Felicity Jones and Robert Rawlinson-Smith, GL Garrad Hassan
June 10, 2013 | 3 Comments
Bristol -- Throughout the 2000s, the emerging wave and tidal stream energy industries operated as a unit. Together they embarked on the journey across the "valley of death" towards commercial maturity, facing shared challenges - such as grid connection, permitting and securing R&D support.
Nowhere has this alliance been more apparent than in the UK, the leading marine energy market globally – and a market fortunate enough to possess significant wave and tidal resources. Working together, wave and tidal developers realised that collectively they could speak with a louder voice in support of their common interests.
Although Scotland has offered differentiated revenue support to wave and tidal in the past, at the UK level policymakers have largely treated them equally.
It is true that wave and tidal devices have a lot in common: both are pre-commercial power generation technologies operating in the marine environment. Their relationship has been so close that the general public and press often mistakenly treat "wave energy" and "tidal energy" as interchangeable terms.
Swimming Against the Tide
But more recently the wave and tidal relationship has been tested. In particular, differences in technology maturity have become apparent.
Although wave energy has made remarkable progress in recent years, tidal technology has benefited from both engineering crossover from its wind-based cousin and the earlier involvement of multinational system integrators. The combined value of these benefits is reflected in tidal's current levelised cost of energy (LCOE). Costs vary substantially from device to device – but the UK trade association, RenewableUK, believes that the current levelised cost of energy of leading tidal stream devices is around £300 (€356)/MWh, compared with roughly £400 (€474)/MWh for wave devices.
This has given tidal projects the edge in recent funding awards for UK-based demonstration projects. Tidal beat wave 4-0 in UK funding announcements under the EU's so-called New Entrants' Reserve NER300 scheme to fund low carbon technologies and Marine Energy Array Demonstrator (MEAD).
The tensions between wave and tidal are set to increase in July, when the UK government's initial view on future revenue support (the strike prices of Contracts for Difference, or CfDs) will be published.
The higher levelised cost of wave energy means that greater support will probably be necessary for wave projects than for tidal. But achieving CfD funding levels for wave which fairly reflect its cost will be politically challenging. Policymakers' instinct is to offer wave and tidal the same support levels, and government faces intense pressure for CfD strike prices to be as low as possible to minimise the impact on consumer energy bills.
Taken in combination, the recent MEAD and NER300 funding announcements, along with fierce CfD debates, mean that 2013 could be the year that the UK wave and tidal relationship reaches crunch point.
If wave technologies fall further behind, it will be increasingly hard for them to catch up and commercialise. Wave energy could be left swimming against the tide.
Still in the Race
Although tidal might have recently edged ahead of wave energy, it would surely be a mistake to leave wave to flounder. Whilst converting wave energy into electricity is undoubtedly a complex engineering challenge, this is nonetheless a technology of great promise.
The appeal of wave energy is clear: the untapped resource is huge. A recent study from E.ON, Quantifying the Potential Global Market for Wave Power, estimates the global resource to be in excess of 2000 GW – more than 40 GW of which is in the UK.
As wave energy is developed and deployed globally, costs can be expected to fall, due to "learning by doing" and the efficiencies of volume production. Add to this the fact that many wave sites can be of utility-scale, and that the resource is close to demand centres in many maritime countries, and wave energy looks like an attractive long-term proposition.
It is no surprise, then, that governments around the world – not least in the U.S. and Australia – are actively supporting the emerging wave sector. The close interest shown by utilities confirms that wave is seen as a strategic technology for investment.
A number of UK technology developers are well positioned to benefit from this global opportunity – but their success hinges on the continued policy attractiveness of their home market. The comparison of Denmark's wind turbine manufacturing industry with the UK's missed opportunity in the 1980s underscores the importance of strong policy support in the early years in order to reap later export benefits.
Dare to Differentiate
A change in UK policy approach is now needed to ensure that both wave and tidal technologies fulfil their potential. It is no longer appropriate for wave and tidal projects to vie for the same funding pots – as occurred with the MEAD. Instead, differentiated funding support is required.
For wave energy, further R&D funding is needed to improve the technology risk profile; following this, capital support schemes similar to MEAD should be available when the industry is ready. For tidal, new funding priorities may emerge; for instance, the provision of debt finance via the Green Investment Bank could be particularly beneficial in de-risking investment in the first tidal arrays.
Furthermore, it appears that the pioneering wave arrays will initially require greater financial support under the new CfD system than tidal projects. This should not be done apologetically; it should be done in recognition of the global export opportunity that wave power represents.
Of course, in other areas collaboration continues to make sense - not least permitting, grid and public engagement efforts. It may also be advisable in multi-national forums, such as in the EU, where wave and tidal energy need to buddy up to grab political attention. But at the level of UK funding support, a differentiated approach is needed.
The wave and tidal sectors are understandably nervous about bifurcation, with the fearful maxim "divide and conquer" ringing in their ears.
But industry must realise that the articulation of difference is not a sign of discord. To the contrary, the argument for differentiated support for pre-commercial technologies has already been won. Internationally, it is common practice to provide technology-specific feed-in tariffs (FiTs). Similarly in the UK, financial support is "banded" by technology to reflect differing levels of maturity – for instance, offshore wind currently receives significantly greater support than its onshore counterpart.
The political signs look promising: the UK's energy minister Greg Barker has stated that "If and when it is sensible to do so, we will, of course, treat the wave and tidal stream sectors separately".
Minister, the time is now.
Felicity Jones is policy analyst and Robert Rawlinson-Smith is head of wave and tidal energy business development at GL Garrad Hassan.
Lead image: Tidal turbines on Shutterstock
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