The deal signed between Siemens and Dong Energy to supply 300 offshore wind turbines, estimated to be worth Eur2.5 billion, reaffirms the ‘fantastic’ potential for the UK to become a leader in offshore renewables, according to WWF-UK. The group warns, however, that Government indecision over support for renewable energy was creating uncertainty in a sector which needed to plan investment decisions for the long term.

Jenny Banks, energy policy officer at WWF-UK, says: “This deal is fantastic news for the UK but it’s coming despite, not because of, what the Government’s doing. Political rows over support for renewables between DECC and the Treasury risk serious damage to this sector, even though the economics of wind are, according to the CBI, ‘blindingly obvious’. The Government also needs to be aware that the industry’s also looking for certainty beyond 2020 too – otherwise there’s a danger that serious investment like this in the UK economy will simply drop off a cliff-edge.”

132 new offshore wind turbines, totalling 523.2 megawatts (MW) were fully grid connected in Europe in the first six months of 2012. This is a 50% increase compared to the same period in 2011 when 348.1 MW were installed.

“Offshore wind power creates jobs in Europe, reduces our fuel import costs, and avoids the global and local health and environmental costs of extracting, transporting and burning fossil fuels. Offshore wind power is increasingly attracting investors, including pension funds and other institutional and corporate investors, but it would be good to see more activity in southern Europe where jobs, investments and growth are desperately needed,” says Christian Kjaer, chief executive of the European Wind Energy Association (EWEA).

2012 could turn out to be the best year ever for offshore wind energy in Europe, as a further 160 turbines, totalling 647.4 MW, are built but awaiting grid connection. This is subject to weather conditions at sea and grid connection delays.

A total of 4,336 MW offshore wind capacity was operating as of 30 June 2012 – up from 3,294 MW in June 2011 – producing electricity for the equivalent of 4 million households.

During the first half of 2012 overall, 13 wind farms were under construction. Once completed these wind farms will account for an additional capacity of 3,762 MW

After a sharp falloff in 2010, investments in the UK’s clean energy sector rebounded in 2011 to $9.4 billion – a 35 percent increase and the seventh highest among G-20 nations, according to new research by The Pew Charitable Trusts. The growth was driven in part by a 10-fold increase in solar energy investments, which rose to $4.8 billion, financing the installation of more than 300 megawatts (MW) of power in 2011. Sustained interest in development of offshore wind turbines also helped to spur $2.3 billion worth of investment and 900 MW of capacity in the wind sector. To date, the UK has installed 6.4 GW of wind capacity.

“While solar investment saw the most significant growth in the UK, offshore wind is poised for significant future investments and capacity additions,” says Phyllis Cuttino, director of Pew’s Clean Energy Program. “In part, investment growth in the United Kingdom can be attributed to investors initiating new projects before policy incentives are curtailed. To maintain growth, the UK must provide consistent, long-term market signals that provide certainty to investors.”

Globally, investment grew to a record $263 billion in 2011, a 6.5 percent increase over the previous year. The United States reclaimed the top spot among all G-20 nations and attracted $48 billion. However, with $45.5 billion in private investments, China continued to be a hub of clean energy activity – leading the world in wind energy investment and deployment, as well as wind and solar manufacturing. Germany received $30.6 billion, ranking third among G-20 nations. The combination of falling prices and growing investments accelerated installation of clean energy generating capacity by a record 83.5 GW in 2011 bringing the total to 565 GW globally. This represents nearly 50 percent more than installed nuclear power capacity worldwide by the end of the year.

“The clean energy sector received its trillionth dollar of private investment just before the end of 2011, demonstrating significant growth over the past eight years,” points out Michael Liebreich, chief executive of Bloomberg New Energy Finance, Pew’s research partner. “Solar installations drove most of the activity last year as the falling price of photovoltaic modules, now 75 percent lower than three years ago, more than compensated for weakening clean energy support mechanisms in a number of parts of the world.”

A mid-term review of the European Energy Programme for Recovery has found that offshore wind energy is the strongest performer of the three areas selected for funding in terms of investment, creating jobs and putting investment in place quickly. The Eur4 billion European Energy Programme for Recovery (EEPR) was launched in 2009 in response to the economic crisis and the need to meet EU energy policy objectives. Three areas – offshore wind energy, gas and electricity infrastructure projects and carbon capture and storage (CCS) – were selected for funding.

Offshore wind energy was allocated the smallest amount of funding – Eur565 million or 14% of the total – but has created ten times more jobs than CCS projects. Since 2009, a total of 4,000 jobs have been created in offshore wind projects financed under the EEPR compared to 400 in CCS, despite CCS being allocated nearly double (Eur1.05 billion) the amount allotted to offshore wind.

Vilma Radvilaite, Regulatory Affairs Advisor at EWEA, comments: “It shows that wind energy projects are an ideal way to stimulate economic growth and create jobs while at the same time reducing greenhouse gas emissions, and improving our energy security. Investment in the wind power sector should be recognised as a way to restore Europe’s economy to health. This report shows that stable legislative frameworks to promote the development of the wind industry should be maintained and enhanced, even in times of austerity.”

Under the Eur4 billion EEPR, 44 gas and electricity infrastructure projects, nine offshore wind energy projects and six CCS projects received funding.

2011 was a stable year for the offshore wind industry with 235 new offshore wind turbines grid connected, worth approximately Eur2.4 billion. The European Wind Energy Association’s offshore wind statistics for 2011 show that 235 new turbines with a total power capacity of 866 Megawatts (MW) were fully grid connected across nine offshore wind farms. This was slightly down on the 883 MW of new offshore wind capacity connected in 2010.

Nine offshore wind farms currently under construction will bring online an additional 2375 MW – increasing the EU’s total installed offshore wind power capacity by 62%. Across the EU, a total of 1,371 offshore turbines have now been grid connected, with a total power capacity of 3813 Megawatts in 53 wind farms in ten European countries.

EWEA’s target for installed EU offshore wind power capacity by 2020 is 40,000 MW, producing approximately 4% of the EU’s total electricity consumption.

“The offshore wind sector witnessed a stable market in 2011,” says Justin Wilkes, policy director of EWEA. “Despite the economy-wide financial squeeze, 2011 saw a 40 per cent increase on the previous year in offshore non-recourse debt financing, up from Eur1.46 billion in 2010 to Eur2.05 billion in 2011.”

He continues: “The strong project pipeline and financial developments highlight the importance of countries continuing to provide and develop stable long-term frameworks for offshore wind power in order to allow the industry to continue its development.”

The majority (87%) of all newly installed and grid connected offshore wind power in 2011 was in British waters. Siemens supplied 80% of the MW installed offshore last year while SSE and RWE Innogy were the most active developers and DONG Energy continued to be the most active equity player in offshore wind power.

Over 141 gigawatts (GW) of offshore wind energy capacity is built, under construction, consented, or planned in Europe – enough to power 130 million average EU households. These wind farms – representing 35 times more capacity than the just under 4 GW installed today – would provide 13.1% of Europe’s total electricity production.

The European Wind Energy Association (EWEA) has published its latest report analysing all existing offshore wind power projects in 17 EU member states, mostly in north-western Europe. New offshore wind farms with a capacity of 5.6 GW are currently under construction in the UK, Germany and Belgium.

“There is huge developer interest in offshore wind energy across Europe,” comments Arthouros Zervos, President of EWEA. “Developers, governments and investors realise that offshore wind energy offers the growth and jobs that Europe desperately needs.”

169,000 jobs in the EU offshore wind energy sector are expected to be created by 2020, going up to 300,000 by 2030, according to the EWEA report. European companies are currently global leaders, with over 99% of the world’s installed offshore capacity in European waters.

Areas for growth in offshore wind energy include turbine and turbine component manufacturing as well as substructures, vessels, electrical infrastructure including high voltage subsea cables, and ports. However, the new report warns that if the offshore wind energy sector’s potential is to be fulfilled in Europe, it is imperative that sufficient levels of financing are brought in by investors. Also crucial are the financing and building of offshore power grids in the northern and Baltic seas, which would enable huge amounts of electricity to be transported to consumers.

For the industry itself, there is a risk of a high-voltage subsea cable shortage in the next few years which has to be addressed urgently, says the report, as well as a possible shortage of trained workers.”The offshore wind energy sector can replicate the success of the onshore wind technology development, which is now a mainstream source of power competitive with new coal and gas plants, and a major European industry,” says Arthouros Zervos. “However, to ensure this happens, EU decision-makers need to set ambitious renewable energy targets beyond 2020, invest more in research and develop offshore grids.”

The Irish Wind Energy Association (IWEA) has stated that the ESRI ‘Review of Irish Energy Policy’ is an important reminder that Ireland is far too dependent on importing its energy supply from other nations and needs to accelerate the move towards maximising our own resources. However, responding to the report, IWEA chief executive Dr Michael Walsh says that any reduction in current supports would undermine investment, cost jobs and result in Ireland potentially failing to meet its EU 2020 renewable energy targets.

“A reduction in supports would most definitely be a major setback for a sector that is more than justifying these same supports but is going to deliver savings to the consumer and create export revenue for Ireland in the future as well. A recent study by international energy analysts Redpoint on the Irish market showed that wind energy generation will deliver savings to Irish consumers of Eur100m by 2020. This demonstrates that wind generation does not add cost in today’s market let alone in the future when we can become an exporter of renewable energy,” he points out. “In that regard, any reduction in the current supports will be a set-back. It will deny investment and, therefore, potentially lead to higher prices, higher emissions, continued imported fuel dependence and a missed opportunity to create thousands of new jobs.

He continues: “This ESRI report, if anything, reaffirms that we are way too dependent on external sources of energy, with approximately 89% of our energy requirement being imported, and justifies the need for accelerating our wind energy programme. What we need now is to develop our own unique resources as quickly as possible to reduce this excessive dependency on what are long term unreliable and, from a price perspective, volatile international energy sources.”

Ireland has strong onshore and offshore wind resource yet last year, due to a lack of co-ordination, Ireland saw only 115MW of onshore wind built – approximately a third of what needs to be built annually to meet our targets. The IWEA is calling on the Government to introduce a co-ordinated energy and enterprise implementation plan to ensure we deliver as much capacity as possible and to develop a major income stream for Ireland by becoming a leading European exporter of wind energy.

“Specifically, we can ensure that Irish projects play a part in meeting the UK’s energy needs as we will have the resources to meet over 15% of the UK’s 2020 renewable requirements in a highly cost effective fashion for UK consumers. This would result in additional jobs and investment in Ireland and ongoing export revenues,” says Michael Walsh.

The economic crisis, the evolving EU policy context and recent developments in technology require new approaches to domestic energy policy, according to a new report – A Review of Irish Energy Policy – by the Economic and Social Research Institute (ESRI). While the objectives of policy remain the enhancement of competitiveness, ensuring a secure energy supply, and tackling the problem of climate change, the changing external context requires some new solutions.

According to the ESRI, one of the key successes of Irish energy policy in recent years was the implementation of the Single Electricity Market on the island of Ireland. It has ensured a secure supply of electricity at a competitive price since 2007. However, new developments at the EU level may require a change in the market structure to facilitate trading in electricity across the EU and it will be important to ensure that the enhanced integration of the Irish electricity system with that of North-Western Europe benefits Irish consumers.

Even if oil and gas prices result in higher electricity prices in the future, it is not sensible to use scarce resources to subsidise electricity prices, says the ESRI. Furthermore, any windfall gains from free electricity permits should accrue to the exchequer.

The report also points out that while current policy on promoting renewable electricity may be broadly consistent with the strategic aims of Irish energy policy, there are aspects of market design and of the support scheme for renewable energy (REFIT) which could result in substantial unnecessary costs falling on Irish consumers. The current support scheme for onshore wind is probably too generous – the additional sum payable where prices are high should be dropped for new investors, argues the report.

The ESRI also maintains that incentives for offshore wind and wave and tidal generation are not appropriate as it is premature to incentivise substantial investment in such technologies. This aspect of current policy could prove very expensive for the Irish economy, while bringing little or no environmental benefits. The Irish electricity market may also need to be adjusted to ensure that the level of investment in intermittent renewable generation is appropriate.

The ESRI report urges Ireland to contribute to a review of EU policy on renewables, as current European policy is likely to increase the cost of reducing emissions while providing limited security of supply advantages. While the costs to Ireland from the inappropriate configuration of EU policy may be small, the potential costs to the EU economy as a whole are likely to be significant. Ireland should also contribute to the next stage of EU policymaking to ensure that the approach to managing greenhouse gas emissions from agriculture is efficient from both an economic and an environmental point of view.

EU policy on energy security is developing in the light of changing circumstances. The extension of the current arrangements for cross-country co-operation in the event of a shortage of oil to the gas market is important for Ireland. It is to be welcomed that the EU is also developing clear rules on gas transmission through member states. Domestic security of energy supply requires that the Corrib gas field is brought to production as rapidly as possible, says the ESRI.

The director of one of Europe’s leading energy producers and owner of indigenous Irish energy supplier Airtricity has warned that Ireland is being left behind in the development of offshore wind and marine generation. Addressing over 400 delegates at the annual conference of the Irish Wind Energy Association, Scottish and Southern Energy Group finance director Gregor Alexander said that this is resulting in a significant lost opportunity for the Irish economy and job creation here.

“Returns on our Irish onshore wind farms are marginal. More attractive returns are available in the UK. Of even more concern is that Ireland is being left behind in the development of offshore wind and marine generation. These technologies offer considerable export and job opportunities but Ireland is not maximising them,” he said.

Mr Alexander pointed out that for the renewable sector here to reach its true potential it needs to forge ahead with market coupling with the UK and to broaden its interconnection plans from just linking with the UK to include an interconnection to France as well.

“As a very small market in European terms Ireland, at a minimum, needs profound interconnection and market coupling with the UK. Coupling would bring economies of scale, a more diverse generation portfolio, the opportunity to export renewable electricity and ensure customers benefit from increased competitive energy supply,” he elaborated. “We would also encourage Ireland to go further seeking interconnection further afield. In Scotland, for example, we are looking to Norway and Iceland to tap into hydro and geothermal resources respectfully.”

An interconnector from Ireland to France would not only access French power in winter but it would provide an export opportunity in summer for Ireland’s generation fleet to supply France’s air conditioning load.

The Scottish and Southern Energy finance director also said that a more pragmatic approach to planning issues is also required in Ireland to bring an end to the current conflict between Irish energy and planning.

For example, SSE Renewables was recently refused planning permission on the basis of ‘the negligible probability’ that the proposed wind farm could pollute a water body some 25KM away, despite having recently completed a wind farm adjacent to a water body.

9.3 gigawatt (GW) of new wind power capacity was installed in the EU during 2010, reaching a total of 84 GW by the end of 2010, according European Wind Energy Association (EWEA). While offshore wind power installations grew 51% from 582 MW in 2009 to 883 MW last year, new onshore wind power installations (8.4 GW) were down 13.9% compared to 2009 (9.7 GW).

“These figures are a warning that we cannot take for granted the continued financing of renewable energy,” points out Christian Kjaer, chief executive of EWEA. “Better access to financing is urgently needed, and the European Union must act without delay to prevent Europe losing its leadership in wind power and other renewable technologies.”

Total investments in new wind power plant was unchanged at Eur13 billion, compared to 2009, due to the larger share of offshore wind capacity. Newly installed capacity in 2010 (9.3 GW) was 10% down on 2009 (10.3 GW).

“Remarkable growth in the onshore wind markets of Romania, Poland and Bulgaria could not make up for the decline in new onshore installations in Spain, Germany and the UK. Strong development of the offshore wind market was lead by the UK, Denmark and Belgium,” says Christian Kjaer.

The overall market for renewable power capacity, including wind, solar, hydro and biomass, reached record levels in 2010, increasing 31% from 17.5 GW in 2009 to 22.6 GW in 2010. Renewable energy accounted for 41% of all new installations.

Wind power installations accounted for 17% of new electricity generating capacity in 2010, the first year since 2007 that the EU did not install more wind power than any other generating technology.

The EU continues to move away from fuel oil and nuclear power for electricity production, decommissioning more old capacity than installing new capacity. However, for only the second time since 1998, the EU installed more coal power capacity than it decommissioned in 2010. 28 GW of new gas capacity was installed last year, compared to 6.6 GW in 2009. Gas represented 51% of all new power capacity in 2010.

The wind power capacity installed by the end of 2010 will, in a normal wind year, produce 181 TWh of electricity (up from 163 TWh), meeting 5.3% of overall EU electricity consumption (4.8% in 2009)

GE Energy, world’s leading suppliers of power generation and energy delivery technologies, has welcomed the UK Government’s publication of the Electricity Market Reform (EMR) proposals, which focus on modernising the UK’s energy system and driving low carbon technology investments. The proposal will help cut the UK greenhouse gas emissions by 80% by 2050.

According to GE, by providing long-term goals and clear policy direction, the UK will create conditions that support technology investment by manufacturers and utilities.

GE Energy recognises the opportunity for the UK to become a global leader in the low carbon economy. This would require standards and incentives that promote the deployment of clean energy technologies such as offshore wind, carbon capture and storage, and smart grid, addressing both supply side and demand side efficiency opportunities.

“The Electricity Market Reform gives the UK a tremendous opportunity to build a world leading supply chain in low carbon technologies. The low carbon technologies that can support the transition to a decarbonised market are available today however ambitious reform is needed to guarantee their timely deployment. The UK has often led European thinking in electricity market design, from privatisation to liberalisation, and the current reform process will be keenly observed in other Member States,” says Magued Eldaief, managing director of GE Energy UK.

GE Energy has long been committed to the UK and has invested over £10 billion into the UK-based activities. Recently, the company reaffirmed this commitment by announcing a £100 million investment into the development of offshore wind turbine manufacturing facilities and locating design, application and service engineering resources in the UK.

A £70 million investment fund to secure Scotland’s place at the forefront of the global offshore wind industry has been announced by the Scottish Government. The National Renewables Infrastructure Fund – to strengthen port and manufacturing facilities and supply chain provision for manufacturing offshore wind turbines and related components – will leverage significant private sector investment in the next four years and help deliver an estimated 28,000 jobs and £7.1 billion in value to Scotland’s economy over the coming decade.

The National Renewables Infrastructure Fund is being delivered through a partnership of Scottish Enterprise and Highlands & Islands Enterprise until 2015.

In launching the initiative, Scottish First Minister Alex Salmond has also reiterated his call for the UK Government to remove the restrictions on immediate access to the £191 million of Scotland’s Fossil Fuel Levy funds generated north of the border to invest in renewable industries. “The Scottish Parliament has condemned the UK Government’s refusal to give unrestricted access to Scotland’s £191 million Fossil Fuel Levy funds. Together with industry, we must and we will continue to press the Treasury to release these funds now due to Scotland. They remain vital for the development of offshore wind and marine power, for heat networks and technology to deliver our renewable heat targets; and vital too for our communities, so they can invest in and benefit from the green economy.

He continues: “Our National Renewables Infrastructure Plan has already established the most immediate needs. Together with Scottish Enterprise and Highlands & Islands Enterprise, we are determined to stimulate the market and act decisively to trigger vital capital investment and launch the next phase of Scotland’s renewables revolution.”

More than 7,000 offshore wind turbines are expected to be constructed off the UK’s coast over the next decade and the Scottish Government and its enterprise agencies are working to support offshore wind farm developers, including by ensuring the provision of Scottish ports and companies able to provide critical manufacturing, operations and maintenance services.

Scottish Enterprise and Highlands & Islands Enterprise will now to work with site owners and public sector partners to develop key locations to the required specification that will fortify Scotland’s position as a key offshore wind development location and attract the associated offshore wind inward investors.