Thursday, June 09, 2005

Shell Oil Plans World's Largest Wind Farm in U.K.

Shell, E.ON Plan World's Largest Wind Farm in U.K. (Update4)
June 7 (Bloomberg) -- Royal Dutch/Shell Group, E.ON AG and partners sought U.K. permission for the world's largest wind park, a 1.5 billion-pound ($2.75 billion) project big enough to serve one-fourth of London, as Prime Minister Tony Blair seeks to cut emissions linked to global warming.

The London Array project would have 270 turbines about 60 miles downstream from central London, in an estuary where the River Thames flows into the North Sea. The windmills 12 miles offshore, with a total of 1,000 megawatts of capacity, may be ready in 2011, the companies said in an e-mailed statement today.

The U.K., the windiest country in Europe, wants 10 percent of its power to come from renewable sources by 2010, and Blair has placed addressing climate change among his priorities while chairing the Group of Eight industrialized nations this year. A European Union program that started in January imposes costs on excess carbon dioxide emissions produced by burning fossil fuels.

``It would make a big difference if it went ahead,'' said Peter Bedson, a consultant with IPA Energy Consulting in Edinburgh. ``This is the sort of project needed if the government is going to meet its targets.''

Kyoto Accord

European Union nations and 35 other countries around the world agreed to cut carbon dioxide emissions, linked to climate change, under the Kyoto Protocol. As a result, European utilities starting this year have to pay a fine or buy emission credits if they pollute above a government-imposed cap. The cost of emissions credits has almost doubled in the past year, to 19.4 euros a ton ($24) for delivery in 2005.

Dusseldorf, Germany-based E.ON, the world's biggest publicly traded utility, will own a third of the project and Shell another third. The rest will be held by Core Ltd., a joint venture between Farm Energy and Denmark's Energi E2 A/S. The partners will share the investment in line with their equity stakes.

Shell, based in London and The Hague, said as many as 1.9 million tons of carbon dioxide emissions a year could be saved through the development. Shell's share of the investment in London Array will be as much as 500 million pounds ($916 million) spread over several years. The company's budget for renewable energy during 2003-2005 was $1 billion.

Shell started working on London Array with its partners in 2001 and announced in December 2003 that it had won the right to lease the offshore area for the project, without giving any estimate then for the overall cost.

Environmentalists, Birds

The project still needs regulatory approval. Regulators sometimes delay or reject such projects because they interfere with the natural landscape. Environmentalists also complain that windmills, which can be twice as tall as New York's Statue of Liberty, can also kill birds.

Such obstacles are likely to delay the U.K.'s government goal of generating 10 percent of power from renewable sources in 2010, said Michael Cupit, a director at consultants Ernst & Young in London.

``The target is unlikely to be met in 2010,'' Cupit said. ``It will probably be met one or two years after, basically because of the complex planning environment. It takes a long time for permission to be granted.''

Due to its location, the London Array project would have ``little visual impact'' from the coastline, according to today's statement.

Norwegian Project

Havgul AS, a Norwegian wind-power company, scrapped one of four planned wind parks after protests from local communities. The company still intends to build three wind parks off the coast of northwestern Norway with a combined capacity of 1,410 megawatts, according to its Web site.

Havgul's the three Norwegian parks, if approved, are unlikely to be completed before London Array, said Morten Thomsen, a spokesman for Energi E2.

Shares of Vestas Wind Systems A/S, the world's largest maker of wind turbines, rose 3.5 kroner, or 3.4 percent, to 106 kroner in Copenhagen. Gamesa Corporacion Tecnologica SA, the third- largest, rose 5 cents, or 0.4 percent, to 11.38 euros in Madrid.

Renewable energy sources will represent about 19 percent of the world's power generation in 10 years, compared with 18 percent today, even after more investment is made, according to a study by PriceWaterhouseCoopers, a consulting company.

Wind power is expensive, erratic and can't guarantee a secure of supply, E.ON said in its ``Wind Report 2004'' in October. Wind electricity can't be relied upon as a constant supplier of power because the masts, which can be as wide as a soccer field, only generate electricity when the wind blows.

``Due to their limited availability, wind power plants cannot replace the usual power station capacities to a significant degree, but can basically only save on fuel,'' the report said.

British Energy Group Plc's Sizewell nuclear station, in the southeastern coast of England, can generate electricity for 2 million people, while a U.K. wind farm can supply about 30,000.

`Political Will'

The growth in wind generation is based on ``political will,'' E.ON said in its report. Wind power generated 4 percent of Germany's electricity last year, while it represented 14 percent of its capacity, the report said.

``It's only through building more powerful wind farm sites such as this that we'll be able to reach the government's tough targets for renewable generation,'' Jason Scagell, director of E.ON U.K. Renewables, said in the statement today.

The U.S. Congress last year renewed a tax credit needed to make the wind plants cost-effective, leading the head of the wind- power business at General Electric Co. to call for a ``boom year'' expected in 2005 in the U.S., the world's largest energy-consuming country.

U.S., Germany

The Stateline wind farm, between the states of Washington and Oregon, is so far the largest wind farm in the world, with a maximum capacity of 300 megawatts, said Alison Hill, a spokeswoman with the British Wind Energy Association. Germany is the country with the most wind energy capacity in the world, followed by Spain, the U.S. and Denmark, Hill said.

The world's biggest offshore wind farm that's already in operation is Denmark's Nysted farm, which can produce 165 megawatts and is operated by Energi E2. The next largest is another Danish project, Horns Rev.

To contact the reporter on this story:
Elena Moya in London at
Last Updated: June 7, 2005 09:49 EDT