Michael Liebrich, chief executive of Bloomberg New Energy Finance, founded the company in 2004 and is a member of the World Economic Forum’s Global Agenda Council on Sustainable Energy:
The Government has announced it will be introducing a new Energy Bill during this parliamentary session. Done right, it could drive huge investment in a mix of clean-energy technologies. Done wrong, the lights could go out. Any discussion about the UK’s energy future has to start with one fact: we are now a net energy importer. Our gas production has been declining by 6 per cent a year since 2000. In 2011, for the first time since 1967, the UK imported more natural gas than it exported.
This leaves us entirely at the mercy of global markets. Over 2004-10, the average annual UK electricity bill rose by £290 because of rising natural gas prices. It is expected to go up another £175 between now and 2020. For all the fevered press coverage about the cost of renewable energy, the main reason UK energy bills have gone up is, and will remain, the cost of natural gas.
In the US, the new technique of fracking – fracturing rocks deep underground to release gas previously thought unrecoverable – has driven prices down to levels unthinkable only a few years ago. But, although the UK has shale gas reserves, they are neither cheap nor abundant enough to meet our energy needs. “Frack, baby, frack!” is not an energy policy.
The best-kept secret in the energy industry is that modern wind turbines can generate power as cheaply as coal or gas plants
Nuclear power has served the UK well, but at a cost too expensive to measure rather than too cheap to meter. For all its attractions, nuclear power will always need subsidies. It should be part of the answer, but not all of it.
Which brings us to wind. The best-kept secret in the energy industry is that modern wind turbines can generate power as cheaply as coal or gas plants. If the UK maintains its leadership position in offshore wind, it stands to attract £30 billion of investment in coming years in areas of high unemployment like Hull, Tyneside, Merseyside, Belfast and Scotland, and to benefit from dynamic new export industries.
Ultimately, that is what the debate is about. Should we invest our best talent, our hard-earned money and our geopolitical capital in propping up an old energy paradigm – slavish dependence on fossil fuels, an ageing grid, energy waste worthy of the Soviet Union? Or should we invest in the new paradigm – clean energy, deep energy efficiency, energy intelligence?
The Energy Bill is nothing less than a showdown between the ghost of energy past and the vision of energy future.
Rupert Posner, who runs The Climate Group’s global energy programme, working to advance the uptake of clean energy, developed a world-first initiative to track greenhouse gas emissions from energy in Australian states:
If I had a pound for every time I heard someone say “renewable energy can’t be built without huge subsidies” or “we’re not seeing the cost reductions renewable energy promised”, I think I could probably have built an offshore wind farm. Well maybe not quite, but I certainly wouldn’t be too worried about the global financial crisis.
The reality is that renewable energy has shown massive cost reductions and technological improvements. Indeed, if we saw the same sorts of improvements in another sector, there would be huge levels of excitement. Actually, we have, and we do. But for some reason the message that renewable energy isn’t and can’t be competitive often seems to linger.
And offshore wind is no different. It suffers from criticism that it is too expensive, too remote and too difficult to connect to the electricity grid. Or we hear that, if the wind stops, it will cause blackouts and all sort of chaos.
But offshore wind power, like other renewable energy technologies, has shown some impressive developments. While relatively new, compared with onshore wind farms, offshore wind farms have now been with us more than two decades.
Since the Vindeby wind farm, with 11 small 450-kilowatt (kW) turbines, was built off the Danish coast in 1991, we’ve seen offshore turbine capacity grow markedly. In March, a huge 6.15-megawatt (MW) turbine, capable of delivering the demands of 6,000 people, was installed 28 kilometres off the Belgian port of Oostende. A 15MW turbine, twice the capacity of the largest onshore turbine currently installed, is in development.
However, it is not just the size of turbines that has advanced. The first full-scale, deep-water floating turbine of 2.3MW is operating in 220 metre-deep water off the Norwegian coast. And in 2007, a wind farm of two 5MW turbines was built in the North Sea, 22 kilometres from the Scottish coast, to test the viability of building commercial wind farms in deep water and some distance from the shore.
We very often can’t imagine what future technological improvements will bring or the speed at which they will come. So, undoubtedly offshore turbines will be more powerful and more efficient, and deliver electricity at lower cost than any of the current forecasts suggest.
And this is vital. We mustn’t forget that governments are supporting the development of clean energy technologies, like offshore wind, because we must swiftly wean ourselves off fossil fuel-based energy that causes climate change and embrace a clean revolution.
Philip Lowe, born in Leeds and educated at Oxford, has been the European Commission’s director-general for energy since February 2010, and is a former director-general for both development and competition:
Offshore wind energy has a key role to play in improving Europe’s competiveness, sustainability and security of supply.
We are only at the beginning of offshore developments. European Union member states’ National Action Plans indicate that installed capacity is to increase ten-fold, from an estimated 4 gigawatts (GW) in 2011 to around 40GW in 2020.
However, more than half of the envisaged capacity in 2020 will be installed in only two countries, the UK and Germany.
Offshore wind energy brings opportunities in terms of emissions cuts as well as growth and employment. The industry estimates that around 170,000 offshore-related jobs will be created by 2020, mostly for the benefit of coastal regions.
The UK’s ambitious Round 3 programme should ensure that the industry can continue to scale up activities and reduce costs.
For the European offshore industry to stay at the forefront of this development it has to stay innovative and continue to look for solutions to new challenges such as installing turbines in ever deeper waters.
New players are entering the market, so technological as well as logistical advances need to continue. At the same time the highest quality and reliability standards need to remain the trademarks of EU offshore producers if they are to remain at the forefront in a highly competitive environment.
The EU is actively encouraging developments in this field, financing R&D and a number of flagship projects, for example under the European Energy Programme for Recovery.
The European Commission is also a keen supporter of the North Sea Countries Offshore Grid Initiative, an integrated grid infrastructure connecting wind farms in the North Sea and off the British, French and Irish Atlantic coasts.
Through its scale, this grid could not only help cut costs significantly, but also facilitate integration of large-scale offshore wind resources into grids, while keeping security of supply standards high.
In June, the European Commission will publish a new paper on a strategy for renewables which aims to take stock of progress in the development of renewables and identify policy choices for the 2012-2020 period. We hope this will lead to a wide public debate.
Martin Lidegaard, Danish Social-Liberal MP, is Denmark’s minister for climate, energy and buildings, and was formerly chairman of the influential Danish environmental think-tank Concito:
In Denmark, we have a long tradition of using wind energy and the Danish wind industry is a vital source of national growth and prosperity.
This March, the Danish government secured broad political support for an ambitious energy plan. The agreement contains a wide range of initiatives, bringing Denmark a good step closer to the target of 100 per cent renewable energy in the energy and transport sectors by 2050.
The agreement moves us up a gear, with large investments to 2020. By then approximately half of electricity consumption will come from wind power (today the share is 25 per cent), and energy consumption will decrease by more than 12 per cent compared to 2006.
One of the ways to get there is that we will construct two new large-scale offshore wind farms at Horns Reef (400 megawatts) and Kriegers Flak (600 megawatts). And, as Denmark will be making huge investments, we will need contributions from competent companies all over Europe.
We will welcome new bidders for the Danish projects. And we will design the tender process in an open dialogue, so that we can ensure strong competition and the best possible end result. Look at this as a very open invitation. We expect the tender to be published next year. So keep an eye out for Denmark.
Green investments are investments in both the present and the future. More than 20 million European jobs are linked to energy and the green economy in one way or another. The European Commission estimates that their proposal for a new energy efficiency directive will deliver about two million new jobs. This clearly illustrates the potential of pursuing the green agenda.
But we are still in times of financial crisis in Europe and political priorities tend to shift. There is a danger that long-term objectives give way to short–term goals and that green ambitions are lowered. I know this is a concern throughout the green industry.
We must remember that the green agenda is both about job creation in the short run, and about our climate and price stability in the long run.
John Loughhead, executive director of the UK Energy Research Centre, is a past-president of the Institution of Engineering and Technology, and was a corporate vice-president with the Alstom Group:
The UK Government pins much of its hopes for increasing exploitation of renewable energy on wind. Offshore installations have been encouraged due to their reduced impact on communities and the generally higher capacity factors which approach 40 per cent rather than the 25 per cent typical of onshore systems.
Under its commitments to European Union targets, the UK must meet 15 per cent of its energy needs from renewables by 2020, which implies around 40 per cent of electricity.
If all this was to be met by wind, around 33 gigawatts (GW) of capacity would be needed. Today, operational or in construction, there is 5.9GW onshore and 4.3GW offshore, with planning consent for a further 3.9GW onshore and 1.1GW offshore, a total of a little more than 14GW.
Initial studies and projects are underway on a further 4GW of offshore wind farms (compared to almost 8GW for onshore) which, as well as highlighting that we still have more capacity to find, suggests that offshore wind is not yet the most attractive option for developers and electricity generators.
Yet, potentially, offshore wind is a vast resource: estimates are that an average of 100GW of power could be generated from less than one third of UK waters shallower than 50 metres. That is more than twice the UK’s current typical electricity demand – so we can do it, but what impedes us from cracking on?
Firstly, today’s cost of offshore wind turbines is proving higher than expected, approaching £3,000 per kilowatt of capacity which means each unit of electricity produced costs about twice that from a conventional power station. Engineering rotating machines for the hostile marine environment is difficult and, although it will be done, our latest analysis suggested costs are likely to reduce by only 20 per cent over the next decade.
Secondly, there are still challenges to overcome with the variability of wind power which requires back-up or other power balancing systems.
And finally, offshore wind is not in the same places as our old coal-fired power stations, so we need a substantial reinforcement of the national grid to move the power to where it’s needed.