Eddie O’Connor addresses The British Irish Parliamentary Assembly Plenary Meeting

A Future Vision for Clean Energy in Europe

Introduction

I wish to thank the British Irish Parliamentary Assembly for its kind invitation to speak here today at this plenary session.

I have been specifically asked to talk on “A Future Vision for Clean Energy” and I do so in the context of being CEO of a renewable energy company which is currently developing a 450 MW wind farm in Scottish waters and a 6,000 MW project in English waters as part of Round 3.   Here in Ireland, we have just commissioned our first onshore wind farm and are in the process of building the largest ever onshore wind farm in the world.

Mainstream is a global company with wind and solar developments in seven countries: Canada, the US, Chile, South Africa, Germany and, of course, Britain and Ireland. Currently we are looking at Central America, Eastern Europe and Saudi Arabia as possible new markets.

All in all, we have a pipeline of

  •           7,000 MW of onshore wind
  •           7,500 MW of offshore wind, and
  •           3,500 MW of solar PV.

The grand total of 18,000 MW confirms we are the largest private developer of wind and solar power in the world.  We were founded five years ago and can be taken as a successor company to Airtricity which I had established ten years previously.

That company had developed wind farms in Ireland, England, Scotland and the US before being acquired by Scottish and Southern Electricity and the German company E.ON.

At Airtricity I began building the Greater Gabbard in the Thames estuary which today is the largest offshore wind farm in the world under construction.

This background will explain much of what I have to say on the future of clean energy in Europe.

 

Once-Off Transition

In addressing that future my starting point is simple.  The world is on a once-off transition to a low carbon society.  This will involve profound change in the way we live, work and travel. And it will have to be done within the next forty years.

Above all, this transition will mean a fundamental change in the way we generate electricity.  The use of coal, oil and gas is coming to an end.  The use of renewable energies, like wind and solar, is just beginning.

By 2050, all power generation will have been completely decarbonised and the generation portfolio will consist of:

  • 40%  wind
  • 40%  solar
  • 10%  other renewables, and perhaps
  • 10%  nuclear.

This is my broad vision for the future of clean energy.

I foresee the great bulk of wind power being built off shore in the Northern seas around Europe on the basis of a vast Supergrid.  That Supergrid will be linked to a Solar PV Supergrid in Southern Europe.

Building these Supergrids will constitute one of the biggest construction projects every undertaken by man, but it will not be unique to Europe for our friends in the US and China will have to do the same.

 

The Climate Change Challenge

Decarbonising power generation is not something we can avoid.

Climate Change is a reality and is the biggest ever threat to our collective existence as a species.  As you know, the concentration of CO2 in the atmosphere has been rising due mainly to fossil fuel usage and there is a scientific consensus we should try to limit the concentration to 450 ppm by 2050.

That would limit the rise in global temperature to 2C.

But to be successful we will have to cut the 1990 levels of Green House Gas emissions by no less than 80% by the time we reach 2050.  That’s a tall order.

We were reminded in the months leading up to Christmas of just how great a threat we face from carbon emissions; reminded let it be said by three international organisations with no axe to grind other than our collective welfare as inhabitants of this planet.

Perhaps the most ominous warning came from the World Bank which published a report called “Turn Down the Heat”, prepared by a team in the Potsdam Institute in led by Professor Schelinhuber.

They warned against a 4°C rise in temperature by 2050 and even suggested that under certain assumptions the rise in temperature could go as high as 6°C, an increase that would have catastrophic climatic consequences throughout the world.

The International Energy Agency, consisting of all OECD countries, had a similar message in its “2013 World Energy Outlook”, which was recently launched in London, Dublin and other major cities by its Chief Economist, Fatih Birol.

The IEA was equally uncompromising in its forecasts of rising temperatures and believes the increase will be of the order of 3.6°C by 2050 unless we cut back on the use of fossil fuels and achieve major savings in our use of energy.  The report said there was little chance of keeping the rise in temperature to 2°C if we failed to act over the next five years.  After that, it would be too late.

At the same time, the United Nations Environment Programme published its annual report on the gap between what emissions should be in 2020 and what they are likely to be.  The conclusions are chilling, Mr. Chairman.   The report said that the gap is now bigger than it was in earlier assessments.  The situation is getting worse.

The UN Under Secretary General,  Achim Steiner, who heads up the programme, said in his introduction to the report that unless urgent action is taken to close the gap between what we are doing and what we should be doing then the longer term challenge may be insurmountable or, at best, very costly.

You will all be very aware, in any event, that these are similar to the conclusions reached by Lord Stern in a report commissioned by the British government on the “Economics of Climate Change” in which  he described climate change as the greatest and widest-ranging market failure ever seen.

Lord Stern said that what we do over the next ten or twenty years can have a profound effect on the climate in the second half of this century and in the next.

But that was in 2006, seven years ago.  Lord Stern had called for urgent action.  You know whether or not that call has been answered.

The World Bank, the IEA and the UNEP says it has not. So do I.

That is my starting point for a vision of clean energy in Europe.  Quite simply, Mr Chairman, I regard the development of clean energy as a categorical imperative. We have no choice in the matter.

Simply put, we cannot bargain with nature.  We cannot seek a derogation from what we have to do.  We cannot secure a postponement of the inevitable or a delay in the unavoidable.

We have to reduce Green House Gas Emissions by switching from fossil fuels to renewables at scale and at speed, and to do so on the basis of what is technically feasible, commercially sensible and politically possible.

Let me start by looking at what is technically feasible in respect of renewables.

 

Technically Feasible

I will start with wind, of which there is an abundance in these islands.

Onshore wind is now competitive with gas and will become progressively cheaper through economies of scale and technical advances.  As a fuel, wind is free, infinitely renewable,  utterly secure and, of course, clean.  In contrast, gas is expensive, finite,  open to security threats, and dirty.

It is a basic fact that gas pumps carbon into the atmosphere.

Offshore wind is in its infancy but near-shore is already technically feasible and unit costs are coming down.  The British government, for instance, is working with the offshore industry to reduce unit costs by 30% by 2020 and I believe this target will be met and that costs will keep falling as we learn how to handle the marine environment.

Deep offshore, on the other hand, will require floating turbines and while the technology has still some way to go I note that at least two machines are undergoing trials in the Atlantic and are showing promise. This is good news because floating technology will play a part in meeting Europe’s offshore wind targets and I regard offshore wind as key to the future for the following reasons.

If power generation is to be completely decarbonised by 2050, and if nearly half the electricity is to come from wind and, further, if there are societal and technical limits on what we can erect on land then we will have to build the bulk of our wind power in the sea.

In practical terms, we will need to install a minimum of one million megawatts in the Northern Seas around Europe, perhaps rising as high as one and a half million megawatts.

That will mean a lot of turbines.  Most likely the number will be in excess of 200,000.

These turbines will be grouped in units of 500 MW which will be linked together through a series of Supernodes, thereby creating what I call a “Supergrid”.  This new grid will be based on direct rather than alternating current and the power will be fed into the existing land based grids in the form of High Voltage Direct Current.

The transmission of electricity as High Voltage Direct Current, or HVDC for short, is technically feasible and is already in use throughout the world.

In fact, it is intended to use HVDC to transmit wind power under the sea from the west coast of Scotland to Lancashire.  It has the advantage of negligible transmission losses and can convey bulk electricity over long distances efficiently and effectively at low cost.

In summary, the Supergrid is the technical answer to a number of challenges.  Firstly, it is the means of collecting, and then transmitting, power generated over a vast geographic area, such as the ocean.  It is the technical solution to what we engineers call distributed generation.

Secondly, it is also the answer to the variability inherent in wind power.  Self evidently, wind does not blow in the same place at the same speed at all times of the day.  But it is a meteorological fact that it blows somewhere at every given moment of the day and it is an engineering reality that it can be captured, used to generate electricity and then transmitted to where the electricity is needed.

That is how the Supergrid overcomes the problem of variability, which seems to cause some non-engineers more concern than it should.

The Supergrid concept can also be applied to Solar PV.  With regard to Solar PV you could say that the future is already upon us.  The unit costs of solar panels are falling in a steep  “J curve” similar to that for micro chips and where the electronics world has “Moore’s  Law” the solar world now has “Swanson’s  Law”.

According to “The Economist” this law indicates that unit costs of solar panels fall by 20% with each doubling of manufacturing capacity.

As the “The Economist” went on to demonstrate, unit costs have fallen by a factor of ten over the past two decades, and are continuing to fall.

That is why I foresee a bright future for Solar PV with vast solar farms being built across Southern Europe and being linked together in a solar Supergrid.

On a continental scale, I foresee the interconnection of the wind and solar Supergrids supplying, as I indicated earlier, about 80% of Europe’s electricity needs.

Wind and solar can furthermore be integrated with hydro power which can act as a sort of battery or storage for the system.

That vision for the future of clean energy in Europe, based as it is on wind and solar power, is technically feasible.

Where I have doubts, Mr. Chairman, is in relation to wave and tidal power.  It is undoubtedly true that the waves off our coast, especially in the Atlantic, contain vast quantities of energy but it is also true that it is extremely difficult to harness that energy through machines that are robust enough to survive the rigours and hazards of the sea itself.

To be honest, I do not foresee wave power playing a major role in the provision of clean energy for Europe as a whole.

Neither, for that matter, do I foresee tidal power playing a major role as it is by its nature location specific and there are very few suitable sites here in Europe, although Northern Ireland has one in the channel between Rathlin Island and Torr Head.

With regards to the balance of the renewable portfolio there are only limited possibilities which, quite frankly, are not capable of being developed at scale.

This is true of biomass, of which I have direct experience as the former Chief Executive of the Irish Peat Development Authority, Bord na Móna.  It  is equally true of geothermal energy and bio-energy.

I should add that I do not regard clean coal or any other variation of so called clean fossil fuels as being technically feasible.  The concept of carbon sequestration is, like nuclear fusion, no more than a mirage which some people employ simply to postpone the day when they have to act on fossil fuels and start eliminating their use in power generation.

As far as these Northern latitudes are concerned wind is the one renewable on which we can build a clean energy future.

 

The “Energy Bridge”

For that reason I was most encouraged by last month’s decision of the British and Irish governments to sign a Memorandum of Understanding on trade in clean energy.  The MOU should lead to an intergovernmental agreement allowing Irish wind power to be imported into Britain and would be the first of its type within the EU.

We in Mainstream anticipated this development some three years ago.  On the one hand, it was clear that from by 2017 Britain would need to import electricity in order to ensure security of supply.  It was equally clear that this electricity should be clean in order to meet Britain’s renewable energy obligations.

On the other hand, it was clear Ireland had an abundance of wind power, about twenty times its domestic requirement.

That is why we set out to create what we call the “Energy Bridge” to match Irish supply with British demand.  A perfect market solution.

This project consists of generating wind power in the Midlands of Ireland and transmitting it directly under the Irish Sea into the British grid.

It so happens that the Irish Midlands are eminently suitable for large scale wind generation in terms of terrain, population density, wind speeds, infrastructure and what I can only describe as an “energy culture” arising from over sixty years of electricity generation from peat.

We are currently assembling a land bank sufficient  to house 1,200 MW of clean electricity for delivery in 2017 and have already secured a firm grid connection from the UK National Grid. In addition we are putting a consortium together to build a submarine cable link across the Irish Sea.

Taken together these three components will constitute Phase One of what we see as a 5,000 MW project to be completed by 2020.

Besides meeting a real need on the part of Britain, we intend the “Energy Bridge” to act as a proving ground for the various pieces of technology that go to make up a Supergrid.

We will use the “Energy Bridge” to build and test the Supernode and to develop sophisticated new equipment, like a DC breaker.  Similarly, in crossing the Irish Sea we will learn a great deal about putting cables under the sea bed so as to endow offshore wind farms with the same security of supply as onshore.

Furthermore, the creation  of a 5,000 MW project will encourage manufacturers and service providers to set up manufacturing plants here in Ireland and so capture the supply chain for the domestic economy.  The British and Scottish governments have the same ambition for their offshore developments and we could have a great deal to learn from each other in reaping the maximum benefit from the supply chain.

The employment potential of wind energy is enormous.  It is generally accepted that the number of jobs created by wind farms is somewhere around 8 job. years per megawatt but can be as high as 12 where exports are concerned.  For its domestic economy Germany creates about 8 job. years per MW but the corresponding figure is as low as 2 for the UK and is even lower again for Ireland.

We have a long way to go, Mr. Chairman.

Now let me look beyond the “Energy Bridge” and start focusing on the offshore Supergrid for Europe.   The prize in terms of jobs and revenues becomes enormous and here is the reason why.  Europe can gain “first mover advantage” in developing the suite of technologies that will go to create the Supergrid and use that advantage to develop exports to the US, China, and the rest of the world.

We here in the northern latitudes, in these very islands, can develop a clean energy sector in the economy that will lead the world in technology, information and control systems, logistics, financial products, insurance and other supply services.

There is absolutely no reason why we cannot create a new industrial sector in these islands that is built on wind, a sector with a global reach and massive export markets.

Phase One

Beyond the “Energy Bridge” the next step in that direction is to start building the Supergrid in a series of phases.  The first phase will consist of wind farms lying in the North Sea between Britain and Germany which are joined together and connected to the grids in each country.

This would make sense in the context of current policy in Britain and Germany.  After all, the British authorities aim to have various projects under Round 3 of the offshore programme built by 2020.

Mainstream’s “Smart Wind” project is one of these and, as I said earlier, amounts to 6,000 MW to be built in the North Sea off Hornsea.  We have a further 450 MW to be built off the Firth of Fourth in Scottish waters

As part of German plans to install 20 GWs of offshore wind we intend to build 1,000 MW off the German coast in a project called “Horizont”.

The obvious thing is to connect these and similar projects into a single grid and thereby link the British and German electricity markets.  This would reduce the need for spinning reserves, enhance security of supply and provide consumer value through lower retail prices based on real time trading.

All this could be done within the present decade.

Phase Two of the Supergrid would incorporate wind farms in Dutch, Belgian, Danish and Swedish waters bringing the Northern Seas project to fruition, a project which, as you know, is being promoted by all the maritime states in Northern Europe under the auspices of the European Commission.

My vision is that these two phases of the Supergrid would be complemented by building in the seas around Scotland and Ireland, encompassing the Isle of Man.  The Isles Study, which was commissioned by the governments of the Republic, Northern Ireland and Scotland, proved that a Supergrid  covering the Irish Sea and the North Western Atlantic was technically feasible.

The basic question, of course, is whether major projects such as the Supergrid are commercially sensible.

Commercially Sensible

The “Energy Bridge”, as I said, will be the biggest engineering project ever undertaken in Ireland and will require an investment between €10bn to €13bn.

Financing for projects of this type normally consist of 80% debt and 20% equity, which means they must be bankable.  To be bankable they require a guaranteed income stream that will pay off the debt, say over 15 years, and reward the equity with a rate of return commensurate with the risk.

The income stream, in turn, depends on the price to be paid for the power and the security of the contracts based on the price regime.

This is where public policy becomes critically important.  If governments want projects of this scale to go ahead then the financial risk has to be minimised by offering the proper purchase price over a stated period of years .

In short, major clean energy projects need policy certainty and the provision of that certainty is the specific task of governments, parliaments and politicians.  Without that certainty, there can be no future for clean energy for the simple reason that investment will not be forthcoming because the risks are deemed to be too high.

We all know that it is extremely difficult to raise equity at present.  Market sentiment is by and large risk adverse and this applies to debt providers as well.  In these circumstances, there is much to be said in favour of project bonds issued by public authorities at national and European level to finance major infrastructural investments at affordable interest rates.

The Growth Commission in Britain, of which Lord Stein is a member, has just published a ground breaking report called “Investing for Prosperity”.

It proposes a framework to support growth which would include an Infrastructure Bank and that would be another way to finance renewable energy projects.

Given that infrastructure is always long-term in nature these sort of policy innovations are essential in my view if we are to realise the vision of a new energy future.

Politically Possible

Now let me turn to the last of the three essentials if we are to have a clean energy projects on the scale needed to combat climate change.

The clean energy future we need demands bold new thinking, motivated by a desperate sense of foreboding as to the consequences of failure to act on Green House Gas Emissions.

We need to start with the very clear conviction that our way of life, our whole culture, are under threat of extinction.

So, what we do next cannot be an add-on to a “Business as Usual” scenario. We need set targets for 2030 and 2040 which ensure that by 2050 Green House Gas Emissions have been lowered to the levels compatible with the preservation of life on this planet.

That is what I call “the new thesis” for the political class, for parliamentarians like yourselves.  In short, we are about to build a new society in which policies on energy, and the environment, on industry and employment, all come together in a coherent whole.

To make any progress we need to explain the danger to the people so that they understand why we need to act, what we intend to do in order to protect the planet and why change, even where it is unpalatable, is nonetheless unavoidable.

We could do this by synthesising the reports I mentioned at the outset and quantifying the targets we have to achieve and laying down a timetable for their achievement.  I am an engineer.

I believe in measurement.  I believe in tracking progress on the basis of numbers. That is why I advocate setting firm targets for 2030 in respect of further reductions in GHG emissions.

I ask the following of you, as parliamentarians.  If we have to decarbonise society then we need to deal systematically with coal, oil and gas.  To do that we cannot compartmentalise policy actions or act in one sphere in isolation from the others.

I specifically ask you to see energy policy as a whole.  That is what I ask.

For example, we cannot have regulators doing their own thing about markets.  We cannot have transmission system operators doing their own thing about grids.  We cannot have planning authorities doing their own thing about what is permissible or not.  We cannot have utilities doing their own thing in national markets, oblivious to the needs of the future.

This is where you come in as parliamentarians.  You have it within your means to paint the big picture, to win popular support, to provide the political will to pull all of the pieces together and to force, where necessary, state bodies, authorities and agencies to work together so that road blocks are eliminated.

I must say honestly that I’m not convinced the political system had the will to do what is necessary.  On the other hand, I believe business will provide the technical solutions and I anticipate the financial system will eventually provide the the capital necessary for a clean energy future.

But I am fearful of political, bureaucratic and institutional inertia. That, in my view, is the biggest obstacle ahead.

Conclusion

I hope I demonstrated that a clean energy future is technically feasible.  I trust I have shown that clean energy is commercially sensible.  Neither technology nor finance is the real problem.  The real problem,  Mr. Chairman, is manmade.

It consists of the rules and regulations devised by myriads of people.  The problem is political and the real question is whether these road blocks can be removed.

I don’t know the answer to that.  You know it better than me.

As someone trying to build a clean energy future, I ask you to provide policy certainty. If you do, then we can deliver.

That is the challenge before this Parliamentary Assembly gathered here in plenary session.

Not only can you help stave off climate disaster but you can place these two islands in pole position when it comes to the technology of a clean energy future.

I hope you act in the manner we expect.  I hope you give us the leadership we require.

If you do, you will not find us wanting, and you will have earned the gratitude of the present and future generations.

I thank you for listening and I wish you well in your deliberations

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