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FROM THE EDITOR 7

Chasing renewable energy’s Holy Grail Will the ITER nuclear fusion project bring an end to our quest for clean power generation?

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ith world population growth continuing to explode and our hunger for energy showing no sign of abating, it seems clear that our efforts to encourage efficiency and renewable generation will not be enough. Scientists have spent years looking for a solution, to no avail. We need a clean, endlessly available source of energy, and we need it now. Step forward, nuclear fusion. Unlike nuclear fission – with which it is often confused, and which generates energy by splitting atoms – nuclear fusion works on the principle that energy can be released by forcing together atomic nuclei. This is the same reaction that occurs in the core of the sun, but with our much lower atmospheric pressure here on Earth, the temperatures needed to produce fusion have to be far higher. The solution is a super-heated plasma held and squeezed inside an intense doughnut-shaped magnetic field, allowing a balance to prevail between the magnetic and plasma pressures – otherwise known as magnetic confinement fusion. It may sound like the stuff of science fiction, but the biggest magnetic confinement fusion project the world has ever known is currently under construction in the south of France. The International Tokamak Experimental Reactor (ITER) project’s seven partners – the EU, India, Japan, China, Russia, South Korea and the US – are hoping it will demonstrate the commercial viability of nuclear fusion once and for all. ITER’s goal is to produce 500 MW of fusion power for at least 480 seconds, which is obviously not enough to do much with. If ITER is successful, however, the plan

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is to move into a currently proposed – and commercially viable – site next door, dubbed DEMO, which would aim to provide a thermal output on the scale of a standard electric power plant. So far, so amazing. But the project does have its detractors, who point out a series of difficult scientific problems that must be solved before nuclear fusion can be developed on a commercial scale. And then there is Greenpeace, which, while not helping its own cause by mixing up fusion with fission, has made the valid point that the money being spent on ITER might be better invested in developing traditional renewable energy sources. The thrust of the argument against ITER seems to be that the huge amount of money that would need to be spent on the project (original estimated cost: €10 billion) could be wasted if the project fails. The counter argument is this: no matter how much we ramp up renewables, it’s unlikely they will ever provide enough energy to supply all our power needs. While projects like ITER may carry a risk of failure, how will we ever know unless we try?

“It will take time to get fusion running and the world’s governments are aware that the sooner we start, the sooner we finish” – ITER

Marie Shields Editor

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CONTENTS 9

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Going for green Chris Huhne, UK Secretary of State for Energy and Climate Change, outlines the new government’s plans to meet the challenges of climate change and the need for energy security

Pro or con-fusion? With the nuclear fusion debate heating up, Nick Pryke looks into a project that could change the world of power generation forever

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Paving the way to efficient consumption Constellation Energy’s Jeff Johnson examines the smart grid’s potential to encourage energy efficiency

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CONTENTS 11

Renewables Executive Interview

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UK Renewables

42 Out of Africa Power from the Sahara desert

46 Dress to impress Presentation is everything in renewables investment

50 Keeping up appearances Why the UK is a poor renewable energy performer

58 The rise of solar power Ingmar Wilhelm examines the current and future states of the European solar power industry

70 Which way now? Marc Mühlenbach looks at the way the wind is blowing in renewable energy

76 End the government-subsidised bet on black EWEA’s Christian Kjaer explains the danger of subscribing to industry assumptions

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Smart grid 90 Smart grid opportunities in Europe The unique qualities of the European intelligent grid space

102 Joining forces Why a truly smart grid can’t exist without a union of ICT and energy

Business systems 112 Strategic asset management for the power and generation industries Clive Deadman outlines the benefits of effective asset management to companies in the utilities sector

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CONTENTS

Executive Interview

Details

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68 74 84 106

Johnny Watson, Limpet Technology Kim Bertelsen, Electricon Bastian Fischer, Oracle Jan Mrosik, Siemens Energy Automation 110 Christina Granacher, Georg Fischer

Ask the Expert 54 Richard Zambuni, Bentley Systems 93 Andy Slater, Sensus 116 Jonathan Hart, Schneider Electric

Industry Insight 78 Claus Myllerup, Lloyds Register ODS 86 Göran Näslund, Maingate 88 Norbert Muhrer, Cinterion 94 Alexander Philbrook, E:SO Global 118 Antti Jokinen, Process Vision Oy

122 Travel: Australia 124 In review: Strategic Asset Management: The Quest for Utility Excellence 126 What’s on: Q4 2010 128 Photo finish: Iceland’s Blue Lagoon

Next Big Thing 115 Bradley Peterson, SAMI Corp.

Project Focus 56 André Harter, Robert Burkle GmbH

Roundtables 62 Wind turbine efficiency, with Rod Corbett of James Walker RotaBolt, Christian Kjaer of the European Wind Energy Association, Mark Henderson of Investec and Marc Mühlenbach of Emerging Energy Research 97 Smart metering systems, with Michael Untiet of KISTERS, Henrik Lindén of Smarteq Wireless and Bo Harald of Tieto

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Jan Mrosik, Siemens Energy Automation Bastian Fischer, Oracle

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NGU Summit Europe 2010 5 - 7 October 2010 InterContinental, Vienna The NGU EU Summit is a three-day critical information gathering of the most influential and important executives from the utilities sector. The NGU EU Summit is an opportunity to debate, benchmark and learn from other industry leaders.

A Controlled, Professional and Focused Environment

Legal Information The advertising and articles appearing within this publication reect the opinions and attitudes of their respective authors and not necessarily those of the publisher or editors. We are not to be held accountable for unsolicited manuscripts, transparencies or photographs. All material within this magazine is Š2010 NGP&E.

A Proven Format This inspired and professional format has been used by over 100 executives as a rewarding platform for discussion and learning.

Chairman/Publisher Spencer Green Worldwide Sales Director Oliver Smart Finance Director Jamie Cantillon

To find out more, call +44 117 915 4788

Editor Marie Shields Managing Editor Ben Thompson Associate Editor Nicholas Pryke Contributors Ian Clover, Lucy Douglas, Rebecca Goozee , Julian Rogers, Stacey Sheppard, Huw Thomas Creative Director Andrew Hobson Design Director Sarah Wilmott Associate Designers Tiffany Farrant, Michael Hall, Crystal Mather, Cliff Newman, Catherine Wilson Online Director James West Online Editor Jana Grune Project Director Pramel Shah Project Manager Nick Ancell Sales Executives Bill Bright, Nick Black, David Taylor, Reuben Alozie, Damien Bragg, Lewis Black, Tristan Parkes, Garrett Culligan Production Director Lauren Heal Production Coordinators Renata Okrajni, Aimee Whitehead VP North America Jason Green Operations Director Ben Kelly IT Director Karen Boparoy Marketing Director John Funnell

Subscription Enquiries: +44 117 9214000, www.ngpowereu.com General Enquiries: info@gdsinternational.com (Please put the magazine name in the subject line) Letters to the Editor: letters@gdspublishing.com

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GDS International GDS Publishing, Queen Square House 18-21 QueenSquare, Bristol, BS1 4NH Tel: +44 117 9214000 E-mail: info@gdsinternational.com

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Top 7 alternative renewable energy sources

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When it comes to renewables, we’ve all heard of solar, wind and hydro. But what about the teams working away on the slightly more ‘bleeding edge’ energy sources? We chart the ones to watch.

1. Lightning Anyone who’s been caught in a thunderstorm knows the awesome power of lightning. One of the main drawbacks is lightning’s unpredictability: a lightningcapturing power plant would only be worth building in regions of the world that suffer frequent storms. Another potential hurdle is the need for infrastructure that could survive the powerful surges created by strikes. Power & Energy probability rating: low

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2. Tornadoes Their wild cousins may wreak havoc, but manmade tornadoes have potential as an energy source. An atmospheric vortex engine (AVE) produces a controlled vortex whose base remains firmly anchored in the centre of a circular structure. The heat needed to trigger the process can come from solar sources, or simply from naturally occurring warm, moist air. Power & Energy probability rating: even

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3. Algae It may look like green goo to you, but algae is one of the more advanced of the emerging alternative energy sources, with big players like Exxon Mobil showing an interest. Algae are often considered an ideal renewable energy source because they may grow faster than land plants and can be grown in the sea or on marginal land that is not useful for food crop production. Power & Energy probability rating: high

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4. Waves

Portobello Road Market, London Long before the area was made famous by Hugh Grant and Julia Roberts, this Notting Hill market was widely recognised as a reputable source for second-hand goods and antiques. What’s more, the Portobello Antiques Dealers Association provides vendors with a tightly regulated code of ethics – comforting for those who know nothing about antiques. If you’re not looking to buy, street entertainers, great neighbourhood pubs and excellent food stalls should keep you busy.

Energy can be captured directly from waves on the surface of the ocean, or from pressure fluctuations below the surface. A number of technologies have been proposed to capture the energy from waves, including terminator devices, an oscillating water column and a point absorber. Some of the more promising of these are currently undergoing commercial testing. Power & Energy probability rating: high

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5. Biogas Biogas is composed of 40 to 60 percent methane, with the remainder being mostly carbon dioxide. It is produced by anaerobic digestion or fermentation of biodegradable materials such as biomass, manure, sewage, municipal waste, green waste, plant material and energy crops. Methane and carbon monoxide can be combusted or oxidised with oxygen, allowing biogas to be used as a fuel. Power & Energy probability rating: even

6. Kites Kite energy attempts to exploit the flight of automatically controlled tethered airfoils, which are similar to power kites used in surfing and sailing. The kites operate between 500 and 1000 metres above the ground, with electricity generated at ground level by converting the traction forces acting on the tethers into mechanical and electrical power. Power & Energy probability rating: low

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7. Sugar In 2007, Sony unveiled a fuel cell powered by glucose that could achieve a 50 MW output. The latest version, demonstrated at the International Hydrogen & Fuel Cell Expo last year, can produce 70 MW on 28cc of sugar-filled cola. The battery uses enzymes to breakdown the energy from a glucose solution, and the only by product is water. However, its potential for larger scale use is currently unclear. Power & Energy probability rating: even

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Electric dreams Elon Musk promises a petrol-free future with Tesla Motors, but his own profile threatens to outshine the company he heads.

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n June 29, Tesla Motors began trading on the NASDAQ Stock Market, raising US$226 million selling shares above its forecast price range in the first initial public offering of a US automaker 50 years. The offering is unusual in that car companies normally have market capitalisations of less than one year’s revenues (ranging from Ford’s 33 percent to Honda’s 59 percent). Tesla’s market capitalisation, on the other hand, is more than US$1.9 billion, 17 times its revenues. This makes TSLA 38 times as expensive as typical automotive stock. But Tesla is not your typical car manufacturer: its existing two-door sports car the Roadster – and the four-door Model S, still in development – run entirely on electricity. As if that weren’t enough, the company’s unusual business model has lately been overshadowed by the larger-than-life antics of lead investor and Chairman of the Board, Elon Musk. With both his personal life and his business sense under scrutiny, the future of Tesla may rest more in his hands than those of its new stockholders. Musk is a ‘serial entrepreneur’ – a dreamer with business sense in the Richard Branson mode. Born in South Africa in 1971 to a South African father and a Canadian mother, Musk sold his first commercial software, a space game called Blaster, at the age of 12. Following a brief sojourn in Canada, he took up a scholarship at the University of Pennsylvania Wharton School, finished off undergraduate degrees in economics and physics, and turned down the opportunity to study for a postgraduate degree at Stanford. Instead, in 1995, at the age of 23, Musk founded Zip2 to provide online content publishing software for news organisations. In 1999, Compaq’s AltaVista division acquired Zip2 for US$307 million in cash and US$34 million in stock options. Musk then co-founded X.com, an online financial services and email payments company. X.com acquired Confinity, along with its PayPal domain, and in February 2001, X.com changed its legal name to PayPal. In October 2002, PayPal was acquired by eBay for US$1.5 billion in stock. Prior to the sale sale, Musk, the company’s largest shareholder, owned 11.7 percent of PayPal’s shares. In June 2002, Musk founded his third company, Space Exploration Technologies (SpaceX), of which he is currently the CEO and CTO. SpaceX develops and manufactures space launch vehicles. Musk is also the primary investor in and Chairman of the Board of SolarCity, a Californian photovoltaics products and services company

that bills itself on its website as “the nation’s leading full-service solar provider for homeowners, businesses and government organisations – the first company to provide solar power system design, financing, installation and monitoring services from a single source”. Obviously passionate about his causes, Musk tirelessly promotes Tesla’s ability to change the future of motoring – and therefore the planet – by eliminating the need for petrol. Of course there is money involved – the 2010 Tesla Roadster Sport retails for US$129,000 – although Tesla has never officially turned a profit. Having made his millions nearly a decade ago, Musk is clearly motivated by more than just dollar signs. His aspirations are not even bound by the limits of planet earth, as Musk told moderator John Battelle at the Web 2.0 summit earlier this year: “When I was in college, I tried to think: what are the things that will most change the future of humanity? The three I came up with were the internet, transitioning to a sustainable energy economy, and space exploration. I didn’t think I would be involved with the third one, and I wasn’t sure about the second one, but fortunately with the internet you could get something started with very little capital. “So I did a couple of internet companies and that gave me the capital to work on the clean energy stuff, which is where SolarCity and Tesla come in, and the third element was space. I just think it’s important that we make progress in space, that we’re on a path, that we can extrapolate forward and see that one day we could be a space-going civilisation and that there could be life as we know it on many planets. That’s a very exciting future compared to one where life never gets beyond earth.” Unfortunately for Musk, it’s his activities closer to home that have been attracting the attention of the media. In the midst of a contentious divorce from his wife Justine – the mother of his five children – Musk has also become engaged to Inception actor Talulah Riley. Then there is his ongoing and very public feud with Valleywag journalist Owen Thomas, who seems adept at dredging up real and (Musk contends) imagined improprieties both from Musk’s personal life and his business dealings. There have been suggestions that the money raised on Tesla’s IPO owes more to Musk’s high profile than the company’s growth prospects. Whether Tesla can succeed on its own merits remains to be seen, but it seems certain that Musk – with his boyish good looks, Hollywood lifestyle, and passionate views on subjects such as renewable energy and space travel – will remain in the limelight for some time to come.

Obviously passionate about his causes, Musk tirelessly promotes Tesla’s ability to change the future of motoring

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Utility earnings up in Europe

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ost European energy utilities are expected to report rising secondquarter operating earnings, according to analysts quoted by Dow Jones Newswires. Helping to drive profits will be improving energy demand in a gradually recovering economy, recent acquisitions and lower costs. In mid-July, Spanish company Iberdrola reported higher operating profits for the second quarter, which were led by renewables. The company’s international output also contributed, boosted by appreciating US and Latin American currencies. Some utilities with exposure to the natural gas market, including GDF Suez and E.ON AG, are expected to suffer from the continued over supply of gas, which is holding prices down. Mergers and acquisitions are back on the agenda, with GDF Suez’s offer to merge its foreign assets with UK-based International Power. At the same time, analysts will also be watching for updates or new announcements on asset sales as companies seek to reduce debt, the results of a previous M&A wave. According to Dow Jones, analysts said that the second-quarter earnings releases could be a welcome catalyst for the shares of German utilities E.ON and RWE AG, which have underperformed their European sector peers. German government plans to introduce a tax on nuclear fuel rods and uncertainty over a possible extension of nuclear reactor lives have weighed heavily on RWE and E.ON in recent months.

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Ocean power making progress

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nergy harnessed from the oceans could provide 15 percent of the EU’s energy needs by 2050 if key challenges are overcome, according to the European Ocean Energy Association (EU-OEA). The organisation, which recently published a technology roadmap for ocean energy in Europe to 2050, says investment in the ocean energy sector would also create employment in addition to contributing to carbon reduction targets. Up to 3.6 GW of installed capacity could be attained by 2020 in the EU, and close to 188 GW by 2050, says EU-OEA. However, potential challenges include the commercialisation of a new generation of full-scale ocean energy conversion devices, and the development and optimisation of manufacturing processes. An investment of €8544 million would be required to reach an installed capacity of 3.6 GW in 2020, which would avoid the emission of 2.61 million t/year of carbon. The ocean energy industry would benefit from knowledge transfer from and industrial cooperation with other sectors, including the offshore wind and oil and gas industries. Significant progress has been made in ocean energy development in the last few years according to the report, with several EU member states putting in place attractive financial incentives as well as developing world-class testing facilities. All the major utilities are engaged in the industry. According to EU-OEA, industry development would be supported by a comprehensive research programme to improve the technical and economic performance of conversion devices. Risk reduction will also be required to leverage private investment. The EU-OEA Roadmap is intended to map out the potential development of ocean energy up to 2020 and beyond to 2050. The Roadmap identifies issues and barriers surrounding the sector, as a first step towards a similar policy framework that European countries implemented for offshore oil and gas and offshore wind.

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Offshore wind heads for record year

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total of 118 new offshore wind turbines were fully connected to the grid in the first half of 2010 according to new statistics released in July by the European Wind Energy Association (EWEA). Those 118 turbines have a capacity of 333 MW – well over half the 577 MW installed offshore last year – showing continuing strong growth in offshore wind power despite the financial crisis. In addition, 151 turbines (440 MW) were installed but not yet connected to the grid. Overall, 16 offshore wind farms totalling 3972 MW were under construction. Of these, four became fully operational: Poseidon in Denmark, Alpha Ventus in Germany, and Gunfleet Sands and Robin Rigg in the

UK. To date in Europe there are 948 offshore wind turbines in 43 fully operational offshore wind farms, with a total capacity of 2396 MW. Among the developers, E.ON Climate and Renewables developed 64 percent of the offshore capacity grid connected during the first half of 2010, followed by DONG (21 percent) and Vattenfall (11 percent). Among the manufacturers, Siemens accounted for 55 percent of the offshore capacity grid connected during the first half of 2010, Vestas 36 percent and REpower nine percent. “Despite the financial crisis, offshore wind continues to be a major growth industry,” said Justin Wilkes, Director of Policy at EWEA. “The number of offshore wind turbines connected to the grid in the first half of this year is well over half the total amount installed all last year and I am confident we are heading for a record year. “There is no doubt this burgeoning industry is being held back by a lack of finance. Projects led by utilities are less affected thanks to their ability to fund investments from their balance sheets, but independent developers are severely constrained.”

Installation and grid connection of wind turbines in offshore wind farms in 1st half 2010 100 90 80 70 60 50 40 30 20 10 0 Walney

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Turbines installed

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E.ON Climate & Renewables: 212.9 MW; 64%

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DONG Energy: 68.4 MW; 21%

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Developers’ share of offshore wind capacity grid connected between 1 January and 30 June 2010

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WT Manufaturers’ share of offshore wind capacity grid connected between 1 January and 30 June 2010

GAIA: 0.033 MW; 0% Vestas: 120 MW; 36%

Vattenfall Renewables: 37.9 MW; 11%

EWE: 14.3 MW; 4% REpower: 30 MW; 9% Floating Power Plant: 0.033 MW; 0%

Siemens: 183.4 MW; 55% Figures from EWEA Offshore Statistics 2010

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International news

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1. Emissions defeat US President Barack Obama has said he is determined to fight on for a climate-change bill, despite the collapse of Senate legislation designed to cut greenhousegas emissions. Following talks with Democratic and Republican leaders in Congress, Obama said a watered-down energy bill – minus a section on climate-change action – that was due to come before senators was only a first step. The bill focuses instead on the aftermath of the BP oil spill in the Gulf of Mexico, and on the need to develop alternative-energy projects.

2. Nut power The Environmental Services Division of Wartsila, Australia is currently installing engines in Australia driven by an alternative energy source – rich oil obtained from a naturally occurring product, the jatropha nut. Jatropha oil can be relatively easily processed into biodiesel, and comes from jatropha curcas nuts or seeds which are crushed. This installation uses heat from digested biomass processing and the resulting electricity is sold to the local power grid.

3. More renewables Renewable energy installation topped fossil fuels and nuclear for the second year in a row in the US and Europe in 2009, according to the Global Wind Energy Association (GWEC). Renewable energy accounted for 60 percent of new capacity installed in Europe and over 50 percent of new capacity in the US in 2009. Renewable energy represented 25 percent of global electricity capacity in 2009 with 1230 GW of the total 4.8 TW. Renewable energy also accounted for 18 percent of global power production.

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4. Green cinema

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The summer blockbuster film, Inception, starring Leonardo DiCaprio and filmed in multiple locations including Japan, Morocco and Canada, was partly powered by the world’s largest mobile solar power system. Constructed by Pure Power Distribution, the S48T is first to be able to power a typical movie base camp exclusively with solar power. Approximately 15 metres long and 3.5 metres wide, it incorporates three 24,000W Xantrex inverter banks, three 2550 AH deep cycle battery banks and 7200W of solar panels.

5. Raising solar A new report from ratings firm Crisil Infrastructure Advisory says India can afford to raise the portion of renewable energy in its national power output from its current four percent to 10 percent by 2015. The national action plan on climate change recommends that India should generate 10 percent of power from solar, wind, hydro power and other renewable energy sources by 2015, and 15 percent by 2020. The report assesses the renewable energy purchase obligations of state utilities and their impact on tariffs. It says the additional costs would be minimal.

6.Nuclear Brazil

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Work can now start on building Brazil’s third nuclear power reactor, after regulators issued a construction permit. Plant owner Eletronuclear can now pour concrete for the reactor’s foundation slab, which marks the official start of construction. Angra 3 began life as a KWU pressurised water reactor in 1984 but development faltered two years later. About 70 percent of the plant’s equipment had already been purchased and this has since been maintained onsite. Construction should be completed in 2015.

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New emissions trading scheme planned

P Continuing education gives job satisfaction Companies that increase employee competence using continuing education have the most satisfied employees, according to a job market survey carried out by BI Norwegian School of Management.

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BA students have the highest degree of job satisfaction. Ninety percent said their job satisfaction increased to a great extent or a very great extent following graduation. Of participants in continuing education programmes, 60 percent responded that they have a greater level of job satisfaction following completion of the course. “There are a number of reasons as to why continuing education increases job satisfaction, but the most important reason is that through further education, you gain new knowledge which again opens new doors. This could be especially important during times when companies need to think differently. In demanding executive programmes, such as the MBA, we see a higher increase than in continuing education at lower levels, which reflects the fact that they qualify for more interesting challenges,” says Glenn Ruud, Director of Studies Executive Master at BI Norwegian School of Management. Every year, Gjensidige carries out a personnel satisfaction survey, which correlates with BI Norwegian School of Management’s job market survey on continuing education. “In Gjensidige’s annual personnel satisfaction survey, we see a higher degree of satisfaction in the group which has participated in courses and/or more extensive study programmes. If we see discontent in connection with continuing education, it is usually when the co-worker does not experience a change in responsibilities following completion of the studies. Therefore the supervisor must draw up a career and follow-up plan for the participant in a study programme before we can support the study,” he says.

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roposals from the European Commission that will see carbon-emitting industries buy roughly half of their emission allowances from 2013 onwards have received unanimous backing from EU member states. A committee of national experts forged an agreement in mid-July that relates to phase three of the EU’s emissions trading system (ETS). Currently, companies receiving their allowances for free. A single European auctioning system to sell pollution permits would be set up under the new plan. The Commission believes this will maximise auctioning efficiency and keep carbon prices sufficiently high to bring down emissions, which is the aim of all cap-andtrade schemes. However, some member states said they were concerned it could have a negative impact on national trading systems, and are insisting on the right to opt out from the scheme at some point in the future. Poland, the UK, Germany and Spain were the main countries expressing concerns. Under the plan, Europe’s embattled aviation sector will be brought into the bloc’s emission’s trading system from 2012. Fifteen percent of allowances would be auctioned, with a proportion set to remain the same in subsequent years.

Good news for Africa?

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ollowing the fourth European Union-Brazil summit held in Brasilia on 14 July, EU and Brazilian leaders announced in a joint statement a “triangular co-operation” initiative, focusing on the sustainable development of bio-energy in interested African countries, as a first step towards broader action on energy. The statement said that the development of feasibility studies on the potential for the sustainable production and use of bioenergy, taking into account social, environmental and economic consequences, will make an important contribution to tackling climate change, fighting poverty, and promoting access to modern forms of energy, such as for transport, cooking fuels and electricity for rural and urban areas. However, some observers called the scheme selfcentred and said it would make conditions worse. In Mozambique, for example, where EU and Brazilian officials are preparing to study how best to develop bioethanol, biodiesel and bioelectricity projects, environmental groups say the initiative will displace people from their land and exacerbate food shortages.

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Plugging the power skills gap How the new National Skills Academy for Power is helping the UK’s utilities sector ensure there is an appropriate talent pool to meet its needs.

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ower is an essential part of our lives: it heats and lights up our homes and runs our computers and appliances, enabling us to live and work in comfort. Yet how many of us think of the energy sector when considering potential career choices? Not enough, it seems. Until recently, companies in the UK’s energy industry – as in many other sectors – assumed that they would have no trouble recruiting from the marketplace to fill job vacancies. However, according to Emma Wilcox, “It was only when they looked across the sector that they realised they’re all trying to recruit the same people, and those people aren’t there. That’s the moment that they knew they had to do something about it.” Wilcox is Head of Operations for the country’s newly formed National Skills Academy for Power. The academy recently conducted research that showed that in the next 15 years 80 percent of the power sector workforce will retire or leave the industry.

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As Wilcox points out, this raises issues not only in terms of challenges in recruitment, but also in the loss of the knowledge and experience those leaving the industry take with them. Much training in the sector is undertaken through apprenticeships and mentoring. Without an available pool of experienced people, that training can’t take place. Luckily, these are the types of issues that the Skills Academy was created to address. As Wilcox explains, one way of encouraging new entrants into the power sector is through increasing sector attractiveness. “There was heavy recruitment into the power sector in the 1970s and 1980s and a reduced intake in the 1990s,” Wilcox says. “This is partly why we’ve got an aging work profile. “But we also know that STEM subjects – science, engineering, technology and mathematics – in general have been less taken up; people with STEM skills are in demand because young people have shifted to subjects such as arts or media.”

“Someone who works in transmission and distribution said about overhead cables, ‘I get to work with the world’s biggest Meccano kit.’ People really enthuse about the sector when they’re in it”

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Starting early Wilcox underlines the need to begin boosting sector attractiveness early, in infant and primary schools, and continue that conversation right through to university level, when people are choosing their degrees or apprenticeships. But it doesn’t stop there – the message can also be carried to those already in work, perhaps in manufacturing or service industries and looking for a career change. “We’ve created a sector value proposition that outlines what it is that the sector offers to an employee and what the employee is expected to do in return,” Wilcox says. “On the basis of that we will then create various different activities to attract people into the sector. Some of it will be promotion of the sector, because the big thing that’s showing up in the research is that power is an invisible sector. “People don’t understand how power gets from the power station to the plug, it’s just not thought about. Most people go into power because they know someone who works in the power sector; but when people do go in, they stay in.” The academy is also creating a web portal that will allow prospective entrants into the industry to choose the route that’s right for them, whether they are school leavers, graduates or experienced engineers. They will be able to enter their current skill set, and find out what they need to do to get a particular job. “We need to give the power sector more exposure in terms of what it is: the fabulous careers that are in it, and the really good career development it offers,” Wilcox says. “We’ve just done some research with focus groups on the sector value proposition and one of my favourite quotes came from someone who works in transmission and distribution, who said about overhead cables, ‘I get to work with the world’s biggest Meccano kit.’ People really enthuse about the sector when they’re in it.”

for the power sector – across the sector, not just company-specific.” Wilcox says that long term, the industry needs people who are going to come through the apprenticeship or technical route as well as people who come through universities and with master’s degrees and PhDs. “We need that balance because the sector needs a broad range of skills and a broad range of knowledge. When asked to pinpoint the most difficult roadblock facing recruitment in the sector, Wilcox returns to the shortage of people with STEM skills: “I see that as one of our biggest challenges, making sure there’s enough throughput of people with the right skills that we can then go and talk to about coming to work in power. It’s something that’s almost out of our control.” “We need to make sure there is that throughput of people through universities into STEM. With the coalition government here and changes around university fees and around STEM subjects, we’ll be watching that quite closely.” Their task could become a critical one if the utilities we depend on are to be able to recruit enough qualified people to allow the sector to develop and grow. In this way, we could find ourselves depending on the National Skills Academy for Power to help ensure a prosperous future for us all.

“The big thing that’s showing up in the research is that power is an invisible sector. People don’t understand how power gets from the power station to the plug, it’s just not thought about”

Capturing knowledge Having dealt with the issue of attracting new talent into the sector, Wilcox now turns to the challenge of retaining the knowledge of those more experienced members of the workforce who are about to retire or leave. “When you’ve got all these people going, how can we capture what’s in their heads?” Wilcox asks, before responding, “We’re looking at setting up a knowledge transfer partnership. It’s a government initiative in which you get universities and companies working together, because we recognise there will be a lot of things that have already been done and a lot of research on the solutions we could use in the power sector. “We will be working with universities to help us understand what’s already out there in terms of systems we can use, and then implementing that

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UPFRONT.

Arctic agreement reached

Company index

Q3 2010 Companies in this issue are indexed to the first page of the article in which each is mentioned.

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orway and Russia have finally agreed on their undersea borders in the high north, after 40 years of negotiations. The deal was reached in April, when Norwegian and Russian Federation leaders signed a joint declaration bringing an end to their disagreement over the extent of their Arctic territory. Norwegian Prime Minister Jens Stoltenberg called the meeting a “historic day”, and said, “We have reached a breakthrough in the most important outstanding issue between Norway and the Russian Federation.” Moscow and Oslo have been engaged in a long struggle over ownership of the frontiers at the bottom of the Barents Sea and the Arctic Ocean, including the oil and gas deposits that straddle the border. In 2007, a Russian submarine planted a flag on the Arctic sea floor underneath the North Pole. The Norwegian coast guard, in turn, has often detained Russian fishing boats. The EU published a security analysis in 2008, highlighting the boundary disputes at the pole and arguing that the bloc should boost its civil and military capacities to respond to “serious security risks” resulting from catastrophic climate change. “I believe this will open the way for many joint projects, especially in the area of energy,” Russian President Dmitri Medvedev told reporters after the agreement was reached. The agreement includes a “maritime delimitation line,” which will divide a disputed area of some 175,000 square kilometres of the Arctic shelf into two parts of roughly the same size. The document also provides for fisheries and oil and gas cooperation, with the countries working together to manage marine life. Crucially, there is a series of detailed rules and procedures governing how oil and gas deposits that cross the border should be apportioned. Negotiations have completed, but some further technical work must still be done before a final treaty is signed and then approved by the parliaments of the two countries.

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Aalborg Energie 48 Baltimore Gas & Electric 80 Bentley Systems 8, 54, 55 BI Norwegian School of Management 24, 25 Cinterion Wireless Modules 88, 89 Constellation Energy 80 Convergys 13 Department of Energy and Climate Change 36 Desertec Foundation 42 Electricon 74, 75 Emerging Energy Research 62, 70 ENEL Green Power 58 EPIA 58 E:SO Global 94, 95 European Wind Energy Association 62, 67, 76 French National Centre for Scientific Research 30 Georg Fischer 110, 111 Greenpeace International 30 Investec 46 iStrategy 125 ITER 30 ITI Energy 102 James Walker Rotabolt 62, 64 JET 30 Kisters 96, 97 Limpet Technology 68, 69 Lloyds Register ODS 78, 79 Maingate 86, 87 Meet the Boss 101 Opower 40 Oracle 84, 85, OBC Orange Boat Support 6 Powel 15 Process Vision Oy 118, 119, IBC Project Syndicate 30 Robert Burkle GmbH 56, 57 SAMI Corp 4, 115 Schneider Electric 116, 117 Sensus Metering Systems 2, 93 Siemens IFC, 106, 108 Smarteq Wireless 10, 97, 98 Smart Grid Analysis 90 SolFocus 61 Statkraft 50 Tieto 29, 97 WCAM 112

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COVER STORY

PRO OR CON-FUSION? With the hunt for alternative sources of clean energy reaching critical mass, Nick Pryke sets the record straight in the ongoing debate surrounding nuclear fusion and a project that could change the world of power generation forever.

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e hear it time and time again: the world needs clean energy and it needs it fast. It’s been the Holy Grail of achievement for the industry’s scientists and engineers ever since they helped power man to the moon – a feat that now seems simple in comparison – and one that has teased them down many a path, hopeful for that elusive shortcut. The collapse of cold fusion, the controversy of bubble fusion and the public disdain for nuclear fission have all contributed to frowning brows and countless hours of scribbled formulas in continuing the search for a boundless source of clean energy. Fortunately for the industry, a guiding star could start burning brightly, quite literally, in the near future – in the form of nuclear fusion. Unlike nuclear fission, which generates energy by splitting atoms, nuclear fusion works on the principle that energy can be released by forcing together atomic nuclei – precisely the same reaction that occurs in the core of the sun. However, with a much lower pressure on Earth, the temperatures needed to produce fusion have to be far higher than those observed in the burning star – above 100 million degrees Celsius to be exact. And with an obvious lack of materials able to withstand anything near that intensity, scientists have had to devise a solution, in which a super-heated plasma is held and squeezed inside an intense doughnutshaped magnetic field, allowing a balance to prevail between the magnetic and plasma pressures – a feat that has come to be more commonly known as magnetic confi nement fusion. Scientists at the Joint European Torus (JET) facility in Culham, UK, produced 16 MW of fusion power in 1997, the fi rst project of its kind to make any real commercial advance with the potential of magnetic confi nement fusion. The only problem was that, due to plasma escaping the confi nement area and potentially touching the walls of the container, their input energy levels were significantly higher than their output levels, leaving them in a perpetual cycle of loss. Regardless, what they came to fi nd was that what they lost in energy production, they reaped in knowledge.

ITER Fast-forward 13 years and this knowledge has been used as an R&D platform to build up to the biggest magnetic confinement fusion project the world has ever witnessed. Known as the International Tokamak Experimental Reactor (ITER), it involves the participation of the EU, India, Japan, China, Russia, South Korea and the US. After some extremely fierce negotiations between the EU and Japan, it was decided back in 2005 that Cadarache in southern France would host the main ITER site, with Japan taking a generous concessions package in heading up the related materials research facility, the International Fusion Materials Irradiation Facility (IFMIF), on their home turf. At the time, Professor Sir Chris Llewellyn Smith, Director of UK Atomic Energy Authority’s (UKAEA) Culham Division, said: “The rapid construction of ITER will be a major step in the development of fusion as a potential large-scale source of electricity that will not contribute to climate change.” And he wasn’t wrong – on the climate change front at least. With the best fuel for fusion being two isotopes of hydrogen – deuterium and tritium, the former being derived from water and the latter being abundant in the Earth’s crust – it means that fusion reactions produce no carbon dioxide, the greenhouse gas so universally blamed by scientists for the warming of our planet. As if that weren’t enough, compared with a timeline of many thousands of years for the radioactive waste of nuclear fission to become remotely safe, nuclear fusion would produce radioactive waste that is safe to handle in a modest 50 to 100 years.

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COVER STORY

Yet this is by the by, as the ITER concept wasn’t designed to run as a commercially viable fusion plant. Instead, its mission statement is to demonstrate the feasibility of fusion power and prove to the watching world that it can work. More specifically, it aims to momentarily produce 10 times more thermal energy from fusion heating than is supplied by traditional auxiliary heating by maintaining a fusion pulse for blasts of 480 seconds. And, unlike JET, ITER hopes to make that jump up from arrears into energy profit, projecting 500 MW of fusion power from a modest 50 MW of energy input. Receiving a thumbs up at this stage would allow the ITER concept to move from its inception site into a currently proposed – and commercially viable – site next door, dubbed DEMO. Where the ITER site would produce 500 MW of fusion power for at least 480 seconds, DEMO’s goal would be to produce a staggering four times that amount on a continual basis – while producing 25 times as much power – giving a thermal output on the scale of a standard electric power plant. For this to happen, DEMO will also need to have dimensions 15 percent larger than the already mammoth ITER ‘tokamak’ machine, at a density 30 percent greater. If DEMO became a reality, it could make fusion energy available within 20 years from implementation and claim the title of the world’s fi rst commercial nuclear fusion power plant.

Opposition However, while the intentions of the ITER concept are aimed at exploring the possibility of removing the world from the clutches of fi nite fuels and towards a better, cleaner future for both the world and those who populate it, there are many who are in vehement disagreement with the project. From the scientific to the environmental, ITER opponents have joined the ranks from a variety of backgrounds to unveil potential cracks in its armour. Perhaps one of the more prominent within this camp, Sébastien Balibar, Director of Research for the French National Centre for Scientific Research, certainly has the expertise to back up his sentiment. Speaking to Project Syndicate, he said: “We say that we will put the sun into a box. The idea is pretty. The problem is, we don’t know how to make the box. Confi ning a little sun inside a box is an extremely difficult task for three main reasons. “First, the nuclear fuel is not seawater, but a mixture of the two heavy isotopes of hydrogen, deuterium and tritium, a radioactive element that has been produced in small quantities for hydrogen bombs. Any development of fusion reactors would require producing tritium with industrial methods that have yet to be invented. “Second, the deuterium-tritium fusion reaction starts at around 100 million degrees. To achieve this requires using a magnet to accelerate a plasma that is a big flame of deuterium and tritium nuclei. Th is must be done in an ultra-high vacuum in a large chamber. ITER is not designed to produce electricity, but to study the stability of the flame in the magnet. Since the fusion reactions produce alpha particles, which pollute the plasma, one has to insert

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ITER estimates it will cost €10 billion to run the project over its 30 year lifetime

We say that we will put the sun into a box. The idea is pretty. The problem is, we don’t know how to make the box Sébastien Balibar

a ‘diverter’ inside the flame at 100 million degrees in order to clean it. Nobody has ever accomplished this, but ITER may be able to try in around 2030 – that is, if it solves the previous problem. “Th ird, fusion also emits neutrons that will produce helium gas bubbles inside the wall material, which tends to explode. The supporters of ITER explain that if the walls are porous, the bubbles can escape. But nothing can be both leak-proof and porous – and ITER is not designed to study this contradiction. In the future, a ‘blanket’ should be inserted between the plasma and the walls, with two objectives: to protect the outer walls and to produce tritium from nuclear reactions within a circulating fluid containing lithium. This might work, but the fi rst wall of the blanket will need to not only be leak-proof and porous, but also sufficiently permeable to neutrons, which have to hit the lithium atoms beyond it. “ITER will not solve our energy problem,” concludes Balibar. “Although it has some scientific interest in plasma physics, the participating countries should clearly state that funding it won’t affect the rest of their research efforts. At the same time, the international community should support research on energy saving and storage and accelerate the development of fourth-generation nuclear reactors, which will use fission and be both clean and durable.” In line with Balibar’s perspective is the French association, Sortir du nucleaire (Get out of nuclear energy), who claim that ITER is hazardous because scientists don’t yet know how to manipulate the high-energy deuterium and tritium hydrogen isotopes used in the fusion process. Even peers within the fusion sector have become critical of ITER in recent years, claiming that ITER researchers have failed to face up to potential technical and economic problems due to the dependence of their jobs on the continuation of tokamak research.

Con-fusion

The rapid construction of ITER will be a major step in the development of fusion as a potential largescale source of electricity Chris Llewellyn Smith

Focusing on the environmental perspective, Greenpeace have had much to say on the subject – albeit with an often-confused narrative. Jan Vande Putte, Greenpeace International’s head nuclear campaigner, declared, “With €10 billion [the original estimated cost of ITER], we could build 10,000 MW offshore wind farms, delivering electricity for 7.5 million European households. Governments should not waste our money on a dangerous toy, which will never deliver any useful energy. Instead, they should invest in renewable energy which is abundantly available; not in 2080, but today.” Unfortunately, while Vande Putte sympathetically highlights the need to progress and implement today’s renewable technologies, he falls short on a number of other points – points that seem to be picked up by many antiITER supporters and preached as gospel. First to be picked out of the confusion hat – and perhaps the biggest mistruth – is that renewable energy can support the world’s energy needs on its own. While this is the dream, it’s simply not true. Although commercial and domestic solar panels and wind generators are becoming increasingly common and

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ITER: the world’s largest tokamak

CRYOSTAT: The entire vacuum vessel is enclosed with a Cryostat, or ‘cold box’, which is literally a super-sized refrigerator. The Cryostat forms a physical envelope surrounding the vacuum vessel, providing thermal insulation for the superconducting magnet system and other components.

MAGNETS: 10,000 tonnes n nnes of magnets will work together to confine and shape the plasma inside ide the ITER vacuum vessel. The 48 8 ‘elements’ will generate a magnetic e field some etic 200,000 times higherr than that of our Earth. For maximum effi e ciency cien and to limit energy consumption, p ption, ITER uses superconducting magnets g gnets that lose n cooled down to their resistance when e es. very low temperatures.

DIVERTOR: The other key component of the ITER, the divertor lies along the bottom of the vacuum vessel and in effect functions like a giant exhaust-system – extracting heat, helium ash and other impurities from the plasma.

DIAGNOSTICS: An extensive diagnostic nostic system n to provide ne will be installed in the ITER machine o ontrol, evalua the necessary measurements to control, evaluate and optimise plasma performance e in IT ITER and to further the understanding of plasma m physics. This ma includes measuring temperatures,, densities, impurity concentrations and particle and energy n nergy confinement times, while coping with a range off phenomena nott h previously encountered in diagnostic implementation.

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BLANKET: Consisting of 440 individual segments and one of the most critical and technically challenging components, the blanket covers the interior surfaces of the vacuum vessel, providing shielding to the vessel and superconducting magnets ffrom the heat and neutron fluxes ux of the fusion reaction. Neutro rons are slowed down in Neutrons the blank nket where their kinetic blanket energy is transformed tr into heat energyy and a collected by the coolants, w where in a power plant, it would be b used for electrical power production. p

HEATING: To init initiate tiate nuclear fusion, the hyd hydrogen drogen plasma that serves ass the fusion fuel must be hea heated eated to 150 million degrees Ce Celsius. In ITER, this is accompl mplished through external accomplished heatin ating systems: natural beam heating inj injections and radio frequency electromagnetic waves that will provide the input heating power of 50 MW required to bring the plasma up to speed and prepped to begin the fusion process.

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COVER STORY

ITER-rific 2300 tonnes: The total weight of the ITER tokamak. To put it into perspective, that’s equivalent to the weight off tthree Eiffel Towers. o

57 metres: Rising 19 stories above ground level – with a further five stories located underground – ITER’s tokamak building will be the tallest structure on the site, slightly taller than the Arc de Triomphe in Paris.

840 metres3 : The staggering plasma volume of the ITER tokamak. Currently, the world’s largest stands at 100 metres3– achieved by both the UK’s JET and Japan’s JT-60.

360 tonnes: The weight of each one of the tokamak’s 18 D-shaped torodial magnetic coils. They will arrive individually by boat before being remotely controlled on transporters along a specially designed road to the ITER site.

do reduce demand on the relevant grid systems, unfortunately they don’t decrease it anywhere close to the ‘golden zero’ level that Vande Putte implies. There is also the negation, deliberate or otherwise, of acknowledging where energy will come from when the sun forgets to shine and the wind stops blowing. Reserve stores will work up until a point, but ultimately an energy-hungry population isn’t going to stop consuming – another, more reliable alternative will always be needed. As David Mackay, Chief Science Advisor to the UK Department of Energy and Climate Change, said when asked about the possibility of running the world on renewables alone: “I’m not pro-nuclear. I’m just pro-arithmetic.” The second misunderstanding stems from an obvious confusion between fission and fusion. Stating that: “Fusion energy – if it could ever operate – would create a serious waste problem, would emit large amounts of radioactive material and could be used to produce materials for nuclear weapons,” Greenpeace has obviously got its wires crossed. It is true that if a reactor uses deuterium-tritium fusion then there will be neutrons a-plenty, which will make the reactor vessel radioactive over time. But Greenpeace refers to the emission of radioactive material, implying gaseous waste. And as helium is the end product of this type of fusion – and not radioactive in the slightest – then surely it must be a reference to tritium? But as ITER plans to use tritium as a fuel, one would presume that they wouldn’t be too keen on their prospective plants emitting any of the radioactive gas.

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5500 0 MW: ITER’s goal is to produce p r 500 MW of output power p o from 50 MW of input energy, e n giving it a net gain of energy e n for the first time in the history h i of nuclear fusion.

Nuclear fission plants already emit 19,000 tonnes of CO2 everyday

If successful, DEMO could produce 2000 MW of power on a continual basis

Continuing the fusion/fission confusion, where nuclear fusion, from projected estimates, would produce the equivalent of one coke can’s worth of radioactive waste per consumer’s lifetime, fission already produces 19,000 tonnes of CO2 waste everyday – nowhere near the same amounts. Of course, over time the potential DEMO plant would witness increased levels of radioactivity and would need to be decommissioned at the end of its cycle – but arguably that’s a small price to pay when balanced against a clean source of energy. Another in a long line of arguments against the goahead of nuclear plants lies in a far greyer area, with its relevance more often than not based in the subjective. Neither specific to fission or fusion, but rather to nuclear power plants in general, protesters claim that building nuclear power plants will increase the proliferation of nuclear weapons. While this obviously comes down to a matter of opinion, there are two main platforms the argument is commonly debated from. First, it would make no logical sense for nuclear fusion plants to begin producing nuclear materials such as plutonium. Reactors could indeed be used to do so by surrounding them with uranium and allowing the neutrons to produce the much-dreaded element, but the relevant military bodies already do this with ‘breeder’ reactors designed specifically for the purpose, so it would make little sense to complicate an existing system. Secondly, many proponents will argue that the old adage of ‘war being inevitable’ is fi nessing the point some-

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COVER STORY 35

what, as the vast majority of nations that want nuclear power and clean energy have already sorted out their weapons agendas and restrictions and are unlikely to jeopardise them at the cost of losing nuclear power security. Counteracting this, opponents often retort by playing the ‘terrorism’ card, claiming that nuclear plants and waste-carrying vehicles could become potential terrorist targets further down the line. The problem is that, until the plants are up and running on a commercial scale, no-one can predict what is going to happen until it does – a sentiment that is bound to provoke scare tactics for both parties.

Responsibility However, while Greenpeace and other parties have done much to distort the true argument at hand with sensational and contradictory assertions, they have managed to bring up a few home truths that the ITER concept will have to face up to sooner or later. Going full circle, we return to the battle that Greenpeace would have you view: renewable versus nuclear power generation. Having contested the fact that it is unlikely that renewables alone could sustain a complete energy supply, the next bone of contention is that of the construction of nuclear sites against those of a renewable nature – both in the context of size and scales of time. It is here that heads start to bang. The problem posed by many in opposition to ITER and nuclear power is two-fold in terms of time. First of all, there is no guarantee that ITER will succeed; it is, after all, a research project with its rooting in progressing the comprehension and potentials of nuclear fusion power. But with constantly evolving costs that have already moved from the originally estimated €10 billion, many see the project as a dangerous waste of money. Voicing this perspective, Rebecca Harms, Green/EFA member of the European Parliament’s Committee on Industry, Research and Energy, revealed: “ITER is an enormous project of no practical relevance whatsoever. The €10 billion that will be spent on this white elephant bears no relation to what we can expect to gain from it. In the next 50 years, nuclear fusion will neither tackle climate change nor guarantee the security of our energy supply. I’m now convinced that this is the best moment to stop ITER before construction begins. We have a great opportunity to save money and invest in better, safer energy solutions. The Green/EFA group demands that these funds be spent instead on energy research that is relevant to the future. A major focus should now be put on renewable sources of energy.” While this is a rather brave assertion to make, Harms does much to exemplify the very real concern held by many watching the project unfold. Ironically, their worry is also vocalised by Steven Cowley, Director of the JET programme in the UK. “We need to get moving on fusion, we’re behind the curve already. We need alternative sources of energy now and if we get a good outcome with ITER, we can go ahead and build a full-scale reactor. If we build a machine that doesn’t work, it will be a waste of time,” he said. For some, the idea of pumping extraordinary amounts of money into a project that could turn out to be “a waste

P&EEU_cover story 35

We need to get moving on fusion, we’re behind the curve already. We need alternative sources of energy now and if we get a good outcome with ITER, we can go ahead and build a fullscale reactor Steve Cowley

Governments should not waste our money on a dangerous toy, which will never deliver any useful energy. Instead, they should invest in renewable energy, which is abundantly available; not in 2080, but today Jan Vande Putte

of time” is at best considered short sighted and naïve. For others, the focus is less on whether or not it will succeed and more on clock-watching. ITER itself foresees a timeline of 35 years for implementation, including development, processes and deconstruction phases, meaning that fi nite fuel plants will inevitably have to fi ll the supply void in the meantime. Th is has magnified the potential Achilles heel of ITER: its time-lag issue. While nuclear fusion is working itself out, energy supply will continue to come from our traditional sources and further contribute to the weight of climate change that already sits heavily on our shoulders. French Green party lawmaker, Noël Mamère, believes this is exactly what will happen if ITER goes ahead, saying: “This is not good news for the fight against the greenhouse effect because we’re going to put €10 billion towards a project that has a term of 30 to 50 years when we’re not even sure it will be effective.” The biggest worry for all in this mindset is the planning to operation delay, with no assurance that after all the time and money spent, it will be anywhere closer to the Holy Grail of energy it so desperately hopes to discover. The fl ip side of the coin shows that ultimately this sense of discovery needs to prevail either way in order to establish a map for the future of the energy sector; if it fails then at least it can be crossed off the list. ITER even countered this argument by making it clear that they are in it for the long-term. “In a period of major economic stress worldwide, none of our members – China, the EU, India, Japan, Korea, Russia and the US – has suggested pulling out of or slowing down the ITER project.” “I do not believe that there is growing scepticism,” explained an ITER spokesperson to EurActiv, “but now is the time when members have to guarantee long-term financial support. I believe it is completely natural that there should be debate and some opposition. However, the future of the world’s economy will be based on energy resources. It will take time to get fusion running and the world’s governments are aware that the sooner we start, the sooner we finish.” If everything goes according to plan, ITER projects that fusion-powered electricity could be available from 2045 – a comparably short time when you consider what that would mean for the world’s population and global warming at large. There is an ongoing joke that we are 40 years away from nuclear fusion energy – and always will be – which says much about both the inherent complexity of harnessing fusion power and the attitude towards a field that is constantly misunderstood by many looking from the outside in. While the ITER project strides forward, its hoards of supporters and opponents continue their war of words outside its doors. For some, the dream of clean and infi nite energy is just too much to ignore; for others, its costs and uncertainty provoke the same feeling. Where the former see the potential in progressing an understanding of plasma and astrophysics even if ITER is a failure, the latter see the holding back of renewable technologies that could otherwise be evolved to secure at least a significant amount of tomorrow’s clean energy. Regardless of the perspective, one thing is certain: clean energy is the dream – and one day in the not so near future it could become our reality. „

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Going for green Chris Huhne, UK Secretary of State for Energy and Climate Change, outlines the new government’s plans to meet the challenges of climate change and the need for energy security.

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n the UK, we now have our first coalition government in 65 years. The last coalition won a world war; this one must tame our biggest ever peacetime deficit. Coalitions can provide strong and decisive government because of their broad support. Indeed, seven of the 10 biggest fiscal consolidations in the developed world since 1970 were under coalitions. But it is not just a question of recovery from recession, difficult enough though that will be. The real challenge is to build a different kind of economy. One that cuts our carbon emissions to tackle climate change and which makes our energy secure in a volatile world. In this challenge lies a tremendous opportunity. By putting in place the right incentives for low-carbon growth, we can help create the investment, exports and jobs we need to bring back economic prosperity.

Stable framework I understand the role that business has played in so much of the progress made in the last few years on infrastructure, investment and new technology. We need to build on this progress to create a new partnership between business and government. You need clarity, certainty and stability from government to deliver the investment we all need. We’ve inherited bad habits. For too long we heard about knee-jerk reactions that had no real understanding of finances, and indeed, the business world. But the absolute necessity of dealing with the public spending deficit means that we can’t lurch back into a patchwork of solutions, initiatives and agencies, doling out grants. Those days are gone. The imperatives of economic recovery, energy security and climate stabilisation all march hand in hand. All require a commitment to a consistent policy set for the long term. I look at these challenges in the same terms as businesses and investors – in terms of risk and reward. My business background was starting and running one of the biggest groups of economists looking at country risk. Helping to run a successful ratings agency taught me a lot about risk. In particular, I learned the need to take decisions yourself – or the decisions get taken for you. I learned that a business needs firm frameworks from policy makers just as much in energy as in banking. And I learned that short-term headline-grabbing gimmicks from a government are worse than useless. This coalition aims to provide stability and predictability – not least, a fixed-term five-year parliament. Given the tough decisions we have to take, we are deter-

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mined to see the country through to growth and prosperity again. But the type of growth is crucial. Simply going back to dependence on fossil fuels would be folly. It would make us vulnerable to oil price spikes and volatility. It would deny us opportunities for green growth’ rich in jobs and export chances in the low-carbon markets that are expanding around the world. The case, to me, is clear – we must fix ourselves on a path to a decarbonised society and economy, stimulating growth while meeting the twin challenges of climate change and energy security.

Climate change Let me turn to the fi rst of those challenges: climate change. Science tells us the probability of climate change being man-made is 90 per cent. If someone told you that there was a nine in 10 chance of your house being burned down, I suspect most of us would take care to renew the fire insurance. And that is the calculus that most governments are making despite the disappointments of Copenhagen. It is simply not true that others are doing nothing, as some have argued. Even as we continue to seek a legally binding global agreement, there is rapid action in China and Japan. Even in the United States, where prospects of early cap-andtrade legislation are slim, the administration is planning on pushing business hard through the Environmental Protection Agency. In turn, this means that Europe’s lead in low-carbon technologies is now at risk. Our industrial future – our competitiveness and our prosperity – depends on being a pioneer of the new green industries that will decarbonise our economies, and we need to be ahead of the international game.

Energy security The impacts of the changing climate by themselves give adequate cause for radical action. But they go hand in hand with the second challenge – that of ensuring energy security. In an uncertain world, we need security of supply at home and abroad. So it is vital we make the most of our domestic oil and gas assets. There is still potentially 20 billion barrels of oil equivalent, possibly more, left to produce. We must continue to invest in exploration, development and production, whilst at the same time maintaining high standards of management and minimising environmental impacts.

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“Britain has on average some of the oldest housing stock in Europe, much of it built in the era of cheap coal – but that’s no excuse. Why have we kept building inefficient homes?” Chris Huhne

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Chris Huhne

The recent events in the Gulf of Mexico were devastating. The impacts of the explosion on the Deepwater Horizon give us pause for thought, particularly given the beginning of exploration in deeper UK waters West of Shetland. I am confident that the UK’s regulatory regime is in good shape to manage the risks of deep-water drilling. But as oil becomes ever more difficult to extract, and as demand for oil surges in the emerging economies, we need to recognise the dangers inherent in our history of fossil fuel addiction. Look at the long-term forecasts for fossil fuel demand. Note the new constraints on marginal exploration. And see what’s happened with energy price spikes as global recovery gets under way. We therefore need to take action on two fronts: to stimulate the expansion of low-carbon technologies, particularly in power generation, and improve the energy efficiency of our economy.

Energy infrastructure The UK faces a massive challenge. No less than £200 billion (€244 billion) of investment is needed in our energy infrastructure over the coming decade. In setting the framework to encourage and steer this investment in the right directions, we recognise our responsibility to support infant and emerging technologies – such as renewables and carbon capture and storage – while removing unnecessary barriers to investment, like planning, offshore connections and grid bottlenecks.

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We have enormous potential in renewables. Thanks to the Renewables Obligation, onshore wind has become cost competitive. The UK is already the world leader in offshore wind and we are also supporting wave and tidal stream. The prospects for growth in all these areas are excellent. And with the new feed-in tariff, and support for renewable heat, community and micro-generation can also play a part. But substantial investment in low-carbon technologies such as these will not happen quickly enough unless we strengthen the incentives. We need a meaningful carbon price to underpin investment decisions. The current price is simply not doing this. It is not yet driving our economy towards the green technologies of the future anywhere near quickly enough. A 30 percent cut in EU emissions by 2020 – up from the existing 20 percent target – would push the price higher, create business opportunities in the domestic market, and put the EU at the forefront of the international race. And, in light of the recession, it is not expensive to achieve. It would cost just 0.1 percent of EU gross domestic product more than the original pre-recession estimate of achieving 20 percent. And those cost estimates fall even further if oil prices rise. We are arguing for the 30 percent target within the EU. But we are also taking action in the UK. On Tuesday the Chancellor announced that we will reshape the Climate Change Levy as the way of delivering our coalition commitment to a carbon price floor. That will support new investment across low-carbon generation. Including, of course, nuclear. The coalition agreement is clear that new nuclear can and will go ahead – but only so long as there is no public subsidy, a pledge robustly guaranteed by the state of the public fi nances. We will learn from past mistakes. Streamlining planning, dealing with waste, reprocessing and decommissioning, and a clear policy framework. The third low-carbon energy source is of course fossil fuels with carbon capture and storage, giving us the potential to provide the flexible response needed to complement intermittent wind. We are committed to four demonstration projects that will enable production at commercial scale. This is a technology that can also provide us with enormous export opportunities as we decarbonise electricity generation. The government will shortly make a statement setting out our plans for major infrastructure development which will include details on National Policy Statements. The abolition of the Infrastructure Planning Commission (IPC) is a coalition agreement. I understand the need for clarity, stability and speed in planning approval, but I am quite clear that the new system will not slow down planning decisions. If we are to generate that £200 billion (€244 billion) of investment in energy infrastructure, we have to create an enabling environment. But we also need to leverage private sector investment in energy infrastructure and lowcarbon technology through a green investment bank. As announced, we are working on a wide range of options for the scope and structure of the bank and will bring forward detailed proposals in the autumn.

“Energy saving is the cheapest way of closing the gap between demand and supply, yet it is the Cinderella of the energy ball”

01/09/2010 14:36

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The Green Deal Alongside investment in new energy infrastructure, we need to reduce overall energy demand. So let me now turn to the Green Deal – our way of expanding the energy mix to a fourth resource. Energy saving is the cheapest way of closing the gap between demand and supply, yet it is the Cinderella of the energy ball. On the near horizon, energy saving will mean smart metres and smart grids that can give consumers control over their appliances; for example, ensuring that fridges power down during temporary price surges. Th is will take time to develop, but there is also much we can do now. To date we have heard too much talk and too little action. Britain has on average some of the oldest housing stock in Europe, much of it built in the era of cheap coal – but that’s no excuse. Why have we kept building inefficient homes? We have been locking in waste, which is why my colleague Grant Shapps, the Housing Minister, is moving quickly to toughen building standards. Most of the homes we will use in 2050 have of course already been built. That is why we have big plans for the Green Deal. It will be my department’s flagship bill for this first session. Its aim is a radical overhaul of our existing homes to save energy, carbon and costs. At the moment, we may as well be burning £50 notes outside our front doors. We use more energy per home than Sweden. And this waste cannot be ignored, because households account for a quarter of all carbon emissions. Th is is another area that can help drive economic recovery. The market is big. There are currently up to 14 million homes in the UK that could benefit from insulation under the Green Deal. We are working on the package for each home, which could unlock tens of billions in spending in the coming years. The Green Deal is a completely new and ambitious approach to home insulation. The aim is that every participating householder will save money by insulating their home. Energy companies and high street stores will help guide customers through a simplified process and pay for the work upfront. Householders will then pay back over time on their energy bills from the energy savings they make. Some people – such as the fuel-poor, and those in hard-to-heat homes lacking cavity walls – will need extra help because energy savings alone will not be enough. We intend to provide that help by refocusing the obligations on energy companies. Local authorities could also join with energy companies to reach those who live in houses that need it most. Insulation measures are often cheaper if implemented a street at a time. And we are planning to strengthen the government’s powers to target energy insulation measures on the highest priority cases. A competitive market will provide best value and confidence in products for the customer. With professional marketing from trusted brands, we ought to make energy efficiency as attractive as broadband or satellite TV. And by tying energy saving to the people who pay the energy bills, the Green Deal will be a breakthrough not just

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for owners but for tenants as well. We are also looking at whether it could apply to businesses. To sustain the market on the long march to a comprehensive refit of our housing stock, we are also looking at triggers and incentives to encourage demand. All in all, this will send the right signal to the energy efficiency industry, providing investment confidence and job opportunities. Indeed, this green growth sector can provide a big fi llip to the economic recovery. We’ve already said we want this to be the greenest government ever, and that means that we must practice what we preach. The Prime Minister, in his second day of office, committed himself and the government to cutting 10 per cent from Whitehall carbon emissions in the next 12 months. Th is is vital because we must lead by example. We have no business encouraging people to change their lifestyles if we can’t do as we say. And the same argument applies just as much to the international arena – we can’t argue for an ambitious global deal if we can’t demonstrate how to do it at home. We intend to set high standards for the energy sector too. We need strong regulation and zero tolerance of market abuse and poor service to protect those who are most vulnerable. Because there are those who need protecting. The era of cheap energy is over. Today’s consumers know that. Tomorrow’s bills will undoubtedly be higher, and I do not want to see the energy challenge as an excuse to inflate our energy bills unnecessarily. Consumers must be respected and treated fairly. Energy companies must take full responsibility for their actions.

At the moment, we may as well be burning £50 notes outside our front doors. We use more energy per home than does Sweden

Vision I hope I have given a taste of the coalition’s strategy. To set a demanding policy framework, ideally along with our EU partners. To create the long-term incentives to invest in low carbon energy sources so that we can make the shift to an increasingly electric economy, to save energy as well as produce it; and all in a package that will improve energy assurance and security whether our supplies come from home or abroad. Labour claimed to have 2020 vision. We need to have 2050 vision. Our 2050 pathways project shows us the scale of the challenge. We will not hide it. We will publish detailed analysis and underpinning data alongside our fi rst annual statement on energy in July, and we will welcome comments and feedback. I want Britain to be the best place in the world to do energy business. To lead the world in decarbonising the economy. To develop the unique products and processes that will power the second industrial revolution – the green revolution – just as steam, coal and iron drove the fi rst. Britain has a proud history as the pioneer of industry and development. Let us rediscover that spirit now as we face the challenges of a green future. „ From a speech given at the Economist UK Energy Summit on 24 June, 2010.

01/09/2010 14:36

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25/08/2010 11:37

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Desert sun How solar power from Africa could change the British energy supply p42

Looking good Why projects need to polish up their appearance p46

Poor performance Why the UK is falling behind on renewable energy p50

UK Renewables

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How power from the Sahara desert could help solve the UK’s energy woes

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W

ith the world on its knees searching for new ways to harness clean energy on a commercially viable level, there appears to be one initiative that surprisingly – considering its potential – has remained relatively under the radar of the general public. It involves a consortium of multinational companies, affects the UK and Europe’s energy conundrum and could change the way we look at renewable energy forever. The surprise? It would involve using less than one percent of the Sahara Desert to produce an amount of electricity equivalent to the world’s total energy consumption. Known as the Desertec Industrial Initiative (Dii) and developed by the ‘TREC’ international network of scientists and engineers, the initiative will use proven solar technologies that are already available to exploit the Sahara Desert’s exposure to sunlight in order to convert it into electricity and transmit it to both the MENA and EU regions. The fact that it has been underpinned by detailed research at the German Aerospace Centre (DLR) and the US DoE was all that was needed to get Gerry Wolff, Coordinator of Desertec UK, on board and prove to him that this wasn’t just some ‘green fantasy’. To a tagline of ‘clean power from deserts’, Wolff adds his own: “Probably the single most effective means of cutting worldwide emissions of CO2”. Of course, residents of the wonderfully wet and windy UK could be easily tempted into assuming that the initiative couldn’t possibly have any effect on them – and how wrong they would be. “One of the key things that’s been identified by this research at the DLR is that it’s feasible to track electricity very efficiently over long distances using highvoltage direct current (HVDC) transmission lines,” notes Wolff. “Even without low-loss transmission lines, there’s a cascading effect in the grid that means that in effect you can transfer energy over even longer distances.”

Intentions In its simplest form, the Dii will round up three of the most cutting-edge concentrated solar power (CSP) technologies in order to exploit varying conditions within the Sahara. In passing, it will also link in with various wind farms located around the MENA

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coastal regions. Where sunlight shines for the majority of the time directly overhead, parabolic trough CSP plants will be utilised. With mirrors designed to focus light along the middle of the trough to a glass pipe filled with fluid running the length of the trough, it allows the fluid to pass through a receiver and into a heat engine where about a third of the heat is converted into electricity. Arguably more efficient, power towers will also be used to great effect. With tracking mirrors covering roughly two square miles per plant, the ‘heliostats’, as they are more commonly known, focus concentrated sunlight on to a receiver that sits on top of the ‘power tower’. Within the receiver, the concentrated sunlight heats molten salt, which then flows into a thermal storage tank where it is stored – maintaining 98 percent thermal efficiency – and eventually reaches a steam generator, which drives a turbine to generate electricity. Essentially, it works on the same cycle as a standard coal-fired plant, bar the obvious addition of clean and free energy. Bringing up the rear, but by no means any less pivotal to the initiative, are CPV systems. Probably the most stereotypical in terms of solar imagery, these parabolic ‘dishes’ concentrate sunlight up to a single point above the dish where a receiver captures it. From here, the most common protocol is to have a steam engine that will then produce kinetic energy that can be converted into electricity using an electric generator. With the added advantage of moving along a double axis, parabolic dishes are able to dedicate themselves to chasing the sun during the course of its day – affording them their sci-fi stereotype. “Estimates vary,” admits Wolff, “but at the present time there are between about nine to 14 GW of CPS capacity in the pipeline according to the World Bank and Emerging Energy Research estimates. The interesting thing about this technology is because it works with heat, it’s relatively easy to store the heat quite cheaply in melted salts, allowing you to continue generating electricity at night or during days with poor sunlight. Unlike photovoltaics, where you convert directly from sunlight, with CSP you have the privilege of a back-up; you can switch power on and off according to demand.” And that is far from the last of the privileges afforded to the Dii. Returning to the topic of HVDC transmission lines,

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DESERTEC’S PROPOSED TRANSMISSION SUPER GRID

Concentrating Solar Power Photovoltaics Wind

CSP collector areas for electricity World 2005 EU-25 2005 MENA 2005

Wolff asserts that they were a key part of the reports from the DLR that enticed him. “One point that I want to stress,” continues Wolff, “is that you can make a start with the existing grid. Europe already has quite a well-developed grid mainly of high-voltage alternating current (HVAC) lines. The point I would like to make is that in many ways the transmission grid is like a lake. If you can imagine taking a tanker of water and tipping it in to the bottom of the lake, you can then go along to the other end of the lake and take the water out. It’s different water. The water hasn’t moved out of the lake, but you can take the second round of it out, so it’s just as if you had transmitted that water down in the lake.

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“The second principle applies to electricity in a transmission grid. If you take, for example, solar power from North Africa to Southern Europe, there’s a cascading effect. The benefits will ripple right the way through to places like Sweden and the UK quite quickly. In other words, you can benefit very quickly using the existing grid without having to wait for this super grid to be built.” Of course, the ‘super grid’ will still need to be built if the full potential of the Dii is to be realised – and it is here that the road forks in the form of two separate proposals. The first comes from two companies in the know: MRP and Airtricity – who both propose using submarines to lay low-loss HVDC lines on the sea floor. With some already in place, the EU

Energy Commissioner, Andris Piebalgs, has endorsed this proposal by providing funds for the super grid. Investment company Imera has also announced a €4.4 billion plan to develop EuropaGrid North Sea and EuropaGrid Atlantic. At the end of the other path stands the Dii itself. With its own schematic proposing that low-loss HVDC transmission lines connect various sources of clean energy spanning the whole of Europe and MENA, it pushes the fact that it can integrate with the existing HVAC grids. And with companies such as Siemens working within the Dii consortium and heading up transmission issues, it seems to have the strongest possible minds working on integration.

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Wolff even claims that integration offers an overall structure that has better properties than either technology could ever produce on its own. “This kind of grid has benefits in many ways – beginning with security supply,” explains Wolff. “If you’ve got an issue in any one area, then you can normally make it up from somewhere else. You’ll reduce wastage while smoothing out peaks and troughs in supply and demand. If you’ve got excess power in any one area, without a grid you’ll simply waste it. If you’re moving to a single market for electricity, which I’m told is officially now in place, you can’t have a single market for elementary power without an efficient large-scale grid.”

Potential When Wolff takes a further step back to take in the worldwide perspective, things start to get really interesting. According to the DLR, 90 percent of the world’s people live within 2700 km of a desert. In principle, deserts could virtually power the whole world. The southwest of the US could power any part of the US as well as some of the big cities in Canada; there’s potential in South America; the Northern Cape could provide for its neighbours. The Iranian peninsula has colossal potential – and it goes without saying that Australia has far more than it could ever fulfill. “Here’s another way of looking at it,” offers Wolff. “Energy density. Gigawatts per hour per square kilometre per year. According to DLR estimates, thermal energy is about one. Wind energy is better at about 30. Then you move on to solar energy in desert regions and you jump right up to about 250 of these units. This energy density is one of the main differences between renewables and conventional sources of power. It’s not a major problem, but it’s a consideration that needs to be taken.” A further consideration is what solar power and CSP plants can offer in terms of what Wolff refers to as “spin-offs” or advantageous side-effects of the plants – the most common of which is the desalination of sea water through waste heat from the relative generators, which cool the turbine, raise the temperature of the sea water before it gets drawn back in and allow for fresh water vapour to be drawn off. “Another interesting spin-off,” continues Wolff, “is that under these mirrors, you

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have shade. In principle – as it hasn’t been done yet – that shade can be used for many purposes. For example, you could use it to park your car. Instead of getting boiling hot, it remains relatively cool. An alternative interesting idea is that, because mirrors are utilised, the ground below isn’t subject to total darkness, allowing you to grow plants that could be protected from the harsh direct sunlight. There are many possibilities.” However, alongside the many possibilities are the many potential issues that critics will undoubtedly raise with the Dii; the main one being that of security and political reliability with transmission lines coming through a plethora of countries – not forgetting the history of the nations of origination. Yet Wolff is more than prepared to hit back, stating that the amount of imported energy into Europe would be less than it is now, in effect reducing exposure to energy imports. With the diversity of energy resources being greater, it would increase the security of energy supplies. Ultimately, Wolff projects that under the Desertec scenario, security of supply would actually be increased when compared with the current situation. “The drivers of this will be the companies that are going to do it and the national governments that will either let them do it or not. Obviously, they could do it in a bad way, or they could do it well. There could be corruption as there has been historically, but I’m inclined to believe that there shouldn’t be too much of that as there’s no reason for it to occur. First of all, the amount of desert

available compared to the amount you need is colossal, so you don’t have to bribe officials to let you have some desert. “The host countries have a clear interest in this development as it will produce clean energy for their local use and we know that several of the governments are quite enthusiastic – especially Morocco. It comes down to negotiation, and unless all the parties are happy, it won’t happen. Simple as that.” As things weigh up, the much talked about – yet publicly shy – Desertec Initiative claims it needs a further two to three years of planning and tweaking with laws, regulations and financial framework. “They expect to start building pilot plants in 2013,” confirms Wolff, “and expect to start delivering by 2015. If they can stick to that timetable then that’s not bad going at all. The companies involved have shown that they’re interested in making this happen and they appear to have the capability to do it. I have a fair amount of confidence that this will happen pretty much as they suggest”. Regardless which side of the line you’re left on, the next few years will be witness to one of the greatest tests of engineering on all possible levels. From the societal to the technological, the Dii is sure to at the very least spark the imaginations of generations to come. How we encourage that imagination and continue to push the boundaries of renewable innovation and collaboration is a completely different task altogether – but one that Wolff is committed to igniting from the UK outwards. „

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Dress to impress Think investors aren’t interested in backing renewables? It could just be how you’re presenting yourself, says Mark Henderson.

I

t’s safe to say the UK renewables industry has been through its fair share of hardship over the past few years. With demanding national targets set by the EU Energy Directive, aimed at bringing about a colossal industry boom – and with inventive technologies and financing mechanisms expected to develop side by side – the hope was that this would result in huge opportunities in the market and kickstart it into the next generation of energy production. Then came – you guessed it – the now infamous global financial downturn. And with it came a surge of lenders and investors closing their books up to anything short of a cast-iron, ‘safe’ proposition. Pretty par for the course, you may be thinking. Perhaps so, but considering that innovation and creativity are the foundation of the industry, proving your proposition is ‘safe’ can be verging on the ridiculous. Thankfully, with unwavering EU and governmental support, societal pressures and votes of confidence in the form of well-publicised injections of capital, the renewable energy sector is alive and kicking once again and ready to take on a new breed of investors. While traditional project finance lenders are slowly peeking their heads above the parapet, more and more mainstream investment is again expected to flow into the sector. With this in mind, one can almost smell the anticipation of an industry hungry to get itself back on track and pushing boundaries. In a position to help the sector achieve at least a fraction of this, Mark Henderson, Head of Investec Power and Renewable Project Finance, has been keeping a close eye on the footprints of new projects being financed and understanding what this means for both the UK and EU markets. Comparing the market to Dickens’ A Tale of Two Cities, Henderson jokingly begins: “It was the best of times, it was the worst of times.” “Despite the gloom about the lack of availability of bank lending,” continues Henderson with an air of confidence, “I believe that there is still a lot of capacity for renewable energy projects, particularly a well-structured transaction in onshore wind. What has been causing a lack of lending is the delay in getting the projects through development and to a stage where they are ready to be financed. The UK’s planning regime, grid connection delays and regulatory changes

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simply do not allow for a high throughput of projects. “Compared to fossil fuel projects, there are certain additional risks, such as wind forecasting and lack of long-term supply contracts for biomass fuel, so the fossil fuel sector can be designed to have more certainty for lenders. That said, due to the high cost of developing and owning these projects, this is now an area almost exclusively for utilities, who have been tending to finance them on a corporate basis rather than through individual project financing.”

Gaining perspective

€23 Billion was financed in renewable projects in 2009

UK

‘consultation constipation’ needs to be addressed

With this being the case, renewable projects often have to explicitly understand the perspective of potential investors, while also ensuring they maintain a grasp of their own position within the market. Perhaps the most common example of this is analysing, in a geographical context, where the projects are. From an investor’s point of view, if a project cannot be easily and efficiently connected to the grid, then it’s bound to be considered risky. It is worth noting here that while there are risks in financing projects in emerging markets, the UK is not much better – in terms of relative growth in 2008, both India and China embarrassed the UK with a growth five times that of the island with the greatest wind resource levels in the EU. On top of this, projects and investors also have to think about the potential for regulatory changes. In June of this year, the British government suggested it could introduce feed-in tariffs (FiTs) for large-scale, renewable projects such as offshore wind farms and marine energy – keeping the current Renewable Obligation Certificate (ROC) scheme for existing projects only. With Investec having financed around US$1 billion (€779 million) in wind, solar, biomass, geothermal and mini-hydro projects in Europe and the US, Henderson believes the uncertainty surrounding the potential change could yet again knock investor confidence: “Even if it’s good news about going to FiTs, there are two consequences for banks. One is: what if they change it again or do something different? The other is that people will delay plans if they think there’s a better tariff coming up.” Henderson talks about these regulatory changes by placing them into two categories – actual or threatened.

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Where the potential for heightened lender concern remains a relative threat, the state of what Henderson refers to as the “UK consultation constipation” problem is very real and an issue that needs addressing. “This is a reference to the seemingly endless series of consultations the UK has,” explains Henderson, “particularly when there is a change to be made. “If you read about a ‘new development’ in the sector, typically it is an initiative that the government then consults on, which means that it will take a year before anyone even begins to draft legislation, so another year to enact. It makes the UK appear very slow to implement initiatives and also to have a very unreliable regulatory environment due to the seemingly constant tinkering. The ‘constipation’ is caused by this uncertainty as developers delay projects and banks delay lending, both awaiting the latest consultation to be enacted and certainty as to what will be the end result.”

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Of course, certain renewable disciplines will prevail over others within the UK market; the obvious two being wind- and water-based technologies. With onshore wind being the most common, Henderson cites the barriers it needs to overcome as an ability to plan efficiently in order keep connecting to the grid and getting over the idea of ‘BANANAs’ – or ‘build absolutely nothing, near anyone, anywhere’ – a mantra the wind sector has become used to over the years. Offshore wind will have its day in the future, but currently proposed projects require ‘deep pockets’ in order to cover the comprehensively more expensive costs; after all, maintaining a turbine 20 Kilometres out at sea isn’t as easy as just popping out in your van. Next on the list, according to Henderson, is the need for projects to prove their technology; investors and lenders aren’t interested in funding conceptual technology that may or may not fail further down the line. What they want is something concrete, tested and

01/09/2010 14:09

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UK FOCUS 49

good to hit the ground running. Combined with this, they’ll also need strong, creditworthy counterparts to enter into business with. Blemished track records, a lack of fuel suppliers and the negation of ROC purchasers are all likely to scare off potential funding and leave a project stuck with nowhere to turn. “All of these factors are easily overcome and all projects should be designed to avoid them. The extent to which they arise is typically because of the particular developer’s needs or aims. For example, a biomass project may have a system that is new and therefore relatively unproven, but the developer believes this is a credible technology and will give a much better result than the other processes. If the developer wants to go this way then fine, but he will have to appreciate that project finance will not be an option – or it will be on very different terms – until the technology is proven. Perhaps the hurdle that is hardest to overcome is that of strong, creditworthy counterparts on fuel supply contracts for the waste to energy and biomass industries, as this is a market still being established. Large corporates with both a balance sheet and a certain, long-term supply of feedstock, do not appear to be present in the market.” “However,” continues Henderson, “a grey area where exceptions can be made is when a project has a specific issue, which can be accommodated. Returning to the biomass example, additional insurance or liquidated damages from the technology provider should be obtained to protect the lenders in case of additional downtime. More equity may need to be included in the capital structure to further protect the lenders for lower plant performance. This flexibility and focusing on specific risks and issues is a strength of project finance and is a discipline that helps the developers as well.”

What has been causing a lack of lending is the delay in getting the projects through development and to a stage where they are ready to be financed

Filling the void Despite this, there continues to be a lack of largescale independent developers and owners of renewable energy projects – the current players are either small scale or large utilities. The larger developers in Europe are still significantly below the utilities in size and are also tending towards the ‘develop and sell’ project model, rather than retaining the ownership of projects. Henderson points to financial investors and funds being able to filling this gap; the taking of projects that are largely developed, building them out, aggregating them and finally selling them to utilities once they have become operational seems to be flavour of the month. This makes financial investors an interesting segment to watch as they may begin to play a much larger role in growing the portfolios of projects. “The tendency towards long-term utility ownership has a number of implications,” affirms Henderson, “the main ones being, in general terms,

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Mark Henderson is responsible for Investec’s power and renewable energy sector investments in Europe. He has over 23 years’ banking experience. Before joining Investec in 2004, Henderson was at Société Générale and Dresdner Kleinwort Benson.

that projects are either having to be larger – to attract the utilities’ interest – or smaller projects need to be capable of being aggregated and consolidated by financial investors or funds before being sold onto utilities. There is a growing secondary market in assets as they change hands from smaller developers and funds to the utilities. Projects are being conservatively structured in order to be attractive, ultimately, to the utilities – for example, using established equipment manufacturers and wind turbine models. This is not a criticism; rather it fits with the project finance lenders’ preference for more bankable structures, project parties and proven technologies. “One particular positive of the utilities’ involvement in the market is in the marine sector. Here, wave and tidal developers are increasingly working in joint venture with utilities, who are investing in the technical R&D of the various equipment manufacturers and their project developments. Given the lack of market pull that these projects have had to cope with, the utilities’ investment should start to create that pull, at least for the projects they are involved with.” As for the foreseeable future, Henderson believes that renewable energy projects will continue to be financed by project finance debt from a very similar universe of banks to the current ones. “This market has worked very effectively since the beginning of renewable energy projects and I don’t see any reason for it to change: the levels of financing are still high, the levels of defaults or problem loans, still very low. Even through the financial crisis. “That said, I would like to see the refinancing of renewable energy projects through the private placement or public bond markets to insurance companies and pension funds as a future evolution. The long-term, reasonably predictable nature of the project revenues, with largely regulated earnings, should be attractive to these investors. In fact, they already do invest large amounts in this sector through the equity markets – so why not the debt markets as well?” concludes Henderson. “This would still leave a role for the project finance banks, but it will allow them to recycle their capital quicker and so better fund the very significant amount of debt required for all countries in the EU to hit their various targets.” It is clear from speaking to Henderson that projects are not being held back due to a lack of bank funding; on the contrary, US$29 billion (€23 billion) was financed in renewable energy projects last year – and while that was down 22 percent from 2008, it’s a far cry from the tight-fisted attitude banks have been painted as having. Ultimately, financing terms should never compensate for a weak project; it may seem against the grain of the inspirational and creative nature of the renewables sector, but when it comes down to the crunch, funding decisions should – and will – be based on the binary. „

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Keeping up appearances With renewable resource levels in the UK one of the highest in the EU, Duncan Dale deconstructs why the country is such a consistently poor performer.

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he UK is a funny old place. It boasts some of the greatest musicians, artists and thinkers on the planet and can lay claim to being the world’s second largest exporter of services, including banking, insurance and stock-broking. But when it comes to renewable energy – considering it has the highest resource levels in the EU – this trend vanishes into thin air. Even more worrying, in terms of the relative growth of normalised economies, the UK comes in at an appalling third from last, behind, amongst others,

Spain – which witnessed four times the growth of the UK in 2008 – and leaders India and China, who stormed the charts with five times the relative growth in comparison. What is going on within the UK market that has allowed this to happen? Well, according to Duncan Dale, Head of UK Origination for Statkraft, we should be looking at the way current incentives are structured and what knock-on effects they offer. “It’s largely down to planning and grid access,” reveals Dale in explaining why the UK is performing so badly. “It’s very difficult to get planning permission to do anything in the UK. With 60 million people on a small island, every man’s home is his castle. If you go to somewhere like Germany, you’ve got far more open spaces and people are individually more enthusiastic about needing to do something about the environment. “Voters are much less switched onto the idea of doing something about the environment in the UK, but the second reason is grid access. The way the grid used to function was by saying that if you wanted to build a big wind farm, you’d have to change the grid. In order to stick in your new power station, you used to have to pay for all this work – you couldn’t connect your power station until the grid had done all the reinforcement around the project.”

Stepping in

It’s very difficult to get planning permission to do anything in the UK. With 60 million people on a small island, every man’s home is his castle

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Fortunately, the government stepped in and forced the National Grid to realise that this was their responsibility and theirs alone. No longer could they ask for projects to fund the necessary grid upgrades in advance, instead having to conform to what the government refer to as ‘connect and manage’ – where projects are connected to the grid before constraints on the system are noted and investments then made retrospectively to remove those constraints. With this in place, the government went back to the National Grid and worked with them to find out what the grid would need to look like in 2020 and work towards that end product – as opposed to taking incremental and inefficient steps with no defined direction – to allow renewable projects to thrive within a sympathetic environment. To do this, they plan to instal huge transmission lines down the length of both the west and east coasts and another, slightly smaller one over in East Anglia, endearingly referred to as “boot straps”. This allowed the grid to accommodate the projected 30,000 MW waiting in place come 2020 for a modest €5.4 billion. However, what this has meant for the market is that Ofgem, the regulatory body for electricity and gas in the UK, is dragging its feet over giving permission in small areas for projects – something Dale believes needs to stop if the UK is serious about achieving its intended targets. “Unfortunately, the whole planning side has gone into a huddle again thanks to the Infrastructure Planning Commission (IPC) and the new government

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wanting to change its reporting structure,” continues Dale. “What’s fun about working at Statkraft is the importance attached to thorough analysis and innovative thinking. When we looked at the number of wind farms that were built in each country,we thought that’s all well and good because the UK has built a few, but we’ve got quite a big economy. What does it look like if you normalise that with the size of economies? I was shocked to see that China and India were doing more relative to the size of their economies than we are.” And with China and India set to lead the world’s future economy, this was an encouraging sign for Dale. “Seeing as China and India have huge amounts of indigenous coal ,everyone was worried about the Kyoto Protocol and standing up to this reduction in carbon and particularly with attorneys in India saying, ‘Look, you guys have done all the polluting in the industrial revolution and it’s our turn to grow now. By the way, we’ve got all this indigenous coal; we’ll be burning that.’ It was quite a scary thing, but instead these guys are embracing the idea of renewables. “China appears to have decided that this is going to be a big competitive advantage in the future for the nation: they’re going to make sure that they build wind farms in the future and have an industrial base in building such farms to export to the rest of the world. This is good because in the end carbon is a global problem and if you can get more carbon reduction per dollar in China than in the UK, then of course you should build it in China and we should make sure that the money flows there. However, I suspect the UK has the strongest wind resource and yet we’re not building it.”

Incentives Ultimately, what Dale is alluding to through raising this carbon problem is the single greatest example of market failure available today. According to him, the way you address this problem is with trading incentives and money. Essentially, the idea would be that the market decides who gets what money, plain and simple; the issue is no longer about eco-warriors and activists – it’s become a major global industry facing up to addressing a major global problem. “What we need to do is build the right incentives so that globally we address this issue of market failure. We should have a lot of wind farms in the UK, more than anywhere else, if it’s cheaper to do it here,” confirms Dale. And while the UK might be slightly more expensive than China or India in the context of civil engineering, one would still expect to see more progression within the market than there has been. “The idea of renewable incentives is all about kick-starting things. Marine current turbines and all these new kinds of technologies could be extremely interesting. They could be lower cost than wind in the

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long term once the technology is sorted out, but we can’t get to that point unless we start building it now and then the next one we build will be cheaper and the next one cheaper still. “What you have to do is give it a kicker. You give it five renewable obligation certificates (ROCs) and then as soon as the cost comes down, in the next banding you give them four ROCs, then three ROCs; make sure to only do this for the new projects that are being built and you’ll manage to gradually build it down. You create that industry by allowing it to kick-start and that’s how you address the market failure.” “A ROC price is a floating market price so it’s more complicated,” explains Dale, “but it should be more economically efficient. What’s happening in Germany is that they’ve had 28,000 MW of wind capacity built, but the load factors on some of those wind farms are very low and it’s not as economically sensible or efficient as in the UK. However, in the UK we’ve got far higher ROC prices than we should do because people haven’t been able to build wind farms due to planning permission and grid problems. Developers are very keen to get them built because they’ll make so much money from it. With feed-in tariffs, you’re likely to get volume delivered more quickly, but it’s less economically efficient.” When it comes down to it, the main problem with the current incentive structures is that they are inescapably exposed to the ridiculously low price of carbon. With the global carbon price currently sitting at around €17 per tonne, Dale doesn’t think the world’s players are taking it seriously. “We’ve got a whole bunch of politicians bleating on about the problem of global warming, but let’s the money. What is happening is that special interest groups in each country are all pleading ‘We’re going to have to close our cement works and move it out to China if you don’t address the carbon problem here.’ “What then happens is politicians in each country accept lower and lower targets. They estimate the caps higher and higher, so the carbon price never ends up at an acceptable level,” he says. While the price of carbon is undoubtedly playing a role in renewable incentives, Dale believes that the “speed of incentives will come down, ultimately, to political will”. With that in mind, what – if anything – can encourage this political will? According to Dale, it comes down to voters who are somewhat apathetic in Great Britain. “Politicians generally respond well to voters and pressure groups trying to persuade other voters that there is an issue that needs to be addressed. There’s a compelling case that climate change is a serious issue for us that needs to be addressed. Whether the British public will back it or not in our generation I’m not so sure, but I see my children being educated already about recycling and climate change, so the next generation of British voters will hopefully want to see more being done.”

What we need to do is build the right incentives so that globally we address this issue of market failure. We should have a lot of wind farms in the UK, more than anywhere else, if it’s cheaper to do it here

Duncan Dale was appointed by Statkraft in 2009 to develop its trading and origination business in the UK. Having previously worked on a series of energy start-up companies and brokered energy deals across Europe, Dale moved to Statkraft after spending the majority of his career with Powergen and TXU.

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Pick up the pace With the UK needing to act fast in order to keep up with its projected renewable goals, Power & Energy has highlighted a few keys to ignition.

Look good: Project finance will obviously be cherry-picking the safest and quickest ROI projects to invest in – so don’t give them a reason to shy away and move onto your competitors elsewhere in the EU. Accelerate growth: With the UK needing to reach extremely high targets by 2030, not 2020 as originally proposed, it needs to step up a gear and ignite the industry in order to keep pace with expectations. Solid to liquid: With the onshore wind market becoming saturated in areas such as Germany, offshore wind undoubtedly has the greatest potential behind it. All that the UK needs to do in order to reap its benefits is lower its costs and correct its infrastructure implementation. It’s as simple as that. Understand: That price volatility comes with the territory. Presuming otherwise could leave projects and investors looking rather embarrassed – but more importantly, could see them losing much needed funds and market share.

However, despite the call for fairer carbon pricing to encourage more efficient incentive structures, Dale doesn’t think the incentives themselves should change as the market moves down the line; conversely, he thinks constantly changing them is dangerous, stating that a period of certainty would need to prevail to allow these things to happen. “The planning side is semi-addressed by the IPC. There needs to be more incentives at a local level for people to accept wind farms. The grid access is being addressed and there’s money there. The whole issue of connecting the infrastructure up is also there and the value chain for offshore wind is developing. If we make big changes then it’s going to frighten people off. We need to allow the market to respond and deliver; these are big changes and we have to be patient to allow them to deliver.” One area Dale would change in the UK power market – and not so much to do with renewable energy as conventional energy – is to make it more liquid, meaning an ability to sell power very easily, both power delivered tomorrow and power delivered in three to four years’ time. “In the power market,” explains Dale, “if you buy power, you have to give a little bit of extra money to the person that you buy it for and when you sell it back again you sell it back for less than it’s worth – known as a ‘bid offer spread’. “If a market is not liquid and you do any further trading out it costs you a lot of money. What we do as an independent in the market is to try and get people long-term fixed prices, but to do that we have to give up money to manage the risk within acceptable limits. The people that can effectively control market liquidity

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India and China have 5 times the growth of renewables compared to the UK

The current carbon price stands at €17 per tonnes

– are the Big Six: E.ON, RWE, EDF, Centrica, Scottish Power, and Scottish and Southern Energy. Sometimes we provide our customers ‘options’, for example if somebody wants to make sure the price never falls below a certain level, that’s a floor option. To do that, we have to keep buying and selling power as prices move to manage the risk. “Every time we do that, we lose money. In order for us to be able to offer a good price to people as an independent, we need the liquid market to do that, which we can’t do because the Big Six control the market. They don’t need to trade into the market because they generate all they need to sell to their retail customers. The tighter those markets and ‘bid offer spreads’ are, the more liquid the market and the easier it is for us to give people a good deal.” What Dale proposes to help the situation and everyone in both the conventional and renewable power markets is to make the Big Six auction power on a regular basis. These auctions would be from the short term prompt market to the longer term forwards contracts. In doing so liquidity will be created as more parties begin to enter and buy power, sell power and get a virtuous circle going. It is only then that the market can start to help itself become more liquid. It would also give a good capacity signal to tell people when to build new plant. This could all be quickly sorted in few months and much simpler and less risky than massive market reforms proposed by OFGEM in Project Discovery. Once it does, the UK could finally witness its own growth on the renewables stage – and live up to the standards it has come to be known so well by. „

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ASK THE EXPERT

STEPS TOWARD A SUSTAINABLE FUTURE Now is the time for a renewed focus on district heating and cooling technology for a more sustainable future, says Richard Zambuni

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he transformation of our global economy has led to an increased focus on improving our impact on the environment. Many energy providers now have a renewed determination to reduce greenhouse gases, reduce their dependency on fossil fuels and provide reliable and sustainable energy to their consumers. Utilities are currently reassessing their existing infrastructure – often pressured by public opinion – and they are searching for ways to deploy more sustainable energy delivery systems. Much of the world’s energy demands are met using business practices that are unsustainable in the longer term. Many utilities have begun to develop programmes to reduce their carbon emissions. However, larger-scale programmes are now needed to successfully reduce their impact on the environment. The world is now recovering from the economic downturn, and addressing these unsustainable business models becomes possible as investment programmes provide an opportunity to re-evaluate, replace and re-engineer our ageing energy infrastructure. One of the areas that show the greatest promise in terms of energy efficiency is district heating and cooling. District heating and district cooling. Today, many societies waste substantial amounts of energy. More than half of energy generated is lost on its way to the customer. Unlike traditional forms of electricity generation, which produce tremendous waste in the form of excess heat, district heating systems recycle surplus heat. The source of recycled heat can include electricity production through co-generation, refi ning and other energy-intensive industrial processes. Furthermore, district heating can make use of many forms of renewable energy sources such as biomass, geothermal, and solar thermal power. District heating is a convenient and sustainable way of providing space heating for residential buildings and workplaces. It is also an efficient way to deliver hot water in urban and suburban areas. District cooling is a sustainable alternative to conventional electricity or gas-driven air conditioning systems. Both district heating and district cooling use existing local resources that otherwise would be wasted or difficult to use. Common resources used in district cooling and heating include: natural cooling from sea water, lakes and rivers; the conversion of surplus heat from industrial processes; combined heat and power (CHP) generation; and waste incineration. Movement towards a more sustainable energy source. District heating and cooling is a relatively mature tech-

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District heating offers a more sustainable approach to the provision of energy to residential and business users.

Currently Global Marketing Director for Bentley Systems, Richard Zambuni has spent all of his career in marketing and the last 15 years in hi-tech marketing, living and working in the US and Europe. He has covered a broad range of technology from network hardware, to telecommunications inventory and provisioning software, to geospatial and infrastructure engineering software. For more information, visit: www.bentley. com/DistrictHeating

nology used throughout the world, but adoption of this technology has been slower than one might expect. When constructing or modifying electric power plants, it is still not a given that they will be capable of co-generating electricity and heat. In addition to the environmental benefits, district heating based energy networks are flexible, reliable and efficient. By modifying the source of heat based upon market prices (wood chips, solar, bio-fuel, etc.) operators are able to manage the system very cost-effectively. Capital costs are also relatively low, and even small-scale CHP systems are viable economically. A complete solution for designing and managing district heating and cooling infrastructure. Bentley is one of the few infrastructure soft ware vendors that offer products specifically designed for managing the complete lifecycle of district heating and cooling network infrastructure. Bentley’s solution for district heating and cooling includes interoperable products for network design, analysis, documentation and operations. Th is is a solution that has been adopted by many progressive utilities including Kelag Wärme, E.ON Hanse, Essent Warmte and Fernwärme Wien. The foundation of this solution is a GIS-based asset and facilities management platform (Bentley sisNET) and support for the thermal-hydraulic calculations needed to optimise the network (Bentley sisHYD). Now is the time for renewed interest in district heating and cooling infrastructure. District heating and cooling technologies offer tremendous near-term opportunities to reduce the waste of scarce energy resources. Bentley will be in the vanguard of providing a comprehensive solution for managing the lifecycle of this class of infrastructure. „

01/09/2010 14:04

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25/08/2010 11:31

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Lamination days and trade shows in Shanghai and Stuttgart reveal: demand is increasing At the photovoltaic fairs in China and Germany, Robert Bürkle GmbH presented its extended product portfolio. At the same time, its system manufacturer showed the first single-opening laminator – e.a.sy-Lam – at their Shanghai factory; it had been manufactured in China using German engineering. Moreover, Bürkle had used it to successfully enter the US market.

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hile masses of visitors streamed through the fair halls at the international PV trade show, SNEC, more than 50 experts benefited from the opportunity to have themselves driven to the nearby Bürkle site in Shanghai. There, they saw a new single-opening laminator during a live demonstration. With its fi rst line produced in Asia with German technology, Bürkle aims to establish itself versus local laminator suppliers and participate in the growth of the PV industry in China. Company manager Hans Joachim Bender sees the situation in Asia as a positive one. “We assume that the Chinese photovoltaics market will show enormous growth in the future. As such, we have expanded our location in Shanghai with an additional assembly site, complete with 3000 m2 of floor space,” he said. In addition, the engineer’s evaluation was encouraged by the positive feedback from visitors at Bürkle’s Lamination Days, some of whom were very impressed by the German-Chinese line and placed concrete enquiries with the machine supplier in the Swabian Freudenstadt. The Photon congress and exhibition that took place in Stuttgart at the end of April also showed the growing demand for Bürkle lines in the PV sector. More than 60 in-

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terested parties visited the Bürkle booth to learn about the novel backend concept for crystalline modules. During the fair, Bürkle was pleased to receive two orders for its multiopening laminator, Ypsator. With an additional order from the US for an Ypsator Lamination Line, the system supplier also managed to break through into the future market of America. Amongst other reasons, the high capacity of the machine having a small footprint was crucial. After a year of crisis in 2009 and with a decrease in sales of around one-third, Bürkle expects substantial growth this year. A group of companies with factories in Freudenstadt, Mastholte, Paderborn, Shanghai and Hangzhou – as well as sales and service companies in the US, Hong Kong, Poland, Slovakia, Taiwan and Brazil – has plans to grow by 30 percent. Being a pioneer in the development and manufacturing of multi-opening laminators, Bürkle is the top machine manufacturer in the solar market with its Ypsator brand. Indeed, companies such as Solarwatt, Q-Cells, Bosch, Day4Energy, Scheuten Solar and others have all ordered more than 50 single-opening and multi-opening laminators since the market launch at the end of 2007. Currently, more than 680 staff members are employed worldwide with Bürkle. „

André Harter joined Robert Bürkle GmbH in 2001. After an industrial manager apprenticeship, Harter studied International Business Administration at the Berufsakademie in VillingenSchwenningen. Since September 2007 he has been responsible for the marketing of all the market segments Bürkle serves (woodworking, plastic card, multilayer and the photovoltaic industry).

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RENEWABLES

power

The rise of solar

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With the European solar power market gaining momentum year upon year, Ingmar Wilhelm offers up his expertise and predictions for the current and future states of the industry.

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respected author, who shall remain nameless for obvious reasons, once asked at a press conference: “If we use solar power, wont the sun burn out?” And while we can smile at his outlook in the comfort of retrospect, his question does much to offer an insight into the huge accelerations that solar power – and renewables in general – have had in the past few decades. Where those in the know once controlled scientific and economic circles, modern day understanding has reached out and encapsulated the masses, forced into knowledge by our growing dependence on fossil fuels and the realisation that a drastic change in energy sources is needed. Renewable energy has become our beacon of hope for the future – and it would appear that solar power has a fi rm grasp on the torch. Making sure it stays that way, Ingmar Wilhelm, Executive Vice President of Enel Green Power and recently appointed President of the European Photovoltaic Industry Association (EPIA), has been working relentlessly to push the boundaries of solar and photovoltaic (PV) tech-

nologies for the European community. What is needed is an all-seeing eye over the industry to ascertain exactly where we are and where we need to go in the near future. Fortunately, Wilhelm can provide just that. “Propelled by its own technological progress,” explains Wilhelm, “but also the uncertainty over the future availability and cost of fossil fuels, increased environmental awareness and lasting political support, photovoltaic power has grown at unprecedented rates over the past few years. At the end of 2009, it accounted for an installed capacity base of over 22,000 MW worldwide. “The growth momentum also remains very strong in 2010. For the fi rst time ever, an additional capacity of over 10,000 MW stemming from new photovoltaic installations will be reached. Th is development will be made up of important additions in an increasing number of countries: Germany will certainly be the frontrunner, with Italy most probably being second in terms of volumes. Other markets such as Japan, the US, France, Greece, the Czech Republic, China and Canada will follow.” Indeed, with a cumulative installed capacity of almost 10 GW, including 3.8 GW installed in 2009, Germany

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remains the world’s largest PV market . Notwithstanding the recently announced feed-in-tariff (FiT) cuts, the German market is expected to grow by some 6000 to 7000 MW during 2010. New cuts in 2011 will come, but the industry’s cost competitiveness will presumably also be able to cope with a reasonable reduction next year. Moving perspective towards the mid-term, Italy glistens with promise, with an additional capacity of around 730 MW in 2009 – and the new Conto Energia, or energy bill, on the remuneration of photovoltaic power – will drum up further momentum for the promising Italian market. Growth in the years from 2010 to 2013 is expected to be above 1000 MW each year – with forecasts suggesting it may reach over 1500MW in both 2010 and 2011. Perhaps one of the more surprising successes of the last year, the Czech Republic showed important growth, with 411 MW installed. However, it’s not all sunshine and smiles, as their overly generous support schemes are more than likely to shrink the market in 2011 after another year of strong growth in 2010. Bringing up the rear, Belgium made its fi rst ever entry into the top 10 markets with 292 MW installed in 2009, followed by France with 185 MW and a further 100 MW installed but not yet connected to the grid – which clearly demonstrates the importance of solving grid connection issues in order to allow the market to develop. Finally, Greece, Portugal and the UK are all showing interesting potential for growth, both this year and looking towards the future.

Different stages However, despite this impressive growth, PV technology is still in the early stages of large-scale deployment. The EPIA predicts that 2010 will be witness to a global cumulative installed PV capacity growth of 40 percent, while annual growth is expected to increase by more than 50 percent. “From this,” continues Wilhelm, “we can derive the outstanding potential for further cost reduction in the future, which will make photovoltaic power competitive with traditional energy sources in several countries already in this decade. The future growth rates of photovoltaic energy will probably be the highest among all renewable sources.” With that in mind, we could assume that PV technologies are set to take the continent by storm. While there may be some truth to that assumption, it needs to be placed in the wider scheme of the renewables industry as a whole in order to appreciate where the PV industry currently resides. “All renewable energies fit the same objective of sustainability,” affi rms Wilhelm. “Therefore, the more the better, at the lowest cost possible. Intelligently developed energy systems will rely on a mix of sources. Th is diversification increases competition as well as safety of supplies, and at the same time reduces risks such as availability of technologies, primary energy and commodities in general. “All cited renewable technologies can, without any problem, be developed in parallel. However, there are also

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some differences, first and foremost in terms of technological maturity. Hydroelectric run-of-river, geothermal and onshore wind power can be considered mature technologies, with still some room for increased efficiency, but the rates of improvement are shrinking. On the other side, technologies like tidal power and wave power are still in their technological infancy and will certainly see major progress in terms of design, installation and cost in the future. “On this maturity curve, between hydro, geothermal, onshore wind on the one hand and wave energy on the other there is photovoltaic power. Th is renewable source has left its infancy and is now ramping up in all dimensions: supply of materials, production facilities, installed capacity and investment in new technologies. The current efficiency gains and foreseeable technological improvements stirred by this combination are the factors that make photovoltaic power so attractive. “The other major difference between the renewable sources mentioned lies in the production profi le and the load factor. The highest load factors will be reached with geothermal, hydroelectric run-of-river and wave power, followed by wind and photovoltaics. However, looking at the value of the energy produced, photovoltaics will be in pole position thanks to a generation profi le obviously concentrated in highly valued peak hours and pretty predictable at the same time.” As a lasting point, Wilhelm cites the ability of any given energy source to adapt to its relative environment, which translates into the biggest potential impact in the race for renewable success. Whereas wind and wave projects are most commonly implemented in large units, photovoltaic energy can cover all segments – from larger plants down to medium and small-scale rooftop applications for residential use. Photovoltaic power can integrate seamlessly with urban environments, always close to where the consumption is: a trait that remains unique among all other major renewable sources. Th is capacity to adapt to almost any situation thrown at it has undoubtedly helped to rocket PV to the top of the residential charts, allowing consumers to run their appliances while simultaneously soothing their eco-morals. To a certain extent, that is what it comes down to: communities must have the opportunity to embrace change in a positive way – looking at PV as something they can personally encourage as opposed to something that is forced upon them. And with EPIA data showing that Europe used over 40,000 MW more total renewable power than America and Asia in 2008, it would seem that Europe is on its way to a winning formula in terms of renewable adoption.

“The EPIA predicts that 2010 will be witness to a global cumulative installed PV capacity growth of 40 percent”

Secret of success “I see three reasons for this,” outlines Wilhelm. “First of all, the gap between high consumption and primary energy reserves is simply too wide and Europe’s energy dependence too strong. Secondly, Europe has understood that only innovative technologies and the highest efficiency possible can pave the way out of the dilemma, with the positive effect of creating new industries here in the

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‘old continent’. On top of this, many European citizens, associations and parties are aware of the environmental impact of fossil fuels and want to make their direct contribution to a more sustainable world energy-wise. “In fact, a large potential of natural resources in hydro, wind, solar, geothermal and biomass energy can be found in Europe. Hydro and geothermal resources have been developed over many decades, whereas wind, solar and biomass have been developed in the last 20 years. As Europe started this development earlier than others, our shares of global power generation from renewables are always relatively high.” The next question running through the minds of EPIA supporters is where PV implementation will have the greatest effect. Is there an increasing amount of interest from small and mediums-sized households and investors, or will big money take over and concentrate the development on very large solar farms? According to Wilhelm, the share of distributed PV, which today already accounts for the majority of new capacity, is set to increase even further in the future, due to the technology’s versatility and the comparable cost of traditional supply being the highest at distribution and not at wholesale level where big solar farms feed in.

mirrors used to capture the sun’s rays. “The plant is based on highly innovative technology developed together with the Italian Governmental Agency for Energy Research (ENEA),” confirms Wilhelm, “with whom Enel signed a cooperation agreement back in March 2007. The aim of the project is to provide a prototype for this kind of integration between traditional and renewable energy production and to address the opportunities of managing generation profi les through imbedded storage facilities. “The new CSP plant will be totally integrated with the existing thermodynamic cycle. The additional generation capacity will be around 5MW – able to meet the energy demand of around 5000 households – representing an annual saving of 2100 tonnes of oil equivalent and reducing carbon dioxide emissions by about 3250 tonnes.” As if having the world’s fi rst combined cycle and CSP power plant and a team of over 550 PV entrepreneurs under your belt weren’t enough, Enel Green Power can now lay claim to directly support EPIA through its presidential function. Having ascended the ranks, Wilhelm was elected in March 2010 to “represent the strong interest within the PV industry to move further down the value chain to electricity generation”.

“Photovoltaic energy is on the way to becoming a significant source of supply in many regional and national energy systems as well as at European level”

Passion and vision

There are three reasons for this. First of all, it comes down to higher cost competitiveness reached at the distributed generation level. Secondly, increasing land use restrictions reduce the opportunities for larger plants and limit the amount of large scale projects. Finally, with grid integration being much easier and less costly at lower voltage levels, it’s logical for distributed PV to ensure it involves itself more. With a higher number of investors, from small and medium-sized enterprises to families, this attractive game of distributed PV power could create direct participation opportunities for all concerned. “In Italy,” continues Wilhelm, “the retail subsidiary of Enel Green Power – Enel.si – is pursuing these opportunities with a franchise team of over 550 photovoltaic entrepreneurs throughout Italy who have already completed small and medium-scale PV units with a total capacity exceeding 150 MW. Nevertheless, Enel Green Power is also investing into larger-scale solar farms, in line with regional power consumption needs, selected sites and territorial acceptance.” Not one to rest on its laurels, Enel also inaugurated the world’s fi rst combined-cycle gas and concentrated solar power (CSP) plant on July 14, 2010. Known as the Archimede Project, it is the only type of its kind to utilise molten salt for heat transfer and storage, which is then processed through a conventional power plant. Rather fittingly, it is named after the inventor’s huge parabolic

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Ingmar Wilhelm

In listening to Wilhelm, it is easy to identify his passion and motivation to propel PV and solar power to the level he, and countless others, feel it should be at. “The EPIA represents all actors along the entire PV value chain in Europe,” he explains. “We are supporting the sustainability of existing markets as well as driving the development of emerging countries. We are also eager to promote investment in the PV industry in Europe. In particular, we are dedicating an increasing amount of time and effort to identifying and developing new business enablers and models such a smart grids, new storage facilities, e-mobility, integrated PV supply solutions and segment-specific building-integrated PV applications. There really is a lot to do.” Adel El Gammal, Secretary General of EPIA, said with regard to Wilhelm’s appointment: “The accession of Enel Green Power to the presidency of EPIA marks the evolution of the industry’s focus from technology and production towards electricity generation.” Combined with this, the EPIA released its ‘SET for 2020’ study, which aimed to establish a roadmap for its goal to make PV a mainstream source of electricity generation in the next 10 years. With so much already on his plate, Wilhelm seems to exude calmness on the road he will need to travel – and he knows where he is going. “My specific contribution to these goals will stem from the utility background that my company and I can offer to the photovoltaic industry. Photovoltaic energy is on the way to becoming a significant source of supply in many regional and national energy systems as well as at European level. Integrating this renewable energy source intelligently into the supply side requires a deep understanding of how major energy systems work, how they can be developed and optimised. Th is will be the focus of our contribution.” „

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ROUNDTABLE

Power & Energy asks four experts for their views on where wind turbine technology is heading.

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As wind-generated energy moves more into the mainstream, how has the understanding of wind turbine efficiency evolved? Rod Corbett. Purely from a technical perspective, there has been little change in the understanding of joint integrity and efficiencies. There is, however, a growing awareness of the potential of adopting a cleverer approach to design and build in other industries. A parallel and directly relevant learning curve on how a technology-driven approach to joint integrity can increase efficiencies and reduce maintenance costs can be found in offshore production platform pedestal cranes, where tension control technology is now widely used on slewing bearings and has made a significant difference. The bolted joints on the crane are virtually identical to those critical joints found on the wind turbine. Exactly the same benefits of assured reliability and reduced maintenance costs transfer to wind turbines. Christian Kjaer. Wind energy has certainly moved into the mainstream as a power generating technology. The European market is €13 billion annually out of a global market of some €50 billion. For the past two years, the EU has installed more wind energy capacity than any other power generating technology. In 2009, 39 percent (10.2 GW) of all new power capacity coming online was wind energy, followed by gas (25 percent), solar PV (17 percent) and coal (nine percent). In total, 62 percent of all new capacity was from renewables. The US also installed more wind energy than any other technology in 2009. Wind power contributes about five percent to the EU electricity demand and increases its share by some 0.5 percentage-points per year. It is already the largest technology in terms of investments, economic activity and job creation. From 2002 to 2007, the wind energy sector created more than 33 new jobs in Europe every day of the year. Over the past two to three decades, the cost of generating wind power has fallen by 80 percent, to a level where it is fully competitive with new coal power or gas power plants, and significantly cheaper than nuclear energy, in most European countries at the carbon and fuel prices. About half of the reduction in cost can be contributed to economies of scale in manufacturing and half of the cost reductions to improved efficiency, resulting from gradual improvements in the technology. Mark Henderson. Banks, and more importantly their credit committees, have become more familiar with the turbine market and the issues that arise from time to time. They have largely adhered to the traditional project fi nance requirement that turbines have to be ‘proven’ and supplied by credible – and creditworthy – companies.

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Almost perversely, some sponsors have been more willing than banks to try and push the limits of what is acceptable under this ‘proven’ criteria, which is fi ne if the projects in question are to be fi nanced by equity, but not if the projects are also to be debt financed. Th is was also driven a few years ago by the under-capacity of the turbine market, although by and large banks held to their principles, and now that there appears to be more equilibrium in the supply/demand of turbines, the more conservative approach of banks does not tend to be pushed as much. One area where this may still be an issue is for offshore turbines, where new models are being developed with the resultant question marks over their potential to perform. Marc Mühlenbach. Wind turbine efficiency has evolved significantly, both in terms of the evolution of conventional turbine designs to capture and transform wind into electricity and in terms of evolving turbine design itself. As wind-generated energy has moved into the mainstream, it has also meant that an increasing number of the more generous sites have been tapped and greater turbine efficiency has become increasingly important as lower class sites require more efficient machines. Several manufacturers, particularly those with a German home market, have recently rolled out ‘next generation’ turbine models to be able to develop projects at lower wind speed sites at attractive yields. There is a good amount of pressure on these manufacturers to develop machines that have greater hub heights and rotor diameters, yet are lighter and remain cost effective. Simultaneously, there has been a recent push, particularly in offshore, towards more efficient direct drive technology, challenging the current balance between geared and gearless designs. Gearless designs are considered more efficient as these include fewer moving parts, and so require less maintenance. Traditionally, these machines have been costlier, however, due to size and weight issues in particular, although we could be starting to see a change in that. How much difference do factors such as adequate lubrication, vibration isolation and potential fatigue failure from incorrectly bolted joints make to the efficient operation of turbines over a sustained period of time? RC. Wind turbines are subject to complex loading. The environment naturally produces extremes and the exposure to the elements adds yet another factor into the equation. Fatigue and vibration are common enemies and incorrect bolt tightening ultimately will lead to failure and costly downtime. The scale of such failures ranges from lost generation through to catastrophic structural failure. Being able to meet the correct design objectives and understanding how to achieve and maintain the correct tension across a bolted joint are essential factors if reliability and greater efficiency are to be met. Significant savings can be made in maintenance regimes where reliability is built in at the outset. The end result is minimum operation risk and lowest life cost for the power plant.

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CK. European wind farms are extremely reliable and operate with availabilities above 97 percent. In the last 25 years, turbines have increased in size by a factor of 300 (from 20 kW to 6,000 kW and beyond). At the same time, the engineering base and computational tools have developed to match machine size and volume. The wind turbine manufacturers are building the world’s largest rotating structures. The rotor diameter of the largest turbines is 50 percent longer than the wingspan of the world’s largest aircraft – Airbus A380. Th is is a remarkable story, but it is far from fi nished: many technical challenges remain and even more spectacular achievements will follow. Incorrectly bolted joints are not a problem in wind turbine manufacturing. Lubrication and vibration isolation are both important elements but are not the main determinants of the technical and economic efficiency of wind turbines. What are the different factors affecting the efficiency of offshore versus onshore wind turbines? RC. Hostile environments need and demand a different approach. Corrosion is just one factor added into the mix alongside increased and even more complex loading. However, it is rare to see these realities taken fully into consideration. When something goes wrong in an offshore environment, the consequences and the resultant costs are far greater. Better design and build can increase reliability, particularly when it comes to applying a technology-driven approach to critical bolted joints. Operational risk is far greater offshore, so assured operational reliability is even more valuable. CK. Offshore wind technology and practice has come a long way in a short time, but there is clearly much development still to be done. Although the fundamentals of the technology are the same onshore and offshore, it is clear that offshore wind technology is likely to diverge further from onshore technology. Methods of installation and operation are already very different from onshore wind generation, with great attention being given to reliability and access. The dilemma for the designer is how best to trade the cost of minimising maintenance by increasing reliability – often at added cost in redundant systems or greater design margins – against the cost systems for facilitating and increasing maintenance capability. Access is critical as lost production is often the greatest cost penalty of a wind turbine fault. For that reason much attention is given to access.

Rod Corbett is Managing Director, James Walker RotaBolt. Corbett’s fastener experience began in automotive, aerospace and defence applications including work on Tornado, Shuttle and Formula One engines. At James Walker RotaBolt, he has been at the forefront of promoting tension control as essential in assuring bolted joint integrity across energy, petrochemicals, transport, defence and civil engineering.

Christian Kjaer was appointed Chief Executive Officer of EWEA in March 2006. He had previously held the post of Policy Director for EWEA. He drafts EWEA’s direction, vision and long-term strategy in collaboration with the President and the Executive Committee. He represents the association in external forums, engages actively with international institutions, key stakeholders and NGOs, the members of EWEA and the media.

MH. I cannot comment on the precise factors, but as a lender we will be keen to see that turbines have a successful operating record in the offshore environment. Given the additional degradation that the marine environment can cause on turbines, this is a factor which lenders should be particularly keen to understand from the operational track record of the turbines. Another key area that lenders should include in their due diligence is the reliability of the turbines and their components. In the offshore environment, any down time

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of the turbines can be very expensive due to the additional delays that weather windows can create – certainly compared to onshore wind turbines – and the cost in terms of lost revenue and operation and maintenance expense will be that much higher. MM. Offshore turbines have to prove durable, above all. Offshore turbines face corrosion issues and have to withstand greater wind speeds. Therefore, reduced maintenance is a key factor in cost efficiency and not an easy problem to overcome, as we have seen on the back of the experience by more than one manufacturer. Both onshore and offshore face the challenge of reducing component weight and logistical complexity for transport and installation. In addition, the increasing scale of offshore projects will put a great deal of focus on the efficiency of the performance of offshore turbines; when considering multi-gigawatt Round 3 developments, small differences in efficiency will be considerably amplified. How do you see innovative engineering within the context of wind turbine manufacture developing over the next decade? RC. It is a fact that the use of tension control technology can result in wind turbine designs that require up to 50 percent fewer bolts on critical joints for the same service rating. Th is significantly saves money in production build, installation and maintenance – less bolts, less drilling, less tightening, less checking. Th is innovation alone has the potential to significantly impact the future of wind turbine manufacture, as well as maintenance regimes. Reliable, maintenance-free bolted joints will become the ‘norm’ if the science is applied. CK. Technology development in the largest unit sizes of conventional wind turbines has been particularly stimulated by the emerging offshore market, and many of the most innovative wind energy systems proposed in recent years target that market. The wind energy sector is also borrow-

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ing much experience and expertise from the offshore oil and gas sector. Some of these systems may be the way of the future; some will undoubtedly disappear from the scene. At the very least, they illustrate the huge stimulus and demand for creative engineering that has arisen from the establishment of wind energy technology in the power industry. MH. Whilst there appears to be another push being made towards increasing the MW capacity of wind turbines – particularly in the offshore industry – I am not convinced that this is what developers, investors and lenders really want. Instead, they are generally satisfied with the current levels of capacity and would prefer that turbine manufacturers focused on making the turbines more efficient and more reliable. This not only saves them a degree of costs but generates more revenue in terms of return per €/MW of capacity. A key area of engineering which would be a welcome development over the next decade is the potential ability to make gearboxes more reliable. Therefore, having more turbines which can be ‘gearless’ would be a welcome development if this cannot be achieved, or as a wider alternative. Finally, given the greater lengths of turbine blades, will we see a growing use of lighter, stronger blades that are made out of carbon fibre? Currently this is cost-prohibitive, but will this be the case by the end of the decade? MM. The challenge posed by direct drive turbines will move increasingly to the fore in the next decade, both onshore and offshore. Aside from turbine vendors continuing to improve their proven designs, there are also several start-up initiatives out there to increase the efficiency of existing turbine technology, be it laser-monitored blade rotation or gas/wind hybrid technology solutions to reduce intermittency, although the commercial deployment of these solutions is obviously not guaranteed. Beyond concerns of wind turbine efficiency, the issue of wind power availability will be helped considerably by affordable wind energy storage solutions. „

Mark Henderson is responsible for Investec’s power and renewable energy sector investments in Europe. He has over 23 years’ banking experience. Before joining Investec in 2004, Henderson was at Société Générale and Dresdner Kleinwort Benson.

Marc Mühlenbach is is an analyst in Emerging Energy Research’s Europe Wind Energy Advisory Group, providing market research and analysis on the European wind energy market environments.

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It’s tough at the top Power & Energy talks to Johnny Watson about standards and progressions in wind energy safety protocol. What are the common concerns that affect height safety in wind turbines? Johnny Watson. The obvious but much overlooked answer is to avoid the risk of falls from height altogether. Where it is impossible to bring work down to ground level and some element of climbing or ascent is involved, the main concerns are fall prevention, rescue, evacuation, climb assistance and simplicity of use. The confi ned space and tall structure of a wind turbine create a unique set of hazards for accessing and evacuating safely. Where lifts are fitted, the ability to evacuate casualties is often compromised by the presence of the lift. Additionally, the height of the structure means that lowering whilst monitoring a casualty is often difficult and ladder climbing causes long-term occupational health issues where climb assist systems are not employed. Rescue is a number one concern. If an accident does occur or a medical emergency is encountered, how can a casualty be quickly and safely evacuated? Whatever system is employed to keep people safe at height, it should be as simple as possible to operate. Complex systems add to the operator risk, and even small falls and slips can result in significant injuries. By preventing a fall rather than arresting it, this type of injury can be reduced. How do you provide cost-effective safety standards to the wind energy industry? JW. At Limpet Technology, we do this by employing a best-of-breed system that incorporates the fall prevention, simple mode of operation, rescue and evacuation functionality mentioned above, all in a single intuitive device. The Limpet is the world’s first height safety system to seamlessly combine such functionality in this way. What are the differing challenges between onshore and offshore wind farm safety? JW. The major difference is the relative remoteness of an off shore turbine. In both onshore and off shore wind there is a need for best possible safety practices, but in the off shore environment it is even more critical that systems allow users to be wholly self-sufficient if necessary and carry out effective rescues without external assistance. Due to the dangerous nature of delivering personnel to the off shore site, it is imperative that the installed equipment is 100 percent reliable. When personnel arrive they need to be able to depend on the safety equipment working.

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One of the most hazardous parts of offshore turbine maintenance is the transfer between boat and turbine. The Limpet makes this much safer. Being able to monitor personnel and safety systems remotely through a turbine’s SCADA system is a real safety benefit. Only the Limpet offers this functionality.   How is wind energy expanding and what is needed to cope with the increasing demand? JW. Predictions range between 75,000 and 100,000 new turbines per year between now and 2020 worldwide. The biggest hurdle in coping with this demand will be training personnel capable of installing and maintaining this. Th is will be dictated chiefly by the industry’s ability to develop and implement safety systems to deliver these people to their workplaces and relieve the strains and occupational health hazards that they will be subjected to. „   Johnny Watson is Managing Director of Limpet Technology and manufacturer of the Limpet, the world’s first integrated height safety system. For more information, visit www.limpettechnology.com.

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WHICH WAY NOW Wind power is a mature renewable energy source in many European countries, but as other parts of the world start to catch up, where is the industry headed? Power & Energy talks to Marc Mühlenbach.

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ike many other industries, the European wind energy market is currently in a period of recovery from the fi nancial crisis, yet there is still potential for growth. According to the European Wind Energy Association (EWEA), Europe’s offshore wind potential is capable of powering the continent seven times over. EWEA says there are currently 830 wind turbines installed and grid connected in Europe, totalling 2063 MW in 39 wind farms in nine countries. In 2009, 201 wind turbines were installed and grid connected totalling 584 MW, up 56 percent from the previous year. During 2010, 1000 MW is expected to be installed, representing 71 percent market growth compared to 2009. Currently there are 16 offshore wind farms under construction, totalling over 3500 MW and a further 52 wind farms have been fully consented, totalling more than 16,000 MW. It’s obvious there is a lot of activity in the European

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There are currently 830 wind turbines installed and grid connected in Europe

39 wind farms in nine European countries generate 2063 MW of power

wind sector, underlining the continent’s traditional role as a global leader in this area. Th is reputation for leadership has been built up in part thanks to the depth of experience enjoyed by the industry’s key players. As analyst Marc Mühlenbach of Emerging Energy Research points out, “We have a diverse group of qualified players in Europe, including very experienced smaller developers that have been in the industry since the beginning, as well as utility players that have acquired experience since wind has become more of a mainstream energy form. We also have experience with IPPs – independent power producers – which can be industrial players or construction players or even fi nancial players. “There is a broader scope of experienced players than ever before. We might have had utilities involved in wind even five or 10 years ago, but now they’ve gained more experience as wind has become a more credible source of generation for electricity.”

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Th is question of credibility is an important one. Although the installation and use of wind power has been growing steadily throughout Europe in the past decade, the path to success has not been without obstacles. One of these has been the availability of relatively inexpensive – at least in the short term – traditional fuel sources. “Let’s not forget that other generation sources have a lot of potential as well and have been a lot cheaper traditionally,” Mühlenbach says. “A combination of factors has allowed wind to reach its current importance. For example, if we had cheap gas, but then gas prices rise, that will start ringing alarm bells that having a cheap source of energy isn’t all that matters. “At the same time, we haven’t had the political incentives to the degree that we now have across the region up until recently. It’s been a very scattered initiative in Denmark and then in Germany and in Spain as well. Before it became EU policy, it was a matter of time in bringing costs down. Then there’s the issue of the technology becoming viable and proven.” In Mühlenbach’s view, considering these challenges, the growth shown by the wind sector in the past decade has been pretty good. “We could say, ‘Why hasn’t more been done?’ but we could just as viably say, ‘Look at the rate of development of wind over the last 10 years,’ and the rate that it’s reached in this time is actually quite astounding. “So while yes, maybe more could have been done, on the other hand if you look at the limits of what it was thought a turbine would be able to produce 10 years ago and what it’s able to produce now – which has exceeded that limit 10-fold – it’s pretty exceptional the rate at which the industry has developed.”

OFFSHORE POTENTIAL IHS Emerging Energy predicts the following as the status of the offshore wind market:

In 2020: The installed offshore base in Europe will be more than 39 GW Offshore will account for more than

17% of total installed wind capacity Offshore will account for 35.8% of new MW additions

By 2025: Offshore will account for more than 43% of new MW additions

Strength There are certain countries within Europe that are stronger in wind than others – Spain and Germany in particular – largely because they’ve been at it the longest, and have had time to build up a strong industry presence. Estimates put the number of people employed in the wind industry in Germany, for example, at 64,000. “Countries like Germany and Spain keep topping the charts in installation because there’s an industry to support – and an industry that in turn supports – the growth of wind energy,” Mühlenbach says. “It’s massive. It means job creation. It means exports, obviously. In the case of Germany, there are already component manufacturers there, thanks to the presence of manufacturers for existing industries such as automotive and steel. You have a lot of steel companies based around the northern harbours in Germany building foundations for offshore turbines. “Having industry presence – again, speaking mainly for Germany here – is something that allows for job creation for the industry to build up and the concentration that a lot of these manufacturers have is extremely high, if you look at the map of where they’re located in Europe. So it’s a historical thing, but also early policy initiatives were made in these countries to support the industry taking off.”

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The offshore base will soar to more than 74 GW Offshore will rise to more than

24% of installed wind capacity

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CENTRALISED VS DISTRIBUTED Marc Mühlenbach gives us his thoughts on the future implementation of distributed wind power generation. “There are initiatives for decentralised, rooftop and wind power generation, but I don’t see it advancing at the same rate by any means as the large scale commercial wind farms. If you look at the average size that’s being planned right now or if you look at offshore plans and the size of some of the projects in new markets like Sweden or Romania, for example, the direction is very clear. “If you think of grid integration initiatives interconnecting all of Europe, especially the EU countries, the direction is obvious in terms of centralising wind energy resources; which is not to say there aren’t going to be important distributed initiatives. I know that RWE, which is one of the largest utilities, is involved in and has invested into rooftop wind energy initiatives. It’s not hugely significant but it’s not to be discounted entirely. “In solar it’s easier: you can install panels and just power your own needs. Th is is something that’s changing now, if you’re looking at the solar markets in Germany and Spain, for example, but historically the tariffs have been far more generous as well. So there’s been quite a push for individuals to do this.”

Mühlenbach says it is also a matter of resources. “There are a few very simple things you need to consider when deciding on constructing a wind farm. You need to look at the resources and the measurements you get from there first and foremost, because you need to know the capacity factors of your turbines. You need to know how much they’re going to be able to produce and you want to know ahead of time if the incentive framework where you’re going to build your farm is going to work for you.” But good wind speeds aren’t enough to guarantee the success of a wind power implementation – this can also depend on the availability of other renewable resources. “If the Norwegians, for example, find huge gas reserves outside the continental shelf off Norway, then there’s little incentive to develop wind energy,” Mühlenbach points out. “Plus they have hydro resources powering absolutely everything they need for 99 percent of their electricity generation. It really was an industry that had to be created in Norway. The components were there for the industry to exist in these countries but it was definitely something that had to be pushed. “On the other hand, if you look at how the way the market economy works in Germany, it’s not a venturecapital boom, latest discovery type of market. It’s more incremental innovation and step-by-step engineering focus. However, a country where there are low incentives, such as

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Turkey, could still make sense; there’s still a push for a lot of development because the resources are extremely high and the wind speeds are extremely good.”

Barriers

“It’s very often the case that high wind speeds are to be found where there’s a lack of infrastructure” re”

Some typical development bottlenecks emerge more frequently in some markets than in others – for example, lengthy bureaucratic processes around permission for planning and construction. “If you’re developing in Eastern Europe,” Mühlenbach underlines, “you’re going to have to decide whether or not you want to deal with years and years of very bureaucratic processes. Is that worth it? Can you hold on that long to develop a project? Do you have the money to weigh it off on your revenues from producing electricity if you’re going to have to wait for a grid connection for three years in Poland, for example? “Bureaucracy aside, the other thing to consider is whether or not the infrastructure is present. The best resources are often in rural areas – coastal regions or mountainous regions or remote regions. It’s very often the case that high wind speeds are to be found where there’s a lack of infrastructure.” Given that another barrier to wind farm site selection has often been opposition from local communities, why are more wind turbines not built offshore? Mühlenbach

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says that any turbine construction is a logistical challenge: you have to go somewhere where the resources are good so you’re sure that you’re going to be generating a healthy revenue stream for many years. “It’s not uncommon, especially in Eastern Europe – where a lot of developers are moving to now – to have to build roads to be able to access your project, or to have build out the grid and pay for that. If you’re building a very large project you may even have to build a substation to connect your project’s output to the national grid.

If you look at the limits of what it was thought a turbine would be able to produce 10 years ago and what it’s able to produce now – which has exceeded that limit 10-fold – it’s pretty exceptional the rate at which the industry has developed “If you’re already having to do all this onshore, not only the cost but the logistics of having to do all that offshore would be beyond what most developers can afford. So offshore is far more expensive, but the main reason why not all things are built offshore is that it’s logistically something that we’re not always prepared to do yet. Clearly it’s picking up, but that industry needs to be created, just as the onshore industry was. “Until that happens, until that critical mass is in place and there’s a steady construction flow – whether it’s foundation, installation vessels, substations or grid build-out – all these things need to be in place in order for a wind farm to function. All of this takes much more effort and much more money to do offshore.” Despite this, the momentum is there, and Mühlenbach predicts that between 2020 and 2025 Europe will see a large push towards offshore, with almost a quarter of installations taking place there.

Competition While the wind sector in Europe is still looking strong, we are in danger of being caught up by other regions, as Mühlenbach explains: “There’s such enormous potential in the US and China that no single European country can compete with the kind of growth you see there. You have to talk about Europe as a whole in order to compete with the vastness of these countries. Although a lot of it, especially in the US, is being done with European technologies and even European developers. “You have the largest number of turbines being installed in the US. GE is American and they’re very much the market leader over there, but that’s not to say that you don’t have European manufacturers capitalising. They are building manufacturing plants in several parts of the US. You have a lot of European utilities that have capitalised on the fact that there’s huge demand there and once there’s stable policy environment in place, there will be the kind of growth that no single European country can compete

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In 2009, 201 wind turbines were installed and grid connected, totalling 584 MW

2009 installations were up 56% from the previous year

with. If you look at last year, for example, the US installed as much as all of Europe together. “The problem with the US is that traditionally it’s been a boom and bust market. It’s not been a place where there’s been enough stable support to create the kind of investor confidence you’ve had in Europe, where growth has been very steady. There has been very little shift in the last two or three years in terms of how much has been installed annually, and we’re heading towards the same annual installations again this year; slightly higher than last year, when it was a bit crisis-struck. “But then you have China, which is at the point of overtaking everyone. China installed more megawatts in terms of wind energy than either Europe or the US last year. They have incredibly ambitious targets and they also have a demand that’s just not comparable to what we’re used to.” However, this upward growth can’t continue forever: there will come a time when the number of annual installations won’t be an increasing figure every year. “You’re not going to be able to install more than the previous year for all eternity,” Mühlenbach says, stating the obvious. “The interesting thing that we have to face as analysts in terms of forecasting market growth is deciding exactly when this time will come. “Eventually that line is going to come to a curb and then start sinking, and we’re going to have to fi nd out exactly when we think that that might be. In the more mature markets like Germany, for example, we’re seeing the beginning of onshore market saturation we’re seeing a transfer of growth from onshore to offshore. We see that in the next four to five years when we think that more megawatts will come from offshore every year than onshore, starting around 2014 or so. “Other markets will follow suit, that’s the way it’s going to go. There are a limited number of wind turbines to be installed in the fi rst place, because there’s a technical limit, and secondly, there are other resources that are going to add to this mix. “Several EU countries have already submitted their national action plans for renewable implementation and others are yet to follow. We’re going to see what countries are going to do, what their intention is of reaching their 2020 targets and what their energy mix is going to look like in order to reach these targets. “It’s entirely possible that let’s say a country we thought was going to install X megawatts of wind to reach these targets has decided, ‘Okay, maybe we’re going to reach our technical limit sooner than we thought and we’re actually going to reach our targets by installing more biomass and we’re going to generate heat from biomass instead of electricity from wind and that way we’re going to reach our climate targets or our legal energy target.’ “We might see indicators for small shift s in terms of predictions of what wind energy is going to contribute but we’re pretty confident that wind energy is going to be the largest contributor of all the renewable options to reaching these targets.”„

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A new standard for lightning protection of wind turbines Kim Bertelsen offers an insight into the new standards protecting wind turbines from lightning damage. The IEC has launched a new standard (IEC 61400-24) for the protection of wind turbines against lightning, which demands documentable reliability for new wind turbine designs. What impact will this have on companies in the wind power sector? Kim Bertelsen. The sector has strived to design reliable wind turbines during the last few years, but without specific requirements for what was really necessary. Finally, the industry has a standard that sets specific demands – and the industry should start preparing itself to meet these requirements. The new standard mandates the electromagnetic environment to be taken into consideration when designing complete wind turbine systems, blades or control systems. How will this affect wind turbine design? KB. Designers will realise that the electromagnetic environment in a turbine exposed to lightning is very harsh during the event. The standard will help the designer to understand the necessity of doing everything related to EMI-protection in a stronger way. The industry has been used to using ‘normal industrial standard’ or using earlier designs as reference for the new up-scaled design. From our experience, this is not an acceptable approach. With the new standard as a reference this is fi nally described and it will be easier to work with for everybody in the technology chain. When having a standard, all suppliers and their sub-suppliers have a common reference point for starting to require that all components can withstand the environmental conditions – or at least can be installed in a way that secures reliable operation. It is also important to realise that not only large damages should be addressed as lightning damages. Also smaller lightning strikes – which are more frequent – can start the wearing of insulation components and the accumulated or delayed effect will, at a later stage, result in damages that cannot directly be related to a specific lightning event. As an example, the generator windings

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Kim Bertelsen, owner of Electricon, has worked with lightning protection and system reliability for more than 15 years, the last 10 years in the wind turbine industry. Bertelsen is participating in the Danish national IEC committee and has a seat in the international IEC PT 24 group, responsible for wind turbine lightning protection.

could be exposed to higher voltages than usually tolerated – even with low-level lightning – and this can start partial discharge, which later may result in damaged insulation, demanding replacement of the generator. Other systems such as control systems, sensors or even mechanical bearings are very exposed to indirect effects from lightning and the individual components must be protected against wearing or immediately damage. As wind turbines continue to grow in size, they are more exposed to blade-triggered lightning than ever. Does it require special technologies to protect these wind turbines? KB. As wind turbines grow in size they tend to be more exposed to lightning strikes – and the lightning strikes can attach in different locations than what is normally experienced on smaller turbines. Only by performing laboratory testing with artificial lightning or simulations can these new designs be verified. The new IEC standard demands new designs to be documented either by testing, simulation or comparison with similar designs. When using new materials such as carbon fibre, tests can be necessary.

Are there products available to help protect already installed wind turbines? KB. It is a good business case to upgrade the protection of already installed wind turbines. Protecting the most sensitive and expensive main components, such as the generator or converter, can be done relatively simply. In general, the protection makes sure that the electric voltages are not exceeding the tolerable level and this should be done by shielding or voltage suppression tailored to the specific case. We have several good solutions for doing this taking into consideration cost effectiveness and easy to install methods. Also, blade protection solutions can and often have to be upgraded. New offshore projects and remote locations complicate access to the wind turbines. What can companies do to make their turbines as efficient as possible? KB. Even though wind turbines are complex machines, they are expected to run without on-site supervision and accessibility are often complicated by bad weather conditions. Th is demands that the turbine can run continuously without even minor disturbances. „

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RENEWABLES

End the governmentsubsidised bet on black With the European energy sector looking to stimulate an internal electricity market, a ‘fifth freedom’ needs to prevail – and quickly – if a foundation for the future of renewable energy is to prevail. By Christian Kjaer

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he fi nancial crisis was brought on by too many investing too much of their wealth in risky assets such as mortgage-backed securities (MBS) and collateralised debt obligations (CDO). Financial institutions, investment banks and other investors even issued large amounts of debt and invested these in MBOs and CDOs. The taxpayers were left with the bill. In the energy sector, we have been doing much the same for decades. We have invested too much of our (energy consumers’ and citizens’) wealth in risky technologies with low capital cost and high and unpredictable fuel and operating cost. Energy policy decisions have been backed up by economic models from the International Energy Agency (IEA), the European Commission and national governments, which assume that fuel price risk, carbon price risk, supply risk and political risk does not exist in the energy markets. Meanwhile, governments allow energy investors to pass on their environmental risks and cost to citizens. The Deepwater Horizon disaster stands out as the exception because US President Obama insisted the company created a €15.6 billion spill response fund after the accident happened. In most businesses, including in the wind energy business, the response to risk is to buy insurance and pay a premium if it makes economic sense to you as an investor. In contrast, when it comes to the conventional energy sector, governments’ response is that taxpayers and consumers carry large parts of the risks and costs of the economic activity. Naturally, that would make sense to any investor in any sector, but it is not in the taxpayers’ best interest and it distorts competition between technologies in the energy markets. Obviously, technologies such as wind energy with zero fuel and carbon costs and minimal environmental impacts are disadvantaged by these distortions.

The EU needs a fifth freedom So here we are, stuck with a European supply structure exposed to all kinds of risks that our energy models still deny the existence of; risks that governments allow investors to pass on to energy consumers, taxpayers and societies at large and which, for a large part, are mitigated by governments rather than through the insurance markets. These indirect subsidies come on top of the €435 billion in global annual

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subsidies that the International Energy Agency (IEA) says governments hand out to the fossil fuel industries and the – as yet unquantified – global nuclear energy subsidies. Th is government-subsidised bet on black at the energy sector roulette must end. In addition, we need to start exposing energy plant investors rather than consumers to these risks. Otherwise, innovation will be too slow to support the necessary rapid shift towards smarter, cleaner and less risky energy options. We must also speed up the process of creating real competition and well functioning power markets in Europe (and elsewhere). Europe’s current electricity supply structure still bears the characteristics of the time in which it was developed. It is national in nature, the technologies applied are ageing and the markets supporting it are underdeveloped. Given the international nature of the energy challenges that the EU is facing, it is astounding that 24 years after the Single European Act was signed – establishing the free movement of goods, services, capital and labour between Europe’s nations – we still do not have an internal market for electricity. We need urgently to establish a fi ft h freedom within Europe: the free movement of energy across borders. Improved and fair competition in the power markets would expose investors to the risk of technology choice. Together with the environmental risks, the two biggest risk factors in power plant investments should be the uncertainties related to the future cost of emitting carbon (most critical for coal power investments) and to future fuel prices (most critical for gas power investments). However, again investors are not fully exposed to these risks because they are free to pass on the fuel and carbon price risk of their technology choice to the consumers, as a result of ineffective competition. Moving from free allocation to auctioning of allowances under the EU Emissions Trading Scheme (ETS) from 2013 will somewhat rectify this distortion when it comes to carbon risk.

“The power systems must be made much more flexible and be supported by modern infrastructure technology, research and development”

Put the money to work in Europe Meanwhile, Europe’s existing power plants are ageing and 50 percent of all the power generating capacity operating in the EU today needs to be replaced over the coming 10 to 15 years. The time is ripe for a complete overhaul of our electricity supply structure. Europe imported 54 percent of

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its energy in 2006 and these imports represented an estimated €350 billion, or around €700 for every EU citizen. We need to end this significant transfer of wealth and start putting a larger part of our citizens’ money to work in the European economies by nurturing the energy technologies where Europe has a real competitive advantage. Europe must use the opportunity created by the large turnover in capacity to construct a new, modern power system capable of meeting the energy and climate challenges of the 21st century, while nurturing Europe’s competitive advantages in tomorrow’s leading technologies, including wind energy, other renewables and infrastructure. The power systems must be made much more flexible and be supported by modern infrastructure technology, research and development and well-functioning markets for electricity and transmission – including markets for balancing power, intra-day markets and greater demand response – to ensure that investors, rather than consumers, are exposed to carbon and fuel price risk. I have no doubt that wind energy will be the most costcompetitive power technology in the world 10 years from now. But we, as a sector, will only be able to prove that if the overall power markets are functioning and competition is fair and effective. Without adequate infrastructure there will be no effective competition. Without effective competition, consumers rather than investors will continue to be exposed to carbon and fuel price risk. But if we get it right, I am convinced that wind energy will dominate global

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power sector investments in the 21st century and that consumers will be less exposed to unpredictable fuel and carbon costs, fuel supply disruptions and environmental and health costs. Europe has no significant resources and the ones we have are depleting and extremely dirty. In this carbonand fuel-constrained world, Europe has a considerable competitive disadvantage when it comes to conventional energy resources. According to the European Commission, the EU is home to only 0.8 percent of the world’s proven oil reserves; 2 percent of the world’s proven gas reserves, 3.5 percent of the world’s coal reserves, and 1.9 percent of the world’s uranium reserves. And out of the resources that the EU does possess, 80 percent is coal and over two thirds of that coal is lignite. The world is currently paying the bill for governments’ acceptance of excessive risk-taking in the fi nancial sector. In 2008, oil reached €117 and our economies tumbled. It is not clear how much high fuel prices contributed to the economic crisis. But what is clear is that the same economic laws apply to both the fi nancial sector and the energy sector. Governments allowed fi nancial market players to invest too heavily in cheap, risky assets with unpredictable returns and European citizens were forced to pick up the bill. The energy sector is heading in the same direction. Unless energy policy-makers address the problem, Europe, together with the rest of the world, will face an energy sector crisis of the same magnitude. „

Christian Kjaer was appointed Chief Executive Officer of The European Wind Energy Association in March 2006. He had previously held the post of Policy Director for EWEA. He drafts EWEA’s direction, vision and long-term strategy in collaboration with the President and the Executive Committee. He represents the association in external forums, and engages actively with the international institutions, the key stakeholders and NGOs, the members of EWEA and the media.

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New perspectives at the boundaries of probabilistic risk management The importance of identifying and interpreting the facets of risk management to ensure future education and success. By Claus Myllerup Known knowns

Unknown unknowns

safety paradigms. Each system is understood intimately, but individual systems interact with each other in complex, non-intuitive and sometimes surprising ways. Small wonder then that despite our diligence in applying the knowledge from what we have seen before and regardless of our resourcefulness in anticipating what we haven’t, we will always fi nd ourselves, now and again, faced with failure. When structures, machinery or components fail, our imperative is to make sure it doesn’t happen again. Clearly it mustn’t happen again on the asset in question, but we must also look to the longer term, capture the failure mode and incorporate it into our risk management protocols. Only then can we be sure it is properly accounted for next time we design and build. But to ensure a failure doesn’t reoccur, we must be confident that we know and understand the relevant causes of that failure. These causes will certainly include an account of physical mechanisms, but just as important to both understanding the problem and ensuring it doesn’t reoccur, they should extend to the procedural and human contributions in the network of causes leading the failure. A mechanical analysis can highlight human and procedural shortcomings, just as an analysis of procedure and where it breaks down can raise mechanical questions and inform analysis of human performance. Many failures lend themselves to one approach or another, but only when all three are represented in the process can we be sure we have captured the entirety of the failure mode. Only then can we ensure that all the options for mitigating the problem in future are covered and the measures for doing so are optimised. The recent acquisition by the Lloyd’s Register group of Lloyd’s Register ODS (mechanical failure analysis), Human Engineering (human factors) and Scandpower (risk and safety) brings all these fields under one umbrella, facilitates mutual learning and ensures that each of these companies has immediate access to the expertise of the others so that they may provide a comprehensive picture of what went wrong and a confident assurance that it won’t happen again. „

Modern energy infrastructure is a triumph of specialisation and synthesis. We assemble our assets from hundreds of systems, each in itself a marvel of technological ingenuity. But exactly this level of specialisation and modularity introduces fault lines in our risk management and

Claus Myllerup is Managing Director of Lloyd’s Register ODS. Myllerup has served as Chairman for the American Society of Mechanical Engineers’ International Gas Turbine Institute Conference and is an external lecturer at the Technical University of Denmark. He has a PhD in mechanical engineering.

Risk-based approaches address both the likelihood of something going wrong and the severity of the consequence of it doing so. These two factors together determine the criticality of failure modes, from low risk – neither likely to occur nor terribly momentous if they do – to extreme risk – both likely to happen and catastrophic when they do. Risks are managed and criticality is lowered by reducing the likelihood of a failure by mitigating its consequences or both. Modern risk management recognises its own weaknesses and works to minimise them. Typically, to determine the likelihood and consequence of failure of a component requires a large amount of statistical data on its lifetime and failure modes. The fourth generation of risk-based maintenance, such as Arivu provided by the Lloyd’s Register-owned Knowledge Based Management (KBM), uses the embedded risk management systems to harvest these data dynamically, feeding them back into the system to improve the modelling.

Known unknowns Risk management is largely experience-based, but for new designs, experience can be a fickle guide. Blindly extrapolating outside the envelope of our previous experience can be a risky practice. Many of the larger critical components, such as major rotating machinery and cryogenic units, are unique or tailor-made and even where there is experience, there is rarely the abundance of data you need to establish the full statistical foundation for conventional risk management. At these levels of innovation, a thorough technical assessment of potential failure modes can weave a safety net for new designs. The inherent uncertainties of such modelling can be accommodated in a probabilistic framework using methods such as fi rst order reliability, Monte Carlo simulation and so on. Companies like Lloyds Register Martec have successfully applied such modelling to supplement the relatively scarce statistical data available for the innovative design of risk critical components.

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“Risk management is largely experiencebased, but for new designs, experience can be a fickle guide. Blindly extrapolating outside the envelope of our previous experience can be a risky practice”

01/09/2010 14:07

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PAVING THE WAY TO EFFICIENT CONSUMPTION Jeff Johnson tells Huw Thomas how the smart grid can be used to get consumers on the road to energy efficiency.

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rom Atlanta to Zurich, the smart grid is big news. If all the claims made about it by some of its more evangelical exponents are to be believed, it is a virtual panacea for much of the world’s energy woes. The smart grid will help consumers to monitor and reduce their power consumption, allow utilities to better cope with peak demand, promote energy-efficiency and reduce operational costs. But as with many new technologies, there remains the persistent challenge of defining exactly what it is. Jeff Johnson is Deputy CIO at Constellation Energy, one of America’s largest power providers and a frontrunner in the smart grid race. Even he agrees that the smart grid can mean different things to different people. “It is something of a Rorschach test,” he confirms when I speak to him at his Baltimore office. “Everybody sees something different in it and I would argue that there are a couple of different themes. One, it does enable much better real-time information from an operational perspective. So the actual management of the transmission/distribution grid is much more real time, and thus able to support higher operational capability and ultimately grid reliability. It also enables us to manage the grid as it evolves. Where it was in the past, a hub-and-spoke kind of network, it’s now moving to a multi-nodal network where you’ve got distributed generation, renewable sources, even potentially fleets of electric vehicles.” Whatever confusion remains over the smart grid’s exact nature, Johnson is excellently placed to cut through it. Constellation’s subsidiary regulated utility, Baltimore Gas & Electric (BGE), is currently engaged in one of the biggest grid innovation projects anywhere in the world. At the time of writing, some protracted wrangling with

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the Maryland Public Service Commission has just been resolved, allowing BGE to use US$200 million (€156 million) of federal stimulus money to roll out the smart grid throughout its Central Maryland service territory. While Johnson is understandably relieved that a significant potential brake on the project has been removed, he nonetheless understands that the smart grid does raise some very real concerns. “There is the question of are we too early? Is the technology mature?” he says. “Is it really going be good for the consumer? There’s always a negotiation with the utility about how much of this is going to go into the rate base and come out of the consumer’s pocket. There are legitimate questions and concerns for everybody to get comfortable around.” But despite these concerns, Johnson firmly believes that the benefits outweigh any potential downsides. “We’ve successfully completed a smart-grid pilot,” he explains. “We are currently engaged in pilot programmes around home energy management, and the evaluation of a couple of different approaches and technologies in that space. We’ve demonstrated that there are significant consumer savings and behavioural changes that can occur, based on the information that then can be provided to the consumer. We’ve seen that in a real-world context.” According to BGE’s estimates, smart grid implementation will lead to consumer savings of at least US$2.5 billion (€1.95 billion) over the course of the project. While the US$200 million (€156 million) in stimulus money is currently grabbing headlines, it is really just a part of Constellation and BGE’s long march towards the grid of tomorrow. “We have this multi-year programme to re-engineer our whole service delivery approach from a utility perspective.”

Johnson explains. “We are currently replacing our whole monolithic customer care and billing system and our meter data management system. That’s all being done based on the requirements that we have defined for a smart grid. It is a major platform for enabling of smart-grid capability and functionality. We are also re-engineering our approach to how we do e-commerce and customer-facing, web transaction support.” It is this long-standing commitment to reimagining the entire energy business that resulted in the Department of Energy’s decision to award BGE with federal funds in the first place. “BGE is clearly ahead of most utilities in terms of a very due diligence-based approach to understanding what does a smart grid mean to our territory,” Johnson confirms. “How might it work? What sort of value proposition might it generate? And then, how do we scope and plan for an implementation in a risk-managed way?” Now that the final regulatory hurdle seems to have been cleared, the stage is set for all this hard work to fi nally pay off.

Promise For Johnson, the true promise of the smart grid centres around two main threads. First is its ability to provide a higher operational capability, which in turn delivers grid reliability in a safe and effective manner, compensating for fluctuations in demand and the need to react in emergency situations. The second is the ability to provide pricing signals to the consumer, allowing them to more efficiently consume energy and consequently reduce their bills. In some cases, this can even see consumers being compensated for reducing their energy use through a demand response. “There are advantages to the end consumer beyond just higher reliability of the grid and enablement of new functions,” Johnson says.

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“There’s also the fact that they are then enabled, through better information, to manage their energy consumption in such a way that they reduce their utility bill without sacrificing significantly in terms of their comfort and lifestyle.” For many on the outside, the idea of a utility encouraging its customers to use less energy seems counterintuitive, like turkeys voting for Christmas. However, energy efficiency has become such an important long-term goal that regional and national governments are stepping in to promote it. “Maryland is lead-edge from a regulatory perspective in this space,” Johnson explains. “California was one of the first but Maryland adopted a decoupling approach, meaning that the utility is incentivised to reduce consumption.” Decoupling is a concept that has been catching on throughout the United States for a while now. It breaks the link between the utility’s ability to recover its agreed-upon fi xed costs, including the profit margin, from the actual volume of sales that occur through a rate adjustment mechanism. If a utility promotes less energy use, they are rewarded rather than punished. Under decoupling, there are a number of ways to compute the rate adjustment, but the basic principle is that if the actual sales are less than forecasted, there is a slight upward adjustment in rates to compensate the utility. Adjustments typically would only be between two or three percent and some jurisdictions have applied caps on possible adjustments to protect consumers. As a result of Maryland adopting decoupling in 2007, much has already been done to promote reduced energy use in the service area. “BGE has a variety of programmes under way today to help manage consumption with existing technologies that surround load response and demand management programs for their customers,” Johnson says. Th is has been under way for several years and has been providing

“It’s incredibly important that this be a business-led, businesssponsored, business-staffed programme. If you try to approach it as just a technology project, you will fail” valuable groundwork ahead of the smart grid’s ultimate implementation. In fact, it is possible to go even further than that and view energy-efficiency programmes as a vital component in smart grid development.

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In the clouds Another big business buzz phrase currently rivaling ‘smart grid’ in ubiquity is ‘cloud computing’. Everyone and their dog is talking it up as a gamechanging technology but, as with the smart grid, there is a certain degree of debate as what exactly it is. “There are a couple of ways to think about so-called cloud computing,” says Johnson. “There’s software as a service. There are external IT clouds for IT capacity, such as Amazon, Google or Verizon which are providing those services. And then there’s also the capability to build so-called internal clouds, where you have IT loads that need to exist for various reasons – such as IT security or operational realities – within the confines of the four walls of a corporate data centre. “My belief is that major companies, especially utilities which have high data security issues, will for the foreseeable future need to maintain many of their operational systems within their own corporate data centres. Thus, we are looking at how we evolve towards the capability to provide IT services on demand through internal clouds, while leveraging external clouds where appropriate, to provide services as part of our solution set. For example, we haven’t completely solved this problem of whether we want all of our historical data around, say, meter reads and meter data, which is potentially a very significant data volume, on-site in our data centres, or is that something that we buy in a secure manner through external cloud providers?” “You can start to build these hybrid approaches to how you leverage this IT service ondemand capability, whether it’s through your own internal cloud and/or external cloud providers where appropriate. “And then, on top of that, you can also say, ‘Maybe there are some services that we want to buy as a software as a service,’ which is extending cloud IT on-demand capacity concepts up to the actual solution level. “The classic example is salesforce.com, but I think there are emerging other SaaS providers in the ERP space, the messaging and collaboration space, email, or some of the other kinds of common function systems.”

“Smart grid is not just fl ipping a switch, and it’s not brand new,” Johnson explains. “It’s more of an incremental approach. The stimulus funding and the grant money has created maybe a perception in the marketplace that somehow this is all brand new and nothing has been done to date. That’s not the case. Utilities have been working towards smart-grid type concepts for years. I think the focus now of trying to accelerate that has created awareness in the consumer’s mind to a much higher degree.”

Change Another thing that is far more than just fl ipping a switch is the amount of organisational and process change a move to a true 21st century grid requires. As part of its ongoing business transformation project, Vision 2020, BGE has been breaking down silos and fostering a closer relationship between IT and the business. For example, rather than gas delivery and power delivery operating largely independently of one another, they instead share certain components

and functions. As a result, processes can be organised more around end-to-end services than discrete siloed functions. “It’s important because you start to drive towards more integrated, real-time management of the operations,” says Johnson. “That has implications from a process and an organisation perspective. The last part is something Gartner has been talking about for several years, where you start to see a convergence of two siloed domains. Traditionally, there’s been a split between the operations side of the business, and the IT side of the business. As you start to deploy a smart grid, you begin to see a convergence between the traditional operational technologies and the more IT technologies. They start to become one. Gartner calls that the convergence of OT and IT.” Having access to the kind of detailed data the smart grid allows becomes important in order to response to rapid changes in demand and in emergency situations. There are several different types of load response that are emerg-

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EEGI selection process

• Compliance with the functional goals of the project • Expected costs and benefits when deployed

• Existence and quality of a deployment plan

TRANSMISSION NETWORK CRITICAL PARAMETERS THAT ENSURE: • Validation • Scaling up • Replication DISTRIBUTION NETWORK LOCAL CONDITIONS THAT COVER RELEVANT: • Network environment • Geographic environment • Customer environment • Regulatory environment

• Open standards and interoperability policy • Cyber security policy • System update policy • Assure grid reliability • Knowledge-sharing rules

PROJECT PROPOSALS

ing,” Johnson says, “but the most common one that has been supported is the concept of emergency demand/response and load shedding in an extreme situation. For example, if we have a series of 38-degree-plus days, like we just recently had here in Baltimore, the system is stressed. In that kind of case, the ISO can declare a demand/response event, and within minutes, we can notify customers that have signed-up as demand/response enabled. Then we can have them shed load, or to allow us to make the predefi ned decisions to shed load. “They get compensated for providing that load back to the grid, thus avoiding either spinning up much more expensive and dirtier re-

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sources in the best case, or outright potential grid reliability issues if the utility did not have that capability. That is the area where most utilities often first focus, provided their territory supports those kinds of programs and tariffs. “As you move forward, there are other kinds of load response scenarios where certain customer types can sign up to provide a more discretionary type of load shifting. These can be load management functions where, depending on market price, sheer power demand or power regulation needs, they can manage their demand in such a way to help manage the grid. That kind of thing is more transactional day-to-day load response. That’s a more sophisticated approach

The European Electricity Grid Initiative Initiated by electricity transmission and distribution network operators to accelerate innovation and the development of future electricity networks in Europe, the European Electricity Grid Initiative (EEGI) proposes a nine year research, development and demonstration programme to push a significant focus onto Smart Grids. Its deployment will start progressively from this year until 2030, with the name of the game being to afford the EU a host of benefits from the grid. For starters, the implementation of a smart grid will increase hosting capacity for renewable and distributed sources of electricity whilst delivering the highest level of quality of electricity supply to all customers hooked up to the grid. Its presence should also, if industry insiders are right, anticipate new developments in the progressive electrification of transport and an economically efficient deployment of future networks. But perhaps the biggest plus-point the EEGI can offer is its love for low-carbon technology initiatives, in particular those focused on wind and solar. As an enabler of these initiatives, the EEGI will connect new energy resources to the final users and facilitate the management of complex interactions between energy producers and users – a truly Smart Grid.

that is just beginning to be recognised in various markets.” Johnson points out that within this process, Constellation is thinking in terms of architecture and thus platform. “First of all, there’s an architected approach to thinking about the business process. Especially in our utility, we’re thinking about what is the re-engineering of the business process first, and starting from there. And then you drill into what is our technology strategy to enable that from an application perspective, and then from a technical architecture perspective, and a vendor partnership perspective. “It’s incredibly important that this be a business-led, business-sponsored, business-staffed programme. Because, ultimately, you’re re-engineering the business. If you try to approach it as just a technology project, you will fail.” „

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EXECUTIVE INTERVIEW

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21st century field service Power & Energy talks to Bastian Fischer about the effect the smart grid will have on the technicians and staff who ensure its efficiency and productivity. We hear a lot about how the smart grid will affect customers. But how it will affect our industry’s employees? Will their jobs change? Bastian Fischer. Twenty-fi rst century utility jobs will be significantly different from those of the 20th century. Field service technicians are a good example. Smart grid means fewer ‘false alarm’ service calls because utilities will know if a customer’s meter is working before sending a repair crew. On the other hand, when they receive an assignment, it may be more challenging. Technicians will be responsible for more sophisticated, complex equipment. And there will be more of it – more sensors, more distributed computing devices. But the tasks technicians handle will likely be much more demanding. How are software vendors supporting these more complex tasks? BF. We’ve significantly increased our support for technicians facing new tasks. In the past, we gave technicians paper repair manuals, or maybe we put the manual on to a laptop. Either way, technicians had to page through a lot of irrelevant information to fi nd what they needed. Frequently, they had to consult crew chiefs or supervisors every step of the way. Today, mobile workforce applications identify from the outset the resources technicians will likely need. They give technicians access through familiar tools like wizards, drop-down menus, searches and drag-and-drop. Most importantly, task-specific checklists take technicians stepby-step through a job, from start to fi nish. The applications answer questions. They give technicians alternatives. They monitor adherence to safety precautions. All this support frees technicians to work more independently. Their work flows naturally, without interruptions caused by waiting for a supervisor to approve work done and authorise the next task. Today’s mobile workforce applications also cut training time; checklists can alter the amount of backup they provide depending on the technician’s experience level. And new technicians have the confidence to take on new responsibilities. What about dispatchers? BF. Twenty-fi rst century dispatchers are increasingly free from routine. That’s because today’s mobile workforce applications handle all routine scheduling – and better than individual dispatchers could. New mobile workforce applications use computational

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grids to take hundreds of data points about the certifications, locations and recent work histories of tens of thousands of technicians located anywhere in a utility’s service territory. Computational grids act on this huge volume of data by dividing it across multiple servers. They then optimise and re-optimise schedules in real time, as emergencies arise and appointments change. And they act on the entire workforce at once. We no longer have to limit technicians to work of a particular type or work within a particular sub-territory. Inevitably, though, situations will arise that the application cannot handle. That’s where dispatchers come in. The applications present all the factors – the ‘context’ of the situation – to the dispatcher. They may even prioritise al-

“Today, mobile workforce applications identify from the outset the resources technicians will likely need” ternatives. They show dispatchers how the various choices may affect the organisation’s key performance indicators. With this entire context close at hand, dispatchers can focus their experience on making the best ‘context-oriented’ choice.

Bastian Fischer is a recognised industry leader with an extensive experience in the utility industry, in IT technology, customer management and smart grid and smart home area. A regular speaker on the theme of utility industry innovation, he is an active contributor to a variety of customer thought leadership initiatives and industry press articles on international level. Before joining Oracle, Fischer held several leadership roles focusing on the utility industry transformation in the US, APAC and Europe.

How do dispatchers then communicate their decisions to the field? BF. Today’s mobile workforce application takes advantage of a major marketplace change: unified communications or ‘ubiquitous mobility’. It unites the entire communications process. Dispatchers communicate with field technicians via a single interface. Voice, written materials – even SMS messages – flow freely throughout the entire organisation. Technicians that can’t get through on one network can get the same information on a different one – or on a different device. Data arrives in multiple forms, but technicians receive it no matter what device they’re using or what network the device connects to. And there’s another benefit: utilities can supplement laptops with lower-cost devices like tablets, PDAs and mobile phones that receive SMS messages. So what’s the bottom line? BF. More support for technicians and dispatchers lowers utilities’ costs to meet safety and reliability goals. „

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INDUSTRY INSIGHT

A SMART GRID IS OPEN Göran Näslund outlines the benefits of flexible communications systems.

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n large parts of Europe, this winter has been colder than its predecessors. Th is is true for Scandinavia as well, though temperatures have in no way been extreme. The Swedish economy is based on heavy industries that, despite the fi nancial crisis, show high output and consume huge amounts of electricity. Sweden’s power production is based on hydro and nuclear, but as demand increases, more expensive generation (such as oil and gas) is added and the demand is also met by the importation of coal based electricity. When low temperatures increase demand beyond the point where low cost and domestic supply is sufficient, the result is an increased cost per kWh. These winter price increases have made the headlines with prices going up by as much as 3000 percent during peak hours. Of course, the average consumer doesn’t pay electricity by the hour, but even the monthly average for December was significantly higher than normal. The regulation for smart metering in Sweden was announced in 2003. A consequence of being early was a relatively low legal requirement, namely a correct monthly invoice based on actual metering data. Previously, monthly billing was based on estimated usage. The weakness with the enforced regulation was that many utilities invested in systems that weren’t capable of anything above mere meter readings. Had the regulator been more visionary, requirements could have included functionality to handle demand management, flexible tariffs and the flexibility/interoperability necessary to provide new services and meet future market demands. When replacing 5.4 million meters it could have been expected that demand management was implemented, being a tool for suppliers as well as consumers to efficiently handle situations like this winter. The direct involvement of consumers, via tools and incentives to save energy, some of the additional production sources would have been redundant with significant accumulated savings as a result. The major lesson learned is that smart grid/smart metering investments must be based on flexible and open systems ready for future known and unknown needs. Several countries across Europe are now poised to implement similar legislation. Albeit crucial, smart meters are only one component in the utilities smart grid infrastructure. Utilities are faced with a number of challenges – and opportunities – that have a direct effect on, and are dependent of, smart grids. Climate change, and the EU’s agenda for mitigating this – the “20-20-20” – is one. Consumer activity in managing energy consumption is another. Micro

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Göran Näslund is Senior VP Utility at Wireless Maingate. He has more than 20 years of experience in the ICT industry and for the past seven years has been involved in providing M2M communication for smart metering rollouts numbering four million metering points.

generated energy, electric vehicles and a growing demand for electricity are all included within this. M2M, machine-to-machine communication, has for many years improved business operations and created new revenues for involved companies. Utilities are no exception. M2M communication is a key component in smart grids. The palette of available applications is business critical and demands on communication are naturally high, be it security, availability or operational quality. And requirements will grow further as new applications and a growing need for immediate access to information emerges. Several lessons can be learned from the telecom sector where open standards like GSM have been a major enabler for the extreme success of mobile telephony. Open standards attract new players and create competiveness, effectiveness and inventiveness that ultimately benefit end users. To date GSM, being the only true standard within smart grids, is the backbone for communication as well as the natural choice for scattered installations. Cellular networks provide communication based on the standard IP-protocol being 2.5G (GPRS), 3G or the coming 4G. Th is means that present and future installations can be mixed and seamlessly integrated without the need for modifying the enterprise systems. Mobile communication will continue to play a major and increasing role as insights grow to show the benefits of open and flexible communication. With a focused M2M solution provider, utilities have the advantage of a partner that understands and provides services through the whole smart grid life cycle, from planning and design through deployment and operation. „

01/09/2010 14:08

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INDUSTRY INSIGHT

M2M, smart grids and wireless technological evolution By Norbert Muhrer

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achine-to-machine technology, M2M for short, is used by businesses across many varied industries to connect machines, automate remote data communications, improve business processes and productivity and ultimately, improve the bottom line. Wireless networks are virtually everywhere and the ubiquity of cellular communications has fuelled extraordinary technical innovation in machine-to-machine technology. Cinterion Wireless Modules is the global leader in wireless M2M communications and has been the driving force for industry innovation since its inception. Some of the most exciting M2M innovation and growth is expected in utility and smart grid applications. At the end of October 2009, the Obama administration announced US$3.4 billion (€2.7billion) in grants from the stimulus bill for smart-grid efforts. Smart grids allow energy consumers and suppliers to quickly respond to each other’s needs to help conserve resources. They operate by using two-way digital and wireless technology to remotely control anything that consumes electricity in homes and businesses. Smart grid technology saves energy, reduces costs and increases reliability and transparency – it’s win-win technology. And what role does M2M play in this? M2M enabled smart meters are the key component to enabling two-way communication, which are an essential component of a smart grid. Smart grid technology drives sustainable energy generation and consumption in a number of ways. It helps alternative sources of energy such as solar and wind integrate into the grid. Smart meters allow energy consumption to be remotely adjusted and controlled, helping consumers take advantage of off-peak rates for non-urgent appliances such as dishwashers and washing machines. Th is type of load shift ing helps to minimize service disruptions during peak hours of use and allows more economical distribution of resources. Smart grid technology also enables remote monitoring and maintenance of equipment in the field. Built-in intelligence enables problem solving in real time so changes can be made before significant fi xes are necessary, which cuts significant costs for utilities. For example, during the 2003 four-day blackout in the US and Canada, the estimated cost to utility companies was US$10 billion (€7.9billion), which might have been alleviated with smart grid technology. Global wireless networks will continue to evolve, bringing advanced communication and computing ca-

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pabilities necessary for smart grid applications. However, evolution offers challenges for adopters who need solutions that will last for the long haul. Unlike cell phones, which are typically upgraded every year or so, smart grid solutions depend on widely distributed geographic implementations with an enormous number of endpoints (meters). It would be enormously time consuming and costly to update the communications modules in every smart meter each time the network evolves. And with network evolution happening at faster rates, a unique challenge emerges – what happens to an implementation when the network is turned off ? Cinterion is well known for its intelligently designed product roadmap and announced its new UMTS900 module EU3 at the Metering, Billing/CRM Europe 2009 tradeshow. The Cinterion EU3 UMTS wireless module

“Smart grid technology saves energy, reduces costs and increases reliability and transparency – it’s win-win technology”

Before taking up his position as Chief Executive Offi cer at Cinterion Wireless Modules in June 2008, Norbert Muhrer served as President and CEO of Siemens’ Wireless Modules division. Under his leadership Cinterion spun off from Siemens and established itself as a focused M2M company leading the market with a 33 percent market share.

offers the perfect solution for the challenging long-term requirements of industrial applications such as automatic meter reading (AMR). The sophisticated module has DualBand frequencies for both 2G and 3G functionality including newly added UMTS900 functionality. Th is means EU3 can support applications designed for use on evolving GSM networks for many years to come – both in areas with next generation wireless service and in remote areas where 3G coverage is not yet available. With its embedded TCP/IP stack including ‘Transparent TCP Service’, the EU3 provides an easy way to handle machine-to-machine data communication via UMTS, EDGE, GPRS or GSM. Utilities, meter makers and enterprises across many varied industries are wise to invest in smart M2M technology that enables wireless connectivity of the future today. Sustainable and forward-thinking M2M technology offers a full range of wireless communications functions and features and protects technology investment while allowing room for growth to the cellular networks of the future. „

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ANALYSIS

While many of the factors that influence the deployment of smart grids in Europe are the same as for smart grids anywhere, there are also some significant differences that need to be taken into consideration by any firm that is playing on the European stage.

SMART GRID OPPORTUNITIES IN EUROPE

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ignificant new opportunities are emerging for suppliers of smart grid equipment and services in Europe. Beneficiaries of these opportunities will include power companies, contractors, equipment suppliers, IT companies and so on. In part, the opportunities reflect the need for major upgrades of European grids. But they also represent the insistence of the EU that smart grids are deployed for a variety of public policy reasons. We see the development of smart grids taking place throughout the 27 member states of the EU, as well as the other European countries. While many of the factors that influence the deployment of smart grids in Europe are the same as for smart grids anywhere, there are also some significant differences that need to be taken into consideration by any fi rm that is playing in the European smart grid space. Strong demographic factors are at work. Th roughout Europe the workforce in the sector is aging rapidly and a significant number of engineers and technicians will retire over the next 15 years. Therefore a significant number of new trainees and graduates will have to be attracted to the network companies, plus the contracting, equipment and consulting companies. Many European companies will face challenges in recruiting qualified staff and may have to look to other parts of the world to fi ll many vacancies. We believe this opens up opportunities to non-European firms and personnel, especially if the Europeans deploy smart grids as fast as they say they want to. European governments tend to place more emphasis on environmental and climate change issues than (say) in the US. Consequently, such issues are a greater motivator in the deployment of smart grids than in other regions and environmental/ climate change issues should therefore play a greater role in the marketing strategies of smart grid equipment and service fi rms playing in the European smart grid arena.

The need to upgrade Massive investment in Europe’s distribution networks took place in the period following the Second War World, particularly during the 1950s and 1960s. Now many of these distribution assets are coming to the end of their natural life. Th is need for infrastructure renewal provides opportunities to future-proof these networks, to create greater flexibility and to allow the incorporation of a range of new technologies. The need for renewal of the network was highlighted during the last decade, when major grid failures occurred, plunging several countries and their capital cities into darkness. Since 2003, there have been outages in Italy, Denmark, London and Athens. These incidents have increased demands for new investment in the electricity network industries of the major European countries. Such outages have an immediacy and importance that tends to eclipse other reasons for smart grid deployment. Somewhat less important in terms of immediacy in influencing the deployment of European smart grids is the growing requirement to integrate the high volumes of renewable energy into the European grid networks, including the potential development and integration of super-grid systems based on renewable energy sources in the North Sea offshore region and potential large-scale solar power networks in northern Africa. While renewable integration is a part of all smart grid deployments, the specific geographic requirements are obviously unique to Europe. In addition to the power infrastructure itself, European network operators will require the installation of sophisticated information, communication and control technologies to monitor and control the electricity systems. These will need to manage the potential unpredictability of greater levels of distributed and embedded generation. The ability for all parts of the system to communicate with one another will be a vital component of smart grids. Th is will require a highly efficient communications platform, able to meet the requirements of coverage, reliability, responsiveness and security. A range of new communication technologies are being developed throughout Europe that will feature in the commercial deployment of smart grids. In addition, it seems certain that the usual US IT and computer fi rms can be expected to play a major role in European smart grid deployment.

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ANALYSIS

Policy as a driver Another key driver in this sector has been the development of new policies in the European Union. The 2006 Green Paper ‘A European Strategy for Sustainable Competitive and Secure Energy’, produced by the European Commission, stressed that Europe has entered a new energy era. With this in mind, the EU has set ambitious goals for 2020 and beyond in several key areas: energy efficiency, reductions in carbon emissions and developing renewable energy sources, as well as security of energy supply. The EU views smart grid deployment as an important part of achieving these goals, and so fi rms entering the smart grid space in Europe can expect a fairly friendly political environment. As European markets are open to new entrants from other countries and from outside the continent, there are significant opportunities for international companies to expand and develop new markets for their products and services. The EU seems committed to the creation and expansion of trans-European grid networks, allowing greater cross-border electricity trade. These expanded grid systems will fully exploit the use of large centralised generators and a growing number of smaller, distributed power sources throughout Europe; the latter mainly based on renewable energy sources. From the perspective of the smart grid equipment or services supplier, the buzz words that help to make smart grid sales in Europe aren’t that different from in other parts of the world. However, the European energy policy tends to stress in particular sustainability and security of supply. Also a clue to where the money will get spent on European smart grids is the European Commission’s stress that Europe’s electricity networks must be flexible, accessible and reliable. Flexible: fulfi lling customers’ needs whilst responding to the changes and challenges ahead; accessible: granting connection access to all network users, particularly for renewable power sources and high efficiency local generation with zero or low carbon emissions; and reliable: assuring and improving security and quality of supply, consistent with the demands of the digital age with resilience to hazards and uncertainties. Legislation covering the use of smart grid technology forms part of the EU energy package which came into force in September 2009. Because of the importance of EU policy in the European electricity markets, we believe that this package will be a good guide to where the money will be made in European smart grids in the near term future. With this in mind, we note the emphasis on metering. Both the EU’s gas and electricity directives stipulate that EU Member States ensure the implementation of intelligent metering systems that shall assist the active participation of consumers in the gas and electricity supply markets. The electricity directive sets a timeline of 80 percent coverage by 2020 and every EU household must be equipped with smart meters by 2022 (allowing two-way communications and control capabilities).

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Every EU household must be equipped with a smart meter by 2022

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of the power workforce will retire in the next 15 years

The need for renewal of the network was highlighted during the last decade, when major grid failures occurred, plunging several countries and their capital cities into darkness

We see these as challenging goals. However, if metering projects are funded and the political will persists, we foresee considerable opportunity in the European metering sector. The European Commission pronouncements also help to pin down the specifics of where some new opportunities are to be found in the European smart grid. These include network technologies to increase grid capacity and reduce energy losses; new power electronic technologies that will improve supply quality; and advances in simulation tools, which will greatly assist the transfer of innovative technologies to practical applications for the benefit of customers and utilities.

Hurdles There are a number of barriers that must be jumped before significant revenues can be generated by smart grid companies in Europe. Technical challenges: European distribution networks were not designed to accommodate large numbers of small and medium-sized generators. There are several potential difficulties which have to be tackled, such as accommodating bi-directional electricity flows; maintaining electricity flow at a level that is consistent with the ratings of the equipment; ensuring voltage remains within safe and statutory limits; and ensuring the electricity flows from local generators do not create network faults. All of these technical challenges, while a barrier to smart grid deployment as a whole, represent an opportunity for innovators who can effectively solve these problems. Regulatory/standards challenges: Developing a smart grid will create significant regulatory challenges in at least three different areas. The fi rst of these is the introduction of European Union electro-technical standards for all new household appliances will be required to provide the necessary functionality for the development of ‘smart demand’. More generally, the regulations and standards in most European countries were designed for the incumbent (often stated-owned) network systems, and these regulations will have to undergo significant changes to accommodate a future smart grid environment. Incentives will have to be developed to encourage network operators to invest in technologies that would allow their networks to be more actively managed. Distributed generation that is located near to the source of demand may bypass many of these costs and have a higher value than conventional generation. But the potential benefits of distributed generation are not fully recognised within the regulatory frameworks of European countries. How this issue is dealt with by the powers that be will strongly influence how money is made and where it is made in the European smart grid market. „ ©Smart Grid Analysis. Reprinted with permission. For additional information on this and other reports from Smart Grid Analysis, please visit www.smartgridanalysis.com.

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Getting smart meters right Smart meters are one of the big energy saving hopes for the future, reducing energy use and lowering energy bills and carbon emissions, but there are still major questions regarding the network technology behind them. Andy Slater outlines the key debates to consider.

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here is no doubt that smart meters help users reduce their carbon footprint. To manage the rollout of a smart meter network in the UK, the government this week launched a consultation process and documentation, which will lead to the technical standards and regulatory framework for the UK smart meter network. Currently, the government and industry there are considering which communication solution would be best suited for a UK roll-out; the two most discussed options are cellular and long-range radio, though other solutions including power line carrier and mesh solutions are also possible. British Gas was one of the fi rst to announce a trial of smart meters, using cellular technology in early 2010. However, more recently, BT has announced a partnership with Arqiva and Detica to offer a dedicated and secure long-range radio communications solution for smart metering. So, which solution suits a smart meter and smart grid network requirement best? Some of the key requirements of a smart meter network are: a high fi rst-time connect rate for meters, data security, interference-free communications over the life of the asset and suitability of the network to be used for smart grid as well as smart metering applications. It is in these key areas that some technologies fall short, which we believe makes a long-range radio solution, designed from the outset to undertake this function, the most suitable option. Long-range radio has proven capabilities across a number of critical operational aspects, including meter first-time connect rates, which have been proven to be above 95 percent in live deployments. Other technologies are not as successful, with cellular sometimes reported as low as 80 percent. Secondly, dedicated radio spectrum as used by licensed long range radio is free from interference from competing radio sources. Th is can’t be said for free access/radiate spectrum, as used by mesh radio solutions, which have to compete to be heard. Whilst this may give acceptable performance in rural areas, the UK is predomi-

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nantly an urban environment, with many devices competing to use this spectrum. Th irdly, smart meters are not just for electrical utilities. Gas and water utilities are also making the move to smart metering and require the same performance that only a long-range, purpose-built communications network can provide. Power line carrier alone cannot provide communication to unpowered gas and water meters, adding significant cost; or as in Italy, the system is owned by the electricity utility and can’t be re-used for other utilities. Cellular radio has difficulty reaching water meters, which are often underground and their broadband signals drain batteries within gas and water meters, forcing more frequent replacement. In the US and other countries, smart meter and grid technology selection has been left to utilities. However, the UK is adopting a different approach. We believe this network will be a piece of critical national infrastructure and so must cover both electricity and gas metering and ultimately extend to water meters. It must also support smart grid applications, which enable utilities to manage distribution automation and introduce demand management. Such a comprehensive approach requires high service levels and a designed-for-purpose solution. Whichever communication network the UK government selects, it must be one that rolls out successfully, offers the best quality of service, builds customer confidence, and ultimately enables energy users to make informed decisions to help reduce their carbon footprint. If the government selects a network that does not meet these needs, any environmental or fi nancial savings could be lost and additional costs experienced. „

Andy Slater is a chartered engineer and Director at Sensus, a global leader in utility infrastructure systems and resource conservation, providing advanced metering infrastructure, smart grid and conservation solutions for electric, water and gas utilities.

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INDUSTRY INSIGHT

The smart consumer Alexander Philbrook guides us through what it takes to ‘create’ the smart consumers of the future.

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he quote by Arthur C. Clarke, “Any sufficiently advanced technology is indistinguishable from magic,” is an appropriate description of the upcoming energy market. A world where smart grids and smart appliances operate seamlessly and with maximum efficiency sounds very much like magic. But the key to unlocking the future ‘magic’ world lies within our reach, and the key is by enabling and creating the smart consumer. The smart consumer is an energy user who has information at their disposal to make informed decisions about current and future energy needs. The smart consumer knows, before turning on the light switch, refrigerator, or assembly line, the ‘cost of use’ for the power needed to operate their life or business. Based on historical use, projected needs and external factors, the smart consumer knows what their requirements will be going forward, providing leverage in purchasing a supply of future power to meet current needs and controlling future costs. To a business owner, the cost of energy becomes another data point in their growing business intelligence portfolio. Creating a smart consumer requires three key components: desire, knowledge and tools. Each of these components represents a separate list of achievable goals, but will be most successful when approached in an integrated fashion.

Desire Desire to save power is growing among energy users worldwide. Both the product manufacturing and energy industries are harnessing the opportunity of the new ‘energy saving consumer’ in developing more efficient products and providing the purchaser more information on smart energy choices. Simultaneous with the desire to use less power is the increasing desire to use more devices that demand power. Thus, desire alone is not sufficient to create a smart consumer.

Knowledge Once an energy user desires to save power, they quickly realise a missing ingredient is knowledge. Once the smart grid, smart meters and smart appliances are all turned on and functioning, the energy user will be overloaded with data, but will not necessarily have more knowledge. It is important that energy users are able to take all of the information being provided and use it to achieve powersaving goals.

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Knowledge about power will come from integrating smart data and energy experts. Smart data coming from the smart grid, smart meters, appliances, utilities and other providers will be integrated with projections of weather, energy pricing and the user’s own internal data, providing understanding of use that can be used by energy experts. These experts bring knowledge about energy best practices and cover the full range of the market – from how to buy power to how and why to use more efficient Alexander Philbrook

“Simultaneous with the desire to use less power is the increasing desire to use more devices that demand power” devices. Effective energy management is a key component in creating the smart consumer, enabling energy users to focus on their interests and core business, knowing their energy costs are controlled.

Tools When complexity is added to a system, it is critical endusers who have the best available tools to manage that complexity. The volume of data that the smart grid will produce will be enormous compared to traditional energy grids. Tools that combine best practices and data provided by infrastructure elevate the energy consumer to that of the smart consumer. Sophisticated energy management tools take the results of an energy audit and integrate consumption and pricing data with the smart meter and appliances. The result is a tool that provides insight and analysis of energy consumption – past, present and future – but more significantly, a framework for creating actions that can control costs. The missing piece to the success of the ‘smart’ initiative taking over the power industry is the ‘smart consumer’. If the industry is able to create this consumer, then the goals of providing more power to more people without significantly increasing the cost to serve can be achieved. Smart consumers can be created by harnessing the current consumer desire to control costs, and go ‘green’ providing knowledge and tools that realise their desire. „ Alexander Philbrook is Managing Director for the European business of E:SO, a division of Ista. E:SO Europe provides innovative consumer utility meter, data services, energy management and reporting for multi-site commercial consumers. E:SO is also looking to extend its successful US ASP utility billing applications into European suppliers and utility companies.

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move

The smart With more and more companies looking to implement smart metering systems, three industry experts outline the pathway to success.

What advice would you give utility companies who are looking to implement smart metering systems? Michael Untiet. Initial approaches in smart meter systems were defined solely by the requirement for remote meter reading of values and the functions of the relevant metering points. Th is method is easily traceable and technically feasible. We now see that metering point operators, who understand their role in the market and have defi ned their data flows in business processes, have it significantly easier when taking the next step. That includes the concept for a service-oriented IT architecture, where a meter data management component draws the data centrally and efficiently, and makes it available for the various business processes. These processes are based on specific standards for communication and can be integrated into a variety of AMI systems. Metering points will continue to develop in terms of technology, which means that recommendations will only ever provide a temporary evaluation. In my opinion, it is much more important to think about the storage and further processing of the data, as this will be the only sure way to economically cope with future requirements for process efficiency, customer focus and additional topics like smart grid.

Henrik LindÊn. When looking at different technology solutions, don’t forget to take a look at all of the business opportunities that will be found. Smart metering can not only help to

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run the core business of the utility more efficiently, it can also extend the business into new market areas. The choice of technologies is very important for the future business strategy of the utility. Hence, it is not just a choice of low cost – it’s a choice of opportunities. Bo Harald. My advice would be to make anything you offer clinically simple and then simplify and simplify it. Smart metering obviously needs to be connected to a personal internet connection and there I would advise my utility companies to team up with the banking sector so that when people sign up for electricity contracts, they can sign the contract electronically with their banking codes as they do for a loan agreement and so forth. The next piece of advice would be to start with invoicing now. Th is is the most obvious connection with the customer and we’re undoubtedly moving into an age where there won’t be any paper invoices at all. Many customers see these invoices as contributing to cutting down 10 million trees – every invoice will do its part of that – so smart metering without the correct invoicing and portals won’t make any sense at all. What is the importance of two-way communication in providing effective intelligent metering to the utility industry? HL. With two way-communication, the possibilities don’t grow by two – they grow by much more. Suddenly, you are able to not only read a value, but also control the meter and all devices connected to it in a building. Th is can be used to switch on and off the energy supply or different applications that use energy. To be able to monitor and control all this will be extremely valuable to becoming efficient in the use of energy and in the aim of the overall target, to save our environment. BH. With business-to-business, any invoice that is sent from the business has to be totally automated and digital. However, from the consumer perspective, I would not advise designing an extensive system that is reliant on two-way communication from a couple of angles. First of all, it’s very expensive to run, and secondly, it’s also very easy to write a message to a consumer that nobody understands at the other end and it’s difficult to get out an answer. MU. One of the most significant advantages of smart metering for utility companies is two-way communication. Its advantages go beyond the much quoted use case in terms of support for requirement management by way of switching or service reduction. Communication can support various additional business processes, for example exchanging configuration data for the process of meter replacement, the modification of operating times or the analysis within the scope of maintenance work, which can contribute towards cost reductions for metrology. And we must not forget future requirements for the smart grid, for which bidirectional communication will be a prerequisite.

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What are the benefits associated with different communication types, for example PLC, GPRS and RF? BH. GPRS is providing its value in many places – and that’s the direction it’ll continue to take. It’s already happening with intrusion alarm systems and the like, so why not with meter reading – there’s defi nitely the space. MU. Our many projects have shown that it isn’t enough in terms of availability to rely on just one communication channel. Existing infrastructures and possibly costs could be an argument in favour of PLC. Traditional communication providers are however able to quickly and securely provide services based on their DSL networks, or in case of insufficient availability, via GPRS. Procurement and operation may, on the other hand, be quite costly. We also see that there is currently a lot of development going on in all technologies, which will open up new possibilities. That is why it is important to back AMI, which supports all communication channels and is open for the integration of future developments.

Michael Untiet joined KISTERS AG (Aachen, Germany) in 2005 after having worked in the energy business with several companies for over 20 years. At KISTERS he is the Business Development Manager for energy market and control solutions. As Branch Office Manager of KISTERS in Oldenburg, Untiet is also Head of the business unit control systems and sales manger for Northern Germany & international.

HL. Regarding GPRS and other RF systems, you have all the benefits of wireless two-way communication. GPRS, mobile phone systems – has the advantage that the infrastructure and maintenance is already taken care of by the mobile network operator. Other RF systems can be developed easily for ‘free’ frequencies and without the control from operators. Since Smarteq is an antenna company, PLC is not a technology that we are involved in except when the data, collected by PLC, is transferred from a wireless concentrator that needs an antenna. However, the biggest benefit we hear of regarding PLC is mainly cost, since you can use existing wires. Our experience – and this is also our belief – is that a mix of the different communication types will often be used for greater effect. How important is the need for high-quality, reliable components to help utility companies ensure their smart metering systems are delivering maximum efficiency? HL. A smart meter is supposed to deliver accurate performance for many years. To achieve this objective, you need to use high-quality components and materials to make products that are engineered to withstand all possible weather and other environmental conditions that can occur during the meter’s long lifetime. When it comes to antennas, they are the crucial link in a wireless system and performance is very important. Furthermore, an antenna should be easy and quick to install together with the meters as this can save a lot of money during the rollout projects.

Henrik Lindén, CEO of Smarteq, has a wide knowledge and experience – both technical and commercial – of antenna products and the wireless market. In 1999, he joined the historically well-reputed Swedish antenna company Allgon as Product Manager. The business area was sold to Smarteq in 2000. Over the years, Lindén has held different positions as Automotive Business Manager, CTO and Sales and Marketing Manager.

MU. Most certainly, requirements for reliable, highperformance systems have taken a back seat in the past, as many pilot projects focused on technical feasibility for low volumes at ideal conditions. The result was solutions that supplemented existing systems with some additional functions without the requirement of having to support all

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business processes reliably – specifically in terms of their international diversity. KISTERS can benefit today from many years of experience in designing and developing energy data management systems, since our systems have always been a central data conversion hub between the various business applications. As we have learned from our initial extensive rollouts for smart meter projects, this is where the decision is made in terms of system reliability for the support of business processes and whether or not an energy supplier has a future-proof market position based on an efficient meter data management system. The basic requirements here are high-quality components – like the ones KISTERS has been developing and successfully deploying in the energy sector for years. BH. Obviously that is very important, otherwise things will become overly expensive very quickly. Standardisation issues are also becoming important – and I think they should be driven with more enthusiasm. Without standardisation, you have no proper competition and

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Bo Harald is Head of the Executive Advisors Unit at TietoEnator. His aim is to concentrate on consulting and advising on services for the digitalisation of business operations. Harald previously worked for 30 years in the world of banking, with particular focus on e-banking with the Union Bank of Finland. He continues to specialise in e-habits created in banking with TietoEnator.

without proper competition, you don’t achieve any real progress. I would say that this should be an ambition for companies as it will be very difficult to get a fast payback without reliable and cost-effective components. Again, that will not prevail if standardisation isn’t present. If you look at standardisation in the area of electronic invoicing, which is what I specialise in, I can certainly see a huge leap forward this year. If I judge from here that we’ve been taken aback by our levels of progress, why shouldn’t it also happen in areas such as meter reading? It’s probably going down the same road but will take a bit longer because there are some hardware aspects here that obviously need to be worked on. The all-important aspect for the industry is to look at what we’re doing with our customers. The aim is to cut administrative costs in half – that can be done by moving to electronic invoicing. On the back of it, you can automate accounting, processes, cash estimates; pretty much anything. It would be really important for the utilities world to commit themselves to this for the good of society at large. „

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A truly intelligent grid can’t exist without the union of ICT and energy, argues Duncan Botting.

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In his keynote address at the recent Next Generation Utilities summit in Bremen, Germany, Duncan Botting, Managing Director of ITI Energy, set out some home truths about the smart grid. Here we present the highlights of his speech.

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’d like to talk today about the language of smart grid – many of us are talking about smart grid, yet each of us comes to it from a different context. We either come to it from an academic point of view, a generation point of view, a transmission point of view, or a distribution point of view. Language is used quite freely, and sometimes we don’t understand it. What is the vision of smart grid and what do we understand? What language are we using with smart grid? I’m going to look at the title because it’s quite important to understand the language of the title before we move forward.

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Oxymoron or synergy? If you take all of the components of a smart grid, when you put them together it adds up to something bigger than just the single component. So are energy and IT a synergy or an oxymoron? We are in a situation where there’s a belief that all we have to do is throw in IT and a power network and suddenly it becomes smart. I question that, and I question the people who believe they understand that the IT is the smart grid. The integration of the power network with the ICT is where the real power comes from. We all understand energy and deal with it every day. If you’re a power engineer you get very upset when the media use the words energy and power interchangeably. There’s a language issue, because they don’t understand what it means.

European Energy Grid Initiative The European Electricity Grid Initiative (EEGI) Roadmap 2010-18 and Implementation Plan 2010-12, has been prepared by ENTSO-E and EDSO-SG in close collaboration with the European Commission, ERGEG and other relevant stakeholders. The EEGI is one of the European Industrial Initiatives under the Strategic Energy Technologies Plan (SETPLAN) and proposes a nine-year European research, development and demonstration programme to accelerate innovation and the development of the electricity networks of the future in Europe. The programme focuses on system innovation rather than on technology innovation, and addresses the challenge of integrating new technologies under real life working conditions and validating the results. The SET PLAN supports European energy and climate policies through technology innovation. It aims to coordinate efforts at national and EU level through joint strategic planning and effective implementation mechanisms. European Industrial Initiatives are industry-driven strategic technology alliances to address key low-carbon energy technologies. ENTSO-E is the European Network of Transmission System Operators for Electricity, representing 42 Transmission System Operators (TSOs) from 34 countries. Founded in December 2008, it’s legal raison d’être is Regulation (EC) 714/2009 on electricity crossborder exchanges.

Different outlooks In terms of what we truly understand about energy and IT, there are some differences. So what is IT? I’m an electronics engineer, and electronics to me traditionally meant hardware. Then I understood that the hardware is useless without soft ware, and soft ware became the big topic. And then the connection of hardware and soft ware and between groups of hardware and soft ware became more important, followed by the rise of the web. Everybody has a different context; they sit in one of these different worlds. Take wide-area networks (WANs) for example: vectors being monitored second-by-second around the network. Th is is a specific application of ICT

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EDSO-SG (European DSO Association for SmartGrids) has recently been created by a number of distribution system operators and is open to wide membership. The two associations, jointly with the European Technology Platform SmartGrids, will play an important role in the planning, monitoring and dissemination of this initiative. In the dissemination of the results regarding the distribution network, Eurelectric will also play a key role.

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to the power network. Another example is factory storage. The ICT is the important bit of the power storage; without it the whole thing falls apart. Then we have centralised versus distributed. Many people from the generation side would take the generation of centralised district power as the meaning of these words. But we could be talking about distributed power, such as the intelligence to deal with demand-side participation. What are these different terminologies we’re all using so freely? We all speak different languages and understand something completely different to the person speaking to us. Everybody thinks they understand exactly what the other person is saying, but they don’t. One of the real issues is this issue of ‘smart’ or ‘dumb’. I believe smart metering can be pretty dumb. The functionality that we are getting immediately is automatic metering. In terms of the integration into a smart grid, the active network isn’t going to be there to be able to react to the dynamic data that we’re getting. Here we have the two specific networks that we’re talking about, energy and IT, or power network and IT. It’s all about infrastructure, the bottom rung of the intelligence infrastructure. In terms of traditional thinking, what do we do to deal with a complex problem? We break it down into a simpler problem, and we deal with that. Once we get a solution out of the simple model, we take the solution, put it into action, and then are surprised it doesn’t solve the original problem. Instead, it causes other problems, because we’ve made assumptions and made it simpler. We end up with silos of transmission and distribution and generation, and we haven’t done very well dealing with the real complexity in each of those silos. When you come to a smart grid, it’s the matrix across all of those that is the difficult part. We need to now do systemic thinking from a smart grid point of view. The easy wins have gone and the difficult questions have to be dealt with.

Design elements If I asked power engineers to design an energy management system, with the solution that we’ve used for smart measuring in the back of our minds, how would we develop an energy management system?

What does ‘smartness’ NOT mean? The smart grid relates to the electricity network only (not gas) – it concerns both distribution and transmission levels. Smart grids are not new ‘super grids’. They will not look significantly different to today’s conventional electricity grids transporting and distributing power over copper and iron. However, smart grids will lead to improved cost-efficiency and effectiveness. The smart grid is not a revolution but rather an evolution or a process within which electricity grids are being continuously improved to meet the needs of current and future customers. There will not (and cannot) be any ‘roll-out’ of smart grids, since such a roll-out is continuously occurring. Although the concepts are sometimes confused, the smart grid is not smart metering – the smart grid is much broader. Source: www.smartgrids.eu

It would be useful to make a comparison with the car industry. When we design a car, do we have a display on the dashboard showing torque, engine temperature and all of the other elements we would need to understand how to drive it? No. Did anybody ask the customer what energy management system they wanted? No. The car industry said, “What they want is to drive the car with good fuel efficiency and drivability.” So what are we doing with smart meters? We’re saying to the customer, “You need a PhD to understand all of the information we’re going to give you so you can control our networks for us,” because that’s effectively what we’re asking them to do.

“We are struggling to deal with the actual components and elements that we’ve got on the smart grid, and we haven’t got a connection between them”

What does ‘smartness’ imply? Smart grids do not only supply power but also information and intelligence. The ‘smartness’ is manifested in making better use of technologies and solutions to better plan and run existing electricity grids, to intelligently control generation and to enable new energy services and energy efficiency improvements. Source: www.smartgrids.eu

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Second by second they’re going to watch the display on a smart meter and understand that they have the opportunity to change the way the network operates; whereas an energy management system would have taken all that data, not shared it with the customer at all, done it automatically behind the scenes and given them the solution. When I talk about smart and dumb, we have some issues around how we see changing behaviour. The way we are going, we are not delivering a smart grid. We are likely to have more of the same: a more

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What is a smart grid? Although there is no standard global definition, the European Technology Platform SmartGrids defines smart grids as electricity networks that can intelligently integrate the behaviour and actions of all users connected to it – generators, consumers and those that do both – in order to efficiently deliver sustainable, economic and secure electricity supplies. Source: www.smartgrids.eu

traditional but bigger infrastructure, not integrated, but connected. Companies in the industry are interested in connecting. But it’s somebody else’s problem once they have. As long as they can sell their product they’re happy. In terms of how we efficiently integrate that, with maybe a connection to the demand side to balance some of the intermittency problems, there might be a much different solution to the one we’re looking at. If we get into the detail of a smart grid, you will see that we’ve gone from one-way power flow to two-way power flow. What’s the biggest issue in the distribution networks that we haven’t even started to look at? Do we know how many electromechanical devices we still have on the distribution input? Do we know how smart these electromechanical devices are? There’s a huge problem in terms of the detail that we’re not going to get into. We’re talking about big scale things; it’s easy to get a smart grid. But the investment in people skills is also going to be huge.

“We’re saying to the customer, ‘You need a PhD to understand all of the information we’re goingX to give you so you can control our networks for us,’ because that’s effectively what we’re asking them to do”

The biggest barrier we will have is fi nding the people with the right skill sets to understand and know that they’re no longer just energy, no longer just ICT, but the true integration of those two elements. And it’s clear to me that we don’t have that alpha presence, not even in our latest thinking. For the future, because we are going to go to a situation whereby the speed of change increases, and because politicians will want and need to differ on something, it’s going to be hard for us to deliver something that is useful and flexible and economically viable, versus Asia and the US, because both of those areas are playing a much smarter game now. Energy and IT are not separate entities, and we need to re-connect and redraw the story of energy and IT, rather than allowing Oracle, IBM and SAP to tell us what the power system will look like in the future. Grid architecture is the underlying key issue. It is the technical architecture of the power network that needs to change. What we have done over the last 20 to 25 years is overlaid the infrastructure with different models, but we have not changed the physical architecture. Now we’re going to have to change that physical architecture at the same time as changing the promotional models and the environmental models. In terms of true intelligence, I would say we are heading towards a situation which is a bigger version of the traditional solution we already have, and not a smart grid at all. „ Duncan Botting is Managing Director of ITI Energy.

Major change As we move towards adaptive protection, this is where you change the curve in real time. We’re going to go from a passive grid of distribution, where you understand what the peak demand load is, because you designed the network for it. That’s what we used to do. Now we’ve got to make it fit such that we can use the network. The problem is that we are struggling to deal with the actual components and elements that we’ve got on the smart grid and we’re rushing forward in trying to put regulation around much of this, so we haven’t got a connection between the them. There are projects going ahead where we do not understand what effect policy and regulations have had on one hand versus the technical solution that may or may not operate on the other. In my mind we need to look at this as a systemic problem. I believe there’s a whole range of detail that isn’t being discussed and needs to be discussed before we rush headlong into a solution. For instance, smart measuring; we’re rolling out smart measuring come what may by the end of 2017. Is that the right solution? How smart is that implementation versus the way that it’s going to interact in the future? The concept then that we move towards is a totally integrated process, and totally integrated means the power network needs to use ICT, not ICT needs to use the power network.

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What does a smart grid do? A smart grid employs innovative products and services together with intelligent monitoring, control, communication and self-healing technologies in order to: • Better facilitate the connection and operation of generators of all sizes and technologies • Allow consumers to play a part in optimising the operation of the system • Provide consumers with greater information and options for choice of supply • Significantly reduce the environmental impact of the whole electricity supply system • Maintain or even improve the existing high levels of system reliability, quality and security of supply • Maintain and improve the existing services efficiently • Foster market integration towards European integrated market Source: www.smartgrids.eu

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EXECUTIVE INTERVIEW

A smart approach to the future Jan Mrosik, CEO of Siemens Energy Automation, explains the challenges facing the energy sector and the need for smart grids. What are the main trends and challenges in the energy sector today? Jan Mrosik. The energy landscape is characterised by several key drivers, the three main ones being: growing energy demand, the need for sustainability and global pressure to cut CO2 emissions. By 2030, power consumption is expected to grow from 20,000 TWh today to roughly 33,000 TWh; that’s a leap of over 60 per cent. The primary cause of growth is demographic change – more people need more electricity. As living standards improve, so does the use of electrical devices, equipment and machines. Th is is especially pronounced in urban centres. As demand growth continues and energy prices rise, countries are also looking to reduce their reliance on foreign energy sources. We have to optimise the use of energy sources that are becoming increasingly scarce. The whole sustainability issue combined with the global pressure to cut CO2 emissions has seen a massive move towards renewables. In Europe and the US more renewable capacity, in particular wind, has been added than any other form of generation. These renewables have to be effectively integrated into the grid. As a key player in the energy market, can you give some examples of how Siemens is helping to meet these challenges? JM. Siemens is the only company with products and solutions for the entire energy chain, from oil and gas production, to power generation, as well as distribution and transmission, right down to private homes. Th is means we are well positioned to meet the global need for increased electrification and the supply of clean, sustainable power. Growing demand and urbanisation calls for greater grid investment in order to improve electrification. China is a good example of where our high voltage direct current (HVDC) systems are being used to transmit clean hydropower over large distances to where the power is needed. Utilising hydropower in China is also a good example of making use of sustainable resources. At the same time, it helps to cut CO2 emissions. We are a strong player in clean renewables. Siemens Wind Power offers highly efficient, solid and reliable wind turbines for both onshore and offshore wind farms. Our solar business is also growing rapidly. We are focusing on two technologies – large-scale photovoltaic plants and concentrating solar plants. Our unique expertise and experience throughout the entire energy conversion chain helps

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us take advantage of the full potential of these technologies and make the most of an investment in solar power. We are also improving the efficiency of our fossil fuel plants, which in turn reduces fuel use and emissions.

Jan Michael Mrosik began his Siemens career in 1996 in information and communication networks. In 1998 he took responsibility for the communications business with Vodafone, and in 2002 he transferred to Siemens Telecommunications South Africa, managing the company as CEO from 2004. In 2007 he became CEO of the business unit Energy Automation, which plays a key role in Siemens’ smart grid activities.

What is the role of the power grid in meeting the goals of the changing energy sector, and what are the limitations of today’s grids? JM. The power grid plays a crucial role in the changing generating mix. In the future, the huge demand for energy will, to a greater extent, be met by renewable sources. The growth in generation from variable sources such as solar and wind is having the biggest impact. Such a high degree of renewables cannot be accommodated without a properly adapted transmission and distribution grid. Most of today’s power grids were built decades ago and do not have the capacity or flexibility to handle the amount of variable generation coming on to the grid. Today, generation from fossil energy sources follows load; i.e. the generation is adjusted according to forecasted load. By the end of the 21st century, in a sustainable energy system, load will follow generation; i.e. the load is managed according to generation from renewable energy sources. What needs to be done in terms of changing our grids and why? JM. We need a grid that can balance fluctuating renewable generation with demand and we need to achieve a scenario where load follows demand. Additionally, consumers may turn into ‘prosumers’ – entities that both produce and consume electricity. The grid will also have to be adapted for the eventual rollout of electric vehicles – a prosumer that not only needs to have a charging infrastructure but also has to be able to feed energy back into the grid to help balance fluctuating generation. These new highly efficient grids therefore need to be made ‘smart’ so that they can respond to load shift ing. Importantly, they also have to be blackout-proof, with built-in capabilities to prevent outages and effect automatic restoration in the event of emergencies. Developing a grid with these capabilities will require significant deployment of IT to provide an intelligent network that allows bi-directional communication between electricity suppliers and prosumers. You talk about making grids ‘smart’. What are the capabilities of smart grids?

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EXECUTIVE INTERVIEW

JM.These grids will permit the control of distributed and renewable generation, as well as more reliable forecasting and planning. Decentralised power generation would be managed like a single power plant, allowing power producers to optimise generation costs and the use of grid assets. Th is will all be balanced against the maximum use of CO2 -free energy. Th rough smart grids, energy providers can offer smart metering and better billing. The benefits for the consumer could be tremendous. They will have the possibility to monitor and manage their energy use. Controlling smart equipment in their homes, for example washing machines and other domestic appliances that switch on automatically when tariffs are low, would also be possible. What is Siemens doing in the area of smart grids and how have you become such an important player? JM. Siemens covers every aspect of the smart grid. We have provided intelligent energy automation solutions for many decades and have the know-how for complex interacting systems in grid operation. Siemens is already a world-leading provider of technologies like HVDC and FACTS, energy management systems and products for grid automation. We cover everything – generation, grids, consumption, buildings and industrial automation. Siemens has worked with its customers to develop tailored solutions in several areas. The ONCOR project in the US, for example, utilises the implementation of a smart energy management system 2 on a distribution grid covering a 120,000 km area. The system helps to reduce outage time by delivering solutions for outage management, energy management and mobile workforce management. We have also implemented a virtual power plant (VPP) for example for RWE, which has already been in operation since 2008. A VPP aggregates the capacity of many diverse distributed energy resources (DER), to create a single operating profi le. Essentially a customer’s portfolio of buildings and optimised supply and demand-side energy resources is transformed into a 24/7 virtual power plant. Siemens’ decentralised energy management system (DEMS) helps generators get a grip on all the mentioned distributed energy sources and intelligent loads. With DEMS, distributed power generating units can be combined with intelligent loads to form a large-scale virtual power plant. The system uses important information, such as weather forecasts, current electricity prices and the energy demands, which forms the basis for drawing up and monitoring a generally optimised dispatch plan. In the area of transmission system reliability and security, we provide a soft ware solution called SIGUARD, which processes data of connected Phasor Measurement Units in real time. This system is used to monitor power system dynamics and to analyse large area outages in detail. This is a powerful tool that helps to reduce the risk of blackouts. New requirements are arising for automation, monitoring control and protection of distribution substations

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Most of today’s power grids were built decades ago and do not have the capacity or flexibility to handle the amount of variable generation coming on to the grid

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and ring main units. Today’s distribution grid operation is mainly characterised by manual procedures. To meet the challenges of tomorrow’s grids we are enhancing our control centre solution to enable a smart, self-healing grid, combining excellent capabilities for integration of distributed and renewable generation and demand response. Siemens offers complete solution packages for smart metering and distribution network automation. Our ‘Meter-to-Bill’ solution combines sophisticated metering functions, the management of distribution networks and the integration of back-end IT systems. It is specifically designed to suit the new challenges that liberalised energy markets pose to distribution network operators and energy retailers. On the demand side, Siemens’ smart building solutions help users to take advantage of automated demand response programmes to optimise interactivity with the smart grid for maximum energy savings. Our uniquely broad presence in the energy sector is defi nitely an advantage. It gives us a full understanding of how the various links in the energy conversion chain connect. We are therefore one of the few players able to meet the challenge of delivering the complete smart grid. „

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EXECUTIVE INTERVIEW

Success in the pipeline Christina Granacher outlines the twists and turns in keeping your plastic pipelines clean and efficient.

Plastics Europe identified significant savings in energy consumption and greenhouse emissions when metal products were replaced with plastic products

How are plastic piping systems used in power stations? Christina Granacher. Within the wide field of energy production, there are many different processes, but they all have one thing in common: they all need process water. The whole water treatment process with reverse osmosis, chemical conveyance and dosing, neutralisation and water distribution can be 100 percent fabricated and installed with highly reliable and totally corrosion-free plastic piping systems. Waste water needs to be neutralised before being discharged into public sewage treatment plants. All these operations must be properly monitored and controlled with M&C. For alkaline neutralisation, several chemicals are commonly used, like caustic soda or lime milk. For acids, sulfuric acid, hydrochloric acid or carbonic acids are often batched. Precise dosing results in a reduction of chemicals and longer periods of dosing. Chemical savings and less water discharge plus energy savings due to reduced pump capacity add up to unbeatable TCO of plastic piping systems. Dosing or dilution of chemicals, especially harsh ones, requires highly specialised and safe operations. Depending upon the media, GF specifies the most suitable piping material and jointing technology. A double containment system to convey harsh chemicals with optional automatic leak detection is also available for maximum safety on site. Th is means customers receive cost-reducing solutions over the entire lifetime of the system. Other applications where power companies can profit from installing GF system solutions are gas distribution lines, flue gas desulfurisation and safety showers. Gas distribution lines are reliable and efficient by using non-corrosive systems with full traceability of welding technology, guaranteeing safe use for over 50 years. Easy maintenance is possible under pressure, enabling repairs without interruption of consumption and durable leaktight systems with low-dig installation methods. What impact does the use of chemicals have on the condition of piping in power stations? CG. Water used for power plant cooling is chemically altered for the purposes of extending the useful life of equipment and to ensure efficient operation. Demineralised regenerants and rinses are chemicals employed to purify waters used as makeup water for the plant’s cooling system. Cooling tower blow-down contains chemicals added to prevent biological growth in the towers and to

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prevent corrosion in condensers. Chemical corrosion happens only when a pipe transports corrosive chemicals or water which contains dissolved oxygen. In steel or cast iron pipes, the metal reacts chemically with water and oxygen to form. Galvanic corrosion is common in metal pipes due to the existence of many dissimilar metals in a pipe. For all the above-mentioned applications, metal piping is used, and for power plants at coastal sites even ductile iron piping. Engineers at power stations are therefore looking for the best solution to protect all piping from chemical, galvanic or salt water corrosion. What are the benefits of using corrosion-free piping systems? CG. Metal pipelines need to be protected and constantly monitored for corrosion and possible leakages. This is not necessary when choosing the most suitable GF plastic piping system. Highest chemical resistance means no rust, no incrustation and, as a consequence, significant energy savings due to long-lasting system solutions. Additionally, experience has shown that there are over 15 times fewer leaks compared to steel in water distribution lines. Onehundred percent traceability in welding technologies designed for the specific systems results in the highest quality of the complete installation. In the end, this alone can reduce the loss of potable water by about 20 percent, thus also saving money. How can plastic piping help ensure that a power plant generates a lower carbon footprint? CG. The carbon footprint represents the amount of greenhouse gases that are emitted in the development, engineering, production, transportation, usage and recycling of each product during its whole lifetime. In a comprehensive study, Plastics Europe identified significant savings in energy consumption and greenhouse emissions when metal products were replaced with functionally identical plastic products. For example, the carbon footprint of PE piping is five times lower than that of a comparable steel pipe. „ Since 2009, Christina Granacher, Head of Global Market Development and Innovation, has led a global team which manages eight market segments: energy, water treatment, water and gas distribution, chemical process industry, building technology, food and beverage, shipbuilding and microelectronics. She joined Georg Fischer Piping Systems in 2004 as global market segment manager for the chemical process industry and power plants. She holds a degree in plastic engineering.

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Clive Deadman outlines the benefits of effective asset management to companies in the utilities sector.

STRATEGIC ASSET MANAGEMENT FOR THE POWER AND GENERATION INDUSTRIES

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he power and generation sectors have pioneered many modern strategic asset management tools and business systems. It is now common, for example, to fi nd these industries making frequent use of a range of tools – such as acoustic and condition monitoring, and thermal analysis in real time – to help decision-making. Th is pioneering approach to asset management has allowed the industry to address many recent challenges and it will also enable it to tackle the fundamental issues of the next few years. In order to understand these issues I will be drawing from my recently published book, Strategic Asset Management: the quest for utility excellence to answer to the following four questions: What exactly do we mean by ‘asset management’ in the power and generation sectors? How good does asset management need to be so it adds more value than cost to our businesses? How are leading asset owners managing their assets, and what challenges have they had to

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overcome? How might great asset management help us address our challenges and opportunities in the future?

Asset management Asset management is a relatively new name for something regulators, engineers and the boards of infrastructure-owning companies have wanted to do for years. The Institute of Asset Management’s defi nition of asset management is: Systematic and coordinated activities and practices through which an organisation optimally and sustainably manages its assets and asset systems, their associated performance, risks and expenditures over their lifecycles for the purpose of achieving its organisational strategic plan. Put simply, asset management is an activity that allows us to see and manage short- and long-term asset risk, as well as performance and cost, and so achieve our objectives. In practice, if we are to do this well we must be able to bal-

ance local issues, such as improving the lubrication of equipment or reducing overtime spent, with strategic issues, such as the need to close or renew power stations. Further complications arise because the cost of many important issues – including pollution, safety, land consumption and the future cost of asset failures – is hard to predict and value. Historically, strategic investment decisions have been made at head office in discussion with policy-makers while local decision-making has been done by local staff, as they have had the best understanding of local priorities. However, as business and asset management systems grow in complexity and capability, the boards of companies and regulators have a growing duty to understand all the opportunities and risks they are managing. It is tempting to think ‘better asset management’ is a modern phrase for greater central control over issues that have historically been managed quite satisfactorily by local staff. How-

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ever, that is not the case for two reasons. Firstly, local frontline staff may not appreciate the full consequences of all their actions and any major disaster – such as the recent problems in the Gulf of Mexico – is evidence of this. Secondly, local operational staff must also be invited to make significant contributions to major strategic decision-making. For example, the flooding of New Orleans by Hurricane Katrina in 2005 was a disaster that could have been easily avoided if policy-makers had taken heed of the valid concerns of technical experts and frontline staff. However, introducing the new business systems and ways of working required by modern asset management approaches is expensive, and can be extremely disruptive. It is therefore important that the approaches used are tailored to the needs of the organisation. At one extreme may be Joseph Stalin, the Soviet dictator, who apparently had train drivers shot for being late, and others executed for going too fast and wearing out the rolling stock. Fortunately, such draconian approaches to reward and punishment aren’t tolerated these days. However, a poor asset management system will mean the business cannot manage longterm value. Likewise, an overly complex asset management system will saddle an otherwise efficient business with complexity and cost. Accordingly, business leaders must balance asset management functionality with cost and complexity if they are to earn and deserve the confidence of the board and front line staff.

Figure 1

Added value

industries, they operate in extremely challenging ‘climates’. Th is is because they must have the capability to operate at the highest levels of performance at those times of the day when demand is greatest. Furthermore, weather events, equipment failure in neighbouring countries and even television viewing figures can impose immense sudden planned production demands on the industry. As a consequence, the failure of energy networks or generating plants at times of peak demand can result in penalties or missed revenue payments of many millions of pounds an hour. Fortunately, power and energy industry equipment is tightly supervised and enjoys sophisticated instrumentation and control systems. For these reasons, compared with other utility sectors, the generation and energy industries have a lower level of unmanaged complexity than other utilities. If we view and contrast energy and generation in a ‘climate’ and ‘complexity’ map and contrast it with other utility sectors we see the picture illustrated in figure 2 emerge.

Two key questions which infrastructure asset owners grapple with continually are ‘How good does an asset management system need to be? and ‘How is such a system best implemented?’ There is no right answer to these questions; a small African power station and a large European wind farm would come to different conclusions. In my book, I propose six factors that assetrich organisations must consider as they fi nd their own answers to these questions: Climate, complexity, goals, tools, organisation and teams. Th ree of these factors (climate, complexity and goals) help defi ne how good an asset management system needs to be, while the three remaining factors (tools, organisation and teams) should be considered when making improvements to asset management systems. By fi nding a good balance for all these factors, organisations can make sure improvements or simplifications to asset management systems add more value than cost. The challenge for the power and generation sectors is that, compared with other utility

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Climate: The business environment, regulation, new legislation and impact Teams: Complexity: of external The importance of The internal events. shared compelling complexity of the common objectives asset base, inter-asset to enable effective dependencies and delivery of goals. utility size.

Asset management capability Organisation:

Goals:

Effective grouping of Corporate strategy, tasks with regard to ambition, values and Tools: corporate capability objectives. Balancing Establish policy and and optimising effectiveness and standards management, process design. efficiency. asset and unit cost registers, risk and investment management systems to enhance capability. Th is combination of the highly challenging climate and lower internal complexity of generating and power networks means they experience the greatest need for the most sophisticated asset management systems. They also experience fewer challenges in getting the basic asset cost and performance information that all great asset management systems need.

Management Extensive use of process controls, onsite control rooms, the low levels of bespoke customisation and comparatively high levels of supervision mean the capabilities of asset management systems in the generation and power industries are comparatively good. However, they also experience the greatest need for further enhancements. Accordingly, developments underway in leading energy companies include work on the following areas: introducing company-wide risk and benefits management systems that allow asset risk and performance to be compared between different operating power plants; and the introduction

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of real-time work order management, which allows the ‘in day’ flexing of resources and inventory between sites to optimise corporate performance and improve safety. Undoubtedly, these developments are invaluable for the boards of utilities, which need to ensure budgets are allocated efficiently. However, these new ways of working can be of great assistance to site and plant operators. For example, a typical pattern during the earlier years of a power plant may be as follows: A ‘rising star’ manager is appointed to oversee the design and commissioning of a new flagship project. When commissioning is completed and a routine is established, the rising star may be promoted and new managers appointed to develop their skills. The lower levels of maintenance typical of new equipment may become an established expectation and a drive to increase efficiency will invariably release any spare resources and inventory. In time, complex condition monitoring systems and information systems may fail to be fully maintained and enhanced. As equipment becomes older, the need for increased resources and innovation grows. It can sometimes be difficult to make a case for such additional resources. Company-wide asset risk and performance systems can provide support to an operational manager and ensure resources are made available before a major equipment failure demonstrates asset resilience is unacceptably low. Centralised asset management business systems also threaten the enormous authority and responsibility plant managers have typically held. For these reasons, change needs to be managed with great respect and sensitivity and the limitations of central resource management systems must be recognised. In other words, great asset management systems give the board and other stakeholders a ‘line of sight’ to important issues but rarely give them a ‘line of control’.

Challenges The power and generation sectors now face an unparalleled period of change. In the last 15 years the commercial landscape for our power and energy industries has been revolutionised. At the policy level, the introduction of legislation such as the Large Combustion Plant Directive means major industries like coal power generation have a limited life. At a political level, the recognition that carbon dioxide accelerates global warming means nuclear power is becoming popular while public resistance to coal is growing. We

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Challenging Climate

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Figure 2

Generation Wastewater

Gas Middle East Water

Electricity Transmission & Distribution Water

Canals & Waterways

Low Climate & Complexity are about to embark on an expansion of wind generation, while smart grids, smart meters and a range of distributed generation are being established. All these measures must be retrofitted on to a stressed and aged network. Given that the gas and electricity transmission and distribution network in the United Kingdom has an estimated replacement cost of £9000 (€11,000) per household, it is unclear if we could get it operating again if it ever became de-energised. The consequences of losing control are unacceptable. As households increasingly commission and operate solar, wind, hydroelectric and smart meters, we also need to understand what effect that may have on national power systems. Whether households will recognise their growing duty to maintain systems and provide appropriate data is unclear. Sadly, homeowners have a track record of being poor at asset management, as the slow take-up of home insulation (despite the quick payback) demonstrates. To conclude, it is not clear how a generating industry that has used sophisticated systems very effectively to run a small number of large critical generating plans might adapt to operating much larger numbers of wind power, combined heat and power units and solar sites. On one hand, we could imagine the existing data defi nitions and control protocols used will be successfully replicated into the growing number of new, highly flexible power networks and gen-

High Complexity erating assets. Under such circumstances an effortless transformation to smart grids and smart distributed generation could occur. Alternatively, the growing complexity and lack of standardisation that may arise from increasing volumes of distributed generation could start to overwhelm the industry. If this is the case, the generation and power industries may have to explore how the less sophisticated but more complex utility sectors – such as water and waste water treatment – have had to manage the semi-chaotic parts of their asset systems. Undoubtedly, this may require a level of network and generation redundancy and flexibility that would be unaffordable for most households, particularly in these times of austerity. The reality may lie somewhere between the two. What is clear is that the cost to society of losing control of this evolutionary step is unthinkable.„ Clive Deadman is the author of Strategic Asset Management: the quest for utility excellence. He has worked in both water and electricity utilities, and is also a member of the council of the Institute of Asset Management and the European Federation of Maintenance Societies. He can be contacted at c.deadman@ tiscali.co.uk. For more information on the book Strategic Asset Management: the quest for utility excellence, go to www. strategic-asset-management.com, or check out our book review on page 124.

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NEXT BIG THING 115

THE BIGGEST PICTURE Bradley Peterson gives P&E an honest depiction of the world’s energy levels and how a certain proposal could change the way we consume energy.

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recently attended a lecture by Dr. Daniel Nocera of MIT, sponsored by the Institute for Human Machine Cognition in Pensacola, Florida. Th is is an important topic to SAMI, as our clients use a lot of energy – and we help them use less. Nocera states that our world currently uses 12 terawatts (TW) of energy. Fossil fuels of oil, gas and coal make up 80 percent of that usage, with the others being biomass, hydro and renewables. He projects that by 2050 we will need 28 TW, assuming that the mature markets don’t increase energy usage (100 percent energy conservation). If everyone used energy at the rate of the US, we’d need over 100 TW in 2050. The 28 TW projection is based on a world population of nine billion. Nocera states that 240,000 people come into this world each hour and that most of the additional three billion people will be from countries currently using low amounts of energy per capita. So we’ll have three billion people served by mature energy infrastructures and six who can’t afford to build nuclear or fossil plants or a distribution network. But these poorer countries, per capita, will move up the energy consumption scale, mimicking the high energy consuming countries. We can easily see the trend now in India and China. He makes the case that we have plenty of carbon-based fuels. We won’t run out. We have reserves, according to his presentation, that run along the estimates of around 200 years for oil, 400 years for gas and a staggering 2000 years for coal. The issue isn’t supply (although cost will increase) – it’s carbon dioxide. Our level of carbon dioxide in the atmosphere is higher than it’s been for 650,000 years. And there’s a very good historical correlation between carbondioxide and global temperature. It is currently at 385 ppm but by 2050, if we keep going, it will be at 550-750 ppm. We don’t know the effects, but they could be dramatic in just 40 more years. He also looked into biomass, wind and nuclear. To get five to seven TW of energy from each source, we’d need to cover the world, except from human crops, with fast growing plants. In addition to that, we would also require windmills to cover the entire land mass and build and commission a new nuclear facility every 1.5 days – and we still wouldn’t meet the energy requirements of the world. However, the sun’s light provides 120,000 TW of energy to the world. We’d only need a tiny portion of that to provide unlimited power for the world, if we could harness it cheaply enough and have no carbon dioxide.

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S. Bradley Peterson is SAMI’s founder. He keynotes conferences on asset management around the globe and is sought after as a speaker and advisor to companies looking to improve results. Peterson is a visionary whose combination of industry expertise and behavioural psychology enables clients to achieve peak performance culture.

Nocera and his research team have proposed the principle of photosynthesis to split water into hydrogen and oxygen as away to use the sun’s energy cheaply and efficiently. Thus, photovoltaic cells covering 30 square metres of your roof will provide enough power for two days of electrical use by using that energy to split water into hydrogen and oxygen and storing each in a tank at 200 bars pressure, using photosynthesis principles. In addition, it will also use a fuel cell to generate electricity when the sun isn’t shining – even going as far as being able to use the hydrogen from your home to power your car. Currently, this system could be built commercially for about $80,000. But it’s still more expensive than coalbased power (where the cost and consequence of carbondioxide has not been figured in). As manufacturing costs come down, as they inevitably will, Nocera sees much less need for expensive infrastructure in developing countries. Like mainframes to personal computers, he sees energy becoming personal energy systems, especially for developing countries, eliminating the grid. SAMI’s business is helping manufacturing companies change and become ever more efficient. We will play a role in helping this new reality come about. Our futures depend on it. „ To watch Nocera’s lecture, visit: http://www.youtube.com/ watch?v=ZAkM_dV6CFs

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ASK THE EXPERT

Energy as currency: controlling costs to boost business If your business was wasting money on a daily basis, wouldn’t you take a closer look, and do all that’s in your power to stop that from happening?

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oday, energy is more than expensive – it’s a liability. Its fluctuating cost, and your reliance on it, are putting the future of your business at risk. The good news: you can reduce future risk, and control that cost, through energy efficiency. When energy was cheap, conserving it was unimportant. Now, however, energy use is at an all-time high, and that figure is projected to increase dramatically. In fact, by 2050, the global demand for energy is predicted to double, and with a series of factors that are increasing current energy prices – global legislation to limit climate change, geopolitical instability and a growing reliance on information technology in emerging countries – one thing becomes clear: the energy problem is not going away. The point here is that energy is being wasted, and energy is money. But at Schneider Electric, we’ve found that the converse is also true: when you invest in energy efficiency, your efforts are realised in the form of increased revenue. There are several metrics with which to justify an energy efficiency programme; chief among them is the speed at which your business sees the return on your energy investment. Though your results may vary, we find that many efficiency projects are paid back within two years of completion. In fact, your business can decrease its energy bill by 10 percent even before any capital investment. Using the information from a certified Schneider Electric energy audit, you can fi nd out where and how your money and energy is being wasted, and where it’s being put to good use. Most people are aware of the passive opportunities to save energy: using product-based systems such as better

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insulation, heat-retaining windows and energy-efficient light bulbs. However, this represents but a small portion of the energy-saving opportunities. To truly optimise your energy savings, you need an intelligent energy solution, made possible via our philosophy of Active Energy Efficiency. Th is philosophy stems from fact: human behaviour is unreliable. A few slip-ups with lights or temperature can add up to a big cost on the energy bill. And right there, your energy efficiency savings are lost. Automated systems preserve savings so that you don’t have to depend on human behaviour to maintain your hard-won gains. They achieve what passive systems cannot: control over the overall system, ensuring that each facility or component is only using the energy required. It provides the means to manage the human element, and drives continued improvement over time. To help you make the most of your energy, we use a four-step process to ensure that your business meets both its short- and long-term efficiency goals. Measurement: energy and power quality meters, along with an in-depth energy audit. Fixing the basics: incorporating low consumption devices, insulation material and power factor correction. However, without proper control, these measures often mitigate against energy losses rather than make a real reduction in energy consumed. Automation: optimising systems such as lighting, HVAC, IT and process through automation is a key element of what we call Active Energy Efficiency. Monitor, maintain and improve: energy management soft ware, maintenance services and remote monitoring systems can help businesses see continued results, setting the stage for the next cycle of improvements. Success starts with a commitment from executive management – your company’s “champion of energy efficiency”. Th is person will be the driving force behind the project, the person who will consistently monitor and maintain progress. Embrace a system of energy management, and Schneider Electric can help reduce your company’s energy consumption by up to 30 percent and often more – savings that can translate into a 10 percent reduction in overall operating costs, while at the same time minimising the impact of future energy cost increases. „

Jonathan Hart is currently Senior Vice President Corporate Communication at Schneider Electric, the global specialist in energy management, responsible for leading the company’s strategic, image and thought leadership communication. Hart has previously held marketing, customer and communication roles at the operational and corporate level worldwide.

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INDUSTRY INSIGHT

Trends in energy IT for smart grids By Antti Jokinen

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he energy world is changing dramatically, due to the twin political drivers of carbon emissions targets and energy efficiency objectives. The Copenhagen meeting of December 2009 was a milestone in showing the concrete threat that global warming poses to all mankind. This event and the drawn-out political discussions that preceded it have opened the eyes of energy industry players, and technology vendors too. As a result of this, several new concepts have been developed to meet global CO2 emissions targets – one of the most exciting being that of the smart grid. It has also been recognised that ICT-based innovations in smart grids may provide one of the most cost-effective ways to enable substantial gains in energy efficiency.

Vision for a future ecosystem The smart grid is a vision for modernising electricity transmission, and especially distribution operations. It is a visionary way of taking advantage of cutting-edge technology to improve the functionality and performance of all electricity networks, both current and future. But because the smart grid concept has reached a wide audience only recently, the concept is fluid and subject to differing interpretations. A common denominator among them, though, is that the smart grid has increased system-wide intelligence, and greatly enhanced utilisation of ICT and communication capabilities between system components. There are many objectives for transforming ordinary electricity networks into smart grids. It is vital that these new intelligent electricity networks can be easily accessed by all network users. This includes both electricity consumers and the full spectrum of electricity producers from large centralised power plants to small distributed energy sources. Easy integration of a wide variety of distributed renewable energy sources is of particular importance for reducing the carbon footprint of the electricity supply system as a whole. Connecting to the grid should work in a plug and play manner. At the same time, however, these new intelligent electricity networks must be highly reliable in providing electricity whenever and wherever it is needed. In general, a major difference between the several interpretations of smart grid lies in the emphasis between the security and reliability of the system and how the energy users and deregulated markets can benefit from the smart grid. Its main difference from the traditional electricity network is that the smart grid has dynamic multi-directional electricity flow under real-time control. This allows parallel operation of both centralised and distributed generation and

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the full integration of distributed generation resources into the larger environment of energy markets and overall power systems.

A proven platform Centralised smart grid compatible IT systems will play an essential role in delivering the benefits of the smart grid. Process Vision has created an innovative global energy information platform that has a special focus on flexibility and scalability. Over 300 systems have been delivered to a broad and diverse set of parties in the energy sector, from modestly-sized local utilities all the way up to system operators and energy exchanges. Our GENERIS platform is widely used for meter data management, balance and imbalance settlement, meter asset management, contract and portfolio management, trade and risk management, billing, and energy efficiency services for large energy users. Process Vision has thoroughly analysed its GENERIS platform for compatibility with the future needs of the smart grid. This analysis and intensive internal piloting have clearly demonstrated that the platform provides the unique flexibility and scalability that are essential for playing a key role in information management for the smart grid. Based on our GENERIS platform, we provide comprehensive meter data management services and also new applications for monitoring and controlling overall energy consumption and CO2 emissions throughout the smart grid. This can accelerate the adoption of optimal energy- and emissions-saving activities by every party on the smart grid – from private homes equipped with intelligent energy conservation technologies and micro-generation up to the largest industrial energy users and producers. „

Antti Jokinen is Head of Marketing and New Businesses, and a partner and member of the management team at Process Vision Oy. Jokinen received a Master of Science degree from the Helsinki University of Technology. He has worked with energy markets for over 15 years in several positions at Process Vision, along the way acquiring extensive knowledge of global energy markets and IT systems.

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TRAVEL & GADGETS & BOOKS & LEISURE & MONEY & TRAVEL & GADGETS & BOOKS & LEISURE & MONEY 121

Book review Strategic Asset Management By Clive Deadman p124

What’s on Where to go and what to see in Q4 p126

Photo finish The healing powers of Iceland’s Blue Lagoon spa p128

Details. Heading down under With some of the best beaches and sunshine available anywhere in the world, Australia is a hot spot for holidays and potentially the longest ‘business trips’ known to man.

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TRAVEL

Regardless of whether you’re looking for run-of-the-mill activities and sightseeing opportunities or a truly life-affirming experience, Australia’s six states have everything you could ever ask for.

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To give you a slightly less pamphlet view of the land down under, Power & Energy has decided to show you around some of Australia’s better-kept secrets. Yes the Sydney Opera House is beautiful, and of course the Great Barrier Reef has to be seen to be believed – but we all know that. Instead, dig below the surface and see what you can find if you have a nose for sniffing out adventure. Or wine, for that matter.

2. Bungle Bungle National Park: Western Australia

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1. Ningaloo Reef: West Coast A literal stone’s throw away from the beach and with far fewer visitors and warmer water than its big brother the Great Barrier Reef, Ningaloo Reef gives its visitors the opportunity to do something that can’t be done anywhere else in Australia: swim with whale sharks. Usually, this kind of tourism would be severely frowned upon, but with such a strong conservation scheme in place, Ningaloo Reef has complete control of the amount of visitors coming into contact with its shark population. Even if you miss the sharks – who are the furthest thing away from Jaws imaginable – you’ve still got a good chance of seeing manta rays, turtles and humpback whales. If that isn’t your thing, count yourself extremely lucky that you can kick back in the idyllic lagoon in Coral Bay and watch the world go by.

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Known to the locals as ‘Purnululu’, you’ll probably get less awkward stares calling this one Bungle Bungle, even though it’s an area within the Purnululus. A World Heritage-listed national park, Bungle Bungle is without doubt one of the most spectacular geological wonders this fine planet has to offer. Unknown to many apart from the locals, the remote park is only accessible by four-wheel drive. To give you a taste of what you’re likely to come across at Bungle Bungle, have you ever seen mystical beehive mounds that rise metres into the air? Didn’t think so. To be honest, trying to describe what you’ll see is irrelevant as the visit is unparalleled in terms of the Mother Nature experience; travel along the Gibb River Road on the way there and leave a new person. As a side note for movie buffs out there, Bungle Bungle is where Baz Luhrmann filmed sections of his film, Australia. So you can tick that box too.

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3. Fraser Island Okay, so we had to put something in here that had done the tourist rounds – but it’s too good to miss out on. Believed to be the largest sand island in the world and spreading across 1100 square kilometres, Fraser Island is a must. Pure and simple. Which is actually also a good way of describing the island. Starting at Hervey Bay on the mainland, the tour commences with being given your very own four-wheel drive before getting the ferry to the island. Once there, you usually have two to three days to drive around, take in the scenes and generally avoid crashing as you check out mesmerising spots such as the famous Champagne Pool, which is great to lie in and soak up the rays, or the Wreck of Maheno; sounds ominous, but is rather enchanting. However, a little tip if you do get yourself out there – don’t worry about the dingos. While they get themselves around camps with ninja precision, the old adage of ‘they’re more scared of you than you are of them’ holds more true than when you were a kid. Talking of kids, Fraser Island is the perfect place to unleash your little monster’s imagination and sense of adventure. Alternatively, get you and your loved one out for a couple of secluded days away.

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4. The Barossa Located roughly 43 kilometres northeast of Adelaide, the Barossa has a food and wine culture that you can’t escape from. With its premium wine production, abundant seasonal produce and unique smoked and cured meats, the Barossa is the perfect place for those with a hunger for the finer things in life – and an even bigger thirst. Listed by the world’s largest online travel community, TripAdvisor, as one of the world’s top 10 wine destinations, leaving there without a smile on your face would be verging on the criminal. Still unsure? Well, these seven words could make all the difference: Reisling, Semillion, Chardonnay, Shiraz, Grenache and Cabernet Sauvignon – all served in their respective vineyards. You can’t ask for more than that.

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5. Andaluz Bar and Tapas, Perth What is a tapas bar doing on here you might be asking? Well, to put it bluntly, if you have any respect for your taste buds you’ll take our word for it and book a table as soon as you land. Offering up a selection of contemporary Spanish tapas menus with exquisite interior design, it’s far from traditional. But what it lacks in history, it certainly makes up for in experience and imagination. Indeed, the Andaluz bar team is well-versed in the art of cocktail flaring and tasting, and is sure to help you on your way to getting to know the area that little bit better. Just remember not to mix your drinks, especially when you’re sitting on the antiquated chesterfield seats by the fireplace. Some things just can’t be unseen.

6. Aussie rules football While not exactly a geographical attraction, no trip to Australia is complete without a visit to an ‘aussie rules’ football stadium. You’ve seen rugby in England, know what American football looks like – but have you ever seen a game of Aussie rules? Truly unlike anything you’ve seen before, it could be loosely described as containing the aggression of ice hockey and the speed of lacrosse; and if you think they can kick in American football, just wait until you’re ducking in the stands to avoid getting hit. As if that wasn’t enticing enough, every bar throughout almost every venue is dedicated to having a live screening of the match, so you don’t need to worry about missing out on a single second of the game as you slurp down yet another freezing cold beverage. It might take you a while to acquaint yourself with the rules, but once you do, you’ll be hard pushed to take it off Eurosport when you get home.

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BOOK REVIEWS

Hot off the press Power & Energy takes a look at one of this quarter’s books aimed at the energy sector.

Strategic Asset Management: the quest for utility excellence By Clive Deadman

“If utilities are the foundation stones of civilisation, an effective asset management system should be at the heart of any utility”

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As the grave yards did not suffice, fields were chosen for the burial of the dead… A countless number of common people and a host of monks and nuns and clerics as well, known to God alone, passed away. It was the young and strong that the plague chiefly attacked […] This great pestilence, which began in Bristol on 15th August and in London on 29th September [of 1348], raged for a whole year in England so terribly that it cleared many country villages entirely of every human being. So runs the first case study in Clive Deadman’s new book, Strategic Asset Management: the quest for utility excellence. We are used to utilities simply being there, chugging away in the background, but they are a crucial part of our infrastructure. Deadman’s example, while extreme, highlights the worst that can happen when they are neglected (lack of effective drainage and sanitation being two of the root causes of the Black Death). on, If utilities are the foundation stones of civilisation, Deadman argues, an effective asset management nt system should be at the heart of any utility. A good od asset management system allows risk and value to be managed appropriately, while a great one can vastly tly improve business performance. wn In writing the book, Deadman drew on his own experience working in water and electricity utilities, es, and also canvassed the views of an impressive roster er of leaders from well-known companies such as gy. E.ON, National Grid and Scottish & Southern Energy. The result is a thorough examination of the current nt pressures faced by utility companies, including ng ng their own growing complexity, a more demanding customer base, the need to manage a higher level of risk than in the past, and the fact that much of the he ng utility infrastructure in developed countries is nearing the end of its useful life. ay Deadman argues that the most effective way of dealing with these pressures is to introduce an efficient asset management system. “In practice, any ny nd utility has an almost endless range of investment and ed operating options, each of which will be championed vigorously by someone,” Deadman points out in the he introduction to the book. “All these options have merit, it, ue and benefits. However, only a few will be good value for customers. Accordingly, in order to manage risk sk and value, a practical and strategic approach to asset et performance, cost and risk information is essential.”” Strategic Asset Management offers a detailed ed explanation of the asset management capability ty

model and devotes a chapter to each of its six factors: business climate, complexity, goals, tools, organisation design and teams. Information is presented clearly on well-designed pages, supplemented by helpful case studies and illustrations. A conclusions chapter summarises the approaches and principles outlined in the book, and promises that by following these, any utility can establish the asset management structures and tools necessary for the delivery of excellent performance. Deadman, however, is at pains to point out that there are no shortcuts and that the work involved is hard, which should not be taken as an excuse to give up before you start. Anyone with an interest in ensuring the long-term viability of the utility sector will find this book an invaluable source of information.

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AGENDA

What’s on... Q4 2010 24.09-02.10 International Festival of Contemporary Music, Venice, Italy Many of the works showcased at this festival have been commissioned by the Venice Biennale and are receiving their Italian premières. Held at various venues across the city, they focus on modern musical composition, and include musical theatre, theatrical concerts, micro-opera, instrumental theatre, performance art and song.

18.09-04.10 Oktoberfest, Munich, Germany Every year six million people congregate in 14 large tents in Munich, where they consume vast quantities of beer from six select breweries whose products adhere to the German Purity Law of 1516. Additional amusements include a traditional German flea circus and crossbow competition.

01-03.10 The Ryder Cup, Newport, Wales This year the competition takes place at the Celtic Manor Resort, in the heart of the rolling Welsh countryside. Corey Pavin and his team look to once again conquer Europe and retain their crown as champions of this prestigious event.

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01.11 All Saints Day, Cádiz, Spain Tosantos – All Saints Day – is a big deal in Cádiz, where celebrations start in the weeks before November 1st. City streets are lined with intricately decorated market stalls selling a mouthwatering variety of local food and wine. Street processions, children’s activites and magic shows also fill the festival period.

29.12-01.01.11 Edinburgh’s Hogmanay, Edinburgh, Scotland 2011 marks the 18th year of Edinburgh’s Hogmanay celebrations. Last year 80,000 people from 60 countries flocked to the city to bring in the new year in style at the infamous Hogmanay Street Party. This year promises even more, with a full programme of music as well as the spectacular midnight fireworks set against the dramatic backdrop of Edinburgh Castle.

Late 11-28.12 German Christmas markets, nationwide The perfect antidote to an over-commercialised holiday. Take your pick of charming Christmas markets across Germany, and pick up traditional hand-crafted crib figurines, toys, wood carvings, marionettes, candles and lambskin shoes along with hot chestnuts, grilled sausages, baked apples and mulled wine. Some of the best are: Esslingen (medieval costumes and carols), Wurzburg (snow likely) and Berncastel-Kues (arguably the prettiest).

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PHOTO FINISH

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ne of the most visited attractions in Iceland, the Blue Lagoon spa boasts warm waters rich in silica and sulphur minerals for all who take the plunge. Reported to help skin diseases and sooth the itches you can’t scratch, the water in the swimming area of the lagoon averages around the 40 degrees Celcuis mark. The lagoon itself is fed by the water output of the geothermal power plant, Svartsengi, which lives close-by, with superheated water being vented from the ground near a lava flow and used to run turbines that generate electricity. After going through the turbines, the steam and hot water pass through a heat exchanger to provide heat for a municipal hot water heating system. Finally, the water is fed into the lagoon to be recycled as the iconic Icelandic showpiece its population know and love. But don’t be fooled by its calm exterior – try and get in the lagoon without showering beforehand and you’re sure to be chased out without a toe hitting the water. Bar that, strip off, kick back and let one of nature’s greatest perks calm your energy while it produces the rest of the town’s.

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