Executive Viewpoint
Racing tides: the value proposition of the tidal industry
25 January 2012
David Krohn, Wave and Tidal development manager at RenewableUK, writes about the current state of the investment landscape for tidal energy and how increased interest from multinationals is validating the tidal industry’s future.
By David Krohn
The investment landscape for tidal energy is currently developing at pace. The clear demonstration of support that the Government has shown through its proposed banding for Tidal Energy at 5 Renewables Obligation Certificates per megawatt hour, along with the upfront capital support we have seen through DECC’s Marine Energy Array Demonstrator fund and the Scottish Government’s Marine Energy Commercialisation Fund, has helped to catalyse a great deal of interest from industrial and commercial organisations.
Original Equipment Manufacturers such as Rolls Royce and Siemens have added an immense amount of credibility to the industry, bringing with them a wealth of technical experience and expertise. With their manufacturing capability, they squeeze cost out of the technologies and enable the rollout of arrays that can withstand the harsh marine conditions.
Multinational presence
The presence of multinational industrials across the leading turbine developers validates the commercial interest in the economic potential of tidal power and we are starting to see increased interest in project financing with the involvement of utility companies and equity providers.
Investments by high profile banks have indicated that the industry is moving closer to commercial viability and is no longer viewed as a risky investment.
The utilities, as the eventual customer for electricity generated from the energy of the ocean, have been integral to the development of the sector. They have provided the project management skills as well as the financing required to take concepts from the drawing board and into the water.
Industry first movers
While these indicators are a massively positive sign for the industry, it is the industry itself that has demonstrated its value proposition in no uncertain terms.
The range of full scale grid connected turbines that have been designed for, and rigorously tested in, open ocean environments represent the most likely short term candidates to make the next critical step to deployment in grid connected arrays and have proven that energy can be extracted from racing tides in an economical fashion.
These first movers are beating a path to market but the commercial viability of the industry is further strengthened by the next generation of device developers that are on the brink of installing their first full scale demonstrator devices.
The injection of innovation and competition that these companies provide helps to improve efficiency, productivity and reliability of devices and further demonstrates the value the industry has to offer.
Critical Period
The next 12 to 24 months is a critical period of time for the industry. Developers need to demonstrate months of contiguous operation in open ocean, grid connected locations in UK waters to attract investment into projects, build local supply chain momentum and drive cost benefits from economies of scale.
With all the pieces of the puzzle in place, it is up to the industry to deliver and I look forward to the coming years as Tidal Energy takes its rightful place at the coal face of the carbon reduction challenge and drives the UK back to economic prosperity as it catalyses the green industrial revolution.
David Krohn is the Wave and Tidal development manager at RenewableUK. His role comprises of analyzing and influencing policy to create the optimal conditions for marine energy installation.
The RenewableUK Wave and Tidal conference, which will be held on the 15th of March in Edinburgh, will be focussing on investment opportunities across the two marine energy sectors.
