Britain is hoping to create an energy giant to rival Big Oil companies
The world is seeing the emergence of a new breed of energy giant.
Florida’s NextEra Energy, a solar and wind power generator, this month briefly surpassed oil and gas titan, ExxonMobil in stock market value, to become the largest US energy company. On Friday, NextEra’s market capitalisation was $138.6bn (£107.4bn) — roughly one billion more than ExxonMobil.
Other green energy heavyweights include Denmark’s Orsted, who in March overtook Norwegian oil major Equinor as the most valuable energy company in the Nordic region. Spanish-German Siemens Gamesa and Spain’s Iberdrola are also growing rapidly.
Many of these energy giants have been drawn to the UK’s windy coastline and have helped drive the country’s offshore energy sector forward. The problem, however, is that none of them are British.
Boris Johnson is determined to change that. This week, he announced his plans to put Britain’s stamp on the sector.
"It was offshore wind that puffed the sails of Drake and Raleigh and Nelson and propelled this country to commercial greatness," said the prime minister, before pledging wind would propel the country in a new direction — making enough clean electricity to power every home in the UK by 2030.
Home-grown talent
Home-grown clean-tech companies are starting to grow. Despite lingering issues surrounding manufacturing capacity, the country is home to a variety of clean energy start-ups. Clean tech unicorn Octopus Energy, for instance, recently announced it will be doubling its workforce, creating 1,000 new jobs to help make the UK the “Silicon Valley of energy”.
Britain has made enormous progress in terms of green energy. Over the past decade, greenhouse gas emissions in the UK have fallen by about 44pc — a faster cut than any other G7 country over the same period.
Even as villages across the country protested against the erection of wind farms in their local landscape, turbines continued to be erected in the North Sea. Thanks to the country’s island status, the UK has the world’s largest capacity for offshore wind.
Power generation costs in 2019
Despite recent progress, consultancy Aurora Energy Research suggests almost £50bn will be needed to follow-through on Johnson’s vision and create green tech champions.
Daniel Grosvenor, an energy and infrastructure expert at Deloitte, says the investment necessary for offshore windfarms is being matched by large-scale players such as major global utilities, infrastructure funds and financial institutions.
"Investors and the clients I have are attracted to offshore wind for its maturity as a sector – it’s now a more established technology,” he says. “They don’t like too much change or radical innovation because that introduces risk." For disruptors trying to enter the market, that hesitancy to innovate makes it harder to find funding.
A block to innovation
Seamach Energy is a Wiltshire-based company in the early stage of developing floating turbines. Although CEO and co-founder Glenn Hunt-Whitfield was buoyed by the Prime Minister’s nod to floating turbines, the company remains entirely self-funded, despite producing research that indicates floating windmills can create more energy per year using fewer turbines than fixed structures.
When the company does secure funding, Hunt-Whitfield sees another issue preventing it from growing: manufacturing capacity.
"The UK is not backing industrial development in the way that Germany and Holland have done," he said, referring to Tuesday’s pledge to channel £160m into ports and factories as "a drop in the ocean".
Companies which are looking to the future of clean energy, such as storage and distribution, are also encountering this issue. Edinburgh-based Gravitricity, which is developing a system to store clean energy in mining shafts and supply it to the National Grid, struggled to find a long-term partner based in Britain to supply its winches, eventually turning to Dutch company Huisman.
"There are very few UK partners who could have taken [Husimans’] place and in fact the UK partner [Davy Markham] we did originally have went bust soon after Brexit [in 2018]" says Charlie Blair, Gravitricity’s Managing Director.
Jamie Stewart, deputy director at the Centre for Energy Policy at Glasgow’s Strathclyde University, says Tuesday’s announcement was an acknowledgement of this problem. "Although the funding [on Tuesday] was relatively small, it was recognising that manufacturing capacity needs support," he said. "Companies are not using UK supply chains. And that may be due to capacity, but it may also be a cost issue."
However not everyone in the offshore sector sees Britain’s clean energy future as tied to manufacturing. For Greg Jackson, founder and CEO of Octopus Energy, this is a technology revolution in which infrastructure plays a more anonymous, background role.
"Technology revolutions increasingly are about not worrying about the infrastructure. You look at Uber, it doesn’t own cars. If you look at Airbnb, it doesn’t own property," he said. The company uses its cloud-based Kraken platform to deliver customers cheaper electricity when renewable power supply is high and special tariffs for customers who generate their own electricity using solar panels, for example. "In energy, we need to move away from this obsession with infrastructure and care about customers.
Right now technology should be bringing customers better, cheaper greener electricity. And the infrastructure that supports that will be built by the market if we let market forces do their job."
Technology skills are going to be important, particularly in the ability to connect the energy generated by offshore wind to the grid and with people’s homes.
Sharing skills
Former turbine blade designer, Chris Cieslak, has worked in wind for the past decade and he believes it will be difficult for the UK to match the manufacturing experience of companies such as Denmark’s Orsted.
"But by having such a large offshore fleet [of turbines] means we are currently one of the world leaders in the operations and maintenance stage," he said.
Boris Johnson poses for photographs with a branded electric taxi as he visits the headquarters of Octopus Energy
Credit: Leon Neal/Getty
Around 40pc of a turbine’s lifetime cost is linked to its operations and maintenance, according to the government fund, the UK’s Offshore Renewable Energy Catapult. That means there is huge demand for companies that can innovate here, minimising the amount of time a turbine spends switched off for repairs and expanding their life expectancies.
Cieslak saw a gap in the market when he was working for Danish turbine manufacturing firm Vestas on the Isle of Wight and has since launched his start-up BladeBUG. The company makes semi-autonomous robots able to scurry across turbines blade, making minor repairs and scanning for faults.
Companies in this space can also take advantage of the skills and expertise that the offshore workforce have already developed by working in oil and gas. "To me, that’s a big opportunity there," says Strathclyde’s Stewart. "And that’s something that a lot of other countries don’t have."
Export potential
The government funding initiative, the Offshore Renewable Energy Catapult, also clearly sees opportunity in operations and maintenance and has given early-stage funding to BladeBUG as well as other companies innovating in this space, such as drone company Cyberhawk and Bristol-based Rovco which uses autonomous vehicles to carry out underwater inspections.
"That kind of lead on technology is one of the big export potentials for the UK that we can take right round the world," says Andrew Jamieson, the fund’s CEO. Without better manufacturing facilities, which would require government inputs far exceeding Tuesday’s limited commitment, Britain is unlikely to catch up so quickly with countries that are already home to giant clean energy infrastructure companies.
But perhaps the country’s strengths can be channelled into the industries that can combine the UK’s talent for tech with the existing knowledge among its offshore workforce.
The UK has the right ingredients to create clean energy champions: the coastline, the wind, the tech, talent. But Boris Johnson’s attempts to be world leading — first with contact tracing, now with offshore wind — might have more success if the commitment is consistent, playing to existing strengths, not for gung-ho glory.
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