Wednesday, January 13, 2010

Big Wind

Even with my long experience in an industry dominated by big structures and gargantuan flows of liquids, gases and power, I was impressed by the scale of last week's announcement awarding the third round of the UK's offshore wind licensing program. The 32,000 MW of wind turbines planned for installation in the waters around Britain over the next ten years or so would match the entire onshore wind capacity of the US, to date, while delivering perhaps a quarter more energy annually, because of their larger size and access to more reliable wind. With the UK facing a significant shortfall in generation and energy output, this isn't just about responding to climate change. Yet big wind won't come cheap, and it's worth spending a few moments putting its scale and cost in perspective.

Round Three of the UK Crown Estate's offshore wind bids dwarfs both the country's 4,000 MW of existing onshore and offshore wind capacity and its first two rounds of offshore licensing. When completed, the turbines in the nine offshore zones awarded last week would generate roughly the same amount of power annually as a dozen nuclear power plants, based on a 40% capacity factor, and considerably more when the wind is blowing strongly. That's directly relevant, because Britain's aging fleet of nuclear power plants is being phased out, and by the time the first of the new offshore wind farms is done, UK nuclear generating capacity could be less than half its current level of around 11,000 MW. If proposed new reactors are delayed or never built, the UK would be down to a single nuke by 2023. It's an interesting coincidence that some of the same companies from continental Europe that participated in Round Three are also involved in the nuclear new build proposals.

Unfortunately, the retirement of the UK's nuclear fleet coincides with the decline of the North Sea gas fields that have powered Britain's shift away from coal in the last couple of decades. The amount of electricity that the Round Three turbines would generate annually is equivalent to around 2.5 billion cubic feet per day (BCFD) of natural gas run through gas turbines. That equates to 38% of the 6.6 BCFD of gas the UK produced last year, or roughly the amount by which UK gas output has declined since 2004. That makes offshore wind a significant contributor to the country's energy supplies, but not the whole answer by itself.

Nor will big wind come cheap. At a reported £3.1 million per MW, the estimated cost for the Round Three build-out comes to almost £100 billion ($161 billion at current exchange rates) not counting National Grid's estimate of £10.4 billion to connect these new wind farms to the onshore power grid. It also doesn't count the substantial subsidies involved. In the UK, those come mainly from utilities--and ultimately power customers--via a system of tradable Renewable Obligation Certificates (ROCs) issued under the country's Renewable Obligation, which is similar to the renewable portfolio standards mandated by many US states. At present, offshore wind projects can earn 2.0 ROCs per MWh generated, though that could fall back to 1.5/MWh before some of these wind farms come onstream, creating some financial uncertainty. At the recent ROC value of £45, the winners of Round Three could be earning as much as £10 billion per year ($16 billion) from the sale of ROCs to utilities needing to meet their renewable quotas. With this subsidy factored in, the cost of the UK's big wind aspirations will run well over £200 billion over the next decade.

I can't help admiring all this as an engineering feat and demonstration of will, despite the enormous cost. It's a tougher call whether the US should be pursuing something similar. The UK has fewer energy options than we do, particularly for solar energy. You don't need maps of solar irradiation to know that it's not a very sunny place, and Britain gets points for not pursuing the kind of misplaced solar mania that Germany has. And with North Sea oil & gas in decline and no big surge of shale gas waiting in the wings, combining large-scale wind with nuclear looks like a sound energy strategy. At a minimum, the UK's plans demonstrate greater seriousness in dealing with energy more realistically than the US is able to manage. We can't even seem to differentiate between domestic vs. imported oil, and we've allowed the influence of a few wealthy residents to block the first offshore US wind farm for years. Big wind, with all its limitations of intermittency and non-dispatchability, might not be the answer here, but we need big something--probably big everything--and we had better get on with it. Our continued status as a global superpower ultimately depends on it.

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