Is carbon capture and storage in the last chance saloon?

In a move that really did take the industry by surprise the new Norwegian government has announced that it is shutting down its full-scale carbon capture project at Mongstad.

From a Norwegian industry standpoint this is a major setback but the government has said it will continue to fund the research centre at Mongstad to enable it to test various carbon capture concepts and will commit 400million Kroner over four years – roughly £10m per year.

Needless to say, despite the cancellation of the main project this is still considerably more than the UK is currently spending.

According to the Carbon Capture Journal a number of big names have expressed interest in using the Mongstad amine plant to test their own technologies and the list of companies lining up includes Aker Solutions, Hitachi, Mitsubishi and Siemens.

Recently ousted Norwegian PM, Jens Stoltenberg, whose Labour Party lost the recent election, said in 2007 that Norway wanted to lead the world in carbon capture but a report by Norway’s Auditor General this week criticised the Norwegian state’s total spending of 7.4billion crowns on carbon capture and storage projects from 2007-12 and suggested that the costs had risen substantially.

That’s actually not that far off the £1billion or so that the partners in the Peterhead CCS project are hoping to win from the UK Government.

Stoltenberg had also claimed that implementing the Mongstad project would be Norway’s equivalent of performing a “Moon landing”.

Perhaps inevitably then, Frederic Hauge, of the Norwegian environmental group Bellona, said of the decision to drop the carbon capture plan: “This is one of the ugliest political crash landings we have ever seen.”

Well it made me smile!

So, putting all the politics aside, the question is, of course, what does it actually mean for other CCS projects if Norway has concluded the technology is too expensive?

After all, Norway has a powerful reputation when it comes to developing and commercialising energy technologies.

So perhaps we should sit up and listen to what they’ve said particularly given that, as I’ve said before, the impact on electricity prices of implementing CCS on coal or gas-fired power stations could be prohibitive.

In addition, I’ve also said before that I am totally unclear as to what the economic benefit of the Peterhead project to Scotland would be given that the critical bits of CCS technology are effectively imported.

Shell and Scottish and Southern Energy – who are fronting the Peterhead project – claim that the joint Government and Industry CCS Cost Reduction Task Force said that “gas and coal power stations equipped with CCS have clear potential to be cost competitive with other forms of low-carbon power generation”.

That is of course not really very encouraging because, reading between the lines it means that all generating costs will be going up – renewables and conventional. There has to be a better way and I believe the Australians have found it.

Algae Tec Ltd will build an A$150million (£90million) algal oils plant to process emissions at Macquarie’s coal-fired power station in the Hunter Valley, which is north of Sydney.

The algae converts the carbon dioxide into oils which can then be “refined” into a range of liquid fuels including bio-kerosene and diesel.

Russell Skelton, chief executive and managing director of Macquarie Generation the owner of the power station, said: “Carbon is now our single largest cost – this technology should reduce our carbon output, reduce our carbon bill, and at the same time improve our bottom line.”

We should be taking this seriously especially given the level of investment is relatively low. In fact, it’s a pittance compared with the cost of the Mongstad plant and the UK Government’s £1bn CCS demonstration budget.

That said, we must recognise that carbon capture technologies are already available. Cansolv Technologies Inc. (a Canadian company and subsidiary of Royal Dutch Shell), working in partnership with the German company RWE npower, is already capturing CO2 at the Aberthaw coal fired Power Station in South Wales.

It’s the world’s first integrated sulphur dioxide and carbon dioxide capture plant.

Interestingly – or depressingly for the UK – RWE in Germany is, as one might expect of German companies, already running a major R&D programme on carbon capture including the use of algae.

Self-evidently RWE also recognises the potential of algae to reduce the cost of carbon capture by providing an income stream from the products that can be produced from algae.

So, given all this activity in Wales, Germany and Norway and bearing in mind that all the technology involved will come from overseas companies then one has to wonder whether the UK Government will really cough up that £1billion to fund the Peterhead power station project.

Now I could be wrong but I actually disagree with those who believe that now the Mongstad project has been killed off then it’s inevitable that Peterhead will go ahead.

I think the UK Government is far more likely to take the view that if the normally adventurous and risk taking Norwegians think such a project is too expensive then that’s a good enough reason for them to take the same view.

Personally, I see no benefit in funding the demonstration of technologies that are already being demonstrated elsewhere especially given they can’t be sourced in this country. We’re too late for that – as usual.

However, I would not like to see the UK Government let off the hook completely and would much prefer to see that government funding going into new ideas such as the development of algae-based carbon capture.

Why? Because I believe it provides the potential for developing indigenous companies that could both benefit and gain an advantage from our exceptional scientific talent.

Scotland’s life sciences research is world beating. Let’s use it to develop a global business.

(First published in the Press & Journal Energy supplement - 7th Oct 2013)

Aberdeen – Nice try, but no coconut.

Apologies in advance but I’ve come over all parochial and am going to discuss Aberdeen itself. I’ve spent the best part of forty years either working out of or in Aberdeen and have watched it evolve into what it is now. Indeed, when I started working here the A90 was a single lane road, the airport terminal was on the East side of the field and flights to London still used some propeller aircraft! I also seem to remember Aberdeen harbour still had a dock gate which we had to wait to open before venturing out into the N Sea. This meant more time in the pub so it didn’t cause too much hardship!

Things have of course changed a great deal since then. From wondering what on earth had hit it in the early seventies Aberdeen has certainly gained confidence and stature and nowadays even calls itself the “Oil and Gas Capital of Europe”. Whether or not that’s deserved is a moot point.

During the run up to the decision on whether or not to redevelop Aberdeen’s Union Terrace gardens I clearly remember Ian Wood claiming that the redevelopment would help turn Aberdeen into “the Houston of the East”. I didn’t laugh – well not for long - at such a suggestion because whilst Wood must have realised that such a goal was impossible; when I thought about it I realised he was actually quite correct in that it is what Aberdeen should be aiming for. But does Aberdeen’s recent history suggest that’s ‘doable’ or not?

In the last month or so there has been a flurry of media praising Aberdeen’s success in doing so well out of the oil and gas industry with one broadcaster talking about “Aberdeen's central role in the North Sea oil industry”.

It’s an interesting turn of phrase. Aberdeen certainly has played a central role in that it has acted as host to the vast majority of oil and gas operators, service companies and manufacturers. Nearly all the important players are here in one shape or another. They’ve created jobs, spent money in our shops and had a huge – some would say negative - impact on our housing market. They’ve also kept our car sales people happy and filled our restaurants almost every night of the week. Our hotels, bed and breakfast providers are booming and our shops and supermarkets are also thriving. Aberdeen airport is constantly busy with both domestic and international flights as well as all those helicopter trips out to N Sea platforms, rigs and so on and so forth.

On some levels then Aberdeen has been a huge success but something niggles me about how deep that success actually is and how well rooted it is. Fact is that if it hadn’t been for firstly the Americans then the Norwegians and to some extent the French and others including the Danes, Italians, Dutch, Swedes and others Aberdeen would have been nothing like as buoyant as it has been.

Aberdeen then is like the oil and gas industry itself in that it’s certainly international. However it also means that because of oil and gas its economy is nothing like broad enough.

This brings with it some considerable risks. Firstly any downturn in the oil and gas sector regardless of what it’s caused by can have a large adverse impact on the Aberdeen and Aberdeenshire economy because there’s little to fill the gap. Secondly, companies can up sticks and move out at any time. Anchoring companies here is critical and because Aberdeen is a source of great engineering and other skills this is a major factor in our favour when it comes to deciding on where to invest. That said, it doesn’t always work like that. Witness Technip’s decision to establish an R&D centre in Paris and not Aberdeen where it has a major operations base. R&D operations are of course another essential element when it comes to anchoring companies anywhere. Where they’re based tells us a lot about where a company’s loyalties really lie.

So what to do?

Well I’m not first one to have talked about the need to broaden Aberdeen’s economy as much as we need to broaden the entire country’s economy and I’m sure I won’t be the last.

However, the time is now ripe to start developing a sensible strategy to actually do this drawing on the skills we have where possible but recognising we may need to develop or “import” others.

I had always hoped that ACSEF (Aberdeen City and Shire Economic Forum) would drive this forward but frankly, that organisation is turning out to be about as much use as the proverbial chocolate teapot.

For example, I’m still staggered that whilst it has a plan to develop a “Hydrogen Highway” as part of the “Energetica” global energy technology corridor, stretching from Aberdeen to Peterhead there is no plan to develop or even bring in a company to manufacture and trial hydrogen refuelling systems, fuel cells, electrolysers and so on and anchor that technology in Aberdeen for the future.

The same applies to their ideas on geothermal energy. Geothermal has huge potential, but where’s the plan to manufacture at least some of the hardware?

ACSEF desperately needs someone to press its restart button and revitalise it.

Ian Wood’s aspiration to turn Aberdeen into another Houston is possible only perhaps on a smaller scale. Houston has major aerospace and electronics sectors – Aberdeen is very good at electronics. Houston has a major medical science sector – as it happens both universities in Aberdeen are very adept at medical science and medical devices. Houston also has a powerful petro-chemical sector. I never have understood why Aberdeen doesn’t.

Of course, being a forward looking City Houston is attracting renewable energy companies to base themselves there as well and companies offering wind technology and low power LED lighting are typical of the ones that have moved in or set up already.
Ian Wood will be surprised to read this but I agree with him. Aberdeen has to emulate Houston and it has to start now.

(First published in the P&J Energy supplement & on EnergyVoice.com, Sept 2013)

Oil & Gas industry prospects in an Independent Scotland

The outcome of the referendum on Scottish independence in 2014 will be critical in determining how the future of energy and particularly oil and gas pans out.   In my personal opinion it will be the difference between actually being able to achieve some long term benefits from oil and gas or just exploiting it to help Westminster fund its current account expenditure for as long as it can with no financial or industrial legacy.

Let’s get the recently contentious stuff over with first. The idiotically named Office of Budget Responsibility said recently it expects the total taxation from oil and gas between 2018 and 2041 would now be £56bn, down £11bn from the £67bn it forecast only a year or so ago. 

Unfortunately their case is somewhat undermined by the fact that two years ago the OBR said that the oil and gas industry’s share of GDP would be more than three times higher than it is now at 0.1%. As the independence referendum became a reality they then cut it in half to 0.05% last year, before this year's further cut to 0.03%.  Bizarre.

On the other hand, Prof Alex Kemp – whose opinion is one I do trust – suggests that compared to his models the OBR is actually underestimating potential production up to 2040 by around 6bn barrels.

Alex has no political axe to grind. The OBR do.  I know who I trust.

Now let’s get to the real substance of the debate.   I have long been of the view that the UK Government has failed miserably in its duty to support the energy industry properly and doesn’t deserve the benefits it gets in terms of taxation, jobs and so on and so forth.   It has treated the industry as a cash cow, used the tax receipts to fund expenditure rather than invest it, and failed to save any of it for a rainy day.

Remember, Norway started putting money into an oil fund in 1996 and it’s now worth £450 billion, equivalent to £90,000 for every Norwegian, and is the largest Sovereign Wealth Fund on the planet.

There is also the issue of Westminster’s laissez faire attitude to company ownership which has been most unhelpful in the attempt to build an indigenous service and manufacturing sector. 

We all recognise this industry is probably one of the most international on the planet but by now we should be a much larger player in it than we are.   That of course is in no small part also due to the attitude of the UK financial sector which happily followed Westminster’s approach to the industry.  

Westminster also has a lousy record in its handling of N Sea taxation issues.  Its unannounced windfall tax in 2011 was politically naïve and strategically inept.   Its partial reversal in 2012 and the albeit welcome Brown Field Allowance still hasn’t fully repaired industry trust in the Treasury and its overall tax structure is still tilted in favour of the Government rather than the industry.  

The industry is also still waiting for a Norwegian type exploration drilling allowance. Improving exploration levels is key to extending the life of the industry.  Tax mechanisms and of course new technologies can help achieve that. 

So what might change if Scotland became an independent country?   Well my view is that having an Energy Department in Edinburgh or preferably Aberdeen should certainly facilitate better communication between government and industry and avoid hiccups such as Osborne’s tax hike.   It provides an opportunity for government and industry to work much more closely together for the overall benefit of the country.   I envisage a much more stable and open and essentially “grown up” relationship.

Stability is also important not just in terms of the tax regime but who the industry has to deal with. Westminster has changed its Energy Minister more times than I’ve got pairs of socks!   No sooner has the industry got used to one than he or she is either fired or given another job.   This is contemptuous and creates the impression that the industry isn’t important enough to warrant stable government management.

In terms of the all-important safety regime I don’t see much change is needed other than perhaps tidying up and streamlining the processes such as inspection and reporting. 

The same applies to some extent to decommissioning although I have to say I would really like to see a reappraisal of the decision not to allow the use of redundant jackets and other inert elements of offshore platforms for the creation of artificial reefs.  From an environmental standpoint this would cause few problems and it could have an extremely positive impact on fish stocks whilst not interfering with fishing itself. A win-win situation?

One piece of misinformation being used about decommissioning can be cleared up and that is that tax relief associated with decommissioning costs could never be afforded by an independent Scottish Government. Given it amounts to only somewhere around 2.5 per cent of the wholesale value of future reserves then this should be more than affordable but of course the UK Treasury has already accrued £300 billion in tax receipts from the oil and gas sector and it doesn’t seem unreasonable for the Scottish Government to expect a contribution to this cost from the UK Government.

The UK Government failed to develop a coherent strategy for developing, commercialising and deploying new technologies and has invested less in energy R&D than our main competitors. Improving this situation is essential and should be high up on the list of an independent Scotland’s priorities.

In other words in terms of R&D we need to adopt an approach that our indigenous industry can benefit from as well as improving discovery and recovery rates and costs.   Let’s have no more of Westminster’s laissez faire attitude where they don’t care who benefits providing the tax revenues keep flowing!

What else?  A national energy company?  Why not - although maybe that should be for renewables and other non-oil and gas areas.   So let’s look at that later in the year.  

(First published in the Press & Journal "Energy" supplement Aug 2013) 

Oh Joy – Another North Sea Review

Ed Davey – UK secretary of state for energy and climate change - has made my day. I was mulling over what to write about for the July issue of Energy but then up popped Ed with the announcement that he’s going to have another review of how to maximise the economic benefits of N Sea oil and gas.

He says he’s “come to the view that the challenges we now face are of sufficient importance that they merit a focused, in-depth review. Such a review has not been conducted since the early 1990s when the challenges faced were very different to those we face now.”

I don’t actually agree with that.  Having had another quick read through the Oil and Gas Industry Taskforce report ... yes I still have a copy as does Energy’s editor, most of the issues that were looked at in 1999 are very similar to the ones Ed thinks should be looked at now. 

Worryingly though many of the actions arising from the 1999 Taskforce report don’t seem to have had a real impact.  In fact in the case of the establishment of ITF (Industry Technology Facilitator) the effect was highly negative because R&D funding fell.

This was strategically inept because the development of new technology is probably the most effective way of achieving what Davey and indeed we all want in terms of maximising North Sea recovery.

Yet, as Scottish Enterprise pointed out recently Norway invests 4% of sales in R&D whereas we only invest 0.3%. So whatever the Norwegians are doing needs to be looked at.

But what triggered Davey to set up this new review?  The 1999 Task Force was aimed at countering the impact of the late 90s oil price slump although in reality and again, as many analysts anticipated, the oil price actually started recovering within months and hasn’t really looked back since. 

Could it be Davey’s chum, chancellor George Osborne wants to know how the Treasury can squeeze more tax revenues out of the North Sea to make up for the collapse in financial services and help the London government pay off more of its ever increasing debt preferably without it having to make any investment in stuff like technology or – heavens forbid – providing additional tax incentives?

As Davey himself says: “The industry supports 440,000 jobs directly or indirectly and paid £11.2billion in direct taxes in 2011 – 2012, almost a quarter of all corporation taxes received by the Exchequer”.

Not difficult then to look through the spin and assume that the emphasis of this inquiry is really on trying to sustain tax contributions as close as possible to today’s levels or even – if possible – improve on the current position, preferably achieving such an objective without incurring any additional costs.

Then there’s the Scottish independence issue.

This review comes at a time when elements of the unionist political parties are all ganging up to try to convince everyone in Scotland  that the oil and gas industry is dying on its feet and in any event the oil price is far too volatile to be relied upon as a steady source of revenue.  Most of the rest of the world is still laughing over that one.

However, by proposing this review, Davey has done those that support Scottish independence a huge favour because he’s demonstrating that the industry has a long and valuable future.

So top marks Ed for at least showing that all that negativity emanating from the “No to independence camp” is indeed just propaganda of the worst type. Oil and gas is obviously worth something after all.

Also worth noting is that Davey’s review comes close on the heels of the first anniversary of the Scottish Government’s energy strategy which looks as if its making progress. The Scottish Government welcomed the announcement but they must be scratching their heads as to why now.

In fact, what will this latest review achieve that operators themselves aren’t already doing and indeed what industry steering group Pilot is also already working on. Reading Pilot’s latest minutes it seems that it is indeed covering most of the stuff the industry needs to cover. Of course this may change now the new Oil and Gas Industry Council is to be formed as part of the UK Government’s new UK Oil & Gas Industrial Strategy.   

Apart from causing confusion over who is doing what the other problem is that this new review won’t actually attempt to deal with issues of real national importance.

For example – it won’t look at how to prevent 70% (£18billion) of all oil/gas sector post-tax profits being remitted overseas or why the UK doesn’t build offshore vessels, own an offshore drilling fleet of substance, or the host of other supply chain failures that the current and successive prior UK governments have never been interested in solving provided the tax revenues keep rolling in.

My suggestion is that the review should concentrate primarily on technology needs, how to properly fund the development of that technology and critically, how to ensure it is commercialised by UK companies.

Back in the 90s, support for SMEs although never matching our competitors, was much more available than it is now following Westminster’s totally inept management of the banks.

I also belief the decommissioning issue needs revisiting. It’s overblown and an ideal candidate for cost-cutting.

Davey says the review will not make recommendations on taxation. Indeed that’s a no go area. Do not touch.

That’s wrong.  Operators should be consulted on potential tax changes to help them increase their exploration effort.  After all, they understand the impact of tax better than anyone.

Operators also know how best to extend infrastructure life, collaborate with their peers and get the most out of the fields they are running including the use of enhanced oil recovery techniques. It’s their money remember.

But the review will also look at “the current structure, scale and effectiveness of the Government stewardship regime”.  Here, there is probably room for improvement given the mistakes made on previous tax changes. But how much scope there is to do anything meaningful given the anticipated Government Department budget cuts? 

Hmmmmm!

 

(First published by the Press & Journal's  "Energy" supplement July 2013)

Where’s the progress?

I’m worried. I think there’s something going badly wrong with our energy industry and particularly with the development of renewables.  Let me explain why.

Firstly, I was really quite shocked to read in a blog by Prof Brian Ashcroft of Strathclyde University that he believes that around 70% of all oil and gas industry post-tax profits are remitted abroad. According to Ashcroft this amounts to around £19bn which if correct is an astonishing figure which he says “reflects high degree of foreign ownership”

This is scary.  Such an extraordinary level of reliance on foreign ownership of such an important industry can’t possibly be healthy for our economy and perhaps goes a long way towards explaining why – as I mentioned last month – our R&D expenditure is so pathetically low compared with Norway.

Actually, I would bet that in Norway these figures are reversed.  I wouldn’t be at all surprised if over there less than 30% of post-tax profits are remitted abroad because there are a lot less foreign companies.  Different attitude you see. They think strategically and we don’t.

The danger now though is that history is going to repeat itself with the renewables sector.  Looking back over the year since the last All Energy conference and exhibition I’m finding it very difficult to come up with any examples of a UK or Scottish company introducing something new or entering other parts of the market.   I’m now really concerned we’re not just letting our competitors snap up the best bits of what we have developed but we’re not actually competing in sectors that we should be competing in.  The proof of that pudding is course that so many overseas companies are moving in.  If we were competing properly then they would think twice about setting up here.

But then the “system” the government has set up isn’t aimed at creating a renewables industry but developing mechanisms to achieve the various government policy aims on carbon emission reductions, percentage of electricity from renewable sources and so on and so forth.  

So, we tend to set up companies that meet these policy needs and they do things like consultancy, windfarm development planning and of course carbon trading and offering advice on how to reduce a company’s carbon emissions and energy consumption.  That said, some companies are offering important and valuable services such as surveying and subsea remotely operated vehicle support although no heavy lift vessels or cable laying now.

In terms of timing the introduction of policies also never allows for the development of new technologies.  By this I mean that when we develop new policies we rarely consider the industrial potential.  

A classic example of this is the so called Smart Meter. The government’s plan is that every household and business should have one of these.  That means millions of the things will be bought and installed but as it looks now none of them will be manufactured by a UK company. How stupid is that.

In fact the more I read and hear about the attitude of the Treasury in particular I seriously wonder if they care about renewables at all.  I get the feeling that actually the Treasury is keeping its fat fingers crossed that in its forthcoming report the British Geological Survey team will say that there is so much shale gas available that we can completely forget renewables for the foreseeable future.

Another threat to renewables is coming from nuclear.  If the government ever gets its act together and comes to a deal with a potential reactor builder then the cost may well reduce funding for other technologies.   There’s also little doubt that this government would much prefer to have a plentiful supply of nuclear power than anything else even if it means relying on French or even Chinese semi state owned companies to build and operate them.

At the same time though I’m completely mystified over the refusal of the National Grid to balance out the costs of grid connections rather than price them geographically.   Actually, that’s wrong.  I can understand some mindless civil service type – perhaps an ex investment banker -  coming up with that sort of idiotic proposal but what I don’t understand is why the Government didn’t tell them to drop it.  

All that said I do have some good news. Things are now stirring in at least one part of the renewables sector.  The Scottish Government’s Energy Advisory Board of which I’m honoured to be a member has agreed a proposal I developed to set up a forum on Future Fuels. 

The forum consists of a mix of members from academia, industry and government bodies and its aim is to design a strategy for the development of a Scottish renewables fuel industry. That means determining where the best opportunities lie, looking at whether we have the skills to build such an industry and of course working out which fuels provide the best potential.   The forum is “time limited” which means that once its job is done it will disband.

It’s exciting stuff because it does look as if there is much more knowledge and expertise around this topic than perhaps was originally thought. 

Whilst looking at the better known fuels such as ethanol and bio-diesel the forum is also considering butanol, bio-kerosene, hydrogen, ammonia and others and of course a range of production techniques that given the high level of life sciences expertise in Scotland could include synthetic biology. 

We have a head start given the work being done by Argent on bio-diesel, Celtic Renewables on bio-butanol and Scottish BioEnergy on algae applications. This is a good base on which to build.

So whilst I find it intensely annoying we never seem to have any projects that can match – for example – flying a solar powered aircraft across the USA perhaps we’ll soon be able to demonstrate a range of new fuels transport, energy storage and heating.   Not quite as spectacular perhaps but considerably more important.

  (First published in "Energy" in May 2013)

 

 

EMEC’s Customer Base has little UK content.

EMEC – the European Marine Energy Centre – on Orkney is a facility Scotland should be proud of. In the nearly 10 years since it opened its doors it has achieved a solid reputation and is now involved in a number of overseas collaborative projects.

This is good for Scotland and good for the marine energy sector.

However, EMEC’s success illustrates the extent to which the industry here in the UK is now increasingly dominated by overseas corporate or other investors.

Going through the list of the companies that have used or are using the Orkney centre, it is really quite surprising as to how remarkably small the Scottish and wider UK content actually is.

Looking first at the wave energy companies who have or are currently testing hardware at EMEC, the first and perhaps best known is Aquamarine of Edinburgh.

The largest investor in Aquamarine appears to be ABB Technology Ventures based in Switzerland which gives Aquamarine access – potentially – to ABB’s huge technology knowledge base. That said the company has also received investment from Scottish Enterprise and Scottish Equity Partners.

Pelamis Wave Power, also based in Edinburgh, initially found a lot of its investment from overseas and, given its chair is also managing partner of Emerald Technology Ventures, the Swiss-based venture capitalist, this would suggest that pattern continues.

It’s also interesting to note that the two companies testing Pelamis devices at EMEC are E.ON (German) and Scottish Power Renewables owned by Iberdrola (Spanish).

A third company, VattenfallB (wholly-owned by the Swedish state), is planning to test the latest generation Pelamis Wave Power device in 2014.

The Finnish company Wello Oy is also testing its wave energy system at EMEC. Having worked on a number of wave energy concepts since 1976 the Penguin model was selected in 2008 to be developed further. Wello Oy is entirely Finnish owned.

AW Energy is also a Finnish company. It is developing the Waverider device, which was successfully tested at EMEC in 2005. The firm now has a project underway – albeit slowly – in Portugal. Needless to say, all main investors are Finnish.

Finally though some good news. Seatricity is a small Orkney-based company developing and testing a new wave device at EMEC and it appears that it may well be that it is actually UK owned.

Turning now to tidal energy devices being trialled, one of the most advanced has been built by Andritz Hydro Hammerfest, which was originally a Norwegian-owned company but it is now owned by the Austrian Andritz Hydro GmbH group.

The Atlantic Resources Corporation (ARC) is also testing a tidal turbine at EMEC. ARC has a project office in London but is essentially a company based in Singapore although it now includes among its investors the Norwegian electricity utility company Statkraft.

Third in our list of tidal energy technology companies is the Dutch company Bluewater Energy Services, which is testing a novel floating tidal generator support device.

Kawasaki Heavy Industries is planning to test a 1Mw tidal generator in 2014 and is currently component testing in Holland, performing tank tests of a scale model, stress tests of blades and power train tests, as well as some component testing for its full-scale prototype. Kawasaki is of course a Japanese company,

OpenHydro has been testing devices at EMEC since 2006, has deployed a device in the Bay of Fundy, Nova Scotia, and is currently working on a project in Brittany, France, where it aims to deploy four 16m tidal turbines. OpenHydro was recently acquired by the major French shipbuilder and marine technology company DCNS SA.

Scotrenewables Tidal Power is a Scottish company that has developed a floating tidal technology device. But its main investors are the Swiss ABB group, the Norwegian Fred Olsen group and the French oil and gas major Total.

Tidal Generation is developing and testing a seabed tidal turbine similar in concept to those of Andritz Hydro Hammerfest and ARC. A Bristol-based company, it was bought by the jet engine builder Rolls Royce in 2009 but it was recently bought from them by the French engineering group Alsthom.

The German company Voith Hydro is working with RWE Innogy through the joint venture Voith Hydro Ocean Current Technologies and currently building a 1MW demonstrator of a seabed turbine due to be tested at EMEC starting this year.

Voith Hydro is also the company responsible for the recent close of the Scottish wave energy company Wavegen and “relocating” its intellectual property and assets to Germany.

When I was asked to analyse EMEC’s customer base even I was not prepared for what it would tell me.

I am actually staggered by the appallingly low level of investment in the sector by UK and Scottish companies even when the technology behind the company involved has been developed by Scottish or UK engineers.

Of course, we can praise EMEC itself for having built a very successful business and for having promoted the huge tidal and wave energy resources that Scotland possesses.

The fact that the centre’s success has exposed another major hole in how we do real economic development isn’t the organisation’s fault. But it is something we should be thinking hard about.

Indeed we should be horrified by our record so far. I certainly am.

(First published in "Energy" 20th May 2013)

UK Oil & Gas Industrial Strategy – It’s good to talk.

The Government’s latest attempt at a strategy for oil and gas was published in March but its impact was somewhat diluted by the announcement on the same day of yet another change of Energy Minister. 

The poor bloke that drew that particular short straw for the least stable post in the government is now responsible for implementing the new strategy, such as it is.

Apart from a few changes and some minor additions it’s actually pretty much a repeat of the report published by the Oil and Gas Industry Taskforce back in 1999 although actually the 1999 version was a bit more detailed particularly when it came to things like technology needs.

This new strategy includes all the usual guff about maximising the “economic production of the UK’s offshore oil and gas resources” and all the other motherhood and apple pie phraseology designed to make us think Westminster actually cares about more than how much tax they can squeeze out of the industry to pay for all the other messes they’ve created.  

For example, one of the aims is “to sustain and promote the growth of the UK industry’s supply chain, in both domestic and international markets”. That’s an interesting turn of phrase. It’s the UK industry’s supply chain not the UK supply chain.  So that includes both indigenous and foreign owned companies which is probably recognition of the extent to which the industry is now dominated by overseas companies.   It goes back to the eighties doctrine of the “level playing field” which was really all about getting as much oil and gas out of the ground as fast as possible in order to fill the Treasury’s coffers and not caring who did it.   

As with all good initiatives it’s important to establish new bodies which can provide an opportunity for the great and the good to be seen to be doing stuff. That’s until they get bored or move on or have collected their OBE.  True to form we now have an “Oil and Gas Industry Council” to carry forward all the recommendations arising from the strategy document. Where does that leave PILOT which was created in 1999 to do the same thing?  To wither quietly on the vine I would guess.

OK – I admit I’m being more than just a tad cynical here primarily because I don’t think the 1999 O&G Taskforce led to any great improvements and I certainly don’t think it led to the much vaunted advances in technology that were talked about being desirable then and indeed are still being talked about as desirable now.

Let’s look at one particular and actually very scary statistic. According to the strategy report the overall sector R&D spend in the UK is reported to be 0.3% of sales which is a shameful figure when compared to Norway’s figure of 4%.  So this aspect of the 1999 Taskforce’s master plan failed miserably much as many of us involved expected it to.  

One action arising from the new strategy’s technology plan is the establishment of “a national centre of excellence that will enable industry to better understand complex reservoirs, reduce drilling costs, improve offshore efficiency, enhance production and maintain the integrity of infrastructure.”

The Government has now done that.  It will be established at Newcastle University. Why Newcastle?  I’ve no idea. Anyway it doesn’t really matter as it seems the Government is only coughing up £7m for this “centre of excellence”.  So – it looks like just another example of Westminster “tokenism”. 

The strategy also says “The UK has very strong financial services and oil and gas sectors. The two should be working closely together to create growth.”   This would be novel because for the past 30 years or so the only growth the financial sector has been interested in is their own.  Expecting the financial services sector to invest more in the supply side is very wishful thinking especially now they are under so much pressure to increase their capital reserves.    

So what’s the answer?  Well, there isn’t one.  We can’t force either the operators or the largest contractors/manufacturers to fund or invest in UK R&D if they don’t want to nor can we force investors to cough up more to grow companies through product or service development.

That said the fact is that Norway’s R&D level is much higher because they have a larger number of technology companies and they have a national champion to work with namely, Statoil.

Neatly linking this to the recent demise of Margaret Thatcher we should recall that she privatised the UK’s national champion the “British National Oil Company” which was then renamed Britoil Plc and later sold off to BP allegedly for peanuts.   

It was claimed Thatcher did this to ensure foreign operator investment in the N Sea. It was a lame excuse because investment in exploration and production in the Norwegian sector of the N Sea has been at least on a par or better than investment in the UK sector but investment in the Norwegian supply side has been of an order of magnitude considerably higher.  There can be little doubt that the BNOC decision wasn’t thought through and like a lot of others was purely ideological.

So do I expect this new strategy to achieve real results?  No I don’t and my reason for saying that is that the one thing that would really make a huge difference isn’t even mentioned. No – it’s not set up a new state oil company although that would be a great idea and neither is it to introduce “informal” targets for genuine UK content.  The one thing that would make a genuinely huge difference is to introduce tax offsets on drilling costs as the Norwegians have.  But that’s probably a step too far for a Government that’s essentially bust and needs the oil and gas tax revenue more than it ever has before.

(First published in the Aberdeen Press & Journal's "Energy" supplement in May 2014)

Proof of the pudding - If you don’t own it you don’t control it.

It’s great being proven right.  I’ve long argued that who owns the companies that make up the energy or indeed any other sector is important because if you don’t own it then you simply don’t control it.   The free market ideologues argue that it doesn’t matter who owns what provided the jobs are anchored here and it’s that attitude which has prevailed in the UK for the last forty years or so.  

So far merger and acquisition activity in the energy sector has tended to support the free market view but that all changed recently with the announcement that the wave energy company Wavegen based in Inverness was being shut down, its eighteen employees were being made redundant and – importantly – all its activities were being moved to its parent company in Germany.

The parent company – Voith Hydro of Heidenheim in Germany say it’s their intention to “pool the Know-How” at the company’s engineering centre which essentially means Wavegen is being intellectually asset stripped. 

Of course it’s not as if Wavegen was a failure.  In fact it designed and built Limpet which uses Wavegen’s OWC (oscillating water column) technology.  Limpet is the world's first commercial scale grid connected wave energy plant. It has an installed capacity of 500kW, was commissioned in November 2000 on the isle of Islay and has been supplying electricity to the grid ever since.

Wavegen also supplied the technology Spanish utility Ente Vasco de la Energía (EVE) use for their wave power project at Mutriku on the Bay of Biscay. The plant was commissioned in July 2011 and will generate an output of 300kW to power 250 households locally.

This then all sounds like good news.  Here is a small high tech company doing some extremely smart stuff in the marine energy sector and even exporting its technology.  Just what we’d all hoped from the renewable sector although of course it took the support of German funding to get it moving along properly after Voith bought the company in 2005.  Despite its potential Wavegen along with countless other companies found the raising funding in the UK to be a major obstacle.  This is sadly not an unusual situation. 

So what triggered Voith’s decision to kill of Wavegen and retreat to Germany? Voith claim the decision was part of their plans for “re-organisation”. 

However, the company was developing the Siadar Wave Energy Project on the Isle of Lewis in the Outer Hebrides which used an “active breakwater” designed to harness power from the Atlantic waves in Siadar Bay. The project was for 4MW with a second phase that would expand the output to 30MW.  The objective was to export most of that energy to the mainland in this case via an HVDC (high voltage direct current) cable.

But in 2011 one of the project’s main investors – the German company RWE – pulled out and one of their spokesman said “Tidal seems simpler to develop and it's going to be easier and quicker to develop than the Siadar (wave) technology”. 

Given the technology has already been proven this appears to be a quite bizarre excuse and frankly, I have real difficulty in believing it.  

Then in late 2012 it was announced that the cost of that HDVC cable had risen by a mighty 75% to at least £700m!   Needless to say this effectively signed the project’s death sentence and along with it the loss of over £5m of public sector investment. 

Highlands and Islands Council have quite rightly said that questions do need to be asked about the costs and the time scales involved in laying the HVDC because it would have allowed other renewable sources such as wind to transmit power to the mainland. 

I also think the Scottish Government should take a look at this project.  Whilst £5m or so worth of grants won’t break the public sector bank and I believe in the public sector supporting projects like this I can’t help but feel that we need to better understand what went wrong. 

Of course you can’t prevent private sector companies pulling out of a project if they’re not happy with it but I would really like to know why RWE entered into the deal in the first place if they were so unsure of the technology.   Seems to me they had plenty of opportunity to make that assessment before signing on the dotted line.

I’d also like to know why this project was aimed mainly at exporting electricity to the mainland.   Why not go for the local market and aim to achieve energy autonomy for the Western Isles.  Perhaps they might even have looked at using the Western Isles for trialling a range of new technologies including using some of the energy produced by the Siadar project to run electrolysers producing hydrogen for use as a transport fuel or as a means of storing energy by converting the hydrogen into ammonia making it easier to contain safely.

Perhaps a little more imagination and forward thinking might have made this a more affordable and beneficial project both in terms of what it would bring to the peoples of the Western Isles, the renewables industry in general and of course, Scotland’s industrial scene.

I say “perhaps” because of course nobody can tell whether the outcome would have been different or whether Voith Hydro – Wavegen’s owners – ever had any intention of doing anything but absorb the Wavegen “knowhow” into its German based headquarters and shutting the Inverness base down. 

Regardless, it should teach us a lesson.  Scotland has now lost the economic potential that Wavegen represented as well as the jobs of some talented people. 

This was a small company but a very smart one with a clever set of proven technologies.  That we allowed Voith to buy it in the first place was extremely careless but of course given the attitude of our glorious financial sector towards funding companies like this it wasn’t surprising. 

It would be nice to say this is unlikely to happen again but a number of ostensibly “British” renewable technology companies are now already foreign owned or have majority overseas shareholders.  So we need to be alert to the possibility of more losses of this nature although of course we won’t stop this until such time as the bankers et al adopt a different culture.  Yes I know - pigs might fly!

(first published in the Press & Journal "Energy" supplement April 2013)

Why Trump is very wrong.

I really wanted to write about shale gas economics and practicalities this month because there’s a lot that needs saying.   However, I’m really going to have to sort this bloke Trump out because he seems to be under the strange delusion that a golf course is more important than Scotland’s industrial future.   

Firstly, let me say that there are some aspects of his complaints and those of others that have leapt conveniently onto the anti windfarm bandwagon that I agree with.  For example, I accept the fact that wind energy is intermittent and that in certain weather conditions it’s utterly useless. 

However, the fact is that wind – and waves, tidal and solar - is here for as long as the planet is whereas oil, coal, gas and even nuclear most certainly won’t be because they are all dependent on inconveniently increasingly expensive resources.  Despite TEA party type anti climate change squeals of patriotic hysteria over possible American self-sufficiency even shale gas which is currently as cheap as chips in the USA will go back up in price as gas drilling reduces and reserves are sold off to bigger players who will ensure they make money out of it one way or the other.

Wind is then a viable long term resource and it’s actually really pretty daft arguing about this.  People may get upset over subsidies being paid to windfarm owners many of whom aren’t even from these shores and they may wish to complain that wind turbines are not particularly elegant devices.  Both views are legitimate but not good enough reasons to stop wind turbine deployment particularly offshore. 

Similarly, there are concerns over noise and certainly bad planning control of some onshore windfarms has led to what might be termed as “acoustic rage” because turbines have been installed far too close to housing.   This would seem though to be far less of a problem with offshore wind turbines because they have considerably larger but much slower and therefore quieter blades.

I find it interesting though that few people complain about the lack of indigenous investment particularly in large scale wind turbine technology.   Not many protest that none of the big turbines are built here by UK let alone Scottish companies.  Watching all those valuable sales falling into overseas hands is my own major gripe about the industry and to a large extent one of the reasons I support strongly the development of the European Offshore Wind Deployment Centre (EOWDC) which is of course the windfarm that Trump is complaining is going to spoil the view from his golf course.

So far the development of wind energy technology has been fairly straightforward and predictable.  We have progressively larger capacity turbines moving offshore where there’s plenty of space using latest generation direct drive – no gearbox – systems with lots of built in condition monitoring stuff all aimed at generating electricity that can be transmitted ashore via a fat cable – which incidentally we don’t manufacture either. The cable usually forms part of a subsea grid laid by cable vessels which we also don’t build.  In fact I don’t think we operate one now either do we?

So why do we need the EOWDC?  Because where we are now with wind technology is only the beginning. 

The industry still needs more efficient generators, systems that will start generating at much lower windspeeds, more efficient and “stealthier” blade designs, cheaper and better foundation designs, improved condition monitoring and control devices, better access methodologies, more effective maintenance methods and hardware replacement techniques.

There is also work to be done on power transmission, cables, connectors, switchgear and so on and so forth.

Most important of all though, we need to develop technologies to tackle the intermittency issue. In short that means energy storage.  It’s the “holy grail” for wind.  How to make sure windfarms are productive 100% of the time or as close as possible to 100% as we can get.

Maybe that doesn’t mean moving electricity onshore but producing something else that can be stored and turned into electricity later. Work is already going on with big batteries and we could use pumped hydro. Perhaps though we should be using the electricity to run large scale electrolysers that produce hydrogen that can be piped ashore. Some of that hydrogen can then be used to fire gas turbines to generate electricity for the grid and some can be stored to be used as a means of backing up the supply in times of low wind or indeed too much wind.

Actually this is of course what the PURE project is doing on Shetland although on an albeit much smaller scale.

Add to this though the possibility of using that hydrogen to produce ammonia for use as a liquid transport fuel and wind technology will become even more attractive.

So wind technology isn’t just throwing up opportunities now for high technology high value adding Scottish companies but I personally have no doubt that it will form a major part of the core of our future energy structure. It’s just that we haven’t yet scratched the surface of what we can do with it. 

Now I don’t want to get into commenting on Donald Trump’s golf course plan because I’m not a golfer. I’ve never seen the attraction. What I do know about golf though is that as far as I can tell from Scottish Development International’s data base Scotland only has one golf related manufacturer which is a company making clubs down at St Andrews.

It’s not fair perhaps to make such a comparison but it would appear then that the industrial potential arising from the EOWDC project is going to be considerably larger than Mr Trump’s golf course.  However, I see no reason at all why the two shouldn’t co-exist. In fact, if I was Mr Trump I’d use the EOWDC as a selling point to attract wealthy overseas investors and industrialists!!  No? Oh well – he’ll just have to live with it then.  

(First published in Energy – Mar 2012)