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JUNE 2007

Doing the right thing with biomass Energy regulation and purchasing Japans R&D on fuel cells
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June 2007

No. 350

Viewpoint Predicting the unpredictable where now for energy prices as the summer arrives? Brian Rickerby News International news Wave energy for South Africa and the US? Energy demand growth in BRIC countries will continue Norway aims for zero-carbon status by 2050 Spanish solar thermal plant feeds the grid Renewable fuel standard launched in US Texas overtakes California on wind power New power stations for Vietnam and South Korea Continued investment in European wind farms Market reform and energy efficiency challenges for Hungary Malaysian solar manufacturing plant New energy saving kit for street lighting Home news We have to adapt to unavoidable climate change Energy Manager of the Year, Renewables Innovation winners How to expand the market for wood fuel First tidal energy testing facility in Europe Motor fuel sales boomed in 2006, but from fewer forecourts Hydro-electric mill group launches first power station Solar PV to power London fire stations Offshore wind farms provide work for suppliers and contractors Cardiff University gas turbine research centre opens North Sea field number 350 Features Utility regulation after twenty years facing the challenges of the future Simon Hobday Europe's next move on liberalisation Dominic Whittome Energy purchasing appetite for green power; outsourcing energy management: the book Burn it? Gasify it? Ferment it? Doing the right thing with biomass Martha Simpson-Holley and Geraint Evans On-site renewables: solar thermal array; underfloor heating; PV/shading and hydro-electric heat pumps Japan takes a lead on stationary fuel cell research Gavin Blair

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Energy World is circulated free of charge to all paid-up members of the Energy Institute. To libraries, organisations and persons not in membership, it is available on a single subscription of 115 for10 issues in the UK and 135 for overseas subscribers. Agency Commission 10%. ISSN 0307-7942 Energy World is printed on wood-free, chlorine-free pulp sourced from a sustainable forest. Energy Institute Registered Charity No. 1097899, 61 New Cavendish Street, London W1G 7AR, UK

Options for processing biomass but which is the best way to utilise this finite resource? See the feature article starting on page 16 and more renewables articles starting on page 20. This issue also looks at several aspects of the business of energy utility liberalisation and regulation; preparing company low-carbon strategies; and purchasing starting on page 10.

The Energy Institute as a body is not responsible either for the statements made or opinions expressed in these pages. Those readers wishing to attend future events advertised are advised to check with the contacts in the organisation listed closer to the date, in case of late changes or cancellations.

Energy World

June 2007


Predicting the unpredictable where now for energy prices as the summer arrives?

uring winter 2006/7, energy prices experienced a dramatic fall, taking everyone by surprise. As we move towards summer, trading prices are once again rising steadily. Is this trend likely to continue, or could the energy industry be wrong again? Before attempting to answer this question, it is important to determine why, in the spring and summer of 2006, traders, suppliers and consultants were predicting that prices would remain high throughout the winter. Within the UK, industry analysts usually attribute a steep rise in the wholesale costs of gas and electricity to the following: l a hike in the world cost of oil and gas; l global dependency on gas imports through a new import infrastructure that has yet to be proven and has shown signs of not being robust enough to cope; and l the reduction in the UKs own gas reserves, combined with the amount of electricity generation required to make this resource available. However, as the past winter proved, these reasons are just part of the story. Looking at the wider picture will assist in determining the reasons behind the markets incredible volatility. Firstly, it is important to realise that electricity and gas are now traded as commodities on a 24-hour market. Large, City-based financial institutions are increasingly trading in this sector, having been attracted by the larger profit margins available than in other heavily regulated markets. These traders whose job is to buy and sell energy profitably monitor the market very closely. As we all know, relatively high prices were being paid for winter energy in the summer of 2006. As it turned out, these future trading forecasts were way off the mark, as winter short-term trading prices dropped substantially.

Brian Rickerby, Joint Managing Director, energyTEAM www.energyteam.co.uk

buying considerably less gas, thanks to the abnormally warm winter. It is pure conjecture to say the two points are related. However, the original plan was that the Langeled pipeline was meant to form one section of a longer connection between the UK and the Ormen Lange gas field. The gas shipped through on the earlycompleted section of the pipeline was, in fact, gas originally destined for the German market. Indeed, as the continental demand has been restored, supply to the UK from this source has all but ceased. It seems a long time ago, but it was only the previous winter we had a predicted one in forty cold season. This led to concerns in the media, and indeed in Parliament, on the UKs ability to meet the nations energy needs. Current gas storage is approximately just 4% of demand in the UK, compared with 15% to 18% in France and Germany. A fire at Rough Storage, Britains largest storing facility, in February 2006 also added to this problem. In the event, whilst supply did drop to concerning levels predominately caused by a lack of storage supply was not disrupted.

Why did everybody get it so wrong?

The simple reason is that nobody predicted such a mild winter across Europe. No matter how talented these institutions may be in creating a bullish market, even the traders cannot beat the simple rule of supply and demand. If the supply is too low for demand, prices will rise. Conversely, if supply greatly outstrips demand, prices will fall.

The fact is that, just as the traders were purchasing forward-priced energy at an over-inflated rate, in the winter of 2006/7 suppliers were producing too much energy for everybodys needs why? Incredible as this sounds, Moscow was recording a temperature of 4C at the end of January. In reality, 20C is a more normal temperature for this time of year in Russia. This was not a limited phenomenon. Skiers were forced to climb high into the mountains as resorts in Scandinavia found themselves without snow. Historically this is unprecedented. The net result is that the two biggest gasproducing countries Russia and Norway produced significantly more gas than was needed. As already highlighted, when supply outstrips demand, prices fall. In addition, the Langeled pipeline which connects the UK to a hub on the Norwegian Continental Shelf was completed well ahead of schedule and began supplying vast amounts of gas to the UK. A second connection into Holland the BBL pipeline was also commissioned earlier than expected. The early completion of these supply points into the UK corresponded to a time when the Scandinavians found their traditional marketplace in Northern Europe

Where does the future lie for energy prices?

Early indications are that the summer of 2007 will be a scorcher. If this proves correct, energy will be high in demand, as air conditioning units and cooling plants across Europe run at full capacity. Even domestic fans will cause a significant increase in demand if usage reaches critical mass. The hot summer of 2005 created problems in regulating cooling levels in French nuclear reactors, which at times reached near critical temperatures. These reactors are cooled by water supplied from nearby rivers, which were unable to cope with the extreme conditions. Whilst this did not cause a safety issue, it did almost enforce closure at a number of generating sites. This downtime, even on a small scale, would have had a major effect on supply and demand across Europe. The days of UK self-sufficiency in oil and gas are long gone. Instead this country is affected by the energy situation across Europe. As the last two winters have proved, nothing is as unpredictable as the weather. However, the probability of a hot summer, supply outstripping demand and a swift return to a bull market in energy trading should not be ignored. l

Energy World

June 2007

International News
Wave energy for South Africa and the US?
US developer Finavera Renewables is aiming to establish wave power in South Africa. Preliminary site evaluation and a selection process for a 20 MW wave energy facility have been completed. The company has identified two areas for potential development, confirming South Africas coast as a strong wave resource. The study took several factors into account when assessing sites; including wave resource potential, distance from potential customers, distance to appropriate ocean depth, proximity to transmission lines, visual impact and proximity to shipping lanes. The study also examined the political and economic climate as it relates to renewable energy. It notes that demand has exceeded the countrys power generation capacity and power shortages have occurred recurrently in the last three years. As a result, electricity prices are anticipated to grow at an estimated 5% per year creating favourable market conditions for renewable energy. The next phase of the project will entail final site selection and preliminary planning studies, along with the associated project development and structuring work. Meanwhile Finaveras Chief Executive Jason Bak has told a US Congress committee of plans for wave power development in the US: Ocean renewable energys time has come. This is not pie in the sky. We have three wave energy projects under development in California, Oregon, and Washington, and we are in discussions about others. These are not just paper projects. We are literally weeks away from issuing contracts that will put US steelworkers to work constructing our prototype wave energy buoy.'

Energy demand growth in BRIC countries will continue

While it has long been acknowledged that commercial opportunities in the so-called BRIC markets Brazil, Russia, India and China remain significant for energy players, new research by market analyst Datamonitor suggests that major challenges need to be overcome if these opportunities are to be successfully commercialised. With rapidly growing economies and a wave of direct foreign investment, the BRIC markets are widely seen as core markets for players in just about every industry the energy industry is no exception. Already, the BRIC markets are heavily intensive and voracious energy consumers, according to Datamonitors Director of energy research and analysis Andrew Hill. 'Despite accounting for just 9% of global GDP, the BRIC markets consume 27% of the worlds primary energy, 17% of its oil, 19% of its gas demand and around half of global coal demand.' However, these statistics hide the fact that per capita energy consumption levels are still extremely low. The rapid growth seen in energy demand in the BRIC markets is certain to continue, with no signs that demand saturation is even on the horizon. Over the past decade, Brazil, India and China have all seen demand growth far outpace the world average. Gas has formed the mainstay of this growth, Hill says. In recent years gas demand growth in the BRIC markets has been well above that seen in many more mature economies.' As the BRIC economies grow, gas demand is unlikely to recede, Hill adds. The attractions of the BRIC markets to energy players are, however, not confined to demand-side factors. In the supply side, there remain considerable commercial opportunities given the often significant resource endowments of these countries. Collectively the BRIC markets make up 41% of global coal reserves, 9% of oil reserves and 29% of gas reserves, Hill points out. However, whilst market fundamentals in the BRIC markets will continue to result in significant investments from players throughout the energy value chain, are a number of barriers to entry are frustrating the process. One of the key threats facing new entrants to the BRIC markets are the dominant, and often entrenched, positions of national energy players and incumbents. Hill explains: 'In Brazil for example, Petrobras dominates the oil and gas value chain, despite the fact that the market was theoretically opened in 1997.' Despite this dominance, some foreign players have begun to see success in penetrating these markets. In India, Shell, ExxonMobil and Caltex have begun to make an impact on some markets but, as Hill explains: Whilst the magnitude and consistency of demand growth in the BRIC markets will continue to represent strong attractions for energy players, the challenges of competing with established national players should not be underestimated.'

Norway aims to reach zero-carbon status by 2050

Norway plans to be the first country in the world to become carbon neutral, cutting its net greenhouse gas emissions to zero by 2050. Norwegian Prime Minister, Jens Stoltenberg, surprised many with the announcement in April. Stoltenberg said the government would sharpen measures to meet its existing obligations under the Kyoto protocol: it now intends to exceed its 2012 Kyoto target by 10% and agreed to a voluntary 30% cut in emissions by 2030 compared to 1990. He said that Norway had a responsibility to act urgently. The country intends to offset its 54mn tonnes of carbon emissions a year using quotas bought on international markets. Norway is the world's fifth largest oil exporter and has built up savings from oil and gas exports of nearly $300bn. Norwegian emissions per capita are about 11 tonnes per year almost three times the world average. Although the proposals were widely welcomed in Norway, critics argued that the country would be doing much more to fight climate change if it stopped producing oil and gas that other countries burn. 'It should do more at home rather than use its vast oil wealth to buy its way out of the problem. Norway should take responsibility for the 500mn tonnes of emissions that it causes by its exports of oil and gas,' environmental group Greenpeace said. It was unclear whether the targets would include its large shipping and aviation emissions, which are not currently part of Kyoto treaty targets.

Spanish solar thermal plant feeds the grid

A new solar thermal plant, claimed to be the largest of its type in Europe and the first in the world to produce power for a national grid, has opened in Spain. Featuring a specially designed steam turbine generator supplied by GE Oil & Gas, Planta Solar an 11 MW solar thermal power plant near Seville has begun producing power. Planta Solar is based on solar tower technology where flat mirrors reflect the suns rays to the top of a tower for heating water and producing pressurised steam. The steam is then expanded through the turbine, which drives the generator to produce electricity. The inlet steam for the solar plant operation is saturated, which requires the turbine to have a design that prevents blade erosion from the high humidity ratio of the steam that flows through it. Other projects employing similar technology are currently under development in Portugal and North Africa.

Energy World

June 2007

International News
Renewable fuel standard launched in US
The US Environmental Protection Agency (EPA) has established the countrys first Renewable Fuel Standard (RFS) programme which requires that by 2012, the equivalent of at least 7.5bn gallons of renewable fuel be blended into motor vehicle fuel sold in the US. The RFS programme is based on a credit trading system that provides a flexible means for industry to comply with the annual standard, by allowing renewable fuels to be used where they are most economical and allowing the use of various renewable fuels to meet the minimum requirements. By 2012, the programme hopes to cut petroleum use by up to 3.9bn gallons and cut annual greenhouse gas emissions by up to 13.1mn tonnes, said to be the equivalent of removing 2.3mn cars from the road. The RFS programme requires refiners, blenders, and importers in the US to use a minimum volume of renewable fuel each year between 2007 and 2012. The minimum level is determined as a percentage of the total volume of fuel a company produces or imports and will increase every year. For 2007, 4.02% of all the fuel sold or dispensed to US motorists will have to come from renewable sources, equal to roughly 4.7bn gallons of renewable fuels. That amount was already exceeded in 2006, when the ethanol fuel industry produced 4.86bn gallons of ethanol. New and expanded plants are expected to push the annual production of ethanol well above the RFS requirement. However, the RFS programme will guarantee a minimum market for renewable fuels in the event of an industry downturn.

Texas overtakes California on wind power

Continued rapid wind power development in Texas has blown the state to the top of the wind power capacity league, according to the American Wind Energy Association (AWEA). California has long been the US leader but, with its greater wind resource, Texas gained a thin lead in mid-2006 and greatly extended that lead later in the year. Texas added 773 MW of wind power last year, boosting its total to 2,768 MW. The rankings place Texas wind power capacity some 17% greater than the capacity in California. A key to the rise in status is the expansion of the Horse Hollow wind farm to 736 MW, making it the largest wind power facility in the world. According to AWEA, another 1,000 MW of wind power is currently under construction in Texas.

New power stations for Vietnam and South Korea

Rapidly increasing power demand in parts of Asia has led to new power stations in Vietnam and South Korea. The Nhon Trach gas-fired combined power plant near Ho Chi Minh City, Vietnam, is planned in response to a predicted power shortage during 20072010. Alstom will supply the plant with power island equipment including two GT13E2 gas turbines (capable of running on gas and fuel oil), two heat recovery steam generators, one steam turbine and three air-cooled turbogenerators. The project will be carried out in two phases, with the plant operating in simple cycle first to support high energy demand during the dry season in 2008. In the second phase, further equipment will be added for full combined cycle operation. Once operational in March 2008, the 460 MW plant will be capable of supplying 2.5bn kWh annually to the national grid. Meanwhile, the Japan Bank for International Cooperation (JBIC) has signed a loan agreement with Vietnam Electricity to finance construction of a new thermal power project, Hai Phong 2, which will have a capacity of 600 MW. JBIC is also financing the construction of a thermal power plant in Jordan. Finally, Siemens has secured an order to supply key components for a combined cycle power plant in Incheon, South Korea. The company will build the Incheon II power plant in the immediate vicinity of Incheon I, currently South Korea's most efficient power plant. Siemens will supply the power island comprising two SGT6-4000F gas turbines, one SST6-5000 steam turbine and three generators and the electrical, instrumentation and control equipment. With a capacity of 550 MW the new plant is hoped to make an important contribution toward meeting the rapidly increasing power demand in Seoul when it starts commercial operation in 2009.

Continued investment in European wind farms

A joint venture between Irelands Airtricity and local renewable energy company Enerbaca-Energias Renovaveis is to build a new wind farm in Northern Portugal. The proposed farm is to produce 400600 MW of power for the region. Airtricity is also developing wind farms in the UK, Germany and the Netherlands and says it is actively seeking further joint venture and partnership opportunities across Europe, both onshore and offshore. Meanwhile, the Hornberget wind farm in Sweden has officially opened. Designed and developed by RES Skandinavien, the farm comprises five Vestas 2 MW turbines. Its location 350 km south of the Arctic Circle makes it the RES Groups most northerly project. Elsewhere, Scottish Power will become the biggest generator of onshore wind in Northern Ireland following the purchase of Wolf Bog wind farm from RES. The five turbine, 10 MW project in County Antrim will offset 22,000 tonnes of carbon dioxide, says the company.

Researchers at Boeing are preparing to conduct experimental flight tests of a manned aeroplane powered only by a fuel cell and lightweight batteries, the result of a research project started in 2003. The demonstrator drives its prop with an electric motor, powered by the combination of a hydrogen fuel cell and a lithium-ion battery pack. The fuel cell powers the prop while cruising whilst the extra power of the battery pack is used for takeoff and climbing. The test craft is currently undergoing its final checkout before ground and flight-testing begins.

Energy World

June 2007

International News
Market reform and energy efficiency challenges for Hungary
The International Energy Agency (IEA) has commended Hungarian energy policy for positive developments since 2003, but notes there are significant challenges on market reform and energy efficiency for the country. The IEA praised the high levels of competence of the Hungarian Energy Office and commended the Governments decision to reform some of the market-distorting subsidies in the energy sector. However: It is now urgent to implement the market reforms in time for full market opening in July 2007. There is also room for improvement particularly in the area of energy efficiency, said Claude Mandil, IEA Executive Director. The Hungarian Government needs to ensure high levels of investment in improving the efficiency in all sectors of the economy, the IEA reported. 'Furthermore, direct financial support for renewables and CHP plants is very high in Hungary, and unlikely to be costeffective, Mandil said. Despite dramatic improvements in energy efficiency during the last 15 years, significant potential for enhanced efficiency remains. Progress is needed in the gas-to-power sector, where old power stations need to be replaced. The gas price dispute between Russia and Ukraine last year led the Government to act quickly by voting for the establishment of strategic gas storage. While attention to this concern is appropriate, the Government would be well-advised to consider all options available supply route and source diversification and increased energy efficiency to increase security of supply, some of which may be less costly and provide more long-term security, says the IEA. Meanwhile, while large parts of the Hungarian energy markets are open to competition, the development of competition has been slow. To prepare the country for the full liberalisation, a system allowing customers to reap the full benefits from competition should be adopted, adds the IEA.

Malaysian solar manufacturing plant

First Solar is to build a new four-line solar module manufacturing plant in Kedah, Malaysia, expected to have a minimum annual capacity of 100 MW. The manufacturing plant will be located in Kulim Hi Tech Park located in Kedah, Malaysia and will employ approximately 500 people. Plant construction will begin by the end of this year, with full volume production expected by the end of 2008.

New energy saving kit for street lighting

Philips has launched a new, directreplacement and energy-saving conversion kit for street lighting. Almost one third of Europes street lighting still uses energy inefficient HPL mercury vapour lamps, says the company. As well as having high running costs and contributing indirectly to greater carbon dioxide emissions, older style street lighting provides light with poor colour rendering. An increasing emphasis on making streets look natural and welcoming after dark and research indicating that good quality white light makes roads safer to drive on has led to the launch of the BeneKit. The 40% energy saving conversion kit contains a MASTER City-white lamp and gear system that can be easily fitted into existing street lighting fittings, providing high quality white light. Designed for local authorities wanting to upgrade their old HPL mercury vapour street lighting installations with energy-efficient lighting, the kit replaces 80 W and 125 W mercury vapour lamps with 70 W master city-white lamps. Located in the centre of Stanley overlooking the harbour and originally built in the 1880s, the Malvina House Hotel in the Falkland Islands has been extensively refurbished over the years, most recently installing solar thermal collectors to generate hot water from the sun. The hotel has installed highlyefficient evacuated tube collectors from SCHOTT to provide the hotel with solar heat for hot water. The installation is expected to save the hotel up to 60% of its energy costs for hot water supplies. The high vacuum, insulated and frameless solar thermal tube collectors are lightweight and modular, which means they are suitable for installation into all building types, says SCHOTT. The panels were supplied by Rayotec in Surrey, UK, shipped to the Islands and installed by local engineers in late 2006.

New street lighting on-test in France

Energy World

June 2007

Home news

We have to adapt to unavoidable climate change

England and Wales have no choice but adapt to unavoidable climate change and build resilience against higher temperatures, rising sea levels and boom or bust rainfall patterns, according to a stark warning from the Environment Agency (EA). Agency modelling data shows that even ambitious reductions in emissions of greenhouse gases will not start to slow the trend in warming until after 2050. We should be relentless in our efforts to reduce carbon emissions. But whatever our success, some degree of climate change is unavoidable and we must adapt in order to protect lives, property, the economy and environment, said EA chief executive Barbara Young. Our present efforts to reduce emissions will prevent destabilisation of the climate during the second half of the century, but for now we need to adapt to changes that are for all practical purposes unavoidable and committed, Baroness Young added. There is already warming locked into the system and the trend in increased temperatures is likely to continue over the next 3040 years. This means increased risk of flooding, coastal tide surges, water shortages and potential loss of biodiversity. What is needed now, says the Agency, is real practical work on the ground such as: l expansion of investment in flood risk management; l well-designed coastal realignment; l controlling water demand, planning water and waste water infrastructure to deal with more variable rainfall; and l thinking carefully about land use and farming.

Energy Manager of the Year, Renewables Innovation winners

Ken Heaton from MITIEs Managed Services division (pictured, centre) is the 2007 Nemex Energy Manager of the Year, having collected his award at the Nemex event in May. Ken won the award partly for his efforts to implement an energy strategy across the National Offender Management Service. The strategy included a new M&T system, a series of energy surveys and energy awareness campaigns, and a purchasing strategy that secured financial savings of 1.3mn and a supply of 83% renewable energy. Meanwhile, Alex Fowler from National Energy Action (NEA) picked-up the Nemex Renewables Innovation award for a project in which six family households were provided with a package of innovative renewable energy measures to reduce their fuel bills and carbon footprint. The awards are bestowed by Nemex organiser, the Faversham House Group and the Energy Institute.

How to expand the market for wood fuel

The Forestry Commissions new Woodfuel Strategy for England recommends provision of capital investment and technical advice and support for the supply chain, and highlights the need to find new ways to engage with the estimated 5080,000 owners of woodland in England. Biomass such as wood fuel currently supplies around 3% of total UK energy. The strategy, launched by Biodiversity Minister Barry Gardiner, aims to boost the wood fuel market with an extra two million tonnes of wood a year by 2020, saving 400,000 tonnes of carbon annually. The Forestry Commission will be working with delivery partners, including Regional Development Agencies, local authorities and private businesses, to produce a detailed implementation plan to support the strategy. Gardiner launched the Strategy following a visit to a pioneering wood fuel scheme in Bristol. Here, the Blaise Plant Nurserys boiler uses recovered wood from Bristol's parks to heat greenhouses, saving 19,000 a year on fuel bills and contributing to climate change targets. Gardiner said: Using wood instead of fossil fuels means that sustainably managed woodland can be a significant resource for a low-carbon economy. Producing fuel from timber taken from well-managed woodlands benefits wildlife too. Stimulating the wood fuel market is good for jobs, and this new strategy gives people the tools to realise the broad range of benefits that wood fuel has to offer.

Ken Heaton (centre), Energy Manager of the Year, with Prof. Martin Fry, EI Vice President, and Bill Turnbull, BBC News presenter

Energy World

June 2007

Home news
First tidal energy testing facility in Europe
The New and Renewable Energy Centre (NaREC) is to launch what is said to be the only independent, large-scale tidal testing facility for device prototypes in Europe. The new facility, based at the Tees Barrage, Stockton-on-Tees, will complement NaRECs existing marine renewable capabilities in Northumberland for grid connection, power conversion, and large-scale wave device testing. Indeed, NaRECs range of full-scale prototype testing facilities for marine renewables should help to drive the advancement of wave and tidal technologies across Europe. The first trials at the Barrage will take place this month (June). Demonstration tests will involve a tidal turbine prototype known as Evopod, developed by marine consultancy Overberg Limited. Several companies worldwide are developing technologies to harness wave and tidal energy, says NaREC. In order to make these concepts market leaders, developers must follow a strict development process, gradually increasing the size of their prototype models from small scale to full-scale. l Meanwhile, NaREC has secured 1.2mn funding from the DTI for a major new R&D programme for building integrated photovoltaics (BIPV). The project will create the UKs first integrated solar business with wafer, cell and module manufacturers all working together, says NaREC, and will establish NaREC and partners Romag and Crystalox in a leading position in this specialist sector of the solar energy market. The project will develop and bring into commercial production a range of speciality BIPV modules with a much higher aesthetic value than those currently available, adds NaREC.

North Sea field number 350

Trade and Industry Secretary Alistair Darling has approved development of three new petroleum fields in the North Sea, Caravel, Shamrock and Kelvin, which will be operated by Shell (in partnership with ExxonMobil) and Conoco Phillips. The move, which included approval of the 350th field in its 40 year history, underlines the continued central role the North Sea in meeting the UKs oil and gas needs, said the DTI. Darling said: North Sea production remains critical to the UK's energy needs. The industry remains strong, is valued and is important to us in ensuring secure supplies of oil and gas. We're seeing record interest in licensing rounds, an influx of new companies alongside long established players, a steady stream of developments put on the table and overall annual investment of around 10bn. Meanwhile, a new representative body with membership open to all companies active in the UK offshore oil and gas industry Oil & Gas UK has replaced the old UK Offshore Operators Association (UKOOA). The new association will: for the first time unite in one forum all companies with a stake in the future of the UK offshore oil and gas industry, from super majors to large contractor businesses and from small independent oil companies to SMEs working in the supply chain.

Solar photovoltaic and marine technologies are studied at NaREC

Motor fuel sales boomed in 2006, but from fewer forecourts

UK petrol sales reversed their progressive decline seen since 1997, with a year-onyear increase of 572,000 tonnes, or 3.1%, according to the latest UK Retail Marketing Survey, conducted by the Energy Institute. Even more dramatically, diesel sales increased by 1.66mn tonnes in 2006 (or 8.4%). In total, motor fuel sales rose by 5.8% in 2006, to a record 40.5mn tonnes. Registered UK vehicles also reached an all-time high of 33.1mn, for a 0.6% gain on 2005. However, in one a considerable feat of productivity, this record volume was dispensed by the smallest number of forecourts seen in the UK since the 1920s with just 9,382 outlets in operation, some 382 less than at the end of 2005. Although this represents a loss of more than one a day, it is a marked slowdown from 2005, when 587 forecourts closed. At the end of 2006, each forecourt was supporting and supplying an average of 3,529 registered vehicles, says the survey.

J Sainsbury has ordered an initial eight Edison electric vans, from zero-emission vehicle manufacturer Tanfield, for its Sainsbury's Online home shopping delivery fleet. The company aims to switch 20% of its urban delivery fleet to electric vehicles by September 2008 and its entire urban home shopping fleet by 2010. The Edison electric van utilises a Ford Transit Body shell, housing Tanfield's electric vehicle technology. It has a restricted top speed of 50 mph and a range of up to 150 miles on one battery charge. Tanfield has signed a supply agreement with Ford that will see Smith Electric Vehicles convert an initial 100 Ford Transit Body shells to battery-powered Edison vans. The order follows a year-long trial by Sainsbury's of the Faraday electric vehicle; a larger van based on a different chassis, also produced by Tanfield's trading division, Smith Electric Vehicles. Tanfield also has contracts to supply electric vehicles to TNT, CEVA Logistics and Scottish & Southern Energy.

Energy World

June 2007

Home news

Hydro-electric mill group launches first power station

Members of the Mendip Power Group, a collection of seven historic water mill owners on Somersets River Frome, are celebrating success after the first new turbine in a series of hydro-electric projects went live. Tellisford Mill, near Frome, the groups first new installation to generate electricity, is on course to produce 300,000 kWh of electricity per year, providing power for approximately 67 homes, says the Group. Led by Mendip Power Group chairman Anthony Battersby, joint owner of Tellisford Mill, the project was partfunded by a share of the 50,000 grant EDF Energys Green Fund awarded to the Mendip Power Group. Anthony has lived in the house beside the mill intermittently for more than 50 years and, from childhood, he longed to see the mill working again a project he pursued after buying the mill in 2002. He said: It is a labour of love but its also a long-term investment and we expect to break even in 20 years time most mortgages run for longer than that. The mill building itself is still a ruin but the turbine is now running. Peter Hofman, EDF Energys Director Sustainable Future, said: This group of mills is an inspiration to those with the potential to harness river and stream power. We welcome schemes like this which can help cut greenhouse gas emissions. According to the New Economics Foundation, the UK holds a huge dormant micro-hydropower opportunity, with tens of thousands of disused water mills spread across the UK that could be redeveloped as small-scale generators. Seven other mills in the Mendip Power Group are at various stages in the process of installing modern turbines, including Croscombe Mill, Clifford Mill, Lullington Mill, Stowford Mill and Farleigh Hungerford.

Part of the micro-hydro installation at Tellisford Mill on the river Frome

Solar PV to power London fire stations

Six London Fire Brigade (LFB) stations across London are to be fitted with solar photovoltaic (PV) systems from the solar energy company Solarcentury, to add to stations in Richmond and Acton already supplied with sun-sourced energy systems. The new PV fire stations will be in Bow, Battersea, Park Royal, Ruislip, Stanmore and Addington. The proposed PV installations are a part of a wider campaign to use microrenewable technologies to reduce carbon emissions from the stations. Discussions are already underway to fit a further 20 fire stations with similar renewable technologies, says Solarcentury. The Brigade is set to meet its ambitious target of returning carbon emissions to 1990 levels by 2010 at the latest. Each year the six new PV systems will save a total of 65 tonnes of carbon; with the Acton fire station system already saving six and a half tonnes of carbon emissions a year. Richmond fire station in south-west London was the first entirely solar powered fire station in the country. To achieve these targets LFB will also be using a range of technologies according to the station building and location, including wind turbines, solar thermal and CHP systems. Fire engines are also being replaced to meet low emission zone targets, boilers and light fittings are being replaced and recycling is now an intrinsic part of Brigade life.

Energy World

June 2007

Home news
Offshore wind farms provide work for turbine suppliers and specialist contractors
The vast programme of wind farm development both off and onshore is providing work for a range of specialist suppliers and contractors as well civil construction teams. Centrica has signalled the start of construction on what is projected to be the UKs largest offshore wind farm development at its Lynn and Inner Dowsing sites in the Greater Wash, off the Lincolnshire coast by making a major investment in wind turbines. The company has entered into a contract with Siemens Power Generation to supply fiftyfour 3.6 MW turbines for the 180 MW development (see Energy World May 2007), enabling a range of other related contracts to progress, says Centrica, the parent company of British Gas. The project is expected to cost approximately 300 million in total. Onshore work to connect the power generation cable in Lincolnshire is already ongoing. The project is scheduled for completion by the end of 2008. Siemens Power Generation is also to supply 30 wind turbines, with a combined capacity of 108 MW, for the Gunfleet Sands project off the east coast of England. Gunfleet Sands will be the third British offshore project in which the largest, 3.6 MW, Siemens wind turbine is deployed. The purchaser is the Danish company DONG Energy A/S, perhaps the world's leading operator of offshore wind farms. Construction of the Gunfleet Sands offshore wind farm is scheduled to begin in 2009. Also offshore, Aberdeen-based Oceanteam Power & Umbilical has signed a contract worth more than 17mn for the installation of submarine cabling at E.ON's Robin Rigg Wind Farm in the Solway Firth. The contract involves cable transportation to the site from Norway and Italy, the construction of an underground conduit to navigate an active railway line and the beach at the shore landing, the installation and burial of two 132 kV submarine cables for the export of the generated power to the National Grid connection, the installation and burial of sixty-four 33 kV inter connector cables. The project will create work for around 70 marine, installation and management personnel at the height of the installation, says Oceanteam. Moving back onshore, Emerson Process Management has been awarded a contract by npower renewables to provide a wide area data gathering system to connect 19 active wind farms to its corporate headquarters and regional centres in various locations within the UK. The data gathering solution will utilise Emersons Bristol OpenEnterprise software and will provide access to realtime operational data and historical information for all of the turbines throughout the network. The wide area network (WAN), which links the wind farms to the operational and corporate data centres, will use a combination of technologies that range from 64 K ISDN to 2 MB ADSL communication networks. The system will provide cost savings by replacing labour-intensive site visits with control capability to remotely start/stop and reset turbines, and remote security features such as security cameras and access monitoring, says Emerson.

Cardiff University gas turbine research centre opens

Cardiff Universitys new world-class Gas Turbine Research Centre is to start operations later this year, to provide South Wales with a facility for the investigation of the use of cleaner and more efficient fuels for turbines for power generation and aircraft engines. The Centre will house two major combustion testing rigs donated by technology company QinetiQ, which selected Cardiff University as the recipient ahead of several other contenders. Cardiff Universitys School of Engineering and QinetiQ are currently re-commissioning the facility and training new operators, before commencing the first research programmes. The facility is unique in several aspects of its design and operation, and is one of very few of its kind anywhere in the world, says the University. In its previous operation, by QinetiQ, it has already claimed a number of world firsts that have shaped gas turbine development. The University has already secured its first two contracts for the Centre. The first is an EU programme in partnership with QinetiQ to test alternative liquid and gas fuels produced from biomass and waste gases, including methane, hydrogen mixtures, coal gasification products, and biofuels. A second industrially-sponsored programme will study the formation of environmental pollutants such as nitrogen oxides, carbon monoxide and unburned hydrocarbons within the gas turbine combustor, facilitating improved computer models for optimised design capability.

Energy World

June 2007

Utility regulation

Utility regulation after twenty years facing the challenges of the future
Simon Hobday reviews some of the successes of privatisation and liberalisation in utilities over the last 20 years, moving on to look at some of the issues facing the utility sector today and then considering the future of utility regulation in England and Wales.

n England and Wales we have some twenty years experience of privatised and liberalised utility industries. Over this period, we have benefitted from a stable operating environment and substantial investment, falling prices, environmental improvements and improved customer services, for example: l although high gas and electricity consumer prices are currently in the headlines, generally utility prices have fallen; for example, gas transportation and electricity transmission costs have fallen by 4050% in real terms since privatisation; l in the water and wastewater sector some 70bn of investment will have been invested in the water and wastewater by 2010; another 30bn has been invested in electricity and gas networks and a further 14bn invested in new generation plant; and l substantial environmental improvements have occurred; for example drinking water quality, coastal bathing water and reduced emissions of pollutants to the air. This is not to say that utilities are beyond improvement, but rather to demonstrate the substantial progress since the days of state monopoly provision. However, looking ahead over the next twenty years, will the regulatory regime which has brought the benefits seen to date remain appropriate for the challenges of the future? In considering this, there is a benefit in looking beyond the established order to challenge current perceptions and the existing legal regime to test whether the current approach works or whether there are areas which could be improved. In so doing, it is important to look at not just regulation in the narrow sense of sectoral economic regulators such as Ofgem or Ofwat, but also the wider regulatory framework involving government, economic consultants, technical consultants, lawyers and regulatory departments; in effect the regulatory industry. To reflect upon the effectiveness of the current regime, I will look at some of the significant issues facing the energy and

water sectors: competition, regulatory best practice, the impact of the financial buyer and short termism.

In theory, competition leads to the best allocation of resources and the greatest efficiencies in the provision of a service, with regulation only required in cases of market failure. The electricity market in England and Wales is generally regarded as highly competitive: the original market unbundling of 1989 has been extended over time to include the separation of distribution and supply and areas such as the provision of metering and connection services. However, more recently, there has been reconsolidation. The six large players within the UK now hold significant positions in generation, distribution and supply. Legal separation between these activities, and particularly between distribution and supply, does not necessarily complement the commercial drivers of a competitive world. However, the Government and Ofgem appear to be relatively comfortable with the situation. It will be interesting in this context to see the final position taken by the European Commission on unbundling of distribution networks following the energy package announced earlier this year. One of the consequences in the energy sector of extending competition has been greater complexity more interfaces, more contracts and at times more regulatory oversight. Often the costs associated with extensions of competition have been high, but the differences in overall bill levels have on occasion been low. The argument put forward by Ofgem that many small cuts in costs will eventually result in large price reductions is not disputed. However, are the desired improvements in customer service actually being achieved, and furthermore who actually are the customers? Are they just the people turning on the lights or drinking water or do utilities have a wider set of customers? For example: problems faced by developers in obtaining timely connection to utility services are a major problem for

that industry. One survey reported that on over 4 out of 5 sites problems were encountered by developers with obtaining at least one or more utility connections (out of telecoms, gas, electricity and water). These businesses rely on utility companies as much as end users. Only recently has Ofgem started to address their concerns, but the example demonstrates the dangers of taking too narrow a focus when considering customers interests. Turning to the water sector, competition and the water sector have long been uneasy bedfellows. One of the duties of the regulator is to promote consumer interests by encouraging effective competition. Over the years there has been a succession of new dawns: the Competition Act 1998, inset appointments and water supply licensing, none of which have taken off for a variety of structural and economic reasons. Would it be preferable if competition in the water sector was either fully embraced or abandoned, rather than this continued yes, but approach? It is encouraging that Ofwat, in a letter of November 2006 to Ian Peterson, Minister for the Environment and more recently by public comments by Ofwat Chief Executive Regina Finn have argued the current system is not working and that the whole area of competition in water needs to be readdressed by Government. One of the difficulties with the current water regulatory regime is the primacy given to comparative regulation, under which Ofwat is reliant on information from the water and wastewater companies, backed up by its own investigations, independent research and reporters to actually understand what is happening in the industry. However, this will only be as good as the information provided to the regulator. Recent problems with the provision of information have been well documented and in these cases one must assume that the system of verification by reporters has not worked as intended. However, where the entity being regulated is a vertically integrated entity and the regulator is using comparative regulation, information asymmetry and resulting


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June 2007

problems are perhaps inevitable. An alternative could be offered if the water sector lost its vertically integrated structure. What would be the result of a degree of functional unbundling, where water production and sewage treatment were conducted by entities separate from those operating the distribution and collection networks? Many systems around the world operate with separate treatment works and distribution networks; indeed, many companies such as Thames Water and AWG have in the past had large overseas operations benefiting from such an approach. Such a split could introduce a greater transparency around the costs, profitability, and efficiencies at various stages of the water cycle, while the introduction of competitive pressures to treatment facilities, and potentially for network operations (it is not inconceivable for new entrants to build and operate new networks in a manner similar to the Independent Distribution Network Operators and Independent Gas Transporters seen in the electricity and gas sectors) would encourage cost efficiencies.

between the regulator and the regulated. If the meaning of the document on its face is not clear, better regulatory practice must surely dictate that the terms of the license be amended to reflect what the regulator actually considers to be the effect of the license condition rather than the words in the provision bearing little or no relation to how it is actually to be implemented.

Short termism
At a time when the energy and water sectors face some significant long term challenges and investment decisions, the accusation of short-termism is never far away. A periodic pricing regime is a common feature of regulated utilities; in many cases of five years. This seems to lead to everything being viewed through a five-year prism. Dramatic consequences can result: for example a company in the supply chain to the water business had turnover during Asset Management Plan 3 of 1mn increasing over the five year period to 2mn then to 3mn, then to 5mn before crashing in the final year to 2mn. Is such an approach sustainable in terms of staff retention, training and morale, as well as research and development? A five-year cycle also raises issues as to the financiability of large long-term projects and whether such projects are compatible with the regulatory regime currently in place. Very few major infrastructure projects in the regulated gas, power or water sectors since privatisation have moved beyond the planning/feasibility stage. With substantial upgrades planned to the gas and power networks, a number of planned new reservoirs and the Thames Tideway project, it will be interesting to see whether the regulatory regime can respond to enable these projects to go ahead and successfully be completed. After twenty years, easy efficiency gains have been won; it is generally accepted that future gains will be increasingly difficult. At some point, if not already

passed, the efficiency barrier will be reached, beyond which any decrease in cost will lead to deterioration in networks and service, and to actually improve service and networks will require increases in costs. Perhaps it is time for regulation to focus on value and not just costs? The focus on cost reduction in successive regulatory settlements has also led to minimal research and development, as companies are only interested in those projects which can pay back within one regulatory cycle. Again, is value being sacrificed for cost? Perhaps the biggest challenge in relation to long or short-termism is climate change, where substantial shortterm costs are likely to be incurred for the provision of long-term protection; for example the Thames Tideway project, which Defra has recently approved. More generally, systems will need to be reengineered to cope with different flow rates, temperatures and operating conditions: potentially a hugely expensive exercise. How will this be managed?

After twenty years, the utility sector has benefited from the legal and regulatory approach of unbundling, competition and regulation. Substantial challenges remain and it is encumbent on those in the regulatory industry to meet those challenges. To do so will require taking the best of current practice, but also to accept that not everything currently done is the best or even adequate approach to some issues; flexibility and openness to new methods and a willingness to challenge apparently accepted norms will be needed. If the regulatory industry is able to do this, then the model will adapt to successfully meet the challenges of the next twenty years. l Simon Hobday is an energy and water specialist at Pinsent Masons: simon.hobday@pinsentmasons.com

Best regulatory practice

Moving from structural to practical issues, is the current regulatory approach properly reflective of best practice and maximisation of results? The mantra of consult and inform which seems to drive much of todays regulation is generally positive, although it requires those who are running consultations to listen, hear, take account of and respond to the consultation, not simply to take a predetermined view and go through the motions. The volume of regulatory information in the form of letters, consultations and reports and papers produced by each of the regulators is huge. Not only does this result in substantial costs for large businesses in keeping up with the current regulatory position, it can also act as a barrier to competition as smaller businesses fear the consequences of not being able to keep on top of current regulatory developments. Is all of the information being published by the various regulators actually necessary, or should it be a case of less is more? Would fewer consultations, discussion papers and letters which were more targeted and therefore resulted in a greater response from industry actually have a greater impact and be of more benefit? A second issue around regulatory best practice is the interpretation of, often voluminous, licence conditions. The regulator frequently has a view as to the meaning of a particular condition which does not correspond to the legal interpretation of the words in the condition (the licence is a legal document). The result is often a series of side letters explaining an interpretation

Utilities tend to stick to home market

Despite the much-trumpeted imminent arrival of full energy market opening, most utilities do not venture out of their national boundaries and a pan-European energy market remains a distant prospect, according to research by independent market analyst Datamonitor. In spite of utility mergers and a liberalising energy market, most utilities sell gas and power only in their home countries and, to the extent they have entered new markets, these efforts are still minimal. With the Europe-wide energy market becoming fully liberalised on 1 July 2007, consumers will still not be able to take advantage of panEuropean competition. In a review of Europes 19 largest gas utilities, Datamonitor found that 63% are solely focused on their home markets. For those gas utilities with European interests, all are overwhelmingly focused on their markets in their local competitive regions. Similarly, out of 27 major European power utilities, just over half are entirely focused on their domestic markets. E.ON, Vattenfall and GDF are the only companies with significant power sales outside of their local regions.

Energy World

June 2007


Energy liberalisation

Europes next move on liberalisation

We have waited a long time for the arrival of properly liberalised gas and electricity markets across Europe and the campaign goes on. Dominic Whittome reports.

ext year will mark the 20th year since the European Commissions initiated its intention to liberalise Europes gas and power markets. In early 1988, the first draft papers outlining a combined third party access and unbundling directive began circulating between the corridors of power within the Directorate General for Energy, which in those days operated as separate DG in its own right. Over the subsequent years, successive proposals were opposed by most of Europes governments, energy utilities and producing majors. The original legislation relating to unbundling then defined as the ownership separation of the network assets from the supply arms of the business proved the most contentious of all and was dropped from the two sets of directives that finally followed. However, the failure of Europes markets to liberalise has moved the focus firmly back onto this question and it is the nettle that the merged Directorate-General for Transport and Energy (DGTREN) is now grappling with. Europes grand 1992 vision of a single European gas and power market came and went; the European Community of twelve member since become a European Union, picking up an extra crew of thirteen new member states along the way. Today two waves of gas and electricity liberation directions have been adopted and their aim was to have fully liberated the gas and electricity markets before July of this year. It is clear to the industry and buyers especially, that this deadline will come and go like the others before it. However, it seems that this failure has, if anything, reinvigorated the determination of the proponents of competition. In January the DGTREN proposed its European Strategic Energy Review; a suite of internal market, security of supply and environmental initiatives and these proposals were put to the Council of Energy Ministers on 15th February. Although no new directive was on the table, the legislative package was adopted by the Council and, insofar as European trading market is concerned, change may now be in the air.

Third generation of directives

The coming months will see the Commission preparing a third generation of directives aimed at prising open Europes gas and power markets. The new proposals will aim to break deadlock surrounding full ownership separation of transmission assets from the incumbent utilities. Although the Commission has not ruled out the traditional unbundling model, DGTREN is

also focussing on an alternative solution called the Independent System Operator (ISO) model. In this case, the utility would maintain legal ownership of its transmission assets provided they be managed by an independent and impartial system operator. The Commission sees the combination of management independence and regulation at national and European level as sufficient to establish the level playing field that energy buyers require to source gas and power supplies on the best terms available in the new market. The type of ISO model that is currently doing the rounds in Brussels looks similar to the model that currently operates in Scotland. However, before the ISO debate has even started to engage the industry stakeholders, UK players are contesting whether the ISO model operated by Scottish Power and Scottish & Southern conforms to the type of ISO system that we should want to see in Europe one day. This model has been dubbed a shallow ISO by some players, since the final decision whether or not to invest is made by the asset owner, not the independent operator. They add this weak form ISO model only works in Scotland because of the maturity of the British gas and electricity markets; and further the perceived strength of the British regulator. The final shape of the type of ISO model which DGTREN has in mind should become more widely known over the next few months. A significant concern of merchants and traders seeking to import and export volumes across Europe is the matter of cross-border congestion. It is argued that, in the main, the incumbent network utilities make large sums of money out of congestion, since this generally bids capacity prices up. Although many socalled bottlenecks, particularly in gas, are contractual, the longer-term issue of network capacity investment also needs to be addressed in the new liberalisation directive that DGTREN proposes later in the year. This investors incentive question has been acknowledged and, in the space of barely three months since its Strategic European Energy Review was tabled in January, a variation of the ISO model is now to be explored in unison with the other two. This Regional Independent System Operator model could involve be an enlarged ISO that manages the network on both sides of the European border. This could improve co-ordination of decision making and ensure the ISO receives the right signals and holds the right motives to invest in the capacity as demanded by the market.

Some companies, particularly the buyers and new entrants, might argue that the ideas of a trans-national ISO simply represents another step back from the original full ownership unbundling model, adding that national regulators should be empowered to force investment decisions on the ISO in order to ameliorate crossborder congestion. They might add with some justification that there is no example of a strong form ISO or RISO model operating anywhere in the world, certainly in the field of natural gas or electricity networks. The alternative of full ownership unbundling meanwhile is still adamantly opposed by France and Germany. As its 20th year of trying approaches, it seems clear that Commission is in experimental mode. The coming months will see concerted efforts in Brussels to break the impasse surrounding the whole issue of dominant networks and to identify a solution that can be rolled into third generation gas and power directives by the end of the year. It would be wrong, however, to underplay the significance of separate, legal initiatives by the Directorate General for Competition (DGCOMP) to enforce full ownership unbundling on those European utilities that it had previously started investigating. What seems very possible is a two-pronged affront by the Commission in order to finally prise the energy markets open.

UK energy buyers participate

As one would imagine, the degree of behind-the-scenes lobbying is intense, even by Brussels standards. However UK energy buyers are having their say included in this current debate. The Major Energy Users Council (meuc), for example, has been liaising directly with policy-makers. For the last two successive years the meuc has led the annual UK energy industry delegation to Brussels, while existing as well as new meuc members are being invited to join forces on this years 3rd delegation to Brussels in September. There is no question that participating at European level enables stakeholders to better understand the impending legislation affecting them, whilst engaging in the lobbying process first hand gives energy buyer the opportunity to influence the outcome, just as the incumbents have been doing these last twenty years. Without question, there is huge amount at stake for energy-intensive buyers. Although the European question may seem to have dragged on for so long, now is not the time l for a user to switch off the radar. www.meuc.co.uk


Energy World

June 2007

Energy purchasing

Appetite for green power will not be satisfied

K businesses will attempt to purchase some 34 TWh of green electricity in 2007, equivalent to around 10% of annual UK demand. Yet, with the volume of renewable power accredited in England and Wales under the Renewables Obligation scheme reaching only 12 TWh in 2006, internal company targets will be very difficult to meet. Ultimately, increasing demand for green energy is not being met by new capacity, according to analyst Datamonitor. Despite suffering at the hands of a sustained period of high wholesale energy prices, UK businesses are increasingly focused on sourcing premium renewable electricity. The creep of climate change and carbon emissions up the corporate agenda is manifesting itself, amongst other things, in the shape of tougher internal renewable energy targets. According to a Datamonitor survey of 3,500 of the UKs largest energy buyers, some 28% of companies have a goal for green electricity consumption in 2007 up 7% on 2006.

With demand for renewable electricity set to grow further in the future, the drive to increase green power generation capacity should have found its counterbalance. Instead, the UK Renewables Obligation (RO) scheme is failing to deliver green supplies at the rate the market is demanding. Between 2005 and 2006, the last reported RO period, the UK as a whole generated 13.7 TWh of accredited electricity, some 24% shy of the schemes 18 TWh target. Despite the increasing likelihood that the UK will miss its 2010 target to produce 10% of electricity from renewable sources, leading energy companies continue to resist a revamp of the RO scheme. Datamonitor energy and utilities analyst Paul Stewart says: Rising UK demand for green energy is not a strong enough incentive alone to bring sufficient renewable generation capacity online. With the RO scheme, ultimately, struggling to deliver this as well, UK businesses should be clear on exactly

where their green electricity is coming from. l Meanwhile, energy market liberalisation is causing a decline in the profitability of utilities, again according to research by Datamonitor. Liberalisation is intended to produce benefits to power and gas consumers across Europe, but the research shows that the profitability of utilities tends to decline as markets become more liberalised, mainly due to the new market entrants that liberalisation encourages. The most profitable utilities in Europe operate in the least liberalised markets of central and eastern Europe and, conversely, the lowest levels of utility profitability are seen in the most liberalised markets, says Datamonitor energy and utilities lead analyst Anton Krawchenko: In the UK, for instance, average utility profitability (return on sales) is 10.6%, which compares with figures over 15% in almost all of central and eastern Europe.

Outsourcing energy management the book

Outsourcing energy management saving energy and carbon through partnering by Steven Fawkes. Pub. Gower: ISBN 978-0-566-08712-7, 65

homas Alvar Edison provides an excellent example of energy outsourcing he sold lighting services, not light bulbs. James Watt and Matthew Boulton didnt sell steam engines; they gave them away (or put external condensers on existing Newcomen atmospheric engines) and earned their profit from commission on the coal saved, writes Vilnis Vesma. In his new book on the subject, Steven Fawkes traces the history of energy services in the UK market to 1966, when the National Coal Board formed Associated Heat Services to provide outsourced management of large boilerhouses. Growth and consolidation since then has seen the emergence of major players such as Dalkia and Elyo. Throughout its history, the energy services business has provoked an emotive response from professional energy managers, who may see energy service companies (ESCOs) as a threat to their livelihoods. This reviewer can remember

when working as an energy manager himself in local government, wondering what advantage an outsider could conceivably have. Fawkes has an interesting take on this: if the ESCO buys the customers plant he will be obliged to take on the staff as well, and the energy manager will suddenly have better career prospects. If he or she wants to stay in energy management, working for an end user is a dead-end job, but an ESCO will provide a hierarchy to climb. Monetisation of energy assets selling your boilerhouse for instance is also a powerful incentive to the employer. The book abounds in insights of this kind. But will outsourcing save energy and carbon? Its all about risk, and some readers may be aware of deals that have gone wrong because the ESCO actually had no incentive to be efficient. Applying monitoring and targeting to the inputs and outputs of outsourced boilerhouses can reveal that avoidable waste and inefficiency still occur. But risk is not a

zero-sum game, and if risk is transferred to the party better able to manage it, then provided the incentive structure is rational, the outcome will be better than business-as-usual. Fawkess book has an important section which enumerates all the risks in outsourcing deals. In this and other respects it provides an indispensable catalogue of checklists. He has covered every angle. There is more here than just checklists, however. The early chapters yield some fascinating material on climate change (which many of us know about) and the prospects for future high and unstable fuel prices as the world economy balances growing demand with diminishing new discoveries which many people dont appreciate. Twenty years ago, new books on energy management were appearing almost every month. Today it is a rarity: Steven Fawkes and Gower are to be congratulated. Like Edison, they arent selling a book they are selling enlightenment.


Energy World

June 2007

Burn it? Gasify it? Ferment it? Doing the right thing with biomass
As we face climate change and dwindling oil supplies, deriving more energy from plants may become a necessity. The extent to which the bio-energy industry will grow depends on politics, economics and international development. Martha Simpson-Holley and Geraint Evans of the National Non-Food Crops Centre discuss the options for biomass processing in the UK.

urrently over 75% of the worlds primary energy supply comes from fossil fuels1. Reducing this (and our carbon emissions) using biomass is possible, but biomass resources are finite. The problem which faces us is how best to manage and use the biomass resources we have. The National Non-Food Crops Centre (NFCC) is helping to optimise technologies and feedstock supply chains to help establish a viable UK biomass strategy. The question posed in this article is how best to use our biomass resources. The human race is extremely energy-hungry and is becoming more so: in 1990, global energy demand was 9bn tonnes oil equivalent (toe); the UKs total energy consumption is around 161mn toe. By 2050, global energy demand is predicted to be anywhere from 14.2 to 24.8bn toe1. The political drivers for biomass energy use are prevention of climate change, fuel security, conservation of natural resources and rural development. In most cases biomass energy is more expensive than non-renewable alternatives such as coal, gas and liquid hydrocarbon fuels. In addition, the infrastructure and processing capacity have yet to be established for bio-energy this brings large capital costs with it. For biomass to become a significant provider of global energy, government action is needed. Government action can be motivated by different factors, and if environmental assessments are not carried out, biomass can be used in a way which does not contribute to the prevention of climate change. Lifecycle assessment (LCA) of biomass processes is crucial to quantify the overall environmental gains presented by different technologies. These assessments take into account greenhouse gas (GHG) emissions from production processes, including fuel used for transport of biomass and fertiliser required by specific crops. Previous LCAs have shown limited GHG savings arising from certain biomass-based processes, for example corn ethanol production2; other processes show larger benefits in terms of GHG reduction3. If biomass is to provide us with a sustainable energy supply we must be able to produce it consistently in large

quantities, without damaging the environment. Intensive farming, in terms of growing large areas of a small number of crops, is likely to be necessary to produce feedstocks for bio-based industries. However it is unlikely that this will take the form of intensive farming as we know it today, in which crops are grown using large quantities of fertilisers and other chemicals. Intensive farming for biomass could instead mean large forests of poplar, willow or other fast-growing trees, which would provide habitats for wildlife and require few chemical inputs. The use of crops requiring high fertiliser inputs must be limited in order to prevent eutrophication and increased GHG emissions. The clearance of land for biomass production is not sustainable; well-managed forests can provide biomass without being cleared. Biomass crops such as miscanthus or poplars may be grown on land which is either already in agricultural use, or is set-aside, low-grade, or spare (such as field margins). It is not sustainable to produce energy at the expense of food production. If we acknowledge that deforestation and the displacement of land from foodproduction land is not an acceptable means to provide biomass, the land which can be used for biomass becomes limited. In the UK, we have 12mn ha of agricultural land that is not required for food production4. Conservative estimates for potential yields of biomass from this spare land settle between 510 dry tonnes per hectare of land. This is attainable in the UK using short rotation coppicing of trees or biomass energy crops. Higher yielding crops may become available. For example, the cultivation Region Global Resource Type

of algae for biomass could become viable; yields of up to 200 tonnes/ha have been suggested. In addition, our biomass resources could include waste derived from industry, agriculture, and municipalities. Estimates of the potential for biomass production are summarised in Table 15. Annual supplies are those produced from spare agricultural land without threatening food supplies. It is assumed that these land areas can be managed sustainably to produce an annual harvest of biomass at minimal cost to the environment. UK biomass resources therefore lie in the range of 1020mn tonnes of biomass per year. This excludes biomass from waste and novel land use, like field margins. In reality, biomass is likely to be sourced both from the UK and abroad, because many developing countries are biomass- and land-rich and can produce biomass cheaply. Therefore the size of the UKs processing capacity for biomass may eventually exceed the capacity for biomass production from UK land. However, for the purposes of this discussion we have assumed that the amount of biomass available to the UK will be in the range shown for UK production.

Using biomass
The options for biomass usage are shown in Figure 1. The potential products are heat, electrical power, fuels, or other chemicals. Currently, these are all largely derived from fossil materials at environmental cost. There are two types of feedstock: specific materials such as plant oils or starch, and non-specific biomass. The processing methods available consist of digestion (anaerobic Potential yield (dry tonnes) 1250 bn6 220 bn6,5 130 bn6 1.413 bn5 0.010.02 bn5


Total Annual, total Annual, excluding marine resources Annual, excluding marine resources and land required for food production Annual, from agricultural land, excluding land required for food production

Table 1: Estimated biomass resources: UK/global


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processes, or the size of capital investment required for their establishment.

Energy conversion, efficiency and yield

The highest efficiency is obtained from a biomass gasification power plant with CHP, providing district heating and electrical power. Using this technology, 68% of the energy in the biomass is delivered as electricity and heat6. This could replace 7% of the UK electricity supply (2004 figures). It could also fulfil around 6% of the UKs space heating requirements, if the infrastructure was available to deliver heat to consumers nearby. The Biomass to Liquid (BTL) process produces liquid transport fuels from biomass via gasification and FischerTropsch processing. Biomass can be converted to energy at an efficiency of about 48%3. If the total UK biomass feedstock were put into BTL, sufficient diesel could be produced to replace 15% of the UKs 2004 diesel consumption. Co-firing represents a straightforward (and inexpensive) means by which biomass can be incorporated into the current electricity generating infrastructure, reducing the capital costs associated with producing energy from biomass. Although it does not exploit the energy contained in the biomass to its full advantage, it does provide greater energy conversion efficiency (up to 45%7) than biomass combustion alone (~30%8). The UKs biomass could supply up to 9% of our Current UK demand/yr (2004 figures) Diesel: 4903 million gallons/yr9 21mto % UK demand replaced 15% of diesel consumption (~7.5% total UK road transport fuel)

Figure 1: Options for the processing of biomass to fuels, chemicals, heat and power or enzymatic), fermentation, combustion and gasification. The questions presented here are: which of these products should be derived from biomass, and using which process? Are our biomass resources large enough to sustainably supply all these materials? If not, how can we get the most out of our biomass? Table 2 summarises the possible products from 14mn tonnes of biomass, which could be sustainably produced in Product Feedstock/ Technology/ Process Biomass, 2nd generation biofuels Biomass fired power plant: Combustion, Steam turbine Biomass gasification power plant with heat recovery the UK. This would require yields of seven dry tonnes/ha from 2mn ha of land. This table allows the evaluation of these biomass resources for use in different technologies. Processes can be evaluated by various criteria: their energy conversion efficiency (which process derives the maximum energy value from the biomass feedstock), their yield of different products, their ability to replace the most environmentally harmful conventional Yield of product perhectare biomass* 388 gallons diesel Yield of product from UK biomass* 776 million gallons 132 million GJ 3.1mtoe 23 billion kWh 83 million GJ 1.9mtoe Electricity: 23 billion kWh 83 million GJ 1.9mtoe + Heat: 106 million GJ 2.5 mtoe

Yield of energy per hectare biomass 66GJ/ 1.6toe 48% energy conversion efficiency3 41GJ/0.97toe 30% energy conversion efficiency10 94GJ/2.3toe 68% energy conversion efficiency10

BTL diesel


11400 kWh

345.2 billion kWh9 7% electricity 30mtoe

Electricity + heat (CHP)

11400 kWh + 53GJ heat

345.2 billion kWh9 7% electricity 30mtoe 5.9% heat UK heat consumption9**: 42.5 mtoe 345.2billion kWh9 30mtoe 9% electricity


Co-fired power station: steam turbines, using up to 15% biomass blended with coal

Up to 62GJ Up to 17000 kWh 34 billion kWh Increased energy 122 million GJ conversion 2.9mtoe efficiency: up to 45%11

*Assumed inputs: Short rotation coppice feedstock, 7 dry tonnes/ha, 19.7 GJ/tonne, 2 million ha (energy total from UK biomass: 276 million GJ) **Energy consumption for space heating, domestic + services + industry mtoe = million tonnes oil equivalent, kWh = kilowatt hour, GJ = Gigajoules

Table 2: Potential production of different energy products from UK biomass resources

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Process GHG emissions % GHG emissions savings over conventional process or material GHG savings if UK biomass displaced fossil equivalent* Conventional Processes Coal powered electricity generation (average plant) Natural gas combined cycle gas turbine 1042g CO2/kWh12 360g CO2/ kWh13 0 0 0 0 0 0 0 0

Standard gas boiler (domestic heat generation) 389-511g CO2/ kWh12 Fossil Diesel 160g CO2/km3

BTL** 1st generation biofuels Biomass powered electricity generation: Miscanthus Biomass powered electricity generation with CHP: wood chip gasification, combined cycle gas turbine Coal and 15% biomass co-firing

Biomass-based Processes 81% 30g CO2/km3 90g CO2 /km3 kWh13 44% 92% (cf coal) 78% (cf gas CCGT) 98% (cf coal) 93% (cf gas CCGT)

8 billion kg CO2 ND 22 billion kg CO2 23 billion kg CO2

80g CO2/

25g CO2/ kWh13

816g CO2/ kWh12

22% (cf coal); produces 127% more emissions than gas CCGT

7.4 billion kg CO2

*Estimated by calculating emissions from biomass technology using 14mn tonnes UK biomass, and subtracting from the emissions produced by the current fossil fuel process (assuming that biomass would replace coal-fired power generation, not gas) ** Assuming 50mpg achieved by diesel fuels (80km/gallon)

Table 3 Estimated GHG savings achievable by using UK biomass resources electricity supply through co-firing. Drax, a coal-fired UK power station, recently announced an intention to use 10% biomass by 2009. This will require 1.5mn tonnes of biomass in the form of oil palm, willow, poplar, olive mush and miscanthus, much of which is expected to be imported. Other options exist which could significantly increase the energy conversion efficiencies of multiple feedstocks. CHP plants using various feedstocks and technologies have been shown to provide up to 75% energy conversion efficiency; however discussion of these is outside the remit of this article. A striking conclusion from the figures shown in Table 2 is that the UKs potential biomass resources are finite, and alone they cannot replace the electricity, liquid fuels and heating power which we currently derive from fossil fuels. Biomass and its derived products are likely to become globally traded commodities, and to some extent already are, but even if imports reach many multiples of the UKs biomass production capacity, we will not be able to source the UKs energy requirements (161mn toe or 6762mn GJ) solely from biomass. the GHG emissions produced by various biomass-based processes. In addition, it is important to look at the emissions associated with existing technologies, which the biomass-based processes will replace. This allows the use of biomass resources where they are needed most, to replace technologies which currently produce the most GHG emissions. Table 3 shows the GHG emissions from some conventional energy generation processes and their potential biomass-based replacements. It also shows the reduction in emissions that could be achieved by feeding 14mn tonnes of biomass into each process, displacing the equivalent amount of fossil materials. In environmental terms, the greatest potential savings in carbon dioxide emissions come from using our biomass resources to produce heat and power using gasification and CHP processes. The replacement of coal by this process prevents a large quantity of GHG emissions. Co-firing 15% biomass with coal would produce comparable emissions savings to those yielded by BTL fuels. instead of fossil feedstocks. Although in the next few decades biomass could become competitive with oil for liquid fuel production, it is unlikely that biomass feedstocks will become comparable in price to coal, since coal is still abundantly and cheaply produced from large reserves. Once established, gasification plants could feasibly be built to run on biomass or coal. In such a scenario, the choice of feedstock could be determined by price or GHG emissions. Coal is around half the price of biomass (e2/GJ in comparison to e4/GJ for biomass). Therefore in the absence of environmental drivers, coal feedstocks would be used. The carbon dioxide emissions from coal are around 0.1 tonne/GJ; for biomass they are potentially close to zero. So from an economic standpoint, a tax of e20/tonne carbon dioxide would be required to make biomass competitive14. The recent Stern Review suggests the social cost of carbon dioxide to be around e60/tonne. Thus, the competitive pricing of biomass feedstocks is likely to remain reliant upon political drivers for the foreseeable future: these range from environmental or carbon taxes, to mandatory requirements for biomass inclusion. Government incentives are also likely to prove essential for investment in new biomass-based infrastructures and plants, and will be required to ensure that alternative technologies such as coal to liquid fuel (CTL) production do not become dominant: these technologies could provide substitutes for oil-derived fuels, but produce higher

Economics of biomass
There are two major factors in paying for biomass-based processes. First is the capital cost associated with establishing new biomass-based technologies. These vary from minimal (for co-firing of biomass with coal) to extremely large (upwards of e500mn for establishing a BTL biorefinery of significant scale). Second are the costs associated with buying biomass feedstocks

Maximum environmental benefits

In addition to getting the most energy out of biomass, it is also important to get maximum environmental gains, through decreasing global GHG emissions. To realise this goal, it is necessary to look at


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emissions than current fossil fuels. A secure market for biomass-based energy must be established before large investments in biorefineries are likely15. This is a simplified analysis of our current options for using the UKs estimated biomass resources for energy production. The question of how best to use biomass, and the size and type of biomass resources available to the UK, will ultimately be answered by the technologies in which industries are prepared to invest, and the economic drivers which affect biomass production worldwide. Independent LCAs can provide a clear picture of the available gains in environmental and energy terms, and will thus play an essential role in mapping out a strategy for development of the future energy industry. In terms of capital investment costs, technologies such as co-firing of biomass with coal and first generation biofuel production are the most attractive options, requiring only limited investment in production facilities. Although their potential yields and/or environmental gains are not

as significant as more advanced technologies such as BTL and gasification power plants with CHP, they can provide a stepchange in the energy industry and may provide an important intermediate in the development and implementation of more capital-cost intensive, environmentally advantageous technologies. Biomass resources are limited and can only be successfully used to prevent climate change as part of a multi-pronged approach including other renewable fuels and energy sources, combined with increased fuel efficiency. In the context of power generation, the harvesting of heat as part of a CHP process is highly desirable and can have a significant impact both on GHG emissions and fuel requirements for the UK. l www.nnfc.co.uk


1. http://www.worldenergy.org 2. Hall, J. et al (2006) Environmental, economic and energetic costs and benefits of biodiesel and ethanol biofuels. PNAS 103: 11206-11210

3. Well to wheels analysis of future automotive fuels and powertrains in the European context. Concawe, EUCAR and JRC. Version 2c, March 2007, http://ies.jrc.ec.europa.eu/WTW 4. http://www.nfuonline.com/x9763.xml 5. The Potential for Renewable Aviation Fuels, (2007) NNFCC position paper http://www.nnfcc.co.uk 6. http://bioenergy.ornl.gov/faqs 7. http://www.www.e8.org 8. Whitehead, P (2006) Platts Renewable Energy Report. Biomass combined heat and power: can it deliver efficient renewable eneregy 9. DTI: UK Energy in Brief, 2005 http://www.dti. gov.uk/energy/inform/energy_in_brief 10. Whitehead, P (2006) Platts Renewable Energy Report. Biomass combined heat and power: can it deliver efficient renewable energy 11. http://www.iea.org/Textbase/techno/essentials3.pdf 12. Mann, M.K., and Spath, P.L. The Net CO2 emissions and energy balances of biomass and coalfired power systems. National Renewable Energy Laboratory, USA 13. http://www.parliament.uk/documents/upload/ postpn268.pdf 14. Siemons, RV (2004) A development perspective for biomass-fuelled electricity generation technologies. Economic technology assessment in view of sustainability. Energy policy 32: 12471249 15. Biorefineries: Definitions, examples of current activities and suggestions for UK development. (2007) NNFCC position paper, http:// www.nnfcc.co.uk

In praise of wood pellets

Graham Hilton highlights the many advantages of one biomass product.

bviously, wood is a perfectly adequate fuel, but its natural state is neither the most efficient nor the most cost-effective to use. For a start, raw wood chips have a high water content, which reduces their efficiency and makes them unpredictable when burned. When stored, they are prone to spontaneous heating and act as a superb breeding ground for fungal spores. Moreover, transporting them is relatively expensive: much of the volume is air, and half the weight is water. Rather like crude oil, the true potential of wood is realised only after a degree of refining. Rather than petroleum or jet fuel, the end product in this case is wood pellets: a clean, predictable and high-value fuel that is safe to store, easy to handle, and inexpensive to transport. Pellets are made from virgin sawdust or by-product from processing untreated timber. Most pellet manufacturing plants are located in close proximity to sawmills,

where the raw material is readily available. The sawdust is extruded through a die to make small, regularly sized pellets 6 mmdiameter capsules of energy. The process causes the lignin that occurs naturally in the wood to form a shiny outer shell that helps the pellets keep their shape. The compression process extracts the water and increases the density of the wood, with the result that pellets have twice as much energy by weight and four times as much energy by volume as unrefined wood. Imperial College has calculated that wood pellets are 97% efficient meaning only 3% of the potential energy content of the end product is consumed during its manufacture. Like all forms of biomass fuel, pellets are considered to be carbon neutral. Their energy derives from organic compounds, and the only carbon dioxide they release into the atmosphere is that which the growing organism in this case the tree absorbed during its lifetime. In effect, wood pellets recycle existing atmospheric carbon dioxide, rather than adding to it. So wood pellets have strong environmental credentials. If that appeals to an organisations heart and the head of CSR, then their economic justification also appeals to its head and its treasury department. Wood pellet fuel currently costs about the same as gas, and is cheaper than oil, LPG or electricity. Where the wholesale prices for fossil fuels have been very volatile in the last few years, the price of wood pellet fuel has remained stable. But how are wood pellets used? First of all, pellets, along with other forms of bio-

mass fuel, can be used to co-fire traditional power generation plants and so supply electricity with a lower carbon content. But perhaps the most efficient and effective use of wood pellets is on a smaller scale, where they are used to produce heat at the point of use. Wood pellet-fired boilers can replace standard units in settings that range from the domestic to the largest commercial establishments, and can easily be integrated into existing central-heating systems. Although traditional oil-fired boilers can be converted to take pellet fuel, it is more likely that specifically-designed wood pellet boilers will be used to replace existing units at end of life, or in new build projects. With nationwide supply chains being developed, pellet fuel is as convenient to use as oil and coal and can be stored in the same units as traditional fuel. And, unlike oil, it doesnt require a storage bund to meet environmental regulations. Using wood to generate energy is not a new idea. Nor is the idea of refining it into pellet form. What is new is the organisational and operational capability of wood pellet suppliers. This is no longer a locallyfocused cottage industry. And, as the capability to provide a consistent, regular supply of wood pellets on a national scale develops, so wood can leave behind its pre-industrial associations and join the high-tech solutions as an essential part of our energy mix. l Graham Hilton is the Managing Director of the Energy Crops Company, www.energy-crops.com

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June 2007


Huge solar thermal array provides heat for training pool
Specialist training organisation Petans in Norfolk has installed various renewable energy resources; the most notable and recent of which is a large solar thermal array to provide heating for its training pool. Petans training centre specialises in courses for the international oil and gas industries and other hazardous sectors. Training courses cover maritime activities, safety management, offshore survival, helicopter operation and fire-fighting. Over five years ago, the company installed a 32-panel solar photovoltaic array to provide electricity for its administration block; it has also experimented with wind power for outdoor lighting. Now, for the indoor pool used in training for the international offshore oil and gas industries the pool is large enough to take the fuselage of a helicopter and can therefore substitute for the sea when such a craft has to ditch into the water a large new solar thermal installation has been commissioned. As survival training for such events means delegates must often spend long periods in the water, it is heated to around 30C to ensure they are comfortable. Depending on the seasons, and the variable amounts of solar energy obtainable as the weather changes, a cascade of three supplementary condensing boilers is also installed. Specialist contractor EnergyWorx was called-in to install the solar thermal array and associated equipment. Space on the pools roof was only available for 80 m2 of solar panels, so a further 6 m2 have been installed on the facade. The latter section heats the water for a new storage cylinder, which in turn feeds the 26 showers available for delegates, while the main array heats water for the pool. Heating for an air-handling system and radiators also had to be provided. Supplied by Viessmann; the solar tube collectors are Vitosol 200 units. Even in winter, the solar array can provide about 35% of the heat needed to take the pools temperature up to the target level, and the supplementary boilers come on stream as necessary to maintain that temperature. By contrast, in mid-summer, the solar array on its own might produce more than enough heat. Previously, there were two oil-fired boilers and two storage cylinders, all with such great standing losses that the plant room become unbearably hot. Now, this room houses the three boilers, which are fuelled by liquefied petroleum gas, a heat exchanger, controls which integrate the solar and boiler systems, a manifold and low-loss header system, diverter valves, pumps and accessories, all fitted in one weekend to minimise training downtime. The main solar array is made up of eight linked banks of evacuated tubes each. The lightweight tubes were easily carried up to the roof, as opposed to heavier flatplate panels, so the installation cost was relatively low, and the angle to the suns rays was optimised. Connecting the panels are stainless steel tubes with crimped fittings, to avoid hot work and the extra costs this entails. The reverseflow system is in turn connected to the heat exchanger. www.viessmann.co.uk

Petans training pool is largely heated by solar enrgy

Hydro-electric ground source heat pumps

Set on the banks of the river Clyde in Scotland, the converted New Lanark Mill now houses some thoroughly modern technology a ground source heat pump, which heats the visitor centre at the mill throughout the year using heat from the river itself. The process works by using low-grade heat from the river Clyde collected via slim jim collectors sited in the mill leat (inlet channel), which is then converted to high-grade heat using a heat pump. This high-grade heat is then used to heat the building. The heat pump is powered using a hydroelectric technology; the result of which is carbon-neutral heating, says the supplier, Geothermal International. The Lanark Mill system uses three 8tonne slim jim units. These are effectively large radiators manufactured from stainless steel. The device has a water/anti-freeze mix pumped around its internal surfaces at temperatures lower than that in the mill leat. The relatively warmer water in the leat transfers heat to the cooler water inside the unit and this is then transformed into high-grade heat using an EKW 90 Water Furnace ground source heat pump. Geothermal International has been designing and installing GSHP in

commercial buildings for over five years. Its experience indicates that ground source heating and cooling systems for large UK commercial buildings are not only viable, but the payback on investment and performance efficiencies is impressive. www.geoheat.co.uk

Installing the slim jims


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June 2007

Underfloor heating makes green partner for heat pumps

Underfloor heating systems from EvenHeat are bringing space-saving comfort to an old hospital, currently being converted into homes, in Wales. The old Llys Maldwyn Hospital at Caersws in the Severn Valley is being converted by Plas Maldwyn Developments into apartments and bungalows. Heating throughout the project will be provided by Even-Heat underfloor heating systems integrated into the floor structures and served by ground source heat pumps. Each of the 34 dwellings will have its own heat pump unit linked to a dedicated 100 m borehole. The versatility of the underfloor heating systems makes it possible to integrate the heating into all types of floor construction, including the wooden suspended floors so often found in older buildings, says Even-Heat. Floor constructions in the 3-storey main building comprise timber joists set between steel beams and feature high levels of both thermal and acoustic insulation. Lightweight, aluminium plates, with preformed grooves to accept the loops of heating pipe, are integrated direct into precut insulation panels. Once the underfloor heating was in place a chipboard deck is floated over the top to

Heating for the new flats at Caersws will be provided from ground floor heat pumps

provide a base for the final floor finish vinyl in the bathrooms and carpet elsewhere. The new bungalow units at Plas Maldwyn feature a solid floor construction. During installation, loops of Even-Heats cross-linked polyethylene pipe work were laid above a layer of insulation material to prevent downward heat transfer. Loop ends were terminated at discreetly located manifolds. Each manifold is connected to an 8 kW heat pump unit. A water-glycol mixture is pumped through pipework in the boreholes drawing naturally occurring heat into the system from deep below the

ground surface. The heated water enters the flow side of the heat pump. Here the action of compressor and condenser brings the water temperature up to the levels required by the underfloor heating and hot water systems. The low flow and return temperatures, which are characteristic of underfloor heating, make perfect partners for heat pump technology. So much so, that the developers expect to save annually up to 2 tonnes of carbon dioxide emissions from each apartment in comparison with conventional oil-fired. www.even-heat.co.uk

University building includes PV/shading system

A new 59 million construction project known as AMPPS (Astronomy, Mathematics, Physics and Photon Sciences) at the University of Manchester includes what has been described as the UKs largest solar shading array using thin film technology. AMPPS has been deliberately designed to encourage collaboration between departments, most symbolically represented in the large glass atrium which will dominate the buildings usage. The structure also integrates cuttingedge environmental technologies into its design with photovoltaic shading arrays to create an alternative source of power. Solar ASI Glass semi-transparent photovoltaic panels from Schott, which convert daylight into electricity, have been fitted onto the roof. Designed by Manchester architects Sheppard Robson, the building incorporates a canopy spanning the three component structures featuring a rack mounted louvre photovoltaic system to provide shading. The light shining through the semi-transparent thin film photovoltaic laminate modules will also produce a striking effect when viewed from below. The energy output from the 1,100 ASI Glass modules will be used to offset the sites power demand. The installation means potential savings of over 17 tonnes of carbon dioxide emissions each year and considerable annual savings for the university in reduced electricity bills. In addition to generating power, the 30 kWp installation will allow up to 20% light transmittance and markedly gain. reduce solar heat www.schott.com/uk

A rack of PV modules will both generate power and transmit light into the atrium

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June 2007



Japan takes a lead on stationary fuel cell research

Japan has to import enormous amounts of energy to accommodate its combination of high consumption patterns and very limited indigenous resources. The Government is therefore keen to support research into both energy efficiency and innovative generation technologies. Here, Gavin Blair concentrates on Japanese efforts to get stationary fuel cell power systems into the market.
than 50% today, current Middle-East geopolitical instability and environmental issues mean this is still an uncomfortably high figure. Add to this the fact that Japan is also the worlds biggest importer of coal, 180mn tonnes in 2005, accounting for approximately a quarter of the world trade according to the International Energy Agency (IEA), and it comes as no surprise that the Japanese Government has long been taking a proactive approach to mobilising the country to develop new power generation technologies. Such pro-activity dates back to 1997 when the Government passed legislation known as the Special Measures for Promotion of the Utilisation of New Energy subsidising and promoting energy innovation. According to Professor Susumu Yoshikawa of the Institute of Advanced Energy, Kyoto University: The basic standpoint of this law is that any person involved in energy has an obligation to strive for the introduction of new and renewable energy. established in 1980 with a brief to develop new oil-alternative energy technologies; its scope has since expanded to include industrial technology research and development and work on environmental technologies. Nearly half of NEDOs 192bn Yen (e12bn) R&D budget is now spent on the combined areas of projects concerned with the development of fuel cell and hydrogen technology, new energy technology and energy conversion technology. This includes the full spectrum of new energy technologies related to solar power, hydro power, wind turbines, biomass, electric vehicles, natural gas vehicles, methanol fuel from waste, a range of fuel cells and natural gas cogeneration. Speaking to Energy World, Kenichiro Ota, President of the Hydrogen Energy Systems Society of Japan (HESS) and a professor at Yokohama National University explained how the impetus for the research into new energy technologies is being driven on a national basis: The Government is really pushing hard for research into new energy such as hydrogen and various types of fuel cells, both stationary and for vehicles. Theyre funding work at places like our research laboratory and other universities, as well as at the Government agencies. Indeed, fuel cells are one of the most promising areas of research currently being carried out into new energy in Japan, with a number already commercialised and others at the later stages of trials.

Government backing
The NNES 2006 sets out a vision for a collaborative approach that would likely amount to little more than fine sentiment in many countries, but in Japan is taken very much to heart. It says: Unified efforts of the Government and private organisations would be necessary to develop and introduce innovative energy technologies, aiming at the establishment of the next-generation energy utilisation society ahead of other countries. Implementation of energy security measures would be an important national task influential to national interests. In the course of establishing specific strategies for implementation, both public and private organisations should make sure of their own responsibilities and at the same time unify their efforts in addressing foreign issues by assisting each other. In addition, all relevant public organisations should share objectives to ensure Government-wide efforts. Along with exhorting private industry to play its part in the development of new energy technologies and providing targeted research grants to that end, the Government has also provided funding to a number of university departments carrying out research in the field. Much of this funding and research coordination is administered by the New Energy and Industrial Technology Development Organisation (NEDO), a Government agency controlled by METI based in Kawasaki, outside Tokyo. The agency was

s the worlds third biggest energy consumer after the US and China, Japan has long been concerned with its lack of self-sufficiency in power generation and fuels. The low level of food self-sufficiency (40%), which has always been something of a national obsession, looks positively healthy when compared to the 16% level for energy. Among the major industrial powers only Italy has a lower percentage. If the nuclear component of the nations electricity production is removed from the equation, the self-sufficiency level drops to around 4%. Around a third of the countrys power currently comes from nuclear sources, however, because of environmental and safety concerns, calls for a large increase in this capacity are currently out of favour in Tokyo. According to the New National Energy Strategy (NNES) 2006, released by the Ministry of Enterprise, Trade and Industry (METI), Japan annually imports 212mn tonnes of oil, 90% of it being Middle Eastdependent. To put this in perspective, the figure for China is 127mn tonnes. While Japan has decreased its level of oildependence from over 75% at the time of the first oil crisis in the early 1970s, to less

Fuel cell research

NEDO is currently attempting to improve the power, efficiency and safety of Solid Oxide Fuel Cell (SOFC) technology whilst reducing costs to make their market viability a reality. Toshimichi Yamanishi, Chief Officer of the fuel cell and hydrogen technology division at the agency, pointed out some of the advantages of these fuel cells that they are working on, Using natural gas the carbon dioxide emissions of SOFCs are reduced to a very low level, not zero as we can achieve with hydrogen, but still very low. Our target is for efficiency of 80% and these will be very powerful systems, easily able to provide all the power and hot water required for an average home. Some of the challenges facing the researchers include reducing the degradation of fuel stacks to ensure longer life and the development of materials to be used in fuel stacks that will allow SOFCs to operate with various fuels and operating conditions. Under enterprise and trade


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June 2007

ministry guidelines, commercial fuel cell stacks must have a shelf-life of ten years, the same as an average domestic appliance in Japan. Another goal of NEDOs current projects is to produce a high power density fuel cell that would be about three times conventional power output, to facilitate downsizing of units. In February this year, it was announced that a micro-SOFC, based around cylindrical mini-reactors with diameters as narrow as 1mm has been developed by a research group including Japans National Institute for Advanced Industrial Science and Technology. A 3cm cube solid oxide fuel cell based on these micro-tubes was reported to have generated 14.2 W at an operating temperature of 650C, with a power density of 0.5 W/cm2. The group is now working towards a stack that will generate 100 W and is considering its future uses as an auxiliary power source or in cogeneration. Meanwhile polymer electrolyte fuel cells, (PEFCs), are already in use in hybrid cars and other electric vehicles, and there are PEFCs about to come to market in Japan for mobile phones and other portable electronic devices. Trials of stationary PEFC stack CHP systems are also underway in a large number of Japanese homes with support from the Government. NEDOs Yamanishi reports that they are also working on larger scale fuel stacks, As well as PEFC systems for vehicles and homes, we are developing 100200 kW stacks for use in businesses. Most of the PEFCs currently under development are hydrogen-based systems and are part of a drive towards a hydrogen economy advocated by many scientists and policymakers in Japan. NEDO is part of a five-year national

project that began in 2005. In order to demonstrate the national commitment to the programme, the first commercial units of the PEFC systems trial were installed in the official residence of the Prime Minister in April 2005. The pros and cons of hydrogen as a viable energy source are well documented but Professor Ota is in no doubt as to its importance, To put it simply, we need hydrogen. Of course there are technical difficulties we need to overcome and infrastructure questions, but with global warming at the current levels, we have no choice. Although, as with all new technologies, there are a range of practical challenges to be overcome, the cost of the platinum used in PEFCs is certainly one of the central issues. Professor Ota explains, In our research laboratory we are most concerned with finding some alternative non-platinum electrolytes. Obviously platinum is very expensive and there are limited resources of it; we are working on compounds using tantalum to try and achieve the catalytic performance of platinum. Hydrogen is not the only possibility for PEFC cogeneration systems. Nippon Oil and Maruichi Sekiyu have both began limited trials of 1 kW kerosene-fuelled PEFCs. Later this year, Idemitsu Kosan plans to begin field tests of a larger 5 kW PEFC unit in restaurants and convenience stores. The company plans to test both kerosene and liquefied petroleum gas (LPG) models. The most widely-used cogeneration unit in Japan though, with over 45,000 units installed the Ecowill is based not on fuel cells but a gas internal combustion engine. This 1 kW system achieves overall efficiency of 85% produced by generating

efficiency of 20% and waste heat recovery efficiency of 65%. It is capable of heating 20 litres of water to 25C per minute while noise is kept to a 44 decibel level. Although often referred to as a Honda product, this is not strictly true, as Shin Kagawa, a spokesperson from the company explained: The units central component, the GE160EV, the worlds smallest natural gas engine, is made by Honda but the Ecowill product is actually produced and sold by Osaka Gas in collaboration with some other gas companies. A similar tie-up has been arranged with Climate Energy in the US where it will be known as the Freewatt Micro-CHP and has been ramped up to a 1.2 kW output.

PV progress
Honda has also becoming involved in photovoltaic power. The company has established Honda Soltec to manufacture and sell its thin film solar cells made from a compound of copper, indium, gallium and selenium. It claims to be able to halve the energy consumed in the manufacturing process of a conventional crystal silicon solar cell and plans to start selling the new cells by autumn this year. Japan leads the way in photovoltaic technology, producing nearly half of the solar power generated worldwide and having four of the five biggest global producers of solar panels. NEDO is, as ever, at the heart of the driving forces behind photovoltaic innovations working with companies, academics and local organisations, to both fund research and subsidise largescale field trials. Energy from photovoltaic sources is still relatively expensive and NEDO generally pays half of the installation costs of major field trials. Projects currently being undertaken include the improvement of the efficiency of CIS-based thin-film solar cells and work on next-generation ultra-thin crystalline silicon solar cells, as well as research into technologies to improve the performance of organic thin-film solar cells. Of course, fuel cells under development in Japan are also being developed for the automobile industry and given Japans world-beating performance in alternative energy systems for vehicles, it is maybe of little surprise that Nissan, which currently uses licensed technology for its hybrid cars, recently announced a joint venture with NEC to develop lithium-ion batteries for the automobile industry. There could be spin-offs from this project for stationary fuel cell applications and multiple-use technology has an obvious financial attraction for their developers. This is also likely to be true for new photovoltaic cell breakthroughs too. One other prediction that can be safely made in this quickly-advancing field is that many of the new innovations in the area of new energy will continue to come from Japan. l


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June 2007