March 1, 2011

Rush to renewable energy generates ‘enormous’ financial questions in Europe

By JEREMY LOVELL of ClimateWire, 1 March 2011

LONDON – The spectacular growth in recent years in the number and size of renewable energy sources across the European Union – particularly wind and solar power – driven by high subsidies and government rhetoric on climate change has left the national electricity grids scrambling to cope.

“Basically, governments have allowed the buildup of wind without thinking through the grid consequences,” Oxford University economist Dieter Helm told ClimateWire. “There are two responses: Stop wasting so much on the rapid development of wind and its questionable economics, or plough on regardless, in which case enormous grid investments are urgently needed.”

Estimated costs of strengthening, upgrading and smartening the grids are put at up to €100 billion ($138 billion) over the next decade alone at a time when budgets remain extremely tight and as governments either impose or contemplate cutting their generous subsidy schemes.

And that only takes into account onshore networks. The costs and technical obstacles rise in multiples when adding in the proposed massive expansion of offshore wind capacity and how to get that highly variable source of power where it is needed, when it is needed and as it is produced.

“We are in danger of being able to build renewables faster than we can build the grid, so we need to build the grid much faster,” Nick Mabey of influential environmental think tank E3G told ClimateWire. “The question is, then, who pays for it?”

Should governments subsidize grid development as they have done renewables’ capacity, or should it be left to market forces through the increasingly sophisticated international electricity trading market?

There is also the issue of built-in capacity redundancy both of production and transportation of the electricity generated by wind and solar, let alone the thorny question of storage.

Lots of wind power with nowhere to go

Germany, with more than 26 gigawatts of installed wind power capacity by mid-2010 according to the World Wind Power Association, is No. 1 in the European Union and No. 3 in the world after the United States and China.

But it habitually produces only about 5 gigawatts of actual wind power, and when recently that output shot up to a record of more than 20 GW on a particularly windy weekend, cross-border connections to grids in neighboring countries had to be shut down because they couldn’t handle the surging power.

“There are already lots of constraints on the grid – for example, Danish wind blocks the German grid. You can do it if you optimally build it, which raises the question of when are you going to optimally build an optimal grid,” said Mabey. “The Germans need to build 17,000 kilometers [10,653 miles] of new grid just internally.”

There are already so-called interconnectors carrying power between various E.U. states, including between the United Kingdom and France and Denmark and Germany. There are also plans afoot to build a 1.4 GW capacity line under the Pyrenees between Spain – with a highly developed wind and solar power industry – and France that will double the power capacity between the two countries.

With the United Kingdom, for one, aiming to get some 30 GW of electricity from wind farms in the North Sea within the next decade as part of its E.U. target to get 15 percent of its power – equivalent to about 40 percent of its electricity – from renewables by 2020, there are also proposals to build a giant subsea grid to bring that power ashore.

To that end, the United Kingdom in December signed a memorandum of understanding with nine other northern European states – Germany, France, Belgium, Denmark, the Netherlands, Ireland, Luxembourg and Norway – to study the possibility of building a €30 billion ($41.4 billion) grid in the North Sea that could be producing 100 GW of electricity within 20 years if all current plans come to fruition.

‘Who pays?’ becomes a high-voltage question

“We are watching with interest the North Sea grid discussions. But at the moment, we don’t fully understand who will pay for it and how it will be developed,” said Julian Leslie of the United Kingdom’s National Grid.

Experts say there is an animated technical and financial discussion already under way around the North Sea grid, including whether it is even desirable given the complications of where to place the grid connections and substations involved as well as some calculations that suggest development of a grid would be more expensive than simple point-to-point connections.

If those issues are resolved and the North Sea grid does get developed, the idea would be for it in turn to form part of the much-debated European supergrid, supposed to be able to seamlessly transport power from the wind-rich north and sun-soaked south to the center, from where most of the demand originates.

But that, too, has its problems – not just of power loss and heat generation over long distances, but also of public acceptability and cost.

As with onshore wind farms, there is frequent public outcry over the placement of power pylons. Yet burying the power cables not only doubles the cost, it also raises the technical problem that at least when suspended in the air, the cables are naturally cooled, whereas underground, there is no such process.

“The idea of the interconnected E.U. supergrid is not without challenges,” said Nick Jenkins, a professor of renewable energy at Cardiff University. “When you dive into the detail, there are more questions left unanswered than answered. The truth is that no one knows the answer.”

A study earlier this year by German company Energynautics commissioned by Greenpeace found that grid upgrades totaling up to 140 GW of capacity would be necessary across the European Union and eastern and northern Europe to cope with the vast increase planned in renewable energy.

Confronting an ‘island attitude’

This ambitious outline, which the study describes as a minimum, is likewise not without its problems.

“It takes about 10 years to get planning permission for a new line. Countries are still struggling to build their own networks, let alone when it comes to crossing borders,” said Mabey. “The only country really doing it is China – using European technology.”

“There is an island attitude in Europe – although it is starting to break down a bit. People have to trust their neighbors. There is a certain reticence among technocrats and politicians alike. What people see as acceptable depends on who and where you are,” he added.

There is also the age-old issue of whether it is better to stay with the devil you know than the one you don’t in the shape of the competition between old friend gas and upstart renewables.

Recent experience with Russia – which supplies about a quarter of the European Union’s gas – suddenly turning off or diverting supplies due to money disputes with Ukraine, through which most of it passes, have raised fears about energy security.

But while this has given some added impetus to renewables – as is also likely to be the case with the oil price spike due to the current turmoil in the Middle East – it has also boosted interest in massive new gas pipelines to diversify sources of gas supply.

“The core discussion is no longer nukes versus renewable. That is long gone,” said Mabey. “It has become pipes versus wires. Do we want to stay reliant on Russian gas or use our own resources to achieve energy security?”

But for Helm, the answer lies in the ground. “Given the revolution shale gas has brought to world gas markets, my own view would be slow down on the wind investment and concentrate on building gas to substitute for coal quickly and cheaply. This really would at the international level make a big difference to emissions.”

Copyright 2011 E&E Publishing. All Rights Reserved.

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