Birth of the Supergrid

I traveled to Britain in the spring of 2006 to see first-hand what I had been reading in the BBC — that Scotland was becoming a pivotal part of a worldwide energy economy in transition from fossil fuels to clean power.

I took the train early one morning from charming old Edinburgh to Burntisland, a drab manufacturing town of about 5,000 just over an hour's ride across the Firth of Forth. Burntisland was and is one of several North Sea oil and gas towns being revitalized by wind power projects that put industrial workers back on the job.

Despite the driving rain and a bird flu scare just up the road near golf holy site St. Andrews, I arrived to join a roomful of Scottish engineers to learn about an offshore wind farm demonstration project being spearheaded by Canadian company Talisman Energy (NYSE: TLM).

We headed by bus to a manufacturing facility in nearby Methil, where I watched workmen weld gigantic steel structural jackets inside an airplane hangar. That was an industrial operation unlike any I had ever seen.

All the bright-yellow pylons around me that day were soon moved by barge to a site 25 kilometers off the coast in the North Sea and then hoisted into place with a special crane; the two 5-megawatt turbines that crowned the structures I saw have now been powering the adjacent Beatrice oil field drilling platform since 2007.

This image of clean energy giving wattage to a fossil fuel operation as it taps a declining undersea oil resource perfectly exemplifies the transitional energy economy we are investing in.

Beatrice is a true pivot point between the old energy order and the new.

Building on that progress, a 34 billion euro (US$46 billion) European power connection project with a decidedly green bent is now taking shape among North Sea nations. We can expect to see large offshore wind farms become commonplace in the next decade as this "Supergrid" expands.

Investing in the Supergrid

This Supergrid already involves nine countries: Germany; France; Belgium; the Netherlands; Luxembourg; Denmark; Ireland; and the United Kingdom.

Those European Union member states are now being joined by a group of boosters from the business world. On Monday, March 8, the "Friends of the Supergrid" announced their support and hope for the EU to build a power infrastructure system that can completely wean the continental economy off of fossil fuel power by 2050.

These power pals are kicking off their partnership with momentum from national governments and the EU, as well as the electricity industry they represent.  

Friends of the Supergrid is currently made up of ten charter companies:

Siemens (Germany); Areva (France); Visser & Smit Marine Contracting (Netherlands); DEME Blue Energy (Belgium); Mainstream Renewable Power (Ireland); Hochtief Construction (Germany), 3E (Belgium); Parsons Brinckerhoff (USA, EU-wide); Elia (Belgium); Prysmian Cables & Systems (Italy).

Of those ten, five are already available to international investors who want to play the Supergrid:

Siemens (NYSE: SI); Prysmian (Pink Sheets: PRYMY); Elia System Operator (Brussels: ELI); Hochtief (Xetra: HOT); and Areva (Pink Sheets: ARVCY).

This will — at the very least — be the foundation for a major offshore wind energy rollout in the EU. Even for Desertec, the German-led plan to link new North African renewable energy capacity with Europe, what goes on between the British Isles and their North Sea neighbors is of great importance, because it means clean power linkups have grown to continent-scale.

The Supergrid is also good news for hydropower generators, especially in Norway.

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Norway: The Saudi Arabia of the North Sea Supergrid?

In the global oil game, the Kingdom of Saudi Arabia has traditionally been the go-to producer when other OPEC members slash output. That role has earned Saudi Arabia the title of "swing producer."

With the need to balance intermittent wind energy contributions to the Supergrid, Norwegian energy companies may step in to make Scandinavia's western branch the swing producer of northern Europe.

Bård Mikkelsen, the CEO of state-owned renewable energy company Statkraft, told the Financial Times this week that hydro power in his country "should be valuable for compensating for the irregularity of wind power."

"That position — being a swing producer to the European market — is a very important role for us," Mikkelsen affirmed. 

Statkraft has been busy both managing existing hydropower facilities in Norway and developing new methods of getting power from water. One example of Statkraft's state-of-the-art hydropower is its power plant at Tofte, where water filtration through osmosis has been kicking out wattage since late 2009. The project is set for commercial generation by 2015.

Oslo policymakers and Statkraft engineers hope to ramp up osmotic hydropower to 1600 TWh (terawatt-hours) per year. That's 13 times Norway's current annual hydropower output!

Each cog in the Supergrid wheel will have to move well for the entire network to grow to maturity. The UK alone wants 50 GW of offshore wind power capacity by 2020 — up from about 2 GW across the entire EU today. 100 GW of offshore wind projects are at varying stages of planning and development right now across the continent, but all the countries and companies I've mentioned here have to share technology to optimize that new capacity.

Offshore wind energy will tie in with onshore wind, hydro, solar, and nuclear power to give Europe a balanced distribution network. Transmission is a huge factor, too — Mainstream Renewable Power CEO Eddie O'Connor, speaking for Friends of the Supergrid, says there is as much as a 20 euro difference in the price of offshore wind per megawatt hour when optimal grid linkup scenarios are put up against connections through less robust cable connections.

The cooperation of companies that make up Friends of the Supergrid today should minimize transmission loss as the project unfolds, and the group is set to double in size to twenty members soon.

Some pieces of the Supergrid puzzle are still missing, like turbine manufacturers and even electric vehicle technology that can provide storage for wind power on the grid. So companies will be added... and I'll be on the lookout for which ones are best to maximize your profits.

Regards,

Sam Hopkins