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HIP plans Icelandic floating wind project for power exports to UK
An offshore wind project set to supply the UK will reach into Icelandic waters, one of several unprecedented measures being taken to boost the project's wind turbine availability.
The developer of the HIP Atlantic Project, Hecate Independent Power (HIP), hopes to export the entire output of the planned 10 GW fixed-and-floating turbine offshore wind farm from the generation site in Icelandic waters to the UK.
HIP is a 50-50 joint venture between UK-headquartered conventional and hydro-electric generator Independent Power Corporation and US solar and storage developer Hecate Energy, chaired by Tony Baldry, a former British energy minister.
The UK government has long envisioned a role for captive foreign wind farms in the country's energy mix, as it was specifically permitted in the 2013 Energy Act that laid down rules for offshore wind development.
Offshore wind projects in UK territory hooking up to the country's grid must apply for land leases and grid connections through the Crown Estate, which manages sovereign-owned land, but HIP will not go through this process. Instead, it has applied for entry points to import wind power directly with grid operator National Grid. The developer is currently working with the government in Iceland to lease seabed.
HIP Atlantic Project's £21 billion ($30 billion) price tag covers thousands of kilometers of high voltage direct current (HVDC) cables and 10 GW of wind turbines. The developers aim to have the first 2 GW, which will employ bottom-fixed turbines, built by 2025.
The developer has made headway on financial agreements, having secured agreements with lenders, and institutional investors have also committed to take equity ownership in the wind project, a step usually taken after construction. The appetite for such investments is strong, with high prices seen at recent Crown Estate seabed auctions.
"We own the project, we've put it together, we have brought in partners, and we are negotiating power purchase agreements to sell electricity to final users," Peter Earl, Managing Director of HIP and CEO of IPC told IHS Markit.
Cabling for the project is being manufactured in the UK, but turbine servicing will be conducted from a base in Iceland, where HIP plans direct investments totaling £2.9 million ($4 million) in 2021 and rising to £144 million ($200 million) by 2025.
Iceland already has a strong renewable energy sector, relying mainly on geothermal energy and hydropower, but also oil and onshore wind to meet its energy needs. The project will be located on the southern and eastern Icelandic coasts in the North Atlantic Ocean where ocean depths can reach 2,400 meters.
HIP is building the project in Iceland to benefit from winds outside the UK's territorial waters, that, when combined with existing UK wind projects, create "a geographical portfolio effect," or steadier wind power supplies for UK consumers.
The consistent winds there make the project interesting to backers. "The key thing is that we're bringing wind energy from a part of the world which has a totally different climate than the North Sea, so when it is calm in the northeast of England, it is absolutely blowing a gale up around Iceland. We get 65% wind availability in a year versus 40% wind availability from a typical North Sea wind farm, so we have a lot more electricity from any given wind turbine and that is what makes the economics work," said Earl.
In a separate location on the North Sea, the developer is looking into piloting offshore gas-fired power technology that could potentially take availability to the next level. "We are developing balancing power solutions using low-emission gas turbines, and we're working on zero-emissions gas turbines located offshore in the North Sea, to be able to provide balancing power for when the wind is not blowing. So, the 60% of the time when there is no wind coming into Grimsby, we're looking to have zero-carbon gas-fired generation using carbon capture and storage offshore in the North Sea. We are working on pilot projects to prove that technology," said Earl.
The HIP Atlantic Project will consist of 1 GW "pods," the collective noun for dolphins that the developer is using to describe a wind farm with floating turbines.
But the success of demonstrations of floating wind technology in the next few years will determine how much floating wind technology is used in the project.
UK cable manufacturing facility
The HIP Atlantic Project will use a HVDC network running between the UK and Iceland to deliver energy supplies to UK consumers.
To supply cables in time to reach a 2025 installation goal, HIP is planning a bespoke £200 million ($277 million) power cable manufacturing plant at a port in the northeast of England, and two cable-laying vessels. "The starting point is to have a large UK manufacturing facility where the cable can be loaded directly onto ships, because, without it, that is a very ambitious timetable to meet," said Earl.
The HVDC cables are uni-directional and not bi-directional, as is the case with a hybrid offshore wind farm that enables two countries to share a wind farm's energy.
On the land side, HIP is aiming to import the electricity through dedicated connection points on the UK's 400-kV network, for which it will lay connection cable into the main arteries of the UK transmission system. "We're coming into points which were previously connected to nuclear plants which aren't operating anymore, for example, so we're saving time and money to be able to get our project connected," said Earl.
As the HIP Atlantic Project uses more than 20% UK-manufactured content, it may be eligible for government financial support through the UK Export Finance agency.
The developer expects up to 50% of the project to be UK-origin, mainly large volumes of cables. "UK Export Finance is supportive of what we're doing, because we are doing good, bread-and-butter exporting of UK-made kit, and it's going to be sitting in Icelandic waters," said Earl, noting it was unusual that the electricity produced would then return to the UK.
UK Export Finance is turning over a new leaf. Between 2013 and 2018 the agency provided almost all of its energy sector project finance to oil and gas projects in developing countries, but the UK's Environmental Audit Committee launched an inquiry in 2019. Last year, the UK government pledged to end such support for fossil fuel projects overseas "with very limited exceptions" as it targets net-zero emissions nationwide by 2050.
In addition to export finance, the HIP Atlantic Project may also be eligible for the UK government's main renewable energy subsidy scheme, Contracts for Difference, which was tweaked in November to help the UK to achieve targets of 1 GW of floating and 40 GW of fixed-bottom offshore wind by 2030, according to law firm CMS.
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