“The answer my friend, is blowin’ in the wind.
The answer is blowin’ in the wind.”
— Bob Dylan

Ever since Colonel Drake tapped the first commercially viable oil well in Titusville, Pennsylvania back in 1849, oil has reined the undisputed king of the energy industry. But this long reign, as with all others, will come to an end. The questions lie not in the “if,” but in the “how” and the “when.”

The world’s supply of crude oil may be enormous, but it is not infinite. Eventually, therefore, crude oil will abdicate its throne to an oligarchy of “alternative energy” sources like wind, solar, geothermal and liquefied coal.

Up in Scotland, the winds of change are already blowing. Earlier this year, Talisman Energy, Inc. (UK), in conjunction with Scottish and Southern Energy, Plc. (SSE), announced that its Beatrice Wind Farm Project, located off the coast of Aberdeen in the northeastern U.K., was online and operational. The project takes advantage of some of the highest wind speeds on the planet, winds that will be around long after the last drop of crude is extracted from the North Sea’s rich oil beds.

The demonstration deepwater offshore project is the largest of its kind in operation today. “We are making history with the first electricity being generated by this offshore deepwater turbine,” said Dr. Jim Buckee, Talisman Energy’s president and CEO.

At a towering 85-meteres (278 feet), the mammoth 5MW wind turbine will be powering the nearby Beatrice Oil Platform, some 25 kilometers off the eastern coast of Scotland.

At first glance, it may seem relatively meaningless — or at least ironic — to use wind energy to power an oil platform. If you take a closer look at those funding the project, however, you begin to appreciate the importance of this landmark event for countries all across Europe. Aside from Talisman and SSE, enthusiastic contributions also came from the European Community, the Scottish Executive and the U.K. Department for Trade and Industry.

Throughout the 1990s, the U.K.’s Non-Fossil Fuel Obligation (NFFO) fostered a slow, but steady development of the wind power industry. (Broadly speaking, the NFFO was a collection of government orders requiring electricity distribution network operators to purchase energy from the nuclear power and renewable energy sectors.) But it wasn’t until 2002, when the British government replaced the NFFO with the Renewables Obligation (RO) that things really started to take off. RO works in a similar fashion to the NFFO, but with loftier targets than the NFFO. Specifically, the RO aims to see the U.K. pass the 10% mark for energy derived from renewable sources. The nearby chart plots the near-exponential growth of the wind industry since the introduction of the RO:

And this is just the beginning. The British Wind and Energy Association (BWEA) has set lofty targets, hoping to capitalize on growing public interest in, and support for, renewable energies. “Consent for an additional 660-1,000 turbines or 2 GW onshore is needed to meet almost half the U.K.’s 2010 target,” the BWEA reports. “This 2 GW of capacity must be consented by the end of 2007 in order to be built by 2010.”

To this end, BWEA’s website proudly announces, “The U.K. is at the forefront of the offshore wind industry, with potentially 8,700 megawatts of projects at various stages of development, and is set to overtake Denmark as the leader in installed offshore wind generating capacity in 2008.”

For all the benefits of onshore wind farms, the typical problems still arise. Aside from governmental red tape, there is always a string of placard waving NIMBYs to contend with.

But NIMBYs don’t swim.

The Beatrice project is part of a larger, collective effort known as the DOWNViND Project (Distant Offshore Wind Farms No Visual Impact in Deepwater) that includes 18 organizations from six European countries. It represents a shift in focus away from the more conventional onshore wind farms and highlights the possibilities for rapid offshore growth. Aside from the obvious circumnavigation of the NIMBY obstacle, the benefits of offshore are tremendous. According to the European Wind Energy Association, offshore wind could provide up to 150GW if its full potential were harnessed — that’s about the same amount of energy produced by 150 nuclear plants.

As the rest of Europe quickens its pace in the quest for energy independence, the U.K. is among those leading the charge. At a current offshore wind capacity of 300MW, they sit second only to Denmark (400MW) and in front of the Netherlands (140MW). Even with their claim on much of the North Sea’s oil wealth, the Brits are taking proactive steps to diversify the sources of their energy. Along with growth in biofuels, solar and wave projects, a hefty part of this independence will reside in the growth of offshore wind projects:

At the recent European Wind Energy Conference in Milan, Italy, nations met to discuss the importance of research and development in the offshore field as pivotal to the successes of their energy targets. “We need to see strong growth in offshore wind farms in order to achieve the target of 20 per cent of the European Union’s overall energy supply to come from renewable sources by 2020,” stated Christian Kjaer, Chief Executive of the European Wind Energy Association (EWEA).

Alongside the U.K., Denmark and the Netherlands, projects are also in development for offshore turbines in Germany, Sweden and France. Over in Spain, the current leader in onshore operations, some 31 projects are awaiting authorization mainly in the Galicia and Andalucía regions. New regulation is expected to simplify the authorization process and should see the Spaniards getting in on the action pretty soon too:

So how does the energy throne of Big Oil respond to the emerging alternative energy oligarchy? By joining the family, of course. British petroleum has purchased both Greenlight Energy and Orion Energy, while also forming a strategic alliance with Clipper Windpower. All three of these companies operate in the wind power industry. With two farms in the Netherlands and five projects at various stages of development in the U.S. this year, BP’s land bank of development projects now has the potential to generate some 15,000 MW of power.

Similarly, Royal Dutch Shell has used its offshore oil and gas expertise to establish a formidable presence in the wind market. Their Egmond aan Zee Offshore Wind Farm in the North Sea supplies some hundred thousand homes in the Netherlands with electricity, eliminating an estimated 140k tones of CO2 emissions a year.

There is little doubt that Big Oil will rein king for a while to come. With their support, so will the alternatives.

Sincerely,
Joel Bowman
November 15, 2007

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