Executive Viewpoint
Bob Smith, CEO Pulse Tidal: Future funding not likely to come from UK
7 July 2010
Bob Smith, CEO of Sheffield-based shallow water tidal stream power developer, Pulse Tidal, talks to Tidal Today in a candid interview about future funding expectations under tough market conditions, (despite ticking all boxes on the VC wish list); the company's involvement on the Pentland Firth tidal project; his take on making ROCs work in the sector's best interests; and why private investment is the answer to tidal's future.
Tidal Today: What’s the latest news in regards to Pulse securing a location for its 1MW generator project?
Bob Smith: We have begun the EIA process at Kyle Rhea and have great cooperation from Marine Scotland and the Crown Estate.
This location has potential to grow to 10MW or more, and because of the shallow water, we can install our machines relatively easily.
This will allow the 10MW array to deliver a commercial return if the Scottish Government moves to harmonise wave and tidal ROCS at 5.
We have a couple of other options too, but we like Kyle Rhea because of the supportive environment in Scotland.
Tidal Today: Your web site is pretty slick in that it really has potential investors in mind, speaking of which... have you been gaining newfound attention from venture firms since receiving your €8m grant from the EU’s technology research and development fund (Framework Programme 7)? And what about interest from US investors?
Bob Smith: In common with many marine power firms, we have found the VC market very tough going.
We have a tremendous offer for potential investors - proven technology, great team, projects underway and nearly half the money we need already secured in the EU grant - and yet we have found only a few VCs willing to consider investment.
This is a structural issue in the VC market - the market conditions have distorted their portfolios making pre-revenue investment very difficult.
For Pulse, the answer has been to spread the net more widely - to look at corporate partnerships, overseas investors and more creative financing solutions.
It is amazing what comes along when you start opening up your thinking - not all of which is good, or legal!! - but careful filtering, and a lot of phone calls and meetings, has led us to some very interesting discussions, both in the US and elsewhere.
It remains a tough market, but there is enough happening to make me confident that we will get what we need.
It seems fairly clear, though, that the money is not going to come from the UK.
Tidal Today: I understand that Pulse has decided to not tender for the Pentland Firth tidal project, but rather hope to supply the lease holders. Now that the Crown Estate has recently re-invited 4 new bidders for the project, how receptive have the lease holders been to your tidal device proposal?
Bob Smith: As you know, some of the leases in Pentland Firth have alliances with technology providers and some don't.
For the one's that don't, it seems clear that the most commercially attractive technology solution will win - something which is supported by our customers.
I can't really comment on what is happening in the Inner Sound as the process is still underway.
Tidal Today: How do you believe ROCs (Renewable Obligation Certificates) should be put into best practice for the greater good of the tidal energy sector?
Bob Smith: The ROC is now a well established tool which has a track record of delivering increased renewable energy generation.
Stability in the fiscal environment is a key factor in determining where investors place their funds, and I think it would be unwise for the UK to change the ROC mechanism itself.
That is different from banding though.
The Scottish Government has led the way by increasing the ROC banding, allowing 5 for wave and 3 for tidal. In England and Wales, the banding remains the same as offshore wind, essentially providing no incentive to invest in tidal technologies, which have a higher risk than wind in the short-term.
Our own calculations suggest that 5 ROCs is the minimum required for tidal devices to deliver a competitive commercial return from the first few small arrays - and so I would like to see this level of support available as soon as possible.
This would be an excellent way to kick-start the industry, but we cannot expect an enhanced level of support over a long period.
As the scale of deployment increases, tidal power costs will fall, allowing the ROC multiplier to come down.
This is essential if we are to deliver an attractive renewable energy option for the UK grid.
Tidal Today: It’s a question I often ask, which is-- if there was one thing you could change to accelerate progress in tidal energy uptake, what would it be?
Bob Smith: We need to find a way to bring private investment into the tidal power sector. Grants and government support are fantastic, but we will only have a really successful sector if we have a free and competitive market making the funding choices.
As I mentioned,there is a structural issue preventing UK investment in marine power generation today - the Government must focus on levelling the playing field, so that we can compete on equal terms with the other investment opportunities available to VCs.
The Green Investment Bank might be the vehicle for that - and I am hopeful that it will be well executed.
Tidal Today: And finally, is there anything you´d like to get off your chest or perhaps a message that you think needs to get out there?
Bob Smith: The message is simple - the UK renewable power targets can be met at a lower cost by mixing predictable tidal power into the portfolio, with the added benefit of increased employment and exports since the leading companies are UK- based.
Photo: Bob Smith, Pulse Tidal
