Generation gain

The energy sector has always depended on factors it cannot control, particularly finite resources such as fossil fuels, whose location is determined by quirks of geography and geology.

The UK was blessed with an abundance of these: huge coal fields, and vast reserves of oil and gas in the North Sea. The supply for power stations to burn and convert into electricity seemed secure for decades.

But that time is coming to an end. The coal remaining underground is too expensive to dig out and difficult to burn without causing disproportionate pollution. And natural gas, the fuel mainstay of the UK's power stations since the 1980s, is also in decline.

Now three ambitious projects are looking at new methods of handling energy resources, both in terms of fuel storage and in seeking news ways to generate power.

The problem with the UK's infrastructure, said Andrew Stacey, director of fuel storage specialist Stag Energy, is related to the climate. Because of the need for winter heating, a lot more gas is needed in the winter months than in the summer. This was not a problem when the UK was self-sufficient in gas but that is no longer the case.

'By 2015, 80 per cent of our gas will come from elsewhere, via long-distance pipelines from Norway, Russia and Algeria and via tanker, as liquefied natural gas, from the Middle East, Angola and West Africa,' he said. The political situation in many of these countries represent uncertainties over security of supply, he added.

One solution, which has been adopted by countries without large gas reserves such as Germany and Poland, is to have large amounts of gas that can be stored in the summer and run down during the cold winter months. Germany can store 20 per cent of its annual gas demand; the UK, at the moment, can store only 4 per cent.

The key to storage lies underneath the UK, onshore and below the seabed, and is due to another quirk of geography. Two hundred million years ago all the Earth's landmasses were joined in a supercontinent called Pangaea, with a large inland sea at its centre. Over time this evaporated, leaving a thick layer of solidified salt, impermeable to gas, which now lies below the bedrocks of large areas of the UK.

Stag Energy specialises in creating caverns within this salt, whose properties are perfect for storing natural gas under pressure, and is about to embark on a five-year project to create a network of salt caverns below the East Irish Sea. Called Gateway, it will be able to store up to 1,200 million m3 of gas.

Choosing the right site for caverns depends on several factors, including proximity to shipping routes, but the most important is geology. 'You need very uniform salt, in terms of its chemistry,' Stacey said. Salt that is not homogeneous can allow the gas to leak into surrounding bedrocks.

The process for making these caverns was perfected about 60 years ago in Canada. A hole is drilled through the bedrock into the salt, then water —seawater, in the case of offshore caverns — is pumped in under pressure to dissolve it, creating a void. 'We use a blanket of nitrogen between the seawater and the salt, to control the shape of the cavern', Stacey said. The gas is then pumped in under pressure and can be withdrawn on demand.

But gas storage is only one way of providing energy security; other generating technologies must also play a part and attention is turning to renewables, in particular, wind energy.

Wind might seem an unlikely candidate for improving security, as one of its drawbacks is its lack of reliability — the wind does not blow all the time and the times it does blow are not necessarily the times you need electricity. Intermittency has been used as an argument against building wind farms and given electricity distributors an excuse to demand a discount for buying wind power.

Grantham's Eclipse Energy is one company looking for new ways of establishing offshore wind-energy farms to overcome the intermittency problem. The company, formed in 1999, plans a wind farm in the East Irish Sea near to Stag's Gateway facility, to the northwest of Morecambe Bay, off Barrow-in-Furness.

Like most of the British and Irish coasts the site, called Ormonde, presents a good wind source. But what is special about this site is the two small gas fields in the sea below. Alongside the 30 wind-turbine towers will be a small platform housing three Rolls-Royce gas turbines, taking the gas from the fields and burning it to create extra electricity when the turbines are not running. Costing about £280m and producing about 200MW of power, Ormonde is the first wind-gas hybrid. It is scheduled to begin operations in 2009.

Ian Hatton, Eclipse managing director, said the firm is unusual as its founders all come from the oil and gas sector. 'All our concepts, business models and ways of operating are a direct lift from there,' he said.

This gives the company an advantage over competitors, he added. 'If you look at some of the other projects in this sector, that's an experience which has been missing. There have been a couple of projects where shallow water was perceived to be a good place to develop, but the water was too shallow for the construction barges to get in. Or the sites were selected on mobile sandbanks, and were fine when they were consented, but the sandbanks moved and are again now too shallow to get the barges in.' Eclipse's understanding of the marine environment gives it a better chance of avoiding such errors, Hatton claimed.

The Ormonde project is Eclipse's first, and the idea came from the board's experience offshore. 'If you establish a piece of energy production infrastructure, it then provides opportunity for additional energy resources to be produced and exported via that infrastructure,' Hatton said. 'So, for example, if somebody builds an oilfield development and installs a pipeline, the next best thing you can have is a small field of oil or gas resources adjacent to that development, because the marginal cost to develop those additional resources is relatively small, and therefore the value is quite high.'

At Ormonde, the infrastructure is the cable taking the power from the wind turbines onshore to the National Grid. 'Because of the nature of wind generation and the load factors on wind turbines, there's an awful lot of spare capacity on that system. That means the voidage on the cable can then take the power from the gas generation.' And that comes at no extra cost.

Because of this Ormonde should be a self-balancing renewable system, producing the same amount of electricity regardless of the weather conditions. Hatton hopes this will have a considerable effect on the economics of the project. Power companies always negotiate a discount when buying electricity from windfarms because they have to find balancing power from other sources to make up the shortfall when the turbines are not running. 'We are able to provide that balancing mechanism,' Hatton said, 'and therefore we can remove that discount and add value to the windfarm.'

In practice it is not that easy. 'It's quite hard to get offtakers to see it from that perspective,' Hatton admitted. 'So we have to work on the two elements of the project as almost stand-alones and ultimately, when we come to fix the power offtake, it'll become something where the self-balancing can be considered. Certainly, we have spoken to some offtakers who are aware of that potential.'