Monday, 16 November 2009

Alternative Energy

Since writing this article the market for home roof top solar power has become affordable and indeed there are many companies providing the installation service. Though it should be noted: unless you have a roof top parallel to the equator, you may struggle to generate enough energy to power your home thru the winter months. This is especially the case where day light time is limited, during such times you will be partially dependent upon the national grid for energy. 
An average 3 bed room home installation typically costs between £10,000 to £18,000, giving you free electricity and a small profit of a few hundred pounds each year. At a larger scale, in terms of cost, wind farms are comparable to large scale solar energy farms, requiring far less land. Domestic solar power installation will render the electricity market redundant in the near future, setting the route ahead for the planet's power consuming technologies.  A brighter, cleaner, future for all!

I was recently shocked to find that Scottish Power is owned by a Spanish company and further dismayed to hear of the planned creation of yet more nuclear power stations to be built for us by France. Whilst television has provided coverage of humanity almost literally “fighting over fire”, nightly for the last three decades, I was suddenly struck with the impulse to investigate alternative, local energy sources, if only to avoid working for yet another corporation or bank that sinks beneath the waves of apathy in philanthropic capitalism.

Offshore wind farming is a misleading avenue on two counts: Firstly it still suffers from the negative aspects of monopolistic control, requiring oil platform technology to deploy, therefore costs will ultimately be held above oil as an automotive energy source. Secondly; hills and ridges, where the rise in the land compresses air flow; wind velocity is typically 20% faster than it is offshore.

Consequently land based wind farms are now a lucrative business, with major manufacturers like Siemens, General Electric and Mitsubishi producing wind turbines, as well as smaller independents such as Nordex, Vestas and Enercon to name but a few.

In the UK the electricity industry consists of four parties:
  1. Electricity generators such as BNFL, Scottish Hydro Electric, as well as wind farmers and other electricity producers.
  2. National Grid, a public listed company which each year sets the Transmission Network Use of System (TNUoS) tariff within the UK.
  3. Electricity suppliers such as British Gas, E-on and nPower.
  4. Energy consumers: domestic and business.
Delivery and installation within the UK for a 2MW turbine typically costs between £1.5m to £2m, depending on delivery location and the particular requirements of the site. Fortunately the UK is the windiest country in Europe, with Scotland and Western Ireland enjoying average wind speeds in excess of 11 m/s, which compares very favourably with global wind speeds.

Wind farm revenue depends upon a number of factors primarily including wind class, National Grid tariff, government incentives and feed in tariff:
  • A wind class of 7m/s will yield around 30% efficiency, whereas 11m/s yields around 65% efficiency. This may be determined from the many online wind turbine efficiency graphs available, including this one for the Siemens SWT-2.3MW 101.
  • The TNUoS tariff is set yearly. The majority of our electricity is generated in Scotland and carried to England. For a 2MW turbine, in northern Scotland, National Grid will charge around £40,000 per annum in the worst case scenario to carry your electricity to the supplier. In the best case scenario, in the south and near London, National Grid will pay you around £10,000 per annum. Regions of the country are allocated a zone, each zone has a negative or positive tariff determined by distance from the bulk of the populace and the maintenance overheads for power transmission incurred.
  • To encourage transition to greener energy sources, the government offers Renewable Obligation Certificates (ROCs) which green energy generators should apply for and then sell to suppliers in order that the supplier achieve their renewable energy obligation target, which is set annually by the Office of Gas and Electricity Markets (Ofgem). For 2008, 9.1% of all electricity sold by each supplier constituted the renewable energy obligation which had to be fulfilled. Each tax year, for every megawatt under the obligation the supplier has to pay the buyout level set by Ofgem. In 2008 the minimum buy out level set by Ofgem was £35.76/MWh. For each megawatt of capacity, this ensures that the cost to the supplier will be at or just below the buyout rate of 3.5 p/KWh. This makes the green energy market safer for generators, since the capacity they did not achieve may also be traded at or near the buyout rate. Note that the ROCs remaining between energy generated and the farms capacity are tradeable with all suppliers.
  • In the UK non domestic energy consumers are required to use energy from green sources, failing to do so they are expected to pay the Climate Change Levy (CCL), which in 2008 was set at 0.47 p/KWh. Instead of paying this levy the non domestic consumer may instead pay using Levy Exemption Certificates (LECs) which are issued to green energy generators. Revenue from the sale of LECs will vary, though assuming these sell for 50% of the levy, a 2MW wind turbine would provide an additional £41,172 in revenue.
  • Insurance and maintenance are currently estimated to be around 3% for the total delivery and installation cost: approximately £50,000 per annum. No exact figures were available, though I feel this is quite a generous estimate. Obviously there are advantages to building wind farms of five or more turbines to reduce maintenance overheads.
  • Land rent will vary depending on the outlook of the land owner, from completely free ranging up to £10,000 per annum per turbine for large installations of ten or more that radically alter the skyline.
  • Finally the feed in tariff which you can typically expect back from the supplier is in the range of 4 to 5 p/kwh. As of April 2010, government proposed feed in tariffs will come into effect, alternatively Ofgem may increase the buyout level for ROCs.

The figures above are conservative and tend toward safe margins, they are also in approximate agreement with this article in the online edition of The Times. With just one 2MW turbine you may expect the following revenue per annum, which should return your initial investment within 5-7 years and continue generating profit for 20 to 25 years in total.

T.N.U.o.S. Tariff
R.O.C. buyout per MW/h
L.E.Cs. traded at 50% buyout
Maintenance and Insurance
Land rent
MW/hs at 30% efficiency of 7 m/s
Revenue at 30% of the 2010 proposed rate of 4.5p KW/h
Revenue from remaining R.O.C.s traded at 75% buyout
Total revenue for 30% efficiency
£318,844 p.a
MW/hs at 60% efficiency of 11 m/s
Revenue at 60% at 2010 proposed rate of 4.5p KW/h
Revenue from remaining R.O.C.s traded at 75% buyout
Total revenue for 60% efficiency
£470,889 p.a

There seems to be a level of hysteria regarding wind farms amongst members of the public who I can only assume have some interest in preserving the existing energy monopoly. They protest that wind turbines are noisy, which if you visit one you will clearly hear for yourself this is not the case. They claim that wind farms are not efficient and do not produce revenue, yet house-hold name manufacturers produce them. Silently gathering thermal energy from the sun as it is converted into pressure variance in the atmosphere producing wind; there may honestly be less elegance in the design of a bird’s wing!

"Baseload" refers to the minimum energy requirement that must be met at any point in time, for critical services such as hospitals, fire stations, banks and so forth. Many advocates of the existing energy monopoly sight baseload as the central reason for discarding wind, solar and other natural sources of power generation. With the introduction of smart-grid technologies such as those now being rolled out by IBM, we have the opportunity to manage electricity usage during times of shortage. In these periods non-critical uses of energy, civic energy consumption such as 24 hour car-park lighting, fountains, rural street lighting, as well as electrical appliances on stand-by, may be reduced or switched off altogether. Going forward the base load issue may be resolved by storing energy generated during peak times, using technologies such as compressed air and advanced batteries. Modern compressed air vehicles such as Tata's air car, in comparison with petrol store 50W/h of electricity in one litre, whilst Encore's research finds that compressed air energy storage is 75% efficient, all indicating that mass energy storage solutions are already here. Clearly there are now revenue opportunities opening in the grid energy storage sector. 

With electric vehicles reaching 100 miles for just 96p of electricity, perhaps we should all take heed of Hampshire constabulary's inspiration for a greener planet.

1 comment:

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