Green Energy Rush Hit By Headwinds

From the Wall Street Journal

OFF THE COAST OF KENT, England—A phalanx of sleek white windmills, rising nearly 400 feet out of the North Sea, is just the start of one of the world’s most audacious green-energy programs.
The turbines are part of a project expected to be the world’s largest offshore wind farm when it is completed later this year. But only for a while, because it’s a prelude to something much bigger. In a few years, its developer, Swedish energy company Vattenfall AB, plans to start a new project farther offshore, in deeper waters, with turbines as tall as London’s 580-foot Gherkin skyscraper.

[UKWind] A vessel carries turbine towers to the Thanet wind farm, off the coast of Kent, England.

Just one problem: Vattenfall has no idea how it’s going to build it. “The equipment we need to operate in such rough waters doesn’t exist yet,” says Ole Bigum Nielsen, the project manager.

Europe is making a huge bet on wind energy. Because there is little room in its crowded countryside for sprawling wind-tower complexes, planners are increasingly looking to the sea. Europe’s current 2,000 megawatts of offshore generating capacity will grow at least 40,000 megawatts by 2020, enough to power more than 25 million households, the European Wind Energy Association predicts.

Britain is making the biggest wind wager. By offering generous incentives, the U.K. already has built more offshore wind power than any other nation. Now it is planning a wave of vast new wind farms, in some of Europe’s stormiest waters.

The U.K.’s commitment is driven by stringent European Union targets. To meet them, Britain will have to raise the share of its electricity that comes from renewable sources to about 30% by 2020. It’s just 7% now. The U.K. also adopted a “carbon budget” a year ago, committing to reduce emissions to at least 34% below 1990 levels by 2018-2022.

Some dismiss the windmills as quixotic. Wind energy needs massive subsidies to be economic. The cost to carry out Britain’s plans is estimated at $150 billion. Some predict a consumer backlash against resulting higher energy bills. And many more challenges await, judging from those the project at Kent faced, ranging from the need to protect marine worms to a design flaw that causes turbines to sink into their foundations.


“The danger is that we might end up paying a huge amount of money trying to achieve this [EU] target and then failing anyway,” says Michael Pollitt, head of the Electricity Policy Research Group at Cambridge University. “The most sensible thing to do is abandon the target.”

For now, Britain is sticking to its goals. With two rounds of projects in operation or being built, the government in January awarded a third round of licenses, for nine enormous wind farms stretching from Scotland’s Moray Firth to the Isle of Wight in southern England.

The government envisages more than 6,000 huge turbines in British waters by decade’s end. Together, the projects are supposed to meet a third of Britain’s electricity needs by 2020.

“Of any renewables program in the world, this is probably the most ambitious,” says David Still, head of the European arm of U.S. turbine manufacturer Clipper Windpower Inc. “It’s a major opportunity for the global wind business.”

Some of the sector’s biggest players are piling in. General Electric Co. says it will invest €110 million (about $150 million) in a turbine plant in the U.K. A unit of Japan’s Mitsubishi Heavy Industries Ltd. is to spend about $154 million here on turbine development. Clipper plans to build massive turbine blades at a new factory near Newcastle.

The program is a leap in the dark. The wind farms under the first two licensing rounds, such as Vattenfall’s $1.2 billion venture off the coast of Kent, which is known as Thanet, are in relatively shallow waters a few miles off the coast. But most Round 3 projects will be in water over 90 feet deep, some 180 miles offshore. Far out in the stormy North Sea, they must withstand 30-foot waves and 60-mile-an-hour winds. Righting one that tips would be a formidable task.


Just hauling them out and installing them is hard enough, given a shortage of vessels large enough to do the job. That challenge will grow as the machines get bigger, like a 10-megawatt turbine Clipper is developing with skyscraper-size blades. All in all, the price tag for wind parks at sea can be three times an onshore equivalent.

“Offshore wind is one of the most expensive short-term ways you can conceive of to reduce CO2 emissions,” says Dieter Helm, professor of energy policy at Oxford University. “It’s economic nonsense to put all your eggs in one basket like this.”

Dr. Helm says the most cost-effective way of “de-carbonizing” U.K. energy, at least in the short term, would be to switch from coal to cleaner-burning natural gas in power generation. “If you take out 4 to 5 gigawatts of coal and replace it with gas, the CO2 savings would be similar and it would only cost £5 billion to £7 billion, compared to £100 billion for offshore wind,” he says.

He thinks many Round 3 projects will never see the light of day. “Companies bought the options on licenses, and they’re not required to develop those options by a particular date,” he says. “My sense is they’ll build some, but won’t try too hard.”

Vattenfall, which has a license for one Round 3 project, off East Anglia, hasn’t made the final go-ahead decision but has committed funds for surveys, permits and such. Construction isn’t supposed to start until 2015.

Boosters of wind farms say that though they have high up-front costs, once built they are cheaper to run than plants burning coal or gas, because wind is free. “There’ll be no gas left in 50 years’ time, whereas we have an infinity of wind,” says Eddie O’Connor, head of Mainstream Renewable Power, a big player in offshore wind.

The origins of Britain’s dash for wind power lie in a 2007 EU summit meeting. The bloc pledged a 20% cut in emissions believed to cause global warming and agreed to boost the proportion of energy derived from renewable sources to 20%, both by 2020.

For some countries, the targets aren’t difficult. Many started switching away from fossil fuels after the first oil-price shock in the 1970s. Sweden came to rely heavily on hydropower, France on nuclear.

Britain, blessed with North Sea oil and gas, didn’t need to change. In 2005, it was getting just 1.3% of its energy from renewables. To catch up, wind appeared a sensible way to go. Solar was less attractive in a place with so little sunshine.

But onshore wind farms often were thwarted by not-in-my-backyard groups, which among other things called them a blot on the landscape. Companies began to think about putting them out of sight, at sea.

Clipper’s Mr. Still was a pioneer. In 2000, a small firm he then headed built the U.K.’s first offshore wind farm off Blyth in northeastern England, a modest project that powered 1,500 homes. “No one else was doing it. We wanted to be adventurous,” he says.

He received an enthusiastic response from the Crown Estate, an independent agency that owns Britain’s seabed. It saw the potential: The British Isles’ territorial waters cover a greater area than those of any other European country, and with their prevailing westerlies they are uncommonly gusty.

Another plus: Britain’s decades of experience pumping oil in the North Sea. The idea was that oil-service companies that install rigs and pipelines could switch to deploying wind turbines and power cables. Big European utilities such as Germany’s E.ON AG, DONG Energy of Denmark and Iberdrola SA of Spain started investing in U.K. wind.

There were setbacks. Though wind-power technology initially declined in cost as it matured, as many technologies do, a surge in metals prices and a weaker pound pushed up costs. The 2008 credit crunch squeezed financing and stalled some projects.

That year, a consortium including Royal Dutch Shell PLC and DONG abandoned plans to place turbines in the Irish Sea after the Ministry of Defence said they would interfere with radar signals. Like civil aviation authorities, the Defence Ministry has to be consulted on every project and has often blocked those that could affect radar or air-traffic control.

The government moved to make wind attractive to investors with a lavish subsidy regime. For each megawatt hour of electricity a company produces from a green-energy source, it is awarded one “Renewables Obligation Certificate,” or ROC. Power producers sell these to electric utilities, which buy them to meet a government mandate for use of renewable power.

The utilities pass much of the cost on to customers. The system adds around $18 to the average household’s annual electricity bill, according to the UK’s energy regulator.

An operator of a single offshore turbine producing 9,000 megawatt hours a year can earn $1 million from selling its ROCs, because offshore projects get 1 ½ ROCs per megawatt hour instead of one. Soon such projects will get two, if accredited by the end of 2010. Some think the deep-water Round 3 projects will require even more support.

Sweden’s Vattenfall, by 2008, was looking offshore for places to build large wind farms. “There are no places onshore in Europe where you can put up 100 or 200 turbines like you can in the U.S. and Canada,” says the company’s Mr. Nielsen. Vattenfall acquired the Thanet project off Kent from a small firm that folded in the credit crisis.

Though the rationale of wind is environmental, other environment issues intruded. Thanet’s initial developer had to change the location of some turbines to avoid reefs that are formed by a marine worm called sabellaria spinulosa.

U.K. authorities banned pile-driving work in the spring, fearing the noise would scare off a type of herring that spawns in the Thames Estuary. After months of discussions, the restriction was lifted.

When seals, whales or dolphins were in the area, work couldn’t start until they left. Undersea cables linking turbines had to be specially routed to avoid historic shipwrecks.

Weather often interfered. For much of the 2009 fall and winter, the seas off Kent were too rough for work.

Vattenfall also couldn’t find enough local steel to build the 500-ton foundations for the turbines. They had to be imported, as did skilled workers and the turbines themselves.

One of the biggest challenges remains finding ships to install the huge and cumbersome equipment. To lay cables, Vattenfall is hiring a ship called the Polar Prince, but it is among the few of its kind and has a customer waiting list. A delay on one project can wreck the schedules of others.

The costs can be exorbitant. To deploy an offshore electrical substation, Vattenfall used a state-of-the-art heavy-lift ship called the Stanislav Yudin that rents for $450,000 a day. Some new installation ships are under construction, including one in a Korean shipyard big enough to install the huge new turbines that are being planned. But many more will be needed.

Late last year, another headache arose. Owners of a Dutch wind farm found their turbines had shifted a few inches, the result of a design flaw in equipment connecting the towers to their foundations. RenewableUK, a trade association, said most of the 336 turbines operating in U.K. waters could have the same fault, and would cost about $250,000 each to fix.

Vattenfall rushed to check its North Sea machines and found many had sunk slightly into their foundations. It is now figuring out how to repair them.

“It’s an example of how this is a young industry, and we haven’t yet reached the maturity we need,” Mr. Nielsen says.

By GUY CHAZAN, email at:

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