Wind&WaveCONNECT - Regensw
Wind&WaveCONNECT
Wind&WaveCONNECT MANAGEMENT • PROCUREMENT • SUPPLIERS WWW.WINDANDWAVECONNECT.CO.UK
®
ISSUE 12 DECEMBER 2013
NOV
ISSUE 12 DECEMBER 2013 £12.50
Portable Power have been building
bespoke Generators for the Oil & Gas industry for the past 14 years. Clients from all over the world have benefited from our Generator experience. NOV Portable Power are now providing their experience into the Renewables industry by
Covering Wind, Wave and Tidal
A head for heights
building a RENTAL NUI (normally unmanned CONNECTING THE WIND, WAVE & TIDAL ENERGY INDUSTRIES
Installations) Generator. The NUI generator will be located on the wind turbine platform during the construction phase until connection to the grid is complete. These 2000hr service interval Generators would require a platform visit once every 3 month for servicing, a huge cost saving on servicing materials and man hours alone. The IP56 weather proof canopy offers the best protection and eliminates unwanted downtime from adverse weather conditions .
+
Going with the flow: Tidal energy round-up Moray Firth: An offshore wind centre of the future? Working in harmony on the sea: Marine mapping
Wind Turbine Generator
with
Managing resource risk for renewables
Looking beyond strike price
Dustin Benton
Johnny Gowdy
written by
CHRIS MORGAN
CEO RES Offshore
INDUSTRY NEWS
•
HEALTH & SAFETY
written by
Green Alliance
•
LAW
•
TRAINING
Regen SW
•
ECOLOGY
•
DIRECTORY
FEATURE: SWMEP
Wave and tidal energy
Looking beyond strike price As the industry awaits the final publication of the EMR Delivery Plan and strike prices, Johnny Gowdy looks ahead at what EMR may mean for the wave and tidal sector.
Words: Johnny Gowdy Programme Director, Regen SW
30
Wind&WaveCONNECT
A
mongst the plethora of Government publications which have been released over the Summer in relation to the Electricity Market Reform (EMR), perhaps the most eagerly anticipated was the announcement in July of the proposed Contract for Difference (CfD) draft strike prices. For wave and tidal energy, the strike price is especially important since the industry has lobbied hard for a high level of subsidy to reflect the early stage of technology development and the opportunity this gives the UK to become the world-leading centre in a new global industry. The Government’s offer (£305 per MW/h on a 15-year term for projects up to 30MW) may be less than the industry wanted, but it is nevertheless a significant incentive, especially in the context of the furore around rising consumer energy costs and extreme pressure for government to reduce the perceived burden of ‘green levies’. Interestingly, the UK strike price is significantly higher than the tariff for tidal energy recently announced by the French Government, although their market support mechanism was accompanied by a large programme of capital grants totalling €120m for the first 80MW. It will be interesting to see whether the French or UK package has the bigger draw for industry investors – higher revenue support or a strong tranche of capital funding. The strike price is not yet a done deal – the consultation ended on 25th September and we await the final tally
– but already the marine energy industry is beginning to think about what this means and how the workings of the CfD may impact on the all-important first array projects. In September, Regen SW held an industry workshop at Osborne Clark’s offices to look at the detail of the EMR. This workshop threw up a lot of gnarly issues related to the allocation of contracts, market reference price, impact on power purchase agreements (PPAs) and a number other concepts such as ‘significant financial commitment’ and ‘commissioning windows’ which we will no doubt become very familiar with.
Given that projects are already constrained by the 30MW project limit, there is a good argument that a further control mechanism is unnecessary. Stepping back from the detail, it is worth keeping in mind that the new CfD framework is intended to reduce project risk and to provide a more stable basis to encourage future investment. According to most industry commentators, the CfD mechanism could achieve this, and for the industry as a whole this should be a major step forward.
For new technologies however there are a number of key questions that need to be resolved: What happens if we get into a constrained allocation (auction) process with technologies competing for a slice of the available funding within the Levy Control Framework (LCF)? and What happens to the strike price after the current delivery plan period which extends to 2019? And also what happens when we eventually get to projects greater than 30MW?
Constrained allocation (auctions) could kill off new technologies A constrained allocation process will be triggered if the projected energy generation is likely to exceed the total subsidy available for low carbon technologies, as determined by the LCF. The LCF is set to rise from £3.3bn in 2014/15 to £7.6bn by 2020 – that’s a big number and will have a direct impact on consumer energy bills. We should consider however that this includes existing capacity funded by ROCs and FIT, and as of 8th August, 57 projects amounting to 18GW have already submitted proposals to take a slice of the LCF under the go-early Final Investment Decision (FID) Enabling scheme. So it is possible, perhaps even likely, that we will be in a constrained allocation process before the end of the current EMR delivery plan period.
WWW.THECONNECTSERIES.CO.UK
FEATURE: SWMEP Levy Control Framework and Draft CfD Strike Prices Levy Control Framework – Upper limits on spend (£m) (2011/12 prices) 2014/15
2015/16
2016/17
2017/18
2018/19
2019/20
2020/21
3,300
4,300
4,900
5,600
6,450
7,000
7,600
Draft strike prices (£/MWh) (2012 prices)
Renewable technology 2014/15
2015/16
2016/17
2017/18
2018/19
Potential 2020 Deployment Sensitivities (subject to VfM and cost reduction) (GW)
Advanced Conversion Technologies (with or without CHP)
155
155
150
140
135
c. 0.3
Anaerobic Digestion (with or without CHP)
145
145
145
140
135
c. 0.2
Biomass Conversion
105
105
105
105
105
1.2 – 4
Dedicated Biomass (with CHP)
120
120
120
120
120
c. 0.3
Energy from Waste (with CHP)
90
90
90
90
90
c. 0.5
125
120
120
120
120
< 0.1
Hydro
95
95
95
95
95
c. 1.7
Landfill Gas
65
65
65
65
65
c. 0.9
Offshore Wind
155
155
150
140
135
8 – 16
Onshore Wind
100
100
100
95
95
9 – 12
85
85
85
85
85
c. 0.2
Large Solar Photo-Voltaic
125
125
120
115
110
2.4 – 3.2
Tidal Stream
305
305
305
305
305
Wave
305
305
305
305
305
Geothermal (with or without CHP)
Sewage Gas
At face value, a blind auction process, red in tooth and claw, would spell the end for new higher-cost technologies such as wave and tidal energy. This is not the Government’s intention, so there is general agreement that a means needs to be found to exclude, or otherwise protect, new technologies from such an outcome.
From £305MW/h one assumes the only way is down, the question is how far and how fast. This could be done giving new technologies a guaranteed allocation within the LCF, but this would risk creating an artificial cap on the number of projects which can be financed and could in consequence lead to all sorts of shenanigans and gaming by project developers trying to grab some LCF pie. It would be better for marine energy to be excluded from the allocation process altogether – and given that projects are already constrained by the 30MW project limit, there is a good argument that a further control mechanism is unnecessary.
WWW.THECONNECTSERIES.CO.UK
Uncertainty beyond 2019 needs to be resolved but this will only happen when we have a better understanding of future costs The industry has rightly highlighted that the uncertainty beyond 2019, and the potential cliff-edge drop in market support, is a major barrier for long-term investment. Indeed, the high strike price that marine energy has secured has paradoxically heightened the cliff; from £305MW/h one assumes the only way is down, the question is how far and how fast. The job and export potential from marine energy is fantastic and so the industry would like to see a sensible ‘glide path’, a steady progression in-line with the cost reduction curve, rather than time-boxed budgets. But we need to accept that there is also frustration within government, both with the speed of deployment to date and the lack of clarity on, and some might say commitment to, a cost reduction timetable. This is a difficult area: a rapid cost reduction is possible but really the early focus is still to prove the technology and guarantee performance. So there is going to have to be an open and honest dialogue between industry and government about what can be
achieved and what the energy consumer can afford. Of course this will be a lot easier once we get more technology in the water and can point to the success of early projects.
c. 0.1
Images: © mark bond fotolia.com
The industry would like to see a sensible ‘glide path’ – a steady progression in line with the cost reduction curve, rather than timeboxed budgets. Regen SW continues to work with its partners in industry, communities, LEPs, local authorities and the region’s universities to unlock the potential of the renewable energy sector. For more information please visit www.regensw.co.uk. To find out more about the South West Marine Energy Park please download the prospectus from www.regensw.co.uk/projects/ offshore-renewables
Wind&WaveCONNECT
31
Wind&WaveCONNECT MANAGEMENT • PROCUREMENT • SUPPLIERS WWW.WINDANDWAVECONNECT.CO.UK
®
ISSUE 12 DECEMBER 2013
NOV
ISSUE 12 DECEMBER 2013 £12.50
Portable Power have been building
bespoke Generators for the Oil & Gas industry for the past 14 years. Clients from all over the world have benefited from our Generator experience. NOV Portable Power are now providing their experience into the Renewables industry by
Covering Wind, Wave and Tidal
A head for heights
building a RENTAL NUI (normally unmanned CONNECTING THE WIND, WAVE & TIDAL ENERGY INDUSTRIES
Installations) Generator. The NUI generator will be located on the wind turbine platform during the construction phase until connection to the grid is complete. These 2000hr service interval Generators would require a platform visit once every 3 month for servicing, a huge cost saving on servicing materials and man hours alone. The IP56 weather proof canopy offers the best protection and eliminates unwanted downtime from adverse weather conditions .
+
Going with the flow: Tidal energy round-up Moray Firth: An offshore wind centre of the future? Working in harmony on the sea: Marine mapping
Wind Turbine Generator
with
Managing resource risk for renewables
Looking beyond strike price
Dustin Benton
Johnny Gowdy
written by
CHRIS MORGAN
CEO RES Offshore
INDUSTRY NEWS
•
HEALTH & SAFETY
written by
Green Alliance
•
LAW
•
TRAINING
Regen SW
•
ECOLOGY
•
DIRECTORY
FEATURE: SWMEP
Wave and tidal energy
Looking beyond strike price As the industry awaits the final publication of the EMR Delivery Plan and strike prices, Johnny Gowdy looks ahead at what EMR may mean for the wave and tidal sector.
Words: Johnny Gowdy Programme Director, Regen SW
30
Wind&WaveCONNECT
A
mongst the plethora of Government publications which have been released over the Summer in relation to the Electricity Market Reform (EMR), perhaps the most eagerly anticipated was the announcement in July of the proposed Contract for Difference (CfD) draft strike prices. For wave and tidal energy, the strike price is especially important since the industry has lobbied hard for a high level of subsidy to reflect the early stage of technology development and the opportunity this gives the UK to become the world-leading centre in a new global industry. The Government’s offer (£305 per MW/h on a 15-year term for projects up to 30MW) may be less than the industry wanted, but it is nevertheless a significant incentive, especially in the context of the furore around rising consumer energy costs and extreme pressure for government to reduce the perceived burden of ‘green levies’. Interestingly, the UK strike price is significantly higher than the tariff for tidal energy recently announced by the French Government, although their market support mechanism was accompanied by a large programme of capital grants totalling €120m for the first 80MW. It will be interesting to see whether the French or UK package has the bigger draw for industry investors – higher revenue support or a strong tranche of capital funding. The strike price is not yet a done deal – the consultation ended on 25th September and we await the final tally
– but already the marine energy industry is beginning to think about what this means and how the workings of the CfD may impact on the all-important first array projects. In September, Regen SW held an industry workshop at Osborne Clark’s offices to look at the detail of the EMR. This workshop threw up a lot of gnarly issues related to the allocation of contracts, market reference price, impact on power purchase agreements (PPAs) and a number other concepts such as ‘significant financial commitment’ and ‘commissioning windows’ which we will no doubt become very familiar with.
Given that projects are already constrained by the 30MW project limit, there is a good argument that a further control mechanism is unnecessary. Stepping back from the detail, it is worth keeping in mind that the new CfD framework is intended to reduce project risk and to provide a more stable basis to encourage future investment. According to most industry commentators, the CfD mechanism could achieve this, and for the industry as a whole this should be a major step forward.
For new technologies however there are a number of key questions that need to be resolved: What happens if we get into a constrained allocation (auction) process with technologies competing for a slice of the available funding within the Levy Control Framework (LCF)? and What happens to the strike price after the current delivery plan period which extends to 2019? And also what happens when we eventually get to projects greater than 30MW?
Constrained allocation (auctions) could kill off new technologies A constrained allocation process will be triggered if the projected energy generation is likely to exceed the total subsidy available for low carbon technologies, as determined by the LCF. The LCF is set to rise from £3.3bn in 2014/15 to £7.6bn by 2020 – that’s a big number and will have a direct impact on consumer energy bills. We should consider however that this includes existing capacity funded by ROCs and FIT, and as of 8th August, 57 projects amounting to 18GW have already submitted proposals to take a slice of the LCF under the go-early Final Investment Decision (FID) Enabling scheme. So it is possible, perhaps even likely, that we will be in a constrained allocation process before the end of the current EMR delivery plan period.
WWW.THECONNECTSERIES.CO.UK
FEATURE: SWMEP Levy Control Framework and Draft CfD Strike Prices Levy Control Framework – Upper limits on spend (£m) (2011/12 prices) 2014/15
2015/16
2016/17
2017/18
2018/19
2019/20
2020/21
3,300
4,300
4,900
5,600
6,450
7,000
7,600
Draft strike prices (£/MWh) (2012 prices)
Renewable technology 2014/15
2015/16
2016/17
2017/18
2018/19
Potential 2020 Deployment Sensitivities (subject to VfM and cost reduction) (GW)
Advanced Conversion Technologies (with or without CHP)
155
155
150
140
135
c. 0.3
Anaerobic Digestion (with or without CHP)
145
145
145
140
135
c. 0.2
Biomass Conversion
105
105
105
105
105
1.2 – 4
Dedicated Biomass (with CHP)
120
120
120
120
120
c. 0.3
Energy from Waste (with CHP)
90
90
90
90
90
c. 0.5
125
120
120
120
120
< 0.1
Hydro
95
95
95
95
95
c. 1.7
Landfill Gas
65
65
65
65
65
c. 0.9
Offshore Wind
155
155
150
140
135
8 – 16
Onshore Wind
100
100
100
95
95
9 – 12
85
85
85
85
85
c. 0.2
Large Solar Photo-Voltaic
125
125
120
115
110
2.4 – 3.2
Tidal Stream
305
305
305
305
305
Wave
305
305
305
305
305
Geothermal (with or without CHP)
Sewage Gas
At face value, a blind auction process, red in tooth and claw, would spell the end for new higher-cost technologies such as wave and tidal energy. This is not the Government’s intention, so there is general agreement that a means needs to be found to exclude, or otherwise protect, new technologies from such an outcome.
From £305MW/h one assumes the only way is down, the question is how far and how fast. This could be done giving new technologies a guaranteed allocation within the LCF, but this would risk creating an artificial cap on the number of projects which can be financed and could in consequence lead to all sorts of shenanigans and gaming by project developers trying to grab some LCF pie. It would be better for marine energy to be excluded from the allocation process altogether – and given that projects are already constrained by the 30MW project limit, there is a good argument that a further control mechanism is unnecessary.
WWW.THECONNECTSERIES.CO.UK
Uncertainty beyond 2019 needs to be resolved but this will only happen when we have a better understanding of future costs The industry has rightly highlighted that the uncertainty beyond 2019, and the potential cliff-edge drop in market support, is a major barrier for long-term investment. Indeed, the high strike price that marine energy has secured has paradoxically heightened the cliff; from £305MW/h one assumes the only way is down, the question is how far and how fast. The job and export potential from marine energy is fantastic and so the industry would like to see a sensible ‘glide path’, a steady progression in-line with the cost reduction curve, rather than time-boxed budgets. But we need to accept that there is also frustration within government, both with the speed of deployment to date and the lack of clarity on, and some might say commitment to, a cost reduction timetable. This is a difficult area: a rapid cost reduction is possible but really the early focus is still to prove the technology and guarantee performance. So there is going to have to be an open and honest dialogue between industry and government about what can be
achieved and what the energy consumer can afford. Of course this will be a lot easier once we get more technology in the water and can point to the success of early projects.
c. 0.1
Images: © mark bond fotolia.com
The industry would like to see a sensible ‘glide path’ – a steady progression in line with the cost reduction curve, rather than timeboxed budgets. Regen SW continues to work with its partners in industry, communities, LEPs, local authorities and the region’s universities to unlock the potential of the renewable energy sector. For more information please visit www.regensw.co.uk. To find out more about the South West Marine Energy Park please download the prospectus from www.regensw.co.uk/projects/ offshore-renewables
Wind&WaveCONNECT
31
