Review: Renewables in the UK and Europe

Falling technology costs, concerns about carbon emissions, and the drive to develop low-carbon energy sources have helped renewables become the fastest-growing energy source globally.

“The pace at which renewable energy penetrates the global energy system is faster than for any fuel in history,” according to the BP Energy Outlook 2019 with forecasts through 2040.  

Wind and solar power are set to account for nearly 50 per cent of global electricity generation in 2050, BloombergNEF says in it's New Energy Outlook 2019. Europe will decarbonise at the fastest clip, according to BloombergNEF estimates, while wind and solar power generation have already become the cheapest solution across more than two-thirds of the world. By 2030, wind and solar power will undercut commissioned coal and gas almost everywhere, BloombergNEF reckons.   
 
Since 2010, technology costs in solar power have plunged by 85 per cent, costs in wind power have declined by 49 per cent, and battery costs have been drastically cut by 85 per cent. By 2050, batteries, gas peakers, and dynamic demand will help wind and solar power reach more than 80 per cent penetration in some markets, BNEF’s outlook shows.

The UK and Europe were one of the early adopters of renewables and are expected to continue to lead the global race for development and usage of lower-carbon energy sources. 

In the UK, the share of renewables in energy generation continues to increase, the oil and gas supply chain is investing in renewables to diversify and help meet the net-zero ambitions of the government.

Operators continue to develop major renewable energy projects and collaboration between operators and suppliers grow.

According to the latest UK government figures from the end of September, the share of renewables in the UK electricity generation in the second quarter of 2019 stood at 35.5 per cent—a record for the second quarter and an increase of 3.5 per centage points compared to the second quarter of 2018. The higher renewables share was largely due to increased installed capacity. Renewable electricity generation came in at 27.1 TWh in Q2 this year, up by 9.9 per cent from Q2 2018, but 14 per cent lower than in Q1 2019, which had been the second highest on record for renewable electricity generation with 31.5 TWh.

Onshore wind generation rose by 13 per cent to 6.1 TWh, while offshore wind generation increased by more than a quarter to 6.0 TWh. Yet, offshore wind generation was still 30 per cent lower than in Q1 2019, when average wind speeds were much higher than in Q2. 

Renewable electricity capacity in the UK was 45.9 GW at the end of the second quarter of 2019, up by 7.9 per cent compared to the same period of 2018 and up by 1.9 per cent on the previous quarter. Two thirds of the increase in renewable capacity compared to last year came from wind power, the UK government figures showed.

In the same energy trends series at end-September, the UK government also published its analysis on the renewable electricity capacity and generation in Scotland, Wales, Northern Ireland, and the regions of England in 2018 compared to 2017.

Last year, renewable generation in the UK increased by 11 per cent compared to 2017, with generation in England rising 14 per cent, generation in Northern Ireland up 21 per cent, generation in Scotland going up 7.1 per cent, and generation in Wales down 2.2 per cent.

Overall renewables capacity rose by 10 per cent from 40.3 GW at the end of 2017 to 44.3 GW at end-2018, including a 9.7 per cent capacity increase in England, Northern Ireland capacity growth of 19 per cent, capacity in Scotland up 10.4 per cent, and capacity in Wales increasing 4.7 per cent.

Operators, as well as major oil companies, continue to work on large renewable projects in the UK, especially in wind power.

In early October, offshore wind developer Ørsted said that the final wind turbine had been installed at the Hornsea One offshore wind farm, which will be the world’s largest offshore wind farm capable of powering more than 1 million UK homes once it starts operations in 2020.

“We have benefitted from fantastic working relationships with contractors and suppliers, and that includes vessel providers who have maintained a constant stream of communication to ensure that turbine installation has been concluded on time and within budget,” said Duncan Clark, Ørsted Programme Director for Hornsea One.

The Hornsea One offshore project will be topped by a new development led by oil and gas major Equinor, which has built an extensive wind power portfolio in recent years. Equinor and its partner SSE were awarded at the end of September contracts to develop three large-scale offshore wind projects in the Dogger Bank region of the North Sea—which will be the world’s biggest offshore wind farm development with a total installed capacity of 3.6 GW.

“A full-scale development of Dogger Bank will constitute an industrial wind hub in the heart of the North Sea, playing a major role in the UK’s ambitions for offshore wind and supporting the net zero ambition,” Equinor’s chief executive Eldar Sætre said in a statement.

“We expect the cost reductions obtained by the industry through continuous project execution and technological innovation will contribute to continued value enhancement,” said the executive vice president for New Energy Solutions at Equinor, Pål Eitrheim.

The Dogger Bank project east of the Yorkshire coast is estimated to trigger a total capital investment of around £9 billion (US$11.1 billion) between 2020 and 2026, Equinor says.

Dogger Bank will not only be Equinor’s biggest project in terms of investment through 2026, but it will also be the world’s sixth-largest offshore development project in that period, Rystad Energy reckons. Dogger Bank is the only renewable energy offshore development among the top ten offshore projects, which feature oil and gas developments in the Middle East, Brazil, Mexico, and Azerbaijan.

“Equinor’s mega offshore wind investment promises hope for a deflated service industry. An eleven-digit investment program - a rare occurrence within the offshore oil and gas industry - is entirely unprecedented in the offshore wind space,” Audun Martinsen, head of oilfield services research at Rystad Energy, said, commenting on the Dogger Bank project. 

Another major oil and gas company, Italy’s Eni, has recently signed a collaboration agreement with wind and solar developer Mainstream Renewable Power to collaborate on potential developments of power generation from renewable sources, with an initial focus on the UK.

In the latest Contracts for Difference (CfD) scheme in September, twelve new renewable energy projects won contracts, the UK government said, noting that those projects would provide some 6 GW of capacity—enough to power over seven million UK homes at record low costs. 

“For the first time renewables are expected to come online below-market prices and without additional subsidy on bills, meaning a better deal for consumers. The costs of offshore wind is now around 30% lower than the second auction held in 2017, with projects now being delivered for as low as £39.65/MWh,” the government said.

As the UK and Scottish Governments announced their net-zero ambitions, the UK’s offshore oil and gas industry published a roadmap outlining ways in which the sector can contribute to low-carbon energy while continuing to provide a secure energy supply. 

“Roadmap 2035 offers a blueprint for how we can continue to meet much of the UK’s oil and gas needs from domestic resources, progressively reduce associated production emissions and develop economy-wide decarbonisation technologies. With 40,000 new people needed in our industry, a quarter of whom will be in roles which don’t currently exist, it is an industry with an exciting future,” OGUK Chief Executive Deirdre Michie said, commenting on the roadmap.

“Our Economic Report 2019 shows we are already playing an active role in the transition to a more diverse energy mix, with many of our members investing in renewables, developing new technologies and bringing new solutions to market,” Michie added.

The European Union (EU) also makes significant strides in its target to have 20 per cent of final energy consumption from renewable sources by 2020. According to a recent EU progress report, the EU overall—including data for the UK—should exceed its 20 per cent target for 2020 by over 0.3 per centage points.  
For 2030, the EU has a goal to have this renewables share up to at least 32 per cent.

According to the SolarPower Europe association, corporate sourcing of renewable power could and would play a leading role in meeting the 32-per cent target. Corporate sourcing of renewable power has risen rapidly in Europe, with 7.5 GW of Power Purchase Agreement (PPA) deals signed over the past five years, and 1.6 GW worth of PPA agreements in 2019 alone. 

“Corporates are ready to help deliver Europe’s 32% renewable energy target by sourcing significant amounts of solar and wind energy to power their businesses. This is an important step towards a sustainable future, sending a strong signal that corporations have an essential role to play in driving Europe’s clean energy transition,” said Walburga Hemetsberger, CEO of SolarPower Europe.

According to the latest Renewables report by the International Energy Agency (IEA), the EU’s binding targets for 2020 and 2030, plus country-level policies and improved energy efficiency will drive a greater share of renewables in the power mix through 2023.

The EU’s capacity growth is set to overtake the United States to become the second-largest growth market after China, with 125 GW of renewable power capacity coming online in 2018-2023. The accelerating growth in the EU will be thanks to the EU-wide targets, PPAs in key countries, and a growing corporate PPA market, according to the IEA. 

“Overall, continuous cost reductions are expected to make renewables more competitive with new coal and natural gas plants in an increasing number of countries,” the IEA says.