Offshore Research evaluates the competitiveness of primary energy sources with a competitive edge within renewable offshore projects.

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Energy prices are volatile, but market prices for oil, gas, coal, nuclear power, hydro power and other renewable energy sources do not always correlate. A comparison of development in energy prices from producer converted to EUR/MWh clearly illustrates this situation (Graph showing energy prices).

What are the reasons for these imbalances?

• In the short run variations are due to limitations in distribution capacity, producers flexibility to change volumes, consumers flexibility to swap energy source and in general lack of transparency
• In the long run energy prices for alternative sources will balance, and new technologies and politics related to taxes, subsidies, security of supply and environmental issues will decide market share for the various primary energy sources.

When evaluating investments in renewable energy projects you have to know:

• Realistic future energy prices to be used in the financial model
• Cost structure related to investments, operating costs incl. fuel costs, as volume in % of production capacity is critical for break-even prices
• Cost structure of alternative existing and planned energy plants, to understand at which price level they will reduce or stop production and when they will invest in increased capacity.
• Optimal location for power projects is often a trade off between optimal production site and distance to market.
• Installation costs offshore incl. transport to onshore are significant, and influence optimal size for offshore projects.
• Optimal financing of renewable energy projects to benefit from existing incentive schemes.

Erik Simonsen, Managing director of Offshore Research AS

Offshore Research can assist you in these evaluations in order to reduce risks and increase return on planned investments.

Offshore Research has assisted Boskalis Westminster NV in their evaluation of market opportunities within installation of offshore wind power projects, and Rain Art BV in their evaluation of necessary break-even prices for their new renewable energy technology.

The Norwegian challenge:

• Norway is one the world's largest energy exporters:
• Produce 150 mill. tonnes oil per year and consume approx. 7%
• Produce 50 mill. tonnes oe. gas per year and consume nearly nothing.
• Produce 11 mill. tonnes oe. hydropower and consumes nearly 100%
• Norway has excellent conditions for wind power, but production is close to zero.

The paradox is that Norway will be increasingly dependent on electricity imports if not gas and/or wind are utilised domestically.

The alternatives are:

• Building gas to power plants in Norway
  • Profitability will depend on the price gap between gas prices and electricity prices being sufficient to justify the investments.
  • We have an alternative market for the gas in Europe, and due to high volumes distribution costs related to offshore pipelines are marginal.
  • In modern gas to power plants approx. 67% of the energy are generated as electricity, and additional 16% can be utilised as room temperature water. Location close to major cities in Europe will fully utilise the water and total energy utilisation and profitability of power project will increase.

   

• Utilising gas directly in Norway
  • 100% of energy will be utilised
  • Distribution costs will be significant due to small population in a large area

   

• Wind and/or wave power
  • Based on present technology and low energy prices, these projects have so far not been profitable, and realisation of present plans will depend on financial incentives.

   

• Offshore high voltage cables between Norway and the European continent
  • Norway will achieve security of energy supply.
  • Business opportunity for Norway to stop hydropower production and import electricity from Europe during the night, and maximise production and export electricity during daytime. Profitability will depend on price variations between day and night prices in Europe.

Energy conservation and environmental consequences are major considerations for all these alternatives.

Offshore Research can assist in evaluations of these alternatives.

 

Offshore Research AS
c/o MRS & Co
Kalfarveien 57A, N-5018 Bergen
Phone: +47 55 30 63 58 / Mobile: +47 90 87 12 02
Fax: +47 55 30 63 60
E-mail: erik@offshore-research.no
Web: www.offshore-research.no

 

Click here to obtain a copy of RENEWABLE ENERGY 2008