Offshore energy for export

By Bryan Walker 23/05/2010

Ben McNeil’s scenario, in The Clean Industrial Revolution, of Australia as a future source of renewable energy exported to its Asian neighbours was of necessity somewhat speculative. However a major report published this week laid out, in very concrete terms, the possibility of the UK becoming a net exporter of renewable energy, not solar in this case, but garnered from the wind and waves of the sea.

The report of the Offshore Valuation Group was sponsored by the UK Department of Energy and Climate Change, the Scottish government, and a number of large companies. Tasked with estimating the value of the offshore renewable energy resource, the group’s findings exceeded their own  expectations.

’The next four decades of technological development could enable us to harness a practical resource ten times the size of today’s planned deployments. Integration with neighbouring electricity networks though a ‘super-grid’ could provide access to a single European electricity market, enabling the UK to sell renewable electricity across the continent.’

The report relied on technologies already either in use or in development: offshore wind with fixed or floating foundations, tidal stream, tidal range, and wave power. It also took into account competing uses of the sea and accessibility constraints.

The resource identified by the report is very large, capable of producing six times as much electricity as is currently used in the UK. The report recognised that electrification of transport and heating will add to demand by 2050, an increase of perhaps 75% on today’s demand. Harnessing 29% of the offshore resource by 2050 would be enough to turn the UK into a net exporter of renewable electricity at an estimated cost of £443 billion with an estimated annual revenue return of £62 billion. The annual production in 2050 would be equivalent to 1 billion barrels of oil. This is the average level of production experienced by the UK’s North Sea oil and gas over the four decades leading up to 2008.

The infrastructure deployment required is similar in scale to that of oil and gas in recent decades.  To deploy the capacity by 2050 would require an average build rate of 7.2GW per year (one thousand 7.5MW turbines per year), including repowering. Of this, 5.4GW would be fixed offshore wind, with the next largest share coming from floating wind. A big plus is that 145,000 jobs could be created in direct roles.

The current EU supergrid negotiations are of major importance to any export development and the report urges that the UK take a leadership role to ensure that the UK derives maximum value from its design and implementation. Government involvement would be essential in many aspects of the development, in cooperation with industry. One is finding ways to develop innovative financing mechanisms that can match the long term risk and reward profile of renewable energy investments. This could take the form of green energy bonds designed either for corporate investors such as pension funds or for individual investors, and should be designed to deliver finance at the required scale; for the 29% harnessing option an average annual investment of £11 billion will be required between 2010 and 2050.

Another role for government is setting a national ambition to become an exporter of offshore renewable electricity. This will provide industry with the confidence it needs to invest for the longer term, it will demonstrate a strong commitment to existing renewable energy and climate targets, and it will help to guide long term policy development on related issues such as energy markets, grid and supply chain development.

The conclusion:

’The UK is now most of the way through its first great offshore energy asset, our stock of hydrocarbon reserves. The central finding of this report is that our second offshore asset, of renewable energy, could be just as valuable. Britain’s extensive offshore experience could now unlock an energy flow that will never run out.’

We wait to see what the policy makers do with the report. Peter Madigan, Head of Offshore Renewables at RenewableUK, was in no doubt about what should happen:

“This is a hugely exciting piece of research which sets out compelling factual evidence of the huge potential of the UK’s offshore renewable energy resource. As an association we have long been saying that the North Sea will become the Saudi Arabia of wind energy, and today’s tonne of oil and employment comparisons amply bear this out. Just as 30 years  ago, the North Sea could be our ticket for economic growth. We are looking forward to the new Government putting in place the policy framework to make this happen.”