Fair weather ahead

Christian Egal, CEO of EDF Energy Renewables, tells Huw Thomas that the forecast for wind energy is extremely good.

“Renewable energy is growing everywhere in the world. But in this country the mix is different”
-Christian Egal

When EDF Energy and EDF Energy Nouvelles announced their partnership to form EDF Energy Renewables in June 2008 it underlined a growing consensus that the industry needs to get serious about developing alternative power sources. Furthermore, the new company's establishment in the UK reflects the country's massive potential as a generator of wind energy. As an island nation, the surrounding seas offer access to one of the most abundant supplies of reliable wind anywhere in the world. When we meet up with CEO Christian Egal in EDF's central London office, the UK's suitability is something he is extremely keen to stress. "Renewable energy is growing everywhere in the world. But in this country the mix is different," he says. "Wind energy has had huge growth for five years, but what is specific to the UK is that Great Britain is an island so we can take advantage of this location with all the renewable energy linked to the sea.  Offshore wind is definitely the main renewables potential in the UK, as well as wave and tidal energies, which are as well very promising. But those are still at the latest development phase."

Plans for UK wind energy can only be described as ambitious. There is currently about 8GW of installed or planned capacity in place. The UK government's strategic energy assessment recently reported that British seas could eventually supply a further 25GW of power, enough to serve the needs of all the country's homes. But while there exist tremendous possibilities, actually realising them will require a great degree of effort. "It's a huge challenge," Egal agrees. "Nobody has ever built a wind farm 100 kilometres off the coast in the North Sea. It will be difficult but what is absolutely fantastic in this business is that everybody is very confident in the capability of the supply chain and the players to deliver." Obviously, the costs associated with such a huge project present difficulties of their own. Installing turbines that far off the coast, even in the comparatively shallow North Sea, is a far more logistically trying operation than sitting them onshore. Farm sites are picked for their exposure to wind, which means they must be built in often very difficult conditions. Building offshore takes twice as long and costs twice as much as a similar project on land. But according to Egal, the UK Crown Estate's plans are helping to mitigate this problem by targeting huge capacity. This encourages all the major players to get involved and creates significant economies of scale. "If you were to put one turbine in the North Sea, it would never happen," Egal says. "If you want to put 500 or 1000 wind turbines there, that is much more achievable."

Building the wind farms is far from being the only challenge. Getting the power they generate to where it is needed also requires some new thinking. "One of the other challenges is the grid," Egal continues. "How to connect it has to be a large scale approach rather than an individual approach for a single wind farm. Maybe in the long-term perspective it will be a European approach because if we build a wind farm for the UK In the North Sea, it could also be connected to Sweden or Denmark. Maybe we'll see in the next decades a power grid all over Europe, based on offshore wind farms located all over the seas?" This vision of an integrated European power infrastructure is one that crops up regularly in talks with those in the industry. Given the speed and efficiency that normally characterises major pan-European projects, you would be forgiven for thinking such a future remains a long way off. While Egal concedes that it remains a huge undertaking, his confidence that it is achievable is infectious. As far as he is concerned, renewable energy, and specifically wind, is an idea whose time has come. "Its very exciting," he says. "Wind energy is the most dynamic industry all over the world, even in this very tricky period it is still growing."

Counting the cost
While there is no argument that Europe desperately needs new sources of power if it is to remain successful, critics of renewable energy contend that it is simply not cost effective without massive government subsidies. So can renewables ever offer value for money?

"It's a complex approach," Egal admits. "Renewable energy all across the world is still supported by public subsidy. The schemes that the countries select are different. The Renewables Obligation Certification (ROC) mechanism is specific in the UK, but in every country there are mechanisms that make renewable investment possible. Because of the current energy market there is no possibility to make a renewable asset profitable. We are not far away, not at all. For example, last year, when the market price was not particularly high, it was at the level where it was much higher than the cost of renewable energy. But to make the operator decide on the investment they need a certain level of visibility on the long-term. So all renewable energies are, lets say, incentivized by public schemes, which make the investment possible. The principle of renewable energy is that it starts from public, government willingness, worldwide European and country willingness to do it, and each country provides to the operators the appropriate scheme to make it happen. So is the mechanism proposed to the operator in the UK enough to be profitable? Yes. If it was no, there wouldn't be any capacity, so it is profitable. Of course, there are some projects that are more profitable than others, and it's down to a professional approach to make the difference."

While this makes a certain amount of sense, it doesn't answer the question of whether renewable energy will ever be able to stand on its own two feet. The current system allows the power companies to stay in the black, but only on the back of government and consumer support. Will renewable energy ever be able to compete on a level playing field? "I would say yes," replies Egal. "The ROC mechanism is providing some additional revenues to renewable energy up to a certain level of achievement. If the global target is reached, the ROC mechanism will stop. Currently the principle is the target is to achieve nine percent of power from renewables. The actual value is four percent. So the ROC mechanism is there to incentivize the utilities to deliver some renewable energy up to certain level of achievement and when the end target is reached, the public support will stop. It's logical."

It is only natural that renewable energy is initially going to cost more than more traditional sources of power. While coal and gas have a massive installed base, wind and the like are effectively starting from scratch. If we are serious about our commitment to getting more and more of our energy from renewable sources, these short-term costs are something that we will just have to bear. In any case, as traditional sources such as oil and gas start to dwindle and become harder to access, the market may make renewable energy considerably more competitive.

Unfortunately the current economic climate is particularly unfriendly. Sources of funding are tight and in many areas there seems little appetite for any investment that isn't going to quickly bring big returns. Nonetheless, Egal is clear that EDF Energy Renewables remains on track to hit its targets. "It does have some impact, but more on the short-term period," he says. "We have to deliver a gigawatt by 2012, so we have to be very attentive to the whole capability to invest in this wind farm in this difficult period. If we speak about the next phase to deliver even by 2015 or 2020, it's another story. That will require a huge amount of money, but we can hope that it will be after the crisis that we are facing now. I am not saying it will be easy, it will be billions and billions of euros to invest in these facilities. As you know EDF as a whole has some other projects as well, so it is challenging."

Further alternatives
Though EDF Energy Renewables' principal focus is on wind power, due to its comparative maturity and the UK's geographical suitability, it is also exploring other potential avenues. "We are looking at wave and tidal technologies, which are not as mature as wind energy, even offshore." Says Egal. "We rely on the R&D department within EDF, we are looking at wave technologies as well. We are very attentive and we are following feedback on this work. Our business is to invest in modern technologies with good profitability, so it could happen in the next two or three years." Solar power also remains in contention. Though the UK isn't known for its warm weather, solar energy's success in the not particularly sunny Germany demonstrates that, as technology improves and becomes less expensive, it does have a part to play in Europe's renewable future.

But from a UK perspective, it is wind that is going to provide the big gains. Wind is one of the most well-established renewable energy sources and has developed rapidly over the past few decades. "Wind technologies are improving every year," Egal confirms. "It is amazing because we have now some that are 160 meters in diameter that generate 6MW. If you look at a wind turbine only 20 years ago, they were only 15 or so metres in diameter and generated only 50KW. Who would've imagined 10 years ago that we could build and install some 6MW wind turbine? As an example, EDF Energy Nouvelles, part of EDF Energy Group, has stakes with other partners in a wind farm of 30MW capacity with just six wind turbines. It is based 30 kilometres offshore and each wind turbine has a rotor diameter of 126 meters."

And the technology is still developing. Egal tells us about projects working towards turbines able to produce 10MW and turbines based on floating platforms that can exploit the wind in deep-sea locations. With the huge capacity of today's turbines it is not technology that is holding the more widespread adoption of wind power back. Rather it is outside factors that limit its large-scale implementation. The aforementioned issues with the grid are a major stumbling block, the lack of high power transmission lines making it extremely difficult to get energy from the remote areas where it is generated to the urban centres where it is most needed. Additionally, the UK planning process can throw plenty of obstacles in the path of speedy expansion. "To develop wind energy is really a very long-track with a lot of hurdles and particularly in this country," Egal confirms. "The planning system is very long-track, but I think it more or less always happens. And if we have an ambitious target, within a certain amount of time, you have to take into account certain difficulties. But I would rather have a slow planning process where you generally get permission rather than a quick one where you do not."

On the whole though, Egal seems optimistic about the potential for wind and other renewable energy, both in the UK and across the world. "When we look at the overall capacity we have 120,000MW installed all over the world," he says. "Last year, for example, we installed more wind energy than gas or coal. Wind energy has developed more in European countries and the US than in developing countries, but if you look at the possibility of wind farms in China for example, there is no limit."

That is not to say we should expect to see a major uptake of renewable energy in the developing world all that soon. Egal sees it as a responsibility of those in more affluent nations to keep working on the problem until it can become affordable for everybody. "I think the fair approach has been taken by the European countries but renewables remain more expensive than coal, gas and so on," he says. "European countries and the US are paying to make these technologies as profitable as the other technologies in the near future. Can we really ask the developing counties to pay for these technologies? I don't think so, and I think we recognize that and that we have to pay this premium. Climate change, which is the basis of these developments, has given us huge responsibilities across Europe, so I think it is very fair approach for us to pay for the first stages of the development and allow others to take advantage of these developments when it is more financially viable. In terms of the possibility to implement wind energy in these countries, it could happen very quickly. It's just about timing."

For those about to ROC

For now the Renewables Obligation Certificate (ROC) remains the key incentive for supplies to provide more power from renewable sources. Implemented by the UK energy regulator Ofgem, the system sets annual targets for companies penalising those who fail to hit them and rewarding those who do. Implemented in 2002, the initial target was to achieve a three percent proportion of energy from renewable sources. By 2012, this figure should reach 10.4 percent, with a further annual rise of one percent for the following five years. The system is currently undergoing examination in the wake of a public consultation and its future shape is yet to be decided.