 UK Takes Energy Leap With Huge Offshore Wind ProjectsJan 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. The 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. The largest 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 is significant. 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. Mainstream 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. O'Connor 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. In December, 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. "These [Round 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. Zone Developer* Capacity (GW) =========== ===================================== ======== ===== *unless specified otherwise, developers' shares in each consortium are equal -By Selina Williams, Dow Jones Newswires +44 207 842 9262; selina.williams@ dowjones.com (Nick Heath in London contributed to this item) 
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