Interview: Ian Marchant, the chief executive of power giant Scottish and Southern Energy on renewable energy

Published on Saturday 10 October 2009 15:08

IAN Marchant prefers to keep a low profile but has long been a forceful public speaker on the issue of renewable energy. The chief executive of power giant Scottish and Southern Energy (SSE) is also putting his money where his mouth is.

Last week, he raised the stakes in the development of wind, wave and tidal energy by announcing a 20 million investment while in Glasgow for the launch of a centre of excellence set to raise Scotland's prospects of becoming a world leader in renewables.

Aside from creating 250 highly skilled and well-paid jobs, the centre, developed in partnership with Strathclyde University, has caught the imagination of business and political leaders who see Marchant and his company as a standard bearer for a new industry that is now shouldering the burden of expectation.

First Minister Alex Salmond – whose government aims to turn Scotland into Europe's green energy capital – was on hand for the unveiling of the Centre of Engineering Excellence for Renewable Energy (CEERE), providing visible support and a 2.8m regional selective assistance grant.

Marchant said SSE was "delighted" to be making this investment in Scotland, a comment that would have seemed glib if it were not for his track record, which includes signing up SSE as a founding member of the Sustainable Glasgow consortium that aims to turn the city into Europe's most ecologically viable within 10 years.

But does this support for the eco-revolution stem from passionately held personal beliefs, or is Marchant's stand rooted in pragmatism? And can Scotland really expect renewables to play a substantial economic role?

"I have long believed that green energy is the answer to two questions," says Marchant. "What do we do as our natural resources run out, and what do we do to decarbonise our environment? Renewable energy is the answer to both questions."

The solution, however, will come at a hefty price. During the five years to March 2013, SSE is set to spend 3billion on renewable projects such as the massive Clyde wind farm near Abington, which will be Europe's largest onshore wind turbine field when it reaches full capacity in 2012. That project alone will cost 500m.

Even pricier will be SSE's investment in Greater Gabbard, the world's largest offshore wind farm, currently under construction about 23km off the Suffolk coast, which will have 140 wind turbines capable of powering more than half a million homes.

Although the project is a 50-50 venture with RWE npower, SSE will invest around 650m, a sum that does not include grid connection costs.

The issue of cost is by no means limited to SSE. Ernst & Young earlier this year estimated the bill for meeting the UK target, of cutting 34 per cent of carbon emissions by 2020, at no less than 233.5bn. The cost in Scotland is likely to be proportionally higher, as the Climate Change Scotland Act passed this year calls for a 42per cent reduction by 2020.

According to Ernst & Young, about half of the UK outlay will be spent on building new supplies of renewable energy, while the remainder will have to go towards upgrading the grid to get these new facilities connected to the power network. National Grid chief executive Steve Holliday has likened the challenge to turning a C-class road into a superhighway.

Tina Cook, energy analyst with Charles Stanley, says: "It is not just a matter in the UK of building some winds farms. There is a lot more to be done for the grid to cope with all these renewables coming online."

Such figures have raised unease over the developments' economic viability. The sheer cost raises the question as to how much the constrained public purse can produce to meet the global climate change agenda.

There is cash available from the European Union, which is setting these legally-binding targets, but not all projects will benefit. The European Commission has decided not to support the installation of carbon capture and storage (CCS) at the coal-burning Longannet station in Fife. On the other hand, a proposed wind farm off Aberdeen and a new transmission hub linking Shetland to mainland Scotland are expected to share about 100m in EU funding.

Private investors are returning to the sector after a tough spell at the height of the credit crunch. London-based consultancy New Energy Finance says nearly $26bn was invested in clean energy technologies globally in the last quarter, nearly double the amount in the first quarter this year. This rising confidence is reflected in the Wilderhill New Energy index, a global basket of clean energy stocks, which has risen by some 39 per cent this year, well ahead of the 17 per cent gain in the FTSE all-share.

Even so, Lawrence Poole, energy analyst with IHS Global Insight, says government support will remain "absolutely crucial" until certain issues are sorted. These include settling policies on carbon trading, speeding up the time it takes to get planning permission and grid connection for new developments. "That is one of the major factors that could help to bring down costs," Poole says. "Companies simply don't have time to sit around for the years it can take to get the go-ahead to build and get connected."

Across England and Wales, there are also concerns that the UK government's support for new nuclear facilities could undermine the renewables effort. That situation is turned on its head in Scotland, where the SNP-led government has effectively blocked all new nuclear stations.

The First Minister is instead pushing a programme he believes could turn Scotland into a net exporter of renewable energy. Salmond has predicted that, by 2050, the country could be generating up to 60 gigawatts from offshore renewables, about 10 times current Scottish annual consumption. He suggests the excess could be exported via a sub-sea "supergrid" connecting Scotland to the rest of Europe. However, it remains unclear who would pay for or finance such a massive undertaking. For the sake of comparison, consider that a recent project to provide two new substations for the Clyde and other wind farm projects in South Lanarkshire cost ScottishPower 84m, resulting in increased export capacity of 600 megawatts – a mere 0.01 per cent of what would be needed to transport 60GW of offshore electricity.

Improvements to the technology are also needed. At the moment, there is no efficient way to capture and store energy produced by a wind farm in periods of low demand. This further exacerbates the intermittent nature of wind-turbine generation, which grinds to halt when there is no breeze, or when conditions are too blustery.

Nonetheless, SSE is investing heavily in offshore wind, with 2,000MW either under construction or with consent in Britain, Ireland and continental Europe. It has also formed two consortia to bid in the new round of R3 licences for deep-water offshore farms, and has joint ventures to develop new onshore farms in Portugal, Italy and Sweden.

SSE has no official stance on the potential for exporting green energy. It says its target of doubling renewable capacity to 4,000MW by 2013 is aimed solely at getting the "necessary mix" to meet the energy needs of its nine million UK customers.

The new CEERE facility will mainly be devoted to managing wind farm engineering, but will also research ways to improve the efficiency of green energy systems, including wave and tidal technologies. Marchant emphasises that with CEERE, SSE will be ready for whatever the future brings.

"You need investment plans," he says, "and for your investment plans to work, you have to have the engineering capability to back that up."