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Welcome again to Power Supply, coming to you from London after a quick summer season break.
The UK can be carefully watched by power traders this week, as the federal government is about to announce the winners of its newest spherical of subsidy contracts for renewable initiatives (referred to as “contracts for distinction”).
The outcomes are set to be notably essential for the UK’s offshore wind sector — the world’s second largest after China — the place builders are combating rising prices.
Final 12 months, the federal government granted offshore wind initiatives a assured value of £37.35 per megawatt-hour. However after Sweden’s Vattenfall mentioned in July it may no longer build at that value, there are questions over the urge for food for this 12 months’s spherical.
Offshore wind is the start line for at the moment’s principal merchandise, which seems at Scottish efforts to make use of the nation’s huge wind sources to develop into a significant hydrogen exporter.
Plans are being floated for a £2.7bn new hydrogen pipeline to Germany, one among a number of such developments being thought-about all over the world as a part of the shift in direction of cleaner power.
The dimensions of the longer term hydrogen market stays unsure and open to fierce debate. Ought to society be in search of extra unconventional options? For the controversy on local weather engineering, look no additional than this fascinating Big Read.
Take pleasure in studying. — Rachel Millard
PS How can the power trade discover the best stability between sustainability, safety and affordability? Please be part of us for discussions with leaders from throughout the sector October 31 — November 2 for our Power Transition Summit in London and on-line. See the full agenda and register here.
Scotland seems to harness its hydrogen hopes with wind energy
Because the world seems in direction of life beyond oil, Scotland is among the many finest positioned to search out its toes within the power system of the longer term.
The nation has a number of the strongest wind speeds in Europe — serving to it develop into one of many world’s largest offshore wind markets.
It’s turning that energy into a brand new export alternative by means of the clean-burning fuel on which many inexperienced hopes are pinned: hydrogen.
Aberdeen’s Web Zero Expertise Centre (NZTC), chaired by BP’s former UK head of nation Peter Mather, final week proposed a brand new pipeline that will carry hydrogen from Scotland to Europe.
The Hydrogen Spine Hyperlink would use electrical energy from Scotland’s rising fleet of offshore wind farms to make so-called “inexperienced hydrogen” (hydrogen cut up from water utilizing clear electrical energy), which might then be piped over to Germany.
It’s one among a number of hydrogen pipelines all over the world being thought-about as new buying and selling relationships evolve round renewable power. The NZTC’s plan marks one of many first concrete proposals what’s wanted for hydrogen to develop into a tradeable commodity.
Expectations in Scotland are excessive: The NZTC mentioned Scotland may use the pipeline to provide as much as 10 per cent (about 35 terawatt-hours per 12 months) of Europe’s projected hydrogen imports by the mid-2030s. Europe is predicted to import about 333 terawatt-hours of hydrogen in 2030, climbing to 1000 terawatt-hours per 12 months by 2050.
It may additionally, NZTC forecasts, create 700 jobs in Scotland within the 2030s and assist hundreds extra by serving to to develop the hydrogen financial system.
“Everyone seems to be in search of a house for his or her hydrogen [production] initiatives,” mentioned Roy Stenhouse, chief affect officer at NZTC. “Proper now they’re all struggling. I believe you might unlock the entire hydrogen financial system [via the pipeline].”
The H2 Interconnector between the Danish island of Bornholm and Lubmin in north-east Germany, and a brand new route between Norway and Germany are amongst dozens of different potential hydrogen pipelines recognized earlier this 12 months by consultants at Rystad Power.
“New hydrogen infrastructure is beginning to materialise because the world seeks to speed up its path to web zero,” it mentioned, in a report. “Merely switching present oil and fuel infrastructure to hydrogen will not be at all times viable.”
Sceptics may say the pipeline plans are overly optimistic, given the comparatively slow pace at which low-carbon hydrogen manufacturing and demand are being scaled-up.
However the NZTC’s plan reveals the seriousness with which such infrastructure is being thought-about — and fleshes out some essential particulars for traders and customers.
The Hydrogen Spine Hyperlink has attracted early-stage funding from the likes of London-listed Shell and EnQuest, with the Scottish authorities additionally contributing to its £3.2mn growth funds as much as 2025. The whole price of the venture, although, is estimated at £2.7bn.
Analysts at Wooden Mackenzie predict that with the pipeline operating at 90 per cent capability and assuming a 32 pence per kilogramme tariff, traders would get a 6 per cent preliminary price of return.
These transportation prices ought to make inexperienced hydrogen from Scotland “price aggressive to different globally sourced hydrogen from international locations and areas with decrease manufacturing prices comparable to Canada, Chile and the Center East,” NZTC argues.
Boosting Scotland’s exports will not be all that’s driving the venture: Wind farm builders additionally want one other route for his or her electrical energy given constraints on Britain’s creaking electrical energy grid.
“In some circumstances, the quantity of power out there in comparison with the cable capability . . . it’s not attainable,” Stenhouse added. Scotland’s post-oil future seems hopeful, however a lot has but to be labored out.
Rising prices and excessive rates of interest are stopping clean crusing for offshore wind initiatives, however the newest knowledge on renewable power’s price path provides a sunnier outlook.
The typical world price of creating new photo voltaic initiatives fell 83 per cent between 2010 and 2022, in line with a brand new report from the International Renewable Energy Agency (Irena), whereas onshore wind is down 42 per cent and offshore wind is down 34 per cent.
The levelised price of electrical energy — which measures the price of producing a unit of electrical energy from a venture throughout its lifetime — fell over 2022 for photo voltaic, onshore wind and geothermal initiatives, in line with Irena’s calculations.
In the meantime, increased generators have helped offshore wind farm builders get extra out of their initiatives, with farms now producing on common 42 per cent of their theoretical most output (referred to as the capability issue), in comparison with 38 per cent in 2010.
It’s a combined bag, with China driving world common price reductions for photo voltaic and onshore wind, outweighing prices will increase in some markets.
However given hovering fossil gas costs, 2021-2022 amounted to “one of many largest enhancements within the competitiveness of renewable energy within the final 20 years”, in line with Irena.
Power Supply is written and edited by the FT’s world power workforce. Attain us at email@example.com and observe us on X, previously Twitter, at @FTEnergy. Atone for previous editions of the e-newsletter here.