Ten leading European companies gathered Monday to announce the launch of a new group aimed at persuading European lawmakers to set the framework for the construction of a European electricity super-grid in the North Sea.

The first phase of the super-grid would cost about EUR34 billion and would connect England, Scotland, Germany, the Netherlands and Norway through 5,000 kilometers of transmission cables, said Eddie O'Connor in an interview with Dow Jones Newswires. O'Connor was speaking on behalf of the new group, Friends of the Supergrid, which brings together industrial giants such as Siemens AG (SI) and Areva (CEI.FR), with smaller energy research companies and marine service operators. O'Connor is chief executive of Ireland's Mainstream Renewable Power Company, a member of the group.

He said construction could start as early as 2015 and would likely take two years to build.

The super-grid, which is still in a conceptual phase, has already gained backing from nine EU member states who believe it would not only boost renewable power generation capacity, but would also allay concerns that increased wind power generation could destabilize a power grid by making customers dependent on electricity from an intermittent source.

The U.K.'s Department of Energy and Climate Change said last December that a grid spanning European waters "should make supplies of electricity more secure for the participating countries by making it easier to optimize offshore wind electricity production," and would help the EU meet its target of having 20% of its power generated from renewable sources by 2020.

O'Connor said a super-grid would be geographically large enough to ensure that wind was always blowing on some part of the grid at any given time. Furthermore, the grid would draw electricity from a wide array of carbon-dioxide free energy sources such as solar, hydro, and nuclear power which could balance each other out.

Ultimately Norway, with its abundant hydro-electricity reserves, could become the swing electricity producer in Europe since hydro-power generation can be quickly switched on to cover a supply shortfall on a grid, O'Connor added.

O'Connor said Europe could source nearly 100% of its electricity from renewable energy sources by 2050 compared to about 10% to 12% currently.

"The UK government has recently shown its commitment to large-scale offshore wind by announcing the development of up to 50 gigawatts by 2020. We now need to integrate this huge resource into Europe to enable the open trade of electricity between member states," he said.

O'Connor said the super-grid would be commercially viable and could be entirely funded by the private sector, provided European member states put in place the right incentives to encourage investment. "Governments are always involved" in the energy market whether it's through taxation, subsides or regulation, he added.

He forecasts it would cost EUR35 a megawatt hour to source electricity from a super grid that could support 21 gigawatts of offshore wind power. The figure takes into account a grid utilization rate of 40% due to the intermittency of wind.

The cost could drop to EUR15/MWh if the grid utilization rate were boosted to 90% by sourcing electricity from different power sources and by allowing electricity to be traded between different countries, he added.

Friends of the Supergrid will be based in Brussels and membership will be limited to 20 companies, O'Connor said. The group currently includes among its members Siemens and Hochtief AG (HOT.XE) of Germany, France's Areva, and Prysmian SpA (PRY.MI)of Italy. The remaining members are Visser & Smit Marine Contracting, DEME Group, Belgium's transmission operator Elia System Operator SA (ELI.BT), Mainstream Renewable Power and renewable energy research firm 3E.

Company Web Site: http://www.friendsofthesupergrid.eu/

-By Alex MacDonald, Dow Jones Newswires; +44 (0)20 7842 9328; alex.macdonald@dowjones.com
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