A recent report on the value of the UK's offshore renewable energy resource has found that by using less than one third of the UK's offshore renewable energy resource, the electricity equivalent of one billion barrels of oil could be generated annually, matching North Sea oil and gas production and thereby making the UK a net electricity exporter.
The report, which was commissioned by The Offshore Valuation Group, presents the findings of a study by the Boston Consulting Group and assesses the value of the UK's offshore renewable energy resource that can be accessed via the generation of electricity from wind, wave and tidal power devices.
This is the first full economic valuation of the UK's offshore renewable energy resource and its central finding is that the UK's offshore renewable energy resource could be just as valuable as the UK's stock of hydrocarbon reserves.
The valuation is based upon estimates of the future demand for clean energy, the size of the available resource, the practical constraints that could prevent this value from being realised, and the economic value of clean electricity. The report also explores the wider European demand for renewable power, rather than viewing the offshore renewable energy resource from the perspective of UK demand only.
The report examines three deployment scenarios to illustrate the potential value of the UK's offshore renewable energy resource:
- Scenario 1 considers maximising the role of offshore renewables in meeting UK electricity demand. This scenario foresees that generation of offshore renewable energy would be sufficient to meet 50% of the UK's electricity demand in 2050, which is the maximum amount of variable renewable electricity that the UK grid could accommodate.
- Scenario 2 foresees the UK as a net exporter of electricity generated by offshore renewables, that is, the UK would produce as much electricity offshore as the UK consumes. By 2050 the amount of energy generated from offshore renewables would be equal to the UK's total electricity demand. The UK would become a net exporter of electricity by exporting to Europe the 50% of offshore renewable electricity which the UK grid could not support.
- Scenario 3 foresees the UK as a net producer of energy through offshore renewables with the amount of electricity generated from offshore renewables being equal to the UK's total energy demand in 2050. The UK's total energy demand is the sum of all energy delivered by electricity, gas, oil-based fuels and other sources. The UK would be able to export what energy it could not use to Europe and become a net exporter of energy.
The main focus of the report is the examination of scenario 2 which envisages that utilisation of 29% of the UK's practical offshore resource would by 2050 facilitate:
- the electricity equivalent of one million barrels of oil to be generated annually, matching North Sea oil and gas production and make the UK a net electricity exporter;
- carbon dioxide reductions of 1.1 billion tonnes to be achieved by the UK between 2010 and 2050 - a major contribution towards 2050 climate targets; and
- 145,000 new UK jobs to be created by industry.
The supply chain necessary to deliver this level of offshore renewable electricity envisaged in scenario 2 would have annual revenue of £62 billion in 2050 and profits of £16 billion and would require an installed capacity of 169 GW with a capital expenditure of £443 billion.
The report also makes a number of suggestions to ensure that the UK remains focused on realising the full value of its offshore renewable resources:
- make Offshore Wind Round 3 grid connections "super-grid compliant" to avoid locking out potential future electricity sales to Europe;
- take a leadership role in the current EU super-grid negotiations to ensure that the UK derives maximum value from its design and implementation;
- continue to develop the UK supply chain as a key to deployment at scale and least cost; and
- evaluate and, where appropriate, facilitate new financing structures that complement the fundamental features of renewable energy infrastructure and can support the scale and speed of industrial growth required.