Arcadis: Inflation may hinder construction industry recovery
The construction industry is on its way towards recovery, although now facing new challenges. Arcadis has warned recovering demand after the COVID-19 pandemic and rising materials costs mean that prices could rapidly increase, with inflation becoming a defining feature of the market over the next three years.
These insights were provided by the latest Spring 2021 Market View, entitled ‘Window of Opportunity’. The quarterly analysis of the UK construction market looks across sectors and regions to deliver a tender price forecast to inform clients about what is going on in UK construction, helping financial decision making for projects and programmes.
60% of experts surveyed are seeing a growth in activity, an increase from 44% since the last quarterly Market View was published at the end of January. Construction output in March reached pre-COVID levels and the estimated value of new contracts in Q1 2021 exceeded £23bn; a 2% improvement on the same period the previous year.
Agnieszka Krzyzaniak, Market Intelligence Lead at Arcadis, said: “The conditions for investment are good, but with so many challenges on the horizon, the situation can change abruptly. At the moment, there is still some spare capacity available, but the shortages of construction materials create inflationary conditions that have already begun to outweigh any deflationary factors. Clients need to move quickly to take advantage of this window of opportunity. Any delays increase the potential exposure to much higher construction costs than initially planned for, as higher inflation becomes the new normal.”
The construction industry is increasingly focusing on net-zero, following the Government’s Sixth Carbon Budget and adoption of a 78% reduction in carbon emissions by 2035. Arcadis has warned that if the pace of transition is not accelerated, the sector will begin struggling to make its contribution to net-zero goals.
“When it comes to net-zero, we need to make every penny count, managing costs and delivering at the scale and speed necessary to meet the challenge. As construction starts to reboot, it is crucial our industry embeds sustainability into its projects, and we take advantage of the reduction in the cost of key technologies in achieving net-zero goals. As prices of carbon-intensive products rise, a failure to decarbonise will increasingly threaten the economic viability of construction projects. There is an imperative to act now to build capacity, and the sooner this starts, the better.” said Ben Harris, UK Climate Change and Sustainability Director at Arcadis.
Sonnedix starts construction of 50MW solar plant in Spain
Sonnedix has started building a 50MW solar PV plant in Badajoz, Spain.
Sonnedix Los Frailes will be built on a 111-hectares, becoming the largest project built by the IPP in the country, where it has operated since 2010. With over 110,000 monocrystaline solar panels, the project will connect through a transmission line to the Vaguadas substation.
During construction, Sonnedix will create approximately 250 new jobs in Badajoz, in line with its ESG standards and commitment to improving the life of the local community.
Once operational, Sonnedix Los Frailes, which is being developed in collaboration with Viridi RE group, will produce approximately 102,000 MWh per year, capable of powering more than 36,500 homes with clean electricity and avoiding over 24,000 tons of CO2.
Axel Thiemann, CEO of Sonnedix, said: “We are excited to start the construction of our largest project to date in Spain, a milestone that highlights both our strong commitment to the Spanish market, and our potential to expand our platform worldwide. We are very proud of our hard-working and committed team in Spain, which has doubled in the last year, and we look forward to continue developing and acquiring solar PV projects in the country, playing an important role in the energy transition, as well as the post-pandemic economic recovery.”
Last June 2020, Sonnedix signed a 10-year Power Purchase Agreement (PPA) with Europe´s largest producer of renewable energy and leading PPA provider Statkraft for the supply of 100 GWh of energy per year, making it the IPP’s first PPA for a grid-parity project in Spain.
Sonnedix is one of the leading solar IPPs in Spain, with over 1GW of capacity, including 365MW operational, 50MW under construction, and a development pipeline of over 600MW. Currently it has almost 2GW under operation or construction across eight countries, plus more than 2GW in the pipeline.
According to SolarPower Europe, Spain is expected to have a total installed solar PV capacity of 29GW by 2024 in the medium scenario, making it the second largest solar market in Europe. Renewables produced 50.7% of Spain’s electricity in May, generating 10% more gigawatt-hours year-on-year.
The Spanish National Energy and Climate Plan (NECP) targets 74% of renewable electricity generation and 39.2 GW of PV capacity by 2030.