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The Big Question: What is the Best We Can Hope for In 12 Months' Time?

In the Big Question feature for the annual review edition, we asked readers to give us their hopes and fears for the year ahead, and to share their thoughts on what the industry might look like 12 months from now given the best possible scenario and, conversely, perhaps present their view of the worst outcomes a year from now.

PAUL BROWNING, PRESIDENT AND CEO OF THERMAL PRODUCTS, GE ENERGY

When we look at the long-term future of power generation, we see the growing importance of integrating natural gas and renewable energy resources in new and innovative ways to provide energy that is cleaner, more cost effective and more reliable.

For the foreseeable future, it will continue to take a mix of power generation options to satisfy the world's electricity needs. Certainly, wind and solar will play increasingly significant roles. But when the sun isn't shining and the wind isn't blowing, we need other sources of energy to meet grid requirements. The logical choice to tackle that challenge is natural gas, which is in abundant supply and is one of the cheapest energy sources available.

At GE, we have invested more than $500 million to develop gas turbine technology with the flexibility to take full advantage of natural gas, the cleanest of the fossil fuels. By providing the ability to start up quickly, and to rapidly ramp electricity production up and down in response to fluctuations in wind and solar power, this new technology is paving the way for the efficient integration of renewable energy onto the grid.

A new project in Karaman, Turkey emphasizes the synergies between gas and renewables, rather than the competition gas is giving renewables in some markets. MetCap Energy Investments has selected GE's new FlexEfficiency* 50 Combined Cycle Power Plant technology for the world's first Integrated Renewables Combined-Cycle facility, which will seamlessly integrate natural gas, wind and solar energy into a single, efficient power generating operation.

The world's energy mix has changed over the last decade, and we recognize the need for gas turbine technology that delivers the necessary combination of flexibility and efficiency to meet changing plant operations. We believe that the greater use of renewable energy, in combination with natural gas, is the future of power generation.

* Trademark of the General Electric Company

DR MARK ENGLAND, CEO, SENTEC

I was encouraged to see the UK's recent commitment to legally binding emissions targets, including policy to encourage renewable generation. However, all these technological changes will put an immense strain on the grid. In order for the network to cope with the strain, careful investment is needed.

Over the year ahead I hope to see targeted reinforcement of the grid to create a smart grid, which will bring a whole host of benefits including better utilisation of renewable energy resources. Marine, wind and solar have immense potential, but in order for that to be realised it's essential that they can be properly integrated into the network.

The government must demonstrate leadership in smart grid development to address these concerns, which will be particularly challenging in the UK because of our fragmented energy industry. It's also crucial that the interests of generators, DNOs and energy retailers are aligned. If we don't have more ambitious timescales the UK is in danger of being a follower rather than a leader in the renewable market. We have the home grown engineering skills to produce innovative solutions; what we need now is more government support.

At the moment the utilities are hamstrung by a rigid system that doesn't take into account rapidly changing technologies associated with carbon reduction and the smart grid. I hope to see this change over the next 12 months. For straightforward commercial reasons, building a smart grid for the future will provide a much better ROI than upgrades and patching-up of the nation's existing infrastructure.

SIMON AMOS, DIRECTOR, FIELDSKILLS LTD.

The economy far overshadows environmental and energy issues now, closely followed by global security. Leaders and policymakers have had their heads turned and again, energy use is sidelined because it appears less immediate and less vote-catching.

The best thing that can realistically happen in the next year is that energy issues are given the attention they deserve, that a scientific breakthrough in renewables such as the new solar cells catches world attention.

The worst thing that can happen is that another scandal feeds the sceptics, or that renewable energy slips further from view due to more world political or financial events.

Each scientific development is fanfared into the public arena as though the newfangled instruments are being loaded into boxes for shipping already, and of course this is very far from reality.

PROFESSOR CHRIS BURGER, EUROPEAN SCHOOL OF MANAGEMENT & TECHNOLOGY

Europe will face a crucial debate about the Union's energy future in the coming year. The events in Fukushima triggered a wave of anti-nuclear policies in some European countries. Germany's government underwent a radical change and now aims to become nuclear-free by 2022. Italy paused its search for prospective nuclear plant sites. Meanwhile, other countries like France and Finland still adhere to a nuclear strategy, given its benefits to mitigate climate change and secure resource independence.

The anti-nuclear faction of European countries risks a return to a generation mix that includes more fossil energy production, unless it accepts importing a higher share of nuclear energy from neighbouring countries. The pro-nuclear faction has still not resolved the question of how to safely deposit nuclear waste, and the only sizable new European nuclear power plant in Finland is years behind schedule and plagued by cost overruns. In addition, the long promised fourth generation of nuclear reactors has yet to prove that it is safe, technically viable, and economically feasible.

Instead of increasing the polarisation of national energy policies, Europe should use the next year to find a jointly agreed way to reach both emissions targets for 2020 and security of energy supply.

GREGORY DUDZIAK, PROJECT MANAGER, MOTT MACDONALD

Offshore wind is booming again, spurred chiefly by ambitious plans in the UK and Germany, but also in many other countries (Belgium, Holland, China, the US, France) to name but a few.

However, the industry's long-term success is still subject to its ability to rapidly reduce costs (capital and O&M) over time. Indeed, capital costs of offshore wind energy projects have actually significantly increased in the last seven years, spurred by a number of factors, some project specific (like water depth and distance to shore), some exogenous (for example, supply chain restrictions or commodities prices, amongst others), but also due to market conditions favouring the contractors (Seller's Market).

While one can be confident that in the long term costs will reduce, what is going to be the likely trend for offshore wind capital and operational costs in the short term?

Competing factors will be driving the evolution of these costs. Factors which could lead to increased costs include commodity prices (which are on the rise again) and competition from other sectors (O&G).

Factors which could lead to decreased costs include larger wind turbines; learning rates (mass production); innovation (R&D); and new entrants and more competition from low cost jurisdictions.

Whilst the above factors will play a role in future costs, market conditions are likely to be the driving factor in the near future. The current expected exponential growth of the industry is likely to exaggerate the current supply chain constraints and thus maintain the status quo. Nevertheless, and in the longer term, a new equilibrium is likely to be achieved with new entrants to the market and larger fleets of vessels capable of doing the work, to name but a few.

Mott MacDonald has already been involved in projects where this increased competition has resulted in better commercial terms and is well placed to support developers with its mix of strong technical and industry knowledge, and its procurement skills.

One can therefore hope that the recent cost increases will at worst be contained in the immediate future and then decrease again over time. This is in any case an absolute requirement for the offshore wind industry in order to keep the support from policymakers, government, and taxpayers.

MERVYN SAMBLES, VICE PRESIDENT, POWER, FLUOR CORPORATION

The UK faces the unprecedented challenge of decarbonising the energy sector while maintaining its economic competitiveness and ensuring security of supply. Successful resolution of this challenge will require the creation of an environment that attracts investment in low carbon and renewable technologies, while maintaining the efficiency of a free market economy.

The risk and high costs inherent in developing new renewable power generation technologies compound the challenge and underscore the need for targeted government support until new generation technologies reach cost parity. The risk premium attached to investment in new technologies is attributable to a number of factors, including the lack of longterm O&M cost data and the inevitable failures of some technologies to produce the projected results.

However, there is a danger that, in constructing the support mechanism, policymakers fall into the trap of trying to identify technologies that they expect to be 'winners' and create a support structure that protects those technologies, even if they underperform. Worse still, there is a danger that better technologies will be lost.

For example, the Committee on Climate Change (CCC) proposes that by 2030 the UK power sector will consist of 40 percent nuclear, 40% renewables and 20 percent hydrocarbon with CCS. However, CCC also forecasts levelised costs of power generation by this date, which show technologies defined as 'low carbon' (nuclear and hydrocarbon with CCS) producing power at a lower cost than power produced by most technologies defined as 'renewable'.

Therefore, the CCC's figures tend to suggest that it would be easier to invest in the mature low-carbon technologies than in many new renewables, without jeopardising carbon reduction efforts. Hence a decarbonised UK power sector consisting of 40 percent nuclear, 40 percent hydrocarbon with CCS and 20 percent renewables would perhaps be a more achievable goal.

This poses the question: Why are targets being set for certain technologies if these targets will not help the decarbonisation of the power industry?

Is the CCC's advice aimed at creating an enabling environment for the development of the most efficient low-carbon technologies (whether they are classified as renewable or not)? Or is the CCC attempting to pick winning technologies?

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