To attendees of the 30th Summer Olympic Games in London (not to mention Londoners themselves), the most important underground asset is the city’s venerable Tube, operated by Transport for London. Due to celebrate its 150th anniversary next year, the system carries more than 1 billion passengers a year (more than the entire National Railway Network), and is in the midst of a major upgrade of all its lines.
But an equally long-term underground project — London Power Tunnels — may hold equally strong economic development potential for London and the U.K.
In February 2011, National Grid embarked upon a seven-year, US$1-5-billion project to “rewire the capital” via deep underground tunnels, in order to meet increasing electricity demand and help London access the renewable energy of the future.
A total of 32 km. (nearly 20 miles) of tunnels are being constructed well below the road network, in order to allow for fewer maintenance and repair disruptions, as well as allow a conduit for future capacity increases. When complete, the tunnels will have created 10 new 400-kV circuits in London’s transmission system.
In May, after several months’ work, Evelyn, a huge tunnel boring machine constructed by infrastructure firm Costain, broke through to its first destination: a pre-prepared shaft deep below National Grid’s Channel Gate Road offices. Another machine, nicknamed Cleopatra, continues to make its way along a different route.
London accounts for 20 percent of the U.K.’s electricity usage, and the demand is only growing, even as the nation’s demand, according to statistics just released this month, has waned. Demand is also growing for engineers, many of whom might just be employed underground.
In June, National Grid used the occasion of a new energy education center grand opening at its London Power Tunnels project headquarters to call attention to the future generation of engineers it will need:
“The government’s National Infrastructure Plan has identified tunnelling as a vital skill for delivering future infrastructure projects,” said the utility. “By 2015, it is estimated that the number of jobs in tunnelling and underground work will rise to 4,000. In the longer term potentially thousands of engineer and technician jobs will also be created by National Grid and other companies in our sector as we continue to invest in infrastructure to meet the future energy challenge.”
Welcoming Renewables
That future challenge is being met by hard tunnelling in policy as well as in the earth. And those changes purposely are being showcased during these Olympic Games.
A release last week from the U.K. Department of Energy and Climate Change announced that changes to subsidies for renewable electricity could “incentivize between £20 billion and £25 billion of new investment in the economy between 2013 and 2017.”
“Bandings” (British for “allocations”) were set last week for renewable technologies under the Renewables Obligation – the Government’s main mechanism for supporting large-scale renewables – for the period 2013-17 (2014-17 for offshore wind). The announcement came just ahead of the Government’s Global Investment Conference and series of 17 business summits taking place at the British Business Embassy at Lancaster House during the Games, all aiming to secure further investment into the U.K.
“Renewable energy will create a multi-billion pound boom for the British economy, driving growth and supporting jobs across the country,” said Edward Davey, Secretary of State for Energy and Climate Change. “The support we’re setting out today will unlock investment decisions, help ensure that rapid growth in renewable energy continues and shows the key role of renewables for our energy security.”
Among the measures, support for onshore wind will be reduced by 10 percent from 2013-2017, while a new allocation will be made for conversion of coal plants to biomass, and support for certain marine energy technologies will more than double. “Rates of support for offshore wind will reduce as the cost of the technology comes down during the decade,” said the DECC.
On the same day, the U.K. treasury announced the introduction of a £500-million “field allowance” (British for “tax break”) for large shallow water gas fields, to secure investment in marginal gas fields in the U.K. Continental Shelf. “The Government will set out its gas strategy in the Autumn, and is today confirming that it sees gas continuing to play an important part in the energy mix well into and beyond 2030, while meeting our carbon budgets,” said the DECC.
“Gas is the single biggest source of energy in the U.K.,” said a statement from the Chancellor of the Exchequer George Osborne. “Today the government is signalling its long-term commitment to the role it can play in delivering a stable, secure and lower-carbon energy mix. At the Budget, we announced an ambitious package of support to stimulate billions of investment in oil and gas production in the North Sea. Today’s news is a further sign of the Government’s determination to get the most out of a huge national asset.”
The tax break will protect up to £500-million in income from qualifying fields from the 32-percent Supplementary Charge (SC) tax rate. These fields will still pay 30 percent Ring Fence Corporation Tax (RFCT) on all income from the field, in addition to SC on all income not protected by the field allowance.
The announcements come amid a political standoff between Osborne, who wants to give due deference to the oil & gas sector, and Davey, who supports a more aggressive push toward renewables.
According to 2011 energy statistics released separately by the DECC last week:
- Primary energy production fell by a record 13.2 per cent on a year earlier, with record falls in both oil and gas production caused by both maintenance and a number of unexpected slowdowns on the UK Continental Shelf.
- Primary energy consumption was down 6.9 percent, which was attributed primarily to warmer weather. On a temperature-adjusted basis, consumption was down 1.7 percent, “continuing the downward trend of the last six years.”
- Industrial energy consumption decreased by 2 percent, and has decreased by nearly 30 percent since 1990, a fact attributable to such factors as increased energy efficiency and decreased manufacturing.
- Electricity generated from renewable sources in the UK in 2011 increased by 33 percent on a year earlier, and accounted for 9.4 per cent of total UK electricity generation, up from 6.8 per cent in 2010.
- In 2011, imports of energy exceeded U.K. production, the first time this has happened since 1974.
“Installed electrical generating capacity of renewable sources rose by 33 percent in 2011,” reported the DECC, “mainly as a result of solar photovoltaic capacity increasing by 12 times (due to high uptake of Feed in Tariffs), a trebling of biomass capacity (due to the conversion of Tilbury power station from coal to dedicated biomass), and a 37-percent increase in offshore wind capacity.”
Concurrent with all the news and conferences, a tour taking place last week in the Scottish Highlands served as an indicator of the nation’s energy future, and whence the power may come to fill those new tunnels in London.
As part of a tour of the region, Minister of State Charles Hendry visited Global Energy Group’s site at NIGG. Nigg is a large scale fabrication site developed in the 1970s for the North Sea oil and gas industry. For 25 years Nigg was a cornerstone of the oil and gas industry, but the site has been mostly dormant for the past decade. In October 2011 Global Energy Group purchased the 238-acre site and is planning to transform it into a multi-user facility serving a range of energy sectors, including oil & gas and renewables. By 2015, the company aims to train some 3,000 people at the Nigg Skills Academy for a range of jobs, including engineers, operators, riggers, technicians and for general and project management.
As part of 17 Global Business Summits which will take place at the British Business Embassy during the Games, an Energy Summit will take place August 6-7. The series of summits will be the largest set of trade and investment events ever held in the country, with over 3,000 business leaders, policy-makers and ministers from around the world attending, including half the companies in the FTSE 100. More information can be found on the UKTI website.