Energy, Renewables and Offshore

SPECIAL REPORT: ENERGY: RENEWABLES & OFFSHORE

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ENERGY INNOVATOR

SCIENTIFIC SOLUTIONS

Andrew Mill of Narec excited about the future

Prof John Gluyas: We have the technology

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OFFSHORE George Rafferty on the tomorrow’s industry

ELECTRIC AVENUE The future of motoring?

22/04/2010 13:51

A national hub for accelerating the deployment of next generation offshore wind A national hub for accelerating the deployment of generation offshore wind Narecnext is an independent centre for the development, testing and commercialisation of next generation technologies for the wind energy industry. This makes us the ideal development Narec an those independent for thefrom development, testing and expansion commercialisation of next partneris for lookingcentre to capitalise the forecasted global of generating generation technologies for the wind energy industry. This makes us the ideal development capacity, primarily offshore. partner for those looking to capitalise from the forecasted global expansion of generating Research & Development | Testing Services | Specialist Consultancy capacity, primarily offshore. www.narec.co.uk Research & Development | Testing Services | Specialist Consultancy www.narec.co.uk

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CONTACTS ROOM501 LTD Christopher March Managing Director e: chris@room501.co.uk

SPECIAL REPORT: ENERGY: RENEWABLES & OFFSHORE

WELCOME This region’s offshore industry has been a major part of our economy, cushioning the effects of the decline of traditional industries such as shipbuilding. There was a feeling, however, that with North Sea Oil production having peaked, that the offshore industry would itself go the way of shipbuilding. But, with a rising oil price, demand for North East offshore expertise from all over the world, the growth of offshore wind and the promise of a renewal of our nuclear power stations, this is far from being the case. Our offshore industry is alive and well and is embracing the green agenda.

In this issue of BQ2 we look at how the North East offshore industry is taking advantage of these opportunities. We examine the enormous potential represented by the Round 3 programme of offshore wind, the continued importance of the offshore oil and gas sectors and how companies are adapting techniques and technologies acquired in the North Sea

for the requirements of new energy forms.

We also report on electric vehicles and the welcome decision by Nissan to manufacture its new Leaf in Washington and we learn about some of the emerging technologies being developed to help us meet carbon dioxide emission targets.

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Euan Underwood Director e: euan@room501.co.uk Bryan Hoare Director e: bryan@room501.co.uk EDITORIAL Peter Jackson Editor e: peter@bq-magazine.co.uk DESIGN & PRODUCTION room501 e: studio@room501.co.uk PHOTOGRAPHY KG Photography e: info@kgphotography.co.uk ADVERTISING If you wish to advertise with us please contact our sales team on 0191 419 3221, or email sales@room501.co.uk

room501 Contract Publishing Ltd, 10 Baird Close, Stephenson Ind Est, Washington, Tyne & Wear NE37 3HL www.room501.co.uk room501 was formed from a partnership of directors who, combined, have many years of experience in contract publishing, print, marketing, sales and advertising and distribution. We are a passionate, dedicated company that strives to help you to meet your overall business needs and requirements. All contents copyright Š 2010 room501 Ltd. All rights reserved. While every effort is made to ensure accuracy, no responsibility can be accepted for inaccuracies, howsoever caused. No liability can be accepted for illustrations, photographs, artwork or advertising materials while in transmission or with the publisher or their agents. All information is correct at time of going to print, May 2010.

Sponsored by:

ENERGY: RENEWABLES & OFFSHORE

George Cheung Director e: george@room501.co.uk

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BQ Magazine is published quarterly by room501 Ltd.

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CONTENTS SPECIAL REPORT: SPRING 10

ENERGY: RENEWABLES & OFFSHORE MAKING WAVES 18 CATCHING THE WIND Narec working nationally and regionally

22 NEW HORIZONS Tony Trapp on a great new role for offshore

26 MAKING WAVES UNDERSEA

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SMD - a North East worldbeater

05 NEWS The latest in a rapidly changing sector

12 WHICH WAY IS THE WIND BLOWING? Peter Jackson looks at energy issues

16 K HOME INTERNATIONAL’S GREEN OPPORTUNITIES Engineering business profile

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30 LEADING EDGE

LEADING EDGE

Where technology might take us

33 OFFSHORE OPENINGS George Rafferty - bullish for energy

36 POWERING AHEAD Port of Tyne - best kept secret

40 A NEW LEAF The electric motoring future

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Renewed demand for the skills of the offshore oil and gas industry, the growing development of the offshore wind sector and other advances in renewable energy are generating much activity >> Alnmaritec sets course for further expansion with opening of new waterfront facility

All aboard: Simon Johnson of NEL (left) and Chris Millman of Alnmaritec in the new Blyth facility

A North East boat builder is charting a course towards growth by targeting opportunities in the region’s expanding offshore wind market after receiving a six figure investment.

Alnwick-based Alnmaritec, which makes working boats for a wide range of markets, including the oil and gas industry, is opening a new waterfront boat building facility at the Port of Blyth, next to the New & Renewable Energy Centre, with the support of funding from Evolve Finance.

The new facility could eventually be twice as large as Alnmaritec’s existing 3,000 square metre space at Alnwick, and will provide the space required for the company’s to design and build larger vessels, as well as offering a base from which the company can address commercial openings in the burgeoning North East offshore wind market.

Evolve Finance, the debt and mezzanine finance division of regional fund management firm NEL Fund Managers also invested in Alnmaritec four years ago, and since then staff numbers have tripled from 26 to 78 employees, as the company has supplied boats to customers around the world.

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Managing director Chris Millman said: “The growth of our workforce is an indication of the success we’ve enjoyed since acquiring the company, but whilst we remain fully committed to our Alnwick base, its physical size has always constrained us to a degree in the size and specification of the boats that we could build there.

“The new Blyth facility removes this constraint, and also puts us in the perfect place, both physically and commercially, to capitalise on the growing demands of customers in the region’s offshore wind farm sector.’’

Simon Johnson, senior investment executive at Evolve Finance, said: “Alnmaritec have combined design excellence and manufacturing expertise to build a reputation as a world leader in their field, and have proven to be a very strong addition to our investee portfolio.

“With the clear emphasis being placed by policymakers on the future growth of the North East offshore wind farm market, there is a clear opportunity for the company to put themselves in the vanguard of regional firms benefiting from its growth.”

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>> Biofuel milestone The first tanker of sustainably produced bioethanol has been dispatched from the UK’s and Europe’s largest wheat biorefinery, Ensus at Wilton, which recently started production.

The cargo, which has been sold to Shell as part of a long term deal, will help Britain cut carbon emissions from road transport and meet its renewable fuel obligations from UK sources.

Annual production of the new £250m biorefinery is expected to meet about a third of the UK requirement under the Renewable Transport Fuels Obligation, which requires 3.5% of all transport fuel to come from biofuels in 2010-11. The saving in carbon emissions will be equivalent to taking 300,000 cars off the road. The plant will also produce 350,000 tonnes a year of high protein animal feed, which will replace imports.

Alwyn Hughes, Ensus chief executive, said: “This is a milestone for UK production of biofuels and a beacon of hope for the burgeoning green industry on Teesside. We congratulate all those who have been involved.

This is a win, win, win for the environment, UK jobs and the economy at large”.

>> Keith takes the reins ContiTech Beattie, the Ashington and Aberdeen-based manufacturer of high pressure hoses to the North Sea oil and gas industry, has appointed a former apprentice as its new operations manager.

Keith Darling joined the firm 18 years ago, when it operated under the name of K&B Beattie in Ashington, as a 16-year-old apprentice fitter and turner.

Darling’s new role follows a restructuring of the ContiTech Beattie business, bringing all of the areas of the firm under one operations manager, covering all production in Ashington and offshore >>

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operations out of Northumberland and Aberdeen.

He is now undertaking a Leeds Metropolitan University foundation degree in leadership and management at Newcastle College, continuing his development.

He said: “I knew as an apprentice that I wanted to climb the ladder, and throughout my 18 years with the firm the support I have received to do so has been brilliant. At each step of the way, I have been able to identify what my next goal is and I have been helped to achieve that through training and support from colleagues.”

Andrew Esson, managing director of ContiTech Beattie, said: “Keith has always shown a real desire to further his career within ContiTech Beattie and that sort of loyalty and ambition should be rewarded and nurtured. When a business takes on an apprentice, it is always hoped that the young person employed is someone who will repay the faith shown in employment with hard work and commitment to the business and Keith has done that in droves and his new post as operations manager is a deserved reward for his years of service and growth.”

New man: Keith Darling, ContiTech Beattie’s new operations manager

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remediation to enable this factory to be built at the former Neptune Yard.

Freddy Shepherd, Director of Shepherd Offshore, said: “We are delighted that such a prestigious company as Clipper has chosen to base this manufacturing facility at our Renewable Energy Park. We are helping to place the River Tyne and the North East of England at the centre of this dynamic new industry, which is creating new employment.’’

>> Britannia rules the waves Work has begun to build a new Clipper Windpower Marine offshore wind turbine blade manufacturing facility at the Shepherd Offshore Renewable Energy Park in Newcastle.

The new 4,000 square metre facility, is expected to be completed in the third quarter of 2010 and will be the UK’s first offshore wind turbine manufacturing facility. The site is owned and is being developed by Shepherd Offshore Services.

The factory, which will employ more than 500, will be used to develop and build blades for the ‘Britannia Project’, a 10MW offshore wind turbine prototype under development

by Clipper. The prototype is scheduled for deployment in late 2012, and the blades will be 72 metres long and weigh over 30 tonnes.

A Department of Energy and Climate Change grant of £4.46m was awarded to Clipper in September 2009. The grant is intended to accelerate development and demonstration of offshore wind technologies and components for multi-megawatt turbines. In April 2008, the Crown Estate announced its purchase of the first commercial prototype Britannia turbine.

James G.P. Dehlsen, chairman of Clipper, said: “Today marks an exciting and important milestone in achieving the Britannia Project blade requirements. Over the next few years, with the development of the Britannia turbine, the UK will benefit through the supply of electricity based on its abundant offshore wind energy resource, and also with economic activity related to turbine manufacturing, offshore installation, and long term operations and servicing. The offshore wind market in the UK is rapidly becoming one of the most exciting sectors in the global renewable energy industry.” Regional Development Agency One North East has invested £2.1m in land

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>> Cable contract CTC Marine Projects has been awarded a significant contract for the installation and trenching of 80 infield cables on the BARD Offshore 1 Wind Farm Project, in the western North Sea. The project, for client Norddeutsche Seekabelwerke GmbH (NSW) and ultimate client BARD Engineering GmbH, will include the lay, trenching and pull in of the infield cables into the foundations to connect 5MW turbines together in strings and finally to an AC offshore transformer.

CTC Marine Projects, a member of Trico Marine Group, is a Darlington-based marine trenching and installation contractor, operating in the subsea oil and gas, telecommunications, military and utilities sectors of the offshore construction industry.

The contract, which will use one of CTC’s DPII vessels, equipped with trenching and cable installation equipment combined with CTC’s personnel, is due to commence in May 2010. Once operational, the wind farm will produce 400MW of total power and will be the first large scale offshore wind farm with this size of turbines and to reach such a water depth of 40 metres.

CTC managing director, Daryl Lynch said: “At CTC, it is the onshore and offshore management and subsea engineering experience, skills and professionalism of our people that make us the obvious contractor of choice for this wind farm cable installation workscope. CTC is looking forward to establishing a productive and long term relationship with NSW and BARD Engineering in the offshore wind farm business.”

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>> Costain’s vote of confidence Engineering and construction group Costain, has established a new North East operation for its Energy and Process business.

Costain’s Teesside Operation is based in Stockton and is part of its specialist Energy & Process division. The new base on Teesside forms part of Costain’s strategy for growth.

Initially, the business will employ 30 people based in its office on Preston Farm Industrial Estate, which will provide engineering services for new facilities and revamps including conceptual design studies, Front End Engineering Design (FEED) and Engineering Procurement and Construction (EPC). The new operation will build on previous projects executed by Costain in the region.

Peter Laing, general manager Teesside Operations at Costain Energy & Process, said: “This investment demonstrates the confidence Costain has in the North East of England and the region’s role in realising our growth plans for the Energy and Process Division.

“Although the recent economic downturn has taken its toll on the traditional industries in the Tees Valley, we’re confident the region will be at the forefront of the massive investment needed to develop the new energy and process technologies that are required to underpin the economic and environmental security of the UK . This is an exciting time for the sector and organisations with long-term vision can see real opportunities here in the years ahead.”

“Costain selected the Tees Valley as the most attractive option for its new operational centre, not just because of the established process industry cluster but also because there is a large, highly skilled workforce resident in the region.”

>> SME opening Smaller businesses are being urged to look at generating their own energy from renewable sources following a Government announcement.

The introduction of “feed-in tariffs” in April effectively hands businesses and householders large subsidies for smaller scale renewable energy developments.

Environment experts from North-East law firm Ward Hadaway say that the move will make projects such as solar panels, wind turbines and small hydro-electric schemes much more financially viable – and may open up new revenue streams.

Stephen Campbell, partner and head of environment at Ward Hadaway, said: “Until recently, most companies which developed their own energy from renewable sources tended to be larger businesses such as Nissan which could afford to invest in the

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Role for region: Peter Laing, Costain energy and process general manager Teesside operation “We will initially seek to employ 30 people at Stockton and have ambitions to grow this number over the next couple of years.”

Mark Lewis, technical manager for NEPIC said: “The investment Costain is making in the Tees Valley demonstrates the position and reputation the area’s energy and process industries have in the marketplace.

These sectors are at the heart of the long term future for the area and for the UK. “Costain’s decision shows that the work being done by organisations, including NEPIC, to attract investment is having an effect. The engineering capability in the Tees Valley is an essential part of the appeal to investors and securing such a big name as Costain is a very important step forward for the region’s industry.”

infrastructure needed to make such projects stack up financially.

“However, the introduction of FITs opens up that possibility to a much wider range of businesses, as well as individual households.”

>> Free recycling IT company Sumlock is offering individuals and organisations the chance to reduce their carbon footprint with a new range of ‘green’ computers and a specialist recycling service.

Sumlock, which set up on Tyneside in 1976, specialises in providing green technology for individuals and organisations across the region.

The Killingworth-based firm has formed key partnerships with global corporations such as NEC and Intel.

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The firm has also teamed up with the global technology firm NEC to offer a free recycling service, giving people the chance to dispose of their old computers and related equipment in a safe and secure way.

The service, which is available across the North East, includes free collection and environmentally conscious disposal of the equipment, regardless of its age, make or model, as well as providing users with a certificate showing that their goods have been recycled to WEEE standards as set by the Environment Agency.

“These days everyone is looking for a faster, more comprehensive computing experience,” said Darren Towart, Sumlock’s account manager, “but they still want to play their role in protecting the environment.” >>

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>> Offshore wind blows in the jobs A North East firm is to create more than 100 jobs as it prepares to take advantage of the UK’s green energy revolution.

TAG Energy Solutions, TAG, has been offered a grant of £1.5m by One North East as it gears up to bid for more than £500m worth of work in the offshore wind sector.

The grant is being funded via the Tees Valley Industrial Programme, TVIP, and will form part of a £20m project to develop state of the art production facilities at TAG’s Haverton Hill base in Billingham, to roll tubulars and manufacture the foundations that support wind turbines in the offshore wind industry.

The project will create 110 new jobs and safeguard a further 33, and total employment linked to the project is estimated at over 400.

TAG ES chief executive, Alex Dawson, said: “The existing TAG facilities offer developers an integrated manufacturing, marshalling, assembly and load out capability perfectly situated on the River Tees on the east coast of the UK, being very well placed for the largest planned offshore developments for the UK. “The two principle challenges facing offshore wind are an absolute shortage of supply capacity and a need to significantly reduce costs.

The facility proposed by TAG will make a significant contribution to the solution for both of these concerns. The local skills base in this type of work is second to none and this welcome development will bring much needed jobs to the region.”

A host of high-profile global companies are in the process of launching large-scale offshore projects with potential contracts ranging from £6.5m to a potential £215m.

TAG’s project has already received £1.5m from the Department of Energy and Climate Change (DECC) to develop the technology required for the high-tech manufacturing.

David Eason, chairman of TAG welcomed this news and said: “It is encouraging to receive this support for TAG and I would personally like to thank DECC, One North East and our local MP, Frank Cook who has been a major supporter of our activities at Haverton Hill since the first day I established our presence here in 2001.”

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>> Where coal is still king

Marking the milestone: - from left, Neil Cook, Graham Tones, Billy Kennedy, Russell White, David Kelly, Chris Madden and Simon Peacock

Workers at the Shotton Surface Mine in Northumberland have marked a major milestone after extracting the millionth tonne of coal from the site after 22 months.

The Shotton mine, which has been active since the beginning of 2008, is located on the Blagdon Estate to the west of Cramlington, and now employs 125 people directly on site as well as supporting more than 200 jobs in the Banks Group.

The company also says it injects more than £12m into the regional economy every year through salaries, and purchase of goods and services.

Around 3.4 million tonnes of coal, two million tonnes of shale and 750,000 tonnes of fireclay were originally approved to be mined over the eight-year lifetime of the scheme, but Banks has recently announced that it intends to apply for permission to extract an additional two million tonnes of coal from within the mine’s existing boundaries. Banks will now be asking for an extension of the overall life of the site by two years to enable the additional coal supplies to be recovered.

Three public exhibitions have been held in the area recently to provide information on the new proposals to local residents, and a

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planning application for the additional work is scheduled to be submitted to Northumberland County Council later this year.

Mark Dowdall, Banks’ environment and community director, added: “Work on the site has progressed very well, a fact which is especially impressive given the extremes of weather we’ve endured since work began, and reaching this milestone so quickly is a testament to the quality of our workforce at the Shotton site and the investment Banks made in the new mining plant.

“Shotton continues the tradition we have maintained for more than 32 years of mining coal in North East England, making a significant contribution to the regional economy and providing important local employment opportunities.

“We are recognised as setting the standard for our industry in terms of both effective environmental practices and commitment to building productive relationships with local communities around our sites.

“We are continuing to work with local residents around our new proposals, and hope the economic benefits and the continuity of employment provided by being able to do so will be recognised through the planning process.”

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>> Home is where the heat is Around 100 homes in Sunderland will be testing out new ways to finance whole house energy makeovers under a new Government scheme.

Following an open competition, Gentoo Sunderland has been chosen to deliver one of the first ever UK trials for the Government’s Pay As You Save scheme.

The Home Energy Pay As You Save pilots will give households the opportunity to invest in energy efficiency and microgeneration technologies in their homes with no upfront cost. Householders will make repayments spread over a long enough period so that repayments are lower than their predicted energy bill savings, meaning financial and carbon savings are made from day one.

The Government is putting £4m forward to

fund the trial. A total of around 500 homes across England will take part providing evidence of how to foot the bill for the Great British Refurb – the Government’s plan to make the 22 million existing homes in the UK more energy efficient.

Energy and Climate Change Secretary Ed Miliband said: “People in Sunderland will be testing out on behalf of the nation how we can finance the more expensive home energy refurbishments.

“Many householders want to reduce their emissions from their homes, but are put off by the upfront cost of installing insulation, solar panels or ground source heat pumps.

Pay As You Save will trial different ways of paying for this work so it’s affordable.

“Increasing the energy efficiency of homes not only helps reduce emissions, but will also help reduce fuel bills. One quarter of the

NEWS

UK’s total emissions come from homes, so householders represent a key part of the solution to tackling climate change in the UK.” John Craggs, deputy chief executive Gentoo Group said: “We are delighted to have been successfully chosen to be involved in this exciting government backed scheme.

“This will enable us to build on our experience of achieving the Decent Homes Standard throughout all of our homes and not only allow us to save our customers money but also help us to achieve our environmental objective of giving the planet a little something back, in the process.”

DECC is keen to learn whether the PAYS scheme is attractive to consumers and how, in the medium term, it could be a method for enabling more householders to invest in the energy efficiency of their homes. >>

Regularly updated information on all aspects of the show at:

www.all-energy.co.uk or from

info@all-energy.co.uk THE RENEWABLES SHOW IN THE ENERGY CITY – ABERDEEN 19/20 MAY

All-Energy 2010 – the UK’s largest renewable energy exhibition and conference –

10th year

looks forward to welcoming you as an exhibitor or visitor. 5,500 people from 60 countries attended All-Energy ’09 with its 380+ exhibiting companies from 14 countries andmore than 250 conference speakers.

The major exhibition features technology across the full range of renewable energy devices; and the free-to-attend conference looks at issues and challenges facing the industry and at renewable energy sources from multi-million pound offshore projects to microgeneration. Networking opportunities abound.

Be there!

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>> A towering achievement to plug the skills gap Training partners: (l-r) Steve Clarke (Mainstream Renewable Power), Andrew Mill (Narec), David Kidney MP (Department of Energy and Climate Change), Helen Goodman MP (Department for Work and Pensions), Alan Rutherford (Narec), Paul Cook (Northumberland College), Mark Pearson (Energy and Environment, One North East)

A new renewable energy asset has been unveiled at Blyth in the shape of a new 27-metre high training facility – the UK’s first wind turbine training tower.

The training tower is the result of a collaborative training partnership, backed by regional development agency, One North East, between Northumberland College, Mainstream Renewable Power and Narec. It is an open access facility, designed to allow education and training providers to deliver academic and industrial training programmes for technicians working in the wind industry and at height, both onshore and offshore.

It is hoped that this collaboration will lead to an increase in the number of technicians suitably qualified to install, operate and maintain new and existing farms. The training tower will help to develop the necessary skills required for working within the industry.

This latest infrastructure investment builds on Narec’s existing demonstration capabilities and will allow it to fully support the wind industry as it creates a global hub for offshore wind technology and wider renewables development, testing and demonstration.

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Rachel Ellis-Jones, principle and chief executive of Northumberland College said: “The training tower will help to ensure that the students on the wind technician training programme at Northumberland College are trained to British and European industrial standards. The specification of the tower and the equipment within it will also allow us to develop new training modules which will enable us to meet the skills needs of the wind energy industry.”

The tower marks the creation of a national training centre for the industry in North East England

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Andrew Mill, Narec chief executive said: “We are extremely proud today to be able to officially open the UK’s first Wind Turbine Training Tower at Narec and thank all partners involved in the project for their support in making the project a success. The industry is predicting that technicians in their tens of thousands will be needed to install, operate and maintain new wind generating capacity offshore and the tower marks the first stage of the creation of a national training centre for the industry in North East England.”

Steve Clarke, UK content manager for Mainstream Renewable Power said: “From internal modelling of construction, operation and maintenance regimes, Mainstream Renewable Power has been aware for some time of a looming skills gap at wind technician level. Understanding too that training and up-skilling are not instant processes, we’re delighted with the effectiveness of the partnership and the timing of the training initiative to effectively design, procure and construct the training tower. Achieving 60% UK content in the overall project is also personally very satisfying.”

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LOOKING AT THE BIG PICTURE

Encouraging local energy production demands a holistic approach, argues Dr Ruth

>> Filling the Renewable Energy Skills Gap Northumberland College is aiming to make up for a deficit in trained technicians and engineers for the region’s renewable energy sector.

The College has designed and piloted two courses for the renewable energy industry, in partnership with leading wind energy organisations.

Student Christian Galbally said:“The course is a combination of interesting theory and practical work. It’s great to learn about the history and development of the technology as it gives good background on how the industry has developed.

“The field work we have undertaken at the Narec site was excellent and I’m really looking forward to the other planned courses such as First Aid and Sea Survival.”

The first class of students are currently working in the field in Ireland and the North East and the current cohort of six students is due to finish the 10 week course next month.

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Ambitious targets are being set at local, national and international levels specifying various carbon reduction targets.

The G8 summit last year called for developed nations to cut carbon dioxide emissions by four fifths by the middle of the century and the EU has set its own targets of a 20% cut in greenhouse gas emissions by 2010 compared with 1990 levels, further specifying that a fifth of the total energy mix should come from renewables by 2020.

As pressure to address climate change and energy security rises, decentralised energy is becoming an increasingly important way to provide smaller, more efficient and more reliable energy sources closer to where they are needed.

For example, highly efficient combined heat and power schemes can reduce carbon emissions by 30-40% and the use of locally produced biomass and energy from waste plants, such as anaerobic digestion, can further reduce carbon emissions associated with energy production.

There are also a number of wider benefits associated with decentralised low carbon and renewable energy networks such as improved energy security; addressing rising energy costs for business and wider communities; reducing the burden on the ageing transmission system; and reducing the carbon emission from public and private sector participants and hence their obligations under the Carbon Reduction Commitment.

Achieving the maximum benefit in our region from the various available technologies requires a holistic approach rather than the implementation of small-scale opportunistic change to existing systems. Creating frameworks which allow the different technologies to support each other will be critical to achieving a power shift.

Business models have been established for technologies such as renewable electricity production where established incentive mechanisms exist. However, raising finance for other technologies is less straightforward.

The introduction of different technologies requires new risk management approaches and new forms of capital. In addition, low carbon capital projects often carry higher upfront costs and lower operational costs, their requirement for external financing is high and, due to scale, the transaction costs can be disproportionate. For example, the creation of heat networks in an unregulated market with uncertain market incentives can be challenging. The combination of large scale upfront investment and often significant heat sale revenue uncertainty results in specific challenges for potential investors.

The creation of a Green Fund at the appropriate level, as adopted in cities such as Toronto, and currently being established in London and several other UK cities, may be part of the solution.

Additionally energy efficiency investments create revenue streams that can both service capital financing for projects, as well as, provide income for incubating new projects. The greater the proportion of savings that can be recycled into new projects, the greater the acceleration of emissions reductions and the more rapid the expansion of capital available for climate mitigation over time.

There are still a number of barriers to reducing carbon emissions in our cities, such as misalignment of incentives, planning issues and perhaps critically development financing mechanisms to move from initiative to implementation. Incubation funding to get the ball rolling and project financing to scale up pilots are strategies that go hand in hand and could be used in the North East to create a low carbon economy.

Dr Ruth Rule is an assistant director of PricewaterhouseCoopers LLP.

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OVERVIEW

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POWER POLITICS

Are we groping towards an answer to our energy problems and will we find it before the lights go out wonders Peter Jackson

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We stand poised on the edge of a revolution in energy production, but, as with all revolutions, there is no clear consensus on the way forward.

It’s an ill wind that blows no good but in the case of offshore wind we have yet to find an agreement on just how much good it’s going to do.

There are those who argue that the Crown Estate’s issue of Round 3 licenses for offshore wind production – particularly at Dogger Bank off our own coast - presents the region’s offshore wind industry with the kind of opportunity it has not seen since the discovery of North Sea oil.

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The requirements for producing up to 7,000 turbines - 100 - 180m high – are compared to building several warships a week. In fact, it is possible that the North East and, indeed the UK, has missed the boat as far as manufacturing is concerned. We were leaders in onshore turbine manufacture years ago but a familiar British story of early technology failures and lack of government support meant that the development and manufacturing baton was passed to Denmark and Germany.

However, nobody expects any manufacturer to build these huge structures overseas and ship them back to the UK. Rather they will set up manufacturing, or at least assembly plants, here and, while the profits may go abroad, the jobs will be created in the UK. Not only that, but there will also be a huge amount of work for companies in the offshore supply chain, in shipping, cable laying, maintenance and so on – more than enough work to keep everybody busy for a long way into the future.

So, surely the offshore industry is straining at the leash to take advantage of this forthcoming bonanza? Well, no, not quite.

While the profits might be enormous, there

are, for many, difficulties unresolved and questions unanswered.

“One of the problems with offshore wind is that a lot of people think it’s too risky at the moment,” says Professor Phil Taylor of Durham University, who holds the chair of electrical distribution networks and smart grids. “The track record so far is that you get a lot of failures in offshore wind farms and you are forever having to go out and make repairs and service them, so investors are very cautious and they are looking for consultants to do a lot of due diligence work to tell them that their investment is safe. “There have been a few horror stories out there of cables failing and then not being able to get out there for three months to make repairs because of bad sea conditions. A lot of what we have done is to take onshore wind turbines and just put a stronger lick of paint on them and stick them out offshore and then we are surprised when we get failures in that very tough environment.”

These uncertainties are making much of the offshore supply chain reluctant to commit to investment in offshore wind, certainly not

OVERVIEW

before there is a conviction that the finance is in place, whether in the shape of private investors, government subsidy or some form of co-financing. This creates something of a Catch 22 situation, with investors being unwilling to commit until they are sure the supply capacity is there. As George Rafferty, chief executive of NOF Energy, says: his organisation and his members are giving a greater priority to nuclear power, where future development seems less problematic.

There are also the familiar criticisms that wind turbines are useless when the wind does not blow and – less frequently pointed out – when the wind blows too hard so that they have to be shut down to avoid damage.

But, the proponents of offshore wind will counter that such sceptical reluctance ignores the real success of Round 1 projects such as the North Hoyle Wind Farm, off the North Wales coast, which has achieved high generation capacity, and that it also ignores some of the realities of power generation in the UK. There is a minimum demand for power, which is constant, a base load which is ideally >>

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provided by inflexible power stations such as nuclear power stations, running very efficiently at maximum output. Demand, however, above that base load, varies all the time creating peaks – during the breaks in episodes of Coronation Street when several million kettles go on – and troughs. Happily, one of the characteristics of wind power is that it is highly flexible and power generated from wind can be ramped up or down extremely quickly. And, when the wind stops blowing, there is always back-up in the form of say gas-fired power stations.

It is further argued, that, in the future, it will be possible to store the energy provided by wind in the form of compressed air stored in deserted salt mines, for use at times of peak demand when the wind is not blowing. Also, for those who believe that nuclear power provides a more immediate solution to our problems, it must be remembered that it is many years before new stations will come on stream, we long since lost our technological edge in nuclear power and we do not have our own sources of uranium.

The proponents of offshore wind argue that the drivers behind it, most notably the political will and the governments need to meet renewable targets, are so powerful that it will

happen; that the opportunity for UK suppliers is there to be grasped.

As Andrew Mill, chief executive of NAREC says:“If the UK companies don’t do it, if George’s (Rafferty) members don’t respond, we’ll buy the turbines from Germany or from Denmark as we did for onshore wind and we’ll lose the jobs.”

Whatever the arguments over the short-term financial and commercial viability of offshore wind, there is consensus that the UK must develop a broad mix of energy sources in order to meet environmental targets, to ensure sufficient capacity and to secure an energy supply which will not be subject to the whims and vagaries of international politics.

But, even if total consensus is reached on what that mix should be, and, even if we move forward with a mix of offshore wind and nuclear, there remains a problem and it is a particularly acute problem for the North East.

As the North East Chamber of Commerce, NECC, has pointed out in its recent Energy Policy Report, the National Grid capacity in the region is insufficient. The Grid levies a charge on energy generators for connection, use of the system and engineering works, and these changes vary depending on location.

According to the NECC, average charges in

Northumberland are set at £11.73 per kw and for the rest of the North East at £9.85, higher rates than in any other area of England and, when this is compared to an average charge of 36p in Hertfordshire or 25p in Kent, we are saddled with a massive disincentive to generate power in the North East.

James Ramsbotham NECC chief executive says: “Because the National Grid operates as a monopoly it tends to control things through the prices it pays to receive the power – supply-side pricing, which, unless you are a monopoly, you can’t do - and therefore because they want power in the South and not in the North, they pay providers and generators more for the power they deliver in the South than they do in the North.”

Any generators wanting to set up in the North East will not only be disadvantaged on price but will have to pay substantial sums towards the infrastructure required to connect this power to the Grid. According to the NECC, there are at least four businesses which have plans to build generation facilities on Teesside, but all of them are being held back by lack of access to the National Grid and this is threatening billions of pounds worth of investment and the creation of thousands of jobs.

If the UK companies don’t do it, if members don’t respond, we’ll buy the turbines from Germany or from Denmark as we did for onshore wind and we’ll lose the jobs SPECIAL REPORT | SPRING 10 BQ Supp Issue 9.indb 14

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OVERVIEW

So, generating wind power on Dogger Bank is all very well, but it will not contribute to our energy needs unless it can be plugged into the National Grid.

Ramsbotham says: “It’s a big issue and Lord Mandelson has acknowledged this following a meeting he had up here last year when we put it to him that people were talking about offshore wind but no-one has yet designed the ring main that needs to go round the country to link it all up, or indeed where they are going to bring the energy ashore.”

There is nothing then that is simple about energy policy in the UK and one must pity the politicians who have to make the decision and make those decisions quickly. It might seem that the Fates have conspired against us in confronting us with the problems of climate change and rapidly depleting fossil fuels at a time when the technological questions are not fully answered. There is, of course, no coincidence about this: the technology has not been fully developed, because it has not been fully needed – until now.

Where we are unfortunate is that the solutions to the problems that face us will demand massive spending and, sadly, governments – especially our own – are facing empty coffers for years to come.

Even if government and industry do come up with the solutions – and they will because they have to – the rest of us are still left with a big challenge.

In the words of Professor Taylor: “Demand is driving all of this and if we let energy consumption grow at the rate it is growing now and at which it is predicted to grow in the future, it almost doesn’t matter what we do on the supply side; we’re in trouble.” n

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ADVERTORIAL

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Energy production demands engineering skills and K Home International sees a bright future in meeting those demands

ENGINEERING A GREEN FUTURE

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High quality engineering: Detailed PDMS model of SeaDragon Drilling Platform

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Carbon capture and storage is the philosopher’s stone of energy production, the technique that will allow us to power our lives without releasing greenhouse gases.

But the technology is largely untried and potentially highly expensive, even as the demand for a viable solution grows ever more urgent.

Thornaby based K Home International, however, has recently completed a project which will see the successful commercial reprocessing of carbon dioxide produced in the creation of sustainably generated fuel.

Yara UK contracted KHI to perform a cost study followed by an engineering, procurement, construction and management contract to construct a carbon dioxide liquefaction plant.

With the successful completion of the £18m project, the plant recovers carbon dioxide from the raw gas stream to be stored on site for later distribution by road tanker and then used in the drinks industry. The plant will liquefy 250,000 tonnes of carbon dioxide every year which would otherwise be emitted into the atmosphere.

KHI operations director, Lee Anderson says: “This was an exciting and satisfying project to work on for KHI. It demonstrates how the application of sophisticated and leading edge engineering solutions can overcome the challenges that face us as we seek to build a sustainable future. The experience we have gained on the Yara project will be applicable in countless similar facilities around the world.’’

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KHI, a multi-discipline engineering design company providing design, procurement, project and construction management consultancy services, has a long pedigree in working for the process industries. Founded in 1973, it now has 200 employees, an annual turnover of around £20m and offices in several locations around the world.

Its client base ranges from traditional petro-chemicals, pharmaceutical, oil and gas, to the aluminium and nuclear industries.

Clearly, as the Yara project at Wilton demonstrates, the company has a whole new field of opportunity opening up to it, with the rapid growth of recycling and renewable energy.

“We have a very strong materials handling department which has been born out of the aluminium industry and we have used that expertise in handling materials such as wood pellets, wood chippings via a conveying system and hoppers and silos. We applied these techniques in a project involving biomass handling at the Drax power station,’’ added Anderson.

KHI also undertook a feasibility study for Tees Valley Biofuels on a renewable fuels plant at Seal Sands. A cluster of companies, including crop growers, seed distributors, a biodiesel manufacturer and retailer appointed KHI to review potential process technologies and to do enough preliminary design to develop a cost estimate for the project.

KHI’s work included a review of gasification technologies using carbon-neutral fuels for a self-contained, on-site energy plant, and it managed the environmental impact studies for the planning application and planning approval was given at the first application. KHI later managed the pre-engineering phase aimed at final definition of the project packages to allow the placing of construction and installation contracts.

With the Government committed to renewing the UK’s ageing nuclear power stations, the company also sees great opportunities in a whole new field of energy.

Michael Ketley, heading the power and energy taskforce for K Home International, says: “Nuclear will be a massive growth sector and we want to be part of it. We are already in talks with several companies that are existing suppliers to the nuclear industry and we are hopeful that we can work with them.’’

However, even though KHI is actively pursuing a presence in the renewable and nuclear energy sectors, it is still a major force in the traditional offshore oil and gas industry.

SeaDragon subcontracted KHI to carry out the detailed engineering design for two semisubmersible platforms. The £500m platforms – 118 metres long and 73 metres wide, with an operational displacement of approximately 10,600 tonnes – are two of the largest semi-submersibles in the world. KHI’s contribution to the project took some 245,000 man hours to complete, employing about 140 people and was worth some £15m in fees.

Business development manager, Simon Warrington at KHI says: “This was the single biggest project outside of the aluminium industry KHI had ever undertaken’’ Richard Munday engineering manager Vantage Drilling Company, says: “I would like to thank K Home International for the high quality of engineering work that has been produced for the project, for the support and the flexibility shown in meeting our needs in a difficult climate and for the open and honest approach taken during all of our business dealings together.’’

With a rising oil price and the prestige it has gained from the SeaDragon project, KHI is optimistic it will be doing more work for the offshore oil sector.

Egdon Resources has recently appointed KHI

ADVERTORIAL as the engineering, procurement services and construction management contractor for the Kirkleatham development project. Planning consent was received for the Kirkleatham development in August 2009, which allows for production from the existing Kirkleatham-4 well site and for the drilling, testing and production from up to two additional wells at the site.

Gas will be transported from the well site via a 600-metre underground pipeline to the Wilton site boundary and then via an above ground pipeline to a processing site within Wilton.

On the processing site, water and all hydrocarbon liquids will be removed and the gas heated and metered prior to delivery via an above ground pipeline to a Sembcorpowned combined heat and power plant which generates electricity for site and export use and can also generate steam for site use.

Simon Warrington adds: “Times have been tough for KHI as for everybody, but, with our track record, the diverse range of markets we serve and our credentials for operating in new sectors, we are confident of the continued growth of the company.’’ n

UK Head Office Ingram House, Allensway Thornaby, Stockton on Tees TS17 9HA, UK Tel: +44 (0)1642 765421 Fax: +44 (0)1642 760721 Email: enquiry@khomeint.com Web: www.khomeint.com

Nuclear will be a massive growth sector and we want to be part of it. We are already in talks with several companies that are existing suppliers to the nuclear industry and we are hopeful that we can work with them

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WE MUST FARM THE WIND Narec’s new national role could herald the pivotal part the North East can play in powering the future, as Andrew Mill explains to Peter Jackson

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INTERVIEW

There is a palpable air of excitement about Andrew Mill, which is understandable, given the attention his organisation now attracts.

He is chief executive of Narec, the body set up

by One North East to drive the development of renewable energy in the region. But now it is also a national hub for the development of offshore wind technologies and, to reflect that, the past few weeks have seen a number of significant developments.

The government announced an £18.5m grant to fund an offshore wind test site at Narec’s Blyth base, a facility which, it is claimed, will be `unique in global terms’. Also, government ministers recently opened there a 27-metre high training facility – the UK’s first turbine training tower.

Of all forms of renewable energy, offshore wind is the one attracting the attention and funding and Narec has identified two core technologies for development: the blades and the drive trains.

Those are the two which we could bring together and build on to provide an internationally recognised leading platform,’’ says Mill.

Then Narec’s facilities will have not just a national, but international significance.

Mill says: “People will want to come here to do their prototype development work and, if you get the prototype development work here, that will embed it in the UK. That does not necessarily mean sitting in Blyth, although a lot of them will want to be close to the >>

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INTERVIEW

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facilities, but it will mean in the region and in the UK generally.”

He adds: “We want to bring in technologies from overseas, as well as UK technologies, to get the best there is in the UK.’’ Achieving this, he argues, will make possible the achievement of the government’s 2020 targets to develop 33GW of capacity in offshore wind through the Round 3 programme.

The major roll out of Round 3, he reckons, will be around 2014/2015 by which time, hopefully, the technology will be ready and, in that five-year period, no fewer than 7,000 turbines will have to be built. To meet these targets, simple arithmetic demands the building of 1,400 turbines a year, or 27 every week.

He puts the enormity of this task in context by using a comparison which is to become familiar in talking to the offshore industry.

“If you take the average weight of a warship such as a frigate, which is about 3,000 tonnes, each of these turbines is going to be of that order. So you are talking about launching multiple frigates every week. That gives you some idea of the scale of what we are looking at.’’

If that were not a big enough call upon manufacturing capacity, it has to be remembered that countries such as Germany and Denmark are undertaking their own equivalents of Round 3.

Mills says: “When you start to get into these kinds of volumes, you begin to realise that we have got to accelerate the technology development that will increase the reliability because these turbines have to be far more reliable and effective than the ones developed to date and that’s why facilities like these are so important.’’

The next stage, then, is to go offshore, with 100-metre to 180-metre high prototype turbines, for which it would be extremely difficult, to say the least, to obtain planning permission.

“You can’t put them up and test them onshore and the financial community want to see them on the water, working in real conditions before they are going to fund this £100bn investment in Round 3,’’ says Mill.

“And that £100bn investment is only going to

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We want to bring in technologies from overseas, as well as UK technologies,to get the best there is in the UK

be made when the financial community is comfortable that these turbines will work, that the reliability is there, so that you can generate the output of electricity that is then going to

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pay for the financing of the project.’’

Those who have been granted licences for Round 3 must now go through the consenting process to evaluate environmental impact on marine life, bird life and so on, and on shipping.

These assessments, it is calculated, will cost somewhere in the region of £500m and will take until 2012 or 2013, before, if all goes well, final consent is given, so that installation can then begin in about 2014.

In parallel with this, a huge amount of work will have to be done in developing ports, ships and other supply infrastructure. This means, Mill believes, that there is only a narrow window during which the region’s offshore industry can seize a once-in-ageneration opportunity.

Nor should there be, he insists, any doubt that offshore wind generation, as envisaged by Round 3, is going to happen.

“Government has signed up and the commitments it has made to climate change targets are legally binding. We are the first country to sign up to these targets for greenhouse gas reduction; we have signed up to the European directives on renewable energy; we have signed up to the Clean Air Act, which means that a lot of our coal-fired power stations will have to close; our nuclear programme is coming to the end of its useful life – so we are going to have to invest heavily in new infrastructure for electricity generation.

Government has set out a very clear policy and strategy on how that will be achieved.’’

Mill also points to the funding government has given various companies such as Clipper and Mitsubishi to develop technology and, of course, the money it has given to Narec itself.

The government’s chosen mechanism for achieving the generation of renewable energy targets is the Renewable Energy Certificate, ROC, as a way in which the market can channel money from the end-user into the development of renewables. Under the ROC scheme, all electricity suppliers must source a certain percentage of generation from renewable sources, for which they receive ROCs. By 2020, 10% of energy, including electricity, heat and transport, has to come from renewable – and most of that obligation will fall on electricity, meaning that

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something like 30% will have to come from renewable sources.

Any supplier which cannot earn ROCs through its own power generation must buy them in the open market and, if they fail to do that, they will incur financial penalties.

“With these kinds of numbers, the government has to deliver renewable sources of energy, so it must then use the ROC mechanism to make sure these projects are commercially viable,’’ says Mill.

He accepts that challenges remain in both financing and technology, but he is convinced that it will happen and he points to North East companies which have already committed themselves.

“We have got some tremendous companies that are already involved. JDR Cables – what a fantastic story that is – they set up in Hartlepool, they have already got massive

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INTERVIEW

orders for cable, going forward. We have people like TAG down on the Tees, who are looking at developing their facilities to manufacture wind turbines; Clipper and Shepherds looking at the blade manufacturing on the Tyne; IHC Engineering Business already active in this market, as are SMD. As a region, I think we are the best in the UK in terms of the supply chain that is already here.’’

This explains his evident excitement.

“Lots of different bits of the story are already here. What we have got to do is make sure, as a region, that we make it as attractive as possible, for the developers and big manufacturers to set up here.

I’m really fired up with it, this is the place I want to be for the next 10 years of developing this industry.’’ n

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OURS FOR THE TAKING

A massive opportunity for economic transformation lies within the grasp of the North East, but will we meet the challenge?

Peter Jackson talks to Tony Trapp Imagine the transformation on Tyneside if the river was to return to the glory days to the extent of building 50 warships every year.

This is not as fanciful as it sounds, nor is it some misty eyed nostalgia trip, according to Tony Trapp, as he contemplates the implications of the Tyne meeting future North Sea wind turbine requirements.

“It has been said that it would be the equivalent of producing a frigate a week for six years,’’ he says.

And Tony Trapp is a man whose opinion should count. He was one of four Newcastle University engineering graduates who founded the Engineering Business in 1997, now IHC Engineering Business. The company has grown to be a world market leader in the construction of specialist dredging equipment and complex custom-built offshore vessels and employs more than 180 people.

He was named the Entrepreneurs’ Forum `Entrepreneur of the Year’ title in 2008, North East Business Executive of the Year in the same year and was made Newcastle University’s

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David Goldman Visiting Professor of Business Innovation.

It is encouraging then that he is so passionate about the opportunities presented to the North East by the development of offshore wind farms, particularly by the Round 3 project to provide 33GW of offshore wind energy. Of the proposed sites, Dogger Bank, covering some 8,660 sq km, is the most obvious to bring great potential benefits to the North East.

He says: “Can wind have the same effect for North East England that oil and gas had for Aberdeen? The difference with wind is that it’s not going to run out, you won’t deplete it, it’s going to go on and on.’’

He believes the North East is well placed to become another Aberdeen; literally well placed in terms of geography, but also in terms of its skills, its rivers and its port access.

“North East England is the best placed to do the engineering and produce the goods. In terms of offshore wind you really have to scale up because you are talking about massive >>

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Engineering skills: Oil and gas and offshore wind will place huge demands on engineering capacity

production and massive support, with all the support vessels and maintenance, so it can become a big industry for generations.’’

If, as has been projected, there is a £30bn investment in Dogger Bank over 15 years and, if most of it was spent in the North East, the effects would be “transformational’’. We are, after all, talking about the production of 2,660 turbines for that field alone.

“These turbines will have a 30-year life span, so if the project was finished by 2025, you then have all the maintenance and operations to go on throughout the next 30 years, then the decommissioning and, if it proves to be successful, you would have a steady programme of replacement. It’s an industry for semi-ever.’’

The Round 3 licence for Dogger Bank has been awarded to a consortium called Forewind, comprising Statkraft, Statoil, Scottish and Southern Energy and RWE npower.

“They are all such huge players that you have to believe it can happen and it seems to be

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gathering momentum,’’ says Trapp.

If it does happen, he is confident companies such as IHC Engineering Business, which have painstakingly built up their North Sea expertise over 40 years, will be well placed for the offshore wind market.

But, he also warns that this is not something that is simply going to fall into the region’s lap.

It will require action on the part of government and something of a leap of faith by businesses, for, despite some similarities, offshore wind will differ from oil and gas in an important respect.

“With all this renewable stuff, in a way it’s an artificial industry in that it depends on very heavy subsidy compared with oil and gas which is the opposite, being a big tax yielder.

You can do oil and gas, as long as you don’t mind paying the fine, but you’ll only do offshore if you’re bribed.’’

He is convinced that the political will is there to make it happen and believes that the commercial will is also there. But, the money has also got to be on offer.

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He says: “If you want to do engineering, someone has got to pay for it. You want a good big flow of money and you want demand and you also want a bit of urgency about it as well.’’

Even if the will on the part of the private sector is there and, even if the government – or taxpayer – is willing to provide the necessary subsidy, there will still be a question mark over the ability to provide the resources needed to meet the challenge.

“It is estimated that, if it goes ahead, according to plan, you would need something like 800,000 tonnes of fabrication a year,’’ says Trapp. “Well, the current UK capacity, I understand, is about 200,000 tonnes, so you have got a huge shortfall in capability which needs to be developed. You need large industrial sites with river access, but there aren’t that many.’’

It is not even as though the offshore wind industry would replace oil and gas. The price of oil has been in steady recovery from its low point of US$30 a barrel to around US$80 and

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this means that the oil and gas market is picking up again.

“Oil and gas is not anywhere near finished. At IHC EB, we tend to be at the top end of it, designing sophisticated systems for more difficult-to-get-at oil and gas in deeper water and more difficult conditions and these tend to be the more difficult fields to develop. They are also hugely expensive fields to develop and over the past year people have been hesitating, but when the price of oil is anywhere near US$80 a barrel, I believe it’s high enough to justify the development of more difficult fields and then you need specialist equipment.’’

Inevitably, if the demands of wind energy are added to those of oil and gas on the offshore supply chain then we face unprecedented demands, not just on material, but also on human resources.

“You can pretty well guarantee there will be a huge skills shortage,’’ says Trapp. “Oil and gas will pick up and it will have a demand for more engineering. If offshore wind takes off in the way that is envisaged, there will be a huge demand for engineering in all sorts of ways and you can see it going on for decades and not just the next year or two.’’

To address this, he argues that skilled engineers will have to be lured back to the region and schools will have to encourage pupils to take hard subjects and universities will have to expand engineering departments and, finally, engineering graduates will have to be tempted into jobs in engineering and not the financial sector.

To achieve this will take time and this, for Tony Trapp, brings an urgency to the whole question. Decisions have to be made now on investment in facilities and in training if the region is to be in a position to meet the expanded demands of a renewed offshore sector.

“People need to get moving now and we need to put a flag up in the North East of England to say: this is the place.’’

There are, after all, powerful competitors outside of the UK which will be only too willing to step in if our manufacturers fail to do so.

As Trapp says: “All this money comes in in pounds; it must not be spent in euros.’’ n

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INTERVIEW

Can wind have the same effect for North East England that oil and gas had for Aberdeen? The difference with wind is that it’s not going to run out, you won’t deplete it, it’s going to go on and on

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THE BURROWERS Our North Sea oil and gas boom years are behind us, but there are still plenty of opportunities for businesses in that supply chain, as Peter Jackson discovers talking to Soil Machine Dynamics >>

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There are successful companies operating in the North East which are household names, but there are other world-beaters which remain unknown outside their sectors.

Soil Machine Dynamics, SMD, is such a company. But the Wallsend-based sub-sea engineering business, which specialises in the design and manufacture of remotely operating vehicle systems to operate on the sea bed, has recently chalked up some impressive achievements which deserve wider notice.

Last year it was named fastest growing overall business as well as fastest growing large business at the Ward Hadaway Fastest 50 Awards and it was also placed fifth in the Sunday Times Profit Track 100 league table. It has announced that it will create 75 jobs this year in addition to the 40 it created last year and it looks forward to a 50% rise in sales to £75m. Not only that, but it recently opened bases in Texas and Singapore and has facilities in North Yorkshire and Cumbria.

And yet, it remains something of an unsung hero.

As chief executive Andrew Hodgson says: “If you go 50 yards out of the factory people don’t even have a clue what SMD does, but if you bring people in here they cannot believe the technologies we have. We are a world class company working on a world stage. We provide most of the equipment in China, we supply a lot to Japan, equipment for the US Navy, and all the world’s leading oil and gas companies buy our equipment – our equipment is in every corner of the world.’’

The company, which was formed in 1971, as Bywell Holdings, grew by developing a system to bury pipelines and cables for the offshore oil industry. Bought out by its management

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team in April 2008 in a private equity backed deal, it now manufactures and supplies remotely operated vehicles, ROVs, to work on the sea bed and specialised vehicles which can weigh more than 200 tonnes. These machines sell for between £1.5m and £20m.

North Sea oil and gas fuelled SMD’s growth but now that production in those fields has peaked, SMD is using the experience it gained there to move into new markets.

Hodgson says: “North Sea oil and gas is quite a mature market; there is an ongoing requirement for oil and gas equipment but we don’t expect to see significant growth. The North Sea has been very kind to us because we have learnt about developing equipment for very difficult environments and that’s one of the reasons companies like this are so successful around the world.’’

That does not mean, however, there are not still opportunities in the North Sea. In order to extract the oil and gas a lot of assets have been placed on the sea bed and, either because it is too valuable to abandon, or for environmental reasons, there is much work to be done and in otherwise decommissioning.

“There’s a need for specialist equipment to go to do that and that equipment is going to have to have some level of robotic control,’’ says Hodgson.

SMD is still very much in the business of supporting new oil and gas exploration, with growing markets in the Asia Pacific region, Australia, and India. Brazil is a `huge marketplace’ and the company looks forward to growth in the Gulf of Mexico.

As Hodgson points out: as oil and gas’s low hanging fruit is plucked, so SMD’s machinery is needed to get at what is left.

“The easy-get-at shallow water and land based oil and gas supplies are becoming limited so all of the new resource is likely to come out of more demanding environments, which typically means deeper water and, as soon as we get into deeper water, our equipment becomes very attractive, in fact, it becomes essential.’’

SMD’s involvement in North Sea offshore, however, is not going to be limited to decommissioning. There is also a potentially vast market there in renewable, particularly in wind turbines.

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INTERVIEW

As we get into deeper water, our equipment becomes very attractive, in fact, it becomes essential

The government’s Round 3 programme for offshore wind, with plans for wind farms in UK waters to provide up to 33GW of energy, will require an infrastructure investment comparable to that for North Sea oil and gas.

“We provide the specialist vehicles and ROVs required for offshore renewable and there are cables coming back to the shore,’’ says Hodgson. “Already we are providing equipment which will lay and connect cables and equipment which will bury those cables and make sure that they are protected. That’s an existing market and, as Round 3 moves to deeper water the demands on that equipment become significantly higher.

“We are also developing equipment for the maintenance of the offshore wind structures, equipment such as small robots which can clean the towers and maintain anchorage points.’’

And the company already provides equipment for a number of the players contracted for Round 3.

SMD is also building two 1MW prototype tidal turbines to be placed in the Pentland Firth off the North Coast of Scotland using its skills in designing and manufacturing for a subsea environment and in control systems. It is also working on the development of equipment to install tidal turbine systems.

Says Hodgson: “I think that is a huge gap in the technical knowledge of how tidal turbine systems are going to be implemented. Tidal turbines obviously have to be in areas of high tidal flow and constructing things for that is very complicated. You might have six or seven knots of continuous current and, at the moment, our subsea vehicles can operate in

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up to four knots of current and still hold station.’’

Apart from energy, SMD works in defence, subsea mining and telecommunications, which is seeing something of a revival after the bursting of the dot.com bubble at the start of the decade. It recently bought Hallin Robotics Ltd, HRL, which has positioned itself in the nuclear decommissioning market.

“We are specifically targeting the nuclear decommissioning market because the UK was at the forefront of nuclear development back in the 1950s and now a lot of the facilities are coming to the end of their working lives and they all have to be dealt with,’’ says Hodgson.

Now about 60% of SMD’s products are for the oil and gas sector, with the balance being split between telecoms, renewable and the scientific markets.

Hodgson points to some obvious advantages for the company being based in the North East, not the least of these being the engineering heritage and expertise. He also pays tribute to Narec for its support in renewable and for its testing facilities at Blyth.

All this, along with the Round 3 contracts, presents a huge opportunity for the North East, in Hodgson’s opinion. But, there is a potential problem.

“One of the concerns we have is that as we develop some of these industries we have to make sure we have a broad enough population to satisfy the existing and incoming industries, particularly in engineering. We have to make sure we have enough people in place to meet those needs.’’

If we do, there could many more world class companies in the North East still thriving in the field of energy. n

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INTERVIEW

SPRING 10

BLUE SKY THINKING FOR A GREEN TOMORROW Meeting our energy needs is giving rise to some ingenious solutions, as Professor Jon Gluyas explains to Peter Jackson

Here in the North East, it should not be surprising that one fuel source that is attracting renewed attention - even though it is the dirtiest of all fossil fuels - is coal.

But now we are talking of ‘clean coal’, the burning of which will have nothing like the same environmental impact as the coal on which so much of the region’s prosperity was built.

One of the major attractions is its plentiful supply. According to Professor Jon Gluyas of Durham University’s Department of Earth Sciences, who operates under the umbrella of the university’s Durham Energy Institute, part funded by ONE. He quotes Newcastle University research which found that the net present value of the coal offshore Northumberland and Durham is something like £270bn.

He says: “If every power station and source of energy in the UK was to be switched off, this coal alone would be sufficient to power the UK for 25 years and that is only a proportion of the coal left in the UK. The National Coal

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Board calculated, at the time that it was wound up in the late 1980’s, that the UK’s known mineable resources would last for more than 100 years.’’

The clean coal process can mean merely drilling down to extract the methane, but this leaves the coal underground. Professor Gluyas and his colleagues at Durham and Newcastle universities are researching a process called Underground Coal Gasification, first conceived in Durham back in 1912 by Nobel Prize Winner Sir William Ramsay, who reasoned that by combusting coal underground miners would not have to be sent down to extract it and much industrial pollution would be avoided. Until now, this was largely forgotten, apart from in the former Soviet Union, where it was partially taken up.

With Underground Coal Gasification, water is used to control the underground burning and this produces hydrogen, carbon monoxide, methane and some carbon dioxide. The hydrogen can be burned to produce energy and water, the carbon monoxide should produce an excellent feedstock for the petro-chemical industry and it is believed that the residual carbon dioxide can be scrubbed out before it reaches the surface. The process

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would allow us to extend the already vast resources still underground.

Professor Gluyas says: “With Underground Coal Gasifiaction we can go for seams which are deeper and thinner than you could ever hope to send a miner down to, so you have increased the resource enormously. Now it’s not pie-in-the-sky but the technology is not yet developed sufficiently, that you could commercialise this. So we have been putting in bids to research councils to allow us to develop that technology, both to control the reactions you get in the sub-surface and therefore the different gases you get out and optimise those. I would hope to see this as a real UK pilot scheme for the 100th anniversary of Sir William’s discovery in 2012.”

Professor Gluyas has also done work, again in partnership with Newcastle University, on carbon capture. Government’s interest is in seeing carbon captured at source, particularly where production is concentrated as it is with power stations, and then transported as a fluid to be injected deep underground into depleted oil and gas fields.

“We can capture, although that’s probably the most difficult bit of the technology, and we can transport it,’’ says Professor Gluyas. >>

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“There are lots of good examples around the globe, particularly in West Texas where carbon dioxide is piped for thousands of kilometres and, because of the industry we have in the North Sea, we know how to drill wells and we know how to inject fluids into the deep sub-surface.

“However, as far as Professor Gluyas is concerned, this is – or should be – only half the story and carbon capture could bring benefits, which, if realised could transform our energy supplies.

“We are missing a trick here and it’s one I’m pushing very hard indeed. Experience in West Texas has shown that carbon dioxide is a fantastic solvent for oil, so what they have been doing there is injecting it into the ageing oil fields. If you take the example of West Texas, and certainly we have to do our own homework on the North Sea, one would expect to add an extra three billion barrels of oil to what has been produced in the North Sea as a minimum case.”

The carbon dioxide has several effects: it helps maintain pressure in the oil field, it helps ‘sweep’ the oil from the point of extraction to the point of production and it can reach different parts of the rock’s fabric and, being a solvent, it dissolves in the oil and fizzes it up like a keg beer.

Professor Gluyas’ calculations suggest that to get the three billion barrels of oil it would take 15-20 years to prime and cycle the gas and, as luck would have it, if we collected every molecule of industrial carbon dioxide from Scotland to Hull over this period, we would get about a billion tonnes – enough to extract the three billion barrels of oil.

At the end of this we could be left with an infrastructure for the capture and transportation of carbon dioxide, its injection into the North Sea oil fields and with an experienced workforce.

“You can then go into the true storage in aquifers , which is what the Government aspires to do in the long term, but to get there, it has been a soft start. You have earned

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all the money for the oil companies and if you work out what the tax take is on three billion barrels of oil, it’s about US$100bn and you also have an expert workforce, so we are pushing the government very hard on this,’’ says Prof Gluyas.

“Essentially carbon capture and storage is the equivalent of paying for the dustman or for the sewage to be treated, but let’s make a lot of money out of it in the run up. The nay-sayers will say you are pushing a tonne of carbon dioxide into the ground and you are bringing a barrel of oil out and you are not

saving any carbon at all, but the reality is: if we don’t take the oil out of the North Sea, it will come out of somewhere else and it does give us a big head start on carbon capture and storage.”

If that were not enough, according to Professor Gluyas, whereas we are now using more oil than we produce, the process of carbon dioxide injection would make us net exporters once again.

If he is right, the appliance of science could bring the glory days back to the North Sea and to our coal fields. n

If every power station and source of energy in the UK was to be switched off, this coal alone would be sufficient to power the UK for 25 years and that is only a proportion of the coal left in the UK

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INTERVIEW

There is a future for the offshore industry which does not depend on wind, as NOF Energy chief executive George Rafferty explains to Peter Jackson >>

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INTERVIEW

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There was a time – not too long ago – when the North Sea oil and gas sector was seen as being in long term decline.

Not surprisingly, it is a view to which George Rafferty, chief executive of NOF Energy, the development organisation for that sector, does not subscribe.

He says: “From about 2000 to 2006, it was felt that the oil and gas industry was a sunset industry, but it’s anything but a sunset industry.

When the last drop of oil and gas comes out of the North Sea, there will still be a huge opportunity on a global scale for businesses here in the UK, and the challenge that will be faced then is to make sure that we anchor the supply chain here and that it doesn’t up and leave to bed itself down in other markets.’’

He concedes that the North Sea is, what is termed in the industry, `a mature basin’, but it is one which he estimates has another 25 to 30 years left in it.

As for the global opportunities available to that industry when the North Sea is exhausted, he only has to point to the countries NOF Energy is visiting to explore business opportunities in this year alone: Trinidad, South Africa, Spain, Norway, Canada, Kazakhstan, Brazil, Australia and Libya.

The truth is, that, however successful we may be at finding other sources of energy, the world will still be dependent on fossil fuels, including oil and gas, for the foreseeable future. The most easily accessible and exploitable sources have already been found and extracted and rising prices dictate that the

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George Rafferty: chief executive of NOF Energy

next sources of oil and gas will be in the kind of hostile environments that our own supply chain learnt to handle in the North Sea. This opening up of opportunities for the North East’s offshore supply chain has been reflected in an expanding role for NOF Energy.

Formerly the North Sea Offshore Federation, it has, since Rafferty’s appointment in 2005, extended its brief to include other forms of energy.

The organisation has gone national – despite resistance from some original members – and membership in the last three years has gone up from 175 to 342, of which 60% are based in the North East.

However, one thing is clear: despite this apparent bullishness on the part of the industry, Rafferty’s members are not exactly falling over themselves to get involved in offshore wind.

He says: “We would look to move into renewable and offshore wind as and when things become clearer and policy becomes clearer, we would start to move into offshore wind providing our members wanted us to

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actually do that and that’s where we are now.’’

He adds: “Offshore wind will present tremendous opportunities for NOF Energy members and businesses here in the North East of England, but the question has got to be asked: is offshore wind going to develop on the scale that everyone is forecasting, or the scale that the government wants it to? My view is that it won’t develop on that scale and certainly not to that scale over the time scale that the government would like to happen to.

“One of the reasons for that, in my view, is that the supply chain doesn’t currently exist and the technology of it is still to be proven in many regards. Although we have got a very strong oil and gas supply chain that can supply into offshore wind, there are still gaps in the supply chain that need to be plugged.’’

He points out, for example, that there is currently no facility in the UK to roll the steel plate to build the turbine towers. While some of his members have plans to develop production facilities, there is a classic chicken and egg situation, with companies having to

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convince investors to back such facilities but the investors will want to know where the orders are coming from. On the other hand, those who will place the orders, need to be satisfied that the facilities are there to enable delivery.

Here is where he believes the government has a role to play in helping to develop that supply chain.

“The government has got to, in some way, help develop the confidence and maybe free up the investment that will be required to build facilities such as that, and that’s a major part of the supply chain,’’ says Rafferty.

He concedes that the North East should be ideally placed to service the Round 3 Dogger Bank project, but there is a proviso.

“There’s still a huge amount of investment required to make the thing work and sceptics will say the wind doesn’t blow for every minute of every day, so how do you make this thing stack up economically for the periods when the wind isn’t blowing? The developers have a task on their hands to make it work economically as well as technically.’’

He argues that the current oil and gas supply chain could not currently cope with the production demands of Round 3. The only thing that would make it work would be some form of government subsidy.

“If it was left strictly to market forces, I don’t think it would happen.’’

But, even government support, by way of subsidy, could bring its own problems.

“When you consider that offshore wind will

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INTERVIEW

From about 2000 to 2006, it was felt that the oil and gas industry was a sunset industry, but it’s anything but a sunset industry. When the last drop of oil and gas comes out of the North Sea, there will still be a huge opportunity on a global scale for businesses here in the UK play a small part in the overall energy mix, if you distort the market in favour of one particular form of energy, what will then be the effect on other forms of energy? If you give too much to one, there won’t be enough left to help the others and, at the end of the day, you need a balanced energy mix between fossil fuels, nuclear and renewables.’’

NOF Energy is also keeping an eye on developments in wave and tidal power, but it sees more immediate opportunities for its members in the field of nuclear.

As Rafferty says: “If you look at nuclear new-build, it’s estimated there could be up to 400 new nuclear power stations built globally in the next three to four decades and a lot of that activity is taking place in markets that are also oil and gas, so, from an NOF Energy perspective, I can see that, in two years time, we will be making market visits based around oil, gas and nuclear.’’

Which is why NOF Energy is making its members more aware of the transferable skills between offshore oil and gas and nuclear. It sees opportunities in the programme to build new nuclear power stations, in the

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decommissioning of the current nuclear plant and then – because of the energy gap as power stations become obsolete leading to power cuts in the UK in 2015 – there will be on-going life extension work on existing nuclear power stations.

One new nuclear power station represents £5bn worth of investment and some 80% of such a power station is non-nuclear and it is in meeting these requirements that the rich opportunities lie for the offshore oil and gas industry. Opportunities already exist, for example, for subsea specialists to operate in nuclear waste management.

“The government has committed itself to nuclear new-build because you need that base load of electricity and offshore wind will not provide that,’’ says Rafferty.

But whatever the final mix, the production of energy will keep the North Sea offshore supply chain busy for many years to come.

“We all need energy, we can’t do without it. I would say to any young person coming out of school or college that, if they are looking for a life-long career in one industry, then the energy industry will give them that.’’ n

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ADVERTORIAL

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ADVERTORIAL

A PORT WITH ENERGY Port of Tyne prospered in the era when coal was king, but it is now also well placed to benefit from new and renewable energy sources

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Port of Tyne was traditionally famous for its coal exports but the radical changes in the UK’s mining industry during the 1990s created an urgent need for the port to diversify to remain viable.

The port has successfully entered into new markets, ranging from car exports, imports and trans-shipments, through to logistics and cruise and ferries, helping it to earn the accolade of European Port of the Year for three consecutive years, and to be one of >>

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ADVERTORIAL the finalists in the Seatrade Insider Cruise Port of the Year 2008.

But, that is not to say that coal does not remain important and – in a clear case of coals to Newcastle – the port was the UK’s fourth largest importer of coal in 2008.

Coal, however, is only part of the port’s energy portfolio. Last summer saw an announcement

by MGT Power of their plan, subject to planning approval, to build their biomassfuelled Tyne Renewable Energy plant on the port’s north bank near Whitehill Point.

Then, the year ended on a high-note with the signing of an agreement between the Port of Tyne and Drax Power Limited for the provision of handling and covered storage facilities for between 0.5 million and 1.4 million tonnes of biomass per annum, for an initial 10-year period. Both projects contributing significantly to North East England’s growing role at the forefront of the low-carbon economy.

The port’s chief executive Andrew Moffat, who forecast exciting opportunities at May 2009’s AGM, says: “At our AGM I could only hint at the exciting opportunities to come and it was great to finish 2009 in such an upbeat manner.

The Drax agreement is in line with our strategy for sustainability and represents another major long term investment for the Port of Tyne that will ensure there continues to be a vibrant working port on the river Tyne ensuring future employment opportunities.”

He adds that the investment associated with this project has already commenced.

“There is some fairly extensive work to be done to accommodate the specific requirements of this project and we are investing over £16m to ensure everything will be ready in time for the port to be able to handle the new biomass cargo,” he says.

Drax is one of the Port of Tyne’s major customers. Drax Power Station provides in the region of 7% of the electricity in the UK and from mid 2010 is set to produce 12.5% of its output from renewable biomass. This venture into biomass is a key part of Drax’s commitment to reducing the carbon footprint of UK power generation and the project represents a major commitment to the Port of Tyne by Drax.

Port of Tyne is also still a key part of the infrastructure for the UK’s huge offshore

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The Port of Tyne is a business run on a sound commercial and financial basis.

However, unlike many businesses in the private sector, as a trust port we have no shareholders and we are able to re-invest all profits into the port for the benefit of stakeholders and ultimately, North East England

industry for North Sea oil and gas. This was underlined by Tyneside offshore engineering specialist IHC Engineering Business opening a new manufacturing and support facility at Riverside Quay.

This will now form the hub of their manufacturing activity, delivering complex and custom built offshore and subsea equipment.

IHC Engineering Business managing director Toby Bailey says: “EB’s existing business, as a leading supplier of offshore systems, will be expanded to offer an increase in services to

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our oil and gas and other offshore clients.

“Our new facility allows us to accommodate larger vessels than those that could take advantage of our previous base at the Hadrian yard on the North bank of the Tyne.

At Riverside Quay we can take vessels of up to 10.5-metre draft. Split between three areas, we now have some 1,300 metres of quayside accommodating multiple vessels and operations at any one time.”

EM aims to make the Riverside Quay facility an attractive winter and downtime base for

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vessels by offering a combination of cost effective berthing charges backed up by extensive support and engineering services.

Considerable investment is being made to upgrade the 7,484 square metres of covered space, installing hydraulic and electrical clean rooms, overhead craneage, office facilities, secure storage, and project offices for clients operating from the base.

Andrew Moffat says: “We are delighted to welcome EB to the Port of Tyne. We believe this not only cements the position of a hugely successful and growing business in the North East and retains some highly skilled jobs in the region, it also marks a milestone in the port’s development and is another example of the diversification in our business model.”

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The port is convinced that this is not only good news for its own business but also for the whole region. It points to an economic impact assessment, carried out a few years ago, which calculated that the gross value added contribution the port makes to the regional economy is around £460m, and it also supports up to 8,000 people in employment in North East England, both directly and indirectly.

Moffat says: “The Port of Tyne is a highly successful, commercial business, operating as a trust port, employing just under 500 people.

However our trust port status often leads to the misconception that we are publicly funded. Nothing could be further from the truth. Although ultimately responsible to the

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ADVERTORIAL Department for Transport, we are a business run on a sound commercial and financial basis.

However, unlike many businesses in the private sector, as a trust port we have no shareholders and we are able to re-invest all profits into the port for the benefit of stakeholders and ultimately, North East England.’’

The port’s quayside operations on the north bank have also been strengthened with the transfer of landside operational staff from DFDS Seaways to the port. It believes this puts it in a stronger position to attract other ferry operators to the region and potentially new routes from the Tyne, as well bringing new opportunities to market the north bank facilities to a wider customer base.

Moffat adds: “There is a lot going on at the moment. We are working in partnership with North Tyneside Council, One North East, and the Marine and Fisheries Agency in a £5.7m investment to refurbish the Western Quay in North Shields to support the local fishing industry and the wider community”.

Other projects which the port has initiated include the creation of 13 acres of operational land on the port’s south bank in South Shields to give the port flexibility in meeting customer requirements. The land is being created by infilling Tyne Dock with dredged spoil and excavated land-based material from the construction of the second Tyne Tunnel.

“A few years ago the Port of Tyne was a bit of a best kept secret” says Moffat. “Our communications have improved hugely in recent years and there is now a better understanding of the services we provide, but I believe there is still plenty of room for improvement.” n Maritime House, Tyne Dock, South Shields, Tyne & Wear NE34 9PT Tel: 0191 455 2671 Fax: 0191 455 4687

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ANALYSIS

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ELECTRIC VEHICLES THE ROAD Ahead Electric vehicles, which once meant milk floats, are now seen as the future of motoring, but how will they help the environment?

Peter Jackson reports

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Nissan’s Sunderland plant is well and truly plugged into the motor giant’s ambitious plans for electric vehicles having been chosen for the European production of the Leaf.

This not only secures jobs at the Washington plant and in its extensive supply chain, it also puts the region at the leading edge of the automotive industry.

For, no less a figure than Carlos Ghosn, head of Renault Nissan, sees the future of motoring as being an electric future – so much so that he has committed his company to more than £3bn worth of investment in electric vehicles.

It is his belief that by 2020 a tenth of the market will be made up of electric cars and he also believes that Renault Nissan, as the only manufacturer making such an investment in capacity, will have the lion’s share of that market.

While Nissan might be forging ahead with electric vehicles, it is by no means on its own, but is operating with the active support of national, local and regional government.

The Government has declared the North East to be its first low carbon economics area and One North East has helped secure funding for electric charging points across the region. This means 1,300 plug sockets will be installed over the next three years in North East streets, car parks, homes, businesses and shopping centres.

The Government has also designated the North East as one of its first three ‘Plugged in Places’, along with London and Milton Keynes.

Trevor Mann, senior vice president manufacturing, purchasing and supply chain management for Nissan Europe, values this support.

He says: “The North East has worked very hard to be awarded the Low Carbon Economic Area. They seem to me to be getting their act together and doing the right things. I signed the definitive agreement with (ONE chairman) Margaret Fay in January which was the conclusion of a year’s work together between Nissan, One North East and some other partners in terms of what the initial

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infrastructure was to support electric vehicles.

It’s okay having electric vehicles but if you don’t have charging points and infrastructure then it ain’t going to work.

“I think it’s very positive for the North East, I can’t see why the North East can’t be a leading region in terms of zero emission mobility and obviously what the government announced just the other week supports the consumer in terms of incentivising the early adopters, so it’s all looking good.

“Obviously we need the brand new technology and there’s going to be a lot of people who are going to stand back and watch before they adopt because they will want to know how it works.

“So there’s a number of things: one, is we’ve got the base level infrastructure in place, secondly, towards the end of this year and going into next year, we have got the technology strategy board event which is putting electric vehicles in real life test in the North East of England. We are participating in that with 15 Leaf vehicles, and the likes of Smiths Electric Vehicles have got a couple of vehicles in that programme as do AVID. “You have got a significant real life trial which will help the manufacturers understand how people drive round the North East of England and whether their cars are suitable and what tuning needs to be made. It supports One North East’s initial study in terms of whether we have got the right infrastructure and then from that we can then encourage people to purchase electric vehicles, so it’s all going in the right direction as far as I’m concerned, it’s looking good.’’

It is undoubtedly looking good for Nissan, but it is also good news for the environment: what exactly will the take-up of electric vehicles do to reduce carbon dioxide? After all, surely an electric vehicle is only as green as the electricity that powers it and if this electricity is powered by conventional means do we gain anything in terms of emissions?

This question takes on an added significance when one remembers that normally 8% of energy is lost in transmission from the power station to the point of use.

Trevor Mann says: “Even if you take the dirtiest power station powering a car you are still talking about 130 grams of carbon dioxide

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ANALYSIS

Trevor Mann: Senior vice president manufacturing, purchasing and supply chain management for Nissan Europe

The North East has worked very hard to be awarded the Low Carbon Economic Area.They seem to me to be getting their act together and doing the right things per kilometre or something like that, which isn’t the greenest vehicle on the road, but it’s far from the dirtiest. If you look at the national averages, the UK at the moment is not great, but if you take, for example France that uses a lot of nuclear energy to generate electricity then that would be substantially less, probably well below 100 grams.

“As you know, as a consumer, you can purchase renewable energy, so you can >>

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Driving change: Nissan is preparing for full scale electric production make that choice and, as you also know, the UK government has got a firm commitment in terms of renewable energy, both in nuclear, wind and renewables. The world is moving, and by the time we get a significant amount of electric vehicles governments, countries and infrastructures will be in place to support that.”

So the real environmental benefits from electrical vehicles will come when most electricity is produced from non-fossil fuels, with the so-called ‘greening of the grid’.

Professor Phil Taylor of Durham University, who holds the chair of electrical distribution networks and smart grids, says: “Electric vehicles are slightly more efficient than petrol engine vehicles so, even if you don’t green up the grid, there’s still a small efficiency saving.

“You can have centralised carbon dioxide emissions rather than distributed. Carbon dioxide emissions which are much harder to deal with are those inside the city where people are living.

“But, if you really want to make the big impact on carbon dioxide, then you need to increase the amount of renewable and nuclear generation in the network alongside the growth of electric vehicles, that’s when you get the real carbon dioxide benefits.

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“Losses in the power system are usually about 8%, so, for the power to get to your vehicle from the power stations, there might be about 8% losses. But these losses are associated with a system where you have got the traditional systems and large power stations connected up at the high voltages.

The future vision for power systems is that we have more and more distributed generation which is connected at the lower voltages and is closer electrically and physically to the points of consumption and this has the potential to lead to a reduction in losses. So you can have co-location schemes of distributed generation near to say the Metro Centre car park.’’

A study at the university reveals that even if 30% of the driving population opted for electric vehicles it would lead to some overloads of the system at peak periods of peak consumption.

This calls for one of two things: either reinforcing the UK’s electricity

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grid or some demand side management to shift the charging patterns of electric vehicles by putting pricing incentives in place to encourage people to charge their vehicles in off-peak periods.

Professor Taylor also argues that electric vehicles could be a support to the Grid and not just a further demand placed upon it.

“Potentially, if you imagine the UK decades from now with a huge fleet of electric vehicles connected to the Grid at any one time, that is a controllable load or generator, because you have basically got a huge distributed battery connected to the Grid, so, in times of emergency or very fast changes in demand, you can potentially ask 10million cars to all export energy just for the next five seconds to get you through a little peak when you are under duress – that’s called vehicle-to-grid.

“You would have to incentivise people to do it but if you bought your energy from a company and they put you on a tariff that was 20% less if you agree that in times of emergency they could discharge your car to 25% of full charge temporarily to help the Grid through a bad time, you might go for this.”

Vehicle-to-grid remains, for the moment, a gleam in the engineer’s eye, but it is being talked about. One thing is for sure: electric vehicles have a lot of mileage in them. n

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NIGEL WRIGHT RECRUITMENT SUPPORTING THE RENEWABLES INDUSTRY ACROSS THE NORTH EAST OF ENGLAND

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Making the Switch to Low Carbon in the Built Environment Narec advises clients, including local government and housing associations, on how to incorporate the most suitable technologies for renewable energy systems into major regeneration programmes. We deliver consultancy for energy master planning and citywide energy redevelopment, provide training and support for the installation of micro generation, and test and develop new market-ready technologies.

Energy Master Planning | Regeneration Schemes | Training | Testing and Development www.narec.co.uk

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