Low Carbon Technology Commercialisation Review Wave

Low Carbon Technology Commercialisation Review

Wave Energy

Final report July 2008

Wave Technology Commercialisation Review

Document issue details:

Notice: This report was prepared by Black & Veatch Limited (BVL) solely for use by the Carbon Trust. This report is not addressed to and may not be relied upon by any person or entity other than the Carbon Trust for any purpose without the prior written permission of BVL. BVL, its directors, employees and affiliated companies accept no responsibility or liability for reliance upon or use of this report (whether or not permitted) other than by the Carbon Trust for the purposes for which it was originally commissioned and prepared. In producing this report, BVL has relied upon information provided by others. The completeness or accuracy of this information is not guaranteed by BVL.

Contract Name: Low carbon technology commercialisation review Project Number: 121295 Date Description Rev. Orig. Checked Approved 23/04/08 Phase 1 Rev0 SW RB/AB AB 23/05/2008 Phase 2 – milestone 1 DRAFT SW/RR RB/AB AB 6/06/2008 Phase 2 – milestone 2 DRAFT SW/RR AB AB 19/06/08 Final report DRAFT SW/RR RB/AB AB 02/06/08 Final report Rev0 SW/RR RB/AB AB

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CONTENTS

OVERVIEW OF KEY ISSUES 6

1 CONCISE TECHNOLOGY SUMMARY 11 1.1 Technology Overview...... 11 1.2 Importance to Carbon Reduction...... 23

2 THE INNOVATION AND COMMERCIALISATION CHALLENGE 34 2.1 Research & Development...... 34 2.2 Demonstration Stage...... 56 2.3 Deployment Stage...... 58

3 BARRIERS TO INNOVATION AND DEPLOYMENT 76 3.1 Assessment of Hypothesis of Major Deficiencies ...... 76 3.2 Regulation and Deployment Incentives ...... 82 3.3 Other Current / Short Term Barriers ...... 93 3.4 Other Future / Long Term Barriers ...... 100

4 IMPORTANCE OF THE UK TO TECHNOLOGY INNOVATION 102 4.1 UK Expertise...... 102 4.2 UK Investment & Other Evidence ...... 114

5 UK ECONOMIC POTENTIAL 122 5.1 Economic Benefits by Supply Chain Component & Type...... 122

APPENDIX GUIDE

Appendix A Component level innovation stage Appendix B Description of funding organisations Appendix C UKERC roadmap breakdown Appendix D Marine Roadmaps Appendix E Supply chain supporting information

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TABLE OF TABLES AND FIGURES

Table 1 LEK Stage 2 Developers and Devices ...... 20 Table 2 Range of estimates of carbon savings for 2020, 2030 and 2050 ...... 23 Table 3 Summary of technological areas and issues holding back wave energy technology...... 34 Table 4 Technology breakthroughs – timescales ...... 47 Table 5 Summary of estimated investment to achieve incremental breakthroughs...... 52 Table 6 Summary of estimated investment to achieve step change cost of energy breakthrough ...... 54 Table 7 Enabling technologies...... 54 Table 8 Cost of Electricity and Required subsidy's...... 57 Table 9 - Cost of Energy for a typical Wave farm with 15% learning ...... 61 Table 10 Supply chain components and major associated costs ...... 62 Table 11 Total cost of a wave project broken down into Supply chain components (%)65 Table 12 Most significant components for learning ...... 66 Table 13 Stylised learning stages...... 68 Table 14 Summary of learning stages applied to high cost components of technology and the supply chain ...... 68 Table 15 Learning rates achieved for economies of scale ...... 71 Table 16 Investment in supply chain, for development of Wave Energy Projects, at key dates ...... 74 Table 17 Summary of UK Support programmes for marine technology...... 92 Table 18 Summary of other short term barriers ...... 93 Table 19 Summary of other future long term barriers...... 100 Table 20 UK based Developers...... 109 Table 21 Overseas developers with UK links...... 110 Table 22 Success rate of device developers for progression to the next stage...... 123

Figure 1 Definition of marine energy technology ...... 11 Figure 2 Deployment locations for wave energy devices...... 12 Figure 3 SEADOGTM pump...... 14 Figure 4 Summary of potential bottlenecks in wind industry supply chain ...... 15 Figure 5 Summary of Wind Industry Vessels...... 17 Figure 6 Comparison of UK estimates to 2030 ...... 25 Figure 7 Comparison of Worldwide estimates to 2030 ...... 25 Figure 8 Unconstrained deployment and wind industry deployment until 2030...... 27 Figure 9 UK and Worldwide best case realistic deployment...... 27 Figure 10 UK and Worldwide realistic deployment to 2020...... 28 Figure 11 UK deployment worst case realistic...... 30 Figure 12 UK installed capacity up until 2050...... 31 Figure 13 Abatement cost estimates (high, central and low market technology prices – CCGT) ...... 33 Figure 14 Anaconda ...... 36 Figure 15 Time dependency between the Technical Strategy and Development strategy ...... 41 Figure 16 UK Energy Innovation Chain ...... 45 Figure 17 Global deployment of Wave Energy Devices against time, Cost of wave electricity without subsidy and with ROC subsidy against time, base case of electricity (central, high high) against time...... 58 Figure 18 - Learning in Renewable Energy Technology (IEA)...... 59 Figure 19 Effect of Step Change Technology on Cost of Electricity...... 61 Figure 20 Breakdown of capital costs of a wave farm...... 64

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Figure 21 Breakdown of O&M costs of a wave farm...... 65 Figure 22 Progress ratios from other industries...... 66 Figure 23 Cost reduction associated with supply chain, economies of scale and learning effects ...... 72 Figure 24 Investment (Capex + Opex) per year to meet probable deployment targets to 2020...... 73 Figure 25 Investment (Capex + Opex) per year to meet probable deployment targets to 2050...... 73 Figure 26 Breakdown of total investment for deployment into supply chain components (2020) ...... 74 Figure 27 Breakdown of total investment for deployment into supply chain components (2050) ...... 75 Figure 28 Proposed Banding as provided in Berr’s Reform of the Renewables Obligation ...... 83 Figure 29 Impact of varying levels of ROCs on cost of wave energy...... 83 Figure 30 Policies for Ocean Energy and Renewable Energy ...... 86 Figure 31 EU Countries Policy Instruments ...... 87 Figure 32 Classification of policy instruments...... 87 Figure 33 Research and innovation policies supporting ocean energy...... 91 Figure 34 Reported government ocean energy RD&D budgets in IEA member states 1974-2004...... 102 Figure 35 UK Capabilities Assessment...... 104 Figure 36 Global Distributions of Wave Projects – Project Type - March 2006...... 105 Figure 37 Global Distributions of Wave Projects – Development Phase - March 2006 105 Figure 38 The wave energy technologies in Dec 2007 ...... 106 Figure 39 Universities Involved In Marine Renewable Research ...... 107 Figure 40 UK Universities representing key areas of marine focus...... 108 Figure 41 Segmentation of the Marine Sector ...... 112 Figure 42 Funding Profile for an individual developer in the UK market...... 115 Figure 43 Funding Profile for the entire UK market ...... 116

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OVERVIEW OF KEY ISSUES

GRID

The impact of the grid capacity constraints in the UK indicate that this will be a considerable limiting factor on the industry after 2020, and this therefore has to be tackled soon (given the time required to create new grid capacity) in order for the wave energy industry to succeed in the UK. The technology developers who are considered the leaders in the field are already sourcing sites abroad, for example in Spain and Portugal, because these countries have large coastal communities and thus good grid access on the coast and a good support system in the form of feed-in tariffs. The expansion of the grid will take intervention by Government.

OVERALL DEVELOPMENT RATE

Overall, WEC development generally suffers from a number of problems which prevent the technology from becoming quickly cost competitive with other low carbon technologies:

• The funding streams are uncoordinated (i.e. public/private, and public funding characterised by a multitude of uncoordinated funding bodies), therefore R&D is disjointed, the evidence for this is provided in Section 4.2 which highlights all the public sector funding streams available to the wave energy industry. Each funding stream is managed separately and at this time there is not one body which coordinates all the funding to ensure that there is a smooth transition for devices which show potential, and conversely that no-one supports devices that have already been ‘proven’ to be not worthwhile funding. One example of a single body co-ordinating a funding support in the industry is the SuperGen marine programme which funds marine energy research in a number of universities across the UK, this is not exclusive however has shown the success of many research councils being coordinated. • Learning in the wave industry is initially slow because there is a lack of knowledge sharing (i.e. learning by interacting). In addition learning by doing is mostly associated with building and testing prototypes which for some other renewable technologies are small and relatively cheap (e.g. PV). Wave devices are however extremely large devices and are therefore costly, and time-consuming to build and deploy/test (for example it costs several £M per full scale prototype rather than several £k for a small PV prototype) – see the comment above and below about mid- scale testing. This report provides a comparison of the wave industry learning rate which we believe to be between 10-15% with the average wind industry learning rate which we believe it can not exceed due to the reasons provided here. • Scaling of devices is complex and testing cannot all be done at small scale because there is a limit to how small your device can be to still obtain scalable results. Therefore small scale testing helps save money at an early stage, however those devices which successfully test at mid scale will also require full scale testing. For example Ireland has a mid scale test facility at Galway bay however have committed to a full scale test centre on the west coast in addition. • Testing facilities are limited for intermediate scale testing, which nevertheless is still cheaper than full scale testing (at e.g. EMEC) – intervention by Government to strengthen the UK’s position in this aspect of testing is an area on which industry feedback should be sought.

A number of recommendations have been made throughout the report to provide potential solutions to these problems.

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REDUCING COST OF ENERGY BY INNOVATION

There are two main methods to reduce the cost of energy – major breakthroughs or incremental learning. The most important technological issue holding back finding a major breakthrough is actually finding new concepts which are completely new. The major technology breakthroughs in WECs will be the development of devices which are outside the design of current technologies, i.e. thinking outside the box, and this clearly needs to occur early in the development stages, i.e. at low TRL / LEK development stages.

The UK innovation chain (Figure 16) shows the ETI aims to support developers in TRL 3-6, therefore helping developers to the point at which they can benefit from the BERR Marine Renewables Deployment Fund (Section 3). In contrast the ETI’s Pilot programme in marine energy suggests in the information pack that the focus of investment is on the latter stages (i.e. TRL 5-6) of development. The document describes the main focus of ETI funding as the design, development, installation, and deployment of prototypes. The focus on prototype development, whilst clearly supporting the aim of getting technologies to the point where they can benefit from the MRDF, shows that the primary focus is on TRL 5-7 and this is not coherent with the information supplied in Figure 16. In addition, this approach, combined with the fact that TSB investment has been removed from marine energy due to the ETI’s funding, means that there is now very little funding for non-generic early stage R&D (TRL 2+ to 4), which is now wholly reliant on the Carbon Trust’s programmes. Although they are perhaps the best able to focus research in this area, especially on step-change technologies, their funding is extremely limited compared to what is required.

In terms of direct support to developers, the withdrawal of the TSB funding, and the focus of the ETI on later stages of development, results in the Carbon Trust’s Applied Research programme and the MEA being the only initiatives supporting the Stage 1 R&D (TRL 1-4). The latter initiative has both a time limit, and limited funding; when it is completed then the early development stages for the marine sector will lack any form of meaningful UK support (under known plans), particularly for TRL2-4, where there would appear to be a major funding gap likely to open up within the next 1-2 years. This would mean that most cost reductions would have to be incremental, based on existing technologies, and come from learning by doing, which is likely to be significantly more expensive overall.

It would seem that early stage, mostly generic, R&D is relatively well coordinated by the research councils. Early stage, device specific, R&D is currently almost the sole preserve of the Carbon Trust’s Applied Research programme. The ETI appears to be going to focus on developing/demonstrating prototypes, at TRL 5-7, in preparation for MRDF deployment. The Carbon Trust’s MEA currently supports a limited amount of work at TRL 1-4, but has limited budget and finite life. Therefore, as highlighted above, there is a significant gap opening up in funding for TRL2-4. It would seem that one solution, which would not require too much (often challenging) cross-organisation coordination, would be that the (possibly accidental) structure that appears to be emerging, is rapidly formalised. This would require an ongoing commitment by Carbon Trust (or other organisation?) to fund almost all device specific Stage 1 R&D, through an ongoing commitment to its Applied Research programme (which may exist), and more importantly through a very significantly increased and ongoing effort at TRL2-4. This would result in a much more coordinated early stage R&D programme than has existed in the past, which is more likely to be able to pass on successfully developed TRL4 technologies to other funding (such as ETI and then MRDF). It would also be more likely to find step-change technologies. Such an idea is not altogether new, as can be seen from a quote by B&V from the end of the MEC, although the idea that it is undertaken by Carbon Trust may well be new and require significant thought. It may be that ultimately the transfer

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of this responsibility to another organisation would be best. BERR has had this responsibility previously, but the ETI or even EMEC might consider taking on this role.

“B&V believes that the wave energy technologies that are ultimately successful will be created from fairly radical changes to, or combinations of, existing device concepts. Such inventions are much more likely if a coordinated marine energy programme (especially relating to wave energy) is in place, and systematic invention, and retention and sharing of insights, are encouraged rather than forgotten”.

It has been shown that the costs of a step-change programme are relatively low compared to the costs of the incremental change programme, which (along with its demonstrable need in order to achieve low cost marine energy) underlines its importance and the fact that it is un- funded.

Initially, there needs to be a focus of the funding in a less wasteful manner; for example, elimination of the funding support to the same types of devices over and over again when that type of device is known to be a poor performer. The Carbon Trust and other funding organisations have attempted to avoid this by asking the developer for information on previous funding grants. That previous organisation would be contacted for their opinion and results from the piece of work. This has not completely eradicated the problem as money is still being wasted on devices that have already been proved to be ineffective.

One solution that B&V, Entec, and the University of Edinburgh suggest is that every device that enters a public funding stream would have an initial device assessment (IDA) completed. This IDA would be accessible by all public funded organisations and therefore only one assessment is needed for each device to establish its viability. The average cost of an IDA is £25k per device. Therefore this would cost approximately £250k/year to fund, assuming ten devices per year, but it would save much more than this on wasted grant monies.

FUNDING GAPS

The figure below shows the best case scenario for an individual device developer, i.e. if a developer was able to obtain the maximum level of current funding available. The black areas are key because they indicate the levels of investment required by a developer, or the gaps in public funding. It clearly indicates that developers, even with maximum public sector funding support will have to raise 50% of the funding privately for each stage of development. This is reasonable until the developer reaches the MRDF - when they will have to raise ~£20m per project. Post MRDF there is a very large funding gap of approximately £80m per project. Note that there are two different scales on the y-axis.

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14 250 These stages w ill be governed by the ETI w hich is not yet fully operational. Previously Pos t-MRDF 200 12 they w ere covered by the BERR Technology funding gap Programme w hich has ended for marine. 150 Thus at the time of w riting the ETI has no firm 10 plans to provide this funding. The funding 100 show n here comprises from only the Carbon Trust and WATES. 50 8 0

Developer investment 4 Electricity sale Cumulative capital expenditure [£m] Cumulative capital expenditure [£m] ROC inc ome 2 Other revenue support Capital grant

0 Wave tank Stage 1 TRL4Stage Stage 2 TRL5Stage Scale real sea Stage 2 TRL6Stage Full-scale demo Stage 2 TRL7Stage Stage 4 Stage Stage 1 TRL1-3Stage Full-scale demo 3mth test Stage 3 TRL8-9Stage Labscale to generic research Supported Renewables Obligation Marine Renewables Deployment Fund

The figure below shows the total level of funding currently available to the whole industry, which has to be shared amongst all the device developers in the market and their individual investment requirements.

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2500 These stages w ill be governed by the ETI Pos t-MRDF 2250 200 w hich is not yet fully operational. Previously funding gap 2000 they w ere covered by the BERR Technology 1750 Programme w hich has ended for marine. 1500 Thus at the time of w riting the ETI has no firm 1250 plans to provide this funding. The funding 1000 150 show n here comprises from only the Carbon 750 Trust and WATES. 500 250 0 100

Developer investment Electricity sale

50 ROC inc ome Cumulative capital expenditure [£m] Cumulative capital expenditure [£m] Other revenue support Capital grant

0 Wave tank Stage 1 TRL4Stage Stage 2Stage TRL5 Scale realsea Stage 2 TRL6Stage Full-scale demo Stage 2Stage TRL7 Stage 4 Stage Stage 1 TRL1-3Stage Full-scale demo 3mth test Stage 3Stage TRL8-9 Labscale to generic research Supported Renewables Obligation

Marine Renewables Deployment Fund

It is clear that both on an individual, and consolidated, basis there are significant funding gaps that will occur at:

1. Early development stages (TRL2-4) due to the termination of the BERR Technology Programme and the focus from ETI on TRL5-7. This area is key to finding step change technology breakthroughs. 2. Demonstration stage (TRL5-7), due to lack of overall funding (and possibly lack of take-up due to IP concerns) for pre-MRDF stages, despite the funding from the ETI. 3. Early deployment stage (TRL8-9), particularly, but not only, after the MRDF, due to lack of overall support levels (assuming 2 ROCs post MRDF).

Overcoming these funding gaps will be key to any significant levels of deployment of wave energy in the UK, and the consequent carbon emissions reductions and industry generation.

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1 CONCISE TECHNOLOGY SUMMARY

1.1 Technology Overview

1.1.1 Definition of technology

1.1.1.1 Define the primary marine energy technologies, for example tidal stream and wave

Marine energy technologies include wave, tidal stream, tidal barrage, ocean thermal energy conversion, and salinity gradient. As agreed in the kick off meeting with the Carbon Trust and L.E.K Consulting, this assessment will only consider wave energy. Thus the definition provided here only includes this technology.

Wave energy converters Waves are caused by the winds blowing over the sea. The longer the water distance (fetch) over which the wind blows, the greater the transfer of energy and the larger the waves. Waves are contained in the water nearest the surface; when they approach shore some energy is lost as the waves meet with the seafloor. Wave energy generation is not easily predicted and statistical methods such as those used for wind energy are applicable, the potential resource however (which will be discussed in Phase 2) is considerably larger than that of tidal stream. Since the waves lag the wind it is thought that predicting wave energy output over short timescales will be easier than for wind energy.

1.1.2 Basic science and engineering principles

1.1.2.1 Describe the various marine power generation technologies and provide a high level description of the engineering involved in each The diagram in Figure 1 below provides a summary of marine technologies and shows how wave and tidal stream generation technologies can be defined to show a breakdown of the basic science and engineering principles.

Figure 1 Definition of marine energy technology

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Wave energy converters

The deployment location is the primary defining characteristic of wave devices, there is either onshore (shoreline), near-shore or offshore. This is a useful distinction because it requires little detailed understanding of the exact energy extraction method, but is very useful in defining siting policy, a consideration of many of the policy level stakeholders. The deployment location also gives us an indication of how much energy there will be available to the device as there is more energy available from wave energy in the offshore environment. The energy generating capacity of near-shore and offshore devices is a result of the energy available which is therefore site specific. In addition however, we know that the grid and O&M costs are considerably lower for onshore or near-shore devices.

Onshore devices These are built on the shoreline into existing cliffs (or coastlines). The energy at the shore is much lower than offshore. Much energy is lost through interactions with the seabed that occur in shallower water. The waves in shoreline locations can also be strongly non-linear and thus breaking waves and surf are often seen near the coast. The circular motion of the water in the waves found offshore is replaced by elliptical motions in shallow water. These motions have a lower heave motion and stronger surge motion. Shoreline designs must account for this. An increased number of breaking waves occur near the shoreline, this tends to lead to larger structures designed to withstand them. Thus much of the structure in a shoreline wave device will be required for its own protection rather than as an integral part of the energy extraction method. Most of the structure is required just to withstand storms. Shoreline devices are accessible from land and can be accessed in all but the worst storms (when waves may break over the entire structure for example). This means that their availability could be very high compared with offshore devices. The ease of servicing should lead to lower operation and maintenance costs. There are fewer sites suitable for shoreline wave than offshore wave and each has much less energy than found in deeper water.

Shoreline breakwater devices have many of the same attributes to shoreline devices. Their main difference is that they may be able to make use of a structure that is there for other purposes. Indeed such existing structures include breakwaters that are there to prevent wave energy from entering marinas and the like. Thus a device that dissipates wave energy by converting it to electricity works well with a breakwater. There are even fewer locations for such deployments than for shoreline devices since there are fewer breakwaters in high wave- intensity environments (ports are generally in more sheltered locations).

Figure 2 Deployment locations for wave energy devices

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Near-shore devices Shallow-water devices are often near the shore, but the distance to shore alone does not distinguish them. Shallow-water devices can make use of the seabed. This means that they can fix a rigid structure to the seabed against which the energy extracting part of the device can react. This means that the Earth can be used as a very large reaction mass and potentially higher efficiencies and simpler power takeoff. The shallower water also means more breaking waves and higher extreme wave loads. It also means less energy than offshore. Deep-water devices It is conceivable that deep-water devices are also rigidly fixed to the seabed. This is unlikely since the structural loads through the device are likely to be high and mostly attributed to holding the structure in place rather than usefully providing a reaction force for the energy extraction device. It is possible that reaction forces can be provided directly to the energy extraction device through a tension system such as that used in tension-leg platforms. In these the tension-leg reacts against the platform’s positive buoyancy. It is more likely that offshore wave devices will use moorings to hold the device on-station. These moorings will be in tension and thus require very little structure. Floating devices could be submerged or have surface-piercing elements.

Once the location has been identified the type of device, either resonant or non-resonant is defined. The energy extraction method is defined as shown in Figure 1.

1.1.3 Technology applications

1.1.3.1 Describe the key differences in applications for marine power generation technologies There are two methods of using wave and tidal renewable energy. They are direct generation of electricity (including electricity, desalination and hydrogen production), and mechanical power uses (mechanical pumps and direct desalination.

Direct electricity generation The direct generation of electricity from wave and tidal stream technology is currently the focus of the majority of developers. There is a high demand for energy, in particular renewable energy to meet International and National targets, along with a strong public interest and backing for this method of energy generation. The electricity can be sold directly into the grid and Renewable Energy Certificates can be generated for additional revenue. There are options nevertheless to use the electricity to power a system directly, for example desalination or hydrogen production.

Desalination is increasingly becoming a valuable source of drinking water in many parts of the world. Saline water is available from various sources. For coastal regions, seawater presents itself as an essentially unlimited source of water. In all parts of the world, reuse of wastewater, from both domestic and industrial users, provides a valuable new resource. However the use of desalination techniques requires a considerable amount of energy. Therefore the use of renewable energy as a source of that energy is an option. Some devices use direct mechanical energy for desalination and this is discussed below.

Finally, the production of hydrogen is an option for the use of renewable energy electricity. This is not conceived by B&V or Entec to be a commercially attractive option unless the wave and tidal energy was being generated in an extremely remote location and there was a market for the hydrogen fuel. There is considerable losses in the electrolysis process and further losses should that energy be converted back to electricity. There is a concept that pressurised hydrolysis (in very deep water) could reduce the losses involved in the

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conventional need to pressurise hydrogen produced by electrolysis – however, this is thought to be unproven.

Although hydrogen production has received more attention lately, it is not a new process and at present around the world there is an established market, which is likely to continue to increase with the development of hydrogen fuel cell applications. Hydrogen may be produced wither through electrolysis by using electricity, or through reforming of natural gas. Hydrogen has similar storage capabilities to natural gas; however, the efficiencies and practicalities vary. Hydrogen can be piped as a gas to its destination, it can be compressed as a gas and transported in pressurised containers, or it can be liquefied. More recent technologies for hydrogen storage include metal hydrides, glass micro-spheres and adsorbent surfaces. It is important to understand the advantages and disadvantages of each method of storage, including whether or not that method is most suitable for large-scale or small-scale storage, if this option were to be considered in more detail by any developer.

Mechanical power use The Seadog pump (Figure 3) is being developed by Independent Natural Resources Inc. It is a point absorber device which is intended to pump large volumes of sea water directly. One of the applications suggested by the company includes feeding desalination plants.

Figure 3 SEADOGTM pump Source http://www.inri.us

As mentioned previously desalination can also occur directly from the mechanical energy generated in a marine device and one developer already has as an option for the devices utilisation for direct desalination. Oceanlinx have developed a module which fits into the device which directly produces desalinated water through a reverse osmosis process. Their website states that their standard system can provide up to 3million litres per day but smaller systems are also available. A standard reverse osmosis plant uses approximately 3- 4.5kWh/m3 of water treated, of which 40-50% is recovered for seawater.

1.1.4 Infrastructure and operational support

1.1.4.1 Describe the required infrastructure which would be required to support the deployment of marine technologies at scale

Conclusion

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There is significant infrastructure required to support wave energy device deployment at scale. As well as likely supply chain bottlenecks (some due to overlap in components with offshore wind), there will need to be an expansion in manufacturing, dry dock facilities, construction/maintenance ports, and vessels. For all of these, there is a classic chicken/egg problem as the devices that will eventually be deployed at scale are not known and the requirements are, to a large extent, device specific. Finally, there is a short-term need for easier grid access, and a medium term need for more offshore/onshore grid capacity as detailed in Section 3.4.

Supply chain Many wave devices are manufactured from components that are considered off the shelf or are modified/new components provided by existing companies. The supply chain therefore may already be established at small scale for component supply. However, it would have to expand in order to successfully supply the components for scaled deployment of the technology. This would require additional labour and facilities in order to meet the demand that deployment at scale would create. The wind industry has completed a number of assessments on the potential bottlenecks that it will experience as it moves into the development of Round 2 wind farms. This development may be a problem for the wave industry because it may coincide with wind farm deployment. The main supply chain bottlenecks for the wind industry are summarised in Figure 4 below. Apart from the first two rows, the rest of the components and issues are similar.

Figure 4 Summary of potential bottlenecks in wind industry supply chain1

Manufacturing The large scale manufacture of many wave devices requires significant space. There are facilities which are suitable for the manufacture of wave devices in the UK. However, they are generally not in locations which are close to wave energy sites. In addition, depending on the average time to manufacture one device, there would probably not be enough of these facilities to supply the industry with the required number of devices without expansion. We

1 Garrad Hassan, Offshore Wind – Economies of Scale, Engineering Resource and Load Factors, on behalf of BERR and the Carbon Trust, 2003 Black & Veatch Ltd Wave Review Phase 2_Rev0 15

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believe that if the UK wants to establish an industry for the manufacture of wave energy devices, as well as the installation of them, there could be the requirement to build specialist facilities. If the UK had specialist facilities this might provide the opportunity for the UK to supply wave devices not only for the UK market but also for the international market. Economic transport distances may apply to some devices and also some major parts of some devices and therefore it may be cheaper to manufacture these in areas such as the Far East. However, one of the key issues for manufacturing facilities is knowing what and how many devices to design their facility for at this early stage, a classic chicken and egg start up issue.

Dry dock facilities The UK’s shipping industry has ensured that there are a considerable number of dry dock facilities across the UK, including 2 dry docks over 100m long in Scotland alone. These dry dock facilities are nevertheless, according to a sample of internet searches, generally very busy and wave energy developers would therefore be in competition with the shipping industry for their use. In addition, the array of wave devices in development would require a complete range of sizes of dry docks.

Port/harbour access and usage Some devices will be maintained on site and therefore port and harbour access would be limited to the high concentration of activity during farm construction, and then small vessel launching for access to the device. Some devices will be maintained off site and therefore access will be needed throughout the life of the farm, albeit at a lower level than during construction. Established commercial construction ports are currently in demand in particular locations (specifically Northwest England, Thames Estuary and the Wash area) due to Round 2 wind farm requirements, therefore any requirement in these areas would be conflicting with the wind farm industry as well as shipping industry. It is also worth noting that activities of both wind and wave farm construction will tend to be at the same time, i.e when weather conditions are more favourable.

Vessels for transportation to dock, and offshore The requirement for vessels could potentially be a bottleneck if existing offshore operators do not invest in growing their fleets, or if no new companies emerge. This has already been a significant problem for the offshore wind industry and vessel limitation may impact the wave energy industry. A summary of vessel options for the wind industry are shown in Figure 5, which describes how many of each type are available. The wave industry is unlikely to use jack-up barges during installation; however, crane barges and heavy lift barges may be required for some devices to be installed and these would not only be limited in number but would also be in high demand from not only the offshore wind industry but the oil and gas industry as well. Access to smaller tug and access vessels may not prove to be as limiting and these are likely to be used widely across the wave industry. A number of wave energy developers have suggested that they will build and/or own their own access vessels in order to avoid this problem.

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Figure 5 Summary of Wind Industry Vessels2

1.1.4.2 Identify any operational support process that would be required in the future that do not exist today (e.g., service support marine generating equipment)

The operational support service for the wave energy industry deployed at scale cannot be confirmed in detail at this point because it is highly dependent on which technologies are deployed at scale. This is because some devices are maintained on site and others are disconnected from their moorings and brought into harbours/docks for maintenance. These two methods would, respectively, require small access vessels to carry personnel to the device for maintenance, and larger tugs, or crane barges to lift devices out of the water, to bring them to shore.

Both of these technologies already exist. However, there are currently not enough of them to ensure that they do not limit the deployment of wave energy technology.

Currently, developers are carrying out all maintenance of devices themselves, whereas in the future there is the opportunity for external companies to take on the role of maintenance from the developers. Similarly, the demand for Remotely Operated Vehicles (ROVs) for inspection may rise too as deployment increases.

2 Garrad Hassan, Offshore Wind – Economies of Scale, Engineering Resource and Load Factors, on behalf of BERR and the Carbon Trust, 2003 Black & Veatch Ltd Wave Review Phase 2_Rev0 17

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1.1.5 Timeline of historical development

1974 - The Wave Energy Group was formed by David Jeffrey at the University of Edinburgh. - Professor Salter invented “Salters Duck” wave device. 1982 - Advised by Advisory Committee on Research and Development for Fuel and Power (ACCORD), scaled down the Wave Energy Programme. 1985 - TAPCHAN device in Norway – 500kW prototype commenced operation. It performed well for 3 years until destroyed in a storm. 1988 - Wave energy was classified as too expensive and categorised under “watching brief” by the Government. Funding went on hold. 1987 - After developing a number of wave devices from the 1940s JAMSTEC began to focus their work on the Mighty Whale. 1989 - 75kW OWC installed on Islay, Scotland by Queens University Belfast (decommissioned in 1999 and the experience was used to develop Wavegen). 1993 - World Energy Council estimated the wave resource as 2TW. 1994 - The International Energy Agency (IEA) indicated wave energy could contribute to 10% of world energy supply. 1994/95 - Applied Research and Technology (now Wavegen) showed a 60% reduction in OWC costs (Thorpe). 1995 - OSPREY – Full scale device was constructed but the device was towed to site without the ballast in place. The installation was delayed and a storm struck. As the device had no ballast and the device sank. - European Wave Energy Programme established which included the JOULE program and the European Wave Energy Atlas. - Two OWC pilot plants received funding under JOULE program. One shoreline device on Pico in the Azores, and the second was the Wavegen device on Islay. 1998 - Richard Yemm formed Ocean Power Delivery and the development of Pelamis began. 1998 - Mighty Whale prototype device was tested offshore (after which development stopped) 1999 - Scottish Renewables Order 3 included wave energy. - DTI restarted wave energy part of New and Renewable Energy Programme. - Energetech (Oceanlinx) – reached agreement for first commercial scheme on the East Coast of Australia which was deployed in 2004. 2000 - Wavegen’s Limpet was first commercial plant to be installed and generate to the grid (in collaboration with Queens University Belfast) however performance was poor at less than 20% of that expected. 2001 - House of Commons select committee report recommended that the UK Government commit a large portion of its £100m renewables budget to wave energy. In November 2001 the Cabinet Office Performance and Innovation Unit proposed an allocation of £5m to wave and tidal energy schemes. 2002 - New and Renewable Energy Centre (NaREC), Northumberland launched (wave device testing at approximately 1/10th scale). 2003 - The Carbon Trust: Commenced marine energy funding including: Applied Research programme £2.5m; 2003- ongoing The Marine Energy Challenge £3m; 2004 - 2006 The Marine Energy Accelerator £3.5m; 2007 - ongoing. - SuperGen consortium announced Phase 1 £2.6m; Phase 2 £5.5m;

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2004 - European Marine Energy Centre (EMEC), Stromness, Orkney, was established for the testing of wave energy devices. Pelamis was the first wave device to be installed during 2004 where it was grid connected and remained on site for 9 months. - In August 2004 the Secretary of State for Trade and Industry announced the setting up of the Marine Renewables Deployment Fund (MRDF) with a budget of £50M. This has not been used to date. 2006 - Scottish Wave and Tidal Energy Scheme (WATES) provided £13m for the support of wave and tidal stream development. 2008 - Energy Technologies Institute, promise to provide funding up to £1bn over 10 years (not all for wave energy - % unknown). 2004 – 10 - South West Regional Development Agency, (SWRDA) plan the installation of a 20MW wave farm at Wavehub*, an offshore grid connection point. The costs have escalated from initial estimates of £21.5m up to the most recent estimate of ~£40m. A further delay till 2010 means that the future of Wavehub is currently believed to be uncertain. * Wavehub has been delayed until 2010 due to the initial tender for design and construction of wave hub producing only 2 proposals. These proposals were not considered to provide value for money are the contract was therefore not awarded. The procurement process and the design in order to establish the most effective way of delivering the project (www.wavehub.co.uk).

1.1.6 Innovation stage

1.1.6.1 Determine the innovation stage for the marine technologies against a framework provided by L.E.K.

The innovation stages for the marine technologies have been determined against established technology readiness levels (TRLs) which are presented below in relation to the framework provided by L.E.K.

Stage 1 (R&D) fits within TRL 1-4, defined as:

TRL 1 – 4 Applied and strategic research 1. Basic principles observed and reported 2. Technology concept and/or application formulated 3. Analytical and experimental critical function and/or characteristic proof-of-concept 4. Component and/or partial system validation in a laboratory

Stage 2 (demo) covers both TRL 5-6 and TRL 7-9, defined as:

TRL 5-6 Technology validation 5. Component and/or partial system validation in a relevant environment 6. System/subsystem model validation in a relevant environment

TRL 7-9 System validation 7. System prototype demonstration 8. Actual system completed and service qualified through test and demonstration 9. Actual system proven through successful mission operation

Stage 2, defined by L.E.K as “demonstration projects”, would include devices that are testing components or scaled prototypes in the marine environment, through to full scaled system

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prototype testing, and finally to fully tested commercial devices operational in the marine environment.

36 wave devices are considered to be in “early R&D stage” as defined by L.E.K Stage 1. There are 13 devices which are considered to be in the “demonstration stage” as defined by L.E.K Stage 2 and these devices are listed in Table 1. The leading devices and their funding sources are described further in Section 4.2.

Table 1 LEK Stage 2 Developers and Devices

Developer Device TRL Fred Olsen Buldra 5 Oceanlinx Energetech 5 Hydam Technology Ltd McCabe Wavepump 5 Ocean Energy OE Buoy 5 SDE Energy SDE 5 Wavebob Wavebob 5 A W Energy WaveRoller 5 Finavera Aquabuoy 6 Archimedes AWS Ocean Energy Waveswing 6 Ocean Power Technologies Power Buoy 6 Wave Dragon Wave Dragon 6 Wavegen Limpet 7 Pelamis Wave Power Pelamis 7

1.1.6.2 Identify the major components in the marine power generating system and assess the maturity /innovation stage of the various components

We have assessed all the components associated with wave devices and the full table can be found in Appendix A. A system of assessing the innovation stage of the components was developed and is summarised below; Stage 1 requires no innovation, and Stage 4 requires complete innovation:

Wave developers tend to follow the rule that the first version of a new technology should not contain any entirely new component technology; therefore it is not surprising that we have not found any components that are stage 4. For all the (remaining) components, an average over all the technology developers has been taken for each component type.

We find that c. 75% of the components are Stage 1 and 2, which is what would be expected in the initial development of new technologies. The remaining 24% are stage 3, and therefore a considerable level of innovation is required for these components - which include:

- Device body; - Valves; Black & Veatch Ltd Wave Review Phase 2_Rev0 20

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- Sliding linear generator bearings; - Air turbines; - Linear electrical generator; - Control system programming (components are all off-the-shelf).

We expect that entirely new components will be created as the market matures, in order for the cost of the devices to be reduced (where possible) and most importantly to allow the performance of the devices to be improved.

1.1.7 Demonstration and deployment to date

1.1.7.1 Identify which marine technologies have achieved successful demonstration and highlight schemes that are closest to being launched in the market.

B&V and Entec would use the TRL method to identify the technologies closest to being launched. The demonstration that has been carried out in the wave and tidal stream industry to date only includes the testing of full or partial scale prototypes in the marine environment. We would consider that a successful demonstration project is one that has been completed successfully, monitored, and the results reported. Therefore there are currently no ‘successful demonstration projects’ by this definition. The developers which B&V and Entec would list as being those closest to being launched in the market are the wave devices that have, in B&V and Entec’s opinion, achieved a successful demonstration. They are Pelamis and Wavegen who both have full scale devices installed. B&V believe that the Carbon Trust have provided support to Pelamis and therefore would have access to all the information regarding their successes and issues during demonstration. Other publicly available information regarding issues experience during deployment includes: • Finavera AquaBuOY sank due to a bilge pump failure with the root cause being that the device appears not to have been designed to float despite a pump failure. http://finavera.com/en/wavetech/configuration • AWS experienced some significant (stability) issues trying to deploy their device. • OPT have deployed a number of devices; however, any issues have not been made publicly available.

This is not necessarily a robust method of assessing the market because there are numerous devices whose development has remained entirely secret from the industry and could potentially launch before the devices listed in the public domain. Similarly, Lunar Energy has a robust design, and good engineering and financial backing. Nevertheless they have not completed a successful demonstration under the TRL definitions. This means that although they do not make L.E.K’s stage two, there is still the potential that may be a close to launching their tidal stream device.

1.1.7.2 Determine the level and model of funding support for the early stage projects that have been undertaken

The funding that has been provided by the public and private sector to date in the wave energy industry has all been related to achieving demonstration (i.e. research and development) and deployment. Therefore this report has gathered information on the public funding provided and the private sector funding which has been received by the leading technology developers. This information is summarised in Section 4.2 which describes investment to date. Figure 42 provides a summary of the available investment from public

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sources at each TRL stage of development, and the required private sector funding in order for it to be successful. This therefore allows a clear picture of where there are funding gaps.

1.1.8 Current performance and efficiency parameters

Wave energy technology was described in detail in Section 1.1.1 and 1.1.2. The current stage of development was summarised in Section 1.1.6 showing that there are 15 wave energy devices which have reached the demonstration stage as defined by L.E.K Stage 2.

The current central estimate for cost of energy is 25p/kWh with a range from 22-25p/kWh3.

Entec and B&V believe that the relevant performance parameters relate to the cost of energy. The cost of energy is a better measure since the wave energy problem is to balance costs with performance rather than to maximise efficiency. The cost, size, overall generating efficiency and reliability are all parameters which individually do not represent a good comparison with other technologies. For example, two devices with good efficiencies could have very different capital costs and therefore the cost of energy would be very different. The overall economics may therefore only be viable for one of those devices.

B&V and Entec confirmed with Paul Arwas that this section would adequately be covered by describing the current cost of energy of wave energy technology. Carbon emissions and environmental impacts will nevertheless be described separately.

The future cost of energy is discussed in Section 2.3.1.3, from which the most accurate overall estimation of the current cost of energy was given as 25p/kWh for wave energy with the range between 22-25p/kWh. Many developers are aware that they need to reduce the cost of energy either by reducing capital cost, scaling up devices, or improving the efficiency. Many have realised that it will be very difficult to reduce the capital cost of their devices alone, and it is not possible to increase the size of many wave devices (a point absorber for example must be tuned to the sea and thus its size is dictated by the sea conditions. However Wavedragon is one device that can be made larger and produce proportionately more). Therefore, developers are working on a range of areas including capital cost, operations and maintenance, and device performance. The combinations of small improvements in each should more significantly reduce the cost overall.

The carbon emissions

The carbon emissions estimated for wave energy generation are established as 25 – 4 50gCO2/kWh . The carbon emissions payback has been estimated for wave devices to be 1-2 years. These figures are both highly variable for individual devices (particularly those that use large quantities of concrete). These figures represent an average of the better devices. There are no comparable numbers for different wave energy devices available at this time and the carbon emissions associated with individual technologies will vary considerably due to the size of the device, the manufacturing required, and the energy production of the device. However, in any case it is clear that most wave energy devices will be low carbon, and their emissions will be of the order of other renewables such as wind.

Environmental impacts

3 The Carbon Trust; Future Marine Energy, 2006 http://www.carbontrust.co.uk accessed 29 May 2008 4 Black & Veatch, Life energy and emissions of marine energy devices on behalf of the Carbon Trust http://www.carbontrust.co.uk/technology/technologyaccelerator/life-cycle_energy_and_emissions.htm access June 08 Black & Veatch Ltd Wave Review Phase 2_Rev0 22

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The environmental impacts of wave energy devices deployed at scale are currently still unknown and will not be known until there have been further Strategic Environmental Assessment related to wave energy, and until there is long-term experience of the devices deployed at scale.

Concerns are mainly focused around the impact of removing energy from the environment and the long term impact that larger farms would have on the local ecosystems. There are currently no major concerns regarding interaction with wildlife. Some wave devices break the surface of the water and therefore assessments regarding the individual devices’ visual impact may be of concern.

1.2 Importance to Carbon Reduction

1.2.1 Potential carbon reduction

1.2.1.1 Provide ranged estimates of the potential CO2 emissions reduction available through deployment of marine technologies, globally and in the UK, in 2020, 2030 and 2050.

The potential and expected carbon reduction (or saving) has been estimated based on the potential (unconstrained) and expected (probable) deployment scenarios. The savings are considerable, because as discussed in Section 1.1.8 the lifetime emissions from a wave energy device have been estimated to be 50gCO2/kWh whereas the supply of 1 kWh from the grid (based on the DEFRA conversion factor for long term marginal factor as requested by L.E.K) is 430gCO2/kWh.

The range therefore has been estimated between these two scenarios and the results are provided in Table 2 below.

Table 2 Range of estimates of carbon savings for 2020, 2030 and 2050

million tonnes CO2 2020 2030 2050 UK - unconstrained 1.6 8 73 UK - probable 0.2 2 32 Worldwide - unconstrained 0.9 29 690 Worldwide - probable 0.9 9 139

1.2.2 Expected carbon reduction

1.2.2.1 Describe how resource constraints will limit marine’s contribution to emissions reduction

B&V and Entec feel that they have considered the resource limitations in the deployment assumptions which are described in Section 1.2.3 below.

The resource constraints, particularly in the UK have been considered throughout the deployment estimations and the maximum 60,000MW of installed capacity has not been exceeded. There are a number of global resource estimates that range up to 2000TWh; because our unconstrained scenario does not exceed this we believe that the other limitations to deployment will have more of an impact on carbon emissions reduction than resource constraints themselves – at least to 2050.

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1.2.2.2 Identify other important input resource or physical capacity constraints

As mentioned in the previous Section, 1.2.2.1, the physical constraints that would impact the carbon emissions reduction are the same as those that would impact the deployment. Therefore they are described in 1.2.3 below.

1.2.3 Deployment assumptions

1.2.3.1 For each estimate, provide the underlying assumptions for penetration of different marine energy technologies and the basis for making these assumptions.

B&V and Entec have produced a number of scenarios for the deployment of wave energy in the UK and Worldwide to 2030 (deployment from 2030 to 2050 is also predicted and is described below). The scenarios considered are listed here and the results provided below: 1. Unconstrained deployment 2. Realistic – Best case – Constraints in the UK are minimal and grid connection is available to Max installation in UK - 35,000MW (by 2050) Max installation world wide - unconstrained 3. Realistic – Mid case, is the most likely scenario. There are some grid restraints - Max installation in UK - 26,000MW (by 2050) and some restrictions on projects due to permitting and funding issues. Max installation world wide - unconstrained 4. Realistic – Worst case – extensive grid limitation, permitting problems, large funding gaps Grid Limits in the UK up until: 2020 - 200MW 2030 – 500MW 2050 – Unconstrained The rest of the worlds growth is constrained by 50% which covers funding gaps, grid and planning issues worldwide.

A summary of the results are provided here:

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3,000 Best Case Realistic UK deployment Realistic UK deployment 2,500Worst Case Realistic UK deployment

2,000

1,500 MW

1,000

500

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Year2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Figure 6 Comparison of UK estimates to 2030

12,000 Best Case Realistic World deployment Realistic World deployment 10,000 Worst Case Realistic World deployment

8,000

6,000 MW

4,000

2,000

- 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 year

Figure 7 Comparison of Worldwide estimates to 2030

B&V and Entec are aware that not all the 13 technologies listed in Table 1 are likely to prove successful and have therefore weighted the installations in each scenario accordingly. The consideration of wild card devices (those found during searching exercises for step change technology) cannot be predicted. We do not believe however that this would change the rate at which wave energy was deployed overall in the short-medium term (to 2030), rather

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however it may knock out some of the trailing devices from the short-medium term market. Similarly, the devices we have used here may not necessarily succeed technically or commercially, but there are sufficient other understudy devices that might take over from them. It is also likely that some early success will attract attention and some first movers progress quickly as a result and make up for any failed devices. Unconstrained deployment Initially, the 13 technology developers identified as being at LEK Stage 2 were used to build up the deployment schedules. Therefore, based on the current status of their stated plans, we built up a deployment schedule of planned projects. To this we then added future farms based on the assumptions provided below. The only limitation to the unconstrained deployment is the available resource. Projects that the technology developers have already announced were used as the basis for when their first prototype and commercial projects would be installed. It was then estimated that from the first commercial installation the following would be required: o 1 year of operation for monitoring the performance and refining the design and operations because 1 year will be sufficient for investors to monitor the performance. o 1 year for the construction and installation of the first small scale (normally 5MW) commercial farm, assuming that consenting and licensing had been applied for in advance (e.g. at Wavehub). The development and installation of prototypes from Wavebob, Finavera, Ocean Energy, SDE Energy, and Hydam Technology Ltd. are not currently planned for the UK, therefore their deployment in the UK starts well after their initial farms worldwide are operational. Once all the current planned projects were mapped out on our deployment schedule we considered future farms. The same principle of a year to monitor and a year for construction and installation of the next farm (normally 30MW) after the first small scale farm was assumed as described above. This was also used for the next farm (50MW) as we consider that confidence in investors would still be reliant on the success of the first 30MW installation. After the first 50MW farm is installed it is assumed that deployment rolls out at the same rate every year (50MW per year). It is then assumed that the size of each annual deployment increases from 50MW, which is a reasonably sized initial wave farm installation, to 100MW, and then ultimately 400MW per year being installed per developer worldwide each year. This latter 400MW installation is considered to consist of at least 4 large projects being installed each year. This outcome would be similar to the round 1 and round 2 offshore wind deployments which have increased in size with confidence in the technology and the market, learning in the industry, and availability of funding. When we compared our unconstrained wave data (which was built up from individual technology developers) with that of the global wind industry (from 1980 until 20055), it shows a good correlation (Figure 8). We are therefore confident that our unconstrained total worldwide estimate for wave energy is highly unlikely to be exceeded by the wave industry as it progresses to 2030. This is because the wind industry settled on one design earlier, and it also had the advantage of perfecting the technology on land (which is easier) before moving offshore. The wave industry is also constrained by a number of other factors which are discussed under probable deployment. The UK offshore wind installations (from 20006) were then overlaid onto the unconstrained wave industry and this is represented by the red line in Figure 8 below. This actually correlates well with the early worldwide installations for wave energy, and is therefore higher

5 BTM Consult APS, International wind energy deployment, World Market Update 2006. 6 British Wind Energy Association, www.bwea.com Black & Veatch Ltd Wave Review Phase 2_Rev0 26

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than the early deployment in the UK; however, due to the above reasons we believe the outcome of this assessment with wind energy to be reasonable.

30000

25000

20000 UK Rest of w orld 15000 UK offshore wind 10000 Wind

5000 Installed Capacity (MW)

2 4 6 6 8 10 22 24 0 01 01 01 0 0 02 rrent 2 2 2 2 2018 2020 2 2 2 202 2030 cu

Figure 8 Unconstrained deployment and wind industry deployment until 2030

Best case and Realistic deployment Scenarios The limitations that have been used to determine the best case and realistic deployment scenarios are described below the results which are presented in Figure 9 and Figure 10. These can be compared in Figure 6 and Figure 7.

12,000 Best Case Realistic ROW Best Case Realistic UK 10,000

8,000

6,000 MW

4,000

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0 1 8 9 0 1 2 8 9 08 09 1 1 15 16 17 1 1 2 2 2 25 26 27 2 2 0 0 0 0 0 0 0 0 2 2 20 20 2012 2013 2014 2 2 2 20 20 20 20 20 2023 2024 2 2 2 20 20 2030 years Figure 9 UK and Worldwide best case realistic deployment

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8,000 Realistic Case ROW Realistic Case UK 7,000

6,000

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9 2 7 0 5 8 014 022 2008 200 2010 2011 201 2013 2 2015 2016 201 2018 2019 202 2021 2 2023 2024 202 2026 2027 202 2029 2030 ye ars Figure 10 UK and Worldwide realistic deployment to 2020

Initially, we defined the limitations that we would expect to have a potentially significant effect on wave energy deployment in the UK specifically (such as financial and grid limits). These limitations have also been applied to the “rest of world” deployment scenario because we expect that other countries will experience similar project limitations.

Overall the technology weightings have been applied as per those in the unconstrained deployment. A further 50% reduction in planned projects and future projects has then been applied. This is compiled of a 20% reduction of successful projects due to lack of suitable financial support as described below along with a combination of reduction of 30%, which we estimate from our experience in wave energy, from a combination of problems with site selection, supply chain problems planning/permitting.

Financial limitations The unconstrained deployment assumes that there are no limitations on deployment other than the available resource and the technology readiness of the technologies. Therefore it assumes that there is initially unlimited access to investment for early stage projects, and then unlimited access to debt finance for the larger projects. Realistically, at least 20% (included in 50% above) of the projects are likely to not receive financing (no matter what the level of support mechanisms in various countries) and therefore this is taken into account in the probable deployment schedule.

Site specific limitations There are a number of areas where device deployment may be limited at individual sites and although this is recognised here it is highly site specific and therefore can only be considered as a potential impact.

Supply chain and infrastructure The offshore (and onshore) wind industry has recently begun to experience severe supply chain and infrastructure delays. The supply chain for (onshore) wind, and for solar, were both generally able to cope with worldwide year on year growth of up to c.30%. When this was close to being exceeded, coupled with the move to larger offshore wind farms and some other technical issues, the offshore wind industry experienced limitations due to its supply chain and infrastructure requirements.

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The probable deployment scenario depicted above for the UK shows an average of 29%, but worldwide there is an average 33% growth up until 2030. This indicates that there could be delays and that the scenario is still probably on the optimistic side.

Planning delays Currently the offshore wind industry in the UK takes approximately 3 years to gain planning permission; therefore it is likely that the wave industry in the UK will experience this as well. After the first small scale installation has been monitored for 1 year it is assumed, in the probable deployment scenario for the UK, that 3 years are required for planning to be issued for the initial 30MW farms and a further year for construction. A similar timescale would be experienced when the technology developer moves from 30MW up to 50MW therefore this has also been included. Whilst project developers are constructing the same size farms it is assumed that they have pushed projects through the planning phase in time to meet the annual construction periods assumed in the unconstrained scenario. Whilst this may not always occur in practice, there will be other similar delays – such as extended planning times, longer periods required for monitoring before finances can be obtained, and longer construction times. In total, we expect the above to be approximately what is likely to occur in practice.

Grid infrastructure It is assumed for the best case realistic deployment scenario that in the UK 35,000MW of installed capacity could be connected to the grid by 2050 before its maximum capacity is reached. The realistic deployment scenario is that 26,000MW of installed capacity will be achieved by 2050. The worldwide deployment in both these scenarios is not constrained by grid issues.

Project developers perspective The previous scenarios were based on the readiness of the technology rather than the readiness of project developers to invest. Therefore this final scenario looks at project developers in the UK and the likely timescale of deployment that they may achieve given the constraints applied above. This therefore allows a third view in addition to the unconstrained and the probable deployment scenarios. 6 UK developers who have already shown an interest in marine renewable energy have been selected along with one wildcard Norwegian developer and an additional “other” who would be likely to develop in the UK. We have built up a scenario of development using timescales and farm sizes applicable to them, but have included the technology weightings and combined the limitations from the probable scenario.

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9 3 5 1 3 7 9 1 1 2 2 00 017 02 02 2 2011 20 20 2 2019 20 2 2025 20 2

UK installed capacity from developers perspective

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The results which are presented in the summary graph above indicate that, from the project developers perspective, lower deployment in the UK more in line with the probable deployment scenario may be expected.

Worst case realistic - Grid restrictions for deployment As has been pointed out in Section 3.4, there is likely to be a grid capacity limit for wave technology of between 200-500MW under current grid capacity conditions and plans. It is noted that there is little information to back up this figure, and given the timescales involved in commissioning new grid capacity it would seem paramount that the available grid capacity is identified very rapidly to allow further plans to be made as appropriate.

This capacity is highly dependent on how quickly the offshore wind industry develops because it could use the vast majority of the currently available grid / transmission capacity, therefore reducing that available to the wave industry. PB Power estimated that around 4GW of offshore wind could be accommodated by the UK grid providing the sites were geographically dispersed7. However, if all the Round 1 offshore wind farms were built then around 1GW would be taken up and if Round 2 were built a further 7GW would be built. Thus there is likely to be little left for marine energy. However, since marine energy devices may well be sited in different places to offshore wind then they may bring some diversity, and indeed it may be some of geographically concentrated the offshore wind schemes that are constrained first. The limitations have therefore been included for the UK as 200MW by 2020, 500MW by 2030 and then it is assumed that the grid is strengthened and by 2050 unlimited.

This issue is likely to affect other countries, but to an unknown extent (e.g. on the west coast of the USA the grid is generally much closer to the ocean and therefore may be less constrained or be faster to be upgraded) and therefore we have applied a 50% grid capacity factor to the rest of the world. The impact on the UK versus the worldwide capacity can be seen in Figure 11 and the impact is clearly very considerable if this issue is not resolved.

3,500 Worst Case Realistic ROW Worst Case Realistic UK 3,000

2,500

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9 0 8 9 0 4 5 9 11 15 26 30 00 01 0 013 014 0 01 01 02 02 02 0 027 028 02 0 2008 2 2 2 2012 2 2 2 2016 2017 2 2 2 2021 2022 2023 2 2 2 2 2 2 2 years Figure 11 UK deployment worst case realistic

7 Electrical network limitations on large-scale deployment of offshore wind energy, PB Power, ETSU W/33/00529/REP/1, DTI/Pub URN 01/773, 2001 Black & Veatch Ltd Wave Review Phase 2_Rev0 30

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Deployment from 2030 up until 2050

B&V and Entec have made an estimation for the deployment up until 2050. However, this is based on continuing trends and could vary considerably from the estimates provided. To determine the spread of probable deployment from 2030 up until 2050 we have used the trend lines from each of the deployment scenarios (UK and Rest of the world) in order to extend the predictions. This has been crossed checked using the average growth in the industry from 2020 up until 2030. The variations can be seen for the UK in Figure 12 below. The key assumptions are:

• The growth rate was determined from the average growth rate across the previous 10 years for each scenario. A decrease in growth rate by 1% was applied at 2030 and each subsequent year in order to represent the natural slow down in growth rate. 2030 has been chosen as the start date for the slowdown in the growth rates as this would represent about 20 years of high growth rates, which is reasonable based on other slowdowns experienced in other industries caused by resource and supply chain constraints (e.g. wind). The results for the UK predicted growth to 2050 is presented below for the realistic scenarios (best, central and worst cases). The worst case being that which, we believe, is the minimum growth if the industry challenges (for example the grid) are overcome. B&V and Entec believe that the best case estimate is likely to represent the upper limit for the UK installed capacity, noting that the estimated UK resource is 58.5 GW8 and that the previously discussed unconstrained scenario is not realistic. This assessment indicates the variation and uncertainty that there are in any results that predict this far into the future for an industry which has very limited current installations or history to predict from.

40,000

35,000

30,000 Best Case Realistic UK 25,000 MW Realistic Case UK MW 20,000 MW

15,000 Worst Case Realistic UK MW 10,000

5,000

- 2000 2010 2020 2030 2040 2050 2060

Figure 12 UK installed capacity up until 2050

8 The Carbon Trust, MEC Experts Group Response – Wave resource. Black & Veatch Ltd Wave Review Phase 2_Rev0 31

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Summary of results

The tables below present the numbers for installed capacity at key years.

B&V and Entec have presented the unconstrained and probable deployment, and are reasonably confident that the probable assessment up until 2030 is representative of what is likely to happen in the wave industry given the limitations that will impact upon the deployment.

UK installation - MW 2020 2030 2050 Best Case Realistic 272 2,711 35,000 Realistic 181 1,807 26,000 Worst case Realistic 181 500 3,652 Unconstrained 1,317 6,202 60,000

WW installation - MW 2020 2030 2050 Best Case Realistic 1,116 10,873 166,850 Realistic 744 7,249 113,900 Worst case Realistic 477 5,235 23,630 Unconstrained 2,933 23,872 486,401

1.2.3.2 Highlight any important assumptions regarding legislation that supports the deployment of marine energy technologies in any of the estimates

In order to look at the deployment from present day up to 2030 a number of assumptions were made regarding the constraints that the industry would face (discussed in Section 1.2.3.1).

In order to attempt to provide the most realistic scenario in terms of the probable development, B&V and Entec assumed that there would be a number of changes to legislation/policy in order for this probable scenario to occur.

There is a general assumption that there would be an increase in the support for development and demonstration in order to fill the gaps highlighted throughout this report and summarised in the hypotheses section. In particular, it is assumed that there is an amendment to the RO banding which increases the initial support to an estimated 5 ROCs (or equivalent) for wave energy, and that the support matches the need (perhaps by reducing over time) as the technology progresses down the learning curve – i.e. that projects at the prices predicted will be economic to investors. There is also an assumption that there would be an extension of the Renewables Obligation or a replacement mechanism beyond 2027 (which is where the current commitment ends).

Grid connection, in order to ensure that wave farms will be able to connect to the grid in the long term, is a vital area as highlighted in the assumptions. The UK grid constrained capacity is significantly impacted by this as can be seen in Figure 11. This means that Government would need to make a policy decision early in order for the grid to be ready for large-scale deployment and to achieve our probable deployment estimation.

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1.2.4 Abatement cost

The abatement costs have been calculated for the high, central, and low estimates of the market technology which L.E.K has confirmed is to be taken as CCGT electricity supply. The CCGT energy prices were taken from the common assumptions spreadsheet and a linear relationship assumed in order to obtain the cost at each year up until 2050. The results are presented in Figure 13 below which show the resulting abatement costs over time with high, central and low costs of CCGT as the market technology. This estimate is based on the yearly savings as the technology progresses rather than the lifetime average.

Abatement cost

600

500 low case 400 2 central 300 case

£/kgCO high 200 case 100

2010 2013 2016 2019 2022 2025 2028 2031 2034 2037 2040 2043 2046 2049

Figure 13 Abatement cost estimates (high, central and low market technology prices – CCGT)

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2 THE INNOVATION AND COMMERCIALISATION CHALLENGE

2.1 Research & Development

2.1.1 R&D technology breakthroughs

A summary of the results is provided here for this section on R&D technology breakthroughs. The backup information can be found in the following subsections 2.1.1.1 – 2.1.1.3.

Table 3 Summary of technological areas and issues holding back wave energy technology Issues Solutions Timescales Finding a new technology Identify a technology which offers a step change in cost Ongoing of energy Resource 2015 Device modelling 2012 Experimental testing 2012 Moorings 2015 Electrical – grid Beyond 2020 Development of existing PTO & control 2015 technology and research in Engineering design 2012 order to make incremental Techniques – 2015 Manufacturing reductions to the cost of energy Implemented beyond 2020 Installation & O&M 2015 Environmental 2015 understanding Standards 2010 System simulation Beyond 2020

Availability of private sector finance

The early development of the WEC market was funded mainly by developers’ own equity, with limited venture capital financing, although in the last five years the industry has been boosted by the involvement of major utilities in both technology provision and project development.

2.1.1.1 Describe the key technological issues that are holding back the development of the technology or preventing the technology from achieving a competitive cost position compared to competition.

Introduction

In order to answer this question we must first recognise that Wave Energy Converters (WECs) are in the early stages of development and that current technology is leading to high cost of energy. The over-riding issue holding back the development of WECs is the fact that the cost of energy (CoE) is not competitive with other forms of renewable or conventional generation. This is a combined problem of high capital cost, inherently high operational cost

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(which are due to access of devices, requirement of ROV’s and vessels, and weather delays) and uncertain levels of performance. The CoE is therefore driven by technological issues.

There are two main ways in which the present technological issues, which are holding back the development of WECs, could be solved; - A major breakthrough which would provide a step change in CoE - Development of existing technologies which would provide incremental reductions in CoE

The underlying detailed technological issues were compiled in a workshop which included B&V, Entec, and the University of Edinburgh, and are described below. The technological issues provided here are therefore believed to be the most accurate list available in the industry.

The solutions for the technological issues are discussed in Section 2.1.2.1 below.

Technological issues holding back major breakthroughs

This quote has been taken from previous works by B&V because of it’s relevance and therefore reinforcement of the requirement to find a technology which offers a step change in CoE.

“B&V believes that the wave energy technologies that are ultimately successful will be created from fairly radical changes to, or combinations of, existing device concepts.”9

The most important technological issue holding back finding a major breakthrough is actually finding new concepts which are completely new. The major technology breakthroughs in WECs will be the development of devices which are outside the design of current technologies, i.e. thinking outside the box.

This could be, for example, a new way of extracting energy, or the use of a new material that will remove the majority of structural costs which make up the largest percentage of capital costs for many WECs. Such ideas and concepts may come from enthusiasts or entrepreneurs, some of whom as yet have no connection with wave energy, both of whom may not know you are looking for them, or that there is any urgency in the development, or that they hold a key to the success of the wave energy industry. That said, we are now seeing some movements of staff and skills in the nascent industry and so new ideas from new collaborations may also emerge (e.g. Anaconda came from Atkins / Farley who have worked on many different wave energy device concepts).

The only way therefore that the industry will find these potential major breakthroughs is by a process of learning by searching - a definition of which is provided here;

• Learning by searching – improvements due to research, development and demonstration (RD&D), new inventions, and comparing technologies. It requires clarity of goal10

The Marine Energy Accelerator, which is described in detail in Section 2.1.2, provides a programme to facilitate learning - by searching specifically for major breakthrough new

9 Black & Veatch, for The Carbon Trust – Marine Energy Challenge - Areas for Further Research in Wave and Tidal Stream Energy 10 Hans Martin Junginger, Learning in renewable energy technology development, University of Utrecht, 2005, ISBN 90-393-0486-6 Black & Veatch Ltd Wave Review Phase 2_Rev0 35

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concepts. This is entitled Strand A. There are a number of challenges with this programme; the most important being lack of ability to attract new concepts. One success from this programme would be Checkmate Seaenergy Ltd’s development of Anaconda. Anaconda operates on the principle of passing waves exciting bulge waves within a distensible rubber tube. The bulge wave creates high pressure water which is used to power a generator11. This technology removes a lot of the structural costs associated with WECs and presents a unique method of extracting energy from waves that has the potential to reduce the cost of wave energy. The technology remains unproven; however, it is likely that breakthroughs like this could provide the basis for significant reductions in p/kWh.

We do not know whether Anaconda would actually be a step-change device. However, we would expect a step-change device to be significantly different from the others already out there. Anaconda is significantly different because it couples with the waves in a completely new way and it is made of rubber thus having a completely different structural cost make-up.

Figure 14 Anaconda12

Technology issues holding back developing existing technologies

Wave energy converters present a challenging engineering project, and as discussed the rewards can be substantial; however, there are complex engineering challenges to overcome and efficiencies require improvement. This section aims to evaluate the technological issues that are holding back existing WEC’s from commercialisation.

The technological challenges faced are described in the UK Energy Research Centre (UKERC) Marine Renewable Energy Technology Roadmap. The roadmap included input from 4 community workshops held between April 2005 and February 2007 and over 40 one- to-one stakeholder interviews. Finally it was peer-reviewed by the industry. It is for this reason that B&V and Entec believe that this is the most concise list of technical issues that wave energy faces. Its findings are also consistent with other studies1314. The roadmap is

11 http://www.checkmateuk.com/seaenergy/index.html - Technology 12 http://www.checkmateuk.com/seaenergy/index.html - Technology 13 International Energy Agency, Status and Research and Development Priorities, Richard Boud, DTI report number FES-R-132, AEAT report number AEAT/ENV/1054, 2003 14 WaveNet, Results from the work of the European Thematic Network on Wave Energy, ERK5-CT- 1999-20001 2000-2003, EESD, March 2003 Black & Veatch Ltd Wave Review Phase 2_Rev0 36

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based on a study of the wave and tidal stream market. It is felt that this does not affect the relevance of the information as WECs and tidal stream devices face broadly similar challenges. Further information on the UKERC roadmap is included in the following Section.

UKERC divides the technology issues faced by developers into 12 themes15, which represent the technology development chain. The technical issues associated with each theme are summarised below with supporting information from the MEC programme – Areas for Further Research in Wave and Tidal Stream Energy16:

1. Resource Modelling & Measurement • Accurate modelling - The survivability of the device is dependent mainly on the effects of extreme events, which in turn affects economic performance; • The wave resource model is well developed, however the effects of climate change are unknown; • The combined impact of waves and current is not fully understood; • Modelling needs to be verified at model, intermediate, and full scale to provide confidence in the use of these models, and is thus closely linked to experimental testing.

2. Device modelling • Accurate device modelling would allow developers to utilise this in conjunction with tank tests, which will improve development times; • Modelling of devices in arrays is vital for large volume deployment of devices in arrays. This requires validation from smaller array deployment.

3. Experimental Testing • The number of development stages could be reduced with access to scale test tanks, this will also aid in assessing new concepts; • Currently no facility for investigating the combination of current and waves; • Testing standards and guidelines are required to ensure consistency between test facilities.

4. Moorings & Sea Bed Attachments • Development of technology that does not require large vessels and barges for installation; • Lack of experience with deployment; • Lack of validation of testing facilities; • Improved design of seabed attachments; • Impact of wave and tidal forces on moorings; • Understanding of fatigue of moorings; • Interaction of moorings with device; • Incorporating wave devices into existing structures.

5. Electrical Infrastructure • Cable laying, particularly in high currents, requires further development; • Offshore grid is non existent; • The technology for offshore grid and offshore high voltage systems needs reviewed and improved; • The onshore grid needs strengthened to meet marine renewable and offshore wind demand;

15 UKREC Marine Renewable Energy Technology Roadmap 16 http://www.thecarbontrust.co.uk/technology/technologyaccelerator/mea.htm Black & Veatch Ltd Wave Review Phase 2_Rev0 37

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• The method of connecting arrays needs exploration.

6. Power Take Off and Control • Development of direct drive generators; • Improved performance and reliability of power electronic converters, which are required to interface the electrical grid; • High part-load efficiency and effective control systems in power take off mechanisms are required to improve technical efficiency; • Development of complex conjugate control for device arrays; • Wave power plant interconnections – research into hydraulic and electrical interconnection options; • Wave forward sensing to optimise power extraction.

7. Engineering Design • Survivability is arguably the most important aspect of the development of any new device. This will require advances in new structural materials, a better understanding of failure modes and component reliability, and the ability to forecast extreme events. • The materials used within these devices require advances in coatings; • Advanced magnetic materials need developed (for use in harsh conditions and most importantly for the most efficient use in linear generators); • Appropriate lubricants and fluids; • New types of structural materials and techniques.

8. Lifecycle & Manufacturing • Development of volume production techniques; • Development of component database.

9. Installation, O&M • Development of custom installation vessels; • Development of novel installation and recovery techniques; • Optimisation of devise design for ease of installation; • Condition monitoring of operations.

10. Environmental • Development of appropriate monitoring systems;

11. Standards • Technological developments should be used to develop the following standards: - Test standards at all scales; - Design codes; - Survivability and reliability; - Wave performance; - Electrical and Grid interface.

12. System Simulation • Resource to electricity models require development and verification from early prototypes and array developments.

As previously mentioned B&V, Entec and the University of Edinburgh are confident that this is the most accurate list of all the technical issues that the marine industry faces, however we are aware that the technical issues presented here are all related to learning by searching as discussed above, learning by interacting, and learning by doing - which are described as;

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• Learning by interacting – Literally the sharing of information between developers or across from other industries for example the offshore industry; • Learning by doing – Generally this stage takes place once the device has been designed and the product is in the production stage. WEC’s learn at this stage from scale testing17. It is notable that some countries (e.g. Ireland) are focussed on being able to undertake this testing at mid-scale (e.g. ¼ scale) in the sea rather than jumping from small-scale tank testing in fresh water (e.g. at 1/10th scale) to full-scale prototype. This can accelerate learning by doing, and save time and money. We estimate that the cost of full scale testing is in the region of £10m but that the cost of testing at ¼ scale would be in the region of £1-2m.

This review has highlighted that technical learning in the industry needs to include ‘technical remembering’ (as opposed to ‘ongoing forgetting’ or re-invention) as well as true learning, in order to achieve a cost competitive position. This has been commented on before by B&V in previous works for the Carbon Trust18. Solutions to this are provided in Section 2.1.2 below.

Overall, WEC development generally suffers from a number of problems which prevent the technology from becoming quickly cost competitive with other low carbon technologies: • The funding streams are uncoordinated (i.e. public/private, and public funding characterised by a multitude of uncoordinated funding bodies), therefore R&D is disjointed, the evidence for this is provided in Section 4.2 which highlights all the public sector funding streams available to the wave energy industry. Each funding stream is managed separately and at this time there is not one body which coordinates all the funding to ensure that there is a smooth transition for devices which show potential, and conversely that no-one supports devices that have already been ‘proven’ to be not worthwhile funding. • Learning in the wave industry is initially slow because there is a lack of knowledge sharing (i.e. learning by interacting). In addition learning by doing is mostly associated with building and testing prototypes which for some other renewable technologies are small and relatively cheap (e.g. PV). Wave devices are however extremely large devices and are therefore costly, and time-consuming to build and deploy/test (for example it costs several £M per full scale prototype rather than several £k for a small PV prototype) – see the comment above and below about mid- scale testing. • Scaling of devices is complex and testing cannot all be done at small scale because there is a limit to how small your device can be to still obtain scalable results.19 • Testing facilities are limited for intermediate scale testing, which nevertheless is still cheaper than full scale testing (at e.g. EMEC); • Reliance on major improvements and information from other industries (this will be discussed further in Section 3.3).

In comparison the photovoltaic (PV) market is developing quickly with a relatively steep learning curve. Investment in the area is high, and although it is still inefficient as a technology it is attracting very large investment, and thus becoming increasing commercially viable. In a direct comparison to the WEC market, the photovoltaic (PV) market holds many

17 Learning Curve Analysis for Energy Technologies: - Theoretical and Econometric Issues -Patrik Söderholm Luleå - University of Technology 18 Black & Veatch, for The Carbon Trust – Marine Energy Challenge - Areas for Further Research in Wave and Tidal Stream Energy 19 For example, Froude and Reynolds numbers scale differently with physical size, and they only give similar answers when the device was tested at full-scale. Black & Veatch Ltd Wave Review Phase 2_Rev0 39

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advantages which explain the relatively quick success of the PV market. The key advantages are: • Large organised effort by the industry to develop the technology; • Testing is simple and relatively quick; • Unit costs are small (a few hundred pounds); • PV is simple to install; • Niche markets available such as transport and traffic signals; • There is a large market ready to be tapped even though the technology is expensive and inefficient (due to very significant public support programmes).

The opposite of each of the reasons given here for the success of the PV market are the same as the reasons given above for the prevention of commercialisation in the wave market. In conclusion, the wave market has a number of market-wide hurdles to surmount which are as important as tackling the individual technological issues related to the device cost and performance.

2.1.1.2 Describe the possible development paths for marine technology to 2050, including possible developments in performance and efficiency.

Predicting the future development paths for marine technology to 2050 provides a complex challenge. It is generally accepted that predicting the developments to 2020 is relatively accurate; however, beyond this it becomes difficult. For this reason the information within this section should be treated as highly indicative only.

The timescale and effect of major breakthroughs resulting in step changes is near impossible to predict in any meaningful way, and is therefore not considered within the following development paths, but the results would be directly related to the effort put into searching for the breakthroughs (where there is currently little effort compared to the overall effort).

The UKERC Marine Renewable Energy Technology Roadmap (UKERC Roadmap) is the basis for the graphs presented in this section.

As discussed in the previous section, the UKERC Roadmap is considered to the most reliable and up-to-date source of information on required technological breakthroughs in the wave industry. Other countries such as Canada and NZ are using the UKERC Roadmap as a basis for their own roadmaps; however, other alternatives are considered below for comparison.

The UKERC Roadmap was developed to show how certain deployment scenarios could be applied in the marine sector to achieve an installed capacity of 2GW by 2020, and to detail the ideal requirements and timescales that would be involved in order to achieve the 2GW target. Section 5 provides the deployment timescales that we predict given the pace of the industry as it currently exists, for example, current levels of funding and timescales for consenting.

The UKERC Roadmap up to 2020 is shown in Figure 15. The roadmap summarizes the individual roadmaps for the 12 technological themes previously identified; these roadmaps can be found in Appendix C. The UKERC roadmap was originally created to forecast up to 2020, and at this stage the roadmap has not been extended - under the advice of the University of Edinburgh. The requirements between 2020 and 2050 are discussed below.

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Figure 15 Time dependency between the Technical Strategy and Development strategy

As can be seen in Figure 15, the only critical technological themes that extend beyond 2020 are discussed here:

o Electrical Infrastructure – In order to meet the 2020 forecast of 2GW of installed capacity, it is critical that the onshore grid is strengthened to meet the marine renewable demand as well as the demand of capacity from offshore wind. The roadmap indicates that this will be achieved by 2020. To allow the further development envisioned by 2050 to contribute to UK targets, the implementation of an offshore grid is required, and this will take considerable Government input and policy to drive this.

o Manufacturing – Benefits in economies of scale and high volume manufacturing techniques are to be achieved by 2015. Continuous review of lifecycle costing and energy appraisal, combined with the development of a component database (up to and beyond 2020), is important for lessons to be learned and to push developments forward. The development of an integrated supply chain is important for the overall success of WECs. This will be one of the last technological issues to be overcome.

o System simulation – Continuous development of resource to electricity models for arrays, verified on early prototypes and array developments, and then verified on full deployment arrays. This is critical for improvements in efficiency.

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This section reviews alternative roadmaps, in order to justify the use of the UKERC roadmap.

Path to Power is considered to be the most detailed forecast after the UKERC; the project was run by the British Wind Energy Association and was based on over 100 interviews conducted on the issues of consenting, grid access, and financial support requirements. The report uses The Carbon Trust’s Marine Energy Challenge (MEC) estimate of 3 Gigawatts (GW) installed capacity by 2020 from a combination of WEC and Tidal Stream as its basis.

The Roadmap which is presented in Appendix D.1 does not consider all the technological challenges, focusing on the Grid issues. It is therefore felt that it does not cover the required detail for use in this study. Most importantly, however, it predicts a solution to the North of England and Scotland grid issues in 2015, which B&V and Entec feel is optimistic considering that application and consenting processes have not yet begun, and given experience of the lamentably slow permitting of the Beauly-Denny link.

The DTI Route Map is a generic development pathway providing a forecast up to 2010. The dates in the road map are indicative only. The route map is split into two sections; existing well developed technologies and new design concepts. The route map does not go into the detail of the UKERC roadmap and is close to being out of date. The route map is provided in Appendix D.2.

The other two route maps identified are the World Energy Council Roadmap (Appendix D-3) and the European Ocean Energy Association version (Appendix D-4). These are similar to the DTI Route Map in that they do not go in to the detail of the UKERC document and are therefore considered to have been updated and replaced by the UKERC roadmap.

The research carried out in this section has led B&V and Entec to the conclusion that the UKERC is the most complete, detailed, and relevant information with respect to requirements for meeting the 2020 target. In terms of the development path beyond 2020 we will extend the use of the generic learning curve analysis rather than to look at specific issues - other than those discussed above in Section 5.

2.1.1.3 Explain the extent to which private sector financing is available for marine projects

The early development of the WEC market was funded, in terms of the private sector financing portion of the projects, mainly by developers’ own equity, with limited venture capital financing, although in the last five years the industry has been boosted by the involvement of major utilities in both technology provision and project development.

E.ON’s West Wave project is an example of project development investment. E.ON are working with Ocean Prospect to install a 5.25MW wave farm made up of Pelamis Wave Power’s (PWP) Pelamis device20. West Wave will use the South West Regional Development Agency’s Wavehub for this project. Wavehub is situated 10 Nautical miles from St Ives off the North Cornwall Coast and is essentially the development of infrastructure for the installation of up to 4 developers to install WECs at the site21.

Investment into technology provision is shown by PWP, which has raised some £40m to fund the development of their Pelamis technology from a variety of financial and industry backers. Shareholders with more than 5% of the Company’s share capital include various Sustainable Asset Management funds managed by Emerald Technology Ventures, Norsk Hydro

20 Ocean Prospect http://www.windprospect.com/OceanProspect.htm accessed 19 may 08 21 Pelamis Wave Power http://www.pelamiswave.com/index.php accessed 19 May 08 Black & Veatch Ltd Wave Review Phase 2_Rev0 42

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Technology Ventures, BlackRock Investment Managers, 3i, Carbon Trust, Nettuno Power, and Tudor BVI Global Portfolio.

Scottish and Southern Energy’s subsidiary, Renewable Technology Ventures Ltd (RTVL) is a further example; they joined forces with wave energy company Aquamarine Power to support the development of the Oyster device and to develop a new tidal stream device. The company has also received a £1.5m investment from Sigma Capital22.

Voith Siemens’s acquisition of Wavegen in 200523 is an example of major industrial manufacturers entering the sector with relationships being forged with device developers. Voith Siemens spent several months touring the industry specifically looking for investment opportunities before settling on Wavegen which they bought outright.

Public markets have provided some successful fundraising to the marine sector; Ocean Power Technologies Inc., the developers of PowerBuoy, was floated on the London stock Exchange’s Alternative Investment Market (AIM) in October 200324 and now also trades on the NASDAQ having raised further funds.

Venture capital interest in the sector has risen substantially, although it remains constrained because developers are nervous of the high returns and unrealistic commercial milestones that Venture Capitalists set25. There is considerable scope for future investment into the market; however, this will require further development of the industry, and possibly a clear view of the leading technologies to reduce the risk to investors.

22 Aquamarine Power http://www.aquamarinepower.com/news/view/5/sse-and-aquamarine-power- surge-ahead/ accessed 19 May 08 23 Voith Siemens http://www.voithsiemens.com/vs_e_grpdiv_pressinformation_inquiry.php 24Ocean Power Technologies http://www.oceanpowertechnologies.com/tech.htm, accessed 19 May 08 25 Comments from interviews Black & Veatch Ltd Wave Review Phase 2_Rev0 43

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2.1.2 R&D solutions and indicative timing

2.1.2.1 Describe the focus of research that aims to achieve a breakthrough or indicate a consensus view of how the current issues might be resolved.

Overview

The current WEC market is emerging and unproven, large rewards are possible in the future for successful developers, but these are not yet accessible, and therefore there is a lack of engineering resource going into the development of new concepts. New concepts are coming mainly from academic institutions, which may not be the best placed to develop them.

The Energy Technologies Institute created the UK Innovation Chain diagram (Figure 16) to illustrate the support offered, and the spread of investment from R&D through to deployment. Figure 16 shows that there are four main areas of support in the early R&D stage of development. These organisations, and their support, are described in full in Appendix B. SuperGen and the Research Councils will continue to work on generic issues within the marine industry and therefore support the incremental cost reductions for wave technology.

The focus on prototype development, whilst clearly supporting the aim of getting technologies to the point where they can benefit from the MRDF, shows that the primary focus is on TRL 5-7 and this is not coherent with the information supplied in Figure 16. In addition, this approach, combined with the fact that TSB investment has been removed from marine energy due to the ETI’s funding, means that there is now very little funding for non- generic early stage R&D (TRL 2+ to 4), which is now wholly reliant on the Carbon Trust’s programmes. Although they are perhaps the best able to focus research in this area, especially on step-change technologies, their funding is extremely limited compared to what is required.

26 Energy Technologies Institute’s pilot programme in marine energy: wave and tidal stream, http://www.energytechnologies.co.uk/assets/files/ETI_Marine_Information_Pack.pdf accessed 23 May 08 Black & Veatch Ltd Wave Review Phase 2_Rev0 44

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Figure 16 UK Energy Innovation Chain27

Potential solutions

One can mitigate the risks of industry development by picking several potential winners, helping to develop them as fast and effectively as possible, and one can mitigate it further by continuously looking for the next best thing by continued search; hence, a combination of support across the development paths is required.

It would seem that one solution, which would not require too much (often challenging) cross- organisation coordination, would be that the (possibly accidental) structure that appears to be emerging, is rapidly formalised. This would require an ongoing commitment by Carbon Trust

27 Marine Energy R+D and the ETI - David Clarke - February 2008 Black & Veatch Ltd Wave Review Phase 2_Rev0 45

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(or other organisation?) to fund almost all device specific Stage 1 R&D, through an ongoing commitment to its Applied Research programme (which may exist), and more importantly through a very significantly increased and ongoing effort at TRL2-4. This would result in a much more coordinated early stage R&D programme than has existed in the past, which is more likely to be able to pass on successfully developed TRL4 technologies to other funding (such as ETI and then MRDF). It would also be more likely to find step-change technologies.

Such an idea is not altogether new, as can be seen from a quote by B&V from the end of the MEC, although the idea that it is undertaken by Carbon Trust may well be new and require significant thought. It may be that ultimately the transfer of this responsibility to another organisation would be best. BERR has had this responsibility previously, but the ETI or even EMEC might consider taking on this role.

2.1.2.2 Identity whether technology experts are generally expecting the important breakthroughs to come in either the short, medium or long term.

Table 4 summarises the information presented in the UKERC Marine Renewable Technology Roadmap, this illustrates the indicative timings for developments within the marine market which will be required to meet the 2GW of installed capacity by 2020. It focuses on development of existing technologies which would provide incremental reductions in CoE. It is not possible to forecast when a development in the search for a step change technology may occur.

28 Black & Veatch, for The Carbon Trust – Marine Energy Challenge - Areas for Further Research in Wave and Tidal Stream Energy

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Table 4 Technology breakthroughs – timescales Short Term Medium Term Long Term up to 2012 up to 2020 up to 2050 Resource Modelling & Standard review model – Standard review model – Review period Measurement to include extreme wave to include climate change. events, combined waves and currents, Device Modelling Comparison model– array Review period performance, random waves, shallow water, non linear waves & currents, scaling Experimental Testing Test facilities and Review period protocols – combined wave and current facilities, offshore component testing, environmental monitoring Moorings & Seabed Verified design code – Verified design code – Review period Attachments seabed attachments, waves reliability, device and currents, fatigue, interaction, speed of survivability, scouring, retrieval Electrical Grid infrastructure –cables Grid infrastructure – Infrastructure in currents, array offshore grid connection, direct drive technology,

generators, condition monitoring, power electronic converters, High efficiency PTO and Review period Power take off and Direct drive generators, verified control to optimise Control power converters & control, energy conversion in complex conjugate control arrays Engineering Design Impact of extreme events Database of failures and Review period and design codes – subsequent investigation survivability, materials, structure, failure modes, component reliability. Lifecycle & high volume Integrated Supply Manufacturing Development of strategies manufacturing techniques chain, component cost for Economies of scale and reliability database Installation, O&M Adverse weather Review period conditions, working in Customised installation strong currents & methods performance monitoring. Dedicated IO&M vessels. Environmental Issues and solutions with Issues and solutions with Review period physical data – foundations, physical data –marine life scouring, noise, magnetic and eco system, monitoring fields system Standards Guidelines & best practice Standards based on sea Review period based on early experience development System Simulation Resource to electricity Continuous review and Continuous review model for arrays verified development and development on early prototypes and array developments

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2.1.2.3 Assess the likelihood that a technology breakthrough in theses areas can be protected by patents and assess whether IP concerns are holding back investment

A summary of the results are provided here for Section 2.1.2.3 and the supporting information is provided below.

B&V and Entec feel that the likelihood of breakthroughs being protected by patents firstly depends on whether the breakthrough is patentable, and to what level the device is patented. It then relies heavily on the speed of development and demonstration. If a company with good financial backing wishes to invest in the wave energy market an important question is whether the new company trying to enter the market would: - buy an established company; - try to create a new product using the experience of established companies; or - buy a licence to use the IP?

B&V and Entec believe that IP concerns do indeed hold back investment; however this is partially generic to the market stage. Developers see IP rights as the major advantage they have over their competitors, without it the company would lose most of its value. Alternatively, private investors need to reduce the risk of investment and look to gain something from their investments. IP is the most valuable commodity (as developers have identified) and therefore investors want a share. Further to this, public financing also often has IP conditions attached, this is to ensure the investment is protected. In some cases, this may cause significant issues, such as at ETI.

Can technology breakthroughs be protected by patents?

“Patents provide a legally enforceable means by which a person (including a company) who has an innovative solution to a technical problem can prevent others from using this innovation without his permission. Such innovations, when patented, become intellectual property assets which can be exploited in much the same way as physical property assets, such as a house or a factory. The owner of a patent can decide to sell, license or mortgage it and so realise its economic value. Alternatively, he may exploit the invention himself and use the patent to prevent others from doing so. The unauthorised use of a patent is referred to as infringement”29.

Small commercial device developers depend on intellectual property for their survival30. These companies are driving the marine energy innovation in the UK. Patents allow their IP to be protected, however it is generally accepted that these patents in the marine industry are not very robust. The inherent problem with patents is that, to be of value, they must be very precise, therefore it is rare that an entire device can be protected. Patents typically last 25 years but it is possible to update these patents by resubmitting them with slight modifications and/or additions. Therefore it is possible that individual breakthroughs for a developer can be protected by patents.

There are about 3000 patents31 currently in place for WECs; this does however make it more and more difficult to ensure that your new patent does not infringe another developers’ patent. Patents are used to varying degrees by developers, for instance Pelamis Wave Power claims

29 http://www.opsi.gov.uk/ACTS/acts2004/en/ukpgaen_20040016_en_1 30Winskel, M, etc al Building Renewable Energy Innovation Systems, Sustainable Technology Systems, http://www.sustainabletechnologies.ac.uk/final%20pdf/End%20of%20Award%20Research%20Reports /Final%20Report%2012.pdf accessed 19 May 08 31 http://www.vnunet.com/vnunet/news/2207543/europe-leading-way-marine-energy Black & Veatch Ltd Wave Review Phase 2_Rev0 48

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to use only existing technology and thus they only have patents on the structure and joint mechanism. Some companies are very extensive with their patents, relying on them for their business model and investment strategy.

It is important to consider the relative complexity of wave devices; these are intricate systems with much of the specialised design in the control systems and certain small aspects of the device. It would be difficult for a third party to work out the IP associated with a WEC just by looking at it (as the Russians found when trying to copy the Concord). Thus, many consider the main IP to be ‘know how’ or experience, as the patents are considered weak and only cover parts of the technology.

In this section we discuss a theoretical situation, examining if a company from outside the WEC market could enter the market using an existing design which is not patented. Pelamis Wave Power’s (PWPs) device Pelamis is the technology that we will consider for this discussion. PWP states that there is no new technology in their technology, i.e. all the components are readily available. The key IP of the PWP team and their patents are: • The joint mechanism; • The experience and knowledge of their team, especially the experience gained from extensive trial and error, during device testing; • The control codes – These are a key component of WEC systems in general but these could not be replicated easily, unlike the manufacturing techniques.

It is felt that it would be difficult for other companies to catch up with this in-depth knowledge of the Pelamis device; however, seemingly unrelated problems such as the length of time to gain planning consent (particularly for UK projects) would allow rival companies more time than one might expect. In order to stand a chance, the rival company would need to have large financial backing and use existing experience of the technology and industry, including subcontractors.

Such a rival competitor could still make many mistakes, but if deployment is fast (i.e. getting in place financial resources, permitting regime, and control of supply chain) then potentially these competitors could catch up if the breakthroughs were not patented.

An important question is whether a large company trying to enter the market would: - buy an established company; - try to create a new product using the experience of established companies; or - buy a licence to use the IP?

Are IP concerns holding back investment?

It is believed that the current marine energy market is where wind power was some 20 years ago in terms of component development, for example over twenty years the wind industry improved the reliability of components through sharing learning, and made significant overall performance improvements. At that time the Danish government invested heavily in the wind market, and Denmark has led wind power ever since, with the economy benefiting from being the leader in the industry. A number of UK developers are aware of the lessons learned from the Danish wind experience, in terms of learning by interacting; however, they also see the difficulties in applying this to the present day marine sector.

IP is critical for most device developers to expand their business and attract private finance. This leads to developers protecting their R&D and prototype trial results. It is generally felt

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by developers that IP rights are the key to success at this stage of the market - in an industry where they are very sensitive to their commercial and technical factors32.

Developers recognise that by sharing information they would reduce the amount of duplication as they struggle “to re-invent the wheel”. Learning by interacting is not completely ignored, with some developers willing to disclose certain information and willing to talk about general ideas while keeping details confidential.

It could be argued that IP is one of the main reasons that there is a lack of venture capital (VC) within the early stages of the WEC market. There is currently minimal VC investment, particularly at the early stages of wave device development, because of the unrealistic commercial milestones they want to meet and the high returns that they demand. Developing a project to the stage where it can be protected by IP takes time, during this period VC finance is difficult to obtain as the ideas are unprotected. Even if offered, VC finance opportunities are often over looked by developers even after IP is protected, due to the conditions accompanying it, instead they rely on alternative financing such as public investment or a trade sale or stock market launch. Some developers feel that the government should be playing a bigger role in providing public finance given the limitations of private investment. The lessons learned from the Danish wind market demonstrates that a good combination of public sector financial support and interaction can produce innovation success.

Some public financing also demands some access to IP as a prerequisite before finance is granted, but this is simply to protect the public investment. The UK Government has generally invested in UK developers to try to ensure that the UK leads the WEC market, with the view that the economy will benefit in the long run.

The current support mechanisms that exist to support developers, and the links to patents and IP requirements are considered in detail here.

The Carbon Trust Programme has a prerequisite that developers have secured first mover IP before they commit to a project. This is an example of an investor looking to reduce the risk associated with their investment.

The Energy Technology Institute’s (ETI) marine programme is a public/private partnership, and is backed by companies including BP, Caterpillar, EDF Energy, E.ON, Rolls-Royce and Shell33. The ETI now presents the major funding pool for wave and tidal stream demonstration as discussed above; the funding provided to companies is intended to have conditions attached regarding IP ownership. This presents a risk to companies taking advantage of the funding; the concern is that a large ETI-funding company could gain access to its IP and use it to develop a competing technology. This represents a potentially fundamental problem for the ETI’s investment strategy. The problem for ETI revolves around gaining private sector investment, because large private sector companies are highly unlikely to invest cash into a project which offers nothing in return for their investment. Therefore, when a company like Rolls-Royce agrees to finance £5m per year for 10 years they expect some form of ownership in the technology being developed. On the other side, many developers’ devices are based on a limited amount of IP, therefore this it is essential to their success and selling part of it is often not likely to be in their best interest. Max Carcas of

32 Marine energy innovation in the UK energy system: financial capital, social capital and interactive learning - International Journal of Global Energy Issues 2007 - Vol. 27, No.4 pp. 472 – 491- Mark Winskel 33 Energy Technologies Institute’s pilot programme in marine energy: wave and tidal stream

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Pelamis has expressed particular concern with this type of funding where a partnership is formed with the public funding body through forced sharing of IP.

B&V and Entec believe that, IP concerns do indeed hold back investment; however this is partially generic to the market stage. Developers see IP rights as the major advantage they have over their competitors, without it the company would lose most of its value. Alternatively, private investors need to reduce the risk of investment and look to gain something from their investments. IP is the most valuable commodity (as developers have identified) and therefore investors want a share. Further to this, public financing also often has IP conditions attached, this is to ensure the investment is protected. In some cases, this may cause significant issues, such as with leading developer commitment to ETI, with some developers expressing concerns (and not taking part in the potential projects) due to the requirement to have to share their IP.

IP is perceived as one of, if not the most important aspects for developers. This perception can lead to poor investment choices; given the choice of developing a new concept or adapting existing technologies, developers may target the more complex, expensive, and time consuming route of developing a new concept so that it can be protected by IP.

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2.1.2.4 Estimate the range of investment that might be required to achieve the required breakthroughs in R&D stage challenges

As established in the previous sections there are two main ways of achieving the breakthroughs which are: 1 - A programme that contributes to the incremental steps in decreasing cost of energy; 2 - A programme that encourages a step change in cost of energy.

A summary of the approximate investments that might be required for, and the programmes currently offering investment to, the technology breakthrough areas is provided below. The costs are all associated with UK spend on the industry in order to establish the UK as world leaders in wave (and tidal stream) technology. The costs that ETI will spend are over a 10 year period up until 2018. The costs for the other areas are estimated and do not have a timescale; however, they are all required to meet large scale deployment and therefore it is fair to say that in many cases they are need as soon as possible. Table 5 Summary of estimated investment to achieve incremental breakthroughs R&D breakthroughs Estimated range of cost Reason ETI, SuperGen, and others Resource are currently working on (UKERC roadmap – *ETI total £100m per year improving the understanding Standard resource model (c. £5m in total) of resource extraction, its by 2015) limitations and interaction of marine devices. ETI and SuperGen (generic *ETI total £100m per year devices modelling only) will Device modelling Developers and investors be looking into and funding (c. 5m in total) research into device and array modelling. ETI will support developers individually if selected but £5 – 20m per device Wave and Tidal Energy £5-20m for intermediate test Support Scheme (WATES) is Experimental test centre already providing support. In (c. £100m in total based on addition the supply of an 5-7 devices at full scale) intermediate test centre is also discussed in Section 3.2 below. *ETI total £100m per year ETI may support research Developers and investors into moorings design. Moorings private spend Developers are also looking (c. £10m in total) into this issue. Based on £300k/MW this gives an indication to the costs of installing a grid Electrical £300 – 500m capacity of 1000MW. Cost estimates concur with Beauly-Denny and Beauly- Islands links. ETI will provide support to *ETI total £100m per year PTO & Control this area of R&D for the (c. £15m in total) selected projects and devices. Engineering design *ETI total £100m per year ETI will provide support to Black & Veatch Ltd Wave Review Phase 2_Rev0 52

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(c. £10m in total) this area of R&D for the selected projects and devices. £100k set up Based on the requirement for Manufacturing £50 - £100k per year for database development of upkeep and running (£1m) components. This requires encouragement for companies to invest in supply vessels for the marine market specifically – £100k set up therefore requirements are Installation O&M £50 - £100k per year for around developing strong upkeep and running (£1m) market signals and support. Therefore cost is based on marketing and database for performance and reliability. Environmental factors will require research and monitoring during Environment £500k - £1m per year (£10m) installations; however estimate is focused around planning and co-ordination of information dissemination First draft of marine specific standards have been £100 - £150k in total per (3 completed by EMEC Standards year) update cycle (£500k) therefore costs should be similar if not less for update and review

* The cost split and scope for ETI into marine is unknown; however, it is believed that these topics will be covered and that a fraction of the total budget will be supplied for each of the breakthrough areas highlighted. The % of the total ETI budget that will be spent on wave technologies is unknown, which is in itself an issue in terms of the visibility of the market.

In total the figures in the table above equate to c. £160m for non grid related issues, and £300- 500m for grid related issues, to c. 2020. This shows the critical importance of having a method by which the grid infrastructure can be paid for. Of the £160m, c. 2/3 is for experimental testing.

In terms of sourcing the new ideas and concepts which could provide a step change in cost of energy, a programme similar to the Marine Energy Accelerator Strand A is required. B&V and Entec have estimated the costs below, based on a 5 year programme:

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Table 6 Summary of estimated investment to achieve step change cost of energy breakthrough Tasks to achieve step Estimated range of cost Reason change in cost of energy In order to attract the right type of developer* a focused Marketing programme £50 - 100k per year and widespread marketing programme will be needed. To encourage inventors and entrepreneurs to focus on Incentive or prize for a new concepts now rather concept that brings a step £500k - £1m (to be debated) than thinking of the idea in change in cost of energy 10 years time, a high incentive is required. £25k per initial device Similar aims and objectives assessment (IDA) to give to the ETI programme and Programme support for £100k per year (IDAs). therefore assumed similar R&D £5 – 10m per device costs for each device. £15 - 30m in total (3 devices) TOTAL £17 – 32m * technology developer with a completely new concept

It can be seen that the costs of a step-change programme are relatively low compared to the costs of the incremental change programme, which (along with its demonstrable need in order to achieve low cost marine energy) underlines its importance and the fact that it is un-funded.

2.1.3 Enabling technology developments

Identify any important enabling or parallel technology developments that are required to support the successful commercialisation and subsequent developments of marine power generation

Many of the areas where there will be a technology development, purely as a result of the wave and tidal industry, lie around the fact the devices will be operating in a challenging and expensive marine environment. The areas where we believe an enabling technology will be required are listed below. It should be noted however that at this stage in the development of wave and tidal stream energy many of the enabling factors will be non technical, however this will be covered in the barriers section included in Phase 2.

Table 7 summarises where we foresee important enabling or parallel technology developments that are specifically required for wave development to be successful Table 7 Enabling technologies

Support area Requirement Enabling technologies

R&D Ongoing development of Modelling techniques to enable tidal streams and resource assessment wave climates to be modelled with increasing

accuracy and to produce bankable energy output

predictions.

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R&D Ongoing development of Components that can operate in the desired technology which will conditions, and improve the efficiency of the increase the effectiveness required task, for example; of marine devices and increase the efficiency of • Wetmate connections their accessibility, and • Mooring systems maintainability. Wave design & Experienced engineers Design and development of structural materials, engineering and designers are vital to power-train and moorings will benefit the ensure the flow of industry. enabling technologies –

the specific areas of technology are described further on the right. Manufacture Location (hanger, dry Many components of wave and tidal devices dock) require specific manufacture in large facilities of which there will need to be considerably more Components when the industry develops. Techniques and technology for the large production of specialist components for example; SeaGen blades. It is likely though that manufacturing companies will adapt from other industries. Installation Specialist vessels Vessels that can carry out installation of wave and tidal devices – particularly in deep water where Drilling equipment & velocities are high. vessels Real-time 3-D sonars would allow increased ease Accessible ports and accuracy during installation Operation & Access to device – visual ROV’s – capability of operating in specific maintenance inspection conditions where wave & tidal devices are located Access – install & ROV’s – capability of inspections could be removal of device developed and help enable the technology because O&M costs could be high if onsite inspection and identification is not possible. Decommissioning Vessels Decommissioning of large scale farms is a considerable time away however a technology will be required for this if they are ever decommissioned on a large scale. Offshore wave devices will be towed however, vessels which can maintain their position in deep waters and lift tidal stream devices from the ocean floor will be required. Materials Alternative construction Designing devices and construction methods that materials allow main structural materials to be swapped for other materials as, for example steel price changes and material scarcity increases. Environmental Specific impact of wave A centralised system/web for the access of specialists and tidal devices on the information on the impacts of wave and tidal environment – a central stream technology on the environment could

means of storing considerably improve the time taken for permits information to allow to be issued. access to all Timely collaboration with regulators and

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Ongoing monitoring as developers to determine the main environmental projects grow issues, their assessment and their interpretation.

2.2 Demonstration Stage

2.2.1 Demonstration challenges; Describe the main challenges to be overcome in achieving a demonstration unit that can move to large scale commercial generation.

Demonstration challenges describe moving from a prototype unit to a unit suitable for large scale commercial demonstration. This has, so far, only been partly achieved by a handful of wave device developers and many lessons can be learned from their experience.

There are two main areas of demonstration challenges: 1. Physically getting a device installed offshore in the marine environment is an enormous and expensive challenge particularly for those who do not have considerable offshore experience. 2. Working within funding limitations is also a major issue, and there are a number of strands to this area which will be described below.

The challenge of installing devices offshore is often not given the attention that it deserves. The conditions that marine energy installations target are challenging even for the offshore oil and gas industry because their vessels and equipment are not always designed to withstand extremely wavy sites, which is exactly what the wave energy industry aims for in identifying sites. The installation of one of the earliest wave devices, OSPREY, ended in disaster because it was assumed that they could get the device in position before the ballast was installed. Installation was delayed, which is common, and a storm arrived. There was no preparation for this and the device sank because there was no ballast. Every eventuality needs to be covered, because in the offshore environment any expert’s advice is to ‘expect the unexpected’ and ‘what can go wrong will go wrong’.

Funding limitations are a widespread challenge for demonstration, which is of concern because this is likely to lead to more challenges when installation occurs. Funding limitations / issues include:

1. Applying for the correct amount of funding – being realistic rather than optimistic about costs for installation and potential delays. 2. At this time individual developers are having to learn and project manage the environmental consenting process. It is time-consuming, and many developers and industry observers think this could/should be completed by government, in particular, for small initial installations in the region of 1 – 10MW, which will have very limited if any impact on the environment but then on a larger scale for larger farm installations. This would avoid developers individually collecting similar evidence which wastes their funding and resources and allows this evidence to inform everyone. 3. Cutting corners to stay within funding limits.

Developers are therefore spending significant amounts of the funding that they do receive on non technical issues such as consenting, when it really needs to be spent on solving the many technical problems. This is probably causing companies to cut corners (especially where they have also underestimated the investment needed) which results in further costly problems during installation. Environmental risks are mitigated at the cost of technical risks.

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B&V and Entec believe that, if there was more realism about installation offshore and if developers sought advice from offshore experts, many issues would be avoided when full scale units were deployed. The financial limitations impact considerably on full scale unit installation because any short cuts taken during design and manufacture can result in much more expensive problems once the device is offshore. Considerable expense is incurred on environmental consenting, which is considered by many developers to repetitive and over zealous for small 1-10MW installations.

2.2.2 Estimate the time and investment that will be required in the UK and globally to achieve large scale commercial generation using marine technologies (wave energy technologies only).

LEK have defined that a technology becomes commercial when the cost of energy is equal to that of the market technology. The market technology as defined by L.E.K is CCGT for which estimated costs were also provided for the future.

B&V and Entec have estimated, as part of this assessment, the cost of wave energy over time (the analysis of this calculation is described in Section 5). In our assessment in 2050, wave energy reaches a cost of 5.2pp/kWh and at this point CCGT central case is at 4.5p/kWh (high high case is at 7.1p/kWh). Therefore we would consider that at this point commercial generation will have broadly been achieved, certainly within the errors of both aspects of the assessment. The total investment in the UK is £46,192million, and globally it is £197,796million (Table 8) highlights the total costs, and subsidy’s required (based on Total cost of electricity minus base case electricity minus ROCs (2 ROCs up to 2026, 1 ROC up to 2036, no ROCs thereafter) for both the World and UK), values are presented in current value and discounted at 10%, The negative subsidy values for the base case (high, high) electricity costs indicates that in this scenario, by 2050, the wave industry will have repaid all its subsidy and started making a profit on investment. However, it should be noted that these are total investments, not all of which are related to public investment and/or public subsidy. Table 8 Cost of Electricity and Required subsidy's World 2050 UK 2050 Current Discounted Current Discounted Value £m 10% (£m) Value £m 10% (£m) Total investment required (Cost to deploy) 197,796 10,879 46,192 2,648 Subsidy Required ( central case marker) 37,568 3,154 7,210 745 Subsidy Required ( high, high case marker) (52,142) (524) (14,594) (160)

The realistic cumulative global deployment in MW against the cost of electricity is presented in Figure 17, this illustrates the effect of a 12% learning rate on the cost of electricity. The extra costs over and above the costs of a base case CCGT (central and high, high cases represented) approach can be calculated and these have been incorporated into abatement cost calculation, see Section 1.2.4. Figure 17 also shows the effect of ROC’s subsidy (ROC’s analysis based on 2 ROC’s up to 2026, 1 ROC up to 2036, and no ROC’s thereafter) on the cost of electricity from wave power.

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45.0 140,000 World Wide Total MW Installed

40.0 Cost of wave electricity p/kWh 120,000 Base Case Electricity (Central) 35.0 Base Case ELectricity (High High) 100,000 30.0 Cost of wave electricity with ROC's subsidy (2 ROC's -2026, 1 ROC - 2036)

25.0 80,000 MW p/kWh p/kWh 20.0 60,000

15.0 40,000

10.0

20,000 5.0

0.0 - 2008 2012 2016 2020 2024 2028 2032 2036 2040 2044 2048 Year

Figure 17 Global deployment of Wave Energy Devices against time, Cost of wave electricity without subsidy and with ROC subsidy against time, base case of electricity (central, high high) against time.

B&V and Entec believe that debt financing will begin in 2025 after there is approximately 5 years experience on the first 50MW farm that was installed.

2.3 Deployment Stage

2.3.1 Overall technology learning effects

Determine representative technology learning curves. Learning curves should be developed in line with the framework provided by L.E.K. − e.g., cost per kWh, overall efficiency, etc

The learning rate established for wave energy is 10-15%.

The rates provided above have been taken from the study which was completed as part of the Marine Energy Challenge for the Carbon Trust and the reasons for this are provided below.

2.3.1.1 Agreement with Marine Energy Challenge

The most useful metric for describing marine energy is the cost of energy. This is because the capital cost and operating costs are significant for marine energy and reductions in either have significant effects. Additionally the performance of marine energy devices (wave energy devices particularly) will be a cost compromise too and thus it will often be theoretically possible to improve energy performance at modest cost. Thus there are several distinct but related routes to cost reduction; reducing capital cost, improving O&M procedures and costs, and increasing performance. The combination of these opportunities are represented by the cost of energy.

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B&V and Entec feel that the information provided in the Marine Energy Challenge34 on learning rates is the best available data because learning rates apply directly to the cost of energy and there is currently no experience of this in the wave industry.

Only approximately 2MW has been installed globally and this does not provide a sound basis for predictions up to 1GW of installation. All the information gathered on learning for the Marine Energy Challenge is from long established industries and we therefore have no reason to question these.

The MEC assessment was based on numerous well researched assumptions. It is beyond the scope of this summary to re-investigate these assumptions; however, B&V and Entec are confident that a more accurate answer would not be established because there is no substantial new information to base new assumptions on.

It should be highlighted that changes in the input assumptions have a dramatic impact on the results of future predictions, which re-emphasises that B&V and Entec are content with the Marine Energy Challenge learning effects and cost of energy predictions.

There is an understood and high level of uncertainty in predicting the learning and future costs of energy in the wave and tidal stream sectors due to the lack of present data to base assumptions on.

2.3.1.2 Estimation of the Learning Rate for the Wave and Tidal Industry

In order to form a judgement as to the likely learning rates that can reasonably be assumed for marine energy technology in the coming years the Marine Energy Challenge studied other renewable energy technologies that were more established.

Figure 18 - Learning in Renewable Energy Technology (IEA)35

34 The Carbon Trust, Future Marine Energy, Marine Energy Challenge 2006. 35 Cost of electricity and electricity produced from selected electric technologies installed in the European Union 1980-1995. Numbers in parentheses are estimates of progress ratios. Data for renewable technology are from the EU-ATLAS project. The curve for Natural Gas Combined Cycle (NGCC) is calculated for EU based on the information in Claeson (1999).The progress ratio for supercritical coal power plants is based on a US study of Joskow and Rose (1985). For the fossil technologies, the fuel prices have been set constant at the 1995 level. EU-ATLAS data are available for five-year intervals for the period 1980-1995 (Marsh, 1998) and do not permit more than very rough estimates of the progress ratios for photovoltaic and electricity from biomass.6 The two curves for wind power show the average production cost and the production cost from the plants with the best performance. Black & Veatch Ltd Wave Review Phase 2_Rev0 59

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Figure 18 from the International Energy Agency36 shows learning rate data for a range of emerging renewable energy technologies. Price and cumulative capacity are observed to exhibit a straight line when plotted on a log-log diagram and mathematically this straight line indicates that an increase by a fixed percentage of cumulative installed capacity gives a consistent percentage reduction in price. For each doubling of installed capacity the progress ratio for Photovoltaic Power over the period 1985 to 1995 was ~65% (learning rate ~35%) and that for Wind Power between 1980-1995 was 82% (learning rate 18%).

Any discussion as to the likely learning rates that may be experienced in the wave and tidal stream energy industry will be subjective. The only industry where learning could be used for wave and tidal was the wind industry. A progress ratio as low as wind energy (82%) is not expected by B&V and Entec for the wave industry :

Wave energy learning a) Much of the learning associated with wind energy is a result of doing “the same thing bigger” rather than “doing something new”, in other words “upsizing”. Turbines with larger swept areas, and the relatively low risk associated with building them is a major factor in the progress ratio for wind. Most wave energy devices (particularly resonant devices) do not work in this way. A certain size of device is required for a particular location in order to minimise the energy cost and simply making larger devices does not reduce energy costs in the same way. Nevertheless, wave devices can benefit from the economies of scales of building farms with larger and larger numbers of devices. b) Unlike wind in which the agreed technical solution has consolidated (3-bladed horizontal-axis turbine), there is a plethora of different options within wave energy devices and little indication at this stage as to which is the best solution. This indicates that learning rate reductions will take longer to realise when measured against cumulative industry capacity.

2.3.1.3 Estimation of Future Costs

Estimates of the likely future costs of energy are generated using the predicted cost of energy at a meaningful scale (10-50MW) of several well-studied and normalized devices. To these cost estimates are then applied various learning rates. This section provides an overview of learning experience from other similar developing industries, suggests applicable learning rates for wave energy and tidal stream technologies, and presents some future predictions for cost of energy.

The cost of energy expected with the learning rates established above are presented below, based on a current estimated cost-of-energy of 25p/kWh for wave.

The starting cost of marine energy has however increased since these predictions were made during the Marine Energy Challenge, due largely to significant changes in material and vessel costs since 2005.

36 Experience Curves for Energy Technology Policy – International Energy Agency, 2000.

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Table 9 illustrates potential reductions in the cost of energy as a pre-commercial 10MW wave farm is developed to a 1000MW of wave farm deployment:

Table 9 - Cost of Energy for a typical Wave farm with 15% learning

Installed Cost of Capacity Energy MW p/kWh 10 25.0 20 21.3 40 18.1 80 15.4 160 13.1 320 11.1 640 9.4 1280 8.0 B&V’s assessment of cost of energy versus probable deployment can be see in Section 2.2.2 and the breakdown of capex and opex can be seen in Section 2.3.6.

Effect of a Step Change Technology

The concept of a step change technology was originaly introduced in Section 2.1.1 of the report, the possible effects of such a step change in technology will be developed in this section. It is important when considering the information presented in this section to consider that this is only an example of one possible scenario. This scenario is based on one major step change, i.e. a new device entering the market, which significantly reduces the cost of electricity, occurring in 2012. The step change technology reduces the cost of electricity. The effect of this new technology is dipicted in Figure 19, the learning rate remains at a constant level of 12%, with the cost of electricity reducing as shown.

45.0 Effect of a Step change technology, introduced in 2012, on the cost of electricity 40.0 Cost of electricity

35.0 Step change 30.0 technology introduced 25.0

p/kWh 20.0

15.0

10.0

5.0

0.0

2 6 0 4 8 08 12 16 20 24 28 0 010 0 014 0 018 0 022 0 026 0 03 03 04 04 04 2 2 2 2 2 2 2 2 2 2 2 2030 2 2034 2 2038 2 2042 2 2046 2 2050 Year

Figure 19 Effect of Step Change Technology on Cost of Electricity

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2.3.2 Supply chain performance

2.3.2.1 Provide a high level description of the marine generation supply chain and provide a representative breakdown of major costs across the supply chain elements and by major type of cost (e.g., labour, materials, etc)

The marine generation supply chain’s suppliers are evaluated in Section 4.1, and Figure 41 in that section breaks the supply chain into its 8 major areas. This section adds a financial aspect to the supply chain assessment. The categories highlighted in Figure 41 are listed here along with detailed descriptions of their associated costs;

Table 10 Supply chain components and major associated costs Major Likelihood of Technical or impact of Supply Chain Components Associated performance large scale challenges to overcome Costs deployment Feasibility and survey – can be linked closely to the wind industry, currently a great deal of time is spent assessing a site to ascertain the particular size, location and number of devices Labour Med Sharing information that will achieve the greatest p/kWhr. The wave industry will follow similar trends and therefore a relatively large amount of time, money and resources will be required. Planning/permits – is a major issue in wind farm development due to a general public resistance in most areas. The wave industry is likely to face One body controlling less resistance to new the offshore planning Labour Med developments due to the low and permits (for visual impact. This could result example, MMO) in planning applications moving faster through the process benefiting the cost of projects. Design – is currently the main focus for financial investment as developers are still progressing their ideas. As the Learning in device industry grows and a clear Labour, Med preferred design emerges these development design costs will reduce, however investment in design will always be required for step change solutions and improved

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efficiencies. Manufacture – As the industry develops manufacturing will incur the highest costs associated with the supply chain. Currently the supply of components is being carried out Labour, on an ad hoc basis as Materials, Learning in High technology developers select Specialist manufacture their suppliers for their first tools prototypes. This process will have to grow to accommodate the demand in wave devices if the supply chain is going to remain in the UK. Testing and Certification – Labour, The testing procedure is Cost of testing at facilities such unlikely to decrease Low as EMEC and Wavehub. Test considerably until the Facilities large scale deployment Installation - Delays and reliance upon other industries The costs of vessels due to restricted access to could increase with vessels will be key to the cost Labour, Med demand; however, the implications of this area. Vessels installation process Currently there is a distinct lack should improve. of commercial vessels suitable for installation of these devices. Operation and Maintenance - Access to vessels will be key to Labour, The O&M costs are the cost implications of this currently high due to the area. Currently there is a Vessels low reliability of the distinct lack of commercial and other Med wave devices. As the vessels available for machinery, reliability improves the maintenance of devices as requirement for O&M described in Section 1.1.4. Materials will decrease.

Decommissioning – currently this is not required. However, test devices and offshore Labour, prototypes may have to be Decommissioning costs removed in the near future. Specialised are considered Low Other than onshore OWCs there tools negligible due to are very few offshore devices discount rates. which will be fixed to the Vessels seabed and therefore the most important factor will be vessels.

The breakdown of costs of the supply chain have not been studied in detail in this review, therefore the breakdown for the supply chain that was produced during the in depth study of wave devices in the Marine Energy Challenge has been supplied below. Figure 20 provides a breakdown within the capital costs and Figure 21 provides a breakdown of the operational

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and maintenance costs. The study during the MEC estimated that the CAPEX – OPEX split, assuming that the OPEX costs are the lifetime costs, are 55% and 45% respectively. This breakdown represents a specific device and a specific location and therefore it is important to recognise that the split presented would vary with both. It does nevertheless provide an indication that the majority of the supply chain costs are associated with the device itself which includes material, components and labour. Installation is also estimated to be a higher percentage of the capital costs particularly while there are likely to be limitations on vessel for installation (see Section 1.1.4). Moorings are also another site specific component which not only have to consider the geology of the area, but the tidal currents also have to be included in the assessment which may require the moorings to cope with additional loads which subsequently increases the costs.

Figure 20 Breakdown of capital costs of a wave farm37

The breakdown of the operational costs in Figure 21 is also device specific and therefore, although it demonstrates a breakdown, it would vary with device and location. Due to the early stage of the wave energy device development, the unplanned maintenance is considerably higher than would be expected when the devices reach large scale commercial deployment. Ideally the visits to the device would be for overall and general maintenance rather than unplanned failures.

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Figure 21 Breakdown of O&M costs of a wave farm

The percentage split by stage in the value chain has been estimated in Table 11, this information has been created in house using the information presented in this section and our experience. The supply chain is further split into Capex and Opex costs, and analysed for the current situation and key future dates. The Capex emphasis on R&D and Engineering design identified in 2008 will reduce with increasing levels of Manufacturing and Installation as we progress to 2050

Table 11 Total cost of a wave project broken down into Supply chain components (%) Capex Opex % of Total costs Current 2020 2030 2050 Current 2020 2030 2050 R&D 15 10 8 3 10 5 3 0 Engineering & 25 10 8 5 15 10 7 5 Design Manufacture and 45 60 64 72 5 5 5 5 Fabrication Installation 15 20 20 20 30 20 20 15 Operation & 0 0 0 0 40 60 65 75 Maintenance

2.3.3 Component technology learning effects

2.3.3.1 Provide anticipated learning curves for component technologies in the parts of the wave generation system or the wider supply chain where significant operational improvements are expected – the individual component learning effects should underpin the overall learning effect in section 2.3.1

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The anticipated learning effects for the component technologies and wider supply chain that are expected to provide a significant operational improvement to wave energy are identified in Table 12. A description is also provided, which explains how these learning effects were determined.

Table 12 Most significant components for learning Component Technologies Category Learning rates38 Mechanical, hydrodynamic, control and offshore Design 10 – 20% Mooring Tethers, Anchors and WEC Connection Mooring 5 – 10% Access and requirement Vessels Supply chain Generator Powertrain 15 – 25% AC/DC/AC Power Converter Powertrain 15 – 25% Device onboard electrics and interconnections Electrical 15 – 25% Pumps, turbines and other components Mechanical 15 – 25% Floats and device body Structural Materials 5 – 10% Offshore Substation Platform Structural Materials 5 – 10%

The components summarised in Table 12 and the areas from the wider supply chain are, individually, not new. They are only new in their application in wave energy generation. For this reason there has been considerable learning throughout their previous history with other industries. There is hence no reason as to why within this application these components should learn at a different rate. NASA compiled research on learning rates/progress ratios for other industries and these are presented below. B&V and Entec are of the opinion that these rates are the most robust and can be applied here given the lack of industry experience.

Low High

Purchased Parts 85% 88% Raw materials 93% 96% Repetitive welding operations 90% 90% Repetitive electrical operations 75% 85% Repetitive machining or punch-press operations 90% 95% Repetitive electronics manufacturing 90% 95% Complex machine tools for new models 75% 85% Shipbuilding 80% 85% Construction operations 70% 90% Aerospace 85% 85% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Figure 22 Progress ratios from other industries39

Further explanation of the learning rates or requirement for cost reduction

As part of a study completed by B&V for the Carbon Trust at the start of MEA Strand B the breakdown of costs for 10 wave devices was determined. The study identified components which: 1. Contribute significantly to device costs, generally across many different device types 2. Have potential for significant cost reductions; and

38 NASA, Leon M. Delionback, Guidelines for Application of Learning/Cost Improvement Curves (NASA Report TM X-64968, 1975) 39 NASA, Leon M. Delionback, Guidelines for Application of Learning/Cost Improvement Curves (NASA Report TM X-64968, 1975) Black & Veatch Ltd Wave Review Phase 2_Rev0 66

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3. Do not benefit from knowledge transfer from another industry, therefore are specific to wave energy. The components of mooring, powertrain and structural were selected for Strand B because the Carbon Trust could contribute to their general development and thus help the industry as a whole. There are additional areas of high spending in technology components where cost reduction will have to come from individual developers device improvements or the wider supply chain itself.

B&V and Entec have identified 6 areas of particularly high spend which could benefit from cost reduction (which includes the 3 identified in the MEA Strand B report), supply chain developments (learning by doing), or economies of scale, the latter two of which will be discussed in more detail Section 2.3.4 and 2.3.5. Moorings (Strand B) Powertrain (Strand B) Structural (Strand B) Vessels Electrical Mechanical We also believe that design costs will be considerably reduced by learning and therefore design has also been considered as a component of cost. There are currently no studies or predictions that have been completed which provide detailed assessments of the learning predicted for components in the wave industry therefore B&V and Entec have assessed the stage of learning that these components of wave energy development are at, which will help identify the potential for learning in the future.

There are 6 stages of learning (Table 13) which describe the mechanisms and current cost level. These learning styles have been applied to the components, provided above, in order to establish what the potential for learning is. The results can be found in Table 14.

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Table 13 Stylised learning stages

Commercial Stage Mechanisms Cost market share Players 1 Invention Seeking stumbling upon new ideas; High, but difficult to attribute to a 0% MEC breakthroughs; basic research particular idea or product EPSRC Supergen Universities SMEs 2 RD&D Applied research, research (Very) high, increasingly focussed 0% MEC development and demonstration on particular promising ideas and DTI Renewable (RD&D) projects products Energy Programme SMEs

3 Niche market Identification of special niche High but declining with 0-5% Wavehub comm- applications; investments in field standardisation of production SMEs ercialisation projects; "learning by doing"; close Some industrial relationships between suppliers and users 4 Pervasive Standardisation and mass Rapidly declining Rapidly rising ROC market diffusion production; economies of scale; (5-50%) Industry building of network effects Utilites 5 Saturation Exhaustion of improvement Low, sometimes declining Maximum (up … potentials and scale economies; to 100%) arrival of more efficient competitors into market; redefinition of performance requirements

6 Senescence Domination by superior competitors; Low sometimes declining Declining … inability to compete because of exhausted improvement potentials

Table 14 Summary of learning stages applied to high cost components of technology and the supply chain Component Learning stage Explanation Design 1 – 2 Although a number of companies have designed an operating device there is considerable effort to ensure performance is optimised, in addition to searching for potential step change technologies Moorings 1 - 2 CT is currently researching generic mooring improvements, however developers are also learning by doing and installing devices. Vessels 1 - 2 Vessel costs have made up a large part of early project costs, primarily because of high demand for vessels from other industries. There is an established vessels market for oil and gas and offshore wind, however specialist vessel may ultimately be developed for the wave industry. Powertrain 1 - 2 Although the components are relatively standard, the application of and variation from the standard components is still being carried out under learning by searching and doing which is improving the efficiency of devices. Electrical 1 - 2 Similarly to powertrain, the electrical systems are made from off the shelf components which are on occasion being adapted for such harsh conditions. Mechanical 1 - 2 Mechanical components are currently bought off the shelf

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however there is the potential for wave device specific components to be developed which may decrease cost of energy through learning, economies of scale, and improved performance. Structural 2 The cost of the structure of wave devices is the highest because it is the largest component of many wave devices. However there is limited learning that can occur for most devices. The size and shape can be altered (see Section 2.3.5) and the material can sometimes be changed.

B&V and Entec believe that, within their application to wave energy, most of these components of wave device development and deployment are all at the early stages of learning. This means that the current costs of these components are high but that little learning in this application has occurred, and therefore there is still significant cost reduction potential. The issue is how to determine a likely learning rate, and this is discussed below.

Overall learning effect The data gathered during the main Marine Energy Challenge are the result of detailed and diligent engineering assessments from several organisations. They are reasonably robust but carry varying degrees of risk reflecting the early stage of development of the technology. B&V and Entec are of the opinion that component progress ratios provided in Figure 22 back up the learning rate of 10-15% described in Section 2.3.1 because the average of the subsequent learning component learning rates, derived from Figure 22 and provided as a summary in Table 12, is in line with the MEC prediction.

The wind industry has been used as a comparator for the wave industry because it has faced some of the same challenges. However, B&V and Entec strongly believe that there are some fundamental reasons why the wave industry learning rate will always be lower than that of the wind industry. Wind industry learning rate estimations vary depending on the organisation calculating it, and the year from which the assessment began to when it finished. The mid range is from 6% - 25%, with the outer range extending to 32% learning40. The most commonly referenced wind industry learning rate is the IEA established 18%41 which spans 1980 through to 1995. The most recent study by the Unversity of Cambridge describes a learning rate of 12.7% from 1990 to 200342. This latter assessment models the component costs, increase in turbine size and subsequent improved performance, but it does not include economies of scale in the supply chain. The wind industry has benefited from the ability to learn a lot onshore where testing and development is much cheaper. The turbines have progressed naturally to have longer blades to capture more energy and thus use taller monopiles, this gives an added advantage of reducing the turbulence around the turbine caused by wind shear and of placing the turbines in the energetic winds found higher up. Finally, as these turbines have got larger there is less cost associated (per kW) from project costs, cable installations, and grid connection.

In contrast, the majority of the devices being developed in the wave industry will not be able to scale up in the same manner because there is a limitation due to the requirement for resonance effect. There are some exceptions, but even for these it is not necessarily economically viable to keep increasing their size as has been then case for wind turbines.

40 Hans Martin Junginger, Learning in renewable energy technology development, University of Utrecht, 2005, ISBN 90-393-0486-6 41 IEA Experience Curves for Energy Technology Policy 2000, ISBN 92-64-17650-0 - 2000 42 Coulomb and Neuhoff, Learning curves and changing product attributes; the case of wind turbines, University of Cambridge, 2005 Black & Veatch Ltd Wave Review Phase 2_Rev0 69

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Certainly, making machines larger does not mean they access a better resource, as making wind turbines taller does.

It is for this reason that B&V and Entec are confident of the learning rate estimate of the 10 – 15% for the wave industry, and that the wave industry once established at a few 10’s of MW will not learn faster than the wind industry. We expect that this view will not be shared by many of the optimistic members of the wave energy industry who consider that the wave industry would learn faster than the wind industry. Obviously faster learning produces lower cost of energy and this is the main driver for the optimistic industry members to assume that the wave industry would learn faster than the wind industry. With increasing prices of electricity wave energy will become more viable however we believe, as presented here that there is strong evidence that learning is unlikely to exceed the wind industry.

2.3.4 Economies of scale

Our estimated breakdown of the overall learning rate is provided below, followed by a short description of how this was obtained:

Learning effects 8 – 14% Supply chain improvements and economies of scale 1 – 7%

Explanation Scale economies are considered as part of the overall learning rate that is established for components and industries alike. B&V and Entec would like to highlight that separating out an estimation for the economies of scale contribution to the overall learning rate will add to the uncertainty.

Economies of scale also do not apply equally to all components. Some components benefit greatly from economies of scale, whereas other components have only a high level of learning. Where large economies of scale apply there is also often supply chain learning entwined with it.

Within the manufacturing and supply chain industry it is understood that ordering (for instance) 100 of the same item should get you between a 5% and 40% discount depending on the complexity of the item. For a relatively standardised component the discount would be towards the lower end at 5%. Where a component is complex, a discount of up to 40% could be expected with a large order.

Using standard learning theory we established that to achieve a 5-40% discount through economies of scale the learning rate for economies of scale and supply chain learning would need to be 1-7%, see Table 15 below. The table shows that after 128 components the costs would have reduced between ~5% and 40%.

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Table 15 Learning rates achieved for economies of scale Learning

No of Components 1% 7% 1 1.00 1.00 2 0.99 0.93 4 0.98 0.86 8 0.97 0.80 16 0.96 0.75 32 0.95 0.70 64 0.94 0.65 128 0.93 0.60

2.3.5 Cost and performance development

The development of cost of energy (which represents the performance and costs) in terms of the impact from the supply chain, scale economies and learning effects is shown in Figure 23 below. As described in 2.3.4 it is practically impossible to determine the economies of scale separately from the supply chain as it varies with each individual component, let alone individual device concept. An estimation of the supply chain and economies of scale effect on the overall learning was established above as between 1-7%. We have used a split of supply chain 2% and economies of scale 2% for the purpose of showing the development of cost of energy.

The overall learning rate (10-15%) that is considered to be most accurate for the wave energy industry has been described in detail in the Phase 1 report and then in further detail in Section 2.3.3 above. The overall rate has been assumed here to be 12% with an average supply chain effect of 1.5% and average economies of scale effect of 1.5%. The impact of technical learning effects therefore account for 9% of the overall learning of the cost of wave energy. In order to represent the impact of each of the effects on the cost of energy the graph below has been produced using 1.4% effect for supply chain and 1.6% for economies of scale to ensure that they are both accounted for.

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25 Supply chain - 1.4% 20 Economies of scale - 1.6% 15 Learning - 9% p/kWh

10 Overall learning - 12% 5

0 0 500 1000 1500 Installed capacity (MW)

Figure 23 Cost reduction associated with supply chain, economies of scale and learning effects

2.3.6 Global deployment spending

2.3.6.1Estimate the level of deployment for the technology over time

B&V and Entec have derived an estimate of central realistic deployment scenario worldwide. The assumptions and results are presented in Section 1.2.3.2. The central realistic deployment scenario is used here to estimate the overall investment required to achieve this level of deployment.

The total investment required to achieve the central realistic deployment scenario illustrated in Section 1.2.3.2 has been estimated here in Figure 24. The investment is split into yearly Capex and Opex costs. The total investment is equal to the area under the graph, and individual points along the curves represent individual years. Capex costs dominate the investment costs in the early years of deployment as the total Opex costs for a project are estimated to occur over 20 years. This also explains the trend of the Opex becoming more dominant as deployment continues in the long term. Figure 24 provides the yearly investment up until 2020 and the area under the Capex and Opex areas is the total worldwide investment which is summarised here:

• Total investment to 2020 is - £2,208m • Total investment to 2030 is - £15,441m • Total investment to 2050 is – £190,937m

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160 450 Total Opex Costs per year Total Capex Costs per Year 140 World Wide MW Installed per Year 400

350 120

300 100

250 80 £m 200 MW Installed MW 60 150

40 100

20 50

0 - 2008 2012 2016 2020 Year Figure 24 Investment (Capex + Opex) per year to meet probable deployment targets to 2020

9,000 14,000 Total Opex investment per Year Total Capex investment per year 8,000 World Wide MW Installed per Year 12,000

7,000

10,000 6,000

8,000 5,000 £m 4,000 6,000 MW Installed MW

3,000 4,000

2,000

2,000 1,000

- - 2020 2024 2028 2032 2036 2040 2044 2048 Year Figure 25 Investment (Capex + Opex) per year to meet probable deployment targets to 2050

2.3.6.2 Estimate the level of investment required globally to move marine down the learning curve in the deployment stage, by supply chain area

The total investment to meet the probable deployment scenario is split into the individual supply chain components in this section. The percentage split of the supply chain components presented in Table 16 were used to divide the total investment required presented above, to

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give the total investment required split in to the supply chain components. The results for 2020, 2030 and 2050 are summarised in Table 16.

Table 16 Investment in supply chain, for development of Wave Energy Projects, at key dates Total Investment 2020 2030 2050 (£M) R&D 217 1,114 5,736 Engineering & Design 304 1,412 11,845 Manufacture and Fabrication 1,045 6,516 68,863 Installation 489 3,136 35,157 Operation & Maintenance 380 3,491 68,997 Total investment required 2,437 15,671 190,600

This information is presented on a yearly basis in Figure 26 and Figure 27 below, the former of which shows the detail up until 2020. Both the graphs clearly indicate where the majority of spend is for each of the supply chain elements at each year of deployment.

700 R&D Engineering & Design Manufacture and Fabrication Installation Operation & Maintenance 600

500

400 £M

300

200

100

- 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Year

Figure 26 Breakdown of total investment for deployment into supply chain components (2020)

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14,000 R&D Engineering & Design Manufacture and Fabrication Installation Operation & Maintenance 12,000

10,000

8,000 £M

6,000

4,000

2,000

- 2008 2012 2016 2020 2024 2028 2032 2036 2040 2044 2048 Year

Figure 27 Breakdown of total investment for deployment into supply chain components (2050)

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3 BARRIERS TO INNOVATION AND DEPLOYMENT

3.1 Assessment of Hypothesis of Major Deficiencies

A summary of Entec and B&V’s opinion on each of the hypotheses is provided here and further information is provided below. * represents exceptions/changes in hypothesis to allow agreement.

Hypothesis Entec and B&V’s opinion 1 Agree 2 Agree 3 Agree* 4 Agree 5 Agree 6 Disagree 7 Agree

The Carbon Trust and LEK produced a list of major deficiencies which they consider the innovation market may be suffering from at this time. Paul Arwas agreed with B&V and Entec that the most effective way of determining if these deficiencies applied within the wave energy market was to carry out a sample of interviews with technology and project developers, and investors. Due to the limited time available, it was agreed that 5 of the leading technology developers at LEK Innovation Stage 2 would be contacted, along with 5 project developers or investors interested or active in the marine (wave and tidal) market in general. This is a relatively small sample of the market; however we feel that it provides a good overview of market perceptions and a good basis for this assessment.

Entec and B&V’s opinion is provided below each hypothesis, along with the results from the survey - which in the majority of cases generally support our opinion, where the survey does not support our opinion this has been highlighted..

1. Private sector investment is held back by poor visibility of the longer term market potential of marine technologies, given the current high cost of production and uncertainty regarding the prospects of a wide range of marine technologies B&V and Entec’s opinion: Agree We agree with this hypothesis - that there is currently no clear long term market for wave energy, and that this (to some extent) holds back private sector investment (although there has been a reasonably significant investment into the sector despite this lack of visibility). This lack of long term market is primarily because the RO banding allocation of 2 ROCs is not sufficient to support the market immediately after the MRDF (or other countries’ equivalent support schemes), compounded by the fact that the market does not have a clear picture of what it requires. The BWEA are in agreement that there is confusion within the industry about the support that is needed and this is also evident in our small survey. As there are no clearly defined set of needs from the industry, it is perhaps not surprising that there is no clear policy which can support those needs. This has probably resulted in some of the gaps in the funding system.

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B&V and Entec believe that with the current funding systems in the UK there are 3 main areas where wave device developers are likely to fail to have sufficient funding, often leading to other problems as noted in other areas. We have identified these areas throughout this report and have provided a summary below, as well as Figure 42 in Section 4.2 to demonstrate these gaps. • Early stage at TRL 2-3 • Full scale testing (3months demonstration for MRDF) • Post MRDF

We believe that if there was long term visibility of a successful market post MRDF, then this would also close the earlier funding gaps to some extent (through enhanced levels of private funding). However, the public funding of earlier stages should also be reviewed to ensure that there is the correct balance of funding at these stages (particularly at TRL2-3), and that the funding that exists (particularly for full scale testing) is being correctly targeted. There may well also be opportunities for public funding to reduce the total amount of funding needed at various points in the development path (notably in permitting activities). The most important funding area to establish correctly is therefore post MRDF. At a discount rate of 15%, we believe that wave energy technology will initially require c. 5 ROCs (or equivalent) after the MRDF, although this could of course be reduced over time as learning occurs. Market survey There was support and contradiction from the survey in these areas. Generally all parties were in agreement that the Government is trying to establish a market for marine renewables here in the UK, that they have put in a number of policy and financial measures (the success of these is not agreed upon however), and that the Government is in the process of trying to build up support for the marine industry. Two technology developers were of the opinion that there were definite flaws in Government’s ability to deliver adequate signals for a market to develop because in their opinion investors and project developers cannot foresee any market. Those participants who commented on policy within the UK were supportive that policy was in place to encourage innovation and therefore marine technologies. Two developers and one investor mentioned the positive signals from the development of the Renewables Obligation, particularly that it did extend to 2027. However, one technology developer was vociferous in stating their disappointment at the levels of banding allocated to wave and tidal technologies and that it was not sufficient to support the market. Recent feedback from the Ocean Energy Group run by the Renewable Energy Association (REA) stated that the RO banding system is likely to replace the MSO and therefore banding in Scotland would be set at a higher rate to match the MSO. It was suggested that England and Wales match these higher rates for tidal, 3ROCs/MWh, and for wave, 5ROCs/MWh. A different technology developer stated that the banded ROC support was comparable to the level of feed in tariff support available elsewhere and was therefore satisfied that it matched other options for support. The type of funding and support was discussed by most technology and project developers, and investors, and there were mixed views on whether a feed-in tariff support mechanism would be more successful than the ROCs system in place. One technology developer stated that it would cause more bureaucratic delays if the system was changed; however, a system similar to the Scottish ROC system would be welcomed. One technology developer was also supportive of ROCs but was concerned about when the market would be ready to utilise them as they still have to reach MRDF. The implementation of projects, for example Wavehub, and the delays that this has faced has caused two of the technology developers interviewed to lose confidence in the UK support systems.

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Demand itself is not considered a problem, because there is a considerable demand for energy – prices are rising – and the general public are showing more support for renewable energy. Many companies are now investing in renewable energy as part of their plans to reduce their carbon emissions. To provide a long term market signal, technology/project developers and investors were similarly placed in that they wanted a smoother funding process from R&D through to development (the Irish system was referenced on a number of occasions), and a mid scale test centre that would allow mid scale testing, which would be cheaper for developers, was also mentioned. One investor clearly stated that there were too many devices in the industry for investors to have a clear view of which devices were going to be successful, and that this may be a consequence of the means in which public funding at R&D stage is distributed. This is believed by this investor to be a wide problem for private investors for the marine industry. 2. In addition, investors are wary of planning controls and grid infrastructure constraints that may limit the opportunity in the short term B&V and Entec’s opinion: Agree B&V and Entec believe that there are three main areas where there are problems with planning and grid infrastructure and these result in our agreement with this hypothesis that planning and grid infrastructure are affecting investors’ confidence. Firstly, technology developers have been spending a lot of their investors’ hard-earned money on environmental permitting - which has been prolonged and expensive because this technology is new to the regulators. This will continue to cost the technology developers a considerable amount of their budget if they are installing in a new location that has not previously had an environmental statement completed for a marine energy device. We believe, and the BWEA agree, that a system of grants for the environmental assessments should be provided for the first technology developer to install in a new area. This would allow the regulators time to learn about the new technology, and would provide a bank of environmental information for technology developers who follow. This investment generates little IP but has wider industry acceleration benefits. The second issue is the co-ordination of planning and permitting. The Planning Bill, if successfully passed through Government, would implement the proposals of the May 2007 Planning White Paper which includes forming a single consents regime for major infrastructure projects under an independent Infrastructure Planning Commission (IPC). Existing legislation currently relevant to marine energy deployments would be covered by the IPC, however they would also be covered by the MMO (see Section 3.2.1.1). It is believed that the IPC will have responsibility for all projects over 100MW and the MMO will be responsible for projects under 100MW. That said, since the MMO will have expertise in offshore, it is likely that the IPC will defer to the MMO for all marine projects, this it makes sense for the MMO to deal with all marine projects regardless of size. Finally, there is the grid infrastructure, which is more of a long term issue as previously discussed. However, it impacts the visibility that investors have of the long term market and therefore their commitment in the short term. Market survey A combination of support and contradiction was established in the sample of the sector. The developers are concerned about the access to the grid and the limitations that this may cause in the future; however, there was general consensus that there are other more pressing concerns in the short term which are included in the discussions for other hypotheses.

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Grid issues were considered a long term problem for two technology developers who do not see that there can be success without the commitment of the Government to both lead this issue and change the remit of OFGEM. This view was supported strongly by one investor as well - however they did believe that there was a near term solution to this problem which they have presented to the Crown Estate (with mixed responses to date). It was recognised by the interviewees that there is a very long and complex planning process in the UK and that technology developers are footing the bill for all these costs as well as environmental assessments. Technology developers and investors highlighted that Government could provide support here; for example, Scotland is starting to complete Strategic Environmental Assessments which remove the requirement for developers to survey the same areas43. In addition if the UK Government were to provide a simpler route to planning this would be welcomed, and make a significant difference to the rate of project implementation. The marine industry has already encountered the complexities of the planning process for the offshore wind industry and therefore the industry is very aware of the time and resource consuming nature of the process, which is likely to be similar for wave and tidal if a ‘one- stop-shop’ is not created. One investor would like the Crown Estate to use a completely new process for the tender/allocation of sites, for tidal stream in particular, but B&V and Entec feel that this view would apply to wave as well. The Crown Estate tendering process for the licensing of sites works for the wind industry as the technology is all the same, the differences in wave and tidal devices however will require more detailed investigations as to the suitability for one technology at a particular site. This could be changed in the short term in order to support the industry. Similarly the REA have requested that the tendering process, that is used for wind farms, is not suitable at this stage for wave and tidal devices because it is not at a competitive level. 3. There are important knowledge spillover effects, given the wide array of devices that are currently in development and the high cost of establishing a demonstration facility B&V and Entec’s opinion: Agree (in part) The market survey revealed concerns regarding IP and sharing technical information; however, B&V and Entec believe that there are important knowledge spillover effects for the non-IP-protectable portions of project development. These are mainly the planning, permitting, and environmental statement portions, where authorities need to be ‘educated’ by the industry but this also includes ‘educating’ demonstration facilities themselves. The costs for these areas will be considerably higher for the first technology developers to install. All the technology developers to follow will benefit from that first installation because the regulators will process any following projects more quickly and the environmental statements are all publicly available. In addition, they will learn from watching the whole installation process of that first developer, benefiting from learning from any mistakes which are publicised. We are less confident that there are important knowledge spillover effects on the technical side, as the technology developers are secretive and patent their ideas where possible. Market Survey The deficiency that relates to this hypothesis is under technology development, which discusses if public funding inadequately addresses knowledge spillover.

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B&V and Entec recognise that knowledge spillover would increase the speed at which the industry learns and therefore converges on one technology. However, when talking to developers and investors active at this time, their opinion is that the device concepts and IP has to be actively protected. One investor stated that they have concerns over patenting due to the number of patenting authorities and the small differences in many patents. They consider that developers with patents show willing to protect their concept which is a good sign to them as investors that they are serious. However, it is not considered an essential factor in their investment. One credible device developer, who has received in the region of £10m in a combination of public funding from two other countries, and a substantial amount from private investors, has not been able to access any UK funding although they have applied for all sources. However, another developer has applied for funding or participation in certain funding streams (e.g. ETI and the Carbon Trust) but due to the contractual conditions to share IP with the research organisations or funding bodies the developer has chosen not to accept funding or participate. On the contrary another developer does not see sharing their IP as a negative impact and feels that they get a lot of expertise committed to their device development in return. 4. These factors, combined with the classical problems of low levels of R&D investment in the power sector (e.g., absence of early adopter premium pricing, subsidies for conventional fuels, bias towards centralised generation and concentrated industry structure) create the case for a real market failure and hence the need for public sector support B&V and Entec’s opinion: Agree We have determined that there is currently inadequate and incomplete support to ensure that wave energy technology reaches commercialisation and therefore have summarised the funding available. There is a definite requirement for public sector support. Figure 42 in Section 4.2 summarises the funding support for the wave energy industry at each technology readiness level (TRL) that is currently provided by the public sector, and the remainder therefore that is required by private sector support. Market Survey The developers and investors who discussed R&D funding considered it to be spread wide (across many devices) and therefore ineffective at supporting technologies through to the next stage. One investor described it as “split, overly bureaucratic, and insufficient”. As previously stated, one developer has not had access to any UK funding. Another developer believed that public funding was useful but that 90% of their funding had been through the private sector. Serious concern was expressed from 7 of those interviewed about the future of marine energy in the UK for the following reasons (one or a combination of): - Insufficient support through ROCs (developer); - Feed in tariff essential (investor); (B&V and Entec specifically disagree that it is essential) - Too slow in terms of decisions on planning, funding, and grid (developer); - The funding on offer is disjointed and difficult to access (developers and investors). However, 2 of the investors believed that some developers may have misled the Government (unintentionally with over-optimism of the industry or their technology). - The Government does not have a long term practical marine deployment strategy;

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- Government agencies are slow and uncooperative to look at options/projects that could be funded by private sector (investment banks) in order to move the market forward now (investment bank – this will be described further in final draft). In summary the overall view was that Government are trying to implement programmes and funding streams to support the industry; however, there are continuing problems with gaps in, and the accessibility of, support. There is a lot of interest and activity from private sector investors, and if there was a shake-out of developers some clear leaders may be identified which could be supported. 5. However, currently the public sector support is inadequate in terms of the amount (especially as costs are increasing with the more advanced stages of some devices, and is inappropriate) e.g., the public sector is unwilling to fund multiple RD&D projects at scale, given the risks involved B&V and Entec’s opinion: Agree B&V and Entec agree with this hypothesis because although the MRDF has provided a good initial signal to the industry, the cost of the technology has increased, there is limited support for the 3 month demonstration entry requirement (both in terms of scope and applicability), and there is not sufficient support post the MRDF (see Figure 42 Section 4.2). Market Survey Two investors and one developer expressed that there were specific problems with funding at R&D stage; in particular that there was widespread funding and therefore no clear move forward for a number of leading technologies from which others could follow. All developers and investors spoken to agreed that although the MRDF was inaccessible at this stage, the idea was correct, it gave good signals to the market and that it was overall a good move by Government. However, some of the interviewees, particularly technology developers, have recognised a number of areas which are currently preventing developers from achieving 3 months continuous operation. These are the requirement for a test centre that is mid scale and therefore cheaper to access, and support to develop and demonstrate the first device which would be expected to operate for the 3 months required to access the MRDF. The investors and project developers agreed that the MRDF was a good sign to investors but they considered the 3 months continuous operation fair if they were expected to invest in the technology. The RAB report states that the MRDF was early, however this was perhaps due to over optimism in the industry which led Government to believe that it was ready for deployment. The RAB report highlights the requirement for further communication between all interested parties in the marine industry and this is supported by one project developer and one investor who were aware of unrealistic promises from particular technology developers in the industry. 6. Utilities, the natural users of the technology, are rather risk averse due to the nature of power market regulation and have limited appetite for the exposure to a large investment in marine technology B&V and Entec’s opinion: Disagree B&V and Entec both disagree with this hypothesis because there is significant evidence of support and investment by the private sector (including utilities) presented in the market survey below and the rest of this report (and in our own experience). In particular, the leading wave energy developers have primarily been funded by the private sector (some by as much as 10:1). The utilities have specifically been quite active in the market, and those to whom we have spoken are very keen to invest in the right technology once the technology developers have successfully achieved their 3 months demonstration.

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Market Survey This hypothesis is contradicted by the majority of technology developers, utilities, and the investors we spoke to. Two technology developers highlighted the high level of interest that they have received from utilities and that they are currently very active in the marine industry in terms of searching for ideas and concepts that they feel comfortable to invest in. It was stated by one technology developer that investment from utilities was sought after in comparison to venture capital funding because project developers are interested in long term investments. One investor in particular mentioned the unrealistic claims by developers which have immediately put them off investing in certain technologies; however, where developers are realistic, they remain interested. 7. Many projects struggle to progress as they are small in scale and lack the resources to fund costly demonstration projects and struggle to navigate the complex planning issues B&V and Entec’s opinion: Agree

We agree with this hypothesis and Figure 42 demonstrates the gaps where we believe the technology developers are most likely to struggle due to gaps in funding. We have highlighted the problems with what we believe may be potential confusion between the IPC and the MMO which are both organisations designed to simplify the planning process. We also highlight the retreat of BERR from supporting wave in favour of the ETI that has yet to offer alternative support.

Market Survey

This hypothesis is supported by the industry.

The general view was that small companies developing technology, generally without the significant capital funding to back them, are being subjected to many hurdles in order to deploy their technology. There has been one example of a developer in the marine industry having to find resource and funding for the consenting and planning process which was as complex for a single marine device as it would be for a large power station (according to the technology developer).

Technology and project developers stated that they are aware of the lack of engineering, planning and environmental resource throughout the UK. Some technology developers find it difficult to attract experienced engineers particularly because they would often transfer from more lucrative roles in the offshore engineering field. Many of those who do transfer to the renewables industry have a moral inclination to do so.

3.2 Regulation and Deployment Incentives

3.2.1.1 Describe the UK Government’s current and planned deployment incentives and regulation in relation to creating a market for marine and promoting its deployment

Deployment incentives The deployment incentives in the UK are listed and described below: a) Renewables Obligation The renewables obligation is a “renewable portfolio standard (RPS)” method of support which is revenue based. It is designed to facilitate large-scale deployment of renewables which would lead to long-term cost reductions. Black & Veatch Ltd Wave Review Phase 2_Rev0 82

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In 2006 the Energy Review Report announced there would be a number of changes to the renewables obligation. Berr’s aim was to provide different levels of support for the different technologies depending on how commercially advanced the individual technology was. This is likely to come into effect with the future phases of the EU Emissions Trading Scheme (2013). Figure 28 below gives the proposed breakdowns under which wave and tidal stream energy are under the emerging technology groups which would receive 2ROCs/MWh.

Figure 28 Proposed Banding as provided in Berr’s Reform of the Renewables Obligation44 The impact of this level of ROC support is demonstrated in the figure below which shows where the different level of ROCs support enables wave energy to meet the base rate of electricity. Initially 5 ROCs would be required but by 2018 only 2ROCs would be required to meet the baseline electricity costs.

45.0 Cost of Electricity with no ROC's

40.0 Cost of Electricity with 2 ROC's

Cost of Electricity with 3 ROC's 35.0 Cost of Electricity with 4 ROC's

30.0 Cost of Electricity with 5 ROC's

Base rate of Electrcity 25.0 2 ROC's up to 2026, 1 ROC up to 2036, no

Year ROC's thereafter 20.0

15.0

10.0

5.0

0.0

2 08 3 42 0 0 0 2 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2 2034 2036 2038 2040 2 2044 2046 2048 2050 p/kWh

Figure 29 Impact of varying levels of ROCs on cost of wave energy

44 http://www.berr.gov.uk/files/file39497.pdf Black & Veatch Ltd Wave Review Phase 2_Rev0 83

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b) Marine Supply Obligation (Scotland) The new MSO will operate only in Scotland and will fund a marine renewable obligation – RPS for wave and tidal renewable energy sources, initially, from 2008-2015. The target contribution to the grid is 75MW from a 50% share of wave and tidal stream energy. The renewable energy supply will thus have to include a percentage of marine renewable energy supply from Scottish Waters. There will be a buy-out price allocated which is considered at this time to be £175/MWh for wave and £105MWh for tidal stream. c) Marine Renewables Deployment Fund (MRDF) The MRDF is a £50m fund which was set up in 2004 by BERR to provide; • Wave and tidal energy demonstration scheme (£42m for capital grants and revenue support at early commercialisation stage) • Environmental research • Related research • And infrastructure support • Currently no devices have been supported by the scheme.

d) Scottish Wave and Tidal Energy Support Scheme The Scottish Government provided £13m to provide grants and support to businesses who are working to develop installation and commissioning of pre-commercial wave and tidal stream energy. The majority of the fund has been used in the development and running of the EMEC test centre in addition to supporting 9 test projects to date. Support has gone to the following wave energy projects and was taken directly from Scottish Government website45: • EMEC - £2.5m • CRE Energy Ltd £4.141 million to use four of Ocean Power Delivery's Pelamis devices arranged as a single wave energy array. Each device will be rated at 750kW giving a total array of output of 3MW • AWS Ocean Energy £2.128 million design, construction, installation, testing and demonstration of a 500kW Archimedes Wave Swing ("AWS") wave energy converter at the European Wave Energy Centre • Ocean Power Technology £0.598 million The PowerBuoy is a buoy acting as a point absorber which moves up and down a central 'spar' as the wave passes by • Aquamarine £0.275 million Oyster devices are designed to exploit the wave resource in near-shore locations. The near-shore environment is considered to be an optimal location for a device as the waves retain significant power compared to an offshore location but the damaging extreme waves are limited by water depth. This location is considered to reduce the capital and operating costs and hence maximise economic efficiency • Wavegen £0.149 million development and testing of an advanced Wells turbine system which is

45 Scottish Government website news release http://www.scotland.gov.uk/News/Releases/2007/02/20091751 accessed 19/06/08 Black & Veatch Ltd Wave Review Phase 2_Rev0 84

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expected to be utilized on a wave energy project on the Western Isles, at Siadar, which is currently being developed with npower renewables. This project will use Wavegen's existing Oscillating Water Column (OWC) at the Limpet site, near Portnahaven on the island of Islay e) Northern Ireland’s Research and Demonstration Programme £15.2m was provided by the Secretary of State in 2006 to encourage the development and testing of new renewable energy technologies. The UK has now supported a number of projects with capital grants which have resulted in the development of 3 different types of test centres across the UK.

i. Marine environment test tanks – New and Renewable Energy Test Centre (NaREC) in Northumberland, provides the facilities to test small and large scale wave and tidal prototype devices in tanks and open sea test bays from which they have grid connection facilities.

ii. Full scale prototype testing – European Marine Energy Centre (EMEC), in Orkney, provides grid connection points in open-ocean off Orkney to test both wave and tidal stream devices. This removes the necessity for individual companies to obtaining installation permits from the Crown Estate, or complete delete EIA assessments because they are all provided as part of the EMEC package.

iii. Commercial small farm installation – Wavehub is a Government funded grid connection point which will consist of four bays. Each of the bays will contain a different wave energy device array that will be rated at a maximum of 5MW.

Deployment regulation Regulation and policy for the installation of marine deployment in the UK is complex and time consuming.

A licence or permit is required from the Crown Estate for any offshore development in territorial waters. Consent under the Electricity Act 1989 (over 1MW) is required, and consent under the Coastal Protection Act 1949, Food and Environmental Protection Act 1985, and the Town and Country Planning Act 1990 could be required depending on the individual project. This varies in Scotland and Northern Ireland; however, it is a similarly complex network of legislation to comply with. The legislation requires planning documentation and environmental permitting to be in place, all of which at the current point in time takes a considerable length of time to complete because the wave and tidal industry in particular does not have a central means of obtaining permission.

BERR states that “The characteristics of an ideal consents process are that it should be efficient in producing a decision as quickly as possible without compromising the thoroughness with which all the issues arising from a particular application need to be considered. The process should also be clear and straightforward so that the administrative and cost burden on the applicant is minimised.”

There is strong hope that the Marine Bill will provide the new Marine Management Organisation the power to consent offshore renewable energy projects, or co-ordinate licensing from relevant Government departments to reduce the application time for developers.

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3.2.1.2 Explain the main differences between the UK’s marine deployment policy and that of markets where the level of deployment may also be significant

There are a number of different types of deployment incentive that are used across the UK, and other countries. The countries which specifically fund wave and tidal stream deployment are UK, Germany, Portugal, United States and South Africa. The types of incentives are included in Figure 30 followed by a description of them and the differences between the UK and other relevant countries.

Figure 30 Policies for Ocean Energy and Renewable Energy

Implementation options The application in the UK of the current policy has focused on the implementation of the Renewables Obligation across all eligible renewable energy technologies, which is known as a renewable portfolio standard (RPS) (quotation obligation). Other countries use different means to implement their policies including feed – in – tariffs (FIT) or tendering system, see Figure 31 below. More detail of these systems is provided below46.

46 Vries (de), H.J., Roos, C.J., Beurskens, L.W.M., Kooijman – van Dijk, A.L., Uyterlinde, M.A. (2003). Renewable electricity policies in Europe. Country fact sheets 2003. Energy research Centre of the Netherlands. ECN Policy Studies. Black & Veatch Ltd Wave Review Phase 2_Rev0 86

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Figure 31 EU Countries Policy Instruments

Feed-in-tariffs are set for a period of years. The cost is that which the distributor must pay to the electricity supplier and it can therefore be described as supply regulated. The consumer would normally then pay an additional fee on their energy bills. This is the method that is used in many European countries including Germany, Spain and Denmark

Figure 32 Classification of policy instruments

The Renewable Portfolio Standard (RPS) which is also called the Green Certificate (GC) system operates in a different manner. It sets quantities of renewable energy that must be produced, distributed and purchased. This therefore is demand regulated according to a percentage of the energy quota consumed. Certificates are awarded for the renewable energy produced and these certificates are sold to those companies not meeting their quotas.

In a Tendering System (TS) renewable energy contracts are auctioned and the additional costs of supplying renewable energy are passed onto the purchaser through a system of levies. Black & Veatch Ltd Wave Review Phase 2_Rev0 87

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Other systems which are used in conjunction with the above primary instruments are subsidies and grants, and tax incentives.

There are advantages and disadvantages of both, but unfortunately where one technique works in one country, it is not guaranteed to work in the next. The RPS system is theoretically effective because the quotas are applied through law, however there have been failings in the UK RO system and the Renewable Obligation has at this time failed to generate a significant renewable energy industry in the UK compared to those developed in the EU under FIT schemes (only 4% of electricity produced by renewable energy BERR,2007). The Renewables Obligation was amended last year in order to account for the short falls of the system. France and Greece have a FIT, which is seen to be successful in Spain (although not for solar energy) and Germany, yet poor contribution by onshore wind has been experienced in France and Greece since its inception47.

Deployment incentives The demand for renewables has been generated by international (EU) and national policy on the contribution of renewable energy to the electricity supply. All the countries investigated had renewable energy policies in place; however it is beyond the scope of this short assessment to include them all here. Some key countries, their targets and the methods for implementing the policy are discussed below.

The United Kingdom deployment incentives The UK renewable energy policy states that the target is to achieve 20% of electricity generation from renewable energy by 2020. This feeds down from the Kyoto Protocol, through European Legislation. The UK agreed to this binding European target of 20% in 2007 and the strategy for implementation in each country has still to be announced; the UK Government plan to release the new renewable energy strategy in spring 2009. All EU countries and many countries outside the EU now have a renewable energy policy, the majority of which have been adapted to include wave and tidal stream developments.

Although the UK has a general renewable energy obligation multiple banding has now been defined and marine renewables are specifically identified as being eligible.

Ireland’s deployment incentives The EU Renewables Directive states that Ireland has committed to providing 13.2% of the electricity consumption from renewable energy by 2010. The two main instruments to achieve this are a corporate tax relief and a bidding system. The AER bidding system allows companies to compete for the right to produce renewable electricity and a 15 year supply agreement.

Portugal deployment incentives

Portugal, Spain, Germany, and Denmark all use the FIT. Portugal has set a target of 39% of electricity to be produced from renewable energy by 2020 which will also be supported by subsidies (up to 40%), tendering procedures for wind and biomass, and tax reductions. Portugal is nevertheless not expected to meet their renewable energy target (http://ec.europa.eu/energy/energy_policy/facts_en.htm). The Portuguese Government previously agreed to a €0.23/kWh for the first 20MW installed. This has been agreed for the initial 3 device Pelamis and Enersis wave farm installation at Agucadoura and, if they

47 Rey, Daniel Spanish Renewable Energy Policy Anaylsis; A Broader View. Cranfield Univeristy 2007 Black & Veatch Ltd Wave Review Phase 2_Rev0 88

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perform satisfactorily, the remaining 28 devices to complete the installation. The Government have since however changed the law that each innovative technology farm installation will be agreed between the developer and the Government on a case by case basis. The Pelamis project also received a €1.25million grant from DEMTEC to help fund the demonstration project48. The DEMTEC support scheme has so far, in addition to this project, supported the full scale testing of the Archimedes Wave Swing, the Pico Oscillating Water Column (OWC) Pilot Plant in the Azores, and the Douro Breakwater OWC.

Australia

Australia has an initial target of 9500GWh/electricity generation by 2010, and a new target of 45,000GWh of electricity by 2020. They have had a RPS system since 1997; however, in April 2001 they put the Mandatory Renewable Energy Target in place. They have already got two demonstration projects in Port Kembla and Fremantle. In addition the Renewable Energy Equity Fund (REEF) is available for renewable energy developers who are pre commercialisation. A maximum of £3m funding can be provided from this funding source.

USA

The Energy Policy Act 2005 provides tax incentives and loan guarantees for energy generation from various sources and it separately identifies marine energy. The 10 year Production Tax Credit (PTC) which encourages investors support, has been extended to cover wave and tidal stream electricity generation too.

The USA Department of Energy have also recently announced49 the expected support of $18.5million for Water Power Projects, which will include projects that can demonstrate wave and tidal stream energy extraction (in addition to supporting efficiency improvements for hydropower). There are expected to be around 17 awards made.

The USA has varying targets across the states; however, the US 2005 Energy Bill requires that 3% of electricity production is produced from a renewable source (including wave and tidal). The RPS system applies on a national level in the US, however individual states and regions in both countries do however have feed-in tariffs in place as well.

Permits and licenses for the development of tidal stream technology (and wave energy converters) are issued by the Federal Energy Regulator Commission (FERC) under the Hydrokinetic licensing department in the US.

A full development license from FERC is required to actually construct and install any commercial project; however, it is possible to reserve the first right to apply for a license by obtaining a preliminary permit. The preliminary permit literally reserves a particular area, for up to 3 years, which may be under consideration for development. The 3 years allows the developer time to carry out environmental and engineering assessments to enable them to gather all the relevant information to apply for a license. FERC have recently implemented a strict scrutiny for preliminary permits, for which developers must submit an update report every 6 months. The licensing process has been criticized as causing a delay in this new industry and thus, in order to support this young industry, FERC have developed a Pilot License which allows developers to install a device for testing commercial scale devices

48 Review and Analysis of Ocean Energy Systems; Development and Supporting policies. AEA Energy and Environment report for the IEA implementing agreement on Ocean Energy. June 2006 49 https://e- center.doe.gov/iips/faopor.nsf/UNID/7CA0728BFF68198E8525742C005FEFBC?OpenDocument Black & Veatch Ltd Wave Review Phase 2_Rev0 89

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which allows grid connection (in addition to obtaining revenue from the generation). This type of testing and evaluation is the final step in proving a technology and vital in the move to commercial projects. The conditions for pilot license are: 1 – Projects are under 5MW 2 – Maximum 5 year installation 3 – Not available in areas where environmental designations exist 4 – Applications must be supported by sufficient environmental analysis 5 – Any installation is subject to environmental and other safeguards 6 – The project must be decommissioned

Canada – British Columbia

BCHydro in British Columbia have recently issued a Standing Offer for clean electricity for projects up to 10MW. The technologies have to be “proven generation technologies” which are commercially available, and which have 3 installed and operating projects. It is therefore not an immediate incentive for the industry; however, they are looking to establish a Can$25m Innovative Clean Energy (ICE) Fund which will support new technologies.

All applications for investigative use permits in Canada (British Columbia), which allow a 2 year period of environmental and engineering testing before a full license is applied for by developers, are issued through the British Columbia Government.

3.2.1.3 Explain the main differences between the UK’s marine innovation policy and that of markets where RD&D is also taking place

The policies which encourage deployment are compared above - some of which overlap with innovation policy. The table below gives a summary of all the research and innovation policy in a number of countries where marine energy RD&D is active. The total funding available is not specifically for marine energy, the funding that has been provided to support marine projects is summarised in the following column. A description of the mechanisms developed from successful policy implementation is then provided from the UK perspective.

This shows that the UK appears to have the most policy structure around RD&D of marine renewables in place. From discussions with the developers however, other markets are currently more attractive for early deployment, for example Portugal and Ireland. Both these countries have feed-in tariffs, good accessibility to funding and, particularly in Portugal, there is good access to the grid. This means that attractive markets for RD&D and deployment have been created elsewhere and this is discussed further in the hypotheses Section 3.1 and the barriers Section 3.2.

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Figure 33 Research and innovation policies supporting ocean energy50

The main differences surrounding innovation policy in the UK and other markets is the level of social capital versus the financial capital invested in a market. The pros and cons of both are provided below; however, the general consensus from a review of some other successful and unsuccessful renewable energy markets is that a combination of both is required. Thus innovation policy in countries where there has been a good level of both financial support as well as interaction encouragement has produced a leading market (such as for wind in Denmark). Whilst this difference has yet to be demonstrated anywhere, it seems likely that other countries may be more effective at obtaining the correct balance unless the UK’s traditional approach (which generally appears less interactive) is modified for marine. Background to UK innovation policy Currently there is no specific marine innovation policy in the UK; however, there is policy that is put in place by Government in order to encourage innovation in particular markets. In the 1970s the Government funded a Wave Energy Programme which provided the opportunity for device developers at concept stage to form partnerships with engineering business and this was the first of its kind for the marine industry. After the energy crisis there was little activity or requirement for marine energy innovation until the late 1990s when there was increased emphasis on Global Warming and the role that renewable energy could play. In 2003, the Government published the Innovation Report, "Competing in the Global Economy: the innovation challenge" which was the result of wide stakeholder consultation. This resulted in an increase in support for innovation, particularly in the area of Science but it

50 AEA Energy & Environment on behalf of Sustainable Energy Ireland, Review and Analysis of Ocean Energy Sustems Development and Supporting Policies, 2006 Black & Veatch Ltd Wave Review Phase 2_Rev0 91

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encouraged innovation in other sectors by raising awareness for innovation during policy reviews. The Energy White paper in 2003 and the Energy Review in 2006 increased the activity in innovation in the UK, particularly in marine energy because marine energy was individually cited in the reviews. The Energy White Paper in 2003 specifically highlighted marine energy as a priority area which required further R&D support. The then Scottish Executive, newly formed, also identified the potential marine resource as an area where Scotland could become a world leader. The UK was also identified as having an appropriate skills base and industries for knowledge transfer, in addition to ample resource, which provided an opportunity for the country to become expert in the industry - as the Danish are known for wind power. There have since been a number of non-marine specific programmes that have been developed as part of a wider array of policy development within Government; however, these programmes do encourage innovation in marine energy.

3.2.1.4 Explain the current programmes of funding support for marine technology innovation and the funding provided

Current funding programmes in the UK which support innovation are summarised in the table below. Some programmes are the same as those that support research and development, therefore their descriptions can be found in Appendix B. The Scottish Wave and Tidal Energy Support Scheme (WATES) is described below. Each of the programmes has specific aims and objectives in terms of the development stage at which it supports technology innovation and this can be seen for some of the programmes on Figure 16 and Table 15 below provides a summary of the UK support programmes for marine technology.

Table 17 Summary of UK Support programmes for marine technology

Owner Programme Value Timescale £100m total £15m energy DBERR Technology Programme £40m engineering and 1999-2007 manufacture (fraction for wave from latter 2)

Applied Research 2001 - £250k per device Programme ongoing

Carbon Trust Marine Energy £3m Challenge 2003-2006

Marine Energy 2006-2009 £3.5m Accelerator Wave and Tidal Energy £8m (increased to Scottish Government Support Scheme 2006 – 2008 £13m) (WATES) Engineering & Physical Sciences SuperGen 1 Marine £2.6m 2003-2007 Research Council SuperGen 2 Marine £5.5m 2008-2012 (EPSRC)

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£1bn – 10 years (marine Pilot Programme in ETI fraction unknown) 2008 – 2018 marine energy £5-10m per project

Scottish Government’s Wave and Tidal Energy Support Scheme (WATES) is a £13m scheme that provides funding support to pre-commercial devices that are ready to prove their concept in the offshore environment and will therefore install at the European Marine Energy Centre (EMEC) in Orkney see Section 3.2.1.1 for funded projects.

The scheme is clear to indicate that the information and learning gained from this assessment would be beneficial to the marine industry as a whole however commercially sensitive information would not be shared.

The scheme has been successful because all the feedback from developers and the RAB report is that it was the most accessible scheme with the most effective application form, and all the money has been allocated to projects. The funding has successfully supported 9 projects and funded upgrades at EMEC worth £2.5m. There has been no information available to date if this scheme will be continued and further funding made available. A summary of the programmes offered in the UK including those described in Section 2.1.2 is provided in Table 17.

3.3 Other Current / Short Term Barriers

Table 18 provides a summary of the other current and short term barriers that B&V and Entec believe that the industry face. More detailed costs for the solutions are provided in Section 2.1.2.4.

Table 18 Summary of other short term barriers Other short term barriers Solution Cost Technical ¾ High R&D ¾ Programmes that encourage ¾ Public funding costs i - Step change in CoE i - See Table 4

ii - Incremental reductions in ii - See Table 3 CoE

¾ Lack of ¾ Install accessible ¾ Public funding intermediate intermediate scale testing ~£10m (test centres scale testing could be privatised) Funding ¾ The market ¾ Strong policy ¾ Long term ¾ Public/private ¾ Co-ordination and industry commitment consolidation ¾ £25k/device ~£250k/year ¾ Expectation ¾ Improved communication through conferences etc ¾ Conferences are currently run privately therefore the attendees pays Knowledge ¾ Within ¾ Encouraging social capital ¾ Encouraging social transfer industry capital i - Personnel moving around i - free Black & Veatch Ltd Wave Review Phase 2_Rev0 93

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ii – Conferences ii - free iii - KTN iii - £100k/year

¾ Into industry ¾ Free if there is a ¾ Partnerships and market engineering consortiums firms will be keen to continue to commit Resources ¾ Engineering ¾ Education and training ¾ University courses, issue short training courses from ¾ LCT’s ¾ Market generation will consultants. Client generally provide job security pays. ¾ Competition ¾ Market generation will ¾ Policy and public with oil & gas encourage those interested funding support in this area of work ¾ Policy and public funding support Developer ¾ Lacking in ¾ SME management advice ¾ General cost not management business is not generally co- applicable to the skills knowledge ordinated in the UK Marine industry

¾ Investors may avoid ¾ Developer resource developers with poor or investor support business management or take over business management Planning – ¾ Disjointed ¾ Marine Bill – Marine ¾ £millions for the SEA and time Management Organisation development of the consuming will ideally be given the MMO process power to co-ordinate planning

B&V and Entec have used our in-house expertise, published reports, and industry knowledge and experience to produce a list of barriers which are considered by all these contributors to be preventing or at least slowing the development of the wave energy industry. Through discussions with leading technology developers, and developers already interested in marine energy, these barriers have been confirmed as those which are holding the industry back. The barriers that are considered to be current or short term barriers (i.e. within the next 2 years) are included, and described in further detail below. However, many of these barriers are considered to be future barriers as well, and therefore are also discussed in the other future and long term barriers below.

1) Technical Barriers

The technical barriers are considered to be intrinsically linked to the technology breakthroughs previously discussed in Section 2, which describes the breakthroughs that are required and a timescale for when those breakthroughs are likely to occur. In addition this is linked to the enabling technologies in Section 2.1.3, Phase 1 of the report. Although the above are considered important in the development of an optimum device for the industry these are not considered to be barriers by device developers, they are more like challenges.

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• High R&D costs

Intermediate testing in real sea conditions rather than tank testing - Although there are currently two test centres in the UK, EMEC and NaREC, there is a requirement in the market for an intermediate scale test facility which allows developers to test their devices at an optimum scale. This avoids the extra costs of moving to full scale which is one of the requirements of testing at EMEC, but allows devices to be large enough to avoid any problems that can occur with scaling up results of performance testing if the device is not large enough. It would also be sensible to place any future intermediate test facility at a more accessible location (see Section 2.1.1.1 – System simulation).

High R&D costs - The costs for R&D are considerably higher for wave energy than they are for other Low Carbon emerging technologies, for example PV. Therefore option testing and scaling up of the devices as they move towards commercial readiness is far slower than for technologies that can test numerous prototypes, cheaply and quickly. The impact of this is that the learning in the industry is slower because fewer alternative devices / options can be tested.

An intermediate sized test facility would remove some of this cost (and time). Even though the costs for individual device development are high, the funding organisations have not been coordinated in whom that funding is going to. This has resulted in unsuccessful devices being supported for too long and public money being wasted. This problem is described in more detail in Section 2.1.

Technical barriers - Solutions

The main technical problems are due to the cost of energy. Every technical barrier has been identified because the solution to that barrier would reduce the cost of energy. The solutions to technical barriers are primarily discussed in Section 2.1. However, it can be concluded here that there are 2 main methods for reducing the cost-of energy and thus overcoming the technical barriers, they are presented below along with the solutions:

1 – Step change Step change in cost from a new technology that utilises different materials or a different technical solution to energy extraction Solution – Government funded programme that encourages the development of new ideas (similar to Strand A from the MEC but perhaps with a prize or incentive for a new concept that works).

2 – Incremental steps

Incremental steps by tackling the subset of technical issues (for example efficiency of PTO). Solution – R&D programmes, to which SuperGen and ETI are contributing.

The two over-riding technical barriers presented above (high R&D costs and intermediate testing) can be overcome with what we believe is a small input from Government.

The start-up of a testing facility that would provide an offshore connection point for scaled devices would cost in the region of £10 million based on the cost of EMEC at £14.5million and NaREC at £10 million51. This would provide a vital stepping stone in the development process for renewable energy devices, and would reduce the costs of testing which would in

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the long term save the Government money because devices could be “ruled out” at an early stage.

Providing a co-ordinated and effective UK funding programme that backs winners is the only way to eradicate the wasting of funding on device types that have been proved to be ineffective. Potential solutions that could be implemented to overcome this barrier are presented in the section below on funding as they are more closely linked to those barriers.

2) Funding/Investment

There are three main areas of consideration in terms of the barriers to accessing funding and investment; • the market; • funding from public investors and private investors; • expectation of the supply chain.

A market potential and driver are essential for the adoption of a new technology by any country, and without these there will be no investment in technology. The UK Government have given some good signals to investors that it will support this market; for example, the Marine Renewables Deployment Fund, although too early in its inception, has been recognised by private investors to show the Government supports the industry. Investors have expressed their interest in the marine industry, however they recognise that the industry is still at the R&D stage and that to invest there has to be a market that will be supported by the Government for the foreseeable future. The ROC scheme, for instance, is one area where investors look for long term commitment from the Government. The changes to policy that have recently been made, as discussed in Section 3.2, have provided the initial message to the industry that the Government will support a marine industry in the long term.

The general consensus in the industry is that there is funding available, but that the funding streams are disjointed, complex to access, and inconsistent (this was also found through the RAB report survey). The funding available in the UK has been summarised by B&V and Entec in this report which indicates the variety of funding streams that are available at each stage of development. Developers have commented that they do not have a good understanding of what the funding body is looking for and therefore cannot supply sufficient information in the application forms. Some of the reasons provided (in the RAB report) by developers for funding being a barrier to the industry were nevertheless factually incorrect. For example; “the Government takes back money if the device fails”. This suggests that there is a communication problem between Government and developers in terms of what the Government expects and what the developer can deliver.

There are currently c. 50 technologies for wave energy extraction in development, and there is no coordinated approach as to the support that these developers do, or do not, receive. This means that the funding is currently shared amongst many developers, when from a funding perspective industry consolidation on the best technology would be ideal as all the funding support could be directed towards this. However, the “best” technology has not been identified, and until one technology becomes accepted then a more effective way of managing funding support is required which will have to be coordinated by Government, or a Government funded body. The potential cost of implementing some sort of coordination is minimal but would result in extensive cost savings through effective project support. A potential solution for this is discussed under solutions in Section 2.1.2.1.

Expectation management is an area that is not currently being given much consideration in the industry; however, B&V, Entec, and the University of Edinburgh all believe that it should be

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incorporated into any future plans for the wave industry. There is perceived to be a high level of investor confusion, and therefore fatigue, in the industry - although the RAB reports from interviews that investors are still driven and interested in the wave industry. The expectation of the supply chain also requires management, because this could potentially be a major barrier if the supply chain is not ready to support the industry when it is required.

Funding/Investment - Solutions

The Government needs to continue to give clear and consistent signals through its policy and support mechanisms to develop a successful and world class marine energy industry.

The ideal solution to the requirement for coordination of support to developers in R&D is industry consolidation on one device that is known to be the most efficient and cost competitive. Reaching industry consensus on one technology is a natural progression of any industry; however, due to the high expense and large number of wave energy devices being developed, it is important in the wave industry that this consolidation happens more quickly.

Initially, there needs to be a focus of the funding in a less wasteful manner; for example, elimination of the funding support to the same types of devices over and over again when that type of device is known to be a poor performer. The PICO project was supported even though the Limpet project did not perform well on installation. The Stingray device was supported however a good initial device assessment (IDA) could have avoided this money being wasted on a prototype. The Carbon Trust and other funding organisations have attempted to avoid this by asking the developer for information on previous funding grants. That previous organisation would be contacted for their opinion and results from the piece of work. This has not completely eradicated the problem as money is still being wasted on devices that have already been proved to be ineffective.

One of the challenges is also to attract the right type of developers into any public funded programme and this requires an effective marketing plan. Some developers are put off by the issues surrounding IP, the interaction with consultants, and most importantly the initial application process. By improving communication between the funding organisations and the developers these issues can be resolved.

3) Knowledge transfer

Knowledge transfer within the industry, and into the industry from other areas of expertise, has proved to have an impact on the speed of learning and therefore development within early technology R&D (this is discussed further in Section 3.2).

The sharing of information means that developers do not have to all keep making the same mistakes. The current opinion of developers is that they have spent a lot of money making that mistake and finding the solution, and that they do not want to just hand it over to other

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developers52. There is a general call for the results of performance testing to be made available for the industry; however, this is provoking a similar reaction from the developers.

The issues that are researched by Universities and public bodies tend to be on generic issues which do not focus around the issues which the developers see as the key problems to overcome.

Knowledge transfer - Solutions

B&V and Entec believe that the most effective way of sharing information, at this early stage in the industry, is through conferences. We have had numerous experiences of the leading technology developers candidly sharing lessons learnt already and this should be encouraged to continue.

It is believed by B&V and Entec that one way in which the marine industry will share information is by personnel moving around from company to company. This has begun to happen but will, like any industry, continue to happen further as the industry grows.

A solution which could be implemented on a general basis or on a developer level is a industry design workshop. Invitations to Tenders are sent out to desirable participants. Successful industry experts meet up for a day long workshop, for which they are paid, during which one main problem will be discussed and a solution provided at the end of the day. During this session the Chatham House Rules are applied. This may be effective for sharing information in a confidential manner between interested parties.

The wind industry shares information on performance and failure rates of turbines, which is used in statistical analysis by anyone interested in the sector. This has proved to be a very valuable factor for learning in the wind industry. Currently in the marine sector no performance information is shared. The considerable funding requirements to gain any data make the developers feel that they do not want to share something that they have worked so hard to achieve. As part of the public funding, agreements which require sharing information (which is not protected by IP), could incorporated. For example, the MRDF agreement could publicise any performance data or information gathered from the deployment. This need not only be performance related, it is also important for the potential environmental impacts associated with the first installations. This information will be made publicly available under the Environmental Impact Assessment and future SEA’s. This means, however, that the developers have to look for or request the information, which is time consuming.

There is also currently information available through the SuperGen programme, for example, which is not used by all developers. Therefore, not only does the information have to be available, it has to be very easily accessible.

A longer term solution which could be Government funded is a Knowledge Transfer Network (KTN) or portal for the sector. This would be relatively inexpensive with an estimated set up cost of £100k and the yearly cost of employing one person (£100k/year) to update.

4) Resources (personnel)

There is a general shortage of engineers in the UK at the current time, and the problems that the marine sector is facing are additional to this overriding problem. The areas of expertise where the marine sector has requirements are engineering and mathematical modelling. This

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means that the marine sector competes with the oil and gas sector, which generally pays more. In addition, the offshore wind industry is also demanding more and more resource as it expands, and it can also offer more. In summary the main issues are: • General shortage of engineering skills • Greater problem for low carbon technologies particularly • Further competition with the Oil and Gas market for marine

This problem has been highlighted in conversations with wave developers, and from the RAB report which contacted an array of marine developers.

Resources - Solutions

The generation of a market will encourage those interested in marine energy that there is a long term future for them in this industry and that there are career options for them moving forward. The latter point is also the responsibility of the employer - to ensure that there are pathways that the employee could take as they move forward in their career and therefore positions in the company to work towards.

It is currently recognised by B&V, Entec and the University of Edinburgh that there are insufficient courses and training available for the sector and that this has to be encouraged in order for there to be the resources and skills available in the industry. That said, some courses are beginning, for example Garrad Hassan is offering a basic introduction to marine energy course. One could expect that Universities would start to offer these courses, but may need additional funding to do so.

5) Developer’s Management Skills

Technical skills in developers organisations can be second to none, but often the business management side of the developers’ core team is lacking in skills, and sometimes it is this that discourages investors rather than the confidence in the technology or concept.

Developer’s Management Skills - Solutions

This is not solely a problem of the marine industry; a recent report on the support to small businesses highlighted the requirement for business management in small to medium size enterprises (SMEs) to come from a co-ordinated source53. Currently, there are in the region of 3000 companies (spending 2.5b) in the UK that offer advice and business support to SMEs, and it is claimed that one third of the money is spent on telling people where to find support.

6) Planning/SEA

The current planning process in the UK is disjointed and requires contact with numerous bodies to obtain sufficient licensing for the siting of wave devices. It is believed that the planning permission for offshore installations is particularly complex because it involves onshore permits from local authorities, Crown Estate approval for utilisation of the seabed, permits from the Maritime Coastguards for navigational purposes, and then there are all the stakeholders of the sea. There is also environmental permitting, which is very complex because of the unknown impacts of this technology when installed at full scale and in arrays.

Planning and SEA - Solutions

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Every industry expert agrees that the planning system in the UK is a major hindrance to the offshore industry because it is extremely complex. The main contributors to this solution are the UK Government, the EU, and the Crown Estate. The Government is required to push the Marine Bill through parliament. There is strong hope that the Marine Bill will provide the new Marine Management Organisation the power to consent offshore renewable energy projects, or co-ordinate licensing from relevant Government departments to reduce the application time for developers. The EU is required to update EU Directives which are now considered out of date (for example few have tackling climate change as an objective), and finally the Crown Estate has experience from the Wind Industry and is a key permit provider for offshore installations. The cost of implementing the Marine Bill is thought to be in the region of millions of pounds.

3.4 Other Future / Long Term Barriers

Table 19 Summary of other future long term barriers Other future long term barriers Solution Cost Grid ¾ Lack of grid ¾ Upgrading and installing ¾ £300 – 500m infrastructure infrastructure new connections for the marine industry

3.4.1 Grid Infrastructure

All areas of our research have highlighted the main future and long term barrier to be access to the national grid and electrical connections.

The technology developers who are considered the leaders in the field are already sourcing sites abroad, for example in Spain and Portugal, because these countries have large coastal communities and thus good grid access on the coast and a good support system in the form of feed-in tariffs. The expansion of the grid will take intervention by Government.

Marine energy also faces competition from the more established and growing offshore wind industry which could absorb all the grid capacity before the marine industry is ready to connect. For example, if wind industry uses up the new capacity on the Beauly-Deny link, then marine energy in the energetic seas off Scotland could once again be hindered.

This is certainly not an immediate problem; however, it is definitely a future barrier.

3.4.1.1 Solutions

The only solution to this problem is to extend and strengthen the UK Grid, and probably to provide strong interconnection with Europe. B&V, Entec, and Edinburgh believe that it is the

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responsibility of Government, National Grid, and OFGEM to put the correct policies and institutional remits in place to enable this to occur.

The timing and planning permission for this project will be absolutely crucial for the marine industry, the expansion of the offshore wind industry, and the security of the increasing energy demands of the country.

The estimated costs of extending the grid for 1000MW of wave energy by 2020 are £300 - 500m (i.e. to reach the 2GW marine target could need c. £1b). This is based on an estimated capital cost of £300k per MW, which is in line with the costs of the Beauly-Denny and Beauly-Islands links

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4 IMPORTANCE OF THE UK TO TECHNOLOGY INNOVATION

4.1 UK Expertise

4.1.1.1 Describe the nature of marine expertise in the UK

As a whole, the UK is estimated to have half of Europe’s total wave resource54. This potential, combined with rising oil prices in the 1970s, resulted in significant investment into wave power in the 1970s and early 1980s The research was government led, through Universities and Government Institutions, with the focus on providing a 2GW Wave Energy Converter, as opposed to a commercially viable device. Subsequently, a 1982 a review of wave energy potential branded the economics of wave power as poor. This resulted in the Department of Energy abandoning full scale prototypes and significantly reducing investment. Figure 34 shows the government spending of IEA nations from 1974-2004. It is clear that UK investment dropped off in 1982 and then again in 1991. There was a period of relative inactivity until 1999 when investment started to come back into the sector in the UK.

This reduced funding stream, and a general feeling that wave energy had limited potential, resulted in Universities predominantly leading marine renewable research up to the 1980s, but in the later 1990s independent device developers began to play larger roles, especially Wavegen and Ocean Power Delivery (now known as Pelamis Wave Power).

A government review and recommendations from the Marine Foresight Panel, in 1999, resulted in the government reinstating funding for wave energy research.

Figure 34 Reported government ocean energy RD&D budgets in IEA member states 1974-200455

54 Marine Renewable Opportunity Review – Scottish Enterprise 55 Review and analysis of ocean energy systems development and supporting policies - A report by AEA Energy & Environment on the behalf of Sustainable Energy Ireland for the IEA’s Implementing Agreement on Ocean Energy Systems – June 2008 Black & Veatch Ltd Wave Review Phase 2_Rev0 102

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The number of wave device developers has been increasing steadily since the 1990s. In 2003 the International Energy Association recognised 30 wave devices in development, and by the end of 2007 this figure had risen to 7656; the UK accounts for c. 20 (i.e.25%) of the devices. Traditionally, university research has been through the engineering departments. More recently, this has expanded to other departments to include the economic, social and environmental issues, resulting in research centres being established incorporating many varying disciplines working together.

The growth of wave energy sector has also resulted in many consultants entering the UK market, to provide independent expertise to Universities, government, and device developers. These consultants are listed in Section 4.1.3.

The UKERC Energy Research Atlas for Marine Renewable Energy carried out a capabilities assessment of the UK, the results of which are documented in Figure 35. The list covers all aspects of technology development from concept to large scale deployment. The current capabilities and expertise derive from activity in other sectors, such as off-shore oil & gas.

World leading environmental work is being undertaken as part of the SEA in Scotland, and research at EMEC, SMRU, and eventually Wavehub, is likely to provide the UK the expertise to exploit a global market. Environmental monitoring experience gained from the above work has been identified in the UKERC report as being particularly important to the UK’s ability to undertake future development.

Reasons behind the UK’s extensive expertise

The UK’s extensive expertise in wave energy has come as a result of their long history in the industry. The market was initially driven by the large natural resource potential and rising oil prices (this remains a key driver behind current development). At this early stage the research being carried out was driven by the Government, mainly through Universities and Government institutions. The investment in Universities ensured that many of the UK’s young engineers and scientists were exposed to the wave industry, resulting in high levels of idea generation and expertise compared to other countries. It is generally believed by B&V and Entec that the majority of device developers’ ideas were generated and nurtured at universities, including Pelamis, Salters Duck (both the University of Edinburgh), Manchester Bobber (University of Manchester) and Oyster (Queens University Belfast) amongst others. With such strong foundations, set early in the development of the industry, it was in the Government’s interest to continue to support the industry, with funding and research facilities.

Further to the UK’s high resource and leading expertise, the wave industry is backed with strong political support. The UK has not benefited economically from the wind industry, and thus a more concerted effort is being made by the Government to support the up and coming wave industry.

UK Capability Area Market Potential High Wave device development Global market Tidal stream device development Global market Electrical system design Global market Tank & offshore testing Global market Resource assessment Global market Device installation Global market

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Grid connection Global market System demonstration (EMEC & Wavehub) Global market R&D Global market Environmental monitoring Global market Medium Manufacturing Global market Low Material design and development for marine Global market Figure 35 UK Capabilities Assessment57

4.1.1.2 Identify other important markets for marine innovation and contrast the level of expertise with the UK

Historically, the UK has been the driving force in marine energy innovation, with Japan, Portugal, and the Scandinavian countries being other major players. Figure 34 shows that the UK’s interest in the marine sector has shown some correlation with general investment in the sector. Other historical players include the USA and Canada. Interest in the USA has picked up significantly in recent years.

World Activity Overview Currently Europe leads the way in wave power development; Figure 35 shows that Europe accounts for nearly half of the proposed/installed projects around the world. The global distribution of wave projects in their development stage shown in

Figure 36 further illustrates Europe’s dominance, with over half of the projects being based in Europe. Portugal and the UK are the countries with the most current activities within the EU.

In the 1980s and 1990s Asia’s presence in the market was strong, with a number of projects being developed, but since then there has been little activity.

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Figure 36 Global Distributions of Wave Projects – Project Type - March 200658

Figure 37 Global Distributions of Wave Projects – Development Phase - March 200659

Wave device developers Wave devices are being developed worldwide. Figure 3860 illustrates the distribution of developers throughout the world, this clearly shows that the UK (20 projects) and the USA (12 projects) are the two key players in technology development with over 40% of the total technology projects between them. Canada (6) and Denmark (5) represent the only other

58 Marine Renewable Opportunity Review – Scottish Enterprise 59 Marine Renewable Opportunity Review – Scottish Enterprise 60 It must be noted that some technologies are being developed in more than one country; therefore the total number of projects represented in Figure 37 is more than the total number of technologies in development.

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countries with more than three technologies in development. The countries with three devices in development are Australia, Ireland, Japan, Norway, Portugal, Sweden and China.

Although Portugal is only represented with 3 wave technologies in development, it should be noted that they are currently running deployment projects with developers outside of Portugal, notably Pelamis Wave Power and Archimedes Wave Swing.

The information provided is based on countries participating in the IEA OES, information on non-IEA countries is less known due to lack of accessible information.

hnologies in development hnologies 10

5 Wave Energy Tec 0 UK USA India Isreal Spain Brazil China Japan Ireland France Russia Finland Norway Canada Greece Greece Sweden Portugal Australia Denmark Netherlands New Zealand New Figure 38 The wave energy technologies in Dec 200761

Universities are considered a key area for innovation. They have been the key in particular to innovation in the marine industry in the past having developed some of the earliest wave technology. It is likely, with the support available through programmes such as SuperGen that innovation will continue. The universities involved in marine research across some countries around the world are illustrated in Figure 39. This shows that the UK has the highest number of dedicated research facilities, with the USA, Portugal, and Ireland also well represented.

Country Key Universities China Guangzhou Institute of Energy Conversion Denmark Aalborg University France ECN Nantes Ireland HMRC, University of Limerick Italy Uni. Reggio Calabria, University of Naples Japan JAMSTEC, Kyushu University, Saga University Norway NTNU Portugal INETI, IST, MARETEC, Wave Energy Centre Spain University of Las Palmas de Gran Canaria Sweden Chalmers University, Uppsala University

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UK Coventry University, Edinburgh University, Heriot-Watt University, Lancaster University, Manchester University, Queen's University of Belfast, The Robert Gordon University, University College London, University of Bristol, University of Durham, University of Exeter, University of Newcastle, University of Swansea USA Oregon State University, University of California (Santa Barbara), University of Rhode Island, Washington State University Figure 39 Universities Involved In Marine Renewable Research62

Details of marine innovation in some of the main countries outside the UK are detailed below.

Denmark and Norway In recent years these countries have not committed any significant national resources to wave energy, however devices are still emerging with funding secured at a European level or through consortia. Denmark has the advantage of leading the wind sector, and Norway has a strong offshore culture through the oil and gas industry.

Denmark and Norway’s main strengths are probably in wave / resource modelling and device development including the designs of Wavedragon, Wave Plane, SEEWEC and Wavestar.

Portugal Portugal are currently building on a long history of marine energy projects; a number of shoreline OWC demonstrator systems were installed in the late 1970s giving the country a leading edge in this technology. The Portuguese government is supporting wave energy with favourable tariffs, resulting in UK companies such as Pelamis Wave Power gaining orders for commercial units for installation in Portugal, so their expertise is likely to build into grid connection, and towards device and system installation.

Ireland The Irish government is providing support to marine energy, a target of 500MW of ocean energy power by 2020 has been set.Ireland also benefits from the mid-scale Galway Bay test facility and a number of developers including the Wavebob device. Ireland’s main strengths are probably in tank testing, and system modelling, and more recently in device development and installation activities.

USA The USA is second behind the UK in the number of technologies being developed, and has extensive experience in oil and gas that could be applied to wave energy. The USA Navy is involved in a number of project with device developers, and can bring significant expertise.

Given the evidence provided in this section, we believe that the UK is the current global leader in wave energy expertise, although there are a number of other countries that have a higher expertise particular niche areas.

4.1.1.3 Profile the UK companies and organisations that are involved in marine innovation and provide details of their experience, current activities and stated plans

Universities The marine sector is currently the focus of much academic research. The key academic research within the UK, has been identified by the UKERC63 as the EPSRC funded

62 Marine Renewable (Wave and Tidal) Opportunity Review – Scottish Enterprise – Dec 2005 63 UKERC Energy Research Atlas: Marine Renewable Energy Black & Veatch Ltd Wave Review Phase 2_Rev0 107

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SUPERGEN Marine consortium which includes the Universities of Edinburgh, Lancaster, Heriot Watt, Strathclyde, and Robert Gordon University.

There are 24 universities64 in the UK which currently focus on the marine sector. These universities research and development activities can be broadly categorised into 6 broad areas: 1. Device Development – Designing new and improving existing devices 2. Environmental Impact – impact of devices on local environment 3. Resource Assessment – Improving accuracy and consistency 4. Wave Modelling / Device Testing – both theoretical including computational fluid dynamics and through tank testing. 5. Power take-off 6. Materials

Figure 39 provided above lists the UK universities involved in marine renewables and highlights the key areas of research that they focus on. It is apparent from Figure 40 that Wave modelling and device testing is the area of most focus, followed by the environmental impact and device development. It is estimated that there are over 600 university employees65 working within these universities made up of faculty, researchers and PhD students, although we believe that it is unlikely this number is made up of staff working solely on marine projects.

Black & Veatch and Entec believe that the spread of resources throughout the UK universities is a positive for the UK market. The quality of individual research departments is not be assessed within this document.

18 Liverpool University Machester Metropolitian University 16 Imperial College University of Oxford University of Bath 14 University of Sheffield University of Nottingham 12 University of Plymouth University of Strathclyde/Glasgow University of Southampton 10 University of Newcastle University of Swansea University of Exeter 8 University of Durham University of Bristol 6 University College London Heriot-Watt University The Robert Gordon University 4 Coventry University Queen’s University of Belfast 2 University of Manchester Lancaster University Edinburgh University 0 Device Environmental Resource Wave/device Power take-off Materials Development Impact AssessmentModelling/Testing

Figure 40 UK Universities representing key areas of marine focus

64 UKERC Energy Research Atlas: Marine Renewable Energy; Marine Renewable Opportunity Review – Scottish Enterprise 65 UKERC Energy Research Atlas: Marine Renewable Energy; Marine Renewable Opportunity Review – Scottish Enterprise Black & Veatch Ltd Wave Review Phase 2_Rev0 108

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Engineering Consultants The UKERC (Energy Research Atlas) identify 9 engineering consultants with services for the marine renewable sector. With the exception of Green Cat Renewables, all these expanded their services to cover the marine renewable sector. Green Cat Renewables set up specifically to focus on the wave market, with the aim of developing their own device and providing services to the renewable energy industry. The UKERC list of engineering consultants is:

• Atkins • Black & Veatch • Det Norske Veritas (DNV) • Ecofys • Garrad Hassan • Green Cat Renewables • Halcrow • IT Power LTD • Ramboll Denmark

As activity is growing rapidly, there are a number of other consultancies entering the market. Of the above list, Atkins, Black & Veatch, DNV, and Garrad Hassan are probably the most involved in the marine energy sector (Garrad Hassan has historically focused on wind).

R&D Science & Engineering The UK has two dedicated test facilities available for marine devices; they are: • NaREC (Test Facilities) – The New and Renewable Energy Centre (NAREC) was set up as part of the five Centres of Excellence created by One NorthEast as part of the Strategy for Success programme. The centre offers tank test facilities, an electrical network lab, and a high voltage lab. • EMEC – The European Marine Energy Centre (EMEC) was established in 2003 by the Highlands and Islands Enterprise and its funding partners. The aim is to simulate and accelerate the development of marine devices, initially through the operation of a test centre in Orkney.

Funding Organisations Description and funding policies of support organisations are detailed in section 4.2.1.

Technology Developers & Design Engineering There 21 device developers working within the UK, of these 17 originated in the UK and 4 are based abroad and run offices out of the UK. Table 20 details the UK’s device developers and provides further details, while Table 21 illustrates the overseas developers with links to the UK.

Table 20 UK based Developers Developer Device Description AWS Ocean Energy Archimedes 2MW prototype was installed and commissioned of WaveSwing the coast of Portugal in 2004. Currently based in Scotland and looking to install at EMEC in 2009. Pelamis Wave Pelamis Sea A full scale prototype has been tested at EMEC in Power Snake Orkney, and an order for 3 * 750kW devices has been placed by a Portuguese Consortium led by Enersis. These are due to be installed in 2008. Manchester Bobber Manchester Consists of an array of buoy type devices on a fixed Black & Veatch Ltd Wave Review Phase 2_Rev0 109

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Bobber structure. Testing at 1/10th scale of a single device has taken place at NaREC. Wavegen LIMPET Installed the first grid connected wave energy device. Orecon Orecon MRC Oscillating wave column device – advanced testing taken place – 13 tonne sea trials unit – 2002. Aquamarine Oyster A seabed mounted device, which pumps sea water to a hydro power take off onshore. Due to be installed at EMEC in 2008-9. Edinburgh Designs Wave In last six years they have installed seven multi- Ltd generators paddle tanks with a total of more than 300 paddles across the world. Trident Energy Direct Energy Developed a DECM of generating electricity Conversion directly from ocean waves. Method (DECM) Checkmate Anaconda The project is still in its early stages but already SeaEnergy Anaconda has shown considerable promise compared with other WECs. C-WavePower C-Wave C-Wave gained £1million funding to progress into detailed design and planning for the installation of a 1MW device in 2007 off the coast of the UK. Edinburgh Sloped IPS Currently in the course of an EPSRC funded University - Wave Buoy programme to further investigate the device. Power Group Embley Energy SPERBOY SPERBOY has completed the Marine Energy Challenge, where independent consultants investigated its performance in terms of power capture as well as carrying out a detailed study of both capital and maintenance costings to arrive at their prediction for the cost of delivered power. Neptune Renewable Triton The device operates in the nearshore and consists of Energy Ltd an axi-asymmetrical buoy attached to an A-frame which would be piled into the sea bed. Artemis Intelligent Design of Performs contract research, consulting, and Power Ltd Hydraulic technology licensing associated with development Systems of hydraulic power applications. Ocean Navitas Aegir Dynamo The Aegir Dynamo™ functions in a unique fashion by generating electrical current from the motion of the prime mover in one phase via a direct mechanical conversion and the use of a bespoke buoyancy vessel. Ocean Wave Grampus Design verified by extensive tank-testing and Energy Ltd mathematical modelling and are now planning the deployment of a seagoing prototype. Ocean Wavemaster WaveMaster Following the feasibility study OWL/UMITEK Ltd have received funding from the Carbon Trust to work with NaREC and UMIST to build a 20m model of the WaveMaster device.

Table 21 Overseas developers with UK links

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Wavedragon Wavedragon Danish developer with an office in Wales. Built a 20kW prototype device in Denmark. Ocean Power Powerbuoy Developer based in the US but with an office in the Technology UK. Finavera: Aqua Aquabuoy Formed a consortium for the installation of the first Energy Group offshore power plant in Makah Bay. Teamwork Archimedes Innovations company based in Holand working in Technology Waveswing energy and sustainability sector. A number of spin- off companies created to exploit some off the developments including AWS (based in Scotland).

Electrical Engineering Multinationals & Utilities

Electrical Power Engineering Companies: Electrical power engineering companies are present in the market, providing expertise in power generation, power quality, electrical machines and drives etc.; supporting developers solve the complex problems such as efficient electrical generation and conversion. Voith Siemens Hydro Power Generation recently acquired Wavegen the developer of LIMPET. The electrical engineering multinationals are: • Alstom – Specialises in power generation equipment, having supplied 25% of the world’s installed capacity; • Voith Siemens Hydro Power Generation – Recently bought Wavegen in the UK; • ABB - The ABB generators are one of the essential components of the Pelamis Wave Energy Converter66; • AREVA – Ivolved in power system engineering; • Cummins Generation – provides electrical power engineering; • Converteam – currently has about 10% of the world market for electrical systems in renewables, the majority being wind. They are the largest exporter of such systems in the UK and aim to supply the electrical systems for individual wave devices as well as the infrastructure for farms67.

Electrical Utilities The electrical utilities are a major source of private investment into the marine renewable sector. All the utilities listed below are either developing projects or developing devices: • EON – Involved in the West Wave project to install 7 Pelamis devices at Wave Hub in collaboration with Ocean Prospect and OPD; • Scottish & Southern Energy – subsidiary Renewable Technology Ventures Ltd joined forces with Aquamarine Power Ltd to work on their Oyster device; • Scottish Power – Working with the Scottish Executive announced plans for a £10m project to install 4 Pelamis devices at EMEC in 2008; • Npower renewables – through the npower juice fund the company is investing in marine renewable projects; • Electricité de France.

4.1.1.4 Determine the major suppliers at each point in the supply chain

The marine renewable sector will require an expansive supply chain to be successful in the long term. Currently projects are in the development stage with technology developer led

66 http://www.abb.co.uk/cawp/seitp202/FDD09C84E783C574C12572C1005B6B46.aspx 67 http://wattwatt.com/pulses/74/wave-power-buoyant-as-energy-source/ Black & Veatch Ltd Wave Review Phase 2_Rev0 111

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projects, therefore common strategies for procurement and contracting for large projects have yet to be established. Figure 41 shows the key segments of the supply chain for the renewable energy sector, Appendix E further breaks down Figure 41 by segment to show the overall resources required for the complete marine renewable supply chain.

The supply chain will need to include Legal firms, Financial firms, Insurance firms, Marine Service firms, Technology Developers, Manufacturers, Test Facilities, Project Developers, Installation Contractors, and Energy Major Utilities.

Figure 41 Segmentation of the Marine Sector68

Supply Chain examples are presented below, the following information has been collected by the Scottish Enterprise and was presented in the Marine Renewable (Wave and Tidal) Opportunity Review, Dec 2005:

Pelamis The following companies and organisations were involved in the construction of the full scale Pelamis Prototype with OPD: • WS Atkins - have fully verified the Pelamis prototype design; • EMEC (Orkney) – testing of the full scale device; • Scotrenewables, Orkney; • Aquatera, Orkney - environmental consultancy; • Ross Deeptech Initiatives - design and manufacture, assembly and test, installation and commissioning within Subsea and Offshore Engineering; • Hytec - specialist hydraulic engineers; • Hydro Bond Engineering - supplier of harsh environment connectors; • Hydrocable Systems - electrical cables and wire; • Farstad - vessel hire; • Balmoral Group - marine engineers; • Hystat Systems - hydraulic cylinder manufacturers; • Offshore Shipbrokers (Aberdeen) - vessel hire.

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Wave Dragon A prototype device was installed in Denmark in March 2003, and remained until mid 2006. The companies that were involved in the project were: • Wave Dragon ApS (Denmark) - The know-how company and managers of the project. Wave Dragon ApS is owned by the inventor Erik Friis-Madsen, the project coordinator H.C. Soerensen, L.K. Hansen and L. Christensen; • Löwenmark F.R.I (Denmark) -Danish consultant engineering company, owned by the inventor of the Wave Dragon and designer of the Wave Dragon; • SPOK ApS (former EMU) (Denmark) - Project management, environmental impact studies, business development, Construction materials research; • Balslev A/S (Denmark) - Electrical & automation systems engineering consultancy; • Armstrong Technology (UK) - Naval Architects specialised in design and validation of war ships and Floating Production Offloading and Supply platforms for the oil & gas industry; • ESB International (Ireland) - Power technology consultancy owned by the Irish Electricity Supply Board; • Veteran Kraft AB - Hydro turbine designer, responsible for the development and design of the Wave Dragon low head axial turbine; • NIRAS AS - Consulting Engineers and Planners (Denmark); • Computational wave forecasting models; • Nöhrlind, Research & Development (UK) - Market studies, business strategy development and internationalisation; • Promecon as (fomer MT Hoejgaard A/S (Steel)) (Denmark) - International construction enterprise with strong expertise in offshore construction; • Kössler Ges.m.b.H. (Austria) - Hydro turbine manufacturing; • Aalborg University (Denmark) - Breakwater structures testing, wave energy testing, wind turbine foundation hydraulic testing; • Technical University Munich (Germany) - Hydro turbine testing, CFD modelling.

Archimedes Wave Swing In 2004 Archimedes Wave Swing installed a 1MW prototype in Portugual, the companies involved in the project were: • Alstom - developed and supplied the generator and the converter; • Damen Shipyards - engineered and supplied the steel structure for the Pilot Plant; • Portuguese engineers from the shipyard in Viano do Castelo assembled the linear generator. All equipment was mounted satisfactorily within tolerance, in close co- operation with the Dutch companies; • Teamwork provided the conceptual development and the management of the development process. Teamwork combines a number of disciplines required, such as overall, technical, legal and financial management; • WE-engineering - involved as a supporting engineering company. WE-engineering, in the AWS project, produced the new design of the linear generator; • University of Lisbon – calculated the available wave energy and carried out theoretical work to calculate forces and dimensions for the project; • The Technical University in Delft (TUD) - designed the electromagnetic configuration of the generator. From their experience with direct drives for the wind turbine industry they could assist with the permanent magnet linear generator; • Ecn - assisted in the building of mathematical and physical models to calculate and check the behaviour of the concept. They were involved with the preparations for the offshore test in Portugal; • Cees Vroege - external consultant. Black & Veatch Ltd Wave Review Phase 2_Rev0 113

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4.2 UK Investment & Other Evidence

4.2.1 Determine the level and type of public sector and private sector spending in the UK on marine technology development

Initially we have summarised the funding provided in the UK in our funding gap analysis. Further details of the funding provided is also given in this section below.

This section aims to evaluate the level of investment required for an individual wave device developer and the entire UK market to progress their technologies from initial conception to the early stages of near commercialisation. The investment is broken down into categories clearly defining where the investment currently comes from. Device developer investment is considered to include private sector investment.

The development stages have been broken down using both the TRL definitions and LEK stages (1-4) (see Section 1.1.6). The analysis focuses on the development of a device from conception through to the early stages of near commercialisation, which is defined as ‘supported’ renewable obligations. This means that at near commercialisation stage (2) ROCs alone will not be enough to support the devices and some other funding is also required. The sections not included on these graphs are the final stage of near commercialisation, where (2) ROCs are sufficient, and full commercialisation.

Figure 42 shows the best case scenario for an individual device developer, i.e. if a developer was able to obtain the maximum level of current funding available. The black areas are key because they indicate the levels of investment required by a developer, or the gaps in public funding. It clearly indicates that developers, even with maximum public sector funding support will have to raise 50% of the funding privately for each stage of development. This is reasonable until the developer reaches the MRDF - when they will have to raise ~£20m per project. Post MRDF there is a very large funding gap of approximately £80m per project. Note that there are two different scales on the y-axis.

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Developer investment 4 Electricity sale Cumulative capital expenditure[£m] Cumulative capital expenditure[£m] ROC inc ome 2 Other revenue support Capital grant

0 Wave tank Stage 1 TRL4Stage Stage 2 TRL5Stage Scale real sea Stage 2 TRL6Stage Full-scale demo Stage 2 Stage TRL7 Stage 4 Stage Stage 1 TRL1-3Stage Full-scale demo 3mth test 3mth demo Full-scale Stage 3 TRL8-9Stage Labscalegeneric to research Supported RenewablesObligation Marine Renewables DeploymentFund

Figure 42 Funding Profile for an individual developer in the UK market

Figure 43 shows the total level of funding currently available to the whole industry, which has to be shared amongst all the device developers in the market and their individual investment requirements. The number of device developers is based on the global success rates discussed in Section 5. The success rates have been increased slightly here to reflect the UK’s strong position within the market.

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Developer investment Electricity sale

50 ROC inc ome Cumulative capital expenditure [£m] Cumulative capital expenditure [£m] Other revenue support Capital grant

Marine Renewables Deployment Fund Figure 43 Funding Profile for the entire UK market Assumptions The funding gap analysis provided here has been based on the following assumptions on funding: • SuperGen – This initiative has £5.5m available for the marine sector, however this funding is for generic research and is therefore not device specific, so it has not been considered. • DBERR – Technology Programme - Funding ceased in 2007, therefore it has not been included. • Carbon Trust – It is considered that the Carbon Trust will contribute £2m from their Applied Research Programme (supporting 8 devices) combined with a further £1m from Strand A of the MEA. This investment will be spread over TRL’s 1-5. • Scottish Government’s Wave and Tidal Energy Support Scheme (WATES) – Have provided a £13m investment to aid developers test in the sea. This funding is spread over TRL’s 5-7 (Stage 2). • ETI Pilot Programme in Marine Energy – This fund is potentially worth £100m per year for 10 years, supporting projects with between £5-£10m investments. At the time of writing the funding hasn’t been deployed and it remains unclear where the funding will be aimed, it has therefore not been included. In any case, we would expect that a maximum of c. £25-40m would be deployed into marine given their other ambitions,

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and it is likely that not all of this will be device related, leaving perhaps £15-30m for device related activities at TRL5-7, compared to a funding gap shown of c. £80m for these stages.. • Marine Renewables Deployment Fund (MRDF) – Based on a total of £43m available, with a maximum of £10m available to an individual project plus £100/MWh. This funding is available to devices in TRL’s 8-9 (Stage 3) • R&D projects have no income, demonstration projects earn income for only 5 years, whereas near commercial projects last 20 years..

Further Assumptions in calculation: • ROCs are based on the current level of 2 ROCs per MWh generated, with a ROC valued at £50/MWh as provided by LEK. • The wholesale rate of electricity is £35.5/MWh as provided by LEK.

In order to estimate this funding gap analysis B&V and Entec have made a number of assumptions regarding the length of time required for development at each stage, and the total level of investment that is required at each stage. These assumptions are based on our experience of wave devices and our expert opinion in the development of wave energy. All the information can be found in Appendix F.

The current funding for the UK is broken down in to public and private sector finance received by the industry to date, and examples are provided below of current device developers and their funding strategies to present a general overview of the current funding strategy. This has also been previously discussed in Section 3.2.1.4.

Public Sector This section covers the public sector spending in the marine sector. It is important to understand that the information provided considers the spending on the marine sector as a whole, i.e. wave and tidal.

Basic Research Funding The UK’s public sector committed funding to marine research from 1990 up to and including present plans until 2011 totals £13.32m69. This is made up from: • Engineering & Physical Sciences Research Council (EPSRC) ¾ Supergen - Marine (phase 1) - £2.6m ¾ Supergen - Marine (phase 2) – 5.5m • National Environment Research Council - NERC ¾ UK Energy Research Facility - £170k This Research funding is detailed in Appendix B.

Applied Research Funding This public spending is aimed at helping developers reach the demonstration stage. The funds available here can range from small grants for feasibility studies to full scale demonstration projects. Further to this, investment funding has been put in place to support EMEC’s test facility in Orkney. Regional Development Agencies (RDAs) contribute to applied research and such initiatives include: The New and Renewable Centre (NaREC), which was supported by One North East and provides a testing facility for developers, other RDA projects include the Joule centre in the north east, and Wavehub. The public applied research funding includes: • NAREC - £10m • EMEC - £14m • Carbon Trust

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¾ Marine Energy Accelerator - £3.5m; ¾ Marine Energy Challenge - £3m; ¾ R&D Programme - £2.7m. • DTI ¾ Renewable Energy Programme - £12.5m (This project has ended and is replaced by ETI’s programme below). • Enterprise Technology Institutes (ETI) ¾ Pilot programme – Marine Energy, unknown, but total funding up to £1b over 10 years (Appendix A for details).

Demonstration Projects The DTI announced proposals for the Marine Renewables Deployment Fund in January 2005; the fund includes the Wave and Tidal Stream Energy Demonstration Scheme. Under this scheme, projects developing “multi-device wave or tidal-stream electricity generating facilities connected to the UK grid70” can receive up to £5m of funding. At present no developer has reached the stage to be able to access the fund. The Scottish executive has spent £13m on 9 devices’ currently in development71. Wavehub is currently being setup up as a test facility for full scale multiple array devices. • Department for Business, Enterprise & Regulatory Reform (BERR) ¾ Marine Renewables Deployment Fund - £50m • Scottish Executive ¾ Wave and Tidal Development Fund - £13m (This has been used to support 9 projects) • South West Regional Developing Agency (SWRDA) ¾ Wavehub -£21.5m (initially but costs have risen to ~£40m)

Device Developers – Funding sources This section looks at 6 UK device developers and shows information on their funding streams. The developers that have been assessed are: • Ocean Power Technologies (OPT); • Clear Power Technology (CPT); • Pelamis Wave Power (PWP); • Wavegen; • Orecon; • AWS Ocean Energy • Aquamarine Power Ltd • Manchester Bobber

Ocean Power Technologies (OPT) In October 2003 Ocean Power Technogies Inc. was floated on the London Stock Exchange’s AIM market, following successful completion of its IPO. In 2007, OPT completed its US IPO and listed on Nasdaq72. The Scottish Executive invested £0.275m for the construction, installation and in-ocean demonstration of a 150kW PowerBuoy73.

Clear Power Technology (CPT) Clear Power technology have designed the Wavebob device, they state on their website that they have invested over €3m on R&D. The interview we carried out with CPT revealed that they received 10% of their funding from public sources and 90% from private investors.

70 http://www.nrcan.gc.ca/se/etb/cetc/cetc01/oceangroup/ocean/DTI_Febmarkedup.pdf 71 http://www.scotland.gov.uk/News/Releases/2007/02/20091751 72 http://www.oceanpowertechnologies.com/about.htm 73 http://www.scotland.gov.uk/News/Releases/2007/02/20091751 Black & Veatch Ltd Wave Review Phase 2_Rev0 118

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Pelamis Wave Power (PWP) “PWP has raised some £40m to fund the development of Pelamis technology from a variety of financial and industry backers. Shareholders with more than 5% of the Company’s share capital include various Sustainable Asset Management funds managed by Emerald Technology Ventures, Norsk Hydro Technology Ventures, BlackRock Investment Managers, 3i, Carbon Trust, Nettuno Power and Tudor BVI Global Portfolio”74. Pelamis Wave Power received DTI funding for a 1/7th scale prototype of the Pelamis device in the Firth of Forth, and also a full scale prototype device at EMEC. We carried out an interview with PWP, which revealed that the company is not considering using the investments available from the ETI and Carbon Trust due to the associated clauses on IP. CRE Energy Ltd (a subsidy of ScottishPower) was granted £4.141m from the Scottish Executive to install 4 of Pelamis Wave Power 750kW Pelamis devices at EMEC75.

Wavegen Voith Siemens bought Wavegen in May 2005, and is providing the backing to make the technology commercially viable. Wavegen gained funding from the EU for the construction of a 500kW Limpet shoreline OWC device on Islay. The DTI provided funding for early monitoring (amounts unknown).

Orecon Orecon followed the early path of many developers, spawning from a University (Plymouth) project. Their early feasibility work was supported by a SMART grant, the company then gained private sector finance to match a Carbon Trust grant to continue development. In 2008 a major private sector investment was secured, this investment was led by Advent Ventures and includes Venrock, Wellington Partners and Northzone Ventures.

AWS Ocean Energy AWS Ocean Energy is backed by Shell Technology Ventures and other blue-chip investors including: • RAB Capital invested £2 million in AWS (April 2006) • Isleburn Group • Tersus Energy PLC • STV Fund • The Tudor Group The Scottish Executive supported the installation of a 500kW AWS device in EMEC in 2008, with a £2.128m investment.

Aquamarine Power Ltd Aquamarine Power Ltd conception came from a research programme at Queens University Belfast, The university backed research into the development of Oscillating Water Column wave power devices, this led to the development of the Oyster OWC device. In 2005 Aquamarine Power Incorporated was created to continue the development of the device. In October 2007 Aquamarine Power Industries joined forces with Renewable Technology Ventures Ltd, a subsidiary of Scottish and Southern Energy to form Aquamarine Power Ltd76.

Manchester Bobber University of Manchester and their intellectual property managing agent The University of Manchester Intellectual Property Ltd (UMIP) have successfully attracted 8 industrial partners:

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ABB, Renold Chains, Renold Gears, Red Rooster, Royal Haskoning, Bridon International, ODE and Capita Symonds77.

In comparison to the funding gap assessment for the UK, the total world investment required for wave energy development to successfully get through stage 2 and stage 3 is £1.130bn and £7.897bn, respectively. This is based on the assumptions in the knowledge spillover sheets that stage 2 and 3 are both 10years.

Impact on Worldwide wave energy deployment if UK market was not supported

We have assumed that if the UK did not support wave energy, there would initially be no deployment in the UK. The device developers that are currently in the UK would, we assume, move their businesses abroad and therefore continue with their development. There would however, we believe, not be any further ideas generated from the UK Universities that as shown in this section have provided the starting point for many of the UK devices. Therefore we have assumed that new devices would not enter the worldwide market from the UK. Overall this impacts the realistic (central case) deployment by reducing it at the key years as follows: 2020 – From 744MW to 393MW 2030 – From 7,249MW to 3,816MW 2050 - From 113,900MW to 61,263MW It can therefore be seen that the lack of UK support would have a significant impact on the overall deployment of wave energy technology Worldwide.

4.2.2 Contrast the level and type of investment in the UK with that in other leading markets

We generally believe that the UK leads the way in funding for wave energy technologies. This conclusion is based mainly on the fact that 26% of the worlds wave technologies are being developed to some extent in the UK, and the USA has the next highest share with 16%, as well as the known levels of funding, as described below. All the other countries developing devices have less than an 8% share.

Further to this, it was estimated in 2004 that between 2004 and 2008 that the UK would contribute almost half of the world CAPEX expenditure on wave energy estimated at £72m78, which also matches our assessment reasonably closely. An overview of some of the other leading countries and their funding strategies is presented below. It is fair to say that several other countries are starting to increase their funding, specifically into the deployment phase, and if this trend continues then this is likely to reduce the share of the CAPEX in the UK.

Portugal Portugal is widely regarded as a key player in the market, placing more emphasis on device deployment and demonstration than development. A favourable feed-in tariff for wave energy (currently €0.224/kWh) has been set up by the Portuguese government, a factor that has encouraged the first offshore wave projects to be situated in Portuguese waters. The Offshore Renewable Energy report stated that this tariff was initially provided without many conditions

77 http://newsweaver.co.uk/mntnetwork/e_article000956549.cfm?x=b11,0,w 78 The World Offshore Renewable Energy Report 2004-2008, Douglas Westwood Ltd., 2004 Black & Veatch Ltd Wave Review Phase 2_Rev0 120

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however recent policy has changed this and now there may be variation in the tariff committed to individual projects.

Denmark Danish Energy Agency & SO Elkraft invested €4.35m into Wavedragon to aid with the setup of a 1:4.5 scale test rig at Nissum Bredning in Denmark. This investment is along the lines of UK investments in technologies presented in the previous section. The UK, however, is backing many more technologies.

Spain Spain currently offer developers 90% of a fixed price tariff called the TMR, for the first 20 years of operation (in 2005 this was €0.066/kWh). This tariff is helping Wavegen with their Mutriku Harbour Wall installation of 16 OWC’s rated at 18.5kW each into a harbour wall in Northern Spain.

Ireland Ireland recently announced a big push for wave energy with a major program of activity, grants and support for the nascent renewable industry. The initiative calls for €26 million79 to go towards research and facilities, and establishes a new feed-in-tariff of €0.22/kWh for wave and tidal power in the country.

Norway In general there are no specific goals or funding/support for ocean energy. Approximately 15 initiatives on Ocean Energy have received support from the Norwegian Government and 60- 70 % of the initiatives are focused on wave power80.

USA The U.S. Congress has appropriated funding to begin a $10 million research program for Ocean technologies81, which will be directed by the Department of Energy (DOE) and executed largely by the national laboratories for the coming fiscal year in 2008.

In addition, federal legislation has been passed authorizing up to $50m dollars of annual funding for future years with provisions for the formation of test facilities in key ocean states.

In 2007, $4.5 million of public funding was appropriated by the State of Oregon for the Oregon Wave Energy Trust (OWET), and an additional $3.0 million was appropriated to establish a wave energy test site in Newport, Oregon. The test facility began off-grid testing this year.

79 http://mendocoastcurrent.wordpress.com/2008/01/22/ireland-launches-wave-energy-initiative/ 80 http://www.iea-oceans.org/_fich/6/IEA-OES_Annual_Report_2007.pdf 81 http://www.iea-oceans.org/_fich/6/IEA-OES_Annual_Report_2007.pdf Black & Veatch Ltd Wave Review Phase 2_Rev0 121

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5 UK ECONOMIC POTENTIAL

5.1 Economic Benefits by Supply Chain Component & Type

The information and results for the economic benefits are provided in the accompanying excel spreadsheet. The assumptions that have been used in order to reach these answers are provided here.

Assumptions for the Generation of Future Costs Calculation Sheets This section highlights the assumptions made in completing the Learning Curve Analysis, Knowledge Spillover and the Outputs for the Economy spreadsheets.

Learning Curve Analysis Assumptions

The learning rate is based on a value of 12%, and this is discussed in detail in Section 2.3.

The learning curve analysis assumes that learning occurs as installations are complete as opposed to as a result of installations, i.e. at 50MW of installed capacity the learning factor that is applied to the original cost is 56.3% in that year of installation, instead of a learning factor of 56.3% in the following year. This ties in with the cost of energy discussed below.

The initial cost of 38.4p has been derived from the learning curve and the MEC’s analysis82 of future costs in the wave industry, which stated that at 50MW installed capacity the cost would be 21.6p/kWhr. (The MEC report actually quoted 10MW but we believe it should be 50MW).

The total market size in any one individual year (not including previous years) was calculated as the MW installed that year multiplied by (capacity factor * 8760) to give the MWh of electrical output resulting from the capacity installed in that year, multiplied by the revenue associated with each MWh (£/MWh) to give the total revenue (£) for the capacity installed in any one year. The capacity factor would actually vary considerably with specific device and location therefore we have assumed an average of 32.5% to represent this.

The capacity factor is the ratio of energy output over a period, and that energy output which would have been obtained if the device had operated to its full rated power. This factor will vary by device and location and could vary from 25-40% but it is generally accepted that a value of around 30% is realistic83.

The Capex in any one individual year has been calculated as 55% of the total market size of that year, multiplied by 8.36 (20 years of revenue discounted at 12% interest rate = 8.36 years) with the associated cost incurred in the year of installation.

The Opex in any one year has been calculated as 45% of the total market size of that year, with the associated cost being incurred in every year of the subsequent 20 year period.

Knowledge Spillover Assumptions

The average years in each development stage was assumed to be the time until the majority of developers had demonstrated their devices at the relevant development stage. Commercialisation was left at 200 years (as provided by LEK).

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The size of the deployment prize is based on the market size as described above. B&V and Entec believe that the varying conditions that WEC are required for will effect which technology (or type of device) are successful. We believe that there are 4 main types of device which will succeed in different niches, therefore the market size has then been quartered to indicatively represent the distinct market sectors within the wave industry.

Size of Prize (No Knowledge Spill Over) The size of the prize assuming no knowledge spill over is estimated to be 40% with slightly differing technologies vying for market share.

Given that with no knowledge spill over the successful technologies will have strong market position, it is likely that they will be able to generate good profit margins (10%) due to the lack of competition.

Size of Prize (knowledge spillover) This is based on 1 successful technology making it through to commercialisation and 3 copy cat technologies following through. Therefore the market share is assumed at 25%.

The profit margin that these companies are likely to generate will therefore be reduced.

The success rate of device developers for progression to the next stage is shown in Table Table 22, these success rates are based on one leading technology successfully making it to commercialisation in a given sector of the wave market (i.e. deep sea devices) and that 3 other technologies will learn from this success and make it through to commercialisation to compete for market share:

Table 22 Success rate of device developers for progression to the next stage

LEK Definition % Total Justification Stage Succes Current s rate World wide Devices Only projects which have successful Stage 1 proved their concept have been TRL 1- R&D 100 19 considered therefore it is assumed that 4 all will make it to early demonstration. I.e. 12.4 devices will demonstrate their device to one of the below- Stage 2 Demonstration is considered as: TRL 5- Demonstration 65 12.4 • Scale real sea 7 • Full scale prototype real sea • Full scale real sea 3month trial 1.9 devices will complete full demonstration (3 month and move to Stage 3 early deployment) TRL 8- Early deployment 15 1.9 This is likely to be the first time an 9 array of devices have been installed for an extended period of time, the associated risks are high. Stage 4 Near 70 1.3 Considering the high performance

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commercialisation needed to get to this level and the large investment required it is estimated that a high number of devices will proceed through this stage. Given the investment to date only competition and failure to improve Stage 5 Commercialisation 80 1 efficiencies will stop devices reaching commercialisation.

These rates are B&V and Entec’s prediction of success. There are currently 76 wave devices identified by B&V and Entec in the World and the above assumptions result in 12 successful devices once probable new entrants are assumed (the above probabilities are weighted to include new technologies into the market).

Funding Following directly from this, the individual project investment required at the demonstration stage was calculated from the funding gap analysis. Demonstration is defined as the stage from scale real sea tests through to the MRDF (deployment of a small test farm ~10MW). The total costs to fund this stage were calculated at £67.5m less the revenue from base rate electricity (£4.5m) gives the total investment per project at £63m.

The early deployment stage funding was based on the assumption that at this stage, project developers have taken on the responsibility of installing wave farms, therefore the developer is seeing revenue from this. This revenue covers the developers costs and a small profit (see below for profit predictions), however to continue down the learning curve the developer must continue to invest money in R&D. It is this investment in R&D that we consider to be the investment at stage 3. The R&D spend is based on 8% of the estimated revenue generated during the period of early deployment. The actual calculation is based on the total revenue divided by the number of sectors in market (4) divided by the number of developers (4, 1 leader and 3 followers) multiplied by the percentage revenue spend (8%), to give ~ £60m

The near commercialisation stage is assumed to be large projects (e.g. 20MW) which are close to being self sufficient, as requested by LEK these projects have not been allocated funding however they will require ROC’s or some other means of funding to be commercial.

The commercialised stage is assumed to be totally self sufficient.

The number of technology variants is assumed to be a quarter of the total device developers (76), due to the split of the market by sector.

Outputs for Economy Assumptions - UK & Worldwide assumptions

The Capex and Opex costs have been generated as described above.

The split by stage in the value chain has not been documented to date. These figures have therefore been estimated in house (see Table 11). The emphasis on R&D and Engineering design identified in 2020 will reduce, with increasing levels of Manufacturing, and Installation as we progress to 2050 (the installation fraction is assumed constant as the manufacturing is likely to have a lower learning rate – see learning rate section).

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installation. As worldwide competition develops, the UK’s share will decrease moving forward to 2030 and 2050.

B&V and Entec have estimated that there are 300 people currently directly employed in the wave industry. Based on research by FREDS, Concerted Action and Green Peace, we have estimated that the size of the UK job market will be based on the sum of the current jobs plus 5 jobs per £m invested yearly.

The profit margins on revenues are based on the LEK assumptions as these appear to be a standard assumption in the knowledge spillover sheet.

The profit margins for the UK and globally, at 2020, are based on a few devices reaching stage 4 (near commercialisation). At this point it is felt that the supply is small and demand is high therefore profit margins are likely to be relatively high (6%) across the board. R&D and Engineering margins will be high as device developers look to capitalise on a strong market position, manufacturing revenues will be high due to a lack of competent manufacturing facilities available, similarly the lack of installation vessels and specialist expertise will drive up both installation and O&M margins.

As the market increases in size towards 2030, and competition increases, profit margins will be forced down (5%). This trend is likely to continue towards 2050, especially if multiple devices have become commercial which leads to more manufacturers, specialists, and specialist vessels, resulting in a further reduced profit margin (3%).

The profit margins discussed are primarily based on devices being near commercial by 2020. Given that we have estimated the cost of electricity from wave power at 2020 to be 12.2p, this assumption is based on Government policy being in place to support project developers (i.e. with ROCs or similar which make the projects commercial). Further, the margins discussed are not the project developer’s margins but the associated margins that the supply chain will receive, i.e. the device developer, manufacturer, installation services and O&M teams all receive revenue for products and services rendered, from the project developer.

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Manufacturing in the UK – Will the UK benefit? The general view of manufacturing in the UK is poor, due to such large scale failures such as cars, mobiles and wind turbines, however, there are many examples of success in the UK also, particular industries relevant to the Wave industry include Oil & Gas and Shipping industries. Further to this most of the potential resource for wave power in the UK is based in Scotland which has a strong manufacturing history, there is already strong political support for the marine renewable industry, as it is seen as the natural successor to the Oil & Gas industry.

The following presents an analysis of the key components of a wave energy converter (WEC) and the UK’s ability to manufacture them. The key major components of a generic WEC are: ¾ The Device Body – This tends to be a large empty vessel, for example the body of Pelamis is made up of several metal tubes attached via a coupling device. It is felt that such large structures would inherently be built in a relative close proximity to the assembly and deployment point. This is mainly due to the large costs associated with transporting such a bulky piece of kit. It is felt that the Oil and Gas and shipping industries could be utilised to good effect in the manufacture of device bodies. ¾ Power Take Off System – Generically this involves very precise engineering, including the construction of complex hydraulics and linear generation systems. The UK has a good history in this difficult area of manufacturing and therefore are in a good position moving forward. ¾ The Control System – A critical part of the device, however the value is in the code and not the hardware. Highly unlikely the UK would manufacture the components in the UK, however the knowledge and engineering of the control would stem from the UK. ¾ The Moorings – In the future it is likely that moorings will become generic and mass produced to reduce costs. Moorings present a small proportion of the cost of a device. It is felt that the UK will not be involved in the manufacture of these components due to size and cost.

Exploration of possible incentives that could be created by the Government to drive innovation (from device developers) forward.

This section aims to critically analyse possible methods that the Government could use to ensure the UK continues to lead the WEC market. This section can be split in to two main areas, the market as a whole (Generic market issues), and incentives to individual device developers (Device developer incentives).

Generic market issues 1. Grid - Grid issues cloud the long term prize, the UK has a huge potential however, this can not be utilised without an updated grid. Currently the majority of the future grid capacity (planned and installed) is taken up by off-shore wind. Therefore a developer has no urgency to push through its device as the UK prize is unclear, if a developer successfully demonstrates its device in 2015 but theres no grid capacity until 2020 then the competitors (UK and international) have time to catch up.

2. Planning Constraints - Complex planning constraints will hold many developers back, it is possible that large sums will need to be invested into a long planning process, which has the effect of holding up deployment (and thus learning), tying up investment which could be used to develop the device and putting of potential investors.

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Device Developer Incentives

Varied ROC’s levels – The number of ROC’s that a WEC could receive would vary depending on the cost of generating electricity, therefore a likely scenario for ROCs support could be: 2008 - 2011 - 5 ROCs 2012 – 2018 - 4 ROCs 2019 – 2022 – 3 ROCs 2022 – 2030 – 2 ROCs 2030 – 2050 – 1 ROC

The benefits of this type of support is that it does vary with costs, therefore making wave energy a commercial alternative at varying stages of development.

A disadvantage however of this is that the ROCs can vary in price therefore support isn’t stable and ROCs are inherently complicated.

Intermediate prize (as per the Scottish Saltare prize) – Device developers are rewarded as they move through the stages for demonstrating certain criteria. For example the first device to: Demonstrate a full scale device via a successful 3 month trial could receive - £10m Achieve an installation of 10MW farm could receive - £30m Achieve an installation of successful 30MW farm could receive - £50m

The benefit of the incentive prize is that it gives developers a clear achievable goal which provides a worthy and attractive prize.

A disadvantage nevertheless is that the incentive would need to work with another form of support, i.e ROCs, because only a small number of developers would benefit from the prize.

Cash incentive - An approach similar to ROCs but guaranteed i.e. feed in tariffs per MWh – This may be achieved by offering 2 ROCs plus £/MWh, or just using a straight cash incentive.

The reward from this type of incentive is more stable and therefore more reliable and it would therefore lead to reduced risk and greater investment

It would however require some method of calculating a fair continuously reducing cash incentive to take into account the reduction in p/kWh.

Demonstration Scheme – This would involve the government backing the first device developers to successfully demonstrate their device can achieve certain criteria. The support would come in the form of the government taking on the role of project developer and bear the costs and resources needed to install the first large scale deployment, therefore the project would be commercial for the device developer. A possible scenario would be: The first 5 developers that can demonstrate that their device can reliably generate electricity at 23p/kWh receive government backing to install a 10MW farm with financing coming directly from the government. The reward could potentially be performance based to ensure that developers don’t rush to market for the short term prize.

This form of incentive would allow the Government to prove that technologies work. The rest of the world would see that the UK is leading the field of wave energy deployment and the UK’s reputation would be enhanced by successful deployments.

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Huge investment would however be required and thus a strong commitment from the Governmnet. In addition the developers could potentially rush their devices into the water to receive this prize however, stringent regulations for successful demonstration of projects would eliminate this potential problem.

This option could be further expanded to support step change technologies coming through at a later stage. i.e. the first three projects to demonstrate successfully would be supported. Then the bar would be lowered (the p/kWh lowered to reflect a step change) to allow emerging technologies to take advantage of the incentive. i.e. the first three technologies may demonstrate 23p/kWh the next project must demonstrate 18p/kWh down to 15p/kWh for emerging technologies.

Impacts of no incentive scheme

The effects of not taking on one of the discussed schemes which have been discussed throughout the report and summarised in this section here are: other countries would be allowed to catch up with the UK and possibly over take to lead the industry, companies such as Pelamis will continue to install abroad therefore reducing the learning and expertise in the UK, especially in terms of operational activities, and the UK could potentially follow the route of wind and lose out in terms of the prize of leading the field and generating a new industry in the UK.

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APPENDIX A – COMPONENT INNOVATION STAGE

Stage 1 – Off-the-shelf component; Stage 2 – Standard component or minor adjustment to standard component; Stage 3 – The component is considerably larger or has one major different characteristic; Stage 4 – Entirely new or novel component. Stage L.E.K Configuration Location Foundation Structural Mechanical Off-shore Ballast Mass Device body Valve Pistons Seal Bearings platform Onshore / Near- Sliding - DEVELOPER DEVICE NAME shore / Deep Rota http://www.emec.or Guide Linear water tiona g.uk/wave_energy rail generator l _devices.asp s Oscillating water Oceanlinx (Uisecetha) Energetech Stage 2 column Near-shore Floating 2 Wavebob Wavebob Stage 2 Point absorber Deep water Floating 2 2 2 2 Seabed- AWS Ocean Energy Archimedes Waveswing Stage 2 Point absorber Deep water mounted 2 2 2 Ocean Power Technologies Power Buoy Stage 2 Point absorber Deep water Floating 3 Over topping Wave Dragon Wave Dragon Stage 2 device Deep water Floating 3 Oscillating water Coastline Wavegen Limpet Stage 2 column Onshore mounted 2 point absorber / Pelamis Wave Power Pelamis Stage 2 attenuating device Deep water Floating 2 Fred Olsen Buldra Stage 2 Point absorber Deep water Floating 2 2 2 2 Oscillating water JAMSTEC Mighty Whale Stage 2 column Deep water Floating 2 3 2 Oscillating wave Seabed- A W Energy WaveRoller Stage 2 surge converter Near shore mounted 3 2 2 Finavera Aquabuoy Stage 2 Point Absorber Deep water Floating 2 2 Seabed- Wave Energy Technologies EnGen Stage 2 Point absorber Near-shore mounted 2 Hydam Technology Ltd McCabe Wavepump Stage 2 Attenuator Deep water Floating 3 2 3 Oscillating water Ocean Energy OE Buoy Stage 2 column Deep water Floating 2 2 Oscillating Wave Coatline SDE Energy SDE Stage 2 Surge Converter Onshore mounted 2 2

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POWER GENERATION Pneumatic Hydraulics Electromagnetic FluxInverter Sub station Systems Open DEVELOPER DEVICE NAME Linear Generator - Gear Rams / Closed system - Direct Air Turbine Hose pipe electrical Electromagnetic On shore Off-shore Box Pistons System sea Drive generation induction water

Oceanlinx (Uisecetha) Energetech 2 3 11 Wavebob Wavebob 2 2 1 ? 1 AWS Ocean Energy Archimedes Waveswing 2 2 1 1 Ocean Power Technologies Power Buoy 31 Wave Dragon Wave Dragon 2 1 1 1 Wavegen Limpet 2 2 11 Pelamis Wave Power Pelamis 2 1 1 1 1 Fred Olsen Buldra 2 2 1 1 1 JAMSTEC Mighty Whale 2 2 11 A W Energy WaveRoller 2 2 2 1 1 2 Finavera Aquabuoy 22 2 112 Wave Energy Technologies EnGen 2 2 2 2 1 Hydam Technology Ltd McCabe Wavepump 2 2 2 1 1 Ocean Energy OE Buoy 22 11 SDE Energy SDE 2 2 2 1 1 1

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APPENDIX B – Supporting information for Section 2.1.2.1 R&D Funding sources Introduction

The potential rewards for technological breakthrough within the marine market are substantial, with the eventual value of the worldwide electricity revenues estimated to be between £60b/year and 190b/year84. However, all the breakthroughs and barriers, described in Sections 2.1.1 and 3.2 respectively, have to be overcome to take advantage of this. For this reason, new ideas and early developments need to be nurtured and supported. The following section highlights the focus of research that aims to achieve this, and the inherent weaknesses of the system in relation to the two main ways in which the technological issues could be solved (as discussed earlier): - A major breakthrough for a step change in CoE - Development of existing technologies for incremental reductions in CoE

The Energy Technologies Institute created the UK Innovation Chain diagram (Figure 16) to illustrate the support offered, and the spread of investment from R&D through to deployment. This section of the report will focus on the Research and Development section of the chart (for further details on support for demonstration and deployment see Section 3). The innovation stages for the marine technologies have been determined against established technology readiness levels (TRLs). As described in Section 1.1.6, L.E.K Stage 1 R&D is equivalent to TRL’s 1-4, and L.E.K Stage 2 Demonstration is equivalent to TRL’s 5-9.

Research Councils - SuperGen The research council area supports the incremental changes to cost of energy, because they are focusing on finding solutions to issues that are faced by existing technologies. SuperGen85 provides generic support for early stage development and therefore does not support individual developers. It is led and funded by the Engineering and Physical Sciences Research Council (EPRSC) in partnership with Economic & Social Research Council (ESRC), Natural Environmental Research Council (NERC), Biotechnology and Biological Sciences Research Council (BBSRC), and the Carbon Trust for academic research. The programme was initially a 4-year programme which ran from 2003-2007 to support the UK in meeting its emissions target by encouraging and improving sustainable power generation and supply. The £32m programme covers 13 areas of energy generation, of which marine energy research is one. The marine energy research consortium is comprised of The University of Edinburgh, Heriot-Watt University, the University of Lancaster, Robert Gordon University and the University of Strathclyde. These comprise the leading UK universities in the marine energy field. Phase 1 focused on the wave and tidal stream resource which enhanced understanding of the nature of the resource and the extent of it. This included the limitations of resource extraction, the impacts on the surrounding environment, and understanding how device developers could focus their technology to ensure the most effective exploitation of that resource. As some of the schemes, including Marine and Bioenergy, have now completed their initial four years of research, the council have issued further grants to continue for a further four years. Phase 2 of SuperGen Marine has been awarded £5.5m in funding.

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The aim of the Phase 2 SuperGen Marine Consortium has changed slightly from the aim of Phase 1 as the project moves forward. It now includes device interaction with the resource. The stated aim is: To increase knowledge and understanding of device-sea interactions of energy converters from model-scale in the laboratory to full size in the open sea. The SuperGen Programme is closely linked to the UK Energy Research Council Programme as it is also led by the University of Edinburgh and funded by EPSRC, NERC and ESRC. UKERC, which is part of the £28m cross research council programme for Towards a Sustainable Energy Economy (TSEC), has recently produced roadmaps for emerging technologies, one of which is marine energy. This roadmap, which has been peer reviewed by the sector has been used and referenced in this report. As SuperGen and UKERC research are funded and led by the same organisations, it ensures that there is co-ordination and co- operation across the two programmes.

The Carbon Trust Applied Research programme supports the development and commercialisation of technology which has the potential to contribute to carbon emissions reductions in the UK. It is available to both businesses and Universities. There is a maximum of £250k available to each successful applicant, and since 2001 the programme has supported 15 marine energy projects worth £3m. There are two calls for proposals planned for 2008 which will take place in summer and autumn. This programme therefore supports research and development throughout L.E.K Stage 1 R&D phase and encourages further learning by searching, and potentially supports novel step-change technologies.

The Carbon Trust’s Marine Energy Accelerator86 (MEA) covers L.E.K Stage 1 R&D (TRL 1- 4 in Figure 16). This aims to accelerate progress in cost reduction of marine energy technologies, to bring forward the time when marine energy becomes cost-competitive so that significant carbon emissions reductions are achieved. The Carbon Trust’s MEA follows on from the Marine Energy Challenge which was completed in January 2006 with the Future Marine Energy Report.

The MEA splits the areas of concern into 3 strands to focus on cost reduction via a major breakthrough and incremental changes, these are: A. Development of new marine energy device concepts with potential for significantly lower costs than front-runner technologies; B. Research and development into specific component technologies of marine energy devices that are common causes of high costs; and C. Development of low cost installation, and operation and maintenance strategies for marine energy devices.

Strand A Strand A focuses on supporting technology breakthroughs by getting developers working with engineering consultants and academic research groups. To help engage device developers in Strand A, the Carbon Trust have a continuing competition aimed at new concept developers. The prerequisites for entering are: • The device is at an early stage of development; • The device has potential to significantly lower costs.

If successful device developers benefit from:

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• New costing and engineering analysis — a confirmation that they probably have a step-change technology; • Increased credibility with financers and investors.

Developers have been extremely keen to utilise the initiative, however a new concept device is the prerequisite for Strand A. It was found that there were few concepts submitted which were viable and that differ significantly from existing technology. To date the only successful wave device developer who has utilised Strand A has been Anaconda.

Strand B Strand B aims to support developers and manufacturers, with specific research into component technologies to understand how to make them more suitable for marine energy devices. The aim was to work closely with device developers to determine accurate specifications and requirements, and involve a combination of scientific and engineering analysis, testing, and product development activities.

As Strand B progresses it has become clear that it is very difficult to engage component manufacturers due to the limited rewards on offer; for instance, convincing a company like GE to invest heavily in the development of a gearbox to improve the energy capture and reliability of a device is difficult as the associated risks of a low return are high.

Strand C In Strand C, developers are encouraged to work with offshore engineering consultants/contractors with particular focus on low cost installation and O&M strategies. The idea is to benefit from their experience and thus increase the learning rate for offshore operations.

Strand C has been relatively successful and useful partnerships have been developed, and the marine energy devices are benefiting from the experience. Strand C has been relatively successful due to the financial incentives on offer to offshore experts, i.e. they get paid for their contributions.

When considering the future support for wave energy devices (especially as regards step- change technology) it is important to consider that the Carbon Trust’s MEA has a limited time scale. A budget is in place for each strand, once this is used the initiative will finish.

Technology Strategy Board (TSB) The TSB was set up in 2003 following DBERR’s, then DTI’s, Innovation Report. The TSB has and will continue to play an important role in the development of the Governments Innovation Strategy. The Government invest around £3bn/year to innovation across all industries and sectors and specifically for Low Carbon Technologies have invested £100m for the Autumn 2007 call. The TSB investment for Marine (under the Technology Programme now called the Collaborative Research and Development) which covered TRL 3-6 (Figure 16) has however been omitted from the 2007-8 Autumn call, on the understanding that the ETI’s funding is sufficient and would cover this area87.

Energy Technologies Institute (ETI)

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The ETI88 has been established to develop a focused portfolio of commercially viable, sustainable energy technologies. In particular for marine energy, its goal is to develop a small number of major new development and demonstration projects in marine energy, with funding of between £5m and £10m on offer to support developers.

The ETI is a public/private partnership, and is backed by companies including BP, Caterpillar, EDF Energy, E.ON, Rolls-Royce and Shell. This private investment (of £5m per year per company for all projects) is matched by the UK government.

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APPENDIX C - Technology Roadmaps

1. Technical Strategy: Resource Modelling & Measurement Timeline

Resource Modelling & Measurement Timeline

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2. Technical Strategy: Device Modelling Timeline

Device Modelling Timeline

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3. Technical Strategy: Electrical Infrastructure Timeline

Experimental Timeline

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4. Technical Strategy: Moorings and Seabed Attachments Timeline

Moorings & Seabed Attachments Timeline

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5. Technical Strategy: Electrical Infrastructure Timeline

Electrical Infrastructure Timeline

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6. Technical Strategy: Power Take Off and Control Systems Timeline

Power Take Off & Control Systems Timeline

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7. Technical Strategy: Engineering Design Timeline

Engineering Design Timeline

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8. Technical Strategy: Lifecycle & Manufacturing Timeline

Lifecycle and Manufacturing Timeline

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9. Technical Strategy: Installation and O&M Timeline

Installation, O&M Timeline

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10. Technical Strategy: Environmental Timeline

Environmental Timeline

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11. Technical Strategy: Standards Timeline

Standards Timeline

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Appendix C – Alternative Roadmaps

1. Path to Power

Path to Power: Recommendations summary (Roadmap)89

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Appendix D – Alternative Roadmaps

2. DTI Route Map

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Appendix C – Alternative Roadmaps

3. WEC R&D Road-map for Wave Energy, 2001.

4. European Ocean Energy Association Roadmap

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Appendix E – Supply chain detail

1. Survey and Planning Human Geological Oceanographic Heritage Environmental Activity Planning & Survey Survey Assessment Assessment Survey Permits Insurance Finance Legal Geological Oceanographic Environmental Consultancy - Consent Survey Survey Marine Survey Consulting Navigation Process Insurance Banking Legal

Environmental Expert Environmental Survey, Human Regulatory Finance Witness Surveys, Marine Activity Advice Consulting Services Planning Permission Finance Feasibility Studies

2. Planning and Permits

Power Purchase Planning Permits Insurance Finance Legal Agreements Regulatory Advice Consent Process Insurance Banking Legal Legal Expert Power Planning Finance Witness Industry Permission Consulting Services Consultants Finance

3. Design Electrical Civil Control Mechanical Hydrodynamic System (onshore) System Project Design Offshore Design Design Design Design Design Design

Control Electrical Civil System Design Design Design CFD Analysis Engineering Engineering Engineering Electrical Grid Control Engineering Engineering Systems Connection Fluids Consultancy FEM Analysis FEM Analysis Consultancy Simulation Design Design Materials Engineering Engineering Engineering Consultancy Consultancy Materials Materials Engineering Engineering

Manufacture

Floating / Energy Power Power Resource Offshore Coupling Generation Transmission Navigation / Control Onshore Assessment Moorings Structure System Equipment Equipment Comms Equipment Equipment Structure Equipment Manufacture Manufacture Manufacture Manufacture Manufacture Manufacture Manufacture Construction Manufacture

Small Grid- Turbine Cable Connected Ocean Foundations Buoyancy Manufacture Alternators Manufacturer Batteries Data Loggers Systems Sensors Anti Mooring Structural Vibration Offshore Ropes -Steel Steel Hose Pump Mounts Transformers Battery Charging Instrumentation Construction

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Mooring Battery Monitoring Ropes -Fibre Valves Cabling Connectors Systems pumping Cranes Large Turbine Cabling Electrical Communication Safety Power Piles Manufacture Systems risers Equipment Equipment Distribution Hydraulic Hydraulic Monitoring Floats Systems Pipeline Protection Devices Equipment Torque- Limiting Onshore Drives Transformers DP Systems Controllers Onshore Generators Switchgear Telecommunications Control fluids

Brakes Navigation Aids Clutches Lighting Couplings Gear Units Generator Manufacturers Generators Inverters

Testing

Prototype Full scale Component Component Testing testing Testing Verification Small Scale Testing Materials Certification and Facilities Vessels Testing Documentation Power Hook Up Consultancy - Vessels System Certification Power Hook Up System Installation

Civil Onshore Cable Offshore (onshore) Assembly Laying Transportation Construction Engineering Lifting Cable Laying Vessels Diving Construction Electrical Welding/assembly Diving Cranes Cranes engineering Vessels Pile installation Foundation installation Operation

Integrity Performance Recovery & Reliability Structural Management Evaluation Repair Management monitoring Reliability Electrical Instrumentation Vessels Consultancy Data Analysis Engineering Repair Foundations Consultancy Services Data Logging Diagnostics Hydraulic Services Marine Mechanical Piling Preventative Maintenance Turbine

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Cable Control Systems Instrumentation

Decommissioning

Offshore Recycling/Waste Environmental disassembly Transportation Disposal Refurbishment assessment Electrical Environmental system Impact Vessels Vessels Scrap Metal refurbishment Assessment Hydraulic system Cranes Cranes Waste Disposal refurbishment

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