The renewables are attracting a veritable gold rush of investment, if a recent "trend analysis" report from the UN Environmental Programme is anything to go by. "While renewable sources today produce about 2% of the world's energy, they now account for about 18% of world investment in power generation, with wind generation at the investment forefront," says the accompanying press release. About $101 billion poured into the renewables sector in 2006, roughly $30 billion of it via mergers and acquisitions and some $70 billion through investments in companies and projects (43% higher than 2005, up 158% over the past two years, and expected to increase further substantially this year).
The largest single source of investment was asset financing of new generation capacity (accounting for about 40% of the $71 billion), "a reflection of the sector's coming of age", the report says. In the words of Eric Usher, head of the energy finance unit at UNEP's division of technology, industry and economics in Paris, this report "puts a full stop to the idea of renewable energy being a fringe interest of environmentalists. It is now a mainstream commercial interest to investors and bankers alike."
So far it is of course only onshore wind technology that is proving sufficiently mature to attract substantial investment. But if the ambitious renewables targets now being talked about around the world are to have any chance of being met, offshore wind will have to make a substantial contribution in the not too distant future.
Interestingly, the offshore wind community can now claim one project under construction – the 120 MWe Q7 park, off the Dutch coast – where financing is being provided on a non-recourse basis by a group of banks, meaning that the lead banks involved, Dexia and Rabobank, are relying on the project to generate the revenues needed to service the loans. This is a bold step indeed for bankers, not known for their readiness to embrace risk, particularly as Q7 also has the distinction of being further out to sea than any offshore wind facility yet built, 23 km, and in deeper water, 19-24 m.
Investors in Q7 will presumably also be taking a not inconsiderable interest in the reliability of wind turbines currently operating offshore, where the record has been decidedly mixed, to put it politely. The Q7 project is using Vestas V80-2.0MW machines (currently being installed, with all 60 scheduled to be ready for testing in September – weather permitting of course). It was this type of machine which famously experienced serious reliability problems in the early operating phase of the pioneering Horns Rev I offshore wind farm, damaging the credibility of offshore wind.
Subsequent problems with Vestas offshore machines have not helped. These have included widespread gearbox bearing damage at Scroby Sands (also V80-2.0MW type) and problems with gearboxes at Kentish Flats, necessitating their complete replacement. Rather worryingly the Kentish Flats machines are of a later design (Vestas V90-3.0MW), which was intended to fully take on board the lessons drawn from previous operating experience, with special attention to marinisation and testing of gearboxes (a problematic component in wind turbine technology to date, both onshore and offshore) – see MPS, February 2006, pp 20-21. So, to encounter these problems after a relatively short operating period is particularly embarrassing, and indeed has led Vestas to suspend further sales of the V90 into offshore projects (leaving the way open for Siemens and its 3.6 MWe offshore machine, now being installed at Burbo Banks, and selected for Gunfleet Sands, Lynn and Inner Dowsing).
A new issue has recently been encountered at Horns Rev I – the faster than expected corrosion of turbine tower bases – but this has not deterred Dong from committing (in May) to development of a second phase, Horns Rev 2. Indeed Denmark's plans for offshore wind remain ambitious. Horns Rev is one of 23 areas identified in a recent report from the Danish Committee for Future Offshore Wind Turbine Locations as possible sites for additional wind farms, bringing the country's offshore wind generating capacity up to a total of roughly 4600 MWe by 2025, with wind contributing about 50% of Denmark's electricity supply. (The issue of how the Danish power system should be developed to accommodate this high proportion of wind generation is to be examined in a just launched research programme to be conducted by Energinet.dk, academia, power companies and equipment suppliers. Called EcoGrid.dk, the new study, which is due to be completed in 2011, aims to "introduce new thinking and targeted research into the overall power systems of the future.")
The UK also has big plans for offshore wind, with farms as large as 1 GWe and 1.5 GWe now being proposed. At the same time the relative immaturity, and consequent riskiness, of the technology has been recognised in the new banding system put forward in the UK government's energy white paper (published on 23 May). This awards offshore wind 1.5 ROCs (renewable obligation certificates) per MWh, compared with 1 ROC/MWh for onshore wind (see table above).
Meanwhile, in Germany, the gap between aspiration and the realities of offshore wind remains very large indeed, not helped by the distances out to sea and relatively large water depths that the Germans are aiming for. The existing subsidy system aims to incentivise ambitious projects, but so far progress has been slow. Provisions in the recently enacted infrastructure project acceleration act should help, but in recent months there has been the added problem of escalating raw material and equipment costs. An opportunity to improve the support system for offshore wind will arise over the next year or so as the renewable energy law is due for amendment in 2008, and this presents an opportunity that needs to be fully taken advantage of.
Major improvements in the offshore wind technologies themselves would also clearly help to improve the long term bankability of projects planned in the German offshore sector. One interesting future possibility here is the use of floating foundations (see MPS, June, pp 64-66), which is being proposed for the Ventotec East 2 project in the Baltic, recently approved by the German shipping authority, BSH.
Twenty years ago – MPS July 1987
"Nuclear power has been excluded from the Finnish government's ten-year power plan (1987-98) approved by the Council of State."
"French Foreign Minister Jean Bernard Raimond is reported to have presented a proposal to Pakistan that France would build a nuclear power station in that country...."
"A 3.2 MW wind turbine on the Hawaiian island of Oahu is now complete...It was built by Boeing Aerospace."
"Electrocorp of Wellington, New Zealand plans to investigate a possible second hvdc link between the North Island and South Island..."
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