UK Announces Revised Financial Support for Wind Industry

In early December the UK Treasury announced its policy regarding support for wind energy. It was published as part of an overall UK infrastructure investment plan. The much anticipated announcement was a mixed bag for industry, with additional support for offshore wind and a reduction of support for onshore wind.

In a statement RenewableUK, the leading advocacy organization for wind energy in the United Kingdom, described the announced details as follows:

The reduction in financial support for offshore wind is less steep than had been mooted in the draft strike prices which were published in the summer – for the financial year 2018/19, the level of support has been increased by £5 per megawatt hour, from £135/MWh to £140/MWh.

Financial support for onshore wind has been reduced by £5/MWh from 2015 onwards compared to the draft strike prices, e.g. £100/MWh in 2015/16 has fallen to £95/MWh, and £95/MWh in 2017/18 has dropped to £90/MWh.

Much has been written about this shift in support towards offshore wind and Government officials have gone to some length to explain that the shift is a result of the onshore industry no longer needing the support, while offshore is still in its early stages. Chief Secretary to the Treasury Danny Alexander denied that the shift was in any way a response to NIMBY complaints about the siting of large on-shore wind farms.

Either way, the announcement will shake up the industry in the UK with the likely pull back of on shore projects, and a burst of anticipation at port facilities and other coastal regions such as Grimsby who will likely benefit as offshore wind continues its impressive growth.

As of Dec 2013 there are over 1,000 offshore wind turbines in UK waters producing over 3.5Gw of electricity to British homes and businesses. That type of scale has taken over a decade of work to reach. Now, with firm Government support announced, that growth can accelerate.

In the end, investors need to have a clear and stable path forward if they are to invest with confidence. For a long while the UK Government has made the expansion of renewable energy a cornerstone of its energy policy. This latest announcement reaffirms that commitment and will allow wind energy, (mostly offshore) to continue to expand its place in the UK energy production portfolio.

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“I would say the industry is falling apart,”

At the Reuters Global Commodities Summit in Houston this week, Stefaan Sercu, chief executive of GDF Suez Energy Marketing NA Inc. shared is bleak opinion that Power Generators in the US are facing a market which has all but eliminated the opportunity for new investment.

“I would say the industry is falling apart,” said Sercu.

At the conference and elsewhere the blame is place on falling natural gas prices on one side and increased government mandate and regulation on the other. In the mandate category it us usually renewable energy portfolio requirements which top the complaint list.

Just who is supposed to pay for the care and feeding of the transmission networks largely built by our great grandparents is always, like religion and politics, just one of those problems not discussed in good company. Heaven forbid we face up to the glaring truth that a simple care and feeding will no longer cut it – the electricity system in the US has become our weak link, our most vulnerable asset. A simple google search on the vulnerabilities of the system; from run-of-the-mill natural disasters (forget more superstorms) and various bad people like terrorists will keep you awake at night.

We can’t afford to fix it is the common refrain – just look down most main streets around East Coast towns and you will see the decades old wooden poles groaning under the accumulated weight of technology. The rats nest of wires and the growing bend in the pole (that we all try not to see) is our system. That is what our way of life depends upon.

Sercu is correct, why should private companies take on the risk of these investments? These companies exist in world of system division created on a set of 1970’s era political and technical fault lines. Remember local and long distance?

Whether we prefer cheap natural gas with emissions much less than coal or we believe that the climate is actually changing and we really should do something about it – transmission, distribution, ie: the system – it needs to be there, no matter what – given the age and ragged state of the US electrical system today – the only entity capable of taking on that type of meta-risk is …. Government.

Uh Oh.

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Floating Offshore Wind Projects Continue to Advance

As of 2013 all of the offshore windfarms operating in the world are mounted on foundations in relatively shallow water firmly anchored or embedded in the floor of the sea.

The dependence current technology has on shallow water has put a major constraint on market development, limiting it to only those areas where offshore wind can be built using these traditional foundations.

The Oil &Gas industry has long utilized sophisticated floating structures for deep water exploration and extraction. By adapting and innovating floating technology for use in offshore wind, the possibility of huge market expansion and as a result, a much lower cost from electricity produced from offshore wind is just now coming into view.

Currently there are only a few demonstration units installed anywhere in the world, the most advanced of these are located off the coast of Norway and another off the coast of Portugal. Earlier this summer we highlighted the demonstration unit installed off the coast of Maine. Just this last week it was announced that Principle Power Inc. a Seattle based company, (the same company which operates the floating unit off of Portugal) has applied for a commercial wind lease off the coast of Coos Bay, Oregon. This area would be used for the installation of their floating wind demonstration units.

In recent months Japan has aggressively advanced floating wind as a major new contributor to its future electricity supply even as it dismantles its nuclear power program in the wake of the Fukushima disaster. The Environmental Ministry projects that offshore wind has the potential to produce 1.6 billion Kw or 8 times the current capacity of Japan’s electricity production.

To develop this technology on a fast track the University of Tokyo’s Graduate School of Engineering has partnered with several leading manufacturing companies to develop large capacity  (2Mw-7Mw) floating turbines with the ultimate goal to build the worlds first 1Gw floating offshore wind farm.

We look forward to the day when such renewable energy projects are developed just over the horizon in the deep water off of Tokyo and near such electricity hungry American cities as Los Angeles, San Francisco and Honolulu.

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Jobs in Offshore Wind

When the topic of offshore wind is brought up, one of the most commonly asked questions is how many jobs would be created by a project or better yet a number of projects?

Up and down the East Coast underutilized port facilities are a common sight. The decades of struggle for of all types of maritime industry has been well documented as jobs have moved out of the country, or simply vanished with shifting markets.

Creating electricity via a maritime resource such as offshore wind sounds ideal – but how real are the jobs and has this been proven elsewhere?

A new set of jobs data published in mid-September gives a current view of wind and marine energy jobs creation to date in the UK. Published by RenewableUK, the report highlights a 74% increase in wind and marine energy job creation since 2010.

Some specific data from the report are as follows:

  • In the UK, wind, wave and tidal energy sector directly employs 18,465 people full time.
  • The sector also supports 15,908 indirect jobs, making a total of over 34,300 employees
  • Number of employees in offshore wind has doubled since 2010.
  • More than 70,000 jobs could be created over the next decade.
  • 91% of the industry’s jobs in the UK are currently filled by UK citizens.

The full report can be found here.

This growth is impressive. Every State along the American Coast would love to be in a position to report similar growth numbers – and it is not all large corporate employers. More than 80% of all employers in the wind, wave and tidal industries employ fewer than 250 people and 56% employ fewer than 25 people. Small, innovative businesses growth is a key ingredient for a healthy economy and clearly a major component of a growing offshore wind industry.

The types of jobs created by this industry cut across a range of skills from Service, to R&D, engineering & design to manufacturing and maritime based installation, operations and maintenance. A 2013 report from the International Economic Development Council cites a useful breakdown from the Carbon Trust of offshore wind jobs by category:

Carbon Trust jobs breakdown by type

Rebuilding maritime industry has long been a priority for US government and business throughout the East Coast, West Coast and the Great Lakes, but the options have been few and far between. Producing renewable energy using the stronger winds offshore provides just such an opportunity – Just as in the UK and elsewhere, its time we brought industry back to the American waterfront.

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The Rise of the Microgrid

In 1969 no one could have imagined the benefits brought by the Internet – and in 2013 no one can properly imagine the benefits which a new approach to our electricity infrastructure will bring.

In 2003 outages on 3 Ohio transmission cables caused over 50 million people and much of the US Eastern Seaboard to lose power. New research published in August provides little comfort.

The argument goes that formal power grid structures, unlike their informal social media counterparts, are more dependant on central structure and will by their nature collapse quickly when destabilized.

Back in the Cold War, the telecommunications grid systems was vulnerable to the same risk – that it could easily be knocked out. The solution to this problem was a government project called ARPANET, which was the foundation of today’s internet; A highly interconnected, decentralized communications system which has profoundly changed the world.

Ironically, and arguably, a great vulnerability faced by the internet in the US is the long-term loss of electricity from the out of date American power grid.

There are no easy answers – but there are some interesting recent developments.

Microgrids are (comparatively) small clusters of electricity production, storage and transmission which are designed to operate independent of a larger transmission system, bypassing that system altogether in the event of an outage.

The idea is that these independent clusters can function – when the larger grid is out. Exactly the same principles which gave us the internet.

Microgrids can also be designed to operate efficiently with the unique demands of renewable energy – making them ideal for a world of more regionalized and mixed sources of electricity production.

Microgrids were in high visibility after Hurricane Sandy hit the East Coast of the US in 2012.

This summer the state of Connecticut, a frequent victim of hurricane damage, began an innovative program to fund the development of 9 microgrids throughout the state.

Along the same lines the California Energy Commission recently announced that it is funding a microgrid demonstration project at Camp Pendleton in San Diego.

Also in California, the US Navy this week announced that it was taking a step further by linking three microgrids: at the hospital a Naval Base San Diego, a data center at Naval Base Coronado and at Naval Base Point Loma – providing a secure centrally managed microgrid.

Lets move past our Victorian age electricity grid – reworking the way we think, innovate and invest in our electricity infrastructure will reshape our economy for the better.

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New Cost Savings Report from the German Offshore Wind Energy Foundation

As a new technology Offshore Wind development costs are high. To become a viable global source of electricity production, these costs must come down. A new report published by the German Offshore Wind Energy Foundation addresses the issue head on.

The headline grabbing conclusion is that with consistent development the cost of electricity from offshore wind can be reduced by a third over the next ten years.

The report focused on the German market (which currently has an installed capacity of just over 3GW) and considered two scales of development:

1. A German market build out to 9GW installed capacity by 2023 which resulted in a cost reduction of 31%

2. A German market build out to 14GW installed capacity by 2023 which resulted in a cost reduction of 39%

The report was presented at an event in Berlin on Aug 22. Great emphasis was given to the need for a stable market framework for these advances to be realized.  At the presentation Jens Eckhoff, President of the 
Foundation said “Offshore wind power has a substantial cost reduction potential.
 However, the industry can only exploit this potential if there are reliable framework conditions to achieve significant market volumes.”

There are a lot of people in Europe, the US, and elsewhere around the world who will argue that all of this R&D is a huge waste of time, that it is anti-capitalistic for government to provide long term subsidy and assurance for renewable energy markets (often overlooking that traditional energy markets are some of the largest beneficiaries of such benefits), and that the way to meet our future electricity production demand is to lift restrictions on drilling and mining and to ensure that few restrictions are placed on Natural Gas exploration.

I don’t consider myself anti-fossil fuel but like replacing the old copper telephone network with fiber; we need other options. Pragmatically, carefully and methodically developing new and innovative technologies which will with the passing of time, inevitably become part of our future is what has made us strong in the past, and it will do so again.

When I remember the history of the energy industry in Europe, the US and elsewhere,  it is the century of Government-Industry partnership, for both good and bad, which provided the bedrock for development and growth.

When I look forward and contrast the innovative potential of technology such as offshore wind with hard climate science such as this latest report on ocean acidification or this other new report on sea level rise - the same Government-Industry partnership model, working together by investing in emerging technology and adapting to real change, seems both necessary and inevitable.

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Reading the Renewable Energy Tea Leaves

This week a couple of contrasting and noteworthy stories made the headlines which illustrate the slow, but steady progress in the US towards a renewable energy future.

First, LEEDCO the developer behind the Icebreaker project being planned for Lake Erie, just off the coast of Cleveland, Ohio announced that so far it has gathered 4,500 signatures from customers who have pledged to purchase (and pay extra) for the electricity which will be produced by the windfarm.

Also showing support for the project, Cleveland Public Power has already pledged to buy 25% of the project’s electricity, or up to 5 megawatts.

This is an interesting shift from a part of the country not traditionally known for taking a leading role in renewable energy innovation and development. At a gathering in Cleveland this week the Mayor Frank Jackson addressed the crowd.

“This project creates a sustainable economy because money spent on renewable energy installation tends to remain in the community, creating jobs and fueling local economies,” Jackson said.  “This is the type of project that I envisioned when I launched Sustainable Cleveland 2019 four years ago to transform our economy.”

The Cleveland Pain Dealer has the full story which can be found here:

The other bookend to this weeks news can be found out in Cheyenne, Wyoming where for the first time there were no bids received to secure the rights to mine a newly opened coal tract in the state.

U.S. Bureau of Land Management spokeswoman Beverly Gorny said it as plainly “This is the first time it’s happened in Wyoming”

Market conditions, political uncertainty and cheap natural gas were the main reasons cited for the absence of and interested bidders.

The Casper Star Tribune has full story here.

The recognition that fossil fuels are no longer the exclusive way forward, the need for innovation in our energy supply and the serious development of the full range of utility scale alternatives is slowly becoming the accepted norm in the US as it has been for a while throughout the rest of the world – these two stories seem to illustrate some of that important progress nicely.

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Floating Wind Just Around the Corner

A new report published in July by the European Wind Energy Association (EWEA) makes some excellent reading about the viability of large scale floating wind farms, most notably:

…the first deep offshore wind farms could be installed and grid connected by 2017.

The idea has been around for a while – mount a turbine on top of a floating platform far offshore where the wind is better and no one can see it – However recent technology advances have made this much closer to reality. Efforts at Glosten Associates, Principle PowerStatoil, University of Maine to name a few are well past their initial concept phase and deep into trials – in July the first floating turbines were installed in Japan with electricity expected to be generated by October.

To my way of thinking floating production brings with it some key ingredients which will dramatically improve the market and economics around offshore wind.

  1. Lower Cost with On Shore Assembly – the largest cost for offshore wind installation is assembly at sea – installing foundations and assembling turbines in place with very rare and expensive vessels – floating wind turbines can be assembled on shore and towed into place – and for major maintenance the reverse path can be followed. This will dramatically lower the cost of building offshore wind.
  2. Out of View – NIMBY issues have stalled projects for decades. In the case of floating wing the Windfarm can be sited “over the horizon” which should make it a lot more palatable for those who like the idea of renewable energy as long as it doesn’t spoil the view.
  3. Offshore Transmission – In many places the desire for new electricity production is hampered by the limitations of the local transmission capability – and more importantly, the chances of getting new overhead transmission permits. With floating wind farm, although they may be over the horizon – they can be placed in direct proximity to major metro areas hungry for the power. Think of what a 1GW floating wind farm could do 20 miles off the coast of Los Angeles or San Francisco.
  4. Opens up New Markets – the West Coast, Japan, Northern Europe,  these are all places with large costal populations and large power consumption requirements but no shallow water – floating wind opens these markets, dramatically expanding the total market potential for offshore wind.
  5. Technically Feasible – As the demonstration projects are proving, the technology to pull this off can be largely adapted from proven techniques and processes taken from existing marine industries such as Oil & Gas and Telecommunications.

The phrase “Game Changer” is one of those blandly overused business terms – but Floating Wind does seem to have to the potential to actually change the game of offshore electricity production, the next 24 months should be interesting.

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First US Offshore Wind Lease Auction Held

A huge milestone was reached in the US market this past week – the first ever lease auction was held for offshore wind development. The location is southwest of Martha’s Vineyard and southeast of the Block Island and is the product of arguably the most extensive marine use review in American history.

Tommy Beaudreau, director of the Bureau of Ocean Energy Management, said in a conference call that offshore wind power is a key part of the Obama administration’s efforts to address climate change, which include the development of 20,000 megawatts of renewable energy on public lands and waters by 2020.

“This sale marks a really historic moment in the clean energy future of this country,” Beaudreau said.

For several years the States of Massachusetts and Rhode Island have worked together and with the US Federal Government to identify the appropriate location for offshore wind development. This will have the likely effect of avoiding much of the controversy that has surrounded the Cape Wind project for over a decade and should allow a more straightforward permitting and development process for the Developer.

The provisional winner of this weeks lease sale, which auctioned two leases for a Wind Energy Area of 164,750 acres offshore was Deepwater Wind New England, LLC. When built, these areas could generate enough combined energy to power more than one million homes.

The story has been covered around the world, but the Providence Journal has the most extensive write up here

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RenewableUK: Manchester 2013

The largest Offshore Wind trade show in the UK was held earlier this month in Manchester, England. Sponsored by the leading UK wind advocacy group, RenewableUK– the event brought together all of the leading offshore wind companies in the UK and a fair number of companies from the continent and Asia as well.

Some excellent new market research from RenewableUK was published at the event:Building an Industry, Updated Scenarios for Industrial Development gives a detailed picture of the current industry build out happening in the worlds leading offshore wind market. It paints a couple of scenarios: a build out of 13GW of offshore wind installed by 202 and a build our of 18GW by 2020. From there it breaks out the necessary supply chain implications, painting a clear picture of what the market will likely look like over the next 8 years.

On a more modest, but no less important note, Cape Wind announced an important milestone on June 19:

“PensionDanmark is funding a conditional investment commitment of 200 million USD in America’s first offshore wind farm, Cape Wind. The aim is to close the deal to construct the wind farm this year. The wind farm is to supply up to 500.000 households with power.”

The announcement goes on to say that financial close on the project is now anticipated with construction beginning as soon as this year.

It is not 12GW, but it is an important start – and like the UK, Europe, China, Japan, and Korea; once the industry gets its first projects underway the US market will not be far behind.

You can read the announcement here.

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