Fair weather ahead

Christian Egal, CEO of EDF Energy Renewables, and Christian Kjaer of the European Wind Energy Association tell Huw Thomas that the forecast for wind energy is extremely good.

“Each wind turbine has a rotor diameter of 126 metres”

When EDF Energy and EDF Energy Nouvelles announced their partnership to form EDF Energy Renewables in June 2008 it underlined a growing consensus that the industry needs to get serious about developing alternative power sources. Furthermore, the new company’s establishment in the UK reflects the country’s massive potential as a generator of wind energy.

As an island nation, the surrounding seas offer access to one of the most abundant supplies of reliable wind anywhere in the world. When we meet up with CEO Christian Egal in EDF’s central London office, the UK’s suitability is something he is extremely keen to stress. “Renewable energy is growing everywhere in the world. But in this country the mix is different,” he says. “Wind energy has had huge growth for five years, but what is specific to the UK is that Great Britain is an island so we can take advantage of this location with all the renewable energy linked to the sea.  Offshore wind is definitely the main renewables potential in the UK, as well as wave and tidal energies, which are as well very promising. But those are still at the latest development phase.”

Plans for UK wind energy can only be described as ambitious. There is currently about 8GW of installed or planned capacity in place. The UK government’s strategic energy assessment recently reported that British seas could eventually supply a further 25GW of power, enough to serve the needs of all the country’s homes. But while there exist tremendous possibilities, actually realising them will require a great degree of effort. “It's a huge challenge,” Egal agrees. “Nobody has ever built a wind farm 100 kilometres off the coast in the North Sea. It will be difficult but what is absolutely fantastic in this business is that everybody is very confident in the capability of the supply chain and the players to deliver.”

Obviously, the costs associated with such a huge project present difficulties of their own. Installing turbines that far off the coast, even in the comparatively shallow North Sea, is a far more logistically trying operation than sitting them onshore. Farm sites are picked for their exposure to wind, which means they must be built in often very difficult conditions. Building offshore takes twice as long and costs twice as much as a similar project on land. But according to Egal, the UK Crown Estate’s plans are helping to mitigate this problem by targeting huge capacity. This encourages all the major players to get involved and creates significant economies of scale. “If you were to put one turbine in the North Sea, it would never happen,” Egal says. “If you want to put 500 or 1000 wind turbines there, that is much more achievable.”

Building the wind farms is far from being the only challenge. Getting the power they generate to where it is needed also requires some new thinking. “One of the other challenges is the grid,” Egal continues. “How to connect it has to be a large scale approach rather than an individual approach for a single wind farm. Maybe in the long-term perspective it will be a European approach because if we build a wind farm for the UK In the North Sea, it could also be connected to Sweden or Denmark. Maybe we’ll see in the next decades a power grid all over Europe, based on offshore wind farms located all over the seas?”

This vision of an integrated European power infrastructure is one that crops up regularly in talks with those in the industry. Given the speed and efficiency that normally characterises major pan-European projects, you would be forgiven for thinking such a future remains a long way off. While Egal concedes that it remains a huge undertaking, his confidence that it is achievable is infectious. As far as he is concerned, renewable energy, and specifically wind, is an idea whose time has come. “Its very exciting,” he says. “Wind energy is the most dynamic industry all over the world, even in this very tricky period it is still growing.”

Counting the cost

While there is no argument that Europe desperately needs new sources of power if it is to remain successful, critics of renewable energy contend that it is simply not cost effective without massive government subsidies. So can renewables ever offer value for money?

“It's a complex approach,” Egal admits. “Renewable energy all across the world is still supported by public subsidy. The schemes that the countries select are different. The Renewables Obligation Certification (ROC) mechanism is specific in the UK, but in every country there are mechanisms that make renewable investment possible. Because of the current energy market there is no possibility to make a renewable asset profitable. We are not far away, not at all. For example, last year, when the market price was not particularly high, it was at the level where it was much higher than the cost of renewable energy. But to make the operator decide on the investment they need a certain level of visibility on the long-term. So all renewable energies are, lets say, incentivized by public schemes, which make the investment possible.

"The principle of renewable energy is that it starts from public, government willingness, worldwide European and country willingness to do it, and each country provides to the operators the appropriate scheme to make it happen. So is the mechanism proposed to the operator in the UK enough to be profitable? Yes. If it was no, there wouldn’t be any capacity, so it is profitable. Of course, there are some projects that are more profitable than others, and it’s down to a professional approach to make the difference.”

While this makes a certain amount of sense, it doesn’t answer the question of whether renewable energy will ever be able to stand on its own two feet. The current system allows the power companies to stay in the black, but only on the back of government and consumer support. Will renewable energy ever be able to compete on a level playing field? “I would say yes,” replies Egal. “The ROC mechanism is providing some additional revenues to renewable energy up to a certain level of achievement. If the global target is reached, the ROC mechanism will stop. Currently the principle is the target is to achieve nine percent of power from renewables. The actual value is four percent. So the ROC mechanism is there to incentivize the utilities to deliver some renewable energy up to certain level of achievement and when the end target is reached, the public support will stop. It’s logical.”

It is only natural that renewable energy is initially going to cost more than more traditional sources of power. While coal and gas have a massive installed base, wind and the like are effectively starting from scratch. If we are serious about our commitment to getting more and more of our energy from renewable sources, these short-term costs are something that we will just have to bear. In any case, as traditional sources such as oil and gas start to dwindle and become harder to access, the market may make renewable energy considerably more competitive.

Unfortunately the current economic climate is particularly unfriendly. Sources of funding are tight and in many areas there seems little appetite for any investment that isn’t going to quickly bring big returns. Nonetheless, Egal is clear that EDF Energy Renewables remains on track to hit its targets. “It does have some impact, but more on the short-term period,” he says.

“We have to deliver a gigawatt by 2012, so we have to be very attentive to the whole capability to invest in this wind farm in this difficult period. If we speak about the next phase to deliver even by 2015 or 2020, it’s another story. That will require a huge amount of money, but we can hope that it will be after the crisis that we are facing now. I am not saying it will be easy, it will be billions and billions of euros to invest in these facilities. As you know EDF as a whole has some other projects as well, so it is challenging.”

Further alternatives

Though EDF Energy Renewables’ principal focus is on wind power, due to its comparative maturity and the UK’s geographical suitability, it is also exploring other potential avenues. “We are looking at wave and tidal technologies, which are not as mature as wind energy, even offshore.” Says Egal. “We rely on the R&D department within EDF, we are looking at wave technologies as well. We are very attentive and we are following feedback on this work. Our business is to invest in modern technologies with good profitability, so it could happen in the next two or three years.” Solar power also remains in contention. Though the UK isn’t known for its warm weather, solar energy’s success in the not particularly sunny Germany demonstrates that, as technology improves and becomes less expensive, it does have a part to play in Europe’s renewable future.

But from a UK perspective, it is wind that is going to provide the big gains. Wind is one of the most well-established renewable energy sources and has developed rapidly over the past few decades. “Wind technologies are improving every year,” Egal confirms. “It is amazing because we have now some that are 160 meters in diameter that generate 6MW. If you look at a wind turbine only 20 years ago, they were only 15 or so metres in diameter and generated only 50KW. Who would’ve imagined 10 years ago that we could build and install some 6MW wind turbine? As an example, EDF Energy Nouvelles, part of EDF Energy Group, has stakes with other partners in a wind farm of 30MW capacity with just six wind turbines. It is based 30 kilometres offshore and each wind turbine has a rotor diameter of 126 meters.”

And the technology is still developing. Egal tells us about projects working towards turbines able to produce 10MW and turbines based on floating platforms that can exploit the wind in deep-sea locations. With the huge capacity of today’s turbines it is not technology that is holding the more widespread adoption of wind power back. Rather it is outside factors that limit its large-scale implementation. The aforementioned issues with the grid are a major stumbling block, the lack of high power transmission lines making it extremely difficult to get energy from the remote areas where it is generated to the urban centres where it is most needed.

Additionally, the UK planning process can throw plenty of obstacles in the path of speedy expansion. “To develop wind energy is really a very long-track with a lot of hurdles and particularly in this country,” Egal confirms. “The planning system is very long-track, but I think it more or less always happens. And if we have an ambitious target, within a certain amount of time, you have to take into account certain difficulties. But I would rather have a slow planning process where you generally get permission rather than a quick one where you do not.”

On the whole though, Egal seems optimistic about the potential for wind and other renewable energy, both in the UK and across the world. “When we look at the overall capacity we have 120,000MW installed all over the world,” he says. “Last year, for example, we installed more wind energy than gas or coal. Wind energy has developed more in European countries and the US than in developing countries, but if you look at the possibility of wind farms in China for example, there is no limit.”

That is not to say we should expect to see a major uptake of renewable energy in the developing world all that soon. Egal sees it as a responsibility of those in more affluent nations to keep working on the problem until it can become affordable for everybody. “I think the fair approach has been taken by the European countries but renewables remain more expensive than coal, gas and so on,” he says. “European countries and the US are paying to make these technologies as profitable as the other technologies in the near future.

"Can we really ask the developing counties to pay for these technologies? I don't think so, and I think we recognize that and that we have to pay this premium. Climate change, which is the basis of these developments, has given us huge responsibilities across Europe, so I think it is very fair approach for us to pay for the first stages of the development and allow others to take advantage of these developments when it is more financially viable. In terms of the possibility to implement wind energy in these countries, it could happen very quickly. It’s just about timing.”

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The European Union has set a binding target of 20 percent of its energy supply to come from wind and other renewable sources by 2020. In order to achieve this 20 percent energy target, more than one-third of the European electrical demand would have to come from renewables, with wind power expected to deliver 12-14 percent. So how realistic is this target? Well, Christian Kjaer, Chief Executive of the European Wind Energy Association (EWEA) believes that this is completely possible.

“To reach the targets set out by the European union we would have to increase total wind power capacity in Europe by 9.5 gigawatts per year over the next 12 years. Given that we increased wind power capacity by 8.5 gigawatts last year, it’s not an ambitious aspiration,” he explains. It is quite clear that wind energy will take the lion’s share of the energy target that the European Union has set, but the target also calls for hydro resources and biomass to be fully utilized. “I would say it’s certainly achievable to reach 20 percent renewables although whether we meet the projections for biomass remains to be seen. It’s all down to how effectively the members are going to implement renewables – that’s the big question mark,” adds Kjaer. 

While it is widely believed that the development of wind energy across Europe is limited by existing power infrastructure Kjaer believes that this is not a hugely limiting factor in regard to the physical grid. “We do have some restrictions if we look at certain regions of Europe. There are regions in Spain where you get 40-50 percent of the electricity coming from wind, so there are certainly limitations on how much you can expand there unless you do something with the internal infrastructure of the grid itself,” he explains.

Challenges

So, challenges do remain in terms of how the grid is operated. Kjaer believes that it is vital to start putting together plans that allow investors to invest in new infrastructure, as projects take an extended amount of time to get on track. “We certainly need to change operations and look at the way we operate our grid if we want to meet the 2020 renewable target. There is no question that the biggest challenge over the next 10 years is grid infrastructure. The grid is already a limiting factor because of course we don’t have electricity infrastructure offshore. We need to start planning to prevent this becoming a challenge in the future,” says Kjaer.

“In short there are limitations, certainly offshore with the lack of grid, but we need to stop and put in place measures that concentrate on companies investing and building in the sector. There are some institutional problems with this, such as a lack of funding, but we simply haven’t invested enough in our infrastructure for decades now and that needs to change if we want to make a dramatic change in the way we get our energy in the future.”

While offshore wind is more expensive due to the sky-high costs of foundations and the grid that needs to be built offshore, it will always provide a larger wind resource. Kjaer hopes that as more economies of scale are introduced to the system and that wind turbines are mass-produced, offshore will be recognised for the stronger resource that it is.

“The offshore market in Europe is more or less at the level that we were in 1992 and 1993 onshore, so we haven’t even come close to reaping the benefits and getting the cost reductions down in the same way as onshore in the last 20 years,” he says. “In order to do that we need economies of scale and that’s why it’s so important that you have some companies that are focusing very heavily on this, including in the UK, Germany and Norway, as well as France. But again offshore infrastructure is a much more imminent issue to solve compared to onshore because there aren’t any grids.”

Kjaer goes on to explain that the benefit of improving offshore grids is that it is possible to build interconnections between countries that means it would be possible to improve the electricity and tracing of electricity over the borders of Europe, giving consumers the cheapest electricity possible. By planning infrastructure investment it will benefit in terms of maximising the exchange between various member states as well as putting the infrastructure where there are offshore wind resources or weight power resources and improve the functioning of the internal electricity market while meeting targets for renewables.

“What we do in terms of offshore infrastructure is extremely important, and here we are in need of faster action than onshore in terms of new infrastructure. We need to figure out structures that allow us to make smart plans in how we build electricity infrastructure offshore at a bilateral or regional country level. It’s very much a similar challenge that we’re standing in front of as when we were building the oil and gas infrastructure. We would like for that planning to be a bit more international in nature, and a bit more co-ordinated among individual European countries than we saw with oil and gas because it makes sense in terms of electricity markets.”

There is no doubt that grid infrastructure is going to be the most important issue to work on in the next decade, along with the development of the power market and a much higher degree of interconnection between the European member states. While it will be possible to learn something from the onshore infrastructure for increasing offshore wind farms particularly around grid development, Kjaer believes that from an infrastructure perspective we in Europe have never much cared about what happens on the other side of the border, which means it may well be harder to do so this time around.

“Don’t repeat what we’ve done onshore because there needs to be co-operation in terms of infrastructure planning,” advises Kjaer. “Let’s not repeat the nationalistic approach that we have taken on for the last 100 years of onshore when we planned grids. Instead it’s even more important that we co-operate as the benefits of offshore are that much higher.”

Power generation

As Europe looks to expand both onshore and offshore wind generation capacity it becomes clear that wind alone cannot be responsible for all of our power generation because of the variable nature of wind power. So how exact a proportion of European energy can be realistically generated by wind? Kjaer believes it depends on how big an integrated power system it is possible to construct, so the amount of wind energy put into the system at a European level depends on how integrated the European grid system turns out to be.

Of course the bigger the geographical area, the more firm power is generated from wind energy so there is a huge benefit in the geographical dispersion of wind energy. However, in order to get that geographical dispersion it means that the grid has to have the same sort of dimensions, which is why interconnections are so valuable because a more interconnected grid means that variability becomes irrelevant. “This is why we believe that the infrastructure is so important, and it’s not only about integrating wind energy but also about improving competition in the electricity market.”

Kjaer goes on to say that while no-one is suggesting that wind energy should provide 100 percent of all European Union power, but rather if it was well integrated and utilised it could have a large segment of the electricity market. “If we used the enormous hydro resources that we have in Norway or Sweden for example, which complements wind energy extremely well, I have no doubt that we can have a system based on 100 percent renewable electricity, be it biomass, wind, large hydro, small hydro or geothermal, but it requires a complete change in our way of thinking about operating systems and requires that we start utilizing that.”

Indeed, Kjaer believes that there are no technical barriers to wind energy producing 25-40 percent of Europe’s electricity. He highlights Denmark as having plans to use wind power alone to generate 50 percent of its electricity by 2020, and of course if that’s possible in a small geographical area like Denmark why shouldn’t it be possible Europe wide. “In reality there are no technical barriers to having half of Europe’s electricity supplied by wind energy, but that will be beyond 2020, when we expect to be on target and see between 14 and 19 percent of our energy coming from here. By 2030 I see wind energy will provide at least a quarter of our electricity and I think there’s still quite a long way to go in terms of increasing wind energies,” explains Kjaer.

Progress

In terms of moving forward, Kjaer explains that the key projects currently underway in the European wind energy space are extremely interesting and that the sector is learning a great deal from these developments. He also points to Eastern Europe as an interesting area, with Romania, Bulgaria and Poland in particular getting serious about renewable energy. “The speed at which the conditions have been put in place to attract investors in great,” says Kjaer. “It’s interesting to see how these countries have approached the whole debate about the renewables directive, putting in place measures in terms of grid access and payment frameworks.”

So how does Kjaer envisage the wind energy space progressing in the future as Europe reaches its 2020 deadline? “It’s a truly interesting time,” replies Kjaer, “because we have come from a past in which we actually didn’t need more new electricity generating capacity. We actually had excess capacity until a few years ago, which is no longer the case because we are shutting down old power plants and have to build new ones. What the European Commission are saying is that between now and 2020 we have to build approximately 350,000 megawatts of new electricity generating capacity, which is equal to 50 percent of all capacity that’s currently running in the European Union.”

Kjaer explains that the interesting element over the next 12 years will be seeing where that capacity will come from – where wind will be in relation to its main competitors in terms of new electricity generating capacity. “If we look at investments over the last 10 years, Europe has really been investing in wind power and gas, and I think it will be really interesting to see how wind energy compares in terms of cost with building a new gas fired power plant,” he says. Kjaer sees three elements that are very much in wind energy’s favour.

"Firstly is that it is quicker to build a wind farm than a new coal or gas fired power plant. Second is the fact that from 2013 coal and gas power plants will have to pay for every ton of CO2 that is emitted. And third is that with a coal or gas fired plant it is vital to take into account future fuel prices in order to understand the cost of operations. “One of the main benefits of wind power is that the cost of carbon and fuel prices will be zero over the next 20 years of operation, whereas you can’t guarantee that for coal and gas fired plants, you just don’t know what fuel and carbon prices will be.

“The competition over the next 12 years will be who gets to build those 350,000 megawatts that we need in the European Union and it will be between coal, gas and wind energy and with the current outlook for fuel prices, wind energy looks like an increasingly attractive investment.”