Wednesday, 21 May 2008

All-Energy - memo from the Highlands

So I'm up in Aberdeen for the All-Energy exhibition and conference - the two-day shindig that claims to be the UK's largest renewables event.

It's certainly big, sprawling across the labyrinthine complex of the AECC - delegates wandering confused in search of the next talk were a regular feature of the day.

It's events like this, with 380-odd exhibitors, that give you a better idea of the size and increasing maturity of the sector. It's not just the guys making and selling the wind turbines, fuel cells, solar panels et al, but a whole ecosystem of supporting industries - from the hard hats who brave the elements to put the turbines up, to the suits who will lobby the regulators on your behalf.

There was little sign of the VC and finance side of things, though. There was one stall from a small but keen investor (hello, Sigma Capital Group) but you wouldn't know that renewable energy and cleantech has become the key investment category that it is. Obviously the VCs themselves don't do their real hunting at events like this, but a some visible presence would have been good - I met a few serious guys who were looking for investment, so there were contacts to be made.

But then there were the talks - as expected, not much was said that was radically new, but a few sessions presented a good opportunity to catch up on some key areas.

I missed the opening plenary session as I was still travelling the last leg of the journey, but reports from those who were there suggested it was all a bit doom and gloom. I did manage to catch the second big panel - 'Policy: countdown to the EU 2020 targets'. Heady stuff.

The 2020 basically aim to make sure that the EU zone derives 20% of its total energy (not just electric generation, but heat, transport, etc) from renewable sources by the year 2020. Exact targets differ between countries, depending on their assessed ability to comply - the UK has a humble 15% target. The targets raise a lot of issues with significant implications for the cleantech industries in each country - perhaps particularly for that of the UK.

As the moderator, Tom Hodkinson, managing director of AMEC Wind Energy, emphasised - the UK's position is not good. There's very little manufacturing industry in the UK of the kind that can provide the necessary product - primarily wind turbines, which are suffering severe supply chain problems as global demand soars.

EU representative Reijo Kempinnen was a bit more optimistic - all EU member states are agreement on the principle of cutting emissions, but the devil as ever in the detail. If we are to reach the 2020 goals, we have to secure a European agreement by the end of this year, he reckoned.

Kempinnen also highlighted some issues with the incoming third phase of the European emissions trading scheme (ETS). This will produce revenue of some Euro50bn a year, and the EC wants 20% of that earmarked for actions to fight climate change, including R&D funding and support for tech commercialisations. The treasuries of member states have other plans, however. He urged interested parties such as industries (and, presumably, investors) who genuinely believe in the rightness of the cause to apply what pressure they can in their own territories.

The other speakers focused on off-shore wind, the key tech for the UK in the medium term at least. In a popular show for the economists in the audience, Richard Slark of Poyry Energy Consulting presented a cross-European supply curve of renewable energy sources, showing what technologies can achieve what reductions for what price. At the renewables production target of around 1100TWh (with an associated cost of cEuro110/MWh), off-shore is still marginally too expensive - but with the international give-and-take trading of 'Guarantees of Origin' (which may or may not be allowed by the current regulatory plans), off-shore should still play a large part in the UK's options. In fact, Slark said, it's absolutely critical for the UK to meet its obligations.

Alan Bruce of Scottish and Southern Energy and the British Wind Energy Association also (as you might expect) flew the flag for off-shore wind, and called for more UK businesses to enter the sector, particularly in component manufacture. We've got no problem raising capital for renewables in the UK, he noted - the problem is in deploying it here.

After an interesting research-based talk from Amec's Elaine Greig on the grievous constraints imposed by lack of grid resources, energy minister Malcolm Wicks took the podium. His talk had been postponed from the plenary session thanks to the previous night's abortion and embryo research votes, but it wasn't particularly worth the wait - a familiar trot round the overlapping climate change and energy security agendas, with an emphasis (disquieting for many) on tapping the more inaccessible fossil fuel resources, taking the Alberta oil sands as an example. With regards to the previous points, he noted that the government is currently consulting with Ofgem on the grid issue, and looking to streamline planning process for nationally important infrastructure.

After lunch, I caught a short presentation by Dane Wilkins of Ernst & Young's renewable energy group. He repeated some of the observations of the policy session with regards to the challenges facing the key technologies - planning, grid and supply constraints for on-shore wind, and the marginal economics of off-shore. The E&Y team are seeing investor interest in off-shore, however.

Despite the credit crunch knocking off a good portion of margins for large installations, utilities remain a dominant source of funding for renewable assets, Wilkins noted. There's also still strong appetite from private equity for developed assets and buy-and-build deals, he noted, as well as appetite for emerging technologies - though, he reckoned, we're not seeing much emerging tech being presented in a way that would appeal to later-stage private equity.

I also caught a session on the UK's renewables solutions and market prospects, hosted by the good folk at BERR (the former DTI). Basically a pitch for inward investors, presented in a deathly civil service fashion - not the best advertisement in all.

Special mention, on the other hand, must go to the Caithness Energy Alliance for their sterling marketing efforts. Attaching a wee bottle of Old Pulteney to your press pack is an excellent way of making sure the journalists pick them up. Slainte!

No comments: