the process and truly become new connections. Having visibility of what is a ‘real’ project, versus what is a ‘placeholder’ connection request, is fundamental. No business in our sector is able to gear-up rapidly in terms of resources and focus on the right projects and priorities – trying to adapt at the last minute makes things extremely slow and cost inefficient for everyone in the supply chain. Having better access to, and early involvement in, Government thinking would help us to plan ahead and design our business strategy accordingly.

Ofgem’s new grid connection policy should go some way towards easing the excessively long waiting times for grid connections. A move away from the current first-come, first-served application process in favour of prioritising viable projects is a step in the right direction to speed up grid connections. While the policy is still to be truly tested, we are hopeful it will ease the current bottleneck, but this remains an area of concern.

Invest in the next generation

The second element, and one of the biggest challenges that we have is availability of people with the right competencies. The magnitude and the number of projects that will have to be delivered over the years ahead is going to require a huge investment in resources, particularly in project management, electrical engineering and mechanical engineering. Compounding this is the challenge of an ageing population and so we anticipate things are going to get worse before they get better.

There needs to be much greater capacity and flexibility to pull in the skilled resources we need from within the UK. In the short term we will have to be bring people from abroad because there's not enough readily available talent in the UK today. In the longer term, as more and more countries rise to the challenges of their own energy needs, the only solution is to invest in more university places, apprenticeships for young people looking to start their careers and better training, supported by existing engineers in businesses like BRUSH.

(2) What more can the government do to encourage greater domestic supply chain investment in the energy industry by 2035?

Fundamentally the government needs to put in place the mechanisms to strongly incentivise procurement within the UK in a way which aligns with the Contracts for Difference (CfD) scheme. At BRUSH we provide the UK energy sector with the nearest thing to a local solution, as all our design, assembly and test operations are here in the UK, but we are competing against product manufacturers in India, China, Turkey and elsewhere – and even though we employ a UK workforce, we contribute to the UK economy and have a lower carbon footprint compared to imports, none of that creates any differentiation in a competitive tender process, even with the DNOs (Distribution Network Operators). It’s all about the price and we're often not able to compete on cost or lead time under the current arrangements.

‘Buy local’ incentives
A ‘buy local’ scheme could work both up and down the supply chain. Today, a DNO in the UK can source their transformers, switchgear and other parts of their electrical infrastructure from wherever they choose. There are no restrictions on where the units come from and as a result there's no benefit for UK manufacturers. For example, BRUSH competitors commonly import 33 kV units from Colombia, Turkey or India and we are unable to compete with their prices. So having a national preference scheme would be a gamechanger for those in the supply chain in the UK. In turn that would enable use to invest in local talent which would help to address some of the other challenges we face.

‘Sell local’ incentives

Equally, today, UK businesses can get financial support when they export products out of the country. But there is no equivalent scheme to encourage businesses to sell their products within the UK. For example, BRUSH currently buys steel from India but if there was a support scheme in place to incentivise domestic steel supply, where a UK steel producer got a 5% or 10% subsidy to sell to us, then we could swap our procurement of steel from India to a local UK supplier. Making those kinds of switches would not only level the playing field and help boost UK business growth, but would have a huge benefit to our Scope 3 carbon emissions.
 

(3) Does the UK have the supply chain capacity to deliver the required energy infrastructure structure by 2035, including an expanded electricity network?

No. And the main issue, again, is because there’s a lack of clarity over the next decade or so, and that means businesses don’t have the confidence to invest. As a result, no one in the supply chain can possibly be ready. When we embarked on our business growth strategy, we anticipated a healthy increase in demand for transformers. As of today, the demand is already much greater than we were expecting, and it’s likely to keep growing. This creates significant challenges because the current supply chain capacity means that the lead time for bigger power transformers can be several years. And it’s only going to get longer unless there’s major investment in the supply chain to create clarity and encourage commitment.

There are also other knock-on effects, the longer lead times mean other parts of the supply chain effectively stagnate while they wait. And then, suppliers are expected to ramp-up rapidly to meet demand – this is the challenge that we expect to face within our switchgear business, for example, but it’s impossible to predict when this might happen. That’s why clarity and commitment is necessary – to allow for development of people and investment in the resources needed.

Clarity, certainty, confidence and commitment

Uncertainties create blockages right through the supply chain. Consider the government’s ambition to switch to electric vehicles. One of the many things we do at BRUSH is design and build connections for vehicle charging points. The magnitude of power needed over the years ahead is huge. Today the current grid can cope with only a small quantity of electric vehicles (cars) as a percentage of all cars (not even including HGVs which will create a massive load onto the network).

For example, a customer might ask us to design a car charging station with 12 charging points, but they only connect four or five because there is insufficient power to have all 12 functioning. So, they are relying on the ability of the relevant DNO to accept new connection points. And this is where, again, we end up with a long, slow and complicated process. We need to be able to move in a much faster, simpler way, with greater visibility on the direction of travel so we’re all working towards the same goal.

Another example is in renewables. We recently met with a battery storage developer. They've got 8000 hectares of land already earmarked for purchase for which they've got equity, all the agreements in place and connection approved. And yet everything’s arranged for 2035. They are unable to commit financial investment sooner because there’s no certainty that they can get a return. They need the confidence that in 10 years’ time the capacity will be there, and the legislation that’s in place today will not have given way to policy changes that no longer make the scheme viable.

(4) To what extent to what extent would growing the domestic supply chain bolster UK energy security?

Besides the lack of financial confidence from investors, right now there are many battery storage developments which are not moving forwards because they can't get a connection to the grid. And yet battery storage is the best way to mitigate the lack of consistency of renewable energy sources. If there's no wind or no sun, we don't have renewable power generation, so having the ability to connect quickly to battery storage is critical in terms of growing the domestic supply chain.

We have seen a number of recent examples of how vulnerable our supply chains can be as a result of over-reliance on materials and components travelling long distances, from regions the world over, which we have little or no control. So, anything we can do to get the supply chain closer to us, would mitigate such risks, helping us to control lead times and better deliver energy transition over the coming decades.

Being local is an important part of the strategic approach we are taking at BRUSH. Besides improving product availability, we are committed to delivering all the associated services locally too – we have skilled people on site and can offer service support to our UK customers within 24 hours. And the fact that we hold a quantity of critical spare parts means we can intervene very quickly to get power back up and running. In the past we have replaced a transformer for a DNO within 48 hours of a major failure. A company in India or Turkey would struggle to do that as their resources and priorities are elsewhere.

(5) What are the key concerns with respect to the availability of raw materials in the supply chain and how might those be addressed?

The availability of raw materials and components is critical to energy security and the transition to net zero and, as already mentioned, shortening supply chains and sourcing locally, either from within the UK or within Europe, is an important aspect of robust supply chains.

Yet our concerns extend beyond the supply chain itself. We are extremely concerned about the current lack of engineering expertise and the engineering resources to be able to design, innovate, build, install, test and maintain components like transformers and switchgear which are essential to the UK’s connectivity. Nothing of what we do comes ‘off-the-shelf’ as standard. Even those aspects where there are some commonalities, there are always larger elements of tailoring for each specific project, which is what the customer requires to connect to the grid whether as a new electricity provider or user.

Today the availability of fresh engineering expertise is the single biggest challenge as it stifles growth, slows the manufacturing process and extends lead times. If we cannot support our domestic market with the right people what chance is there of the UK being able to compete internationally? As previously mentioned, it is vital that the UK invests in the right university courses and apprenticeships to develop the next generation of engineers now, so we have a talented pool who will deliver energy security and the transition to net zero over the coming decades.

January 2024