A CLEAN, RENEWABLE ENERGY PARTNERSHIP
Bringing geothermal and hydro-electrical power from Iceland to the UK – delivering commerce, infrastructure and employment – to time and to budget.
- 1 Providing large scale, low cost, reliable, low carbon energy to the UK
- 2 Providing Iceland with a significant increase to its GDP
- 3 Providing a world class manufacturing facility
ATLANTIC SUPERCONNECTION STARTED DEVELOPING THE SUPERCONNECTION IN 2012 AND ITS FACTORY IN 2016. SINCE THEN ATLANTIC SUPERCONNECTION HAS PROVEN THAT THE SUPERCONNECTION IS TECHNICALLY POSSIBLE AND IS READY TO HEAD TO FINANCIAL CLOSE ON BOTH PROJECTS …..
Atlantic SuperConnection is developing:
o a c.1500km subsea High Voltage Direct Current (HVDC) cable to bring 1.2GW of on-demand and baseload geothermal and hydroelectric power from Iceland to the UK;
o bringing low carbon power to approximately two million British homes at a price below all competing low carbon sources – wind, solar, nuclear, tidal …; while
o providing Iceland with increased grid security and significant economic benefits; and
o a world class leading HVDC subsea cable factory in the North East of England;
o bringing a new manufacturing capability to the UK together with jobs and economic growth for the region.
In 2008, the Climate Change Act introduced a legally binding target to reduce the UK’s greenhouse gas emissions to at least 80% below 1990 levels by 2050. The UK confirmed is climate change commitments by signing the Paris Agreement in November 2016 and this was again confirmed in the Queen’s Speech in June 2017. To meet these commitments the UK will have to decarbonise the lion’s share of its electricity by 2030, and as part of this commitment it has agreed to close all coal plant by 2025.
Energy demand in the UK is forecast to grow by 1.4% per annum to 2030. Even the most conservative projections show a 4% increase from 2016 figures by 2035.
This demand growth combined with the planned reduction in existing generation capacity means the UK is facing a material reduction in ‘plant margin’ (the excess of generation capacity over maximum demand) over the coming years. As a result, significant investment in new generating capacity is needed and the need to address climate change requires a focus on generation from low-carbon sources.
Iceland is ideally placed to provide the UK with a proven, cost competitive and reliable baseload and peaking supply from operating and undeveloped hydro and geothermal energy. Iceland currently generates 100% of its electricity from these low carbon energy resources for domestic and industrial use, and is estimated to only be producing about one-third of its total potential energy generation capacity.
The unique attributes of a connection with Iceland - the capability of bringing very low carbon, reliable baseload and peaking electricity to UK consumers at a price below other low carbon sources – strongly supports the development of the SuperConnection. ASC believes that there is no other project currently under consideration that can deliver all of these benefits.
POLITICAL SUPPORT FOR THE PROJECT
Following ASC’s initial development of the SuperConnection, in 2012, under the stewardship of Charles Hendry as Minister of Energy, the Icelandic Government and UK Government entered into a Memorandum of Understanding “…to explore the possibility of developing an electricity interconnection between Iceland and the UK…” .
Between 2012 and 2015, ASC continued developing the SuperConnection. On 28 October 2015 the then UK Prime Minister, David Cameron, met with the then Icelandic Prime Minister Sigmunder Davio Gunnlaugsson and they agreed to explore further the SuperConnection. Heads of terms were signed to establish the Iceland Energy Task Force for Iceland and the UK to consider the SuperConnection. The Task Force issued its Joint Statement in July 2016, which was supportive of the SuperConnection. The Task Force has been reconstituted in 2017 and discussions are continuing between the UK and Icelandic Government.
Through the recent changing political landscape in Iceland Atlantic SuperConnection has maintained and built new strong relationships with the Icelandic Ministers. Atlantic SuperConnection believes that there is largely cross-party support in Iceland for the SuperConnection .
ASC is looking to secure a CfD for the SuperConnection, so that the SuperConnection comes on-line by 2025 all the coal plant have to be shut down in line with the UK Government’s Kyoto and Paris Accord commitments. Such UK Government support is key for the SuperConnection to progress. However no other assistance is required from the Icelandic or UK Government for the SuperConnection to move ahead.
The development of the project is following a typical infrastructure capital investment program as set out below:
2014 to 2016
Deciding on and selecting:
- - Cable route and design
- - Cable supplier options
- - EPC Contractor options
- - Connection options
- - Revenue models
- - Funding models
- - Route and cable design
- - Preferred contractors
- - Revenue model and contracts
- - Connection Agreements
- - Debt & Equity Funding secured
2019 to 2025
- - Factory build & testing through to operation
- - Cable manufacture
- - Cable laying
- - Cable connection
- - Project Finance compliance
- - Revenue contracts
- - OPEX
- - New energy supply options
- - Debt Finance
THE DEVELOPMENT OF HVDC TECHNOLOGY CAN BE TRACED BACK AS FAR AS THE 1880S. HOWEVER, THE MODERN FORM OF HVDC TRANSMISSION USES TECHNOLOGY DEVELOPED IN SWEDEN AND GERMANY IN THE 1930S WITH THE FIRST COMMERCIAL INSTALLATIONS IN THE SOVIET UNION AND SWEDEN IN THE 1950s.
Today HVDC is only used in point-to-point connections and requires conversion from alternating current (“AC”) to HVDC and back again at each end point via a converter station as most onshore electricity grids are AC based. The conversion from standard AC to HVDC, and vice versa, is technically the most complicated part of the entire process. Fortunately our converter stations will be located on land, making them easier to maintain. The VSC converter stations, which we will use due to a smaller footprint and increased weather resistance, are well established.
For long distance bulk electrical power transmission, HVDC transmission is far superior technology to AC systems for several reasons:
• the efficiency of HVDC is only limited by the design of the cable (both conductor and insulator) and the operating temperature.
• HVDC transmission can achieve very low transmission losses, using generated electrical energy more efficiently and making it very economical;
• for submarine power cables, HVDC avoids the heavy currents required to charge and discharge the cable capacitance each cycle;
• HVDC allows asynchronous AC grids or AC grids with different frequencies to be connected, improving the stability and economy of each grid;
• the power flow through an HVDC cable is fully controllable in either direction and has inherent overload capability that can be actively used for peak supply. This facilitates effective stabilisation of a network against disturbances due to rapid changes in power; and
• HVDC (particularly XLPE) cables are unobtrusive and environmentally friendly.
THE SUPERCONNECTION FACTORY
HIGH VOLTAGE CABLE PRODUCTION IN THE NORTH EAST OF ENGLAND
Atlantic SuperConnection has recognised the capacity issues in the global market for HVDC cabling. As such, as a parallel project, it is developing a world class manufacturing HVDC cable factory in the North East of England.
The SuperConnection Factory will be a joint venture with an existing and world leading HVDC subsea cable manufacturer.
The SuperConnection Factory will be built in a port in the North East of England. The enormous HVDC cables require direct access to very large ships for transportation and export. We have been working with the local authorities in the region on this exciting development.
This exciting development would provide:
• significant investment in the North East of England,
• the UK with a strategically important high tech manufacturing capability that it does not currently possess,
• hundreds of jobs and economic growth for the region, and
• import substitution and export opportunities for the UK
ASC is currently undertaking an assessment of the ports in the North East of England to find the best sites for the SuperConnection Factory.
Frequently Asked Questions
1. REGULATORY AND POLITICAL
The Joint Task Force between the UK and Icelandic Government has done a great job in evaluating the project and reporting back positively. However, while co-operation between the two governments is always desirable, the best approach for the UK consumers is that the delivery of the project to develop a HVDC cable between Iceland and the UK (the “SuperConnection”) is now handed back to the private sector to make the SuperConnection a reality.
In Iceland there are two significant milestones that need to be met:
- agreeing how the power will be made available with the Icelandic generators including Landsvirkjun (LVK); and
- obtaining confirmation from Landsnet that the grid strengthening will be completed in time.
In the UK key milestones include:
- securing a CfD from the UK government at a competitive price;
- obtaining a connection point and agreeing a Connection Agreement with National Grid;
- finalising an EPC contract with a consortium which includes a world leading cable manufacturer; and
- finalising a joint venture for a new HVDC cable factory in the North East of England (the “Factory”).
The SuperConnection and particularly the Factory will bring highly skilled jobs and hundreds of millions in investment to the area. The Factory will be a world-class export business for many years to come and will support other energy projects in and from the UK and abroad.
ASC has spent £8 million ensuring that the SuperConnection is technical feasibility. ASC had engaged with the world’s largest cable engineering companies and leading advisers on the manufacture and laying of sub-sea HVDC cables. ASC is now very confident that the SuperConnection can be delivered by 2025.
It is expected that power losses across the SuperConnection will be a modest 5% or so by using very high voltage direct current cable.
Yes, the SuperConnection will take 5/6 years to construct. Therefore, in order to meet the key date for the UK Government of 2025 (when the coal plant are due to come off-line), construction needs to begin as soon as possible. If we start now, we can hit the key start date with much greater certainty than other big energy generation projects.
Where the cable comes ashore in Iceland is not tectonically active, so there is a low risk of volcanoes or earthquakes which could affect the SuperConnection.
ASC are currently planning to bury the SuperConnection along the majority of the route to reduce the risk to the cable from trawling/anchoring.
The cost of the SuperConnection is £3.3 billion. As with any company, and in order to raise funds in the first place, we need to make a return on our and our investors £3.3 billion equity and debt investment. Our investors (equity and debt) all have a duty to their shareholders to make a return on any investment. By virtue of the CfD mechanism any return will be regulated and limited by the UK government.
ASC’s potential investors include UK and international banks, pension funds, sovereign wealth funds, utility companies, export credit agencies etc – all of whom want to invest in the UK and in the SuperConnection. ASC would especially welcome Icelandic participation in investing in the project.
ASC’s experience team has overseen about £110 billion of infrastructure investments in the last 20 years. ASC has been approached by a number of entities who are interested in investing in this exciting and groundbreaking project. ASC is confident that the funds can be raised.
ASC is planning to sell the power both to large UK power users; and to power utilities - who can then sell it on as low carbon energy to consumers at a lower price than other low carbon electricity.
David Cameron was very supportive. He set up the joint Task Force to examine the SuperConnection proposal. Charles Hendry signed an MoU with Iceland for the SuperConnection when he was Energy Minister; and Andrea Leadsom was very encouraging of our efforts. Since then I guess they’ve been a bit distracted by other events.
ASC is currently the only active developer of a cable from Iceland to the UK. ASC is the only company who has spent significant funds in ensuring the SuperConnection is technically feasible in planning the route of the cable and who can deliver such a project in the near future.
The UK needs all the low carbon power it can get. This is especially true of flexible ‘baseload’ power, (i.e. the always available power to replace the old nuclear and coal plants). The SuperConnection is however considerably cheaper than all other forms of reliable, large scale low carbon electricity.
The strike price in the SuperConnection CfD will be significantly lower than other forms of low carbon electricity including solar, advanced technologies, nuclear and tidal power.
The SuperConnection can provide a large amount of readily deliverable electricity in time to meet the 2025 deadline.
The Factory will be be the only HVDC cable manufacturer in the UK. Rather than being a competitor to other UK companies it will add to the UK’s capabilities in the sub-sea activities helping to make the UK, and particularly the North East, a leader in the area.
5. ECONOMIC IMPACT
No, the price to be agreed with the UK Government for the electricity will be cheaper than other low carbon alternatives.
The SuperConnection will create hundreds of jobs during construction which is expected to take five/ six years. The operation and long term management of the SuperConnection will also create highly skilled jobs in the North East of England.
This depends on the size and design of the Factory: a comparable plant in Europe employs about 800 people. In addition to the jobs directly created by the SuperConnection Factory, the Factory will bring jobs and economic growth to the region through goods and services to support the Factory.
The SuperConnection should have no effect on fish stocks along any of the route. There will be a narrow corridor where the cable is buried through which bottom trawling will be prohibited in accordance with the international treaties, as with any electricity or telecommunication sub-sea cable.
ASC is planning to invest millions in R&D to optimise both the HVDC cable and laying efforts. This will influence both the SuperConnection and set us up for future projects around the world. ASC is already working with the University of Southampton and the intention is to bring in other universities and research centres to support this key R&D development.
Cable crossings are a routine part of laying cables of this type. Agreements will need to be entered into with all the cables we cross. However, there should be no impact on those cables.
Ideally little or no new plant will need to be built in Iceland. Iceland already has most of the power the SuperConnection will require.
Existing plant already have surplus capacity, and Iceland is currently wasting energy by spilling water over the dams. Further Iceland is planning on upgrading older plant to produce more electricity. ASC understand that Iceland can provide enough power for our needs by refurbishing and upgrading these existing power plants together with utilising the existing electricity more efficiently.
In relation to new plant it will be a decision for the Icelandic Government as to whether they think new plant is needed to support the SuperConnection.
No the SuperConnection does not need to affect the price for electricity in Iceland. In the same way that large energy users (e.g. aluminium smelters) are separated from the domestic market, the SuperConnection may be ring-fenced from the market, to ensure that domestic power prices are not affected.
The SuperConnection will not result any problems for the existing aluminium smelters in Iceland.
The SuperConnection will provide Iceland with an alternate source of income from its energy, diversifying its market. This could result in a significant increase to Iceland’s GDP.
The Icelandic grid requires significant upgrades regardless of whether the SuperConnection is built. However the SuperConnection will help provide the financial resources to the country to make this work viable through the hundred of millions of dollars that will flow to Iceland through the SuperConnection.
ASC expects to need to provide capital for improving the Icelandic Grid and connecting to the SuperConnection.
Iceland will be well remunerated for the electricity supplied, therefore there should be no reason for them not to provide the power. The increase to Icelandic revenue would result in a significant increae in Icelandic GDP.
The SuperConnection’s strike price would be lower than many other low carbon energy sources and therefore it would have a positive effect on the levy control framework.
By offering an alternative, lower cost, technology in large scale and deliverable in a short timescale, the SuperConnection will encourage competition amongst the other low carbon electricity developers which should result in them being more competitive too.
6. ENVIRONMENTAL IMPACT
The core is kept apart from seawater by layers of plastic and insulation.
The SuperConnection will largely be replacing coal generation (due to be closed by 2025 in line with the UK Government’s commitments), as such, this could lead to a reduction of up to 3 million tonnes of CO2 annually. How this will be allocated is yet to be determined.
The cable will have no discernable environmental impact. Even in the unlikely event of it breaking it will not impact the environment as it is made of copper and/or aluminium and solid plastic.
There is no oil in modern (XLPE) cables.
No, definitely not. Fracking is a completely different technology used by oil and gas industry.
The electricity will be produced by hydro and geothermal plant in Iceland – some of the lowest carbon generation in the world.
While it would be shorter to come into Scotland, there are limitations on the UK’s electricity grid to transmit the power south to where the majority of the power would be used. Therefore it better value for money for UK electricity consumers, more environmentally friendly and less of the power is lost in transmission in bringing the power further south into the North East of England.
The seabed conditions on the west coast are very difficult for laying cable. This makes the east coast route the easier and more economical option; thereby reducing the cost for UK electricity consumers.
Approximately 30 million tonnes of copper; or 22 million tonnes of aluminum will be required.
There are only 4 experienced manufacturers of the type of sub-sea cable we require for the SuperConnection. These companies are all based in Asia or Europe. However we will be helping to address this by building in the North East of England the Factory which will manufacture world leading sub-sea HVDC cabling.
A project of this scale is a long term endeavour. ASC has spent a lot of time and money ensuring the SuperConnection is technically, politically, environmentally and financially viable.
ASC has secured intiial bids from HVDC cable manufacturers and HVDC converter stations in relation to our Projects.
Edmund has over 30 years of financial services experience in private equity and debt markets, including leadership positions in banking, private equity, pensions, insurance and debt investment.
He trained at Bankers Trust Co in New York, following which he was appointed a Director of Hambros Bank in 1991; Chief Executive of Hambro European Ventures in 1994; led the 1998 buyout and formation of Duke Street Capital; and was responsible in 2000 for creating and building Duke Street Capital Debt Management.
Fiona is an international energy expert with over 20 years experience of the international energy markets, including development, structuring, EPCs, international legal and regulatory development and compliance, licensing and financing.
She is recognised as an expert in the development and financing of nuclear projects by the International Atomic Energy Agency (IAEA). She has also worked in the oil and gas industry and other forms of electricity generation, including hydro, solar and coal.
Matt is an expert in Oceanography and has been an advisor for Atlantic SuperConnection since 2013. He led our work on the hydrographic surveying and HVDC power cables.
Matt is currently working toward a PhD on Undersea Cable Route Optimisation. Previously Matt undertook a Masters in Oceanography at the University of Southampton before joining the Royal Navy.