UK Takes Energy Leap With Huge Offshore Wind Projects
8, 2010 - Dow Jones & Company, Inc - energycentral.com
The U.K. took
a massive step forward towards boosting its renewable energy capacity Friday after
announcing plans to develop 32 gigawatts of new offshore wind energy--cementing
its position as the world leader in the sector.
The U.K. government Friday
announced the winners of Round 3 development licenses for nine sites off the U.K.
coast which, if fully implemented, will put the country well on track to cutting
emissions, and to meet its 2020 European Union target to increase to 15% the share
of renewables in the U.K.'s energy mix.
The scale of the task ahead--which
will require the installation of around 6, 400 turbines over the next 10 years--has
been compared to the development of North Sea oil and gas in the 1970s.
cost of developing the new generation capacity, which could provide up to a quarter
of the country's power, would require investment of around GBP100 billion, according
to the Crown Estate, owner of the U.K. seabed. Ahead of Friday's announcement,
it was expected that 25 gigawatts of new offshore wind capacity would be awarded.
Winners of the nine sites --the world's largest offshore wind tender to
date-- included major European utilities such as RWE AG (RWE.XE), E.ON AG (EOAN.XE),
Centrica PLC (CNA.LN), Scottish and Southern Energy PLC (SSE.LN), Iberdrola SA
( IBE.MC), Vattenfall, EDP Renovaveis (EDPR.LB), and others such as Statoil ASA
( STO), Siemens AG (SI) and Fluor Corp.(FLR).
U.K. Prime Minister Gordon
Brown said the announcement would provide a substantial new platform for investing
in U.K. industrial capacity.
"The offshore wind industry is at the heart
of the U.K. economy's shift to low carbon and could be worth GBP75 billion and
support up to 70,000 jobs by 2020," Brown said.
The Crown Estate estimated
that around GBP75 billion would be required to develop the wind farms, GBP15 billion
for transmission infrastructure, and GBP5 billion to GBP10 billion to expand the
offshore wind industry supply chain.
Offshore wind power currently costs
around GBP3 million a megawatt to develop, although that figure is expected to
fall as the supply chain expands.
Rob Hastings, the Crown Estate's director
of marine estate, said that having a manufacturing and supply base in the U.K.
would make the projects cheaper to build. The Crown Estate is holding twelve supply
chain events across the U.K. to support the sector.
"Once the supply chain
and the whole industry is mobilized, it will force the pace of development, just
like it did in the North Sea oil and gas sector," Hastings said.
development will be in the Dogger Bank zone, where up to nine gigawatts of capacity
are to be installed by a consortium equally owned by SSE Renewables, RWE Npower
Renewables, Statoil and Statkraft (SKT.YY).
However, the scale of the challenge
Wind farm developers face engineering and technology challenges
as well as massive costs from an industry still in its infancy, developers and
analysts have said.
Currently, most of the wind farms being developed under
the U.K.'s first two offshore tender rounds--totaling 8 gigawatts of capacity--are
in water less than 20 meters deep. Most of the Round 3 turbines will be located
in water over 30 meters deep, and up to 285 kilometers offshore.
Renewable Power CEO Eddie O'Connor said Friday that a hub comprising new harbor
and manufacturing facilities, a research and development site and financial services
facilities would be needed on the U.K.'s east coast to support the offshore development.
Managing the intermittency of wind power will also pose a challenge, although
the U.K.'s electricity network operator National Grid has said it is confident
it will be able to accommodate the peaks and troughs of supply and demand.
said a new "super grid"--an offshore transmission grid linking Norway, Britain,
the U.K. and Denmark--was vital to the success of the Round 3 projects, which
are due to start being constructed in 2014 at the earliest.
nine countries including the U.K. gave their political support to an integrated
offshore electricity grid in the North and Irish Seas to aid the development of
offshore wind and boost flexibility of offshore supplies. But there are no concrete
plans or investors for the project yet.
"You could bring a few of the first
[Round 3] projects ashore and connect them radially, but if you wanted to connect
25 to 32 gigawatts, the first leg of the super grid would have to be operational
by 2017 to 2018," O'Connor said, adding that such a project cost GBP10 billion
to GBP15 billion.
Mainstream Renewable Power and Siemens Project Ventures,
with Hochtief Construction, won the Hornsea zone, where up to four gigawatts of
offshore wind generation capacity is to be developed.
Finance is also an
issue. In the previous two tender rounds, smaller projects were delayed until
the U.K. government raised its financial support mechanism.
3] projects are not just hugely expensive and require a significant amount of
capital but, given their size and the technical challenges faced in their construction,
these projects are considered very risky by the investment community," Andy Cox,
energy partner at KPMG said.
Sarwjit Sambhi, managing director of gas and
electricity supplier Centrica, said the sector would need a long-term stable support
mechanism to make the investments commercially viable.
"Round 3 should
send a strong signal to the renewables supply chain in the U.K. and a suitable
support mechanism would incentivize its creation to increase competition, reducing
costs and creating thousands of new jobs," Sambhi said.
=========== ===================================== ========
*unless specified otherwise, developers' shares in each consortium
-By Selina Williams, Dow Jones Newswires +44 207 842 9262; selina.williams@
(Nick Heath in London contributed to this item)