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UK is Looking to Iceland for Electricity

In last March (2014), UK’s National Grid published a new paper exploring the potential benefits of greater electricity interconnection. According to the paper, new interconnectors will have positive economic and environmental effects. The benefits include lower energy prices for consumers, enhanced energy security, a cleaner environment and wider macro-economic effects. National Grid believes that a full understanding of the benefits of greater interconnection is important to inform the debate on an appropriate ambition to meet the country’s need, and the timeframe within which it should be achieved

UK_National-Grid-Interconnectors-fig4-march-2014The debate on how the United Kingdom (UK) can best meet its energy needs has intensified over recent months. There is broad agreement that energy should be affordable, greenhouse gas emissions need to be reduced, and energy supplies need to be reliable for businesses and consumers to facilitate the UK’s economic recovery. Despite these benefits, Britain’s 4 GW of existing interconnector capacity is relatively small; representing around 5%of total installed electricity generating capacity. This compares with the benchmark highlighted by the European Commission in January 2014 for all EU Member States to have a level of electricity interconnection equivalent to at least 10% of theirinstalled production capacity to realize the full benefits of the Internal Energy Market.

In order to reach this benchmark Britain would need to double its existing interconnector capacity.Britain is therefore poised to complete the final design elements of the new regulatory regime, enabling developers to secure the considerable capital required to deliver these complex and technically challenging projects. Through continuing to work together, the above stakeholders are now well placed to build on the successful momentum developed to date, to secure the necessary regulatory and investment decisions for a 4-5 GW portfolio of new links in 2014/2015 and unlock the benefits including a GBP 1 billion wholesale electricity price reduction per year by 2020.

UK_National-Grid-Interconnectors-fig3-march-2014As renewable electricity forms an increasing part of the energy mix, interconnection is becoming an important tool in managing the intermittent power flows associated with these sources. Based on the consumer, energy security, environmental and economic benefits which could be accessed, greater GB electricity interconnection is considered a ‘no regrets’ investment by a wide range of informed stakeholders within the UK and beyond. This consensus includes the UK Government, the regulator, consumer organizations, green groups, think tanks, academics and the main European Union institutions.

An interconnector between UK and Iceland (sometimes referred to as the IceLink) could become an important part of the additional interconnection. UK already has four interconnectors to France, Holland, Ireland, and Northern Ireland. These links, with a total capacity of 4 GW, represent around 5% of the existing electricity generation capacity in the UK. However, this level remains low compared to the 10% benchmark proposed by the EU Commission and there is strong consensus that this gap should be filled.

While GB remains a net importer of power, economic benefits are available through greater disposable income from lower domestic electricity prices, and enhanced competitiveness for businesses benefitting from reduced energy input costs. Were a portfolio of new projects to be commissioned, the economy would also benefit from new jobs created in activities such as planning, construction and maintenance. They could also catalyse new domestic manufacturing industries in areas such as sub-sea cabling.

Electric interconnectors allow low carbon electricity to flow between European countries more easily and could enable carbon and renewables targets to be met more cost effectively. Significant volumes of low carbon electricity could, for instance, be imported into UK from hydropower in Norway, wind power in Ireland and Denmark, nuclear in France and hydropower / geothermal energy in Iceland.

Copyright statement regarding the NG Paper: © National Grid Interconnector Holdings Limited 2014, all rights reserved.

New Electric Interconnector: Sweden-Germany

On March 27th 2014, plans for one more electric cable connecting the European mainland with the Nordic countries were revealed. The plans involve a new high voltage interconnector between Sweden and Germany. The interconnector is called Hansa PowerBridge.

Svenska-kraftnat-logoThis took place at the Annual Stakeholder Meeting of the Swedish National Grid (Svenska kraftnät) in Stockholm. The day after (March 28th 2014), Mr. Mikael Odenberg, CEO of Svenska kraftnät, and Mr. Boris Schucht, CEO the German Transmission System Operator 50Hertz, signed a Memorandum of Understanding (MOU) at the German Embassy in Stockholm. The signing was made in the presence of Mr. Rainer Baake, German State Secretary at the Ministry for Economics and Energy and Mr. Christian Pegel, Minister for Energy in Mecklenburg-Vorpommern.

50hertz-logoAccording to a press release from 50Hertz and Svenska kraftnät, the main objective under the MOU is to examine the feasibility for such a new link between Sweden and Germany. In a joint statement from the companies, such an interconnector is said to be another step towards a better integrated European grid and will allow for increased electricity trade between Germany and Sweden and contribute to the security of supply.

Such a new interconnector between Germany and Sweden is believed to make sense both from a commercial and from an environmental point of view. It links directly the huge storage potentials in Sweden to the wind electricity production centres in Northeastern Germany, thus creating value for both partners. The new interconnector is intended to be put into operation within the next decade. This is one more interesting project to have in mind, regarding the possible interconnector between Iceland and Europe.

Iceland is Far Ahead of EU’s Renewable Energy Targets

In 2012, energy from renewable sources within the European Union (EU) was estimated to have contributed 14.1% of gross final energy consumption in the Union, compared with 8.3% in 2004 (the first year for which this data is available).

EU-Energy-Renewable-Sources-Share_2004-2012The share of renewables in gross final energy consumption is one of the headline indicators of the Europe 2020 strategy. The target to be reached by 2020 for the EU is a share of 20% renewable energy use in gross final energy consumption. The national targets take into account the EU’s Member States’ different starting points, renewable energy potential and economic performance.

Since 2004, the share of renewable sources in gross final consumption of energy grew in all the EU Member States. The highest shares of renewable energy in final energy consumption in 2012, within the EU Member States, was found in Sweden (51.0% of energy from renewable sources in gross final consumption of energy), and the lowest in Malta (1.4%), Luxembourg (3.1%), the United Kingdom (4.2%) and the Netherlands (4.5%).

EU-Iceland-gross-final-energy-consumption-renewable-share-2012-and 2020-targetsIn 2011, Estonia was the first EU Member State to reach its 2020 target and in 2012 Bulgaria, Estonia and Sweden already achieved their 2020 targets (16%, 25% and 49% respectively). Since 2004, the share of renewable sources in gross final consumption of energy grew in all the EU Member States. The largest increases during this period were recorded in Sweden (from 38.7% in 2004 to 51.0% in 2012), Denmark from 14.5% to 26.0%), Austria (from 22.7% to 32.1%), Greece (from 7.2% to 15.1%) and Italy (from 5.7% to 13.5%).

This is a good progress. However, this is very far from the share of renewable energy in Iceland, which now account for close to 76% of the gross final consumption of all energy in the country (already higher than the 2020 target of 72%). See further information in the Icelandic National Renewable Energy Action Plan (published in December 2012).

Upcoming Silicon Plant and New Hydropower Station

The National Power Company of Iceland, Landsvirkjun, will provide electricity to a new power a metallurgical grade silicon metal production plant being, built by German PCC Group. The plant is to be constructed in Bakki near Húsavík on Northeast Iceland.

PCC-Silicon-logoPCC Group is a privately owned industrial holding and participation company based in Duisburg in Germany. The group operates in 16 countries with a total workforce of around 2,800 employees. PCC’s silicon plant in Iceland will be a 32,000 ton facility and is scheduled to start operating in early 2017. It will require 58 MW of power, which will be derived entirely from the renewable energy sources of Icelandic hydro and geothermal power. The contract is subject to certain conditions set to be finalised later this year. These include the appropriate licensing and permit requirements, financing for the project, as well as the approval of the Boards of both parties.

The Icelandic Landsvirkjun is one of Europe’s leading renewable energy companies. Landsvirkjun is Iceland’s largest generator of electricity, currently operating 16 renewable hydro- and geothermal power stations, producing approximately 75% of all electricity in Iceland. The company has for over 45 years generated renewable electricity from hydro, geothermal and onshore wind power sources.

Budarhals-Landsvirkjun-Hydropower-Iceland-WinterRecently, Landsvirkjun was also starting up its newest hydropower station in Iceland. This is the Búðarháls Hydropower Station, and the official start-up ceremony was on March 7th (2014). The Búðarháls Station is Landsvirkjun’s 16th power station and the seventh largest power station owned and operated by Landsvirkjun. This new station utilises the 40 metre head in the Tungnaá River from the tail water of the Hrauneyjafoss Hydropower Station to the Sultartangi Reservoir. The installed capacity of the Búðarháls Hydropower Station is 95 MW and it will generate approximately 585 GWh of electricity per year for the national grid. Most of the electricity added by Búðarháls has already been purchased by long term agreement with Rio Tinto Alcan’s smelter in Straumsvík in Southwestern Iceland.

Study on Cost of IceLink: 2.7 billion USD

The cost of a 1,200 MW HVDC electric submarine cable between Iceland and the United Kingdom (UK) is likely to be GBP 1.58-1.68 billion (USD 2.63-2.80 billion). This includes the cable (with a capacity of 1,200 MW), converters, cable mobilization, and installation. These cost-figures are presented in a research paper from 2010; Proposed Iceland / UK (Peterhead) 1.2 GW HVDC Cable. The authors are three engineers; Thomas J. Hammons from University of Glasgow in Scotland, Egill Benedikt Hreinsson from University of Iceland, and Piotr Kacejko from Lublin University of Technology in Poland.

LV-HVDC-Iceland-UK-London-august-2012-2The subject of the paper is a 1,200 MW connector from Iceland to a landing point at Peterhead Scotland (a distance of 1,170km). The paper addresses market considerations with cost of electricity in UK (from new offshore and inland wind power, gas, coal, and nuclear), investments for the development of hydro resources in Iceland, investments for submarine cables and converter plant, and overall capacity of the link. Also reviewed by the authors, is the exploration of deep unconventional geothermal resources in Iceland that could be harnessed in future and developed for the IceLink. The economics, availability, and reliability of geothermal plants are reviewed. [The slide above is from a recent presentation by the Icelandic power company Landsvirkjun}

According to the paper, there should be no major difficulties in the manufacture and laying of submarine cables of length and type necessary for the IceLink connector. What is no less interesting is the finding that the cost of delivered energy would be very competitive with offshore and onshore wind, and of new coal/gas and nuclear plant. Also, the connection would offer high reliability; at least equal to that of new coal/gas and nuclear plant in the UK.

The main conclusions are as follows:

  1. Cost of electricity delivered would be very competitive with that from new wind-farms, nuclear, modern gas/coal fired plant, and tidal barrage / tidal stream power.
  2. Availability of the connection should at least equal that from nuclear, and gas/coal fired plant.
  3. No major difficulties are anticipated in manufacturing, laying and repairing the submarine cables or in construction of hydro schemes for the Link.
  4. Expected life for hydro developments is at least 60 years, submarine cables 50 years, and rectifier/inverter stations 30-40 years.
  5. The link could be considerably expanded in future to utilize deep-well geothermal power when the technology is proven.
  6. The contribution would make a significant contribution towards UK and European targets for renewable energy. The development would benefit the Icelandic economy, rather than demanding huge amounts out of a heavily damaged economy without supporting necessary recovery.
  7. The Icelandic hydroelectric system is likely to be a perfect match for interacting with the UK/North sea wind energy resources in a similar way as the Norwegian hydroelectric power system.
  8. The HVOC UK-Iceland link can serve partly as a one­ way exporter of hydroelectric or geothermal energy from Iceland to the UK or it can be considered as a short term bilateral medium for hourly interaction of hydro with marketslwind based on market signals or short term shadow prices. This dual role should be further defined in a negotiation process between the respective national authorities.

IceLink-Study-University-of-Iceland-2010The study can be downloaded here (pdf) from the website of University of Iceland.

Icelandic Electricity Would be Competitive in the UK

In a recent study, Bloomberg New Energy Finance (BNEF) assessed the political, technological and economic feasibility of an 1,100 km interconnector to bring green Icelandic electricity to the United Kingdom (the project is called IceLink).

BNEF-logoAccording to BNEF, the prospects for implementation of such a project seem quite positive. All the technological and economic barriers regarding the IceLink are believed to be surmountable.

Regarding the economics , BNEF claims that the project is competitive in relation to other zero-carbon options. This for example applies to new offshore wind-farms in the UK and also to the recently agreed Hinkley Point C nuclear project. Electricity produced in Iceland and delivered in the UK, could be lower priced than the confirmed contract-for-difference (CfD) strike prices that have been confirmed for new renewable electricity projects in the UK (as announced by the UK Department of Energy and Climate Change; DECC).

The electricity from the IceLink would have a levelized cost of 86 GBP/MWh (close to 145 USD/MWh) as central estimate by BNEF. This number is based on BNEF’s analysis of the costs of high voltage direct current (HVDC) cable development and geothermal build-out in Iceland. In comparison, DECC’s announced strike price for electricity produced in the UK by hydropower is 100 GBP/MWh (165 USD/MWh), and 140-145 GBP/MWh (235 USD/MWh) for geothermal power.

BNEF-summit-2014What is even more interesting, regarding the competitiveness of the green Icelandic electricity, is the UK strike price for electricity from wind power; 140-155 GBP/MWh (approximately 250 USD/MWh). Wind power is the UK’s major source for increasing renewable electricity. However, this technology is substantially more costly than buying electricity from Iceland via subsea cable. In addition, the wind power is very unstable, while the Icelandic hydro- and geothermal power is a very stable power source. Thus, the cable could be excellent business for the UK. At the same time it could create strong new export revenues for Iceland.

Introducing Startup Energy Reykjavik

On January 16th 2014, Startup Energy Reykjavík was presented by their founders in an open day meeting at the headquarters of Arion Bank in Reykjavík.

startup-energy-reykjavik-logoFocused on energy related business, Startup Energy Reykjavik is a mentorship-driven seed stage investment program with a strong focus on energy related business ideas. Startup Energy Reykjavik is a first of a kind program in Iceland. It offers a unique opportunity for entrepreneurs, not only to develop their ideas, but also to network with others in the energy business.

The program is open to different ideas related to the energy-field. Projects include company research or prototype development. International applications In business are highly valued. Early stages ideas are also welcomed to apply.

startup-energy-reykjavik-ideaApplicants are welcome from companies, groups or individuals. Applications are open until February 16th. The top twenty ideas will then be pre-selected by February 20th followed by the selection of the final seven on February 27th. The project is scheduled to start March 10th.

As announced on the website of the program, finalists will receive USD 40,000 in seed funding. The program runs for 10 weeks, participants working 3 days a week at the facilities provided at the University of Reykjavik (including weekly mentor meetings with the program founders).

Startup Energy Reykjavik was founded by LandsvirkjunArion Bank, GEORG and Innovation Center Iceland in December 2013. The program is facilitated by KlakInnovit and Iceland Geothermal. Further information can be seen on the program’s website.

UK Will Import More Power from Neighbouring Countries in the Future

LV-HVDC-Iceland-UK-London-august-2012-1According to the UK National Grid, the UK will import more power from neighbouring countries in the future as the country’s electricity margin continues to tighten. The Financial Times recently wrote about how one of the new subsea electric cables to be constructed is likely to be a cable between UK and Iceland (sometimes referred to as the IceLink):

Swiss engineering group ABB last year commissioned a 262 km interconnector to link Ireland’s grid to the UK’s. National Grid is also working on interconnector projects with Belgium, Denmark, Norway and Iceland. About 5-7 GW of additional capacity could flow from the new interconnectors over the next decade or so, said Mr Bonfield. However, some of the interconnector projects are more feasible than others. A link between UK and Iceland may be the best economic option.

LV-HVDC-Iceland-UK-London-august-2012-2Net electricity imports cost the UK about GBP 365 millions in the past six months of 2013, two and a half times more than two years previously, according to data supplied by ICIS, the price reporting agency. Electricity imports can be cheaper than those produced by UK suppliers and are a small but growing part of the country’s overall power supply. Power is produced in France and the Netherlands and imported via subsea interconnectors. Electricity flows both ways but the UK currently buys more than it sells. And there will be a rise in Uk’s power imports, says Andrew Bonfield, National Grid’s chief finance officer .“[This is] because there is a pricing differential which we believe will be beneficial to the country, and ultimately customers.”

National Grid will invest about GBP 3.5 billion this year, most of which will go towards reinforcing its UK transmission infrastructure. Power imports should help National Grid level out peaks and troughs from renewable energy production and deal with the UK’s diminishing electricity margin, which represents the safety cushion of spare power generating capacity (National Grid previously said that the electricity margin during peak demand in cold weather will be 5 per cent, down from more than 15 per cent in the winter of 2011-12). IceLink could become an important part of this strategy, opening access to Iceland’s 100% renewable power geothermal- and hydro power generation.

The two illustrations above are from a presentation by Mr. Hörður Arnarson, CEO of the Icelandic Power Company Landsvirkjun, presented in August 2012.

UK National Grid: IceLink is Feasible, Achievable and Viable

Economist-Iceland-UK-HVDCAccording to a recent article in the Schumpeter column of the Economist, the proposed IceLink power cable between Iceland and Britain seems to be getting a deservedly serious hearing.

The IceLink would be the longest undersea cable in the world, at at least 1,000 km, costing on current estimates billions of EUR.  According to the Economist It would take four years to construct the cable and would have a capacity of 1,000 MW. And the Economist is very positive about the project:

Iceland is in a unique position with regard to energy: it has in effect unlimited power, from both geothermal and hydro-electric. Apart from keeping the hardy Icelanders warm, it also runs aluminum smelters. But exporting electricty would give the small island economy a new source of income (the main other ones, since the collapse of the financial bubble, are fish and tourism).

HVDC-Cable-Iceland-Europe-map-slideThe Economist goes on by pointing out that the attraction of the IcLink for Britain is flexibility. The increasing dependence on wind energy, which produced a record ten percent of Britain’s power in last December (2013), may be questionable from an economic point of view. And it creates a technical difficulty too: if the wind drops, you need a speedy alternative source of power. When it blows strongly, you need somewhere to store it. Iceland’s stable geothermal- and hydro-electric generation is ideal for both purposes. But Britain has rather little hydro and close to none geothermal.

According to the Economist, the UK National Grid (the transmission operator for electricity and gas) likes the project, describing it as “Technically feasible…Politically achievable…Commercially viable”. Britain and Iceland signed an intergovernmental memorandum of understanding on the project in 2012. In June last year, the project won backing from an UK cross-party government advisory committee. Now the British government is waiting for the Icelandic side to come out with a firm proposal.

University Research on HVDC Development

The Icelandic Energy Portal is cooperating with Reykjavik University and the University of Iceland, as scientific and educational partners. Thus, we sometimes introduce research by university scholars and students. Today, we will focus on the findings in a recent thesis towards MSc in Industrial Engineering at the University of Iceland, by Ms. Svandís Hlín Karlsdóttir.

University-of-iceland-MSc-Engineering-1The title of the thesis is “Experience in transporting energy through subsea power cables: The case of Iceland”. It analyses the experience from subsea power cable projects in Europe to bring new aspects and gain more information and insights to this project. The main focus is on technology, reliability and environmental impact. In the thesis, this study of the European experience is transferred to Iceland and is evaluated as to which technology is suitable for Icelandic conditions, what to avoid and what to keep in mind, and also to evaluate the reliability of possible subsea power cables from Iceland to mainland Europe, or to Great Britain.

Technology

The need for increased renewable energy source utilization has forced the technology forward. Challenges are constantly confronted with new developments in technology. The development in material and manufacturing processes has increased power capacity and voltage rating and made the cables more robust. The cable systems are frequently being laid at greater depth and over longer distances. The maximum power capacity is 800 MW (single cable) at 500 kV or 1,000 MW (two cables) at 320 kV, for mass-impregnated cables and extruded XLPE cables, respectively. The key factors to a successful HVDC subsea power cable project is a thorough marine survey to find the most suitable route and for design of the cable. Great expertise in installation method is also crucial, concerning choice of vessel, equipment and crew.

Reliability

Savings in investment cost, which could lower the reliability of the cable system, could result in higher operation and repair cost in the future. When a cable is damaged and is in need of repair, there is always need for a specialized vessel, equipment and crew. That is independent on the size of the damage and could therefore be a big part of the repair. The time waiting for weather can also be very expensive. Additionally there is loss in revenues when no power is transmitted. Those considerations must be optimized during planning and designing of a cable project.

With prior experience and development of subsea cable systems the reliability has improved. From 1986 to 2009 the reliability has improved from 0.264 failures/year/100km to 0.100 failures/year/100km. Operation procedures with real-time monitoring improve maintenance of the system which can prevent major damage to occurring, resulting in better reliability and longer life time of the system.

Environmental Impact

When implementing such a large complex electrical system there are always concerns about the environmental impact. According to the latest researcher and environmental impact assessments in Sweden there are no threats to the surrounding area and it will not suffer permanent damage, from installation and operation of the cable. Latest technological developments have decreased the electrical magnetic field and improved installation methods. The magnetic field is so low that sensitive marine life and ship compasses have not been influenced in a bad way, according to the latest research.

The Case of Iceland

The cable route from Iceland to mainland Europe will lay under the North Atlantic Ocean passing the Faroe Islands and will be approximately 1,170 km long and reach a depth of 1,200 m. The suitable technology for Icelandic conditions is two mass-impregnated single- core cables, each transmitting 500 MW at 400-450 kV in a bi-polar configuration. That solution improves reliability and eliminates magnetic fields. It is recommended to have copper conductor at the shallower parts and aluminum for the deeper colder part because of the increased laying tensions. Cable burial of at least 2 m is recommended for the whole route to protect against external violence where possible.

University-of-iceland-MSc-Engineering-2The failure rate for the subsea cable between Iceland and mainland Europe is estimated at 0.1 failure/year/100 km which results in 1 failure a year. The outage duration for each repair is dependent on fault location and weather conditions. For a fault location near shore there is more accessibility of weather window which reduces outage duration. The outage duration is higher far offshore but there is also less probability of damage, as the cable will be laid at great depth. The availability on the subsea cable is variable between seasons and locations. During winter the access to repair is less than during other seasons. The average unavailability of the system due to damage is estimated at 12% but with less probability of damage at great depth the unavailability is less, or near 10%.

If sensitive marine species can be avoided along the cable route, the environmental impact is estimated to be low. There is no relation between magnetic fields of HVDC subsea cables and threat to marine life and with the cable type recommended there is no danger of chemical impact, or oil leakage. By laying the cables close together the magnetic fields can be eliminated. Landmarks on the sea bottom formed during cable burial is said to recover in approximately one year.

Future Work

Developments in technology are of special interest. Future technology like superconductors and advanced maintenance tools being developed will increase power capacity and minimize duration of outages, resulting in more asset feasibility. Also, the expected future development of extruded XLPE cables will be of importance. Possible future projects could consist of more specific analysis of the sea state to evaluate suitable routes based on reliability of different locations and to collect real operation data from the owners and operators of the HVDC subsea cable systems.