National renewable energy action plans indicate that 20.6 per cent of total EU energy will be renewable by 2020, with the majority of countries reaching their targets by domestic production. Final statistics for 2009 show that 11.6 per cent of EU final energy consumption was derived from renewables, an increase from 8.5 per cent in 2005. By 2020 renewables are anticipated to account for 34 per cent of electricity, 21.5 per cent of heating and cooling, and 11 per cent of transport. Biomass, wind (with two-thirds coming from onshore) and solar are the main technologies forecasted to increase in supply between now and 2020.

Eighteen EU member states have already met their interim renewables targets for 2020. Under the 2009 Renewable Energy Directive, 4 per cent of the UK’s final energy demand must come from renewables during 2011-2012. Provisional figures for 2011 put the proportion at 3.3 per cent.

In the electricity sector, provisional 2010 figures suggest that 6.7 per cent of the UK’s electricity was sourced from renewables (6.6 per cent in 2009). Across the EU, the 2010 figure was 19.8 per cent.

The proportion of heating and cooling sourced from renewables stood at 1.7 per cent in 2009, while 2.67 per cent of the UK’s transport energy was renewable. These levels are considerably lower than those across the EU (13.4 per cent and 4.2 per cent respectively).

The UK is one of 18 member states that have transposed the Directive (on renewables and electricity), with a
5 December 2010 deadline for transposition. The nine countries that have only partly transposed the Directive are: Belgium, Bulgaria, Greece, Spain, Hungary, Austria, Poland, Slovenia and Finland.

Among the 12 energy priorities for 2020 and beyond is an offshore grid in the north seas (i.e. the North Sea, the English Channel and the Irish Sea), in which the UK is involved. The project, which covers approximately 90 per cent of planned offshore wind development in the EU, currently has three working groups: grid configuration; regulatory and market framework; and planning and authorisation.

DG Energy is currently working on a post-2020 strategy for renewables. Consultation on that strategy closed on
7 February and a policy statement (a communication in the Commission’s terminology) is due in early summer. The post-2020 policy framework is expected to address how renewable technologies will progress from laboratory to industrial-sized application beyond 2020. Collaboration on sourcing renewable electricity from third party countries is also expected to be covered.

Other initiatives from the Commission in 2012 will include a report on sustainability requirements for solid biomass.  In 2010, the Commission published recommendations for member states on sustainability criteria for schemes for the use of solid and gaseous biomass used in electricity and heating. Following a public consultation in 2011 on the topic, and an external study to benchmark national rules, DG Energy is currently finalising its analysis, but has yet to decide on whether or not it will propose harmonised and binding criteria. The report is expected in the coming months.

R&D, including work on the Horizon 2020 programme, continues. In renewable transport policy, the Commission plans to intensify efforts to increase the use of second generation biofuels, through investment in R&D and accelerating both development and deployment.

The Commission is also planning to develop policy regarding biofuels and indirect land use change so that policy takes the effects of second generation biofuels into account. Growth of biofuels on land previously used for food crops can result in cultivation on grasslands, leading to carbon releases, or cultivation on forested lands.

Offshore wind and tidal technology could be operating off Northern Ireland’s coast from 2016. However, progress is faster across the rest of the United Kingdom and in the Republic.

DETI’s Offshore Renewable Energy Strategic Action Plan outlines the Executive’s aim of Northern Ireland generating 900MW of energy from offshore wind and 300MW from tidal resources by 2020. At present, a 1.2MW SeaGen tidal stream demonstration project is operated by Queen’s University in Strangford Lough. The lough has not been considered suitable for commercial scale development, due to the potential damage to the environment and other marine users. However, that project and Queen’s marine laboratory at Portaferry will continue to host early stage testing of prototype devices.

There are currently 22 offshore wind sites off the coast of England with a total installed capacity of 6.1GW. Two wave technology projects have an installed capacity of 20.5MW and two tidal projects have a combined installed capacity of 12MW.

Scotland currently has five offshore wind sites with a combined installed capacity of 1.18GW. Four wave technology sites have a combined installed capacity of 7.76MW and three tidal projects have a combined installed capacity of 4.64MW. In addition, the Pentland Firth and Orkney waters are the first area in the UK to be made available for commercial scale development of wave and tidal energy. The Crown Estate has entered into agreements for lease for projects with a potential capacity of up to 1.6GW in what is believed to be the largest such development worldwide.

While there is no offshore wind off the Welsh coast, one wave project has an installed capacity of 7MW and two tidal sites have a combined installed capacity of 11.7 MW.

Foreshore leases have been granted for the operation of two sites in Ireland: a 520MW wind farm on the Arklow Bank and a 1.1GW wind farm on the Codling Bank. To date, seven turbines totalling 25.2MW have been installed on the Arklow Bank. Ocean energy research is underway in three universities and at two marine test sites, one in Galway Bay and one in Belmullet, County Mayo.

During 2011, electricity consumption from renewables (mainly onshore wind) in Northern Ireland was an average of
12 per cent (increasing to 18 per cent in some months). Energy Minister Arlene Foster admits that “the development of renewables is undoubtedly a big challenge” but she sees offshore energy as “making a key contribution to our future energy mix.”

The draft Offshore Renewable Energy Strategic Action Plan underwent a strategic environmental assessment (SEA) before both documents were published for a three-month consultation from December 2009 to March 2010. A post-consultation report was published in September 2010, recommending that a habitats regulations appraisal (HRA) of the draft strategic action plan. This took place from October 2010 to March 2011. 

One year passed between the publication of the draft strategic action plan and the final document because the HRA had to undergo a consultation and was approved by the Northern Ireland Environment Agency (NIEA) in July 2011. Discussions on the location of the maritime border took place until November 2011 and the Executive approved the final document for publication in March 2012.

In December 2011, the Crown Estate announced two parallel offshore leasing rounds in Northern Ireland waters: an offshore wind area off the east coast of County Down to deliver up to 600MW of capacity and a tidal stream area off the north coast around Rathlin Island to deliver up to 200MW.

The strategic action plan’s timetable states that the Crown Estate will offer development plans to successful companies by September 2012. Environmental impact assessments and habitat regulation appraisal requirements will be carried out between 2012 and 2015, and construction and deployment should take place in 2015 and 2016 (depending on private sector interest).
Confusion over the maritime border between Northern Ireland and the Republic was temporarily resolved when a memorandum of understanding for offshore renewables was signed by Julian King (while he was UK Ambassador to Ireland) and Irish Foreign Affairs Minister Eamon Gilmore in December 2011. This allows the UK and Irish governments to grant leases in their respective waters up to a line drawn half-way between the mouth of Lough Foyle out to the Crown Estate’s 12-nautical mile boundary and half-way between the mouth of Carlingford Lough out to the 12-nautical mile limit. DETI intends to work towards making this a legal commitment.

Key actions

The SEA and HRA made three recommendations which DETI intends to carry out before the end of the year:

•    ensure that gaps in knowledge and strategic data are filled by having Northern Ireland included in UK-wide studies (the region is currently represented on UK-wide research groups such as the Offshore Renewable Research Steering Group);

•    adopt a ‘deploy and monitor’ approach to marine renewable energy based on Marine Scotland’s approach to its marine licensing regime in the Pentlands Firth; and

•    publish a ‘project level mitigation strategy’ which will outline best practice required to gain consent.

By developing a programme to fill knowledge gaps by this autumn, DETI hopes that developers will be encouraged to invest in the region as they will no longer have to undertake and pay for their own surveying or monitoring.

DETI intends to publish a ‘survey, deploy, monitor’ approach for Northern Ireland waters by December 2012 so that regulators and potential investors will have the necessary information about the environmental impact. Also by December 2012, DETI, in conjunction with the NIEA will publish the mitigation strategy as a reference guide for regulators, developers and stakeholders.
DETI established the Offshore Renewable Energy Forum in January 2011 to advise on the delivery of the strategic action plan. It includes representatives from fishing, ports and harbours, the renewable industry, Invest NI, environmental groups and local authorities.

The electricity grid must be strengthened to accommodate onshore and offshore renewables. DETI says it will work with NIE, SONI and the Utility Regulator to handle this development. The findings of the ISLES offshore grid study will be “continually used” to inform decisions on renewable infrastructure.

Invest NI is working with the Sustainable Energy Authority of Ireland and the DECC to establish potential business and supply chain activities that could arise from offshore developments.

The department wants to ensure that its offshore energy interests are represented in the Marine Bill which will legislate for marine planning and conservation of marine nature (see pages 22-23).

Safety zones and the statutory decommissioning of offshore infrastructure have not yet been legislated for in Northern Ireland. DETI intends to develop proposals, based on those operating within Great Britain’s waters, and will mention this in the Energy Bill consultation which is scheduled for spring 2012.

With electricity market reform underway in Britain, DECC is developing new legislation which will include the powers to introduce a feed-in-tariff with contracts for difference for large scale renewables. DETI is currently considering how these proposals could be shaped to work within the Single Electricity Market and the Minister is to announce her decision this spring. A DETI spokeswoman confirmed that her decision and the consultation on an Energy Bill are due before the end of May.

Owen McQuade speaks to Christophe McGlade, doctoral researcher at University College London’s Energy Institute, about the uncertainties surrounding the future role of gas.

Gas has three key roles to play in a future with a low carbon economy, according to Christophe McGlade.

One is as “a very minor role as a back up to renewables.” McGlade explains: “The wind doesn’t produce when it isn’t blowing so you need a back-up, and gas is ideally placed for that.”

If carbon capture and storage (CCS) could be finalised, gas could have “a much more central and long-term role.” Gas with CCS “gets us pretty close to carbon neutrality so it could be a very big part of our electricity supply in 2050,” McGlade contends.
The concept of natural gas as a bridge to a completely renewable energy economy has become a popular sound-bite, McGlade observes.

More discussion is needed.  There could be a possibility of gas being a bridge to the acceptance of nuclear energy “or some other technology coming through,” he says.

McGlade’s research examines the main influences on the outlook for oil and gas.

These include the total resource availability, the investment in and cost of resource extraction, the role of technological progress, global demand for oil and gas, and the impacts of geopolitical mandates or events. He also investigates the timing and extent of the cross-over between conventional and unconventional resources as well substitutes.

On shale gas, he notes that it has “become very popular and it is a very important source to address.” Estimating how much shale gas exists is “a very uncertain business.” UCL is currently examining the ranges in the estimates that have been made on shale gas.

“Even in a region such as the US, where you’ve got five of six years of pretty good production history, there are still massive ranges in how much gas people think there is,” McGlade tells agendaNi.

Pointing to the Marcellus shale in the north east of the United States, McGlade says: “There have been over 5,000 wells drilled there in the past few years, yet ranges of estimates are [up to] 23 trillion cubic metres. That’s seven-and-a-half times the global gas consumption.”

Before Europe, or indeed the UK or Ireland, get “too excited” about “going down the gas route”, McGlade warns that “it’s important to get more information.”

When asked about the future of shale gas in Europe, McGlade says that there are discrepancies in the projections for shale gas. “Looking out to 2025, some people say there will be 5 billion cubic metres per year; some people say there’ll be 200.”
Recent results from Poland “haven’t been too encouraging,” he adds. “Exxon recently announced a few wells which weren’t particularly commercial. They also announced that the resources there weren’t as high as some people were hoping.”

McGlade concludes: “I think European shale gas potential is there. There will be some production, but whether it will be as high as some people were hoping two or three years ago is not looking quite so sure these days.”

Future of gas seminar: Christophe McGlade

Energy Ireland examines the European Commission’s Roadmap 2050 which outlines various paths to a decarbonised Europe by 2050.

Roadmap 2050 has concluded that Europe’s energy production will have to be almost carbon-free in order to reach the Commission’s latest target of reducing emissions by 80-95 per cent of 1990 levels over the next 38 years.

Most recent statistics show that the level of the EU 27’s greenhouse gas emissions has fallen by 15 per cent from 5.59 billion tonnes in 1990 to 4.72 billion tonnes in 2010.

Following the Commission’s 2020 targets will reduce emissions by 40 per cent by 2050 therefore the Commission believes that urgent change is needed in member states’ energy policy. In addition, energy investments take time to produce results and infrastructure built 30-40 years ago needs to be replaced urgently. The roadmap points out that investing now would avoid costly changes in later decades and reduce lock-in effects (whereby carbon-emitting infrastructure built from now will emit for decades).

In order to determine how the 2050 decarbonisation target will be achieved, the roadmap examines seven scenarios that could reduce emissions while ensuring that each country retains its security of supply and competitiveness.

According to Director General for Energy Philip Lowe, action needs to be taken now because “companies, financial institutions and governments are contemplating future investments and policies with an increasingly large component of [market, political, technological, policy and regulatory] risk and uncertainty.”

Uncertainty is inevitable because it is “impossible” to anticipate when an oil peak will occur, how viable shale gas will be in Europe, whether carbon capture and storage (CCS) will become commercially viable and what role member states will give to nuclear power.

The roadmap will not replace national plans to modernise energy supply. However, it sets itself as a ‘technology-neutral’ framework that, if followed by all member states, would increase security and lower costs by providing a wider and flexible market for new products and services. Further policy initiatives on specific areas will follow in the coming years, starting with proposals on the internal market, renewable energy and nuclear safety later in 2012.

Scenarios

The reference scenario includes current policies e.g. the 2020 targets for renewable energy systems share and greenhouse gas reductions and the Emissions Trading Scheme Directive. It takes the long-term projection that GDP growth will be 1.7 per cent per annum.

Safety measures adopted following Fukushima and proposals in the Energy 2020 Strategy (e.g. to complete the internal energy market by 2015) are included in the current policy initiatives scenario. It also includes proposed actions in the Energy Efficiency Plan (retrofitting homes and public sector buildings and rolling out smart metres) and in the new Energy Taxation Directive (i.e. introducing a CO2 element into energy taxation).

A high energy efficiency scenario would see a political commitment to very high energy savings. It includes more stringent minimum requirements for appliances and new buildings, the renovation of existing buildings and energy savings obligations on energy utilities. This would lead to a decrease in energy demand of 41 per cent by 2050, compared to the peaks in 2005-2006.

No technology is preferred in the diversified supply technologies scenario. All energy sources could compete on a market basis with no specific support measures. Decarbonisation would be driven by carbon pricing, assuming public acceptance of both nuclear and CCS.

Renewable energy systems would have a 75 per cent share of final energy consumption by 2050 and 97 per cent of electricity consumption, according to the high renewable energy sources scenario.

In the delayed CCS scenario, there would be higher shares for nuclear energy and decarbonisation would be driven by carbon prices rather than a technology push.

Only nuclear reactors currently being built would continue under the low nuclear scenario. This would result in a higher penetration of CCS (around 32 per cent in power generation by 2050).

A few things are certain. Renewable energy will be central to energy policy going forward. In addition, the price of electricity will increase between now and 2030 regardless of whether Europe goes for decarbonisation. If Europe continues with its current energy mix, the increase in the price of coal, oil and gas will drive up the price of electricity. If it decides to decarbonise, electricity prices will rise because of heavy investment and construction of new infrastructure.

Ocean energy, concentrated solar power and biofuels need more investment to bring down costs. The decarbonisation of heating and cooling requires a shift to low carbon heat pumps and storage heaters and to renewable energy sources such as solar heating, geothermal and biogas.

If CCS were available and applied at large scale, gas may become a low-carbon technology. However, without CCS, the long term role of gas may be as a flexible back-up to renewable energy supplies. For all fossil fuels, CCS will have to be applied from around 2030 onwards in order to reach the decarbonisation targets.

Energy policy will need to take full account of how each national electricity system is affected by decisions in neighbouring countries.

Cost 

While the capital costs required for investment would inevitably be high, the cost of fuel would be lower. This is due to current energy supply capacities coming to an end of their useful life and a decline in fossil fuel imports as renewables increase.
Continuing current energy policies would bring the total energy system cost to 14.6 per cent of European gross domestic product in 2050, roughly the same as the other scenarios, the roadmap states. This compares to 10.5 per cent in 2005.

Household expenditure on energy (including for transport) is likely to rise to around 16 per cent in 2030, and will decrease to 15 per cent in 2050. Likewise, small and medium-sized enterprises would be affected. Again, this would be balanced in the future by the decreased cost and need for fossil fuels.

Decarbonisation would create jobs and research is needed to develop more cost-competitive technologies. As more wind turbines and potentially unsightly pylons and storage facilities will have to be built, a “more vigorous social dialogue” is needed.
The UK Department of Energy and Climate Change welcomed the roadmap. In order for the UK to meet its 2050 targets, the electricity sector will need to decarbonise during the 2030s. It intends to implement feed-in tariffs for all low-carbon technologies, a capacity mechanism to stimulate investment in back-up power, an emissions performance standard, and (from 1 April 2013) a carbon price floor to attract investment.

Ireland’s Energy Minister Pat Rabbitte has said that the roadmap “shows the importance of a fundamental shift away from fossil fuels” and added that Ireland’s “abundance of onshore and offshore wind resources” means it is “well placed to feature prominently in the euro-wide energy sector.”

He introduced the Renewable Energy Feed-In-Tariff (REFIT 3) in February for biomass technologies and REFIT 2 in March for onshore wind, hydro and landfill gas. He has stressed the importance of having a national electricity grid that will be able to carry the wind energy at least cost and maximum efficiency. This will require the ongoing roll out of the Grid 25 programme and the delivery of the North/South transmission reinforcements and the completion of the East-West Interconnector.

Scotland is aiming high. By 2020, the Scottish Government wants 100 per cent of gross electricity consumption demand and 30 per cent of all energy to be sourced from renewables.  In practice, the 100 per cent target means the total amount of renewable electricity equalling total electricity demand.  This means over 50 per cent of all electricity coming from renewable sources, and the continued use of non-renewable sources for reserve and exports.

In 2010, 24.1 per cent of electricity demand was met by renewables. The interim target for 2011 is 31 per cent, which is thought to have been met. Energy demand is to be reduced by 12 per cent by 2020. By the end of 2009, demand had fallen by 9.6 per cent from the 2005-2007 baseline.

It is a “major challenge,” Colin Imrie says of the 100 per cent target, which will require 15GW of renewable energy (current installed capacity is 4.6GW). It will be met “partly by all the onshore wind in the system,” and the deployment of marine renewables “and offshore wind particularly.”

Implementation of “a very clear vision” for grid upgrades and for developing energy storage systems are also required to meet the target. A further challenge lies in improving consenting and planning for renewable projects. “That’s why we’ve done some work over the last few months to make sure we’re ready to speed up the system for the offshore planning as well,” Imrie explains. This means “the right type of applications in the right place” and getting various agencies to work as effectively as possible “to get the planning applications through the system.”

Imrie doesn’t deny that there is public concern in certain areas regarding renewables projects. However, Scotland’s experience is that “the projects that get through the system best” are those that have “got the communities on side, and, increasingly, are actually involving the communities in implementation of the programme.”

The current Ofgem review of transmission charging, Project TransmiT, is an important factor in Scotland’s plans. The review has initially recommended a change from the existing investment cost-related pricing methodology to one improving the accuracy of cost targeting. “The Scottish Government has been campaigning on this for a few years,” Imrie says.  This was “particularly to make sure” that exports from Scottish islands were “not made totally uneconomic by a methodology which disincentivises that investment.”

Project TrasmiT’s outcome is “absolutely crucial” in addressing the transmission costs from connection charges. “Some very major proposals,” for wind farms on the Western Isles and Shetland, and wave and tidal proposals around the Orkney islands, “fundamentally depend upon on getting these issues sorted.” Ofgem’s final recommendations are expected this spring.
Social and economic revival from the renewables ambition is already evident. “One of the encouraging things,” states Imrie, “particularly in our rural areas, is the way in which communities have been able to turn loss-making local estates in the remote areas of Scotland into areas where actually communities can control their own future.” Small hydro schemes and turbines, owned by the community, are creating income “that wasn’t there before,” bringing people back to areas “which are becoming more vibrant because they’ve got control over their energy future.”

Whiskey distilleries are already benefiting from going green. “They’re moving away from their dependence on fossil fuels to using waste and renewable energy,” he explains. He cites the Islay distilleries in the inner Hebrides. “Moving them to a renewable future, in partnership with the communities, will be a very important way of securing their long-term future.”
Whilst Scotland’s renewables targets are already ambitious, Imrie is excited by the ISLES project’s potential. “This can be an integral part of the EU’s infrastructure plan,” he says. Rather than the “far west of the Atlantic” being “on the edge of Europe,” the three jurisdictions involved could end up “at the centre of Europe.” 

NUI Galway’s environmental geology specialist Tiernan Henry discusses the reality of fracking with Owen McQuade.

It is “incumbent” on the fracking industry to be “transparent about the procedures, methodologies and techniques that they are going to use and to ensure that they use best practice from start to finish,” Tiernan Henry tells agendaNi. The Republic’s Environmental Protection Agency and the Geological Survey of Ireland, in turn, must ensure that “proper regulations are in place before any work begins” and that they are properly enforced. The Northern Ireland Environment Agency and the Geological Survey of Northern Ireland are the province’s equivalents.

Addressing a gas futures seminar, Henry pointed out that anecdotal information, mainly from the United States, is often unchecked by the proper environmental authorities and can lead to a panicked public.

Fracking is “a methodology to stimulate the production of hydrocarbons from unconventional gas resources,” Henry explains. “Essentially, it is stimulating the ground to allow gas to be taken out much more easily than it would already do if you just drilled straight into it.”

It is a growing phenomenon and is seen as increasingly important to the United States’ energy security. Unconventional gas development made up 28 per cent of US total gas production in 2008 and is predicted to be up to 60 per cent by 2035.

“Fracking is obviously an important means of accessing natural gas resources. It’s not going away [as] it’s being developed as a major way of extracting gas from the ground,” Henry notes.

Gas companies will “drill to a particular depth in the sub-surface to particular rock types  that have an established gas resource. But, because of the nature of the rock, the gas can’t move easily through the rock so it has to be stimulated … by breaking it or fracturing it.” Operators will then inject water into the rock under very high pressure. Proppants such as small sand grains are added before the water is injected. “These proppants hold the fractures open. The water is drawn back up the system and the gas follows,” he summarises.

Shale rock must contain more than 2 per cent of total organic content, be more than 40 metres thick, be between 1,000 to 3,500 metres deep, and have a surface area greater than 100 square kilometres.

Because shale is ductile, and bends rather than breaks, industry needs a “shale dominated rock” which contains clay or sand particles to make it brittle.
Concerns about the amount of water required for fracking are unnecessary, particularly in Ireland, which has a lot of rainfall.

“Per fracture, on average, the volume of water needed is 10,000 cubic metres [which is around 3-4 million gallons of water],” Henry says. “These numbers seem quite large but relatively speaking they are very small numbers.”

Putting that in perspective, he explains that the River Corrib in his native Galway, flows at approximately 100 cubic metres a second. “To take out 10,000 cubic metres would be 100 seconds of flow from the river,” he analogises. Alternatively, 10 seconds of flow could be taken out over 10 hours to make the withdrawal more gradual.

When injecting water into the well, “there are issues about [ensuring] that the water goes where you want it to go and doesn’t leak out of the well on the way down.”
Further safety measures are required when the water returns to the surface. Henry points out: “You want to ensure that the water that you pump back comes back to the surface and isn’t lost along the way. When it comes back to the surface, it needs to be stored and treated properly.”

While water generally makes up 90 per cent of the fluid pumped down the well, 9.51 per cent is proppants and 0.49 per cent additives. Additives are controversial and the type used depends on individual fracking companies.

They can include KCL (potassium chloride) which stops the clay in the shale from swelling, biocides which kill off bacteria that could clog the system, and scale inhibitors to stop the breakdown of the metal in the piping itself. The US Environmental Protection Agency has outlined a list of chemicals found in fracking fluid which runs to 25 pages.

Debate

While some irresponsible fracking companies have engendered “valid concerns about the environment”, particularly in relation to the storage of contaminated water, Henry points to a University of Texas February 2012 report which stated that “there is no conclusive evidence that hydraulic fracturing itself is a cause of problems.”

Written by the university’s energy institute, the report is called ‘Fact based regulation for environmental protection in shale gas development’. Examining the Barnett shale in Texas, the Haynesville shale in East Texas and Louisiana, and the Marcellus shale in several states in the eastern US, that report found that there is presently “little or no evidence” of groundwater contamination from hydraulic fracturing of shales at normal depths. However, the process of adding chemicals to the water occurs above ground and can result in undiluted chemicals making their way into surface or ground water.

The report also found that water quality changes observed in water wells (and often blamed by the public and the media on fracking) may be due to vibrations from the drilling process releasing chemicals such as iron and manganese. These are already present in water wells, it claims, and it is unlikely they are released from fracturing fluids or leakage from the well casing.

In conclusion, Henry believes that “the biggest issue … is communication and the quality of the debate about the merits or otherwise of the process [which has] been quite polarised to date.”

Exclusive interview with Tiernan Henry of NUI Galway from the Future of Natural Gas seminar,
27 March 2012.

Britain can learn from the Single Electricity Market’s pool system as it reforms its own electricity market, according to a senior energy economist.

David Newbery is a professor of applied economics at Cambridge University and adviser to DECC and the House of Commons on electricity market reform. He tells agendaNi: “I would urge the Republic and the Northern Ireland regulators not to throw away the good features of the market that you’ve already designed in place of an energy-only power exchange [and a] voluntary and a potentially rather small fraction of the market.”

Electricity market reform in Great Britain, he explains, is being driven by decreasing capacity.  For example, taking coal off the system by 2016 will remove 20 per cent of peak capacity and the loss of 6GW of nuclear takes away another 10 per cent.

Newbery comments: “The idea is that if we’re to meet our long-term carbon targets, new investment should be low- or zero-carbon generation, and the market design at the moment is not well-suited to support that because the price of electricity is driven by the price of fossil fuels.”  This, in turn, makes for “volatile and unpredictable” prices in the market for any nuclear or wind generator.

Secondly, the EU emissions trading system is “demonstrably inadequate to support investment in low-carbon electricity,” having been depressed by the Renewables Directive and the global financial crash.

“It’s no longer either predictable or high enough to support investment and so the solution that the British Government was led to [was] that, in order to reduce the risk and assure the market and especially new entrants, of a future revenue stream, they would provide long-term contracts.”

To make those contracts viable, for nuclear power at least, the Government aims to raise the carbon price to £30 per tonne by 2020, when the new nuclear plant is expected to be generating.  However, the carbon price floor “quite clearly presents problems unless other countries in the European Union adopt a similar method.”  While Newbery argues that this is in their fiscal and carbon interests, the European Commission “cannot mandate taxes for member states” and any new approach must be negotiated between national governments.

The carbon price floor is also the most immediate problem for the Single Electricity Market, arising out of British electricity market reform.  If Northern Ireland energy companies were to pay the carbon tax, in line with the Treasury’s insistence, while the Republic did not, cheap gas generation in the North would be disadvantaged compared to more expensive coal and gas generation in the South.  The efficiency of the Single Electricity Market (and also the trade over east-west interconnectors) would therefore be distorted.

He adds: “The most attractive and, I would have thought, fiscally most responsible solution is [that] the Republic also adopts the carbon price floor so that there’s no disadvantage between the two.”  If the Irish Government refused, he suggests that the system operator should dispatch the plant without the carbon price floor element, add that on to transactions over the Moyle and East-West interconnectors, and charge that to Northern Ireland consumers.

“The IMF will then look at the revenue that Northern Ireland is collecting and the Republic is not, and may lean heavily on the Republic to improve its fiscal situation.”

Britain’s energy policy, in his view, is too insular: “Coming from GB, I’m very struck that first of all we tend to be an island and ignore what’s going on on the continent so we’re coming lately to the targeted electricity model.”  In contrast, the SEM participants have to deal with that straightaway as they are trading between two different jurisdictions.

“So you’re well ahead in thinking through the implications of adapting to market coupling and the capacity mechanism problem,” Newbery remarks.  “We’re slowly thinking that we should worry about these.”

During his presentation at agendaNi’s seminar on developing electricity markets, Newbery explained that as energy infrastructure is capital-intensive, driving down the cost of capital and reducing risk are the key economic elements.  Price zones in the targeted electricity market create many problems “for managing an integrated and meshed transmission system.”

Any electricity investment will have a timescale of 15-60 years (depending on the source technology) and therefore involves “incredibly long-term implications for carbon emissions”.

Reducing electricity’s carbon footprint (currently around 500g/Kwh) to 100mg/Kwh by 2030 will mean almost decarbonising the whole system.  However, neither nuclear nor renewables were economic at the current emissions trading price.

The UK Committee on Climate Change’s forecast of carbon price by 2020 fell from 60 per cent of 2008 levels (at 12.5 per cent renewables) to 50 per cent when the Renewables Directive was set and 20 per cent in 2009 after the recession.

Fixing the emissions trading system also requires political intervention by 27 member states, some of which have large coal deposits.  Newbery’s own preference is a European carbon tax but, short of that, member states should be persuaded to adopt the carbon price floor as a revenue-generator.

Long-term contracts, he explained, are the central component in reform and need careful design and a “sensible commissioning body,” not the Department of Energy and Climate Change where policy staff tend to be in post for 18 months.  The feed-in tariff for wind needs to be “highly location-specific” given the varying wind strengths around Britain.  A carbon-corrected system marginal price would remove the distortions for trade between Britain and Ireland.

Policy-makers need to be cautious about “making expensive changes that may not be permanent” but the time to make decisions is running out.  He noted: “Unless we invest, we will be short of power quite soon and the one thing politicians get unbelievably nervous about is the lights going out.”

Exclusive interview with David Newbery from the Developing Electricity Markets seminar,
22 March 2012.

Hot on the heels of the ROC re-banding consultations in Great Britain, the recently published Department of Enterprise, Trade and Investment (DETI) ROC banding consultation has met with a broadly positive response in the local market.
Whilst the document is still only consultative at the time of writing this article, it does provide specific insights into a transitional regime for UK renewables, starting in April 2012 and ending in March 2017. During this period the multiples of ROCs, or bands which producers benefit from, have been tweaked.

For the majority of technologies, DETI proposes to remain consistent with the proposals in Great Britain.

The few instances where Northern Ireland proposes to differ from the rest of the United Kingdom include continued support for landfill gas at 1 ROC/MWh to 2015 and, in the absence of a feed-in-tariff for small-scale projects in Northern Ireland (up to 5 MW), continued enhanced support for small-scale technologies including onshore wind, anaerobic digestion and solar under the NIRO.

The key changes to the ROC system are that onshore wind will drop from 1 to 0.9 ROCs while offshore wind is going to have a phased drop of 0.1 ROCs per annum from April 2015, down to 1.9 ROCs for 2015-16 and 1.8 in 2016-17. Not the 0.5 slash to incentives feared.

Marine energy has received a big boost with wave energy receiving a hike from 2 ROCs to 5 ROCs for projects up to a 30 MW cap, while for facilities above that cap it will be 2 ROCs.

Tidal – which is currently 2 ROCs for all technologies – has a range of options with tidal stream having the same incentives in place as has been proposed for wave energy.

Across the board for different technologies, there is a slight drop in ROCs for waste-related and solar energy (above 5 MW) alongside broadly continued support for biomass.

Gary Connolly, Chairman of the Northern Ireland Renewables Industry Group (NIRIG), says: “The measures to support wave and tidal energy are particularly welcome and will help build a domestic market big enough to drive innovation and lower cost.
“Onshore wind is already the least expensive form of renewable energy on a mass scale and is currently providing the largest share of renewable electricity. These measures must not put its future deployment in doubt.”

The mood in the market is fairly positive with most saying that they had expected onshore wind to be more heavily impacted than by the loss of just 0.1 ROC. As to offshore wind, the consensus seems to be that the fall in the number of ROCs over the coming years matches what industry believes will be the fall in capex as the sector matures.

As to the marine energy sector, B9 Offshore Developments – which is developing the Thetis tidal scheme at Torr Head in Northern Ireland – Managing Director Michael Harper welcomed the news as a great boost for the local industry.

Harper says: “By proposing to move the ROC banding in Northern Ireland into line with the current level of 5 ROCs for wave in Scotland, DETI has given a positive signal which will incentivise inward investment in what has the potential to be a world-leading, high growth success story for Northern Ireland.”

For more information on the new banding levels proposed for Northern Ireland, please visit our website to access a recent market briefing: www.mcgrigors.com/e-bulletin/energy/eb-2011-10-31.html or contact Richard Murphy (Director, Head of Energy Group in Belfast) on
+44 (0) 28 9089 4844 or by Email at richard.murphy@mcgrigors.com

Construction of a 50-acre assembly and logistics base for DONG Energy and its partner, ScottishPower Renewables, began last year and is scheduled for completion in Quarter 4, 2012. The facility, the first bespoke terminal of its kind in the UK, represents a £50 million investment by Belfast Harbour – the largest ever in the Harbour’s 400-year history.

New dimension

Historically, the Harbour’s policy of investing to diversify brought shipbuilding and aerospace to Belfast. In the 21st Century, the Harbour is keen to do the same with offshore renewables and other Cleantech generation industry.

Industry estimates suggest that over £100 billion of investment in offshore renewable energy will be needed to achieve the UK target of 20 per cent renewable electricity by 2020; Northern Ireland’s own target is 40 per cent. This investment will provide for the construction of up to 11,000 offshore wind turbines in UK and Irish territorial waters. Even if those aims are too ambitious, Belfast Harbour Commercial Director, Joe O’Neill does not see any other industry offering “such a growth opportunity in such a time period”.

Up to a quarter of the turbines planned for British and Irish waters fall within 150 nautical miles of Belfast; that’s 2,500 turbines representing a total investment of circa £25 billion.

Sustainability

The new industry leading facility at Belfast Harbour will be leased on a long term basis to DONG Energy, the world’s most successful offshore wind developer, having built five of the world’s ten largest offshore wind farms to date. The facility will serve as DONG’s offshore logistics and assembly base for its three offshore wind farms in the Irish Sea, for which it received consents from the Crown Estate. DONG Energy also hopes to play a role in other future developments in the Irish Sea, including the soon to be licensed Northern Ireland Territorial Waters which will see a 600MW wind farm being developed off the coast of County Down.

“Developers, up to now, had only been taking one step at a time working on a project by project basis,” he comments. The sector, however, is increasingly realising that as a result of its demanding and often unique requirements, it needs to form long-term partnerships with ports and provide commitments which will enable the ports to undertake the necessary investment. “As we see it, DONG Energy was the first project developer to take the long term view and the result of this is the development of this new facility in Belfast Harbour.”

“Speed to market is one of the absolute essentials for manufacturers and developers if they are to contribute to Government meeting its renewable targets,” he comments. “Belfast Harbour was able to offer a fast-track turnkey solution for DONG Energy, benefiting as it did from its strong and positive stakeholder relationships and its ability to self-finance the £50m project entirely off its own balance sheet.

“DONG Energy recognised those key attributes, along with the Harbour’s recent track record of delivering similar large-scale investments on time and on budget. “Our ability to offer such a timely solution to DONG Energy provides a very positive backdrop for approaches to other developers and/or manufacturers as we seek to establish a marine energy cluster for Northern Ireland.”

Anchor tenant

Attracting DONG Energy gives Belfast Harbour a strong advantage marketing prospective development lands within the Harbour area, and provides an entry point for Northern Ireland companies to access the vast offshore wind supply chain. Drawing an analogy with a shopping centre, he says that the anchor tenant is in place and the harbour is now seeking to “build up all the other shops that feed into that anchor development.”

Construction of the new terminal, being carried out by Northern Ireland-based Farrans Construction, has already created 150 jobs, will take 750,000 man hours to complete and has brought demands for 1m tonnes of stone from local quarries.

Further port related opportunities in the sector lie in O&M (operations and maintenance of the offshore wind farms), and manufacturing of wind farm components be it turbines, foundations, cables and so on. The sheer size and scale of an offshore wind turbine means that this kind of manufacturing can only take place in a port side location. It is thus of great importance, that around 150 acres of land is available immediately around the DONG Energy site to accommodate spin-off industrial sites.

Other Belfast Harbour tenants have already and will continue to play a vital role in establishing Belfast and Northern Ireland’s credentials in the sector. Harland and Wolff has already diversified into offshore wind farm logistics and major component manufacturing, including foundations, tidal devices and building offshore wind farm sub-station platforms; it has a huge physical capability in its building docks, cranes and supporting land.

Belfast’s aerospace industry can provide an edge in skills for the offshore sector. Bombardier has significant experience in composites and (along with Queen’s University, the University of Ulster and Wright Bus) has established a new composite centre less than a mile from the DONG Energy site. Specialist training courses for offshore technicians will be provided at Belfast Metropolitan College’s Titanic Quarter campus.

“If we combine all of our manufacturing heritage, highly skilled resource, leading-edge research in sectors related to the offshore sector and Belfast Harbour’s capability to fast-track and deliver significant large scale developments,” he explains, “we think we’ve got a winning cluster potential here.”

Wave and tidal

Offshore wind, in itself, is not a new sector, but it promises to take off on a “phenomenal scale” as the UK develops the wind farm capacity recently licenced by the Crown Estate. In comparison, wave and tidal energy is “at an embryonic stage”, but Belfast is also well-positioned to take advantage of its growth. O’Neill points to the Northern Ireland Science Park and the excellent R&D work undertaken by Northern Ireland companies and academia.

“Belfast Harbour wants to act as a bridgehead for the renewable sector in Northern Ireland. Securing DONG Energy and ScottishPower Renewables is a major coup and something we want to build on.

“We’re already in serious discussion about a number of other, major related projects which, if they come to fruition, will really put Northern Ireland on the renewables map. It’s exactly the sort of high-value add sector Northern Ireland needs to develop to strengthen its economy. We’re on the cusp of a very exciting opportunity which could be a major boost for both Belfast Harbour and the wider economy.” he added.

Profile: Joe O’Neill

Joe O’Neill is Belfast Harbour’s Commercial Director. A biochemistry graduate from Queen’s University Belfast he started his career in the food and drink sector. After completing an MBA Joe joined Undus Limited a trading company which traded goods between Ireland and Russia. In 1997 he started at Belfast Harbour as a business development executive progressing through commercial manager and port manager posts before attaining his current position.

His interests include cycling and keeping fit.

Public facilities have long since recognised the critical role that providing a comfortable environment plays, by maintaining appropriate levels of heating, cooling, lighting and air quality within buildings – from hospitals to schools and government offices. At the same time, growing budgetary pressures and rising prices are putting a focus on reducing the cost of providing these services.

These cost and efficiency drivers necessitate the delivery of more energy services for less energy input, at a lower cost – through investment in more efficient technology, more efficient operating practices, improved controls and monitoring and management to ensure sustained benefits are delivered and to take corrective actions when they are not.

The issue of ageing and inefficient energy infrastructure can, in parallel, be a serious concern to many establishments, distracting from their core priority. A partnership with an energy services provider, whose core focus is energy efficiency and guaranteed saving reductions, can deliver these benefits. Partnership would bring security of energy provision with cost, energy and carbon savings through overall efficiencies and improvements in the site’s running costs, allowing a healthcare provider for example to concentrate on their primary goal. To illustrate, the provision of lighting, heating and cooling, while critical, is non-core, and presents an opportunity to outsource delivery.

For success, organisations need the support of energy management professionals who understand that energy efficiency can only be achieved through a full energy cycle approach with delivery know-how. For any site to do this sustainably, they need firstly to take a long-term view of their business, their site and their relationship with the energy and utilities management company they work with, as the required contracts can last anywhere between 5 and 25 years.

Securing the supply of input energies such as oil, natural gas, biomass or electricity is the first and vital step in terms of comfort and care; however, it is not the end goal. These input energies need to be transformed (e.g. converting oil into heat, electricity into cooling etc) into useable forms, distributed (for example hot water through piping networks) and then consumed at the point of customer need (radiators, light fittings etc). Efficiencies and cost savings can be made by focusing on one of these steps. However, it is through the integrated management, measurement, monitoring and targeting of the entire energy process in a co-ordinated, structured approach which delivers the maximum benefits to the establishment.

Dalkia customers benefit from:

• Operational improvements (security, availability and reliability of utilities supply, energy efficiency, risk transfer)

• Cost & financial efficiency

• Carbon reduction

To discuss what your organisation could look at towards achieving sustainable energy efficiency improvements, contact: Tony Doherty, General Manager at Dalkia Energy & Utilities Services, at 07879036270 or email infoni@dalkia.co.uk or info@dalkia.ie