The Energy Skills Transition – Graham Barton
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In August 2019, the HySpirits project was awarded £148,600 by the Department of Business, Energy, and Industrial Strategy (BEIS) to investigate the use of hydrogen as the combustion fuel within the distilling process. This project is a partnership between Orkney Distilling Ltd, the European Marine Energy Centre (EMEC), and Edinburgh Napier University and aims to remove the need for fossil fuels such as kerosene and LPG.
This project will build upon the progress Orkney has already made in becoming a global centre of hydrogen development. Like many islands, Orkney has excellent renewable energy resource. So much so in fact that the local grid is unable to accommodate it.
Rather than letting the potential go to waste, the local government along with partners, such as EMEC and local community generators, decided to use the surplus electricity to generate hydrogen. The Surf ‘n’ Turf project, for example, uses community-owned wind power and tidal power from EMEC to produce hydrogen that is then used by the Kirkwall Harbour and ferries. If and when the HySpirits project is successful, it will provide a roadmap for similarly situated distilleries to decarbonise.
Distilleries are also ideal clients for renewable developers. Recent research by Xodus has found that one of the major hurdles facing offshore energy developers is a lack of economic certainty, often stemming from a failure to qualify for support in the UK government’s Contracts for Difference (CfD) subsidy mechanism.
The latest CfD auction has resulted in record low strike prices for offshore wind, with an average of £40.63/MWh. Such prices are comparable with traditional forms of generation and mean that the offshore wind sector is now able to compete without subsidy. However, it is no surprise that the successful bids came from the largest, most experienced developers.
Smaller offshore wind developers have struggled and a failure to qualify for CfD subsidy support means the future of many projects is now uncertain. Likewise, with tidal and wave energy which, despite both experiencing relevant cost reductions in recent years, are said to be 10 and 20 years respectively behind offshore wind and cannot hope to compete with this sector for subsidy in the short to medium term.
Uncertainty over future revenue results in higher investor risk and therefore increases the cost of finance. This can undermine the economic case for otherwise viable projects. An alternative means of achieving this certainty is via Power Purchase Agreements (PPAs) whereby generators sell electricity directly to demand centres. To be attractive, offshore generators will need to be able to offer some guarantee of supply and stabilise their output requiring some form of energy storage.
Fortunately for tidal, current storage technologies are well-suited to tidal resource variability helping the economic case stack up. With their high demand and proximity to good offshore resource, distilleries are ideal candidates for such agreements. By providing a guaranteed market and price for renewably generated marine energy, distilleries can help such projects achieve the economic support they need to develop while meeting their own decarbonisation and social responsibility targets.
Offshore renewable generators – particularly wave and tidal – further stand to benefit from such an arrangement by being able to develop their technologies outside competitive markets. Rather than having to directly compete against more established technologies and more experienced developers in a very public domain, PPAs will allow tidal and wave developers to hone their technologies and learn through doing on a smaller, more private scale. IPPAs will allow less established technologies to continue to develop and improve, encourage supply chains to develop, and will allow developers to gain experience.
Ultimately this will enable these technologies to survive and thrive until such time that a more supportive subsidy framework is introduced, or the technologies become able to compete within the existing market.
Xodus’ Renewables team specialises in offshore wind, tidal, wave, and energy systems consultancy and is well-placed to support any distillery or developer interested in pursuing a mutually beneficial arrangement. We have experience supporting in such fields as site selection, generation technology specification, and energy storage as well as feasibility studies and EIA. If you think we might be of service, please contact us at:
Adrian deAndres, Principal Consultant
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