Transmission & distribution
Where the wind blows1 January 2007
Irish renewables company Airtricity has proposed the development of a European offshore supergrid, bringing together ‘the latest technology in wind generation and electricity transmission’ to provide a ‘secure, sustainable and uninterrupted supply of electricity’ to EU member states. But will it ever get off the ground – or the seabed?
Europe has the world’s richest wind resources, but will never be in a position to exploit them unless it can solve two problems – unpredictable availability and the lack of strong links to national supply grids.
A plan intended to solve both these difficulties has been devised by Irish utility Airtricity and its engineering partner ABB. It consists of nothing less than a several thousand mile long, high voltage, sub-sea transmission network, an undersea ‘supergrid’ embracing Europe in the north, west and south that will connect wind and sea resources to each other and to the European hubs. The network is planned to cover, ultimately, the Baltic Sea, North Sea, Irish Sea, English Channel, the Bay of Biscay and the Mediterranean. A seagoing grid on this scale would cover an area large enough to almost guarantee that most of the time there is wind energy being generated somewhere. How much availability curves would be smoothed, and at what level of availability, has yet to be seen.
The first step in the programme is the creation of what Airtricity is calling a 10 GW Foundation Project to prove both the concept of the supergrid and the technologies to be employed. This will involve the establishment of 2000x5 MW wind turbines in farms located in an area of the North Sea covering around 3000 sq km between the coasts of Germany, the Netherlands and the UK. and delivering its output to all three countries. However, even this first stage, the r22 billion foundation stage, is too big for Airtricity alone to handle. It seeks to form and lead a consortium of ‘progressive companies’ to develop, finance and build it.
Although the foundation project is a small part of the final plan, it is held by Airtricity to be the necessary first step without which there will be no other. It is currently trying to gather support for the project from governments at national and European level, and believes that the three national governments should support the undertaking, with what it calls preferred mechanism status, for primarily political reasons – to help meet environmental targets and as an aid to energy supply security. These reasons, and the boost it would give to prospects of a pan-European energy market, are the prospects held out to the EU, whose support is essential if the project is ever to get into the air, partly to underwrite some of the financial risk, but also because the project partners insist that political risk would have to be removed from long-term off-take agreements for the project, probably through EU or state guarantees.
On environmental issues the European Union needs all the help it can get. It has committed itself to a programme to try and limit global warming to a maximum 2°C average temperature increase above pre-industrial levels. This requires global greenhouse gas emissions to be cut by approximately half by the middle of the century. Global emissions will have to peak and decline in the next one to two decades for temperatures to stay below the 2°C threshold.
Technically the project depends on two recent developments, making available for the first time large scale wind turbines rated at 5 MW +, and a transmission system capable of more economically carrying their output, namely HVDC Light. Crucially this voltage source converter technology, the only type available that can handle the meshed connectors necessary to a trading market, has recently been scaled up to 1000 MW, at a cost, says maker ABB, only 33% higher than its 500 MW precursor.
Always blowing somewhere ...
According to the Supergrid prospectus, the logic of the plan depends heavily on a useful feature of the European weather system – that it consists of a shifting pattern of high and low pressure zones often hundreds of km apart that ensure that the wind is always blowing in one area or another. Linking them together smoothes out the supply irregularities and overcomes one of the main problems associated with wind power – fluctuating availability.
Airtricity’s hope is that building wind farms in the seas around northern and western Europe, as well as areas of the Mediterranean, would make it possible to harness the wind whenever it is blowing and transform it into a stable source of power, thus turning a perceived disadvantage of wind into a strength.
The foundation project is estimated to take five years to build and cost h2million/MW, with a grid cost of h2 bn. Other financial assumptions are a capacity factor of 40%, with financing by 90% debt at 5.5% and 10% equity with a rate of return of 20%. Given a turbine lifetime of 25 years and a refurbishment cost after 25 years of half the initial cost, the cost of power is expected to be h77/MWh for the first 25 years and h48 for years 26 to 50. This compares well to the ILEX projection for the same period and fits within the current fixed feed-in tariffs in Germany and The Netherlands.
The supergrid is expected to have a capacity utilisation rate in excess of 70%, compared to about 40% for dedicated offshore wind farm connections. Even so, given the huge capital investment, the scale of the project and regulatory complexity the venture risk is such that commercial banks are unlikely to take part without an undertaking from the European Investment Bank to underwrite the debt. An EU initiative to harmonise the regulatory climate would be a considerable benefit.
Internal electricity market
An immediate consequence of the supergrid proposal, and potentially one of its strongest selling points, is that by acting as an interconnector between national markets, through which electrcity from all sources could be traded, it facilitates the creation of a functioning internal market. Indeed, its success is arguably dependent upon such an internal market.
Despite the demonstrable advantages of a functional power market, the member states have been as yet unable to abandon their 25 national energy policies and agree on the necessary steps needed to remove obstacles to trade, opting instead for internal competition. One such obstacle is the lack of interconnection between national markets, which results in less than 10% of Europe’s electricity being traded across borders. Inter-connection could enhance the economics and facilitate the integration of electricity markets, thereby overcoming one of the biggest defects of the internal market – the lack of competition in electricity. It could reasonably be argued that the establishment of a functioning internal market in electricity is a necessary complement to a single external energy policy for Europe.
Political and regulatory aspects
There is a strong political dimension to the scheme being proposed. Europe is facing threats to its energy security, ranging from political instability in the regions supplying oil and gas to exponential growth in the global competition for finite resources. At the same time, Europe has accepted onerous environmental responsibilities for reducing greenhouse gas emissions, and for developing green energy, that will be difficult to fulfil. These challenges suggest a single question: how is Europe to manage the energy, environmental and economic crisis that these factors are pushing it toward? There is probably no single answer. But three things are clear. First, any future energy policy should begin with the imperative for greater energy efficiency and conservation. Second, it should be based on primary energy sources that are indigenous, secure, sustainable, clean and competitive, while simultaneously conferring a competitive advantage on the European economy. Finally, such a vision must be consistent with the founding principles of the European Union – solidarity among the member states and common action in the external arena of the global economy. It should therefore conform to the requirements of a functioning internal market as dictated by the Treaties.
The immediate next step is to secure a degree of co-operation among EU members. The European Union may also consider adopting the transmission element of the 10GW Foundation Project as a priority project under the Trans-European Energy Networks initiative in order to facilitate funding of the early feasibility/development costs. In addition, agreement will be required of the governments of the UK, Germany and the Netherlands as to how renewable energy generated from offshore wind farms in the North Sea will be treated when exported directly to a second country – for example, a wind farm in UK waters exporting to Germany.
Agreement will also be required among these same governments, or other appropriate authorities, to harmonise the regulatory and operational aspects of any European offshore supergrid. And to allow development of the project to proceed, national governments will need to ensure a co-operative approach to completion of the necessary Strategic Environmental Assessments, to ensure compliance with the SEA Directive, and oversee the award of sea-bed leases for the project.
Europe needs an energy policy that enables it to meet in an economic manner its internally agreed environmental objectives. The task at hand is to agree on economic policy that can turn environmental objectives into a realisable energy policy.
Added to this is the necessity of devising an energy policy that limits, and preferably eliminates, the risk to supply security. It is salutary that two of the three founding Treaties of the EU (‘The Coal and Steel Community’ and ‘Euratom’) dealt with energy. Individual politicians such as Jean Monnet were from the beginning of the EU preoccupied with the unacceptable geopolitical consequences of Europe’s dependence on imported energy. Europe’s dependence on imported energy has risen from 20% in Monnet’s time to its present level of 50% and is forecast to reach 70% by 2025.
At that point, Europe could be caught in an energy vice. Oil production will have peaked, or will certainly be on the verge of peaking. The forecasts of the International Energy Agency, even the most optimistic, agree on this point. But both China’s and India’s demand for oil and gas will have increased by a factor of six to eight times their present levels. It is likely that with dwindling supplies and ferocious global competition for resources among the US, China and India, countries that have a single energy policy and concentrated purchasing power will have a marked advantage.
The European Union is in danger of being marginalised unless its member states start to act together in the world energy market. However, there is reason to believe that the EU will soon take the step of creating a common policy in primary energy sources. It is desirable, if not inevitable that a common external energy policy should be complemented by an internal market in electricity The supergrid would be a suitable starting point for such co-operation.