Also in this issue: Effecting change – the case for a UK national energy agency
Underinvestment in energy hinders sustainable development
Offshore renewables hold the key to post-COVID recovery
The magazine for energy professionals
February 2021
Energy transition Reducing emissions Adding storage at wind farms to increase generation flexibility Magazine of the
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NUMBER 500 Email e: eworld@energyinst.org NUMBER 500 Editor Steve Hodgson Email t/f: +44 (0)1298 77601 t: +44 (0)1298 77601 e: eworld@energyinst.org e: stevehodgson@btinternet.com shodgson@energyinst.org Editor Deputy Editor Assistant Editor Steve Hodgson Jennifer Johnson t: +44 (0)1298 77601 t: +44 (0)20 7467 7152 Flexible energy e: shodgson@energyinst.org e: jjohnson@energyinst.org Assistant Editor Production Officer Digital & Video Content Officer Jennifer Johnson Yvonne Laas Elliot Tawney t: +44 (0)20 7467 7152 Flexible energy t: +44 (0)20 7467 7117 e: etawney@energyinst.org e: jjohnson@energyinst.org e: ylaas@energyinst.org General enquiries Digital & Video Content Officer General enquires t: +44 (0)20 7467 7100 Elliot Tawney t: +44 (0)20 7467 7100 e: info@energyinst.org e: etawney@energyinst.org e: info@energyinst.org Advertising General enquiries Advertising For advertising opportunities t: +44 (0)20 7467 7100 For advertising opportunities please contact Alexander Bassey or e: info@energyinst.org please Kirby contact: Patrick Lynn, Simon Redactive Media e: advertising@energyinst.org Advertising t: +44 (0)20 7880 7614 For advertising opportunities Magazine subscriptions e: patrick.lynn@redactive.co.uk please contact Alexander Bassey or e: info@energyinst.org Simon Kirby Magazine subscriptions e: advertising@energyinst.org Membership Chris Baker MEI For all membership enquiries please t: +44 (0)20subscriptions 7467 7114 Magazine contact e: membership@energyinst.org f: (0)20 7255 1472 e:+44 info@energyinst.org or visit www.energyinst.org e: cbaker@energyinst.org Membership Membership For all membership enquiries please For all membership enquiries please contact e: membership@energyinst.org contact e: membership@energyinst.org or visit www.energyinst.org or visit www.energyinst.org
Contents Contents Also in this issue:
Effecting change – the case for a UK national energy agency
Underinvestment in energy hinders sustainable development
Offshore renewables hold the key to post-COVID recovery
The magazine for energy professionals
February 2021
Also in this issue: Effecting change – the case for a UK national energy agency
Underinvestment in energy hinders sustainable development
Offshore renewables hold the key to post-COVID recovery
The magazine for energy professionals
February 2021
Energy transition Reducing emissions Adding storage at wind farms to increase generation flexibility Magazine of the
Energy transition Reducing emissions Adding storage at wind farms to increase generation flexibility
Front cover This wind farm with energy storage will have Front cover aThis solar component wind farm added this year. with energy See pagewill 14 have storage onwards for a solar component stories of the added this year. energy transition. See page 14 onwards for Photo: ScottishPower stories of the Renewables energy transition. Photo: ScottishPower Renewables
News & regulars Magazine of the
From the editor News & regulars
2
3 International update 2 From the editor 7 Viewpoint 3 International update 8 UK update 7 Viewpoint 12 EI news 8 UK update See also online… 12 news Don'tEIforget to read our sister publication,
Petroleum Review, which this month looks at the sector’s expected pace of recovery Seeenergy also online… from and highlights key trends for Don'tCOVID-19 forget to read our sister publication, 2021. www.bit.ly/PR_Feb21 Petroleum Review, which this month looks at
Features the energy sector’s expected pace of recovery Features from COVID-19 and highlights key trends for 2021. www.bit.ly/PR_Feb21
Energy transition Features 14 Effecting change – the case Printed by Geerings Print Ltd The inks used in Energy World are made from renewable raw materials. They are free of both mineral Print oil and Printed by Geerings Ltdcobalt. of the World are made The inksMagazine used in Energy
from renewable rawPrint materials. Printed by Geerings Ltd They are free of both mineral oil and cobalt. Magazine of the Magazine of the 61 New Cavendish Chief Executive Street, London Louise Kingham OBE FEI W1G 7AR, UK 61 New Cavendish 61 New Cavendish
Chief Executive Chief Executive
Street,ofLondon FEI Terms control: EnergyLouise World isKingham circulatedOBE Street,7AR, London Louise Kingham OBE FEI W1G UKin digital flipbook free of charge format to W1G 7AR, UK all paid-up members of the Energy Institute. Libraries, organisations and persons who are not EI members receive theismagazine Terms of control:can Energy World circulatedvia free Terms of control: Energy Worldmagazines@ is circulated subscription – please contact of charge to all paid-up members of the Energy free of charge in digital flipbook format to energyinst.org ISSN 0020-3076. Institute. To libraries, organisations and persons all paid-up membersitof EnergyonInstitute. not in membership, is the available a single Libraries, organisations persons who areand Energy Institute Registered Charity subscription of £190 forand 11 issues inNo.1097899, the UK not EIfor members can receive theSingle magazine £300 overseas subscribers. issuevia £18. subscription – please contact magazines@ 61 New Cavendish Street, London W1G 7AR, Agency Commission – 10%. ISSN 0020-3076. UK. energyinst.org 0020-3076. Energy InstituteISSN Registered Charity No.1097899, © Institute 2020. Energy Institute as a 61Energy New Cavendish Street,The London W1G 7AR, UK. Energy Registered Charity No.1097899, body is Institute not responsible either for the statements made or opinions theseInstitute pages. Unless © Energy Instituteexpressed 2014. Thein Energy as a 61 New Cavendish Street, London W1G UK. specifically stated, the magazine not a7AR, partner body is not responsible either for is the statements with, of, or in any otherinway affiliated with madeagent or opinions expressed these pages. Those © Energy Institute The Energy Institute as a any of the advertisers in the publication, nor does readers wishing to 2020. attend future events advertised body is notany responsible either for the statements it endorse of thewith products of such advertisers are advised to check the contacts in the made or opinions in these pages. or external inserts included the magazine. organisation listedexpressed closer to with the date, in caseUnless of specifically stated, the magazine is notthe aevents partner Those readers to attend future late changes orwishing cancellations. To view full with, agentof of,this or in anytoother way affiliated with advertised are advised check with the contacts conditions disclaimer, visit any oforganisation the advertisers in the publication, norindoes in the listed closer to the date, case http://tinyurl.com/pdq4w7d it endorse any oforthe products ofTo such advertisers of late changes cancellations. view the full or externalof inserts included with conditions this disclaimer, visitthe magazine. Those readers wishing to attend future events http://tinyurl.com/pdq4w7d advertised are advised to check with the contacts in the organisation listed closer to the date, in case of late changes or cancellations. To view the full
for a national energy agency Energy transition Simon Virley CB FEI 14 Effecting change – the case for a national energy hold agency 16 Offshore renewables the key to Simon Virley CBrecovery FEI post-COVID Rick Campbell
16 Offshore renewables hold the key to post-COVID recovery 20 Putting hydrogen to the test Rick Campbell Nick Cottam
20 UK Putting to the test 22 solarhydrogen market provides reason for Nick Cottam optimism Andrew Mourant
22 UK solar market provides reason for optimism required to support 24 Investment Andrew Mourant advances in wind power Mattia Boccolini
24 Investment required to support advances in wind power 26 COP26 – the way ahead
February 2021
IN THIS ISSUE…
February 2021
With new climate targets and emissions goals regularly making headlines, it’s safe to IN THIS ISSUE… say the energy transition – the first theme of our issuetargets – is fully under way. WithFebruary new climate and emissions Onregularly page 14, making Simon Virley makesit’s the goals headlines, safe to argument that the UK should establish say the energy transition – the first theme of aour National Energy tounder help the February issueAgency – is fully way. government deliver its net zero target. On page 14, Simon Virley makes the Next, we seethe how renewables argument that UKoffshore should establish can aid theEnergy economic recovery from a National Agency to help the COVID-19 and why there’s to be government deliver its net reason zero target. optimistic about the future of groundNext, we see how offshore renewables mounted solar in the UK. An article can aid the economic recovery fromfrom Professor John Loughhead, former BEIS COVID-19 and why there’s reason to be Chief Scientific on future what he like to optimisticAdvisor, about the ofwould groundsee from the COP26 to be held mounted solar in themeeting UK. An article fromin Glasgow year closes the feature on Professorlater Johnthis Loughhead, former BEIS Chief page 27. Scientific Advisor, on what he would like to magazine’s feature at seeThe from the COP26second meeting to belooks held in the issues of finance and investment – two Glasgow later this year closes the feature on key of the energy transition. pageenablers 27. First up, a piece from thefeature charitylooks SEforALL The magazine’s second at explains energy investment is still the issuesthat of finance and investment – two lacking in theof developing and looks at key enablers the energyworld, transition. what must donefrom to rectify it. An article on First up, be a piece the charity SEforALL the future of green gases in the heating and explains that energy investment is still transport follows. world, and looks at lacking in sector the developing Our usual update pages covering both on what must be done to rectify it. An article international and UK news, with the future of green gases in together the heating and two opinion pieces, complete the February transport sector follows. issue. Our usual update pages covering both international and UK news, together with two opinion pieces, complete the February issue.
Finance and investment 28 Underinvestment in energy hinders sustainable development Finance and investment Olivia Coldrey 28 Underinvestment in energy hinders sustainable 30 Shaping newdevelopment markets for green gas OliviaShallon Coldrey Simi
30 Corporate Shaping new markets for green gas sustainability Simi Shallon 32 Smart, sustainable solutions for the low-carbon transition Corporate sustainability David Hughes 32 Smart, sustainable solutions for the low-carbon transition Energy purchasing David Hughes 34 Bringing post-COVID affordability and carbon targets together Energy purchasing Nick Proctor 34 Bringing post-COVID affordability and carbon targets together Nick Proctor
Mattia Boccolini Professor John Loughhead
26 COP26 – the way ahead Professor LoughheadService – Energy in Conversation Season 2 From the EIJohn Knowledge
Energy in Conversation, the Energy Institute podcast, returns this month for a second season. Featuring young energy professionals from across the world as part of the EI’s Generation 2050 initiative, 1 asks what it means–to have a ‘Career with a Conscience' in today’s energy From theepisode EI Knowledge Service Energy in Conversation Season 2 landscape. Listen now atthe https://energy-inst.org/podcast Energy in Conversation, Energy Institute podcast, returns this month for a second season.
Featuring young energy professionals from across the world as part of the EI’s Generation 2050 initiative, episode 1 asks what it means to have a ‘Career with a Conscience' in today’s energy landscape. Listen now at https://energy-inst.org/podcast
Opinion
FROM THE EDITOR
Start-of-the-decade optimism for net zero T he world is approaching a whole year of the COVID emergency. The pandemic, now part of everyday life, is clearly going to be with us for some time, even with vaccination programmes underway. Each month, more of us are touched personally by the disease. Yet we are also at the start of a new decade, one seen by many as the ‘decade of delivery’ for transitioning energy systems towards a longer-term net zero carbon ambition. Let’s aim to achieve measurable and substantial progress in this decade, they say, rather than hide behind a distant 2050 target. And, once the COVID-19 crisis does begin to abate, there’s a parallel imperative to ditch some of the practices that seemed appropriate before the pandemic, in favour of some new and sustainable ways of working. The EI is promoting a tripletheme decade-of-delivery concept, adding the need to deliver on the UN goal of universal access to energy supplies to the net zero and building back better premises. The three themes will be on show at IP Week later this month, being held online of course – see page 13. And there is plenty of optimism around the world, with several important steps already taken. The governments of Japan and South Korea have both committed their economies to reach net zero carbon by 2050, with China doing the same, but for 2060. Meanwhile President Joe Biden has already begun to turn the US around and
Steve Hodgson, Editor
The views and opinions expressed in this article are those of the editor only and are not necessarily given or endorsed by or on behalf of the Energy Institute.
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of activity around hydrogen as a new fuel – although there are some serious cost issues to be addressed in order to produce green hydrogen from renewables. There’s the optimism. However, the new year has also delivered the disturbing news that 2020 tied with 2016 as the warmest year on record, according to the CarbonBrief website, even without the El Niño event that boosted temperatures in 2016. So no let up there. And the world still has COVID to contend with. •
We used to worry about peak oil and the consequences of the resulting downturn on the industry and its customers, before the concept lost much of its power. Instead, how about a UK electricity low point? Researchers at University of Birmingham have suggested that 2020 is likely to mark a historical trough for electricity consumption in Britain. Demand has been falling steadily for more than a decade now, due to more efficient end use and the closure of heavy industry – the COVID-related drop last year just added to the trend. And, with the rise of electric vehicles and electrically-driven heat pumps starting to gather momentum, demand may be about to rise upwards again. 2020 was a low point in more than one way.
In this month’s Petroleum Review:
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towards similar ambitions. If followed through, the efforts of China alone could help avoid 0.2–0.3°C of warming by the end of the century, according to some estimates. To be held in Glasgow, UK in November, COP26 will be the occasion to judge these initiatives. The event should itself bring forward further and more ambitious national plans to control carbon emissions, in the form of new ‘nationally determined contributions’ (NDCs) from governments. While these NDCs should have been submitted to the UN by the end of last year, so far many have not. The suggestion is that COP26 will nevertheless be the focus for a new wave of commitments from governments. But where, specifically, is measurable progress towards net zero expected to be made this decade? Many start-of-year pundits agreed on a list of four main areas, starting with further growth in the already booming market for even cheaper wind and solar energy; followed by action expected to be taken by the oil majors to start transforming their businesses from supplying oil to energy services. France’s Total is seen by many to be taking a lead here – the company has announced new solar, energy storage and green hydrogen projects in the last month. Third is efforts by energy users in the industrial and commercial sector to decarbonise their energy use and; fourth is the latest burst
1
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Petroleum Review is the monthly sister publication to Energy World, covering all aspects of the international oil and gas industry. As an EI member, you can access it online, for free, at www.bit.ly/PRmag_home For more information visit www.energyinst.org
InternationalUpdate
Electric vehicle battery prices fell by 13% in 2020 – BNEF Analysts predict that cost parity with combustion engine vehicles is just around the corner for some regions
F
or the first time ever, lithiumion battery pack prices of less than $100/kWh have been reported, with the average market cost falling to $137/kWh in 2020, according to research firm BloombergNEF (BNEF). This represents an 89% fall in real terms since 2010, when battery pack prices were above $1,100/kWh, and a 13% fall since 2019. BNEF’s 2020 Battery Price Survey, which considers passenger EVs, e-buses, commercial EVs and stationary storage, suggests that the average price could fall to approximately $101/kWh by 2023. The survey reports that it’s at around this price point that automakers should be able to produce and sell mass market EVs at the same price (and with the
BNEF’s 2020 Battery Price Survey suggests that the average price could fall to approximately $101/kWh by 2023
same margin) as comparable internal combustion vehicles in some markets. This assumes no subsidies are available, but actual pricing strategies will vary by automaker and geography. The lowest battery prices were found in China, where e-bus batteries were cited as under $100/kWh. The fall in price, says BNEF, can be attributed to increasing order sizes, growth in battery electric vehicle (BEV) sales and the introduction of new battery pack designs. New cathode chemistries and falling manufacturing costs will continue to drive prices down in the near term. The prices of cathode materials have fallen since reaching a high in spring 2018, finding a more stable level during
2020, says BNEF. ‘It is a historic milestone to see pack prices of less than $100/kWh reported. Within just a few years we will see the average price in the industry pass this point,’ says James Frith, BNEF’s Head of Energy Storage Research and lead author of the report. He adds: ‘What’s more, our analysis shows that even if prices for raw materials were to return to the highs seen in 2018, it would only delay average prices reaching $100/kWh by two years – rather than completely derailing the industry. The industry is becoming increasingly resilient to changing raw material prices, with leading battery manufacturers moving up the value chain and investing in cathode production or even mines.’
Siemens supplies batteries to Alpine hut Siemens has outfitted the Monte Rosa Hut – a popular mountaineering destination in the Swiss Alps – with a new battery storage solution. Since 2010, the building has been largely energy self-sufficient, with solar thermal collectors and a photovoltaic system meeting its power needs. However, ongoing analysis of the energy flows revealed that the lead batteries in use since the hut’s opening would soon reach the end of their life. This prompted the operators to put a new solution in place. Siemens designed the replacement solution and replaced 48 lead batteries with 14 lithium iron phosphate (LFP) batteries with a capacity of 215 kWh. The hut hosts some 8,000 hikers and mountaineers each year.
Photo: Siemens
Oil in transition
Total leads oil majors in net zero ambition – but still sees a future for gas France’s Total has amassed the largest renewable energy portfolio of any oil major since the firms began announcing their respective greenhouse gas (GHG) reduction targets. According to data compiled by Bloomberg, Total has a total of 8.8 GW of renewables in its operational portfolio and development pipeline. In January, the company agreed to purchase a 20% share in the world’s largest solar developer – India’s Adani Green Energy – which has 14.6 GW of projects either planned or in operation. Total paid $2.5bn for its stake. The same month, it also announced that it had partnered with solar firm 174 Power Global to develop 12 utility-scale solar and energy storage projects of 1.6 GW cumulative capacity in the US.
BP, Total and Shell all announced plans to drastically reduce or eliminate their GHG emissions last year. However, BP is the only other member of the trio to have announced a multibillion-dollar renewable acquisition since. It paid Equinor $1.1bn for a stake in two US offshore windfarms last September. Total’s CEO Patrick Pouyanné told French newspaper Le Parisien that his company wants to become one of the world’s top five renewable energy producers. By 2050, its operational activities will be divided into 40% renewables, 40% gas and 20% oil, he said. Its current mix is 55% oil, 40% gas and less than 5% renewable generation. Total aims to reach 35 GWp of gross production capacity from renewable sources by 2025 – adding 10 GWp per year afterwards. Energy World | February 2021 3
InternationalUpdate
2020 ‘tied’ for warmest year on record – NASA Picture is complicated by reduced particulate emissions and large quantities of smoke from Australian bush fires
A
nalysis from NASA has shown that 2020 is tied with 2016 for the title of warmest year ever recorded. Scientists at NASA’s Goddard Institute for Space Studies (GISS) found that the year’s globally averaged temperature was 1.02°C warmer than the baseline 1951– 1980 mean. The findings come in spite of the reduced carbon dioxide emissions that resulted from COVID-19 lockdown measures. In fact, the lower levels of particulate pollution allowed more sunlight to reach the planet’s surface, producing what NASA called a ‘small but potentially significant’ warming effect. Overall carbon dioxide concentrations also continued to increase in 2020 – just at a slower rate – and because warming is linked to cumulative emissions, the overall amount of avoided warming will be minimal. Meanwhile, the devastating Australian bush fires that burned during the first half of the year released smoke and other particles some 30 km into the atmosphere.
Scientists at NASA’s Goddard Institute for Space Studies found that the year’s globally averaged temperature was 1.02°C warmer than the baseline 1951– 1980 mean The previous record warm year, 2016, received a significant boost from a strong El Nino Photo: NASA
These particles likely blocked sunlight, resulting in slight atmospheric cooling. ‘The previous record warm year, 2016, received a significant boost from a strong El Niño,’ says a statement by GISS Director Gavin Schmidt. ‘The lack of a similar assist from El Niño this year is evidence that the background climate continues to warm due to greenhouse gases.’ Separate analysis by the US
National Oceanic and Atmospheric Administration (NOAA) found that 2020 was the second-warmest year on record behind 2016. Though NOAA and NASA use much of the same temperature data, the former uses a different baseline period (1901–2000). In addition, NOAA doesn’t infer temperatures in polar regions lacking observation – which accounts for much of the disparity between its findings and NASA’s.
Europe’s NordLink interconnector begins operation Hitachi ABB Power Grids has energised the NordLink project, a 623 km high-voltage direct current (HVDC) electricity interconnection that links the German and Norwegian power mark ets for the first time. The connection provides the German power grid with reliable access to Norway’s hydropower resources, while offering Norway access to Germany’s growing base of wind and solar resources. The company designed, engineered and supplied the two converter stations – located in Southern Norway and Northern Germany – at the heart of the NordLink project. The converter stations have been delivered to a consortium of transmission system operators, Statnett and TenneT, and the state-owned German development bank, KfW.
4 Energy World | February 2021
Photo: Hitachi ABB Power Grids
InternationalUpdate
EU’s poorest citizens ‘responsible for its carbon reductions’ Emissions in Europe are tied to income – and the environmental footprint of the wealthiest is on the rise
T
he EU’s emissions reductions since 1990 have resulted from a fall in the emissions of lower and middle-income citizens, while the emissions of the richest 10% of Europeans grew, according to a report from Oxfam and the Stockholm Environment Institute. The authors of Confronting Carbon Inequality in the European Union argue that European lawmakers must put fairness and a just transition at the heart of their Green Deal legislation. The report assesses the consumption emissions of different income groups between 1990 and 2015. During this 25-year period, EU consumption emissions fell by 12% and economic inequality increased. Researchers found that the richest 10% of EU citizens were
responsible for more than a quarter (27%) of EU emissions − the same amount as the poorest half of the EU population combined. The 40% of ‘middle income’ Europeans were responsible for 46% of emissions, and the richest 1% for 7% of emissions. Air travel and car journeys are responsible for the largest share − around 30–40% − of the carbon footprint of the highest-emitting Europeans. Meanwhile, home heating is the biggest contributor to the footprints of lower income groups. Over the 25 years analysed, the poorest half of Europeans cut their emissions by almost a quarter (24%) and middle-income citizens by 13%. Conversely, the richest 10% of Europeans increased their
Greenhouse gases
IEA calls for urgent action to cut methane emissions from oil and gas Methane emissions from the global oil and gas industry fell by an estimated 10% in 2020 as producers slashed output in response to the historic shock of the COVID-19 pandemic, according to a new study from the International Energy Agency (IEA). The report – Driving Down Methane Leaks from the Oil and Gas Industry – indicates that a large part of the drop in methane emissions in 2020 occurred not because companies were taking more care to avoid methane leaks from their operations, but simply because they were producing less oil and gas. ‘Alongside ambitious efforts to decarbonise our economies, early action on methane emissions will be critical for avoiding the worst effects of climate change,’ says IEA Executive Director, Dr Fatih Birol. ‘There has never been a greater sense of urgency about this issue than there is today.’ The IEA states without greater action by companies, policymakers and regulators there is clearly a risk that the downward trend will be reversed by an increase in production to fuel a rebound in global economic activity. ‘The task now for the oil and gas industry is to make sure that there is no resurgence in methane emissions, even as the world economy recovers, and that 2019 becomes their historical peak,’ Birol continues. ‘There is no good reason to allow these harmful leaks to continue, and there is every reason for responsible operators to ensure that they are addressed.’ Methane is known to be a much more potent greenhouse gas than carbon dioxide. According to the IEA’s 2021 update of its Methane Tracker, oil and gas operations worldwide emitted more than 70mn tonnes of methane into the atmosphere last year. This is broadly equivalent to the total energy-related carbon dioxide emissions from the entire European Union.
The richest 10% of EU citizens were responsible for more than a quarter of EU emissions − the same amount as the poorest half of the EU population combined
emissions by 3% and the richest 1% saw an increase of 5%. According to the report, the carbon footprint of the richest 10% of Europeans must be ten times smaller by 2030 to stay on track with the Paris Agreement’s 1.5°C temperature target. The footprint of the richest 1% must be 30 times smaller. ‘The EU Green Deal can target the emissions of the richest while directly benefiting lower income Europeans,’ says Oxfam’s Head of Climate Policy and report coauthor, Tim Gore. ‘It’s time to ban SUVs, tax aviation fuel, and invest in housing renovation and public transport to end fuel poverty, create millions of decent jobs, and cleaner air for all.’
Hybrid solar power system for remote Chilean gold mine Power equipment supplier Aggreko has signed a contract with mining operator Gold Fields to provide 26 MW of hybrid solar and thermal power to the Salares Norte open pit mine in Chile. The solution has been designed to provide power for the entire mine, which sits at an altitude of 4,500 m in the Andes mountain range and is 190 km from the nearest town. The system is made up of high-altitude performance diesel gensets and Aggreko Solar Power units, optimised for off-grid operation and ready to withstand the extreme wind conditions in the region. The gensets will each deliver 772 kW and will incorporate spinning reserve and cold reserve units to manage peaks in demand. The diesel generation system will be integrated with solar units which, once installed, will provide 9.9 MW of power. The system will supply power across all five of the mine’s distribution points, whilst surpassing Gold Fields’ requirement for a minimum of 20% renewable power generation for mining operations.
Photo: Aggreko
Energy World | February 2021 5
InternationalUpdate
Renewables
Alternative Fuels
Equinor and BP win 2.5 GW in New York offshore wind tender
Renewable hydrogen ‘at least cost’ possible within a decade – IRENA
Norwegian energy giant Equinor, formerly Statoil, has won two significant offshore wind tenders in New York state, marking one of the largest renewable energy procurements in the US to date. Together with strategic partner BP, Equinor will provide generation capacity of 1,260 MW from the Empire Wind 2 project, and another 1,230 MW of power from Beacon Wind 1. The company is already developing the 816 MW Empire Wind 1 wind farm, which was selected in New York’s first-ever offshore wind solicitation last year. Both parts of the project will be operational by late 2026. Meanwhile, Beacon Wind – the first US offshore wind project to use high voltage DC connection cables – will begin operation from 2028. As part of the award, the companies will partner with the state to transform two New York ports – the South Brooklyn Marine Terminal and the Port of Albany – into large-scale offshore wind industrial facilities that position New York to become a hub for offshore wind. ‘As Equinor works to expand its renewable energy presence across the United States and the globe, New York’s leadership clearly illustrates the transformative benefits of offshore wind on climate goals and economic activity alike,’ says Siri Espedal Kindem, President of Equinor Wind US. BP paid Equinor $1.1bn for a 50% stake in both the Beacon and Empire wind farms last year. The deal was the oil major’s first offshore wind venture. It has stated that it aims to develop some 50 GW of renewable power by 2030.
’Green’ hydrogen produced using renewable electricity could be costcompetitive with fossil fuels by 2030, according to a report from the International Renewable Energy Agency (IRENA). Today, green hydrogen is two to three times more expensive than ’blue’ hydrogen, which is produced from fossil fuels combined with carbon capture and storage technology. However, the IRENA report – Green Hydrogen Cost Reduction: scaling up electrolysers to meet the 1.5°C climate goal – says falling costs for solar and wind power will change the picture. Improved performance and economies of scale for electrolysers could also play a role in helping green hydrogen reach cost parity with fossil fuels. The production cost for green hydrogen is determined by the renewable electricity price, the investment cost of the electrolyser and its operating hours. IRENA notes that renewables are already the cheapest sources of power in many parts of the world. But investment costs for electrolysis facilities must fall, as well. According to the report, three factors could drive costs down – standardisation and mass-manufacturing of electrolyser stacks, optimisation of supply chains and enhanced efficiency in operation. IRENA analysis found that today’s green hydrogen manufacturing capacity of less than 1 GW must grow to beyond 100 GW in the next 10 to 15 years to ensure output is cost-competitive. In the best-case scenario, using low-cost renewable electricity at $20 per MWh in large, cost-competitive electrolyser facilities could produce green hydrogen at a competitive cost with blue hydrogen already. If rapid scale-up and aggressive electrolysers deployment take place in the next decade, the report says green hydrogen could start competing on costs with blue hydrogen by 2030 in many countries.
Opinion
VIEWPOINT
2050? Talk 2030 and you’ve got my attention A year ago I wrote in these pages about the importance of the COP26 climate talks due to have taken place in Glasgow in November. One unimaginable year later and here I am again in the same position. But it isn’t Groundhog Day, because the last 12 months have seen the prospects for tackling the threat of climate change, in my view, transformed. As an engineer I have never doubted the potential of human ingenuity. Talented professionals across our industry have the capability to bring into play the right mix of solutions. We are seeing this already, with astonishing advances allied with game-changing cost reductions. For its part, the EI has swung its work squarely behind the deployment of renewables; hydrogen; carbon capture, use and storage (CCUS); and – equally importantly – demand side efficiency. But where I fear for our future is in the inertia of our political systems and corporate cultures. Vested interests and a ‘prisoner’s dilemma’* like no other have stood in the way of the ambition required. Net zero breakthrough During the hiatus imposed on us by the pandemic, however, the case for targeting global net zero emissions by the middle of the century has gained traction within governments around the world. President Xi’s commitment for China to reach net zero by 2060, and President Biden’s promise for the US to rejoin the Paris Agreement and target net zero by 2050 are stand-out moments. Japan and South Korea are also now among 120 countries, representing some 70% of the world economy, pledged to net zero. This bodes well for the UK’s chances of pulling the world behind an ambitious outcome at COP26 in Glasgow this November. If realised, it starts to put 2oC within striking distance. These moves have been mirrored across our industry, including by a number of the oil and gas majors. It is a great irony that the very fuels that have provided the
Steve Holliday FREng FEI, EI President
foundation for so much human progress – and still provide more than half of our energy needs – are largely responsible for the existential challenge we face. But this sector also has vital engineering capabilities, financial weight and proven ability to deliver at scale. I have called for a new kind of leadership brave enough to place value on achievement beyond the short-term bottom line, one that has the emotional intelligence to be responsive to the agendas shaping our world. Over the past year, this has started to emerge, with major players reaching beyond carbon intensity and putting absolute net zero goals into their business plans. Repsol, BP, Shell, Total and – I’m pleased to say – the EI itself – are among those taking this step. The same has been seen across myriad other sectors of the global economy. Decade of delivery The climate science driving this, the real-world impacts, the groundswell of public sentiment and demands from investors are all well documented. The critical debate is no longer about whether we need to act to tackle climate change – but how quickly. Global energy related emissions flatlined in 2019 and the pandemic has dented them even further, but that cannot lead to complacency. Nor should talk of 2050 tempt us into putting off action until later. The challenge remains enormous – to underpin the global economy with a radically transformed energy system – and the next decade will be the decider. Change needs to be demonstrable and rapid, to get ourselves onto a manageable, affordable, responsible path to global net zero. The period between now and 2030 will be defining in other respects too. We must build a resilient recovery from the global pandemic, and we must also finish the job of universal access to energy envisaged by the UN Sustainable Development Goals. Almost 800mn people still don’t enjoy the benefits of electricity and
2.8bn still use polluting cooking and heating fuels. Those same populations are among the most vulnerable to the impacts of climate change. A sustainable future for them will be a test of whether we are succeeding – and that test comes in 2030, not 2050. Critical friend Energy professionals look to the EI for the knowledge, skills and good practice they need to pursue impactful careers in this vital, fastevolving field. And we are proud to be into our second century of partnership with the energy sector. The role of a professional body is also to have the courage, when it matters and when the science dictates, to lead, and to recognise and champion the best. This month we convene our annual IP Week conference. It has become the pre-eminent opportunity for thought leadership and building collaboration, and this year discussions will focus on moving from crisis to low carbon opportunity over the next decade. We will welcome industry CEOs including Bernard Looney FEI of BP, Anders Opedal of Equinor, Patrick Pouyanné of Total and other influencers from around the world such as COP26 High Level Climate Action Champion Nigel Topping and UNFCCC Director of Mitigation James Grabert. And I hope many of our members and partners will take advantage of the opportunity this year to join the debate virtually for the first time. Humanity has succeeded in tackling great environmental challenges in the past, and I believe we can do so again. Last year saw encouraging, mutually reinforcing progress in technology and by governments and companies. But the true test is pace, and it starts now. ●
IP Week 2021 takes place virtually from 23–25 February. Reduced rates apply to EI members. Visit www.ipweek.co.uk *The ‘prisoner’s dilemma’ is a situation in which two parties, separated and unable to communicate, must each choose between cooperating with the other or not. The highest reward for each party occurs when both choose to cooperate rather than acting in their own self-interests.
Energy World | February 2021 7
UKUpdate
Energy White Paper sets out plans for clean energy and green jobs A UK emissions trading scheme and support for domestic energy users included, plus talks on new nuclear
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ventually published just before Christmas, the government’s long-delayed Energy White Paper sets out the steps it will take over the next decade to cut emissions from industry, transport and buildings by 230mn tonnes while supporting hundreds of thousands of new green jobs. The document also signalled a new UK Emissions Trading Scheme to take over from the EU equivalent; investment in one, initially, and then four carbon capture and storage (CCS) projects; and a kick-start for the ‘hydrogen economy.’ At the same time, the government confirmed that it is to enter negotiations with developer EDF in relation to the proposed Sizewell C nuclear power station project in Suffolk, as it considers options to enable investment in at least one nuclear power station by the end of this Parliament in 2024. Business and Energy Secretary at the time, Alok Sharma, said of the White Paper: ‘Today’s plan establishes a decisive and permanent shift away from our dependence on fossil fuels, towards cleaner energy sources that will put our country at the forefront of the global green industrial revolution.’ In January, Sharma was appointed as the full-time President of the UN COP26 climate conference, to be held in November in Glasgow, and Kwasi Kwarteng promoted to Secretary of State for Business, Energy and Industrial Strategy. Sharma will be based in the Cabinet office and will also chair the Climate Action Implementation Committee to coordinate government action towards net zero. Kwarteng was previously a Minister of State at BEIS. The document also signalled a new focus on domestic energy consumers – to put affordability at the heart of the UK’s shift away from fossil fuels by boosting competition in the energy retail market, and providing at least £6.7bn in support to the fuel poor and most vulnerable over the next six years. The core parts of the Energy White Paper include: •
Transforming the UK’s energy system from one that was historically based on fossil fuels to one that is fit for a net zero
8 Energy World | February 2021
economy, changing how we heat homes and travel, doubling electricity use, and harnessing renewable energy supplies. •
Supporting up to 220,000 jobs in the next 10 years, including jobs in major infrastructure projects for power generation, CCS and hydrogen, as well as a programme of retrofitting homes for energy efficiency and clean heat.
•
Keeping bills affordable for consumers by making the energy retail market truly competitive.
•
Generating emission-free electricity by 2050 with a trajectory that will see the UK having overwhelmingly decarbonised power in the 2030s.
•
Establishing a UK Emissions Trading Scheme (UK ETS) from January 2021 to replace the old EU ETS.
•
Continuing to explore a range of financing options for new nuclear power stations with developers, including the Regulated Asset Base funding model.
•
Delivering ambitious electricity commitments through a commitment to deliver 40 GW of offshore wind by 2030, including
In January, Sharma was appointed as the full-time President of the UN COP26 climate conference and Kwasi Kwarteng promoted to Secretary of State for Business, Energy and Industrial Strategy
1 GW of floating wind. •
Investing £1bn in carbon capture storage in four industrial clusters by 2030 and at least one fully net zero cluster by 2040.
•
Kick-starting the hydrogen economy by working with industry to aim for 5 GW of production by 2030, backed up by a new £240mn Net Zero Hydrogen Fund.
•
Investing £1.3bn to accelerate the rollout of charge points for electric vehicles in homes, streets and on motorways, as well as up to £1bn to support the electrification of cars.
•
Supporting the lowest paid with their bills through a £6.7bn package of measures that could save families in inefficient homes up to £400 per year.
•
Moving away from fossil fuel boilers – by the mid-2030s all newly installed heating systems should be low-carbon, or able to be converted to a clean fuel supply.
The proposed UK ETS will be the world’s first net zero carbon cap and trade market, and a crucial step towards achieving the UK’s target for net zero carbon emissions by 2050. It will be more ambitious than the EU system it replaces, says the government.
UKUpdate
Feasible and affordable – how the UK can bring net zero within reach Climate Change Committee advises the government on a detailed route map for a fully decarbonised economy
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lso last December, the Climate Change Committee (CCC) published the sixth of its series of carbon budgets for the UK, for 2033–2037, which chart the decisive moves to zero carbon. Polluting emissions must fall by almost 80% by 2035, compared to 1990 levels – a big step-up in ambition. Just 18 months ago this was the UK’s 2050 goal, says the CCC. In 2019, the UK became the first major economy to make net zero emissions law. The CCC says it has now set out the path to that goal over the next three decades, including the first ever detailed assessment of the changes that will result and the key milestones that must be met. And the path involves some radical shifts – to electricity and heat generation, to fuels used for shipping, to energy performance of buildings, and to land use, even diets. Yet the overall cost will be minimal, says the Committee. The Sixth Carbon Budget (2033–2037) is the first detailed route map for a fully decarbonised nation, says the CCC. To deliver this, a major investment programme across the country must be delivered, in large measure by the private sector. In many areas, this will give people real savings, as the nation would use fewer resources and adopts cleaner, more efficient technologies. The CCC says that these savings substantially reduce the cost of net zero compared with previous assessments – now down to less
The path involves some radical shifts – to electricity and heat generation, to fuels used for shipping, to energy performance of buildings, and to land use, even diets
than 1% of GDP throughout the next 30 years. This is thanks, not only to the falling cost of offshore wind, but also a range of new low-cost, low-carbon solutions in every sector. The Sixth Carbon Budget can be met through four key steps: 1 Take up of low-carbon solutions People and businesses will choose to adopt low-carbon solutions as highcarbon options are progressively phased out. By the early 2030s, all new cars and vans and all boiler replacements in homes and other buildings are low-carbon – largely electric. By 2040 all new trucks are low-carbon. UK industry shifts to using renewable electricity or hydrogen instead of fossil fuels, or captures its carbon emissions, storing them safely under the sea. 2 Expansion of low-carbon energy supplies UK electricity production is zero carbon by 2035. Offshore wind becomes the backbone of the UK energy system, growing from the promised 40 GW in 2030 to 100 GW or more by 2050. New uses for this clean electricity are found in transport, heating and industry, pushing up demand by a half over the next 15 years, and doubling or even trebling demand by 2050. Low-carbon hydrogen scales-up to be almost as large, in 2050, as electricity production is today. Hydrogen is used as a shipping and transport fuel and in industry, and potentially in some buildings, as a replacement for natural gas for heating. 3 Reducing demand for carbonintensive activities The UK wastes fewer resources and reduces its reliance on high-carbon goods. Buildings lose less energy through a national programme to improve insulation across the UK. Diets change, reducing consumption
of high-carbon meat and dairy products by 20% by 2030, with further reductions in later years. There are fewer car miles travelled and demand for flights grows more slowly. 4 Land and greenhouse gas removals There is a transformation in agriculture and the use of farmland while maintaining the same levels of food per head produced today. By 2035, 460,000 ha of new mixed woodland are planted to remove carbon dioxide and deliver wider environmental benefits. Some 260,000 ha of farmland shifts to producing energy crops. The CCC’s message to government is clear – the 2020s must be the decisive decade of progress and action on climate change. By the early 2030s, every new car and van, and every replacement boiler must be zero-carbon; by 2035 all UK electricity production will be zero carbon. Modern low-carbon industries will grow – producing hydrogen, capturing carbon, creating new woodlands, and decarbonising the UK’s 28mn homes. The CCC concludes that these changes are feasible and affordable but only if they are led by decisive action from government now. And the process must also be fair and just – the report includes new insights into how the costs and the benefits of net zero can be shared more evenly. This Sixth Carbon Budget must be legislated by June 2021. If the Committee’s recommendations are adopted by Ministers in 2021, these will position the UK as a true global climate leader, as it prepares to host the next major climate summit in Glasgow, says the CCC.
Turbines from a UAE fabrication site to Scotland Offshore Heavy Transport (OHT) vessel, MV Hawk, discharged the last jacket foundation for the Moray East Offshore wind farm, having transported two loads each of ten jackets from the Lamprell fabrication site in Hamriyah, UAE, to the Port of Nigg in the Cromarty Firth. This marks the completion of OHT’s eight-month transportation campaign which also utilised vessels MV Osprey and MV Albatross. The company transported a total of 48 three-legged jacket foundations averaging more than 1,000 tonnes in weight. OHT was contracted by DEME Offshore, the project’s balance of plant contractor, in September 2019. Once complete, Moray Offshore Windfarm (East) will consist of one hundred 9.5 MW turbines. Photo: OHT Energy World | February 2021 9
UKUpdate
Wind, solar and storage on the way for Cornwall site Energy has been exported from a commercial 1 MW battery energy storage system connected to Carland Cross wind farm in Cornwall for the first time, thanks to a joint venture between ScottishPower Renewables (SPR) and Centrica. The energy stored in the battery will soon be available to the Cornwall Local Energy Market (LEM) initiative, helping balance electricity supply and demand at a local level. The project also marks the start of a pipeline of almost 1 GW of battery storage projects for SPR across its portfolio in the UK and Republic of Ireland, says the company. This will include the 50 MW Whitelee ‘super battery’, just south of Glasgow. IN addition, construction work for a 10 MW solar scheme at Carland Cross windfarm is expected to get underway this year. This will make Carland Cross the UK’s first utility-scale energy park, combining wind, solar and storage. Photo: SPR
Brexit
UK and EU trade deal aims to preserve cross-border energy trading The EU and the UK are building a new energy trading relationship after striking the Christmas Eve EU-UK trade agreement that underpinned Britain’s final and full withdrawal from the EU on 1 January. The deal has extensive energy provisions, with the goal of ensuring EU electricity and gas suppliers can still export to the UK, and vice versa, through existing interconnectors. The UK has, however, ceased to participate in the EU’s emissions trading system (ETS). The British government in December said it would create a UK ETS instead and, while it said the system would be linked to other exchanges around the world, it may not have a special link with the EU system, such as that with the Swiss ETS. There was, however, broad commitment from the UK to comply with EU plans on climate change reduction, with EU and UK goals to achieving economy-wide climate neutrality by 2050 written into the agreement. Both sides also agreed not to weaken environmental and climate protections below those in place on 31 December (2020) and maintain effective systems of carbon pricing covering greenhouse gas emissions from electricity and heat generation, industry and aviation.
As for energy trading, the EU/UK deal commits both sides to allow consumers to choose electricity or natural gas suppliers within their retail markets. Transmission or distribution system operators may refuse access to supply such products where it lacks the necessary capacity but must supply reasons for such actions. Otherwise, both sides must allow third-party access to their transmission and distribution networks based on published tariffs applied rationally and without unfair discrimination. Market manipulation and insider trading on wholesale electricity and natural gas markets regarding EU/UK trades are clearly banned. And the EU and UK have promised to cooperate over the security of supply of electricity and natural gas. Further technical agreements on EU/UK energy relations will be established by the EU’s Agency for the Cooperation of Energy Regulators and a UK body. All such work will be overseen by an EU/ UK Specialised Committee on Energy created under the agreement, which will approve these secondary technical deals. The Agency can also amend certain portions of the EU/UK deal, for instance on interconnectors. The broad principles of the deal will be overseen by a new EU/UK Partnership Council, which also has amending rights. Charging London’s electric buses London bus operator Tower Transit has reinforced the move towards zero emissions in the capital by switching more than 10% of its fleet at Westbourne Park Garage to fully electric vehicles. The first buses in an order for 37 Optare battery-electric Metrodeckers were delivered in September last year. As a prelude to the transition, 37 charging bays have been installed by T H WHITE Energy, Fire & Security. The charging rank is located on part of a large open-air concrete deck constructed above Crossrail railway lines. Tower Transit procured Siemens charging equipment, comprising thirty-four 22 kW AC units primarily used for overnight charging, plus four 150 kW rapid charging units which can deliver a fast charge during shorter layovers. Photo: TH WHITE
10 Energy World | February 2021
UKUpdate
Power generation
Carbon intensity of GB power reached record low in 2020 Last year (2020) was the greenest year on record for Britain’s electricity system, with average carbon intensity – the measure of carbon dioxide emissions per unit of electricity consumed – reaching a new low. So reports Electricity System Operator National Grid ESO. This follows a trend that has seen the electricity system decarbonise by 66% in the last seven years and progress towards the ESO’s ambition of a carbon-free system by 2025. May 2020 saw both the greenest month on record and the lowest carbon intensity ever seen on the system on 24 May. Significant periods of coal-free electricity generation and recordbreaking levels of power from zero carbon sources were key factors in reducing 2020’s carbon intensity – while record low electricity demand during the nation’s lockdown also contributed. During the spring Britain saw its longest run of generating electricity without using coal since the industrial revolution, stretching almost 68 days between 10 April and 16 June. In total, the country was powered coal-free for 5,147 hours in 2020, compared with 3,666 hours in 2019 and just 624 in 2017, says the ESO. Indeed, coal generated only 1.6% of the electricity mix in 2020, compared with almost 25% five years ago. The record for the highest ever level of wind generation was broken several times during the year – most recently on 18 December (17.2 GW) – while 26 August saw wind contributing its highest ever share to the electricity mix (59.9%). Solar power also set new records for its highest ever level of generation (9.7 GW) and its highest share in the mix (34%) – comfortably providing a third of Britain’s electricity supplies on several occasions in May.
Lead carbon batteries power narrowboat Leoch Battery UK has supplied its LC2 series of lead carbon batteries to power a unique new build narrowboat. The 48V 800Ah bank of batteries will be installed in the engine room of the Old Nick electric serial hybrid narrowboat, built by Ortomarine in Worcestershire. One of only a handful of electric serial hybrid narrowboats, Old Nick is the first narrowboat where the whole drivetrain is from the same manufacturer, Vetus. The Leoch LC series of lead carbon batteries is based on super carbon technology and offers over 12 years’ design life, says the supplier. Photo: Leoch Battery UK Connecting onshore wind farms to the grid Electrical engineering firm Smith Brothers Contracting has connected two solar farms, in Nottinghamshire and Worcestershire, to the electricity grid. The first of the two projects – both of which are connected to the Western Power Distribution network, is The Grange, a 40 MW solar farm located in Newark. Acting as the independent connection provider (ICP), Smith Brothers energised the site last month. The second project, in Strensham, was connected last November and will generate 25 MW of power via 100,000 solar modules. The scope of works at both The Grange and Strensham saw Smith Brothers providing a turnkey solution which included all contestable elements of the 132 kV and 66 kV WPD connections respectively, as well as the 33 kV private-side . Photo: Smith Brothers Contracting
Energy World | February 2021 11
EI News
Institute to bid fond farewell to longstanding CEO
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fter more than two decades as Chief Executive of the Energy Institute and its precursor bodies, Louise Kingham OBE FEI has announced she will be leaving the organisation in April to take up a new position with BP. Informing staff of the news, Louise said: ‘This is an incredibly exciting time for the energy industry. I have enjoyed my time at the EI immensely and will miss the family that exists within the staff team, volunteer base and wider membership. It has been an absolute honour and privilege to be your CEO. Now, new challenges beckon for me and the time has come for someone else to take the helm.’ EI President Steve Holliday FREng FEI paid tribute to Kingham, saying: ‘It’s never easy replacing a CEO and particularly in this case. What Louise has achieved has been extraordinary – from uniting the organisation’s precursor bodies, diversifying and internationalising its membership, and taking a determined lead on defining issues such as the energy transition and women’s representation in the boardroom. She is
respected for this work across the industry and will be missed by all at the EI. That said, she will hand to her successor an EI in tremendously good shape as the foremost professional body for the world of energy.’ ‘Myself and the Board of Trustees are delighted Louise has this new opportunity to further her career in the energy industry. The search process for a new Chief Executive has commenced. He or she will work with the Board of Trustees and Senior Leadership Team to develop even further our work with and for our members, partners and customers. There are big global challenges to be met – not least net zero emissions and universal access to energy – and we are determined the EI will continue to play its full part.’ In her new role with BP, Louise will work within the senior leadership to help support society in the move to a low carbon energy system, part of the company’s transformation into an integrated energy company with its sights set on net zero. Information about the CEO search is at www.energyinst.org/about/job-vacancies
GETI report focuses on workforce experience of pandemic The fifth annual Global Energy Talent Index (GETI), the world’s largest energy recruitment and employment trends report, has been published. Focusing this year on the workforce’s experiences during the global pandemic, it finds despite an unprecedented year, optimism and resilience remain. Encapsulating the views of 16,000 energy professionals of 151 different
nationalities and spread across 166 countries, the report, published by Airswift and Energy Jobline with the backing of the Energy Institute, shows an industry facing a number of once-in-a-generation challenges – from the energy transition and the decarbonisation agenda to geopolitical tensions and, of course, the pandemic. Janette Marx, Chief Executive Officer at
Airswift, says:'There is no denying that this has been a challenging year for the energy industry, and COVID-19related instability is certainly being felt by the workforce. Yet, professionals seem confident in their ability to rise to the challenges ahead'. The full report is at www.getireport.com/reports/2021
Generation 2050 takeover EI podcast
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ollowing the successful first season of the EI’s Energy in Conversation podcast last year, which received a 5-star rating and a total so far of 10,000 streams, the energy deep-dive conversation series is back with a second season. Billed as a Generation 2050 ‘takeover’ – part of the EI’s new initiative to amplify the voices of tomorrow’s leaders – young professionals from across the world of energy will be in conversation with EI Fellows about their experiences starting out, and reflections on the challenges they face. The opening episode is available now. It explores what it means to pursue a ‘career with a conscience’, with Louise Kingham OBE FEI in discussion with Mervin Azeta,
12 Energy World | February 2021
Business Delivery Manager at Schlumberger, and David Davidson, an offshore engineer with Ørsted. They discuss their own motivations, the challenges faced by women working in a
sector still dominated by men, and whether a career in oil and gas can be reconciled with the world’s climate goals. Subsequent episodes will dive into CCUS, future grids, financing the energy transition and much more, all with a focus on the perspectives of professionals early in their careers, as well as with the substantive and technical content listeners of the first season have come to expect. Energy In Conversation is a great listen, so help spread the word and leave us a rating! It’s available on all major podcast streaming platforms, including Spotify, Apple Music and Castbox, as well as on YouTube and the EI website at www. energy-inst.org/podcast
EINews
From COVID to climate – tune in to the global agenda at IP Week 2021
Bernard Looney, CEO - BP, Gauri Singh, Deputy Director - General, International Renewable Energy Agency (IRENA) and Nigel Topping, High Level Climate Action Champion -UNFCCC COP26
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eaders and influencers from across the world of energy are gearing up for the EI’s IP Week 2021 conference, which take place virtually for the first time in its long history. Focused firmly on the new ‘decade of delivery’ facing the industry, big name speakers will include chief executives from the major oil and gas operators, alongside others from elsewhere in energy, academia, NGOs and government. With COP26 only months way, the line up also includes High Level Champion for Climate Action Nigel Topping, the UK’s Net Zero Business
Champion Andrew Griffith MP, UNFCCC Director of Mitigation James Grabert and IRENA Deputy Director-General Gauri Singh. IP Week’s innovative virtual experience will enable delegates to move seamlessly from speaker sessions to networking and exhibition spaces in a special Knowledge and Innovation Hub. Speaking ahead of the conference, Louise Kingham OBE FEI says: ‘IP Week 2021 will be a critical moment for the sector to discuss its role in three historic challenges over the coming decade:
building a resilient recovery from the devastating COVID-19 pandemic, striving to achieve the UN goal of universal access to energy, and charting an ambitious course – at COP26 and beyond – for tackling the threat we all face from the climate emergency.' ‘Virtual means even more impact and reaching all geographies around the world’, she continues. ‘IP Week will once again convene the top industry leaders and influencers to discuss, debate and share how they are working to deliver on these massive challenges. The urgency of action, together with the associated opportunities and challenges, will be at the heart of IP Week 2021.’ IP Week 2021 takes place virtually from 23–25 February. Reduced rates apply to EI members. Visit www.ipweek.co.uk EI President Steve Holliday FREng FEI write on page 7 of this issue about the importance of the next decade and the issues being discussed at IP Week 2021.
EI enables members facing hardship during pandemic Charitable donations from past and present members are helping to meet the membership fees of those who have been made redundant during the COVID-19 crisis. ‘With many thousands facing losing their jobs as a result of the global economic shutdown – in oil and gas in particular – the support of a professional body is even more important than ever,’ says Sue Beard FSAMP, Head of Professional Affairs at the EI. Assistance is being provided by the EI Benevolent Fund, which also funds EI Enable offering support through a confidential helpline open for members 24 hours a day.
‘Enable is there to help with information and advice on any kind of problem or issue, whether its childcare, finances, retirement or a legal issue. It can also provide a friendly advice if you need a bit of extra support.’ If you would like to apply for support with your membership fees, or further information about EI Enable, visit www.energyinst.org/membership-and-careers/ei-enable. For free information and advice from qualified professionals or just a friendly voice, you can also call EI Enable anytime on +44 (0)300 303 4331.
New professional members The EI provides a range of professional membership grades and chartered titles. Achieving these higher levels of recognition supports your career development and demonstrates your commitment to the industry. Congratulations to the individuals who have achieved professional recognition and/or have acquired registration in the last few months. Member (MEI) Mr A C W Powell MEI – Buro Happold Mr A M Turner MEI – RPS Mr J Featherstone MEI – Defence Infrastructure Organisation Mr D D Maguire MEI – Foster + Partners Mr N Das MEI – Reliance Industries Limited Mr B B Holt MEI – Ben Holt Consulting Mr A McGeachie MEI – Total E&P UK Mr M Kamuss MEI – MHNK Associates Dr H Moss MEI – British Petroleum Co Mr B Cott MEI – Cork Institute of Technology Mr O D Lee MEI – Ørsted Mr T Jenkins MEI – Chrysaor Fellow (FEI) Mr M Hassan FEI – CMS Cameron McKenna Nabarro Olswang LLP Mr T Rockell FEI – Energy Strat Asia Pte Ltd
Dr A Al Yousef FEI – Saudi Aramco – Upstream Research Center Mr S Dunhill FEI – Chevron Dr D G Karczub FEI – ConocoPhillips Mr T Appleton FEI – Burns & McDonnell Ms M Shehu FEI – Total Upstream Companies in Nigeria CEng Chartered Energy Engineer: Miss C De Bartolo – Ramboll Mr T A Liu – CLP Power Hong Kong Limited Mr B P M Richardson – Alpha Process Controls Dr B Gowreesunker – GreenYellow Indian Ocean CEng Chartered Petroleum Engineer: Mr U Muraleedharan Pillai – Borr Drilling Chartered Energy Manager: Mr B V Burke – Solar in Spain
Contact the EI Membership team on t: +44 (0)20 7467 7100 or membership@energyinst.org for details of upgrading your membership, applying for registration or for any other queries about your EI membership. Energy World | February 2021 13
Energy transition
INSTITUTIONS
Effecting change – the case for a national energy agency T he Ten Point Plan for a Green Industrial Revolution, announced by the Prime Minister last November, sets out an ambitious set of targets to put the UK on a path towards its legally-binding target of achieving net zero emissions by 2050. These included a ban on petrol and diesel car sales and a quadrupling of the amount of offshore wind by 2030. In December, this was followed by the long-awaited Energy White Paper, which provided some detail on these targets and how they might be achieved, but also pointed to a series of upcoming policy statements in 2021 to provide further details. These decarbonisation targets are stretching. Yet there has been little mention in these announcements about the delivery mechanisms and specifically the institutional architecture needed deliver them. The Energy White Paper does reference needing to ‘review’ the governance arrangements for the GB energy system, and (at the time of writing) we are expecting some form of consultation to emerge from the Department for Business, Energy and Industrial Strategy (BEIS) on this early in 2021. As well, we await the conclusions of Ofgem’s Review of the role of the System Operator, set up after the power cuts of 9 August 2019. But, as yet, very few details have emerged on the government’s real intentions for the institutions needed to deliver net zero. If I were still in government, my advice would be to establish an independent, expert ‘National Energy Agency’ to advise government on the energy system needed to help deliver net zero at least cost to consumers, whilst keeping the lights on. There are three main reasons for this recommendation: •
first, the level of systems thinking and new roles required to deliver net zero;
•
second, the limited bandwidth in Whitehall to carry these out, given COVID and Brexit; and
14 Energy World | February 2021
We have plans and policies aplenty for Britain’s energy transition, but still need more. KPMG’s Simon Virley argues that we also need to establish a new national energy agency to help the government actually deliver net zero. •
third, the opportunity to think holistically about the institutions needed for net zero, given the future of the System Operator is already under review by both BEIS and Ofgem.
Let’s take each of these in turn, starting with the implications of net zero.
Image: Shutterstock
Far more intrusive Net zero changes everything. It will change all our lives – the cars we drive, the way we heat our homes, the way our businesses and industries operate. As a result, the next phase of decarbonisation is also going to feel far more intrusive than what we have delivered thus far. To date, decarbonisation in the UK has largely been about the power sector – taking coal off the system and growing the share of renewables in our generation mix.
Some people will have had solar panels or a ground source heat pump fitted but, for the majority, their lives will have been largely unaffected by this change. That won’t be true going forwards. With the route to decarbonising the power sector increasingly clear, the focus now is on how to decarbonise heat, industry, transport and other sectors of the economy, such as agriculture. This next phase will require a step change in systems thinking, for example, analysing the implications for power demand of the take up of electric vehicles (EVs) or heat pumps; or thinking through how best to utilise the excess renewable generation on sunny or windy days. Couldn’t we just leave this to the market to resolve? Yes, it would be possible to let the market address these issues, if system and balancing costs were properly considered and the price of carbon was set at a level consistent with delivering the targets the government has set. The externalities created by using intermittent technologies, or fossil fuels, would then be reflected in investment decisions and the market could respond accordingly. But, sadly, history suggests that this won’t happen. Investors currently only know about the price of carbon in the year ahead, which makes investment decisions in assets lasting decades extremely hard to make. There are also monopoly elements of our energy system, like the gas and electricity networks, that can’t just be left to the market and need some form of regulation and strategic planning. Decisions about whether we need the gas network to carry hydrogen in the future, or how best to develop an offshore grid capable of delivering the government’s target of 40 GW of offshore wind by 2030, can only be taken by government. Net zero also gives rise to new functions that need to be carried out, like providing the specialist expertise to local authorities and City Regions to help them deliver their Local Area Energy Plans (LAEPs), and ensuring that these
Energy transition
local plans add up to what we need to meet our national carbon reduction targets. Two hundred civil servants There is precious little bandwidth in government or Ofgem to take on new responsibilities like this, or do this level of system thinking given other pressures, including COVID, Brexit and managing the current regulatory system. For example, there were around 200 civil servants involved in designing the Electricity Market Reforms (EMR) under the coalition government, the last major set of energy market reforms undertaken in GB, which I was responsible for when at the Department of Energy and Climate Change (DECC). Today, there is only a fraction of that number doing energy strategy work in BEIS, despite the complexity of the task being much greater now, reflecting the many pressing demands the department faces. So the need for systems thinking has never been higher; yet the capacity to do it is at an all-time low. A national energy agency The final point is about timing. The government and Ofgem are already reviewing the role of the System Operator, and whether it should continue to operate as a legally separate part of National Grid, or be moved out entirely into a new body. This is therefore the perfect time to be thinking holistically about what functions that new body should carry out if it were to be created. In my view, the National Energy Agency would: •
•
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Have lead responsibility for advising the government on how best to develop the energy system to achieve net zero at least cost to consumers, whilst ensuring security of energy supplies. Lead the national debate on what investments are needed in the energy system, across power, heat, industry and transport, to achieve net zero, building consensus around these measures. This would include investments in the power and gas grid network on and offshore. Run the competitive tenders to deliver this infrastructure, once assessed and approved by Ofgem, as being in the interest of consumers now and in the future.
Net zero will change all our lives – the cars we drive, the way we heat our homes, the way our businesses and industries operate; the next phase of decarbonisation is going to feel far more intrusive than what we have delivered thus far
•
Run the Capacity Market (CM) and Contract for Difference (CfD) auctions to procure the capacity and low carbon generation needed to hit net zero.
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Take on responsibility for advising local authorities on their Local Area Energy Plans (LAEPs) and assessing whether these local plans add up to what is needed at a national level to hit the carbon budgets.
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Be separate from the Climate Change Committee (CCC), which advises government on the carbon budgets and steps needed to adapt to climate change.
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Take on the strategic advice and market planning functions from BEIS, Ofgem, and National Grid.
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Be staffed by energy experts, drawn from these existing bodies, industry, the advisory sector and academia.
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Be run on a not-for-profit basis.
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Be accountable to the BEIS Secretary of State, who would appoint the Chair.
Specialist organisations In other sectors, we have seen similar functions outsourced to specialist agencies, filled with deep subject matter experts and able to advise democratically elected politicians on the best way to achieve statutory targets. Examples include: •
National Air Traffic Services (NATS), which manages the complex system that is air traffic control to a set of standards set by the government and the Civil Aviation Authority;
•
Transport for London (TfL), which manages different modes of transport in London to minimise costs and travel disruption, and is accountable to the Mayor of London; and
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Bank of England, which runs monetary policy to achieve a government-set inflation target.
There are many different governance models that could be used. Some are effectively government agencies. Others have a greater degree of private sector involvement. The NATS model, which combines a private sector ethos with public service objectives, could provide a useful precedent on which to base the National Energy Agency, as it combines elements of both private sector efficiency with public accountability. Other steps would be needed alongside creating a National Energy Agency to ensure alignment of objectives. In my view, it would make sense to change Ofgem’s remit now to align with the new overall objective of energy policy – to achieve net zero at least cost to consumers, whilst ensuring security of supply. Similarly, other investment frameworks, such as the Treasury ‘Green Book’, would need to be changed to align with the new over-riding policy objective to ensure consistency in decisionmaking across government. Beyond incremental change The UK has a long and proud tradition of pioneering new approaches to energy regulation. Just as the old RPI-X model established post-privatisation with a focus on cost efficiency evolved into RIIO, with a broader focus on outputs and incentives, the current framework now needs to evolve into one capable of delivering net zero at least cost to consumers. Now is the time to consider what institutions we will need to hit the 2050 target, rather than focusing on incremental changes to the current institutional design. In doing so, the UK could continue to lead the way in designing regulatory frameworks for the achievement of net zero, just as we did post-privatisation, when the focus was primarily on cost efficiency. ● Simon Virley CB FEI is Partner and Head of Energy and Natural Resources at KPMG in the UK. He was formerly Director General for Energy in the UK Department of Energy and Climate Change from 2009–15. He writes here in a personal capacity.
Internationally, there are a number of precedents for independent agencies providing this kind of strategic advice and management of energy market issues, including in Australia, with the Australian Energy Market Authority (AEMO) and the US, with PJM, or ISO New England. Energy World | February 2021 15
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INVESTMENT
Offshore renewables hold the key to post-COVID recovery
Large-scale investment, much of it from overseas, will be essential to any low-carbon recovery from the pandemic in the UK. Here, Rick Campbell argues that offshore wind will be a big part of that exercise.
T
here are many unanswered questions about what our post-pandemic world will look like, but what we do know for sure is that we need to rebuild the UK economy. We need an economy fuelled by cheap, reliable energy. And one that is competitive outside of the EU. To get the economy moving again, we need investment from around the world. To attract this investment in renewable energy projects, we need to ensure the right policies and measures are in place, and now’s the time to do it. Creating the right framework to facilitate and encourage investment needs to be a top priority for government. If we can position the UK energy sector as an attractive investment proposition, with attractive returns, then government funds can be used elsewhere for other critical services, such as the NHS for example. The UK is a world leader in the development, construction and
16 Energy World | February 2021
operation of offshore wind. The forthcoming Scotwind and Round 4 leasing rounds are incredibly exciting and there is a huge opportunity for the UK to develop supply chain capability, in particular for floating offshore wind. It is generally accepted now that fixed foundation offshore wind is cost competitive with other forms of renewable energy generation. Improvements in turbine efficiency and reduction in installation, operations and maintenance costs, together with the competitiveness of the supply chain driven by state support mechanisms, has provided a reduction in levelised cost of energy (LCOE) for the offshore wind energy sector. Floating offshore wind provides a huge opportunity for developing projects in regions which were previously not accessible. Technological advancements and lessons learned within offshore wind in the UK in recent years will
be incorporated by floating wind, meaning the trajectory for floating offshore wind to reach cost parity with other forms of generation will be much faster than fixed-bottom projects have seen. This domestic experience stands us in a strong position to export our expertise to support the development of projects globally.
At the Robin Rigg offshore wind farm, Natural Power designed the marine environment monitoring plan, managed surveys for birds, marine mammals, fish and benthic, ecological monitoring. Photo: Natural Power
Any country with a coastline The growing maturity of the offshore wind market, in particular in Europe and Asia-Pacific provides a reduced risk profile for investors. This, in turn, has reduced the cost of financing projects and provides an unparalleled opportunity for the deployment of new commercialscale generation. It is now realistic to consider next-generation offshore wind projects in any country with a coastline. The size and capacity of wind turbines has been a major contributor to the reduction in overall costs. It is now normal for
Energy transition
projects to seek consent for turbines with a generating capacity of up to 20 MW, and a maximum tip height over 300 m above the water, which was aspirational only a few years ago. An interesting challenge for floating offshore wind will be to ensure it is capable of accommodating next generation turbines. The industry has moved on enormously during the last five years. This demonstrates how a long-term support mechanism, such as the Contracts for Difference (CfD), the UK government’s main mechanism for supporting low-carbon electricity generation, can provide certainty to investors. The predictable nature of it attracts investment, enables cost reduction and allows the supply chain to mature. Whilst it is an industry objective to remove the need for such a mechanism, its efficacy in attracting investment is clear. As well as advances in technology and supply chains, an important lesson for emerging markets is to identify sensitive locations and a robust planning process for development of offshore wind projects. The industry will fundamentally change the use of areas of sea and coastal communities. It is important that this is done so in a manner which integrates with other industries and is respectful of current sea users, as well as seeking to minimise and mitigate effects on physical and environmental conditions on site. An example of where the industry has learned from elsewhere, and maintains a high standard worldwide, is with HSE practices. Building on 40 years of oil
Natural Power supported the decommissioning of the Blyth offshore wind farm, the first to be built in UK waters, with fisheries liaison, permit management and environmental assessment Photo: Natural Power
Building on 40 years of oil and gas offshore experience, UK HSE professionals are much sought after and the lessons learned through development and construction of offshore wind to date will form the principles to be used throughout the industry
and gas offshore experience, UK HSE professionals are much sought after and the lessons learned through development and construction of offshore wind to date will form the principles to be used throughout the industry. This must remain a central tenet of all our activities as the industry expands. An interesting development in 2020 has been meaningful investment in offshore wind by oil majors at all stages of the project lifecycle, in existing and emerging markets. This demonstrates a long-term, strategic approach to offshore wind, implying a change in organisational values within these companies which would indicate that talk of ‘greenwashing’ is now (hopefully) becoming a thing of the past. This is an important part of the transition to a zero carbon economy which shouldn’t be understated. Recovery from the pandemic The renewable energy sector as a whole is already on course and there is an agreed direction of travel to achieve our net zero obligations as part of the Paris Agreement on climate change – 100% by 2050 (2045 in Scotland). However we, like everyone, are anxious to see how the impacts of the global pandemic affect our industry. We have all been affected by COVID-19 in one way or another, and we have been fortunate that our business model has been largely resilient to the impacts other industries have seen. In part, this is testament to the important role renewable energy plays in the global recovery. So, when we emerge at the other
side of COVID-19, the decade ahead is critical. With targets set, momentum is building and costs are dropping. To help meet these targets, the UK Energy White Paper suggests that we need to quadruple current offshore production to 40 GW by 2030. Scotland alone needs to deliver between 8 and 10 GW of offshore wind, and a further 8–10 GW of onshore wind and solar PV, while also pushing energy efficiency and renewable heat. To facilitate this, investment is required for the supporting infrastructure, transmission and distribution systems; as well as support to deploy energy efficiency measures that further enhance the route to net zero. We need to look beyond the immediate future to the economy in 2040 to understand what infrastructure will be required to deliver and integrate capacity to create a seamless network. Our network needs to be fit for purpose and investment in infrastructure is essential. At a local level, we need to understand and plan for what people need, and at a national level we need to understand the large-scale infrastructure required. Underpinning this is the ability of our planning procedures to enable success. We need to submit proposals at the earliest possible stage to lay the foundations, so to speak, for attracting the investment required to build out this infrastructure of least regrets. In the immediate term, Round 4 of allocations under the CfD scheme, is due to open in 2021 so projects should be looking to secure consent for implementing technology that improves existing infrastructure. We have already seen the positive impact of increasing existing wind turbine heights and turbine blade extensions on overall energy output. Collectively, such activities will make a significant improvement to UK renewable energy output that helps us meet the carbon targets at the lowest cost to consumers. When it comes to offshore wind, it is clear that we are no longer asking ‘if’ it will take off, but ‘how’ we best go about doing it. Investment in infrastructure A challenge every market is facing at the moment is ensuring grid infrastructure is capable of accommodating offshore wind at the scale required to meet government targets. In many cases this will involve a level of coordinated, strategic investment which is larger than has been seen Energy World | February 2021 17
Energy transition
previously and will require a strong policy and regulatory framework. Other supply chain and supporting industries, such as ports for construction and operations, will require similar investment. New technology and improved efficiencies in offshore wind are bringing costs down and we have seen the advent of subsidy-free offshore wind. Although there is an acceptance that innovation will continue to reduce costs, the industry has, so far, required a support mechanism to deliver projects in all markets. The evolution of the electricity wholesale market through new energy trading arrangements must deliver a move away from this. The most significant driver behind the expansion of offshore wind to date has been the ability to achieve cost parity with other forms of renewable generation, and the most important step from here is to demonstrate that projects can be deployed without a governmentbacked support mechanism. Given the reduction in costs that the industry has seen in recent years this is a realistic objective, and will most likely be achieved through corporate offtake. The growing industry is expected to deliver a large number of jobs, both new entrants and
those retraining from other industries. Whilst this is excellent, and even more so in the face of a global downturn, it is important that as an industry we seek to train up staff in a responsible manner. We have big ambitions in this area and are keen to play our part in securing and training the next generation of renewable energy professionals. New industrial activity In tandem, we will see further advancements in disruptive ideas for implementing success. Inevitably electric cars will takeoff during this decade and that means we have a large battery resource sitting dormant for large parts of the day, so there’s potential to utilise this for load shifting, and therefore maximising available power. Aggregation of grid connected assets (small and large) will be a feature of the new intelligent networks. COVID-19 has provided National Grid with a view of the future in terms of system operation while demand has dropped (to around 18 GW capacity twice in recent months) and is running largely on renewables. Overall renewable capacity has increased dramatically in recent years, becoming Britain’s main power source during the first
The most important step is to demonstrate that [offshore wind] projects can be deployed without a governmentbacked support mechanism – this is a realistic objective, and will most likely be achieved through corporate offtake
quarter of 2020. Offshore wind is set to provide a unique opportunity for the establishment of new industrial activity in the coming years and is certain to play a major part in the global economic recovery. Whilst the UK is currently at the forefront of the industry, it is clear that countries around the world are looking to attract investment, develop their supply chain and build towards a net zero economy. As an industry, we are committed to creating worldleading, competitive and compelling projects that are good for reaching targets, good for the supply chain, and ultimately good for the economy. And if we take advantage of the ever-falling price tag of renewables to put clean energy at the heart of COVID-19 economic recovery, we can take a big step towards a healthy natural world. ● Rick Campbell is the Head of Offshore at Natural Power, a consultancy and service provider that supports a global client base in the delivery of a wide range of renewable projects. Its experience extends across all phases of the project lifecycle from initial feasibility, through construction, operation to decommissioning.
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Energy transition
HYDROGEN
Putting hydrogen to the test The potential use of hydrogen for home heating and other applications is being trialled at a series of projects around the UK – as Nick Cottam reports.
W
hen the world wakes up after COVID, hydrogen will have a new impetus and a significant role to play as part of efforts to transition to a low carbon (net zero) global economy. Putting the hydrogen hype to one side, this is the message coming out of a series of trials underway in the UK and overseas. While countries such as France, Germany, Japan and Australia have pledged billions of dollars of investment in a hydrogen future, the UK is taking its own cautious steps, following the government’s loudly trumpeted announcement of a green revolution. Initiatives such as HY4Heat, H21, H100 Fife and HyDeploy are all underway, the onus being to demonstrate how hydrogen can be used safely and efficiently as a source of heat for homes and businesses. ‘There are many great initiatives underway in the UK at the moment,’ says Graham Bennett, who heads up DNV GL’s Energy Transition Team for the UK and West Africa. ‘The UK gas network is well on the way to demonstrating its ability to handle
20 Energy World | February 2021
hydrogen and just needs a clear signal of support from government, and funding approvals from its regulator Ofgem.’ Hydrogen-ready boilers This came, in part at least, when the UK government’s Committee on Climate Change (CCC) advised in December 2020 that all new boilers should be hydrogen ready by 2025 at the latest. There are currently around 1.3mn new gas boilers sold every year and more than 22mn in total connected to the gas network. A key first step has been to show that it is possible to safely run a hydrogen blend on existing appliances and distribution networks. To this end, for example, a blend of 20% hydrogen has been successfully piped to 130 homes and faculty buildings at Keele University in the UK’s first live pilot to test the gas. HyDeploy, a £7mn project backed by Ofgem’s Network Innovation Competition, has established that a hydrogen blend can be used with minimal disruption to customers while also
The Spadeadam project features a 1-km pipework test loop designed to replicate the national gas transmission system Photo: DNV GL
producing a significant fall in carbon dioxide emissions. The CCC estimates that if a 20% blend was rolled out across the country it could save around 6mn tonnes of carbon dioxide emissions a year – the equivalent of taking 2.5mn cars off the road. A follow-up trial, HyDeploy 2, will take the blend to 670 homes in the North East, while in Scotland up to 1,000 homes in Fife could be receiving green hydrogen by the end of 2022. In the first phase of the H100 Fife trial, some 300 homes are being fitted with hydrogen boilers, heaters and cooking appliances as part of the UK bid to reach net zero carbon by 2050. The Scottish government is supporting the Fife trial with a grant of £6.9mn, part of an £18mn Ofgem pot to support the project. Upstream there are UK projects such as HyNet and Acorn, both designed to make so-called blue hydrogen from natural gas – the latter, located at Peterhead, north of Aberdeen, is seeking to square the sustainability circle through the use of carbon capture and storage (CCS). The net zero holy grail is the production of green hydrogen in sufficient quantities from renewables; the Catch 22 being that you need an awful lot of renewable energy to isolate enough hydrogen. Dedicated delivery ‘What we really needed to make this work,’ says Bennett ‘is a National Hydrogen Delivery Authority. At the moment there is no dedicated source of hydrogen for domestic consumption and the gas networks are only allowed under regulations to transport gas.’ That could change as operators demonstrate they can produce green hydrogen at scale. For example, the wind energy producer Ørsted is seeking to harness power from its Hornsea Two facility which is set to become the world’s largest offshore wind farm with the potential to produce green hydrogen. In what Ørsted’s Damien Speight describes as ‘nature’s recipe for a world run entirely on
Energy transition
green energy,’ the company has teamed up with electrolyser manufacturer ITM Power, Phillips 66 oil refining company, and low carbon energy consultant Element Energy to develop the North Sea demonstration project Gigastack. Phase 2, which has received £7.5mn of funding from the Department for Business, Energy and Industrial Strategy (BEIS), will involve the production of the UK’s first 100 MW electrolysers designed to support large-scale green hydrogen production. The process uses electrolysis to separate water into its constituent parts, the end result being that you capture the hydrogen. Another significant downstream trial is taking shape at DNV GL’s Spadeadam research centre in Cumbria. This offline trial is the first of its kind in the UK and involves the testing of hydrogenready boilers which have been developed and manufactured for domestic use. It also features a 1-km pipework test loop which is designed to replicate the national gas transmission system.
uninhabited terrace houses which are designed to replicate real-world energy requirements and any risks from putting hydrogen into the mix. Each house, featuring a different layout and design, contains a hydrogen-ready boiler and a standard domestic set-up for heating and hot water.
A blended solution ‘We will be using hydrogen at various blends,’ explains Bennett. ‘You can use a fuel mix of 20% hydrogen without any conversion whatsoever but this doesn’t achieve the scale of decarbonisation we need for net zero. If we want to achieve a 100% hydrogen solution then the boilers need converting.’ The CCC has estimated that the UK needs to be spending between £15bn and £20bn every year between now and 2050 on decarbonisation initiatives if we are to have any chance of meeting net zero – a tall order whatever the state of the economy. The Spadeadam trial is linked to what is known as the H21 programme, a collaboration Safe as houses between all UK gas and Safety, says Bennett, is a key transmission networks to see how element of the Spadeadam trial, the existing system could be the focus being to develop a repurposed to safely carry safety case for the transmission hydrogen to homes and businesses. and distribution of hydrogen The aim is to keep the test facility as a fuel for home and business separate from the UK’s national heating. ‘There are more people transmission system, allowing killed in homes from carbon tests to be carried out in a monoxide poisoning than from controlled environment. gas explosions or fires. You have to While hydrogen will only be one weigh up the risks and benefits in a element in the UK’s future zero trial like this and there is no carbon carbon energy mix, it will be an monoxide risk from hydrogen.’ important one predicts Bennett. Perhaps fittingly in this context, ‘We will need electric heat pumps, DNV GL Research Centre is part of for example, but hydrogen will be RAF Spadeadam, where the least disruptive change for technological innovation has been domestic consumers.’ a feature since the 1950s. While host DNV-GL must deliver a Customer buy-in credible safety case for the This is evident from the first practical use of hydrogen as a fuel, phase of HyDeploy, led by the gas the £10mn FutureGrid initiative is distributor Cadent in partnership being led by National Grid, with with Northern Gas Networks partners Northern Gas Networks and Keele University. ‘The results and Fluxys, the operator of reflect those we were getting from Belgium’s gas transmission laboratory testing before the pilot network. began,’ comments Ed Syson, Chief ‘Sectors such as heat are difficult Safety and Strategy Officer for to decarbonise and the importance Cadent. ‘The gas network and gas of the gas networks to the UK’s appliances are operating normally energy supply means projects like and customers are positive about this are crucial if we are to deliver the project. They haven’t noticed low carbon energy, reliably and any difference to their gas supply safely to all consumers,’ and haven’t needed to change the commented Antony Green, the way they use gas.’ head of National Grid’s hydrogen The Spadeadam test houses are project. served by two sets of gas networks, Within the test loop of one for standard methane and one pipework, the Spadeadam site for hydrogen. Each network is features a snapshot of modern engineered with valves to change living; in this case a row of flows and mixtures and produce
‘You can use a fuel mix of 20% hydrogen without any conversion whatsoever, but this doesn’t achieve the scale of decarbonisation we need for net zero.’ Graham Bennett, DNV GL
test leaks as required. ‘One of the key advantages of hydrogen,’ says Bennett ‘is its ability to enable decarbonisation across multiple sectors. This will be most important for domestic and industrial heat, transport, power generation, and to act as an energy storage medium for variable renewables.’ Massive investment He adds: ‘A coherent vision for the entire energy system is needed. Every option we look at will cost more than existing solutions. Costs will come down as has been the case with wind power but it is estimated that we will need to spend around £1tn by 2050 to meet our net zero target.’ Keele University’s Professor Zoe Robinson stresses the human dimension when introducing a new fuel such as hydrogen. ‘Social acceptance is a key part of technical energy transitions,’ she says. ‘One of the learning points from our research so far is that evaluating the opinions of people taking part is important, both for increasing our knowledge but also making those people feel valued.’ An ITM Power electrolyser is also helping to drive Keele’s HyDeploy trial, using an electric current to split water molecules into hydrogen and oxygen. Keele was deemed suitable for the trial because it has its own private gas network which can be safely isolated from the wider UK network. Prime concerns for households involved have revolved around cost and safety and, as Bennett notes every option for transforming our energy system will cost more than existing solutions. The challenge is to drive down costs through economies of scale – larger investment, bigger projects and ultimately lower capital costs to produce large volumes of green hydrogen. ‘The world urgently needs to massively ramp up deployment of breakthrough solutions like green hydrogen,’ says Nigel Topping, COP26 High Level Champion for Global Climate Action. ‘The bold vision and leadership of businesses can propel green hydrogen along an exponential growth trajectory to support economic recovery and deep decarbonisation sooner than anticipated.’ ●
Energy World | February 2021 21
Energy transition
PHOTOVOLTAICS
UK solar market provides reason for optimism W ith falling costs, better technology and big projects in the pipeline, there’s a justifiably upbeat mood among solar energy producers about the future for groundmounted systems. While many feel UK government policy has done the industry few favours in recent years, it received a boost in November with news that solar would be allowed to compete in this year’s Contract for Difference (CfD) auctions, enabling renewable projects to get started. Successful CfD bidders enter into a contract with the Low Carbon Contracts Company (LCCC), a government-owned entity. They receive a flat (indexed) rate for electricity produced over 15 years; the difference between the ‘strike price’, reflecting the investment cost in a particular low carbon technology, and ‘reference price’, which measures the average GB market price for electricity. Solar, long unsure what to expect from the Department for Business, Energy and Industrial Strategy (BEIS), received further good news in that CfD will now run until 2035. Solar Energy UK (until recently the Solar Trade Association) believes the changes could herald significant numbers of subsidy-free solar projects over the next few years. However SEUK wants to see more frequent auctions. These, it says, would accommodate solar PV’s shorter project development timeframes. Sites for solar SEUK statistics indicate that ground-mounted solar is taking off. Over 12 GW of utility-scale projects are currently being developed, while 500 MW per month is being added to the pipeline. There were almost 200 new schemes in 2020. According to SEUK Chief Executive Chris Hewett, those already involved are expanding their reach. ‘I think [changes to] CfD will accelerate their interest,’ he says. For landowners contemplating solar as a long-term investment, subsidy-free solar rents can typically be around £2,500 per hectare. Payment levels may 22 Energy World | February 2021
Years of policy indecision have not dampened enthusiasm for groundmounted solar in the UK. Andrew Mourant looks at how market conditions continue to improve.
Clayhill in Bedfordshire is said to be the UK’s first subsidy-free solar farm Photo: Anesco.
depend on how much sun a site receives and expenses such as connecting to the national grid, planning, installation and finance costs. According to property consultants Hobbs Parker, developers prefer sites of 40–80 ha, with nearby access to grid connection and without any special environmental designation. It’s usually developers, rather than landowners, who deal with planning applications, paying legal and other costs. Lawyers recommend that agreements include a decommissioning bond and that they stipulate that the developer takes on the risk of insuring against damage caused by livestock. Hobbs Parker reported a dramatic drop in installation costs from around £1.4mn per MW in 2011 to £600,000 by 2018, driven not least by the increased efficiency of solar panels. The technology continues to improve
– and the falling cost of hardware has been crucial. A survey of SEUK members two years ago suggested that the levelised cost of electricity – which measures the average net present cost of electricity generation for a plant over its lifetime – would be 35% lower by 2030 than had been predicted in 2014. The findings of a new SEUK survey should be out soon. ‘We expect to find that cost projections will be lower still,’ says Hewett. ‘Actual costs to 2020 are consistently lower than projections and still falling.’ Solar farm developers strike long-term deals with landowners, sometimes up to 50 years. ‘With 500–600 W panels coming on to the market, you need less land,’ says Hewett. Innovations gaining ground include panels that track and tilt towards the sun. Gridserve, at its solar plant in York, has developed technology enabling energy to be generated from both sides of a solar panel (the rear benefiting from light bounce) without proportionally increasing costs. Panel improvements Panels may be more sophisticated, but Hewett says those dating back 10 years, when ground-mounted solar began to take off, still perform pretty well. Now, a decade later,
Energy transition
solar farm applications usually come with a plan for battery storage, for which costs are also tumbling. Renewables developer Anesco was a pioneer of the combined operational setup. The firm says including batteries was central to the economic viability of what, in September 2017, was claimed to be the UK’s first subsidy-free solar farm, Clayhill. The 10 MW site is located near Flitwick, Bedfordshire and boasts a 6 MW energy storage facility. It was developed after a government subsidy, the Renewables Obligation scheme, had closed to new applicants. Anesco’s Chief Executive at the time, Steve Shine, claimed the loss of subsidies ‘doesn’t have to signal the end of solar as a commercially viable technology.’ Anesco’s current CEO, Mark Futyan, says the UK has become the dominant market in Europe for battery storage. Despite ‘adverse’ regulatory changes, there’s been good news such as changes to the CfD, the government scheme to encourage investment in low carbon electricity production. Some 4.7 GW of battery projects now successfully prequalify for the T-4 auction. Meanwhile, changes to National Grid’s Balancing Mechanism, designed to manage electricity supply and demand, have created opportunities for smaller scale battery storage. ‘In today’s market, the main benefit of co-locating storage with renewables is to reduce combined construction costs,’ says Futyan. ‘Long-term we might see a market signal to use excess wind or solar generation for charging, with battery discharge at peak times.’ In December 2019 Gridserve handed over a solar farm to Warrington Borough Council which, it claimed, paved the way for a national expansion of subsidy-free renewable power. Its 34.7 MWp solar farm in York, said to be largest completed since 2016, includes 30 MWh of battery storage. This means the plant can supply solar-generated power by day and battery-stored energy by night. Pathfinder Clean Energy’s (PACE) involvement typifies how the sector is expanding. PACE claims to have a development pipeline of over 1 GW of solar projects in the UK and overseas. Its target is to construct over 300 MW in the UK over the next three years. Recently PACE submitted planning bids to build two subsidy-free ground-mounted farms, totalling 40 MW, in Norfolk. These will have scope for co-locating energy storage. Subject to planning and financing, they’re due to start
SEUK statistics indicate that groundmounted solar is taking off – over 12 GW of utility scale projects are currently being developed, while 500 MW per month is being added to the pipeline
operating in the middle of this year. Power purchase agreements (PPAs) involving public and private bodies are also gaining traction. Last November, in a £40mn deal, the City of London announced a 15-year PPA with developer Voltalia. Under the arrangement it will buy solarproduced electricity from a 50 MW farm in Spetisbury, Dorset, for which planning permission was granted in February 2020. It’s expected to provide electricity for over half the City Corporation’s needs, powering such buildings as the Guildhall and the Barbican arts centre. At about the same time, Tesco revealed its partnership with renewable energy investor, Low Carbon, in which it will buy electricity from three solar farms in Essex, Anglesey and Oxfordshire. Environmental impact Any solar farm over 50 MW requires submission of a Development Consent Order via the Planning Inspectorate, which acts on behalf of BEIS. In May 2020, then-BEIS Secretary of State Alok Sharma gave permission for a huge subsidy-free solar/battery storage operation at Cleve Hill, near Faversham Kent. Said to be the UK’s biggest of its type, the scheme will have the capacity to generate up to 350 MW, sufficient to power 91,000 homes. The bigger the scheme, the greater its physical impact and the more concerns it is likely to throw up. Battery storage plans at Cleve Hill triggered safety concerns among locals about the prospect of fumes, leaks and fire hazards. The BEIS examining authority (ExA) considered all arguments but decided that risks ‘could be managed or mitigated’. Meanwhile, the applicants – Cleve Hill is a joint venture between solar industry firms Hive Energy and Wirsol Enery – amended their plans. They switched from a standalone battery storage system to a containerised lithium-ion battery scheme. The report into Cleve Hill, which is set to cover around 490 ha, reflected the concerns of environmental bodies such as Kent Wildlife Trust and the RSPB. Sharma admits that nationally significant energy projects are ‘very likely to have a negative effect on landscape that… may be hard to mitigate.’ Hewett says that SEUK does a lot of work on environmental factors and it keeps an eye on what’s happening beyond the UK. He points to projects in the Netherlands, where solar panels are replacing polytunnels and specialist crops being grown beneath them. It could be a way forward in the UK.
Hewett claims that, in general, the public has become more amenable to solar farms. ‘Developments that go to planning aren’t getting much pushback from local people,’ he says. Community solar Ground-mounted solar isn’t the sole preserve of large investors and corporates. Last February (2020), Community Owned Renewable Energy Partners (CORE) and Yealm Community Energy (YCE) celebrated the connection of the UK’s first subsidy-free community groundmount solar plant at Creacombe Farm, south Devon, a project five years in the making. YCE plans to offer the community a chance to invest directly in Creacombe along with another solar farm, Newton Downs, also acquired in partnership with CORE in late 2017. Creacombe will be managed by Bright Renewables, a community-owned renewable energy asset manager set up in 2018 with support from CORE and charitable trust Power to Change. According to Peter Brown, YCE chair, both solar farms will be able to generate enough electricity to supply the equivalent of all the homes across five parishes. ‘Once community-owned we expect to generate a healthy profit which will be spent locally to grow… more green power generation,’ he says. CORE is a social investment partnership between Big Society Capital and charitable trust Power to Change. However, Power to Change has suspended all current funding programmes as its focus has switched to supporting community businesses impacted by COVID-19. What does the future hold for ground-mounted solar? Futyan predicts a market realignment, with different types of investors coming forward – and that supply chain efficiencies will increase, reducing overall build costs. ‘We’ll see an increase in larger scale projects, close to the 50 MW planning threshold,’ he says. ‘Competition will increase as more capacity comes to market, putting downward pressure on frequency regulation prices.’ Amid all this there will surely be further planning battles, though events at Cleve Hill suggests that system will take the side of big developments given government commitment to net zero emissions by 2050. ‘More than 3 GW of projects in the planning pipeline stand ready for development,’ says Hewett. ‘It isn’t up to government what will happen. We will see the market take over more and more.’ ●
Energy World | February 2021 23
Energy transition
POWER GENERATION
Investment required to support advances in wind power
First onshore and more recently offshore wind have been major enablers of the energy transition to date. But the sector must not rest on its laurels – there’s much left to do before wind energy truly becomes a superpower. Mattia Boccolini reviews DNV GL’s proposed path forward.
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he world is headed towards a net zero carbon future, characterised by a profound shift towards electrification and to electricity generation from renewable sources such as solar and onshore wind. However, this is still not enough to meet climate targets. While electricity is less than 20% of the energy demand mix today, it will double its share by 2050, according to DNV GL’s fourth Energy Transition Outlook (ETO). This year’s report states that while carbon emissions peaked in 2019, they will not fall sufficiently by 2050 to reach the Paris Agreement goal of below 2°C global warming by the end of the century. In fact, the model estimates a rise in average global temperatures of 2.3°C above pre-industrial levels. The dedicated power supply and use report forecasts that average capacity factors in the wind industry will keep increasing in all regions with significant expansion in Greater China, Europe, the Indian 24 Energy World | February 2021
Subcontinent and North America. Power systems in most regions will be dominated by solar and wind to provide about a quarter (24%) of the world’s electricity in 2030 and more than half (62%) by mid-century. Over the next three decades, global annual solar PV generation is predicted to grow 28-fold, reaching 18.7 PWh just before 2050. In the same timeframe, installed wind capacity could increase ten-fold to 4.9 TW for onshore, 1 TW for fixed offshore, and 260 GW for floating offshore wind.
While the contribution of offshore wind will grow, reaching more than a quarter (28%) of total wind production by 2050, wind generation remains predominantly onshore Photo: DNV GL
Growth drivers For onshore wind, there are several mega drivers fueling the surge in capacity. While magnified climate change effects will make consumers increasingly aware of the need to transition towards greener energy sources, advances in technology will lower the costs of renewables. Greater electrification of society and job creation from local plants will
also shift the discourse around renewables and act as catalysts for their development and deployment. Furthermore, as traditional energy systems age and the need for decommissioning increases, investors will look on renewables as an increasingly attractive financial prospect for replacing old fossil fuel systems. While the contribution of offshore wind will grow, reaching more than a quarter (28%) of total wind production by 2050, wind generation remains predominantly onshore due to lower economic, logistical and technical limitations. Innovation is key DNV GL’s annual study anticipates that wind capacity additions should consistently exceed those of the previous decade until 2050. By then, solar and wind power will become the main providers of electricity generation, and in many cases, become complementary energy sources in hybrid power
Energy transition
plants. Combined with energy storage systems, these aim to best exploit onsite resources. It is expected that advances in wind turbine technology and growth in economies of scale will further cut costs and reduce installation times – making onshore wind more and more attractive for investment. There are several factors to take into consideration when deciding where to build a wind farm: environmental impact, energy potential of the area, the geotechnical conditions of the site, environmental, legal and territorial viability, grid connection and the accessibility of the location. As technology develops, additional viable sites must be found. Or older sites need to be repowered with modern, larger turbines to adapt to the varying wind conditions and enable significantly improved energy production and reduced levelised cost of energy. Turbines are also increasing in size and capacity. As a result, manufacturers are introducing concepts to facilitate transport, installation and up-tower repairs. For example, one industry player has unveiled its largest onshore wind turbine to date, with a modular two-piece blade, while other suppliers are introducing solutions such as up-tower crane devices for installation and repairs. Proper testing, adoption of international standards and independent certification will play a crucial role in project and technology risk mitigation. The ETO also noted that wind farms increasingly provide services to the grid and have begun to utilise progressively detailed data and model-driven approaches (such as digital twins). Industrial smart systems can inform wind farm operators by continuously sending data via the internet and predicting turbine loading and behavior based on measured wind data and other signals recorded by turbine sensors. Wind power hubs While the energy transition will drive change for power systems, grids and electricity markets will be essential enablers. Globally, the capex ratio between transmission (33%) and distribution (67%) has remained almost constant over the last five years. However, in the case of the most advanced renewables integrators, the ratio starts to shift towards transmission. High voltage direct current (HDVC) applications for interconnection and offshore wind integration are planned or ongoing. In Greater China, the Indian
Subcontinent and Europe, expansion of grids to cover larger market areas will move from interconnection to ‘supergrids’ and ultra-high-voltage systems for long distance transmission. Governments in Europe are already focusing on larger-scale and cross-border infrastructure projects. An example of this is Germany’s Westküste 100 project, which includes a 700 MW green hydrogen plant powered by a dedicated wind farm. Similar projects are being developed in the Netherlands and Denmark with government support. These projects will require additional market design and operating rules to support business models for offshore wind projects in cross-border hubs, as well as for the production and integration of green hydrogen in the energy system. Government support and challenges Whilst government support has proven vital to renewables projects over the past decade, 2021 will see increased partnerships between the public and private sectors. The deployment of renewables projects and adoption of sustainable energy in the future will depend on the commitment of political leaders. In the next five years, almost half of wind and solar projects in the European Union’s pipeline are tied to planned government-backed incentives. Following a reduction in spend and the uncertainty around the COVID-19 situation, many states now see renewables as an opportunity to change the trajectory of their economies and unemployment levels, while targeting overarching goals such as reducing energy bills and carbon dioxide emissions. Renewables will be a popular option for governments globally in the coming years, as the cost of electricity from onshore wind and solar power is increasingly cheaper than from fossil fuel plants. In scores of regions around the world, renewables are the cheapest way of meeting the growing demand of thriving populations and economies, as well as meeting national and international emissions targets. The UK government plans to double the amount of renewable energy it will subsidise next year after agreeing to include onshore wind and solar power projects for the first time since 2015. Energy companies will compete for subsidy contracts in a competitive auction which could support up to 12 GW of renewable energy, or
Power systems in most regions will be dominated by solar and wind to provide about a quarter (24%) of the world’s electricity in 2030 and more than half (62%) by mid-century
enough clean electricity to charge up to 20mn electric vehicles. While the UK’s £12bn of public investment in renewable energy has been welcomed by the industry, it pales in comparison with China’s commitment to investing 2.1% of GDP in the green economy. Furthermore, President Joe Biden has recently unveiled his ambitious plans to spend $2tn over four years to tackle climate change, proposing to make US electricity production carbon-free by 2035 and to have the country achieve net zero emissions by the middle of the century. Renewable evolution While it is encouraging to see increasing electricity generation from renewables, this development is not without its challenges. The lack of government frameworks in some markets, limited or aging transmission and grid capacity, and the public opposition to wind turbines ‘in the backyard’ all need to be addressed to make onshore wind a more appealing option for investors. Governments around the globe must commit to post-pandemic economic stimulus packages, bold policies and supportive infrastructure regulations that will drive the uptake of low or zerocarbon solutions. Such an approach will prove to be a good and sustainable use of public stimulus in a post-pandemic economy. Technologies which already exist can deliver a future within the bounds of the Paris Agreement’s temperature targets. However, much stronger policies and regulations are needed to scale solutions in all sectors – particularly hard-to-abate sectors that have yet to be subjected to targeted policy measures. We need a combination of solutions to set a new path that is sustainable and people-centred. And we need it now because the challenge ahead cannot be underestimated. It will be crucial to figure out how to embrace technological advancement by effectively handling the increasing volume of variable renewables. To truly accelerate the pace, higher carbon pricing, rapidly scaled and deployed renewable technology, expanded digitalised regional grid infrastructure, and greater energy-efficiency measures are urgently needed. ● Mattia Boccolini is Service Area Leader for Renewables Advisory with DNV GL – Energy, https://www.dnvgl.com/
Energy World | February 2021 25
Energy transition
CLIMATE NEGOTIATIONS
COP26 – the way ahead
Professor John Loughhead FREng, former BEIS Chief Scientific Advisor, explains what he would like to see from the COP26 meeting to be held in Glasgow later this year.
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ll 197 countries who are party to the UN Framework Convention on Climate Change (UNFCCC), established at the Rio Earth Summit in 1992, meet annually to review activities and agree new actions to tackle climate change. This year, COP26 – the 26th Conference of the Parties to the UNFCCC – will be hosted by the UK and Italy in Glasgow on 1–12 November, a year later than expected due to the COVID-19 pandemic. The discussions are especially important this year as they will examine progress against the targets agreed at the Paris meeting in 2015. There, for the first time, each and every country agreed specific actions called Nationally Determined Contributions (NDCs), to reduce emissions, develop adaptation actions, and to address so-called ‘loss and damage’ mechanisms to compensate for climate-induced catastrophes. The latter are still under discussion. Importantly, all countries have been asked to revise their NDCs for COP26 to increase impacts by 2030, as current measures are predicted to result in average temperature rises of about 3.3oC even if they are all actually implemented. Since 2015 work by the UNFCCC scientific group, the
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Intergovernmental Panel on Climate Change (IPCC), published in 2018, has shown that if average temperature rises can be held to 1.5oC the effects, in terms of extreme weather events such as heatwaves and heavy rainfall, can be significantly reduced compared to a temperature rise of 2oC. Adopting measures to try and achieve this target also has the benefit of slowing the rate of average temperature increase, which allows more time to implement adaptations to the inevitable changes in the environment that will occur. But to do this, global emissions will need to reduce 45% from 2010 levels by 2030 and achieve net zero by 2050. Such changes are significantly greater than the targets adopted at Paris will produce, so the case for more urgent and ambitious action has become clear in the last five years. In some ways the delay to COP26 taking place may prove advantageous to the discussions. The world has changed markedly over the extra year. China, Japan, South Korea, South Africa and Canada have declared an ambition to achieve net zero emissions by 2050 or 2060, and the election of Joe Biden as President makes it very likely that the US will
dramatically change its position to a 2050 net zero target too. More than 110 countries have declared an intent to achieve this (although only six, including the UK, have specific legal commitments in place). The momentum has shifted, so for the remaining large emitters – notably India, Russia and Saudi Arabia – pressure will increase to demonstrate greater commitments than they have to date. A real challenge for COP26 will be the extent to which this group is prepared to make a material contribution to the global emission reduction efforts. There are genuine issues they have to face, primarily the economic challenge, but the changed US stance could play a major influence on their position. It is reasonable to assume that the balance of views internationally has now moved to accepting that more ambitious action is required, as opposed to the position in Paris where there was debate about the need for the scale of response proposed by the climate leader countries.
Celebrating the signing of the Paris Agreement at COP21 in 2015 Photo: UNclimatechange
Targets for success The President of COP26, Alok Sharma, has indicated the meeting’s focus will be the transition to clean energy, clean transport, nature-based solutions,
Energy transition
adaptation and resilience and finance. What will be critical are the binding commitments countries are prepared to make to deliver them. Aspirations provide cheery announcements, but the success of COP26 will be measured by hard targets and the support of means to deliver them. Assuming we see targets accepted, I believe there will have to be an emphasis on innovation to enable them. The International Energy Agency’s (IEA) Energy Technologies Perspectives report last year claimed that 35% of required emissions reductions will come from technologies that are still at very early stages of exploration, and a further 40% from those not yet commercially deployed. This represents an enormous challenge that will require a response from both the public and private sectors. Fortunately this has already started. For earlystage technologies the Mission Innovation initiative brings together 25 major countries working to accelerate innovation progress. Mission Innovation was launched at the Paris COP in 2015 with members pledging to double public resources for clean energy innovation by 2020. A few months ago they unanimously agreed to support a second phase, focused on delivering specific outputs needed to meet more ambitious emissions reduction targets. In parallel, the Clean Energy Ministerial meetings have become a forum for countries to share information on transition policies, and form collaborations on demonstrations and developments in later stage, but non-commercial, technologies. Combined with the UNFCCC Race to Zero campaign, Oil & Gas Climate Initiative, Energy Transitions Commission, World Economic Forum Future of Energy and many others we have a plethora of campaigns. A valuable output from COP26 would be a means for these to work in a cohesive fashion rather than independently. A substantial task Assuming COP26 does secure commitments globally, the task of delivering will be substantial. The global economy is today underpinned by carbon-based energy and the implication of a change towards net zero emissions is its total transformation, something Rachel Kyte, Dean of the Fletcher School at Tufts University, has termed ‘a handbrake turn for the world economy’.
Energy and industrial infrastructure are typically longlived, so making the required changes at the pace demanded will not be easy, could demand early retirement of some assets, and will need sustained commitment at government level. An example is that changes to low carbon heating in UK dwellings will require upgrading the fabric and systems of around a million homes annually for each of the next 30 years. That demands the development of a suitably skilled workforce in the hundreds of thousands, and investment of at least £10bn each year. Who will pay the costs, and how they can be recovered or justified at personal or corporate level remains to be agreed. Similar efforts will be needed in all countries, some of whom may not have the financial means to deliver them, so finance mechanisms to be discussed at COP26 are of real import. Clearly the downward pressure on carbon emissions will challenge the existing oil and gas business models, and we are now at or close to the point of peak oil production. Evidence can already be seen in the markets of caution over the future of the industry; the market capitalisation of Ørsted now roughly equals that of BP for instance. However, all is not bad news, as the importance of oil and gas will not disappear rapidly – although the nature of its use will probably change. The IEA’s latest World Energy Outlook projects natural gas supply remaining roughly at current levels until 2040, and oil supply doing the same or seeing a reduction of up to a third over the same timescale, depending on policies pursued internationally. The difference will come in how these fuels are used. After a couple of decades of tentative exploration it seems probable that carbon capture and storage (CCS) technologies will become a significant means for countries to meet their emissions reduction goals, particularly in the industrial sector and as a route to produce low carbon energy vectors such as blue hydrogen. Gas remains attractive as a transition fuel, especially for those places where coal is currently exploited. The opportunity for the incumbent oil and gas companies to find new roles is there, but they will need to become advocates for change in how their products are used and leaders of the transition. An important and often overlooked aspect will be helping their current customers through the
changes they will need to make to stimulate demand for new means to provide energy.
Professor John Loughhead FREng
A green recovery The impact of COVID-19 on climate change mitigation efforts is still to be understood. Restrictions on travel and economic activity have caused an immediate reduction in emissions, but it is not clear to what extent this will rebound as vaccination is progressively implemented globally. Previous experience suggests travel will resume with time, so the main question is whether the economic cost of the pandemic will inhibit ability and willingness to change the system, or the need to stimulate economies will find energy transformation an attractive option. Recent signals from the Biden team hint at decarbonisation of the electricity system, major deployment of electric vehicle (EV) chargers, and greening of buildings in the US by 2035, in addition to the $1.9tn stimulus package for direct COVID support. Meanwhile, the EU and UK have both declared intents to establish a ‘green recovery’. In the UK, the announcement in November 2020 of a 10-point plan for a green industrial revolution with £12bn of public funding towards a total £50bn investment demonstrates intent, but details of exactly what will be done, and when, are still to be disclosed. Importantly, making the required changes means tackling the activities increasingly difficult to decarbonise, as most of the lowhanging fruit has been exploited. So, although a small contributor to global emissions, the UK’s performance will be influential. As host of COP26, where increased commitments are sought; as the first country to adopt legal climate targets; and the first to commit in law to achieving net zero, the UK’s ability to demonstrate real progress against its increasingly challenging ambitions will be seen as proof of feasibility by many. It is therefore significant that Alok Sharma is now committed full-time to his role as COP26 President, relinquishing his position as UK Business Secretary. As a major statement of its intent to deliver a successful COP26, this is the first step by the UK government. But securing agreement to what is needed, and then showing domestic delivery, will be no easy task. We should wish him well. ●
Energy World | February 2021 27
Finance and investment
DEVELOPMENT FINANCE
Underinvestment in energy hinders sustainable development
Despite measurable progress in recent years, finance committed for energy access and clean cooking is still not targeted where it is most needed. Olivia Coldrey looks at how financiers can address the problem and help the world get on track with sustainable development targets.
The IEA estimates that $41bn is required annually to achieve universal residential electrification Photo: SEforALL
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he United Nations’ Sustainable Development Goal 7 (SDG7) calls for affordable, reliable, sustainable and modern energy for all by 2030. Currently, there are around 789mn people worldwide who have no access to electricity and 2.8bn people with no access to clean fuels or technologies for cooking. Meeting SDG7 targets for electrification, clean cooking, energy efficiency and renewable energy is impossible without huge volumes of finance, judiciously deployed. Politicians, development agencies and businesses continuously state the importance of closing energy access gaps, boosting efficiency and deploying clean technologies. But only finance – not words – will help bring sustainable energy to everyone. Investment in sustainable energy is urgently needed because of energy’s tangible, positive impact on people’s lives. This point is amply demonstrated in the context of COVID-19. Reliable energy access is a matter of life and death – health facilities rely on stable power supplies to treat patients, and the distribution of vaccines hinges on the ability to
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preserve them through cooling, which is only possible through cold chains powered by electricity. Beyond health implications, investment in sustainable energy supports the achievement of all 17 SDGs and the realisation of Paris Agreement commitments. For example, we cannot end poverty or empower women without creating new economic opportunities, using energy as an input. And we cannot limit global warming to 1.5°C above pre-industrial levels without accelerating the energy transition away from fossil fuels. Tracking energy finance The IEA estimates that universal energy access will require an investment of at least $45bn annually until 2030. Impactfully deploying this volume of finance requires an understanding of the amount and type of finance currently committed to countries with large energy access deficits, how quickly and effectively it is disbursed and absorbed, the types of energy access solutions that receive finance, and the financing needs of enterprises delivering those solutions. Providing these insights to inform policy and investment decisions is the aim of Sustainable Energy for All (SEforALL)’s Energizing Finance research series. In November 2020, two new reports were published as part of the series, offering the latest data and evidence on energy finance commitments and disbursements. Financing energy access is a two-sided problem. First, we need sufficient volumes of committed finance from the full spectrum of investors, including development finance institutions, commercial banks and governments. Second,
finance must be efficiently disbursed to initiatives and projects on the ground. The latest findings from Energizing Finance show that the world is failing to meet both challenges. Chronic underinvestment Energizing Finance: Understanding the Landscape 2020 tracks finance commitments for electrification and clean cooking in 20 countries in Africa and Asia with the largest energy access deficits, based on best available data for 2018. It found that finance for electrification increased to an aggregate $43.6bn in 2018 – up 26% from the $34.6bn tracked in 2017. These numbers show promise, but a closer look reveals that finance committed for energy access is not targeted where it is most needed. While the IEA estimates that $41bn is required annually to achieve universal residential electrification, Energizing Finance tracked only one-third of this –$16bn – in 2018 for residential access in the 20 countries that are home to 80% of the world’s population without electricity. Even within this group, electricity sector investment is highly concentrated. Sub-Saharan Africa accounts for 70% of people in the 20 ‘high-impact’ countries without electricity access. But in 2018, the 14 countries we tracked in Sub-Saharan Africa received less than 20% of the total $43.6bn finance for electrification tracked in the broader group of 20 countries. Meanwhile, finance for clean cooking in 20 tracked countries tripled from an aggregate $48mn in 2017 to $131mn in 2018. While
Finance and investment
this growth is an important step forward, finance remains a fraction of the IEA’s estimated annual $4.5bn required to achieve universal clean cooking access by 2030. As the world recovers from COVID-19, we cannot continue to ignore the challenge of expanding clean cooking access, with its positive impacts on health, climate and gender equality. Current investment is dominated by international and public capital from a small number of funding institutions and concentrated in a few recipient countries. Bangladesh alone accounted for 47% of total clean cooking finance commitments in 2018, dominated by two large projects. Increasing investment in fossil fuel projects Finance can be committed to energy projects across a range of generation sources. Knowing that the energy transition is incompatible with continued investment in fossil fuels, and with continued declining costs of renewable energy technologies, one would think fossil fuel investment would be on the decline. However, we found that fossil fuel finance commitments to developing countries increased substantially in 2018, accounting for the largest portion of electricity finance for the first time in at least six years, up from $5.5bn in 2017 to $21.7bn in 2018. This was accompanied by a commensurate fall in commitments for gridconnected renewable energy in countries with large electricity access deficits. Investment in mini-grids and off-grid electricity solutions attracted less than 1.5% of the total electrification finance we tracked in 2018. This is especially troubling considering the vital service that off-grid electricity provides in remote, hard-to-reach communities. Decentralised electricity solutions are essential for affordably powering healthcare facilities and other critical infrastructure in these communities, along with businesses and homes. The problem of disbursement There is an additional challenge in financing energy access – prompt and efficient disbursement of committed funds. Until disbursement occurs, there is no positive impact on the ground. Energizing Finance: Missing the Mark 2020 identified gaps and lags in disbursement of development
First, we need sufficient volumes of committed finance from the full spectrum of investors; second, finance must be efficiently disbursed to initiatives and projects on the ground
finance for energy in developing countries. It found that disbursement delays are currently plaguing the energy sector and depriving millions of electricity access and clean cooking solutions. In the countries tracked, between 2002 and 2018, more than half of all energy finance commitments suffered from delayed disbursement. As a result, 48% of energy projects suffered implementation delays. The world is already underinvesting in SDG7. But even with significantly greater committed finance, providing universal access to energy by 2030 would be impossible without addressing inefficiencies in disbursement of committed funds. The way forward The international community can consider several strategies to address existing shortfalls in energy finance commitments and regular disbursement delays. Development financiers and donors can better coordinate to expand their energy access investment portfolios, particularly in Sub-Saharan African countries, and ensure their efforts are complementary and recognise the co-benefits of energy access. In so doing, funders can shift from unilaterally financing individual energy projects to providing programmatic support grounded in countries’ long-term, integrated energy plans. In this context it is especially critical that funders and governments address the unique barriers women face in accessing finance for energy access. Development financiers should combine their investment activities with technical assistance and local capacity building efforts that target the reasons for disbursement delays. Their expertise can lead to improved energy project design, more efficient administrative processes, and better coordination between stakeholders, all of which are factors that influence how quickly development finance reaches energy projects. The continued financing of fossil fuel projects as a means to close the energy-access gap has proven ineffective and must be rapidly phased out to align with global climate goals. Instead, funds should be allocated to projects that provide sustainable energy access, such as grid-connected and off-grid renewable energy. In many countries, expansion of decentralised renewable energy is hampered by unsupportive policies
and regulations, small deal sizes, and limited access to growth capital, de-risking instruments and local currency finance. Policy reforms that create a more conducive investment environment, and continued innovation in business models and financial instruments, can help overcome these barriers. Rwanda is a strong example of how supportive polices for mini-grid developers, including clear licensing requirements, tariff regulations, provisions for grid arrival and risk mitigation facilities, have increased private sector participation in, and finance commitments to, the decentralised electricity sector. National governments are key to expanding clean cooking access. Making it easier for small and medium-sized enterprises and clean cooking innovators to access the finance they need to commercialise solutions should be a high priority. Governments can also send price signals to support a transition to clean cooking by phasing out fossil fuel subsidies and removing taxes on cleaner fuels and technologies. This would go a long way in moving the sector beyond improved cookstoves and supporting the development of innovative solutions like ethanol and electric cooking. The viability of these emerging solutions would be further boosted with injections of public finance to de-risk private sector investment in the nascent clean cooking sector. These are just some recommendations, informed by data and evidence, to promote increased energy finance commitments and more efficient disbursement of committed funds. Governments, the energy and financial sectors, and the development community might consider them as they pursue a shared SDG7 agenda and support the delivery of new energy solutions to countries with stubbornly high energy access deficits. Only purposeful, concerted action will accelerate the transition to sustainable, universal energy access where it is currently most lacking. ● Olivia Coldrey is Lead, Energy Finance and Clean Cooking at Sustainable Energy for All, seforall.org
Energy World | February 2021 29
Finance
SUPPORT MECHANISMS
Shaping new markets for green gas I n an effort to meet the targets set for a net zero future, the UK government has been supporting the production and regulation of electricity generated from renewable sources for almost 30 years. UK renewable electricity markets are now very well established. In spite of wider macroeconomic challenges, the UK’s renewable electricity markets continued to thrive last year. At the end of Q2 2020, the country’s renewable electricity capacity totalled 48.5 GW, an increase of 5.4% year-on-year, as illustrated in Figure 1. However, though much has been achieved in the power sector, significant improvement still needs to be made in the fields of heat and transport.
Learning opportunities There are lessons to be learned from the success of the UK’s renewable electrification drive. Among the most salient is the need to create systems that don’t overburden the end user of energy. There is growing pressure on electricity suppliers from regulators to ensure that costs don’t fall on consumers – especially during times of recession. It is crucial that people are not penalised for the state of policy or the market. From a market perspective, clients both on the buy and sell side have reported support systems and policy as being overly complicated – even for the experts. Grid connection and accreditation should be easier, and the industry must look out for unexpected loopholes. There have been occasions where unanticipated and unhelpful events have happened, due to policy not being fully thought out from a market perspective. Meanwhile, market participants have sometimes struggled to get to grips with new information or changes to policies. And some developers have expressed concerns about the short timescales for projects to win financial support. 30 Energy World | February 2021
The successful transformation of the UK electricity system into one now dominated by low-carbon generation is largely due to a succession of government support schemes for renewables. Here, Simi Shallon considers how the use of ‘green gases’ could be encouraged for the heat and transport sectors. With any system that is not robustly implemented, mistakes and oversights can be expected. These can be very costly when legislation is not fully understood or properly executed, as was seen in Northern Ireland’s ‘cash for ash’ scandal. Historically, the Renewables Obligation (RO) and Feed-in-Tariff (FiT) were the main support mechanisms designed to encourage the uptake of renewable energy. However, these schemes have been superseded by the Contracts for Difference (CfD) scheme, which is now the UK government’s primary mechanism for supporting low-carbon electricity. It encourages investment in renewable energy to provide projects with a stable income, while simultaneously protecting consumers from paying increased costs when electricity prices are high. The fourth round of the CfD scheme, opening late 2021, will aim to double the capacity of renewable electricity in the UK and
Figure 1. UK installed renewable electricity generating capacity Source: Department for Business, Energy and Industrial Strategy
will be available to a wider range of potential participants. Following lobbying for its expansion, solar and onshore wind are eligible to bid for the first time since 2015. Transport and heating In the second quarter of 2020, the UK transport sector consumed 440mn litres of liquid biofuels – 27% less than in the second quarter of 2019. This sharp drop in consumption reflects an overall drop in all transport fuel consumption, with much of this is accounted for by COVID-19 lockdown measures and related reductions in travel. Heating provided to homes, businesses and industry is responsible for a third of the UK’s greenhouse gas emissions, making decarbonisation of heat one of the biggest challenges faced by the country in meeting its climate targets. Currently in place is the domestic Renewable Heat Incentive (RHI), which promotes the use of renewable heating technologies.
Finance
Since its inception in April 2014, thousands of people have joined the scheme and receive regular payments. Meanwhile, the non-domestic RHI scheme provides financial incentives to increase the uptake of renewable heat across businesses, the public sector and non-profit organisations. The 2020 consultation ‘Future support for low carbon heat’ set out proposals to increase the proportion of green gas in the grid. The scheme for biomethane injection is expected to begin in autumn 2021 and will be available to eligible new applicants for four years. Within this consultation, the introduction of a Clean Heat Grant scheme proposes support for heat pumps and, in limited circumstances, biomass. Views were invited to help shape a mechanism for the way the UK will heat homes and businesses. Present suggestions include support through a grant scheme, a voucher system and supporting domestic and non-domestic installations up to a capacity of 45 kW in size. Levy on green gas Also, in 2020, the UK government announced the introduction of a Green Gas Levy and consultations were initiated. This levy will fund support for biomethane injection into the gas grid through the new Green Gas Support Scheme. Also expected to launch in autumn 2021, the scheme would be applied to all licensed gas suppliers and it is proposed that the levy costs are split across suppliers according to the number of meter points they serve. Each meter point would incur the same charge, regardless of gas consumption or meter type. Some industry members have criticised this scheme as unfair, as its approach is likely to cause disproportionate bills amongst suppliers and a huge disparity with how much gas is being supplied. The formula is based on a variable that doesn’t account for the volume of the gas being supplied. However, this outcome might be avoided, given that alternative levy design options have been considered, including the option to reduce costs for low-gas users under the per meter point approach. The government is mindful of the benefits of future policy costs on gas bills being more closely aligned to gas consumption, so that the amount gas users pay is proportional to the amount of gas they use. It is the government’s intention
There are lessons to be learned from the success of the UK’s renewable electrification drive; among the most salient is the need to create systems that don’t overburden the end user of energy
Figure 2. Increases in demand for Renewable Gas Guarantees of Origin (RGGR) Source: Cornwall Insights Certificates Survey
to transition to a volumetric levy in 2024/25. The policy design will need to avoid distortive effects and disproportionate burdens. The first levy payments will not be made by gas suppliers until April 2022 and any changes to the levy design would be subject to a public consultation. Ofgem has been appointed as the official administrator of both schemes, building on its experience of delivering other supplier obligation schemes. Biomethane Certification Scheme The Biomethane Certification Scheme (BMCS) is an independent certification scheme run by Green Gas Trading. It aims to maximise the value and the liquidity of biomethane by enabling producers and consumers to transact in the ‘green’ value of the biomethane at a market determined price, with the certainty that the certificate that they are trading evidences a unique unit of biomethane. Similarly, the Green Gas Certification Scheme (GGCS) is run by the Renewable Energy Association’s subsidiary, Renewable Energy Assurance Ltd. GGCS participants oversee the way it is run, on a not-for-profit basis. This scheme tracks biomethane, or ‘green gas’, through the supply chain to provide certainty for those that buy it. Certificates are traded as Renewable Gas Guarantees of Origin (RGGOs). An industry survey, published in October 2020, showed that there was an increase in the demand for RGGOs and which sectors this demand came from, as illustrated in Figure 2. Both the BMCS and GGCS play host to beneficial tracking systems but both schemes are voluntary. It will be interesting to see if they become mandatory in conjunction
with future government policy and regulation. Markets dip The global pandemic of 2020 caused a dip in the energy markets globally, including both the renewable gas and electricity markets. Fortunately, these markets are now bouncing back more readily than the fossil fuel markets, since the UK is pushing for renewables. Originators are working closely with producers and suppliers to help structure long-term contracts in the green gas space and we have seen increasing market demand on both the sell and buy sides of the renewable energy markets. This service involves careful consideration for the needs of both the buyers and sellers, ensuring that a healthy balance is struck between risk and reward in these uncertain markets. What is needed now to really drive the green gas market is policy certainty, which will hopefully materialise once the outcomes of the consultations are publicised. The industry is very much looking forward to systems and mechanisms, which support all renewable energy technologies. The future of the green gas markets looks optimistic and the continued support and efforts from government will certainly help the UK meet the ultimate aims and end its contribution to climate change, entirely, by 2050. ● Simi Shallon is the Senior Originator at OS Commodities Ltd, which acts as brokers in the renewable energy markets, working with buyers and sellers in the UK and across Europe
Energy World | February 2021 31
Corporate sustainability
Smart, sustainable solutions for the low-carbon transition A chieving the UK government’s goal of net zero greenhouse gas (GHG) emissions by 2050 requires a concerted effort by UK businesses from all sectors and of all sizes – from SMEs to multinationals. Most business leaders now agree that reducing carbon emissions from company operations and supply chains makes sound business sense. It can help boost productivity, reduce downtime, ensure compliance with environmental legislation, and attract a new generation of talent, for whom sustainability is a priority. Reducing your carbon footprint can be done in a variety of ways, from electrifying car fleets and using renewable energy to power operations, to investing in more energy-efficient plant and equipment, as well as taking a forensic look at internal business culture to ensure staff think and act sustainably.
CEMARS accreditation For ABB in the UK, the journey to sustainability began several years ago with a commitment to achieving recognition under the Certified Emissions Measurement and Reduction Scheme (CEMARS), one of the world’s first internationally accredited greenhouse gas (GHG) certification schemes under the ISO 14064 standard, which checks and verifies the methodology used to measure carbon emissions. The CEMARS process is comprehensive and requires businesses to collect granular data on energy use, carbon emissions and waste from all facets of their operations, from car fleets and domestic and international business flights, to future initiatives around the company’s sustainability culture. With much of our work connected to helping customers reduce their own carbon emissions, it is important that ABB leads by example by eliminating carbon from its own operations and supply chains. To this end, in the last 12 months, ABB UK has reduced its carbon dioxide emissions and achieved CEMARS accreditation.
32 Energy World | February 2021
As momentum builds behind the energy transition, companies of all sizes must embrace low carbon targets and make changes to their operations. Here, David Hughes of ABB UK explains how his organisation is approaching the task.
Electrifying company car fleets More and more drivers are taking advantage of advancements in technology and a growing network of charging infrastructure to make the transition from fossil fuel to low-carbon, electric transport. Electric vehicles (EVs) are now recognised as playing a key role in reducing air and noise pollution. In 2019, ABB UK’s business mileage was the second-highest contributor to its carbon footprint. In that same year, the company’s fleet of vehicles covered 6.8mn business miles in the UK alone. To mark World EV day in September, ABB announced it will transition to an all-electric company car fleet by 2025 with the aim of reducing its carbon footprint in the UK by 20% in the next two years. For added convenience, and to further accelerate the uptake of EV charging infrastructure in the UK, an ABB electric charging point will be fitted in the homes of all employees using company EVs. To date, ABB has installed over 14,000 EV chargers in 80 countries in commercial and domestic environments to support this move
to a sustainable future for travel. It would have been easy to continue with a heavily dieselweighted fleet, but ABB UK believes that this substantial investment is further evidence of its commitment to a sustainable future, and to demonstrating the same high environmental standards that we help our customers to maintain.
Sustainable solutions Sustainable development means balancing the needs of society, the environment, and the economy. ABB focuses on reducing carbon emissions, preserving resources and promoting social progress. Our solutions and business methodology drive sustainability across our value chain and contribute to the UN’s Sustainable Development Goals. Energy use in industry, buildings, and transport accounts for nearly three quarters of global energy consumption. By employing automated and digital technologies that encompass visualisation, data analytics, the cloud, advanced modelling algorithms and the internet of things, companies can more efficiently manage energy consumption and waste, and make the transition to a low-carbon future.
To date, ABB has installed over 14,000 EV chargers in 80 countries in commercial and domestic environments Photo: ABB
Managing energy flows Industries worldwide must manage and consume energy more efficiently. This is the message from the International Energy Agency, which advises energy efficiency could provide more than 40% of the emissions reduction required by 2040 to comply with the Paris Agreement. ABB’s advice is to formulate clear goals; develop a forensic understanding of your facility, including the ebbs and flows of its energy use, to optimise performance; and don’t be afraid to rethink and streamline operations. The key to success is managing energy flows through an optimised and stable production process – one where you have visibility across your entire operations and energy flows. The first step towards identifying where energy is consumed and produced is integrating electrical equipment
Corporate sustainability
with process equipment, either directly through the control system or via a distinct energy management system. Next, managing the energy money factor means using data for asset optimisation, load forecasting, emissions tracking, managing peak production, and increasing the amount of selfgenerated energy. The final step is to determine where energy consumption comes from, at what time, and for what systems and appliances. These processes can take place on a large scale, but often energy efficiency begins with something as simple as an electric motor. Typically, 40% of all energy consumed in the UK is via such motors, many of them inefficient IE1–IE3 models. The new generation of IE5 electric motors can offer up to 50% lower energy losses and businesses can get three months of use from an IE5 motor before the energy bill matches the initial outlay. The smart move Smart buildings are leveraging digital building solutions and the Internet of Things to enable realtime data, operational analytics and integrated applications for more sustainable, efficient
and intelligent management of buildings. A fully scalable portfolio of energy and asset management digital solutions aimed at commercial and industrial buildings, ABB’s ‘Give your buildings a new dimension’ programme helps our small to medium-sized customers achieve energy and operating cost savings. It does this by enabling electrical installers, building owners, and facility and energy managers to collect and visualise data on-site and remotely, and make informed decisions around maintenance and energy consumption. This type of connectivity and data availability can translate into operating savings of up to 30%. The solution collects information and measurements in order to simplify asset monitoring, control and optimisation, with data gathered from devices installed in the power distribution system. These innovations, and others like them, can enable UK businesses to monitor and control energy usage in separate offices from a single remote location, enabling them to contribute towards making the UK’s net zero goal a reality. Another key point is that
The International Energy Agency says that energy efficiency could provide more than 40% of the emissions reduction required by 2040 to comply with the Paris Agreement
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one-third of the world’s industrial electricity is consumed by low voltage motors. However only around 5–10% of the motors installed are controlled by variable speed drives, which after an initial outlay, could pay for themselves within months of installation and help reduce carbon emissions through added efficiency. Only recently, at the end of 2020, the UK government published an energy white paper building on the Prime Minister’s Ten Point Plan for a green industrial revolution. The white paper addresses the transformation of the UK’s energy system, promoting high-skilled jobs and clean, resilient economic growth. The global markets for low carbon technologies, EVs and clean energy are growing at a rapid pace – zero-emission vehicles, for example, could support 40,000 jobs by 2030. With help from technology leaders such as ABB, the time is right for UK businesses to look to implement cultural change and seize opportunities for a sustainable future. ● David Hughes is Managing Director of ABB in the UK, https://new.abb.com/uk
Energy purchasing
Bringing post-COVID affordability and carbon targets together I n the energy industry, we are often required to make educated guesses as to what might happen in the future. But few forecasters could have predicted the events of 2020, as COVID-19 spread around the globe leaving untold damage in its wake. The highly contagious respiratory virus forced businesses and organisations of all shapes and sizes to shut their premises, and force staff to work from home where they could. Sectors such as retail, travel and hospitality were particularly hard-hit. The virus put the brakes on the plans of innumerable businesses and forced many into changing their operations dramatically, or closing altogether. It also had a significant effect on the price of energy. Suppliers dealt with enormous surpluses of electricity and gas, and wholesale prices dropped to historic lows. As we reach the anniversary of when everything started to change, businesses have started to adapt to the so-called ‘new normal’. But they still need to be mindful of the carbon targets they need to hit by 2030, as per the Paris Agreement. This means striking a delicate balance between carefully procuring their energy to make sure they have got the right supply to reach their aspirations, as well as getting their carbon output down for 2030. Lots of businesses would like to discount the events of 2020 as a mere blip in the road, but the climate clock is not going to listen. Businesses reduced energy consumption globally more than they could have ever imagined last year – perhaps one of the few positives to be gleaned from the global situation. They’ve bought as much time as they have lost, but now it’s time to readjust. Getting greener – which can sometimes be perceived as costly – might not be a priority for businesses which are currently struggling. The affordability of reducing carbon is a question which is always going to be there, but there are plenty of ways to 34 Energy World | February 2021
The COVID crisis has impacted business energy use severely, and therefore suppliers too. Here, Nick Proctor suggests how buyers could react to the changed situation and start to blend energy management and purchasing strategies. become greener and save money at the same time – they are far from being mutually exclusive. Utilities trilemma We’ve found that customers became much more energy-aware in 2020. We witnessed a real shift in how customers are viewing their utilities. While previously many businesses were looking at reducing costs by getting onto certain tariffs, they are now looking at their usage – things like their consumption patterns and making sure that they have a responsibility around going green. A business’ needs can best be summed up by the ‘utilities trilemma’ – lean (financial aspects such as cost, controlled in part through procurement); clean (efficiencies, such as how effectively a facility is operating) and green (reducing carbon output and consumption from the grid). Until now, lots of businesses tended to focus on just one area, often neglecting the other two. But taking a more wide-ranging view of utilities is the key to locking in business energy rates which are affordable and flexible enough to service commercial ambitions, as well as reducing carbon output. There are five simple steps you can take to give your business’ energy supply a good balance of affordability and adaptability as well as giving yourself a fighting chance of getting to those 2030 carbon targets. Take stock and get some certainty With energy costs reaching record lows, it’s advisable for businesses to start tracking their energy costs right now for future years. So, if
you are tied into a contract which expires within 12 months’ time, now is a great time to start looking at the market and establishing what your cost projections might be in the future. And if your business was hit hard by COVID-19 in 2020 you can start to get a grip on what you’ll be spending on energy for the next two or three years. There’s been plenty of uncertainty over the past year – not just with the implications of COVID-19 but also with how the UK’s relationship with the European Union will develop and what this will mean for businesses. But securing your energy contracts now can give you some certainty around your budget, meaning one less thing to worry about. Think holistically in your energy procurement Your energy procurement should not be treated in silo. The purpose of buying energy is to arrive at a point where you get a competitive price without too much risk. We often see big businesses with procurement departments make decisions that are restrictive. When you go out to procure a contract, have discussions about what you want to do in the future – for instance, will you be expanding? If you have a fleet of vans, will you want to replace them with electric vehicles? It’s worth asking any potential supplier what support they might be able to provide, like helping you reduce your energy consumption or providing you with a charging point for electric cars or vans. The energy market is very competitive at the moment, so it’s likely any prospective supplier will be very proactive in their offer. The biggest mistake you could make is focusing strictly on the price of your energy – there are potentially more compelling outcomes for your business than simply lowering your rates. Think about room to maneuver The past year has taught many businesses that it’s worth building
Energy purchasing
some flexibility into their energy buying strategy. We’ve seen so many companies use far less energy than they would do in a normal year due to staff working from home, or changes in a business’ operations – for instance, restaurants and cafes pivoting to a takeaway model. While last summer saw life return to some degree of normality, at the time of writing we are back in a similar situation to March last year, albeit with a vaccine being rolled out. Energy contracts typically have a tolerance level around the amount of energy you can use, typically +/-20%, which is to protect the supplier and parties upstream in situations where consumption is heavily impacted. A deviation away from the agreed consumption tolerance levels can add additional costs to customers outside of the standard utility bill, as suppliers can look to recoup any losses incurred. Many businesses are unaware of this. With uncertainty of operations due to COVID-19, and for greater peace of mind, more focus should be given to this contractual element when agreeing supply contracts, and where possible, a small premium, typically less than one percent, can be agreed with
Businesses reduced energy consumption globally more than they could have ever imagined last year – perhaps one of the few positives to be gleaned from the global situation
your supplier to provide greater tolerance levels and in some cases, mitigate completely. Look at your operations This is the ‘lean’ aspect of the utilities trilemma. It’s important for businesses to get to grips with what they are consuming, when they are consuming it, and why. Reducing the amount of energy your business uses is one of the most effective and simple ways to reduce your costs and have a smaller carbon footprint. If you can become more familiar with how your operation runs, how your building is set-up, or – depending on what industry you are in – your internal processes, that’s how you can start to drive down your costs as well as your carbon output. This will also help you get some budget security, which lots of businesses are craving now. Examining data is a great place to start, and advances in fields such as ‘Internet of Things’ technology have made identifying efficiency gains in your operations easier than ever.
legislation, and as a result, making smarter purchasing decisions. Environmental aspects are becoming a focus point for businesses and being made a priority as part of a company’s corporate governance. Being seen to be green – and backing it up – is something which is now a big part of overall business strategy. The only way you can hit the headlines with your carbon strategy these days is reaching carbon targets before 2030, like how we’ve seen the Scottish brewing and bar company Brewdog achieve. It’s a real challenge which sometimes creates a dilemma between just saving money – something of a short-term approach – and longer-term sustainability. ● Nick Proctor, CEO and founder of amber energy, a utilities technology company that helps businesses to cut energy costs and reduce their carbon footprint.
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