Xlinks is not lacking ambition. Founded in 2019 by CEO Simon Moorish to connect ideal renewables sites to sources of high demand, the start-up’s first project involves generating 10.5 gigawatts (GW) of renewable power in Morocco exclusively for the UK market. The project aims to deliver 26 terawatt hours per year — enough for more than seven million homes — by 2030. 

The project has passed several development hurdles, utilises proven technology and is backed by UK supplier Octopus Energy. “It’s not reliant on a technical breakthrough on the horizon that may never come,” says Richard Hardy, project director at Xlinks.

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Morocco is an emerging renewables centre, and solar, wind and hydro produce 35% of the country’s energy mix, with targets to increase this to 50% by 2030 and 80% by 2050. Xlinks plans to deploy 3.5GW of onshore wind and 7GW of solar combined with 20 gigawatt hours of storage, utilising lithium-ion phosphate technology. It has already completed the  majority of the required studies for the 1500km squared site in Guelmim Oued Noun, on the central Moroccan coast.

Peter Osbaldstone, research director of European power and renewables at Wood Mackenzie, says: “It’s incredibly exciting — renewables production and storage in north Africa supporting the decarbonisation of European energy. It is a megaproject with an ideal location for wind and solar, and mature technologies mean it doesn’t carry a great deal of supply-side risk.”

The four high-voltage direct current (HVDC) cables stretching between Morocco and the UK that are part of Xlinks vision would be similar to those used in National Grid Ventures’s under-construction North Sea Viking Link and operate at unexceptional voltages. 

“The National Grid owns and operates five interconnectors that are live and one in construction, Viking Link, which we are building to Denmark and will be 740km long,” says Phil Sandy, head of new interconnectors, National Grid Ventures. “It is a phenomenal project, a 1.4GW interconnector that is looking to bring in clean energy to supply 1.4 million homes. It goes operational at the end of next year.” National Grid has owned and operated similar interconnectors for three decades.

The Xlinks 3800km shallow-water cables would suffer transmission losses of 15%, according to Mr Hardy. “Given how low-cost wind and solar are, it’s clear this is very acceptable.” 

However, while the development stage required £40m, construction capital expenditure of £18bn means success is not guaranteed.

Construction challenges

The Morocco project team has made progress, says Mr Hardy. “The geotechnical, topographical and archaeological surveys are complete, and we have concluded the majority of the generation site studies,” he says. 

Xlinks is gathering granular real-time wind turbine output data, from 15 wind masts and five meteorological stations. It is surveying seabed sediment stability, archaeological sites and trawler scarring to minimise impact. And it has developed a 15km route from the north Devon coast to connect with the National Grid, under the guidance of Natural England.

The cable’s length presents a supply chain challenge, so Xlinks set up the subsidiary XLCC to develop two facilities “that will be the most sophisticated subsea HVDC cable factories in the world … designed specifically for long-distance projects”. Planning permission has been granted and a consultation for a site in Hunterston, north Ayrshire, took place in May.

The contracts-for-difference price being discussed with the UK government is £48 per megawatt hour (MWh) in 2012 terms (quotes are in 2012 prices to preserve comparability over time). While nuclear power Hinkley Point C was awarded £89.50MWh (or £92.50MWh if construction of the Sizewell C plant does not go ahead), the most recent renewables round cleared around £40/MWh. “Various renewable technologies compete at that level so it's not a standout price — but these don’t offer such stable power,” says Mr Osbaldstone, noting that while nuclear power is similarly stable, the commodity cost is far higher.

Once balancing costs and other levies have been added, which are different for each technology, the picture changes, according to Mr Hardy. “What matters is how much consumers pay and typically the commodity cost makes up less than half.”

The UK renewables buildout has concentrated on domestic on- and offshore wind — so it would benefit from geographical diversification. “It’s largely down to how the solar and wind generation profiles interlink. The very large storage facility further stabilises the generation profile … Our average capacity factor will be 80–85%, which is incredibly reliable,” says Mr Hardy, referring to the whole project and noting the capacity factor for the wind alone would be around 54%.

The Moroccan market will likely not be able to match the UK offtake price of £48/MWh. However, Mr Osbaldstone notes there is “an awful lot of European demand sitting alongside the cable route” — Portugal, Spain and France — that could. However, while a shorter seabed connection would reduce costs, the diversification benefits available to only slightly less sun-rich Mediterranean markets would be smaller. 

“The generation site will only be connected to the UK. Whenever Xlinks is generating power, it’s only going to the UK as there is no alternative. That provides confidence in the security of supply.”

The £18bn question

The key challenge is financing construction. Only strategic large-scale investors could support £18bn capital expenditure and no deals have yet been concluded. Development institutions only support projects that aid local decarbonisation or economic development. “A big part of the question is whether they can secure the £18bn,” says Juan Monge, principal analyst of European solar at Wood Mackenzie.

The Xlinks investment team is engaged with a very broad range of organisations, according to Mr Hardy. “There are only certain investors that can come to the table … such as pension funds and sovereign wealth funds. We are also in discussions with companies that have been involved in very large energy infrastructure projects.”

Octopus Energy Group founder and CEO Greg Jackson personally invested in the project development stage and remains supportive. He praised the project for potentially cutting UK customers’ energy costs, reducing the impact of fossil fuel volatility, helping combat climate change and improving affordability and security.

Octopus is exploring potential offtaking rights with Xlinks.

“UK demand is an anchor of the project,” says Mr Monge. In a country such as Morocco, “having an offtake agreement or a big developer backing a project increases certainty and that is an important component”.

If it secures a sufficient quantity of power purchase agreements (PPAs) to cover a large portion of capacity, it will make the investment look a lot more attractive and low risk. “Going merchant [without PPAs] is risky, particularly as the UK is the only place it can land,” adds Mr Osbaldstone.

The flexible capacity market may deliver higher prices, but the 2030 completion date means it is too early to bid for a contract in the UK — bids for contracts in auctions are held four years ahead of the delivery date. 

Locking in secure and reasonably priced renewable baseload power could be a very smart move. “We might look back in 10 or 20 years and say these guys were visionaries that spotted the opportunity [that led to a] whole host of similar projects. Our experience has told us not to dismiss anything at this stage,” says Mr Osbaldstone.

“The policy background is as bullish as it's ever been so [innovative projects] are really going to happen. Projects we wouldn’t previously have expected to have had legs could well be delivered.”

This article first appeared in the August/September 2022 print edition of fDi Intelligence. View a digital edition of the magazine here.