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United Kingdom

Rallying call to oil and gas sectors

If Britain is to reach its modest target for wind power in 2010, the pace of offshore development needs to be stepped up dramatically. The oil and gas sector can speed things up and make significant business gains. But to be among the early winners, companies need to get into the fray now, not later, delegates at the All-Energy Opportunities Conference in Aberdeen were told

Oil and gas companies based in Scotland have been urged to act quickly to benefit from the predicted boom in offshore wind energy development. "The potential prize is huge. The challenge of climate change is global and the UK now has the chance to contribute to world-sized solutions, but against many potential competitors," UK energy minister Brian Wilson told delegates at the All-Energy Opportunities conference held in Aberdeen in late May. "Success depends on the indigenous energy companies and companies that supply them."

Inviting bids for the latest round of the Sustainable Energy research and development program, which will allocate up to £15 million from the Department of Trade and Industry (DTI) to support proposals across a range of technologies, including offshore wind, Wilson stressed the "potentially huge economic benefits" to be had in a market where global investment is growing. It is expected to grow by over £400 billion by 2010, he said. "The opportunity is now -- others will seize the advantage if we do not."

move fast

Ian Todd, director of DTI oil and gas development, agreed: "The time is right to look to other areas, particularly renewables for opportunities," he said. "The growth in demand is there for all to see, but if you want to succeed you will need to move fairly fast." Nick Goodall of the British Wind Energy Association (BWEA) added that other regions in the UK were waiting in the wings to take centre stage: "If you don't fully embrace and go for it, somebody else will."

If Ross Finnie, Scotland's environment and rural development minister, has anything to do with it then embrace the opportunity they will. "From onshore and offshore wind power to wave and tidal stream power, renewable energy presents tremendous opportunities for Scotland. We cannot and will not let these pass," he said. "We already produce some 13% of our energy needs from clean, renewable sources, and there is massive potential to expand this, to benefit everyone with a cleaner environment," he continued.

"With its history of working in difficult environments such as the North Sea in pursuit of oil and gas, Scotland is ideally placed to build its existing expertise and worldwide reputation for engineering excellence. That means jobs to provide the infrastructure for Scotland, and the chance to compete for a slice of the rapidly growing international market, which could be as much as £10 billion per year by 2010."

Scotland already has an impressive record in wind power development and renewables generally and the Scottish Executive has been more ambitious in its goals than its UK counterparts -- aiming for 18% of its electricity to come from renewable sources by 2010, compared to the UK's 10% target.

Finnie confirmed the executive's intention to go even further and said proposals will be published soon for a new target seeking 23% of Scotland's energy supply to come from renewable energy sources by 2010 and 30% or more by 2020. He even suggested that with significant grid strengthening and the introduction of the British Electricity Transmission and Trading Arrangements (BETTA) in 2004, it could be feasible for Scotland to achieve 33% or 4000 MW by 2010, or even 6000 MW by 2010. Whichever target is used, he said, two-thirds would be likely to come from wind power.

Development of offshore wind energy is seen as critical for the UK to achieve its climate change targets, but to date the offshore oil and gas industry has been slow to come on board, while issues such as policy inconsistencies, grid connection problems and low investor confidence remain. Furthermore, the lengthy process of getting a project proposal from the drawing board through planning and into the development stage has meant just one offshore plant has been completed so far in Britain -- the 4 MW at Blyth Harbour developed by Amec Border Wind using two Vestas turbines.

Time running out

By the end of 2003 there will be 80 MW thanks to Powergen Renewables' 76 MW Scroby Sands development. But as BWEA's Alison Hill pointed out, this leaves the UK needing a further 3920 MW of new offshore wind power capacity to be developed in the seven year period thereafter if its target for 4000 MW from offshore wind by 2010 is to be realised. Hill acknowledged it was a tall order: "Offshore wind energy resources have been described as unlimited, but they are severely restricted by a number of constraints and time is running out."

Hill remained optimistic, however. She is confident that the momentum of the first round of bidding -- where 18 projects were approved -- can be maintained. If all projects proceed, they will have a combined capacity of 1000 MW. It is hoped they will be installed by 2005.

Meantime, John Westwood of Douglas-Westwood Associates pointed out that its latest study suggests that 77 projects with a combined capacity of 13,000 MW are on the drawing board around the world -- a significant increase on the 21 projects identified by the energy analysts in 2001. His message was clear: the market is growing so fast that companies who do not climb aboard now will miss the boat.

The DTI is due to publish a consultation document for a second round of bids in October and the bidding process for leases is expected to take place in spring 2003. If all goes to plan the first new projects could get underway in 2005, Hill said. "One solution is proposals for consortium development, therefore size will not be a limitation," she added, suggesting projects could be several gigawatts in size.

What role oil and gas?

The question then is will the oil and gas industry play ball and will it do so in time? Gordon Shearer of Shell Renewables commented: "The reaction from the oil and gas sectors has been quieter than I expected. I have no doubt that they will come on board eventually, but when they do is another matter. They don't know enough about it yet to really consider things properly and therefore are likely to be pretty slow. Then there will be a mad rush to get in on the act."

But not everyone was confident. Tony Duffin from Future Energy Solutions suggested the UK would miss its 10% renewables by 2010 target. "My gut feeling is that we will only have 5-7% renewables by 2010," he said. "There has been a lot of hype and lots of talk about wind. What sustains businesses is projects in the ground and that is what we need." He warned against pinning all hopes on offshore wind for meeting early targets: "I am not convinced that offshore wind and oil and gas have lots in common apart from the word offshore. There are lots of strong differences."

This uncertainty is also commonplace among potential financiers, Ben Warren of Ernst and Young and Kirk Taylor of Norddeutsche Landesbank Girozentrale warned. "As far as banks are concerned offshore wind is not a proven technology," Warren said. Taylor agreed but said there is reason for optimism. "The big challenge for us all is offshore wind," he said. "There are a number of very serious issues but banks are keen to address them."

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