Why Britain needs blackouts

Offshore wind led Rame to Latin America

Policy adviser John Armitt recently said that power blackouts would be “the best possible thing” for this country –  they would force politicians to address our looming energy crisis with some much-needed urgency.

I think he makes a good point. We’ve been too slow to invest in new generating capacity, while at the same time shutting down old carbon-based power stations.

Just a couple of years ago, we had surplus capacity of over 15%. Now, it’s down to a worrying 4%.

A big reason for this drop is the huge cost and unpopularity of some renewables.

Offshore wind, for example, weighs in at around £155 per megawatt hour, which is three times today’s electricity price. This makes it unlikely to play a leading role in bridging our energy gap. However, for one newly-listed Aim company, experience gained in European offshore wind has resulted in it building a promising position in Latin American alternative energy.

How to build world’s highest wind turbine

Plymouth-based Rame Energy (LON: RAME) was founded in 2002. At the time, EU directives pushing renewable energy targets made it clear there would be opportunities in the emerging industry of offshore wind farms. Things were just getting started, and Rame saw a chance to use its engineering expertise in energy, subsea and shipbuilding to develop some innovative solutions.

Firstly, the company designed a specialised vessel for installing foundations and erecting offshore turbines. Then, in 2004 it carried out a detailed evaluation of an 80-turbine offshore project in Germany, which broadened its exposure to wind engineering.

The high costs were always likely to make this a difficult market though. So Rame looked to the US to see if there were any opportunities to use its know-how in the Gulf of Mexico. While marketing over there, the technology was seen by Barrick Gold. Barrick is the world’s largest gold producer, and was keen to deploy renewable power in some of its remote mining locations.

Although the environment might not be quite as harsh as the North Sea, erecting a turbine for Barrick in the Argentinian Andes brought its own set of challenges.

After carrying out a monitoring programme, Rame set about installing the world’s highest utility-scale wind turbine at the Valedero gold mine. It designed a hydraulic rig to transport the turbine over the 160km-long dirt track to the mine, built the foundation in the depth of the Andean winter, and then erected and maintained the high-altitude turbine.

This two-megawatt project led to one ten times the size for Barrick at Punta Colorada in Chile. The Chilean market has a lot of potential for Rame. The energy-intensive mining industry is a vital sector, accounting for three-quarters of the country’s exports.

There are substantial plans for growth, and the copper industry’s demand for power is expected to grow by over 50% in the next five years. Yet there are energy shortages, and the success of these expansion plans depend on overcoming them.

Chile needs more energy, Rame can provide it

Historically Chile has relied heavily on hydro energy, but a six-year drought is putting this source under pressure. The tightness of the market means that the electricity spot market can be very volatile. Prices can easily range between five cents per kilowatt-hour to 55 cents; making costs very unpredictable. Even if a miner has much of its energy needs under contract, this can bring an unsettling element into the cost equation for the remainder.

There is an initial portfolio of 14 projects in Chile totalling 549 megawatts. Four of these have been chosen for near-term development, with finance agreed for the first 15 megawatts at Raki/Huajache. Rame will be customer-led. A miner looking to contract for a given amount of power will come to Rame, who will try and find an appropriate solution for them from this inventory of potential projects.

I tend to be a bit cautious where alternative energy and capital-intensive projects are concerned. However, despite its far-flung location, Rame looks to be operating at the lower end of the risk scale.

It has a decade of engineering experience and a history of working with the mining industry customers it’s looking to serve. The initial projects are financed and should be on stream later this year.

As something of a wind power sceptic, I’ll certainly be interested to see how its business develops.

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