APPENDIX 21
Memorandum submitted by the Engineering
Business Limited
INTRODUCTION
1. The Engineering Business has key staff
and directors with many years of experience in designing, building
and operating shipboard and seabed equipment mainly related to
the offshore oil and gas and the submarine telecom industries.
The business headquarters is in Northumberland but manufacturing
is based on the resources of NE England and EB work closely with
a number of key supplier partners. Equipment assembly is in an
EB workshop in Wallsend and due to an increase in production EB
are also assembling equipment in Cammell Laird workshops at Hebburn.
Typical pieces of EB equipment weight one tonne to 40 tonnes and
may include high strength fabrication, complex hydraulics and
electronics and software written in-house.
2. EB was established four years ago and
has grown rapidly. EB has 35 permanent employees, mainly professional
engineers. EB also employs about 15 contract staff at the moment.
EB customers include major international telecom companies and
nearly all of EB production is exported.
EB AND RENEWABLE
OFFSHORE POWER
GENERATION (ROPG)
3. Four years ago EB decided that ROPG would
be one of three markets in which it would develop new ideas and
technology and try to establish new businesses. EB has expertise
in building complex offshore equipment that operates effectively
and to specification. Two EB directors were part of a team of
three engineers who won the 1994 MacRobert Award for the design
of seabed cable ploughs. It is reasonable to assume that the above
would form the basis of a suitable team to develop ROPG technology.
4. ROPG exists in three main forms, wind,
wave and tidal. Wind energy is well established on land and development
of the technology over the past 15 years has led to large improvements
in efficiency and reductions in cost. Offshore wind based power
generation is now well established and is set to play a major
part in expanding renewable generating capacity in the UK. However
most of the technology is not UK based and is being developed
more rapidly in other European countries such as Denmark and Holland.
If offshore wind power is to rapidly expand to form a significant
part of UK electricity generation then it will be necessary to
improve and automate the installation and maintenance of wind
farms. EB is capable of contributing to this development.
5. Wave power systems have been in development
for many years and significant amounts of government funding have
been used to develop the technology. Results so far have not been
very encouraging, particularly in their applicability to large-scale
generation on sites close to centres of electric power demand.
6. Tidal power has been thought of mainly
in terms of large barrier systems such as those proposed for the
Severn Estuary and the Wash. An alternative is tidal stream where
kinetic energy is extracted from the moving mass of water created
by tidal effects. Very large amounts of energy are available in
British coastal waters and this form of ROPG has the advantage
of being predictable when compared to wind and wave power. The
challenge is to develop technology and innovate in a way that
will allow this form of low-density renewable energy to become
practical and economic.
7. After evaluating existing ROPG systems
in 1997, EB decided to attempt to develop new technology and a
new business exploiting tidal stream energy. The aim was to overcome
some of the drawbacks of existing ideas and EB developed a simple
concept that used hydrofoils placed in the tidal stream to produce
an oscillatory motion in the vertical or horizontal plane. This
concept is the subject of an international patent application
filed in 1998 and currently being evaluated by the relevant authorities.
8. In 1998 EB received a DTI funded SMART
award. This contributed £34,000 towards the cost of developing
the EB technology, devising a mathematical model and building
and testing a small-scale model in a local dry dock. This project
was successful but only represented a small start to the development
of this technology. Subsequently EB experienced very rapid growth
in its other markets and devoted all resources to building the
business around sound commercial contracts. This was achieved
with a degree of success, growing a start-up design and manufacturing
business less than four years ago, into a well-established business
with a probable turnover of about £10 million this year.
9. In 2000 it appeared that the climate
for the development of alternative power generation techniques
had improved with rising energy prices and increasing concerns
about the effects of fossil fuel emissions and depleted resources.
EB again applied some resource in an attempt to generate support
and identify a partner so that the technology could be developed
and properly evaluated. EB has now invested about £250,000
in TS-ROPG in the form of labour resources, consultants' fees,
patent fees and other expenses.
10. At a board meeting in January it was
decided that EB could no longer justify further investment in
TS-ROPG without a clear inflow of funds to support the development.
All of the investigations and visits/presentations to funding
organisations, commercial companies, electricity utilities, national
and regional government organisations have only resulted in more
spending opportunities. While EB are not expecting instant profits
from TS-ROPG, the directors have a key responsibility to develop
the company and secure its long-term future and provide job security
for staff.
TECHNOLOGY CHARACTERISTICS
IN ROPG
11. EB engineers played a significant part
in the development of submarine oil and gas pipeline burial, protection
and stabilisation during the development of the North Sea oil
fields 20 years ago. These same engineers contributed to the development
of cable installation and burial technology over the same period
and this has been important in the development of the worldwide
submarine telecoms industry. Both of these areas of technology
depend on rapid innovation combined with sound engineering. Britain
is particularly good at this kind of development. It is less common
to find successful businesses developed from these initial activities.
NE England now has by far the greatest concentration of expertise
and technology in this area and leads the world in new developments
and in equipment sales.
12. To provide a good chance of success
EB believes from previous experience that proposed ROPG technology
should have the following characteristics:
The concept should be simple (and
preferably elegant);
There should not be a requirement
to develop new and doubtful technology;
As far as possible well-established
techniques should be used;
Hardware should be designed and built
by companies with an established track record;
Concepts should be verified by sound
mathematical modelling prior to construction;
There must be a clear commercial
incentive to develop the technology.
13. Considerable effort has been put into
the development of wave power systems and in EB opinion these
have not always been based on practical concepts. More importantly
these programmes have been developed as R&D projects, often
in a university setting. EB engineers have a strong university
background and have spent a considerable time developing a commercial
business from university research. However, EB are surprised at
the apparent lack of ambition in some university-based research,
where only limited goals are achieved. EB is regularly subjected
to the harsh commercial environment encountered when selling "first
of a kind" innovative equipment to international customers,
who demand deliverables "as specified in the contract".
TECHNOLOGICAL VIABILITY
14. Tidal stream technology is not yet "close
to market" and that is the fundamental problem for EB in
terms of accessing funds. The "Stingray" technology
that EB is promoting is described in a section of the EB website
www.engb.com and a paper "Tidal Stream Renewable Offshore
Power Generation (TS-ROPG)". This can be accessed through
the same website.
15. The technical challenges and questions
facing designers of tidal stream generators include:
Can a design be produced that is
simple and robust enough to survive in the hostile offshore environment
for extended periods without maintenance;
Can suitable sites be identified
where it is possible to establish tidal stream farms that are
close to power consumers, and where the tidal currents are high
enough to allow for a reasonable power density (the generator
is not so large that it is uneconomic);
Can suitable sites be identified
that do not conflict with environmental, shipping and fishing
requirements and where suitable cable landing sites can be arranged;
Can the technology be reduced to
simple and cheap components that are well proven and readily available;
What is the trade-off between small
efficient generators that can only be used in areas of high water
speed (where consumer demand tends to be small), and larger more
expensive low water speed generators that can exploit the much
larger resource available and which are close to power consumers;
Can marine fouling problems be avoided;
Can installation and maintenance
schemes be developed that are cheap and practical, remembering
that sites with difficult currents have been deliberately chosen.
16. The development of effective mathematical
modelling is essential as a first step to producing a viable TS-ROPG
schemes. EB has developed a model of their scheme and are developing
this in conjunction with Durham University and Newcastle University.
This can establish confidence that the proposed scheme has some
merit and provide design guidelines.
17. The key step in developing TS-ROPG is
to produce a working demonstration generator deployed offshore
for a reasonable period of perhaps a year. This is where tidal
stream and offshore wave power systems have struggled in the past.
Developers have perhaps been unrealistic in their aspirations
and have underestimated the special challenges of the offshore
environment. EB, with its background in offshore oil and gas and
submarine telecom has the knowledge and experience to build an
effective large-scale demonstration device. This is essential
if the commercial industry is to take EB ideas seriously.
18. The development of TS-ROPG offers an
exciting challenge to engineers of the type employed by EB. It
requires professional expertise from a wide range of disciplines
including seabed geotechnical, structural, hydraulic, electronic
and power engineering, environmental and regulatory requirements.
There is also the possibility of making a real contribution to
increasing the diversity of power sources and reducing the possible
effects of global warming.
19. If successful, TS-ROPG could provide
abundant power to produce hydrogen from seawater for the fuel
cell transport age that may come in the next decade. The ability
to provide a secure supply that is locally generated may be attractive.
20. To demonstrate the merits of the EB
scheme a development programme is proposed that leads to the production
and deployment of a 150kW generator offshore. A funding proposal
has been made to ETSU for this £1.35m programme, although
ETSU will only part-fund the project. It is unnecessary to install
a submarine power cable and connect this to the consumer. The
technology of installing submarine power cables is well established
and is an area of activity familiar to EB. EB must demonstrate
that the generator is effective and robust and suitable for the
environment in which it is deployed. It is also necessary to gather
data on actual power production and use this to refine the mathematical
model and help to develop the technology. The demonstrator will
also provide the first indication that the Stingray scheme has
a commercial future. The ability to innovate and develop to improve
efficiency and reduce costs has been well demonstrated by the
wind power industry and it is reasonable to assume that similar
improvements will be possible with the Stingray system.
21. If a successful demonstrator can be
produced then further development will be needed to establish
the effects of installing a TS-ROPG farm. It will be necessary
to determine the interaction between TS generators and devise
optimal arrangements of generators. It is likely that this will
require the construction and deployment of generators on suitable
sites and this will form an important part of this developing
technical expertise. This is an active area of research at Robert
Gordon University in Aberdeen.
COMMERCIAL VIABILITY
22. The commercial viability of TS-ROPG
in the UK will depend on the economic framework of the energy
sector and the political importance given to power diversity and
the desire to generate more power from renewable resources. This
is discussed briefly in the "Renewables Strategy" section
below.
23. EB believe that it is realistic to plan
for a ten year TS-ROPG programme leading to an installed generating
capacity of 1000 MW. This would provide a small but significant
contribution to UK power generation, with the prospect of much
more in the future. Such a programme would ensure substantial
technical development and put the UK in a leading position in
this technology. If the development fails to show promise in the
early stages then it is easy to scale back the development accordingly.
24. Because TS-ROPG is not "close to
market" any prediction about economic viability must be viewed
with extreme caution. EB designs and builds "first of a kind"
machines that operate on the seabed and are successfully deployed
and recovered in adverse conditions. These machines have a lot
of commonality with the Stingray device proposed. EB is confident
that it can cost the production of a Stingray demonstrator with
reasonable accuracy. EB is also confident that it can design and
built the Stingray device. However until a device is built and
deployed there can be no certainty that the scheme will prove
to be viable. There may be unforeseen technical problems and output
may be lower than that predicted by mathematical modelling. But
there may also be technical innovation that makes the concept
more attractive then anticipated.
25. TS-ROPG will always suffer from the
increased costs of deployment and maintenance offshore when compared
with more conventional power generation systems. Submarine power
cables are expensive to install and grid connection may be difficult
in areas where TS-ROPG is attractive. However if successful, there
is an abundant supply of available energy in UK waters and the
construction of TS-ROPG farms would be unobtrusive.
26. In summary, the big question for TS-ROPG
iscan the technology be made to work and then can the concept
be refined and developed so that large-scale generation is practical
and economic? And can this technology effectively compete with
alternative renewable technologies such as offshore wind? TS-ROPG
has a particular advantage that output is predictable when compared
to wind and wave power.
ENVIRONMENTAL PROBLEMS
27. The installation of TS-ROPG farms will
involve securing areas of shallow water around the coasts. It
will be necessary to exclude vessels and fishing activity. It
is unlikely that marine life will be damaged although there is
a potential marine fouling problem that needs solving. A study
of the environmental effects of TS-ROPG was carried out as a Masters
dissertation at Newcastle University in 1998. This did not indicate
any serious problems. A much more thorough investigation is required
as part of a TS-ROPG development programme.
28. Even if TS-ROPG is very successful in
enabling power to be extracted economically from modest tidal
currents, the area of UK coastal water used would be relatively
small.
CREATING A
BUSINESS IN
ROPG
29. The attraction of a TS-ROPG business
for EB is the possibility of developing a business that offers
the following features:
Fulfils a real need in society for
power generated in a non-polluting sustainable way without consuming
depleting fossil fuels;
Requires the development and integration
of a range of technologies many in common with existing EB skills;
There is new technology to be developed
and EB engineers have a proven track record in doing this;
All of the technology can be developed
in NE England and the local manufacturing resources could be fully
utilised in manufacturing and installing TS-ROPG farms;
A chance for Britain and NE England
to repeat the success with submarine telecom cable installation,
in leading TS-ROPG technology.
30. The current situation is that EB has
expanded very rapidly in submarine telecom in the face of stiff
national and international competition. The demand in this market
shows no signs of diminishing. EB can only develop TS-ROPG if
there is a clear commercial advantage in doing so. However EB
engineers are very keen to develop this market and have already
made a considerable commercial sacrifice in trying to move the
ideas forward. If the technology can be developed properly then
the potential market is huge.
31. It is clear to the writer that EB is
the kind of company that should be developing TS-ROPG. The skills
and experience are appropriate and the renewables market has often
lacked the input of successful engineers and companies used to
producing complex machines for the offshore environment that have
to perform to specification, and be delivered on time and to budget.
32. It is also clear to the writer that
NE England is the most appropriate location to develop TS-ROPG.
The skills and infrastructure are all on hand and the local universities
have an important role to play. The local manufacturing facilities
and shipyards could be utilised and develop the necessary maintenance
services for TS-ROPG farms.
RENEWABLES STRATEGY
33. This is not an areas of activity where
EB can make a proper professional contribution. However there
are some points that the writer offers as a personal opinion:
UK power generation should not rely
too much on any one fuel, such as gas. Diversity of supply is
essential. A proposal for the UK to mainly rely on gas imported
from Eastern Europe in the longer term does not seem sensible;
The £150 million estimate of
funds achieved from the Climate Change Levy, whereby £100
million is proposed to finance a system of 100 per cent first
year capital allowances to encourage investment in energy saving
technologies and £50 million for an energy efficiency fund
is really inadequate. This sum does not provide for the large-scale
technological developments needed. The structuring of the funding
into capital allowances does not reflect the fact that inventions
and the development of new technologies are frequently carried
out by small companies or engineering groups such as EB. EB simply
cannot afford to expend the sums required in bringing their technologies
to commercial reality, whatever the capital allowances made. There
has to be a more pragmatic form of funding available;
The UK has ambitious targets for
the generation of power from renewable resources and these are
unlikely to be met with the current level of activity and commercial
incentives. If it is really intended that renewables targets should
be met, then it is essential that private investors can see a
clear incentive to take risk to obtain the rewards that should
stem from success;
The UK has a poor reputation for
promoting the development of new and risky technology. Foreign
countries already have an established lead in many areas of renewable
technology and the incentives are much greater than in the UK.
Britain has the capacity to lead in TS-ROPG, but will not do so
in the current circumstances;
A large proportion of the funds devoted
to the development of renewable technology appears to be spent
on advisors and consultants rather than on getting the engineering
right and manufacturing hardware;
It is not sufficient to provide some
encouragement to power suppliers to buy renewable based energy,
government has a difficult role to play in enabling the development
of new technology. Accepting that there will be failures is a
part of the necessary risk taking that allows the possibility
(and probability) of some real success;
Government must back the development
of some new renewables schemes and a large proportion of the funds
should be devoted to designing and building mathematical models
and demonstration systems, rather than writing reports and papers.
34. It is very noticeable that the submarine
telecom business has quietly got on with the job of wiring up
the whole world overcoming tremendous difficulties and developing
excellent new technologies. This has been achieved without much
political interference and without the enormous overburden of
experts, consultants and paper that seem to be the main product
of the renewable energy business.
35. The Engineering Business is very keen
to contribute to the development of TS-ROPG but can only do so
in the context of a commercial business. It is not guaranteed
to be a success, but it is worth some investment and risk because
if it is successful the benefits could be huge.
CONCLUSIONS
EB is one of only a small number
of UK companies capable of developing and innovating TS-ROPG technology;
EB cannot develop TS-ROPG technology
alone;
Because the technology is not "close
to market" it is difficult to obtain commercial backing at
the moment;
A larger share of available funds
should be spent on actually doing the engineering and building
equipment, rather than carrying out studies and writing reports;
Other countries are forging ahead
with ROPG schemes and the UK will fail to exploit its natural
lead in this technology without a change of government policy.
12 February 2001
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