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Turning Scots Into Green Saudis Spurs EON, Iberdrola Sea Snakes

July 05, 2011

July 5 (Bloomberg) -- Above the entrance to a converted school in the Orkney Islands, off the northern tip of Scotland, a line from John F. Kennedy is inscribed on the wall: “We need people who can dream of things that never were.”

Beyond the portals of the European Marine Energy Centre, researchers are seeking to transform this island archipelago into a global hub of the renewable age. Situated where the North Sea and Atlantic Ocean collide, a maritime crossroads that Vikings featured in their sagas, companies such as EON AG and Iberdrola SA are today drawn to Orkney as a test bed for the latest wave and tidal power technologies.

Nowhere in the world conducts more research into marine energy than Scotland, whose countrymen invented the telephone, steam engine and television. Scotland’s nationalist government aims to harness that talent for innovation to the country’s natural resources to lead the way on wave and tidal energy, just as Saudi Arabia has with global oil production.

“We’re not trying to put the first Scot on the moon, this is doable,” Neil Kermode, the European Marine Energy Centre’s head the past six years, said at his office in the Orcadian town of Stromness, a 90-minute ferry ride from mainland Scotland. “There aren’t many energy revolutions that come round in anybody’s lifetime, but this is one.”

The seas around Scotland have the potential to provide up to 25 percent of Europe’s tidal power and 10 percent of its wave power, according to Scottish Development International, the government body charged with fostering investment.

Wind Skeptics

Politicians from U.K. Prime Minister David Cameron’s Conservative Party, which trails in third as a political force in Scotland, industry executives and academics say Scottish First Minister Alex Salmond’s vow to secure Scotland’s place as the green energy powerhouse of Europe is reaching too far.

“The question is whether it is affordable and realistic,” Gordon Walkden, a professor of geosciences at the University of Aberdeen, the hub of the North Sea oil industry, said by phone. “Would our budget allow us to throw unlimited money at it like the Americans did when they decided to put a man on the moon? It’s not a dissimilar challenge.”

Salmond pledged that megawatts generated from the sea will help make Scotland’s electricity 100 percent come from renewable sources by 2020, the loftiest goal of any European nation.

Red Snakes

Among the companies developing fledgling marine-energy projects in and around the Orkneys are EON, Germany’s largest utility, and Scottish Power Ltd., part of Iberdrola of Spain, the world’s biggest renewable energy producer, plus a group including investment bank Morgan Stanley and International Power Plc, and Scottish & Southern Energy Plc.

Test projects include red snake-like generators made for EON and Scottish Power by Edinburgh-based Pelamis Wave Power, which has raised 45 million pounds ($72.5 million) from investors such as New York-based BlackRock Inc., the world’s largest money manager, and Norway’s Norsk Hydro ASA to develop its technology.

The Scottish Power machine is due to head to Orkney by the end of August, Max Carcas, Pelamis’s business development director, said yesterday. It will work in tandem with the EON equipment, Scottish Power spokesman Paul Ferguson said from Glasgow yesterday.

Research in the Orkneys and the Pentland Firth will help unlock 6 billion pounds of investment, Salmond said in a May 18 speech on his renewable-energy policy. The firth is a 20-mile- long, eight-mile-wide strip of water dividing the islands with the mainland.

U.K. Treasury

To achieve the green energy target, Salmond is challenging Cameron’s government to cede the rights to the seabed. At present, every company developing marine energy projects must pay rent to the Crown Estate, the body that’s administered the monarchy’s assets in Scotland since 1832.

All revenue -- 13.1 million pounds from Scotland in the year ended March 31, 2010, -- goes to the U.K. Treasury in London. Salmond, whose Scottish National Party won a second term in May 5 elections, wants that money to stay in Scotland.

“It would be preposterous if the revenue from offshore renewables didn’t benefit the communities alongside them,” Richard Lochhead, the minister responsible for negotiations with the U.K. on the Crown Estate, said in an interview. “We don’t want the same mistakes as we made with oil and gas.”

Scotland is waiting for the U.K. government to respond to its plan to take control over the Crown Estate, a spokeswoman for Lochhead said yesterday. Salmond put forward more detailed proposals on June 22, focusing on the seabed and development of offshore renewable energy.

Scottish Waves

In Orkney, which benefits from North Sea oil jobs through the Flotta terminal, the prospect of a bonanza based on marine energy isn’t obvious, with testing taking place under the sea and the boats moving in and out of Stromness and Kirkwall more for fishing and scuba diving.

France’s Alstom SA, the world’s third-largest power- equipment maker, bought a 40 percent stake in the Scottish wave technology developer AWS Ocean Energy Ltd. on June 21. AWS is developing the Archimedes Wave Swing system, and it plans to test a full-size prototype in Scotland next year.

Orkney Islands Council is spending 14 million pounds on port infrastructure, including the development of piers that can accommodate marine energy companies launching their equipment.

“You look at the wave and tidal potential input into Scotland’s energy, it’s not on the same scale as Saudi Arabia by any means, however in terms of wave and tidal energy what’s happening in Orkney now, the technology is there, it’s being developed,” Peter Tipler, 26, a consultant at Xodus Group and chairman of the Orkney Renewable Energy Forum, said in an interview at his Stromness office.

70 Islands

The Orkneys, population 20,000, comprise about 70 islands, 19 of which are inhabited, with most people living in the towns of Kirkwall and Stromness on the largest island, known locally as the “mainland.”

Already, Orkney could be powered by wind if it was able to store electricity, the municipality said. Yet the potential of Orkney’s marine power isn’t always obvious, especially in June, the month most Orcadians will tell you is the best to visit to catch the summer days that last as long as 20 hours.

Most of Orkney is undulating green fields and the main industry is beef farming, along with crab fishing and making cheese. The arable land attracted Neolithic dwellers who built the Stone Age settlement of Skara Brae, a UN World Heritage site, and Vikings, who converted to Christianity and founded the 12th-century St. Magnus Cathedral in Kirkwall.

Scapa Flow

For the nascent marine energy industry, the area has two main selling points, according to Kermode and Stephen Hagan, who heads the Orkney Islands municipality.

Firstly, it’s the most northerly point of Britain’s national grid, allowing the electricity generated from the sea to enter the power market without the need for costly cables to be laid. It also has a 50 square-mile natural harbor called Scapa Flow, where the Germans scuttled their World War I naval fleet. A base for the Royal Navy, it was sealed off with barriers built at the behest of Winston Churchill in 1940 after Germany sank another warship, this time a British one.

On one side of the barrier the sea is choppy, evidence of the potential of the waters. On the other, it’s calm, allowing the industry to build infrastructure to house its equipment.

“You can’t underestimate the importance of Scapa Flow, it’s the jewel in our crown,” said Hagan, 57, a Northern Irishman who moved to Orkney 25 years ago to run his wife’s family farm. “There’s always been the feeling in Orkney that marine renewables is the big opportunity, but when that would happen we didn’t really know,” he said at his office in the town of Kirkwall, home to about 40 percent of the islanders.

Crown Estate

Salmond’s SNP sees wresting control of the Crown Estate’s assets in Scotland as key to realizing that aim.

With cross-party support building in the Scottish Parliament, Salmond may have more success than with a parallel plan to carve up North Sea oil revenue if he wins an independence referendum planned for within the next five years.

“It’s quite a robust story to be able to sell to the voter,” said Ben Warren, head of renewable energy at Ernst & Young in London. “The jury is out in terms of the size of the prize. If Scotland can get there first, one would expect the investment would flow to where the market is most dynamic.”

The Edinburgh legislature, reestablished in 1999 after a hiatus of three centuries, has power over policy areas such as education, health and justice, while foreign and defense policy plus broader economic and energy matters are reserved for Westminster in London.

Job Creator

Salmond, 56, said in an interview while campaigning in March that his government planned to “engineer the 21st century” using wind and waves, and the green energy industry would create 130,000 jobs. His target for 2020 is to generate twice as much electricity as Scotland needs.

So far, Scotland derives about 30 percent of its electricity from renewable sources such as wind, hydro, marine, biomass and energy-from-waste. While Scotland seeks to increase that to 100 percent by 2020, the target is 35 percent for Germany, where Chancellor Angela Merkel ordered her government to speed up the exit from nuclear power after the explosion at Fukushima in Japan. The Scottish government, unlike the U.K., is also anti-nuclear.

Scotland may generate all its electricity needs from renewable sources in nine years, though the bulk of it will come from wind rather than waves, Kermode, 52, said.

The equipment now being tested, including the generator made for EON, can produce 1.5 megawatts of electricity. The goal for marine is 1,600 megawatts by 2020. One Pelamis prototype can produce 0.75 megawatt.

Alchemy to Industry

Marine energy is at least four years away from producing power on an industrial scale, and the European Marine Energy Centre puts the cost of taking a project from the drawing board to the sea at about 40 million pounds.

“That bit of alchemy of turning sea water into electricity has been done,” Kermode said. “Now what we’ve got to do is to industrialize it and do it reliably, at the right quality and down to the right price. The lead is there, it’s ours to lose.”

As Kennedy told members of the Irish parliament in 1963: “The problems of the world cannot possibly be solved by skeptics or cynics whose horizons are limited by the obvious realities.”

--With assistance from Louise Downing in London and Peter Woodifield in Edinburgh. Editors: Alan Crawford, Tim Quinson

To contact the reporter on this story: Rodney Jefferson in Edinburgh at r.jefferson@bloomberg.net.

To contact the editor responsible for this story: Tim Coulter at tcoulter@bloomberg.net


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