First published in Cleantech magazine, May 2012. Compiled with the support of Guernsey Finance
by Rue Swabey
In terms of natural assets, the Bailiwick of Guernsey has some of the strongest tides and winds in Europe, making it an obvious site for tidal power and offshore wind farms.
Guernsey in the Channel Islands is embracing renewable energy in more ways than one. The Bailiwick of Guernsey, which is officially a British Crown Dependency, comprises the islands of Herm, Sark, Alderney and Guernsey. The latter, at 24 square miles, is the largest of the islands, and has a population of 61,000. Guernsey, which is connected to the European Electricity Grid through a submarine cable link, currently imports around 80% of its electricity from France and generates the remaining 20% from imported oil. The grid is modern and there are plans to increase capacity by adding a third cable link between Jersey and France over the next couple of years.
The Guernsey authorities have announced plans to develop macro marine renewable energy encompassing off shore wind, wave and tidal power. Large scale adoption of renewable energy would benefi t the island by improving energy security and lowering its carbon footprint. It may also allow for the export of surplus energy to France and the UK, thus diversifying the economy away from the finance and related sectors which currently represent around 65% of GDP.
In addition to Guernsey’s abundant renewable resources, the island has other cleantech credentials. Guernsey is a well-established and well-regulated financial centre, with £261 billion under management in the funds industry alone. Its financial sector provides products and services that support the development and funding of clean technologies around the world. Fiona Le Poidevin, deputy chief executive of Guernsey Finance, points out that the financial sector is developing relationships in emerging markets where energy demand is rising rapidly. With a track record in providing financial services to the infrastructure sector and, more recently, to the renewable energy sector, Guernsey also has a rapidly growing cleantech sector.
Wayne Atkinson, senior associate in the commercial department of Guernsey law firm Collas Crill, notes that the majority of funds on which he worked in 2011 had exposure to cleantech. Last September, Crescent Capital, a Turkey-based fund manager focused on clean energy and infrastructure, launched a Guernsey domiciled closed-ended, registered fund with a year end 2012 target of €200 million.
Nick Wild, executive chairman of JLT Insurance Management, emphasises that Guernsey provides a unique service required by cleantech companies. It is a leader in captive insurance – first in Europe and fourth in the world. Captive insurance, essentially self-insurance by which companies set up their own subsidiaries to insure themselves, is necessary since the established insurance market does not yet off er competitive policies for businesses using immature technologies like renewable energy. Mr Wild has recently worked on two large renewable energy insurance projects in off shore wind and tidal seabed turbine generation. Guernsey also has expertise in intellectual property, which is particularly relevant to the renewable energy sector given its dependence on new and evolving technologies.
In terms of natural assets, the Bailiwick of Guernsey has some of the strongest tides and winds in Europe, making it an obvious site for tidal power and offshore wind farms. Preliminary assessments have indicated the region has potentially exploitable resources. Alderney Renewable Energy Ltd, a renewable energy company, has secured the rights to the seabed off Alderney to install turbines for capturing tidal power and has signed an agreement for the development of an electricity interconnector cable between France, Alderney and mainland Britain. This development will provide important lessons for Guernsey and is being monitored closely.
The Guernsey authorities are implementing a legislative and commercial framework for the adoption of macro marine energy. Sally-Ann David, chief executive of Guernsey Electricity Ltd, explains that current energy policy is determined by a “least-cost mandate” which does not take into account the issue of carbon. However, the Energy Resource Plan, which was approved in February, puts carbon on the agenda and calls for a strategy to diversify away from fossil fuels, although it stops short of introducing legally binding targets for renewable energy. The island’s government, the States of Guernsey, has introduced primary legislation. Mat Desforges from the Commerce and Employment Department, who is also a lead offi cer on the Renewable Energy Team (RET), expects secondary legislation, dealing with the licensing aspects, to be ready by 2013. The RET has completed a Regional Environmental Assessment (REA) for tidal projects, and this is now being extended to wind power.
Another prong of the strategy is to develop a research and potentially a technical centre of marine renewable energy expertise. To achieve this Guernsey has, so far, teamed up with three UK universities, Exeter, Plymouth and Cranfi eld, to research marine energy opportunities in the area and increase the island’s knowledge base. Fieldwork is scheduled to be carried out in 2012 with investigations into the potential renewable resources of wind, wave and tidal. This will be a cost effective way of building marine renewables knowledge. Since tidal and wave technologies are still relatively immature, Guernsey’s authorities plan to wait until the technologies have matured and costs have come down before seeking a large scale shift to renewables. The RET’s vision is to build small scale local marine energy developments for domestic consumption before 2020.
After that date, when the technology is expected to be more aff ordable, larger developments could be built to provide for local consumption and export. The RET is targeting an installed capacity of 10-20MW for each of tidal power and wind power by 2020. This would mean that, in terms of electricity generation, between 7-15% and 5-11% could come from tidal and wind power respectively. With the addition of around 30% of imported renewable power, Guernsey could have a renewable mix exceeding 50% by 2020.
All macro marine renewables are being investigated, including the potential for wind power. The RET has an open mind on whether this technology is appropriate for Guernsey and commissioned an initial feasibility study to assist in its decision making. The study indicated that a minimum development for off shore wind could be 12MW (4 x 3MW turbines), with an initial maximum development of 30MW (10 x 3MW turbines). Preliminary cost indications suggest a range of £24 million to £30 million for a small off shore wind farm and between £60 million and £70 million for the larger one. Estimates for tidal and wave power are tricky due to the evolving nature of the technologies. However, a feasibility study prepared by the Commerce and Employment Department and the Halcrow Group Ltd estimates that a 20MW wave energy development would cost in the region of £30 million and a 40MW tidal energy development would cost around £70 million. In terms of aff ordability, the same report states that, while the cost of conventional fossil fuel-based electricity was in the region of 7p/kWh (excluding distribution) in 2011, wind-generated energy would cost between 15.1p and 18.3p/kWh using 12MW of off shore wind from 2014. Furthermore, wave and tidal deployed at a commercial scale of 50MW would be in the range of 25p to 35p/kWh.
Guernsey does not have feed in tariff s or a carbon tax. While subsidies and other financial incentives are being investigated, private capital would be required to fund a shift into macro marine renewable energy.
Jason Romer, managing partner at Collas Crill, believes there is a real opportunity for the island to emerge as a renewable energy player and, with this objective, the authorities are assessing how Guernsey can best position itself. The jurisdiction’s unique combination of financial and insurance expertise and its its abundant natural assets bodes well.
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