Macquarie targets the North Sea as a green energy hub in Europe

(Bloomberg) – Macquarie Group Ltd. bets that the North Sea – the engine of Britain’s once-booming oil and gas industry – can be turned into Europe’s green energy hub.

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The Australian bank, a leading investor in energy infrastructure, has acquired offshore wind farms, pipelines and networks that will be in a prime position to produce, transport and store clean hydrogen that could replace gas heating in homes across Britain. It has poured more than £50bn into UK assets since 2005, many of which are in the North Sea.

The UK wants to be carbon neutral by 2050, and clean energy has taken on even greater momentum since Russia invaded Ukraine. While it’s impossible to extract much more natural gas from depleted deposits in the North Sea, its shallow waters and gusty winds are a boon for the renewable electricity needed to make green hydrogen.

“The UK has a great opportunity to be the energy hub of Europe,” Martin Bradley, head of infrastructure investments for Macquarie Asset Management in Europe, the Middle East and Africa, said in an interview. . “We believe in the North Sea for energy storage. I think hydrogen production in the UK needs to be offshore.

The UK and Europe are increasing investment in renewables, with the cost of generating electricity from solar and wind being lower than conventional sources such as coal, gas and nuclear. The climate crisis has already highlighted the need to switch to greener forms of energy, but Russia’s war in Ukraine is forcing countries to think about ways to ensure security of supply.

Decline in production

Britain’s stance on phasing out oil and gas has softened in recent months, but increasing production in the North Sea is not a long-term option. Production has declined over the past two decades, with aging fields producing only about a third of the gas they produced in 2000.

Yet the infrastructure built around the fossil fuel industry and the roughly 300,000 jobs created can be easily reallocated to renewables, according to the bank, which has interests in 10 offshore wind farms or projects in the North Sea.

“There’s a lot of investment needed, and if governments are worried about energy security, you need to look to renewables,” Bradley said. “That’s where there’s the most opportunity because you’re not creating a new dependency on someone else.”

With electricity demand set to double by 2035, the UK is targeting 50 gigawatts of offshore wind power by 2030, more than triple current capacity and enough to power at least 47 million homes.

Britain also wants to build 1 gigawatt of electrolysers by 2025 as part of a hydrogen strategy that is expected to unlock £9bn of investment.

“There is an opportunity here to combine one of the least expensive forms of established renewable energy in terms of offshore wind, and combine it with hydrogen, which is going to do the lion’s share of decarbonization,” said Ed Northam, director of Macquarie Asset. Management’s Green Investment Group in the UK and Europe.

Hydrogen production

The bank’s offshore wind projects will produce green hydrogen by 2030, he said. The fuel will be transported to customers through its investment in Cadent Gas Ltd., which operates half of the eight local gas distribution networks. Macquarie has also invested in Storegga Ltd., which is developing the Acorn blue hydrogen project.

Granted, Britain faces competition from the Netherlands, which is lining up industrial customers to use the fuel in manufacturing. And Macquarie also has to compete with some of Europe’s major oil companies, which are planning large-scale investments in green hydrogen.

The bank bought a majority stake in Britain’s gas network in a deal that valued the transmission system at around £10 billion. Some of this infrastructure could become stranded assets if not converted to transport hydrogen. It will also be expensive to replace the conventional gas boilers that heat 85% of UK homes.

“We’ve already invested in transmission and distribution infrastructure, not because we’re investing in the old economy, but because that will have a key role to play in any net zero scenario,” Bradley said.

Yet the UK is preparing to transport gas with 20% hydrogen mixed in, replacing old Victorian-era iron pipes with plastic ones. The network should be ready to carry the mix by 2023, and the devices can handle it.

This village in England is already using hydrogen to heat its homes

“The lead the UK has on this is huge,” Bradley said. “The pipes will be ready for hydrogen.”

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Mary I. Bruner