LONDON — The downfall of two leading marine- energy developers is damping hope that the emerging industry, which has already lost almost $1 billion, will ever get the technology to market.
Pelamis Wave Power Ltd., once a client of EON SE, Germany’s biggest utility, said last month it had run out of money. Days later Siemens AG announced it’s selling Marine Current Turbines Ltd. Their devices were considered the most advanced, with MCT’s operating at a small-scale plant since 2008.
Only a few companies remain with financial backing and promising projects, and more casualties are likely, said Angus McCrone, senior analyst at London-based researcher Bloomberg New Energy Finance. Already the top 20 wave and tidal-stream businesses have amassed losses of $903 million over their lifetimes, according to BNEF data.
“This is the capitalist survival-of-the-fittest process working as normal in any new market area,” McCrone said by e- mail. “It also reflects the fact that venture capital investors have become much more realistic about the difficulties involved in proving a new power technology in the harsh environment of the sea.”
As other renewables such as solar and wind have reduced cost to become commercially viable, waves and tides remain the most expensive sources of power, costing four times more than coal, BNEF estimates. The group revised down its 2020 capacity forecasts for wave power by 72 percent to just 21 megawatts in August. Tidal stream was bumped down 11 percent to 148 megawatts.
Installing and maintaining generators at sea is costly and difficult, with developers only able to operate during good weather and having to hire expensive vessels to get to their machines to maintain them. Moreover, the devices must withstand powerful waves and strong currents.
Oceanlinx Ltd. and Wavebob Ltd. both failed in the past 18 months, and Ocean Power Technologies Inc., one of the only listed marine energy businesses, canceled a project in Australia. Aquamarine Power Ltd., which is working with SSE Plc in the U.K., said this week it planned to cut jobs. Pelamis had been looking for a partner since 2011.
“The industry is looking at the wrong place for funding,” said Matthew Clayton, executive director of Triodos Renewables Plc, which sold a share in MCT in 2012 because it was too risky. “People are looking to the renewables sector for it, and it in many respects remains pure venture capital.”
Taxpayers Step Up
While financiers get cold feet, governments have stepped in to support the industry through grants, guaranteed power prices and research and testing facilities. They are excited by the potential scale of marine energy.
In the U.K., it’s estimated to be capable of delivering as much as one-fifth of current power needs, and the government has set a guaranteed price of 305 pounds ($478) a megawatt-hour, more than double that of offshore wind.
Ed Davey, the energy secretary, said at a conference on Nov. 26 that the government believes post-2020 marine energy will have a much bigger role to play in meeting low-carbon targets.
In Australia, marine energy could provide more than 35 percent of power, according to the Australian Clean Energy Council, a renewables industry group. The Australian Renewable Energy Agency has provided about A$43 million ($36 million) in grants since 2012.
In Canada the government has provided C$25 million ($22 million) toward a testing facility in the Bay of Fundy, home to the world’s largest tidal surge. Canada seeks to have 75 megawatts of marine energy by 2016 and 250 megawatts by 2020, according to Marine Renewables Canada, an industry group.
Some big names remain in the industry, with tidal technologies tending to be nearer to market than wave. DCNS SA, which owns most of OpenHydro Group Ltd., on Dec. 2 was chosen by the French government to test devices off the coast of Brittany with EDF Energies Nouvelles SA. Morgan Stanley backed-Atlantis Resources Ltd. raised 51 million pounds in September and Alstom SA continues to test its device after buying Rolls-Royce Holdings Plc’s tidal unit in 2012.
In wave power, Seabased AB plans to install a 10-megawatt facility with Finnish utility Fortum Oyj. Carnegie Wave Energy Ltd. raised A$9.4 million in April to test its device at sea and also won A$11 million from the Australian government.
The industry and especially wave power remains “some years” away from commercialization, and while governments are doing what they can, they can’t be expected to bear the whole cost of development, said McCrone. That means technologies are dependent on winning over venture capitalists and engineering companies that have grown “skeptical,” he said.
Copyright 2014 Bloomberg
Lead image: Stormy seas via Shutterstock