(The author is a Reuters market analyst. The views expressed are his own.)
By Gerard Wynn
LONDON Jan 15 A prospective shortage of capacity to manufacture high-voltage power cables threatens grand European projects to build offshore wind and other renewable power projects in remote areas and link isolated countries to the grid.
More government backing is needed to support technology development, new entrants and manufacturing capacity in transmission.
Europe has just three leading manufacturers of high-voltage direct current (HVDC) cables: Swiss engineering firm ABB , Italy's Prysmian and France's Nexans . Siemens also is a major supplier of converter station equipment.
ABB has reported it controls more than 50 percent of the global HVDC market.
A small number of suppliers is a concern for technology development and competition.
The growth of renewable energy increases demand for HVDC cables to balance the supply of intermittent power across longer distances and to connect increasingly distant offshore wind farms.
But European projects must compete with demand from emerging countries such as China and India, which are building out ambitious supergrid projects.
DC cables are favoured over alternating current (AC) for long-distance connections for a variety of reasons including lower transmission losses over long distances; their ability to link to different AC grids; and the fact that subsea AC cables are limited to less than 100 km in length.
In Europe, DC cables already link Nordic countries and Britain to the continent and Mediterranean islands to mainland Spain.
A British parliamentary panel this week reported concerns about the supply chain emerged from the House of Commons Committee of Public Accounts report.
"We only have a couple of suppliers of this kit," Alistair Buchanan, head of energy watchdog, Ofgem, was quoted saying.
"There is a degree of both bottleneck and control over cable, which is a real concern. The main players, Prysmian, Siemens and ABB, are very dominant in the sector."
The speed of development of German offshore wind farms has been slowed partly by bottlenecks in the supply of transmission equipment.
On technology, improvements are envisioned for the high-voltage cables that currently transport power from offshore wind platforms to shore.
Future plans call for multiple HVDC cables to link offshore in a cluster approach that would exploit economies of scale, but this would require a technology breakthrough in circuit-breakers.
A lack of competition may brake technology development, according to an Ofgem report published last March.
"The incentive for the supply chain to accelerate its development work in this area may be limited by orders placed for existing ratings being at or close to production capacity," suggested the report, "Offshore Transmission Coordination Project Conclusions Report".
"The supply chain for key components for offshore transmission (submarine cables, HVDC converters, HVDC circuit breakers, and protection and control systems for multi-ended and inter-system links) is currently highly concentrated," it said.
"Development, production and delivery lead times are between three and five years with the current level of offshore activity."
In a rather contradictory note, a separate Ofgem study found "good evidence that the parties to be involved ... would have the financial strength and delivery capability to deliver transmission assets to the required timelines, cost and quality".
Britain has the world's largest offshore wind capacity and has targeted output of up to 18 GW by 2020 (10 times present capacity) in its "Renewable Energy Roadmap", or nearly a fifth of current overall net electricity production.
Germany's Siemens has forecast the global HVDC market will grow by 250 percent to 350 GW capacity in 2020 from around 100 GW in 2010. (See Chart 1)
That growing market is split between DC interconnectors that join AC networks (both internally and across borders) and DC connections to offshore wind.
ABB in 2011 published an overview of some 18 HVDC projects (some including multiple cables) built or under construction from 1984 to the present. (See Chart 2)
Chart 1: goo.gl/BL4Iy
Chart 2: goo.gl/gRXv7
Of these, six linked hydropower dams to demand centres, 10 were interconnectors and two served offshore wind farms.
China is one of the leading HVDC markets as it develops long-distance, internal transmission. In 2010, for example, it commissioned a 2,000 km, 6,400 megawatt link from an inland hydropower project in Xiangjiaba to Shanghai, built by ABB.
A study by South Africa-based High Voltage Technology SA last year forecast the HVDC market in China alone would grow by 77 GW or 180 percent from 2011-2018, which would eclipse Europe's plans for offshore wind.
While China blasts ahead, Europe's failure to push for development of technology and promote competition in the manufacture of transmission cable will make offshore wind even less competitive and may hold back growth of interconnectors critical to other renewables and to link markets. ($1 = 0.6224 British pounds) (editing by Jane Baird)