Power struggle

Michael Lewis, European Managing Director for E.On Climate and Renewables, talks about the challenges of offshore wind, the need for new transmission infrastructure and fossil fuel's place in the future energy mix.

Offshore is a very important area for the future of the European Union renewables targets. If you look at all the work that has been done about how we get to 20 percent of primary energy from renewables by 2020 or beyond, it requires a large investment in offshore technology. If you look at where we are today, we're around something like 1.5 to two gigawatts of total installed offshore capacity. If we're going to meet the target, we need to get to something like 40 to 50 gigawatts. That's a huge increase and that's within a short period of 10 to 15 years. That means we've got to prove the technology capable of operating in the harsh marine environment and get the supply chain focused on delivering solutions so we can actually install them quickly and efficiently. What we've tried to do is build the renewables offshore strategy, which tries to take the easier locations first.

It's a question of the physical nature of the projects because offshore is not just offshore. There are varying degrees of difficulty. For example, the first project we did, Scroby Sands off Great Yarmouth in the UK, is a very near shore project, 3km from the coast, in relatively shallow water only five metres deep. That is comparatively easy both to install and to operate because of the proximity to the shore, and also to put the foundations in place because of the relatively shallow water. What we're doing is now moving into larger projects like Rødsand in Denmark, much bigger than Scroby Sands, with 207 megawatts as compared to 60 megawatts. It is still in relatively shallow water near Denmark about five kilometres from the shore, in 10 metre deep water, and that means we can use the skills we learned at Scroby to build a bigger wind farm with larger turbines and a bigger capacity. So what we want to do is bring the skills we learned at Scroby in the easier offshore environment to the slightly more difficult and challenging environment at Rødsand and build a much bigger project, with a larger number of foundations and different turbine types.

We want to prove that we can do this on a large scale and not only Rødsand. We also have another project, 180 megawatts in the UK at Robin Rigg in the Solway Firth, again proving that we can install at a large scale but still in the relatively near shore, shallow water environment. When we've mastered those projects and we've proved that we can install efficiently, that we can get the right vessels to the sites so that we can have a reduced cycle time and reduce the capital costs, and when we're happy that the turbines can operate well in that environment, we then intend to move into the larger, far shore, deep water projects. These are projects outside of the 20 metre depth and 20 kilometres from shore and below. Those projects will be a bigger challenge both in the installation and in the operational phase, so we want to learn our trade in the light projects before we move to the difficult ones. The London Array, which we recently approved, will be the largest offshore project in the world once it is constructed with 1000 megawatts.

It's a much bigger proposition, but again, it's about learning the trade, learning how to build a project of that size, and making sure we can operate it efficiently and get the high levels of availability that we need to make it a viable economic proposition. All of our projects so far, not only are they there to create value in themselves, they're also part of a learning curve to enable us to get to the larger offshore projects. For example, in Germany where you might be 45 kilometres from the shore and in 35 metre deep water, and there are some very big potential projects out in the North Sea, not just in Germany, but also in round three of the UK. Before we build those, we want to make sure we can cope with the easier projects, and that's very much our offshore strategy, and there's still massive challenges there, but it's absolutely critical we deliver if we're to meet the E.U. targets.

Transmission

There are two aspects to the whole transmission debate. The first one is how do we connect up all of these new projects? It's clear the wind resource we have in Europe is not in the same place as where the conventional generation is located. If you take the UK as an example, most of the conventional generation's in the north of England, places like Yorkshire where you've got thousands and thousands of megawatts of capacity on the old coal fields. Most of the wind capacity is not in the same place, which means we'll have to create new transmission systems to link up the sources of demand in the south of England and the production, which is the north, or indeed, Scotland, and the other major challenge is of course offshore, where we've got to create a completely new infrastructure network where it's never existed before.

The transmission network is not yet in a position where it can cope, but the good news is we have a number of years to get there, and that means we have to take a strategic approach to building a transmission network. We need to get away from the old model of just connecting when the demand appears, where we approach the national grid and have to work to their timetable. They give you a date and tell you when it can be connected, and if you're lucky, you get a date that fits with your project development plan. If you're unlucky, you might have to wait, not necessarily because they can't connect you to the grid but because there's a knock on effect on the grid somewhere else where strengthening has to take place, and it might not be scheduled for a few years.

We know where the wind resources are. We know where the offshore wind locations are. These are all set out in government policy by the crown estates. For example, for round three where the bulk of the new capacity will be built, we know exactly where they are. That means we can start thinking about where the grid needs to be now. We can start thinking about where the grid needs to be strengthened in the future, and we can do that on a proactive basis to anticipate capacity coming on rather than waiting for it to come on.

Wind farms are much more expensive to build than the transmission network that takes the power away to customers. That means if there is going be a slight mismatch if one is built slightly before the other, it's better to have the transmission network in place before the wind farms come along than vice versa. We're not there yet, but with sound policy and the right strategic approach we can get there.

The second issue is how do you integrate wind into the transmission network, and this is all about intermittency. You often hear people saying, "Well, wind is fine. Trouble is, it's only blowing X percent of the time," which is true, and you do have to manage that intermittency.

The good news is you don't normally get a position where all of the wind is not blowing at the same time. You get geographical differences whereby one part of Europe might be windy and another part might have zero wind. In fact wind farms have a load factor of 25 to 30 percent. That's an annualized number and it doesn't mean the wind is only blowing 25 to 35 percent of the time. They are actually operating for a very large proportion of the time, just not at full output. What you do need to do is ensure that when the wind does drop and there are sudden changes in output, you have enough of what we call spinning reserve.

That is a conventional fossil plan which is operating below full capacity which can ramp up quickly to cover a reduction in renewables This means that we also need replacement of existing fossil capacity, which we'll gradually fade out over the next few years as various pieces of environmental legislation come into place. The corollary is we need existing coal-fired capacity and gas-fired capacity to be replaced because wind does not provide a huge amount of capacity. It's a slightly technical issue, it provides the energy to displace coal and gas but it doesn't count very much for capacity because you can't guarantee it's going to be there when you might need it. As a rule of thumb, if you were to reach your target and you 40 to 50 gigawatts of intermittent wind capacity on the system, it would only displace 5 to 10 gigawatts of conventional capacity, so roughly 10 to 20 percent. That's the challenge. That means you have to maintain that level of fossil capacity to provide the reserve and spinning reserve. I've heard the argument made by anti-wind campaign that wind is useless because it only displaces five to 10 percent of coal. It only displaces that much capacity, but it displaces a lot more energy, and that means it does significantly reduce CO2 emissions. That's an important distinction.

We currently have around 60 gigawatts of installed capacity. We aim to increase that to 90 gigawatts by 2030 to cope with increased energy demand. What we want to do is over that period move to a much lower carbon portfolio, and in fact, we have a target to reduce by 50 percent our specific carbon emissions. That means the emissions per megawatt hour of electricity produced, so at the same time as growing the portfolio by 50 percent we're going to shrink the specific carbon emission by 50 percent. That is a big challenge, but the first phase is to make renewables a key leg of the new growth, and that's what we're doing.

We're investing over €6 billion. That's point number one. The second thing is we're replacing old fossil-fired plants with new fossil-fired plants with a significant increase in efficiency. The latest generation of coal-fired plants were close to 45 percent efficient compared to 34 percent for the average of the really old ones, and that makes a huge difference to the CO2 emissions. The third thing is we need to have other low carbon technologies, nuclear being one of the prime ones. E.ON is looking to develop its nuclear business in the UK in the future, and that will be another key lag in supporting a reduction in CO2 emissions. Finally you've got gas-fired technology, which is already extremely efficient, but again, we're pushing the boundaries to make that even better.

Clean coal, well is probably not going to be commercial until after 2020, but we're doing a lot in the meantime to help develop it. We're doing various pilot studies. We're building new highly efficient coal plants as a first step that are carbon capture ready. That means they have the right plant specification and they have the right plant logistics whereby there's room to install a carbon capture facility when the technology becomes viable. Yes, it is a tricky period, yes, we do have a challenge, but there are clear pathways of how we can get there using existing technologies.

Technology challenge

There is certainly a huge technological component to the challenge. We've already talked about clean coal. We've talked about renewables and what technologies like offshore are going be successful in the future. Nuclear as well is one of the key challenges, so technology shouldn't be ignored. That's obviously a massive, massive challenge, but I think there are other components.

First one is policy. It's a huge policy challenge to coordinate how the globe responds. It's not enough for the UK to win the battle. It's not enough for Europe. It's not enough for the UK, Europe, and the US to win the battle.

You need a global solution and that means a policy that can effectively limit carbon emissions across the world. Now, the means of achieving the reduction in carbon emissions will be technological but the policy has got to be in place first to make sure that those technologies can be applied. I think the other thing is a behavioural issue. We shouldn't underestimate the role that changing patterns of energy use and improved energy efficiency will play in solving this problem as well. There may be solutions looking at demand side management, looking at significantly improving the efficiency of how we use energy. Those things again will partly be driven by technology but partly be driven by people's behaviours and what people accept as societal norms as well. I think there is a complex interaction between policy, behaviours, and technology. We certainly have to win the technological battle and that's a necessary but not sufficient condition to win the overall war.