Andritz Hydro Hammerfest’s 1 MW HS1000

Credit: Andritz Hydro Hammerfest

A number of high-profile setbacks may have dented investor confidence in the marine energy sector in the short term. But as the technology matures and clocks up substantial operating hours, the financial markets are again set to feel the irresistible pull of the tide, finds David Appleyard

There has never really been any question over the huge volumes of energy that are potentially available from the waves, tides and currents of the world’s oceans. Estimates put the commercially viable potential at some 120 GW for tidal energy and 2000 TWh per year for wave energy. Recognizing this potential, engineers and designers have a developed a bewilderingly diverse range of machines designed to extract usable energy from the waves and tides. The question, of course, is whether such machines can exploit this vast potential economically. Or, perhaps more precisely, whether enough of this resource can be exploited economically to have an impact that will register in the global energy portfolio. The alternative is to see this group of technologies effectively stranded as an intellectual curio.

Indeed, just as obvious as the energetic potential are the engineering (here read economic) challenges associated with the marine environment. Alongside the more conventional design considerations such as conversion efficiency and operational lifespan, marine-specific issues such as corrosion and fouling, power take-off, access for maintenance and hazards to navigation must all be addressed before widespread adoption can be considered.

And a swathe of negative announcements towards the end of last year heightened concerns that economic wave and tidal power was an elusive goal as a number of high-profile companies, chiefly wave-based, either went bust or scaled back development plans.

The economic challenges

Among the high-profile casualties of the final quarter of 2014, in the wave energy sector Pelamis went into liquidation while Aquamarine Power decided to significantly downsize its business. In tidal stream, Marine Current Turbines (MCT) announced that it had suspended development of a planned 10 MW tidal array at the Skerries off the coast of Anglesey in Wales. Consisting of five SeaGen 2 MW machines and originally due to begin commercial operations this year, if commissioned it would have been the country’s first commercial tidal energy farm.

The company, then owned by German engineering giant Siemens, declined to confirm the reasoning behind its decision. But in a development suggestive of the tenuous economics of marine energy, the move followed the failure to secure a £10 million ($16 million) government grant.

As with any emerging technology, commercial setbacks for the marine energy sector had been predictable, and to some extent predicted too. Last August Bloomberg New Energy Finance (BNEF) revised down its forecasts for global tidal stream and wave power deployment in 2020, by 11 per cent and 72 per cent respectively. According to their assessment, global installations of tidal stream and wave power are set to grow to 148 MW and 21 MW by the end of this decade, down from the figures of 167 MW for tidal stream and 74 MW for wave produced a year earlier. Between the two forecasts, wave energy firms Oceanlinx and Wavebob went out of business, Wavegen was folded back into parent company Voith, AWS Ocean Energy scaled back its activities and Ocean Power Technologies cancelled two projects. BNEF added that the emergence of marine renewable energy technologies is taking longer than hoped due to project setbacks, fatigue among venture capital investors and the sheer difficulty of deploying devices in the harsh marine environment.

Aquamarine Power’s Oyster 800

Credit: Aquamarine Power

As Angus McCrone, senior analyst at BNEF, observed, “Caution is necessary because taking devices from the small-scale demonstrator stage to the pre-commercial array stage is proving even more expensive and time-consuming than many companies – and their investors – expected.”

Michael Liebreich, chairman of the advisory board at BNEF, summarized: “It is possible to make equipment reliable, as the offshore oil and gas industry has shown, but it’s not cheap. And you have to put a huge amount of steel and concrete into the water, which is inherently expensive. It is still unclear whether this can be done at a cost competitive with offshore wind, let alone other clean energy-generating technologies.”

But Ocean Energy Europe Policy Director Jacopo Moccia counters: “I think some very visible projects going under at the end of last year have left a bit of uneasiness in the industry. It’s a question of what is actually structural to the industry and what was a bit of bad luck in one project.”

Making marine energy bankable

Despite the economic challenges becoming increasingly clear, it is also evident that there is still value in pursuing ocean energy. This is a point made by recent studies looking at the two nations widely acknowledged to be the current leaders in the marine energy field – the UK and Canada.

For instance, a new study commissioned by the Offshore Energy Research Association of Nova Scotia (OERA) shows the potential economic opportunity in building a tidal energy industry in Canada is substantial. Considering the period to 2040, the April 2015 study, Value Proposition for Tidal Energy Development in Nova Scotia, Atlantic Canada and Canada, concludes that building a tidal energy industry could potentially create thousands of new jobs, significantly impact GDP, and generate direct labour income, tax revenue growth and new export markets. This is of course in addition to reducing greenhouse gas emissions and improving national energy security.

Given the immense potential in the Bay of Fundy, which has some of the world’s best tidal resources, relatively low access costs to the grid and legislated emissions reductions targets already in place, Nova Scotia is considered among the main beneficiaries. According to the report, over the next 25 years the tidal energy industry could contribute up to C$1.7 billion ($1.4 billion) to the provincial GDP, create up to 22,000 full time positions and generate as much as C$815 million in labour income.

However, the study concludes with a clear message that for Canada to realize its potential there is a need for strategic policy-setting, ongoing incentive and credit programmes, and continued investments in research and development to bring costs down.

Recognizing the value of success in the marine energy sector is not limited to Canada, however. A February 2014 report, Maximizing the Value of Marine Energy to the United Kingdom from the Marine Energy Programme Board (MEPB), found that the UK could secure a marine energy industry worth up to £6.1 billion ($10 billion) per year, which would directly employ as many as 19,500 individuals and contribute Gross Value Added (GVA) to the UK economy in the region of £800 million per year by 2035. Further estimates indicate that if the UK competes successfully in global markets to achieve market share, the contribution of marine energy to the nation’s GDP could increase to £4 billion per year by 2050.

Similarly though, the report concludes: “As the wave and tidal industry is at the pre-commercial stage of development, adequate capital and revenue support are the necessary preconditions for future growth, as is long term project-volume visibility. Other critical issues are consenting, commercial financing and grid, which all require joined-up governmental thinking and wider stakeholder involvement.”

A much more recent analysis from the MEPB, Capitalising on Capability, echoes this message. The report says a co-ordinated finance package from public and private sources is required to fund such pilot projects. It points to a recent report by the UK’s Offshore Renewable Energy Catapult which identified around £300 million in support which is needed to take these sectors to the next level and to drive down overall costs in the long term.

But it also warns that government support has not yet created an attractive market for the private capital needed for smaller pilot projects to demonstrate performance, a vital step in ensuring that technology has an appropriate track record at demonstration scale before investors will back large-scale commercial projects that are ‘bankable’.

Commercial success stories

Along with the wave industry’s high-profile failures there are a number of tidal power success stories. These events suggest a market appetite for marine energy and a commercial light at the end of the technology development tunnel. For example, Siemens recently sold MCT to Atlantis Resources Ltd in a deal including extensive seabed rights, six existing development projects, staff and intellectual property.

The move consolidates two tidal technologies under a single brand and represents significant operational experience – MCT’s 1.2 MW SeaGen system has now been operating since 2008 in Strangford Lough off Northern Ireland, generating approximately 10 GWh – together with a major project development portfolio. An additional 200 MW of potential project development capacity joins an existing project pipeline of nearly 600 MW. And while, at face value, Siemens may appear to be exiting the marine energy sector, under the terms of the deal the company will receive almost 10 per cent of Atlantis’ issued share capital in return for MCT.

Countries challenging for the uk lead in marine energy

As already noted, Canada is ramping up its tidal stream activities and the Bay of Fundy has succeeded in attracting a swathe of engineering companies keen to test and commercially develop their devices. For example, Scottish company Nautricity is to partner Canada’s Fundy Tidal Inc to develop a 500 kW commercial tidal project due for installation this summer.

Nautricity, a spin-out from the University of Strathclyde, says it will install its Contra Rotating Marine Turbine (CoRMaT) device and HydroBuoy mooring system in Petit Passage, a tidal channel that flows between Long Island and Digby Neck in the Bay of Fundy.

Meanwhile, Black Rock Tidal Power Inc, a subsidiary of Canada’s Schottel, won a demonstration berth in the Bay to install its 70 kW tidal generators on a Triton platform. Set to be installed in spring 2016 with an initial run of 16 tidal machines and a combined capacity of 1.1 MW, the installation is anticipated to ramp up to 2.5 MW and 36 turbines by early 2017.

And DCNS subsidiary OpenHydro has just been awarded C$6.3 million by non-profit foundation Sustainable Development Technology Canada (SDTC) for its pilot tidal array project in the Bay. In March last year, OpenHydro announced that it had been selected by the Nova Scotia Department of Energy for a tidal energy demonstration project at the Fundy Ocean Research Centre for Energy (FORCE) test site.

France is another nation keen to develop a marine energy industry and DCNS and EDF Energies Nouvelles recently won a tender for the development of pilot tidal turbine arrays off the coast of Normandy by the French Environment and Energy Management Agency (ADEME). Once concluded, the Normandie Hydro project will see an array of seven 2 MW tidal turbines installed in the Raz Blanchard off the coast of Cherbourg and grid-connected in 2018.

This project is due to follow on from the pilot Paimpol-Bréhat tidal array in northern Brittany, comprising the installation of two turbines this year. These machines will then be adapted for series production, DCNS says. This pilot phase will pave the way for the deployment of pre-commercial farms and the development of a tidal energy industrial sector in France.

And last April OpenHydro and Alderney Renewable Energy (ARE) signed a joint venture deal to develop a 300 MW tidal array in Alderney waters. The joint venture, Race Tidal Ltd, will see an array expected to consist of 150 turbines rated at 2 MW each. FAB Link Limited, a joint venture between ARE and Transmission Investment LLP, is developing a power interconnector between France, Alderney and Britain in conjunction with French Grid operator RTé. Alderney is located in the Channel Islands between the UK and France.

Chile also offers significant marine energy resources and has hopes of establishing itself as a focus for ocean energy technology development.

Last year DCNS and Enel Green Power (EGP) were selected by the Chilean government’s economic development organization CORFO (Corporación de Fomento de la Producción) to set up a centre of Marine Energy R&D excellence – the Marine Energy Research and Innovation Centre (MERIC).

In an eight-year project, the Centre will be supported by a contribution of approximately $20 million in cash and in-kind funding, 65 per cent of which will come from CORFO. In addition, MERIC will be supported by the Chilean development organization Fundación Chile. From 2019 onwards, MERIC is expected to have a consolidated infrastructure and experience which would allow it to provide services to local and international companies who wish to test MRE technologies in the Chilean marine environment.

In mid-April Carnegie signed a deal with Fundación Chile to collaborate on identifying a development pathway for commercial wave energy projects in Chile. The areas defined for collaboration include the assessment of wave resources, the regulatory environment, site identification and project financing and construction.

According to some estimates, Chile has a marine energy potential of some 240 GW.


Tim Cornelius, CEO of Atlantis, explains the motivation behind the deal: “The value for us was three-fold. One: access to intellectual property and obviously the world’s most proven turbine system; two: we were able to pick up six projects and diversify not only our Scottish portfolio, but moving to Wales, Northern Ireland and England; and three: we were able to bring project funding from some of the existing MCT project portfolio and apply that to our portfolio.”

Cornelius also highlighted the growing track record of tidal stream technology from the likes of MCT, Andritz and Alstom.

This is a point echoed by RenewableUK’s Wave & Tidal Development Manager, Dee Nunn, who says: “A number of different devices have generated over 1 GWh at EMEC [the European Marine Energy Centre] over one-year test programmes. Alstom have gone over that threshold, Andritz, there’s real evidence that that those technologies are proven.”

Quite so. At the end of April, Andritz Hydro Hammerfest announced that it had recovered its 1 MW HS1000 nacelle from the EMEC Tidal Test site, the second retrieval since its original installation in December 2011. According to the company, over 1.2 GWh was generated over a six-month period during this deployment, bringing the total generated by the HS300 and HS1000 turbines to over 3 GWh.

Nunn also highlighted the experience gained in the offshore wind sector that is being leveraged in marine energy development. “They use a lot of similar components as wind turbines, I think that also adds to the components going into those systems being trusted, because they’ve got experience of being used in other ways. That also gives investors confidence.”

Translating that confidence into cash, Cornelius noted the buoyant share price in the wake of the Atlantis/Siemens deal: “This validates that there is much more support from a private sector investor perspective.”

September 2014 also saw Atlantis reach financial close on a £51 million funding deal for the first phase of the MeyGen project, including a total of £17.5 million in senior project finance funding. Phase 1A of the project will comprise the installation of four 1.5 MW turbines, three of which will come from Andritz Hydro Hammerfest and one Lockheed Martin-designed machine. In April, The Switch, a supplier of permanent magnet (PM) generators, received an order to deliver a medium-speed generator for use in Atlantis’ AR1500 turbine drive train. The turbine is scheduled for delivery to the MeyGen project in the first quarter of 2016.

Onshore construction began in January, with first power to the grid and revenues anticipated in the first half of 2016. Starting at 6 MW, the Meygen development in the Pentland Firth off Scotland is set to expand to 400 MW in total. MeyGen has also signed a 10-year power purchase agreement with Smartest Energy for the project.

Australian wave energy developer Carnegie Wave Energy Ltd is also enjoying some commercial success. In February its CETO 6 project off Garden Island in Western Australia reached financial close on a five-year, A$20 million ($15.9 million) loan facility from Clean Energy Finance Corporation (CEFC), which will part-fund the project. The CETO 6 project features three of the company’s new 1 MW generator units and is also supported by an A$11 million grant from the Australian Renewable Energy Agency (ARENA).

The development followed on from the commissioning of the CETO 5 (240 kW per unit) Perth Wave Energy Project, which is now exporting power into the grid at HMAS Stirling, and also on Garden Island. In an April 2015 update on the Perth project, Carnegie revealed a total cumulative operation period in excess of 7500 hours with the full array of three CETO 5 units operating for over 1000 hours.

Commenting on the finance, Carnegie’s Chief Financial Officer, Aidan Flynn, said: “Reaching financial close on the CEFC facility is a watershed moment for Carnegie as this is the first time ever that Carnegie has achieved a pure debt finance deal.” He added: “Not only does the financial close pave the way for this project to happen, it also importantly paves the way for project finance for subsequent CETO projects.”

Moccia also highlighted a growing diversity of investors: “Project developers are being able to start mixing private financing with people taking equity shares along with government grants, which is a good sign.”

For perspective, Carnegie’s CETO technology has been under development for approximately 10 years and has had some A$100 million invested in its commercialization over this period.

Building investor confidence

Looking forward, Cornelius is confident that market appetite will grow in concert with operational experience and as less successful designs are eliminated: “If you look at the evolution of any form of technology development, at an early stage it is conceptual, and obviously then you have more mature technologies which tend to prosper as the other ones fall away.” He added: “The prospect of bringing in more traditional forms of project finance is significantly enhanced because of this consolidation in the sector.”

Cornelius also picks up on the number of major engineering and manufacturing players that are investing in the marine energy sector: “We’re now seeing the right mix of OEMs supporting the industry, and we’ve got stable policy that allows us to develop the first large-scale modern tidal turbine. We feel that this is where the wind and solar industry was 15 years ago: we’ve seen the rapid reduction in levelized cost of energy in those sectors and that’s inextricably linked to economies of scale.

Marine Current Turbines’ 1.2 MW Seagen project

Credit: Siemens

“I think that we are right at the beginning of what will be, in a decade’s time, a relatively usual of form of predictable power generation. We are benefiting from the fact that these other industries have spent a colossal amount of money over the last 10 years and we get to leverage from that.”

Moccia also picks up on the growing raft of operational experience: “There are now some machines that have been in the water for a certain amount of time and are coming forward with real power curves, with the sort of thing that you can go to investors.”

He also notes that while in the wake of the high-profile setbacks developers are adopting a rather low-key approach, they are nonetheless making quiet progress: “There is still quite a lot of uncertainty in the business, but a lot of projects are actually moving forward and we are seeing quite a lot of things that are going into the water this year and next year.”

Considering short-term demonstration projects alone, Moccia suggests that, assuming the right public support, there could be more than 1 GW of marine energy devices in the water by the early 2020s.

Concluding, RenewableUK’s Nunn pointed to the long-term market for marine energy technology in the context of the policy push for low-carbon generation: “The problem in the short term is that most of the renewable energy in the UK will come from established technologies like wind and solar, but by the time those resources have been fully exploited we will need to have the next phase ready to come in. Unless we invest in developing those technologies now, they won’t be ready in time.”

David Appleyard is a freelance journalist