Removing Barriers for Deployment Through Policy Development; the UK Case Study

3rd International Conference on Ocean Energy, 6 October, Bilbao

Removing barriers for deployment through policy development; the UK case study. 1 O H. Wragg

1 RenewableUK, Greencoat House, Victoria, London, UK E-mail: [email protected]

Abstract and carbon emission reduction. In the UK this came firstly from the European Renewable Energy Systems This paper will provide an overview of the directive [1] and secondly through the UK Climate current state of the UK marine energy industry, Change Act [2]. covering installed capacity to date, planed projects The two further key pieces of UK primary and development scenarios up to 2020. Reference legislation that have subsequently be established are the will be made to the development of RenewableUK’s Renewables Obligation [3], which provides the UK’s renewable Energy Database. revenue support mechanisms for renewable energy, and This paper will also outline the major the Marine and Costal Access Bill [4], which will recommendations form RenewableUK’s response to develop a clearly defined system for planning and the UK Marine Energy Action Plan and how this licensing commercial activities within the UK’s could facilitate development. Particular attention renewable energy zone[5]. will be made to: The UK Government has also produced several key • How the secondary legislation arising from the documents within the past year. In 2009 the Marine and Coastal Access Bill will impact the Department of Energy and Climate Change published industry. the Renewable Energy Strategy [6] and the Department • The current status of the UK funding landscape for Business Innovation and Skills launched the Low and possible development pathways. Carbon Industries Strategy [7]. Table 1 details how • Strategic Environmental Assessment and these documents dedicated a total of £60 million to key leasing. infrastructure and technology development. Award Made To Amount • Technology Pathway Activity • Infrastructure, Skills and Supply Chain Awarded Development South West Low Carbon Regional Conclusions will be drawn from the development £20 million over the past year and suggestions to how the Economic Area Development industry and government can continue to work Agency together to facilitate a thriving marine energy Marine Carbon Trust industry will be made. Renewables £22 million Proving Fund Project Nautilus National Keywords: Policy, Market, Industry, Development – Drive Train Renewable £10 million Testing Energy Centre 1. Introduction Installation of European Marine £ 8 million The UK is widely acknowledged to be the world testing births Energy Centre leader in the rapidly developing marine energy Table 1: UK Public Investment Pledged in July 2009 to the industry, with exceptional infrastructure (EMEC, marine energy industry [6-7] NaREC, QinetiQ and Wave Hub) and a significant The past year has also seen the production of two potential resource; policy development can all too private/public partnerships documents. First from the easily be forgotten even though it will inevitably play a Forum for Renewable Energy Deployment in Scotland central role in the formation of a commercially viable in the form of the Marie Energy Road Map [8] and marine energy industry. secondly the Department of Energy and Climate When considering policy development it can be Change coordinated the Marine Energy Action Plan argued that the most important progress, with regards (MEAP) [9]. to facilitating the deployment of renewable energy, has The Department of Energy and Climate Change will been made through the provision of legally binding also produce two further key documents in 2010: government targets for renewable energy production 1. Project Discovery which will redefine Ofgem’s role as regulator of the Grid.

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2. 2050 Vision of the UK energy network 1.1 RenewableUK RenewableUK (formerly the British Wind Energy Association) is the UK’s leading trade association for wind, wave and tidal energy with over 590 corporate members. RenewableUK’s key objective is to maximise the deployment of wind, wave and tidal technologies [10]. By providing an industry forum for coordinating opinions and communication them to government, media and public; they identify barriers to development and deployment and devise and implement strategies to overcome them. The thoughts and ideas provided within this paper Figure 2: Potential UK Build rate for Marine Energy Projects to 2020 [9] represent a collective thinking and understanding that has been developed by RenewableUK’s Marine To achieve this industry must have de-risked the Strategy Group and RenewableUK’s wider technology, mastered installation, operation and membership. maintenance techniques, obtained greater This paper will provide an overview of the current understanding of environmental impacts, developed a state of the UK marine energy industry, covering supply chain and secured significant sums of private installed capacity to date, planed projects and investment. It is recognised that to achieve this development scenarios up to 2020. accelerated rate of delivery beyond “business as usual”, This paper will also outline the major will require significant coordination and policy recommendations form RenewableUK’s response to interjection at both member state and European level. the UK Marine Energy Action Plan and how this could To date the UK has installed 2.4 MW and generated facilitate development. over 1400MWh to the UK grid. Details of these projects are outlined within Table 2.

2. National Targets and Current Projects Date Rated Technology Location RenewableUK identified a target of 1-2GW installed Installed Capacity capacity in there 2010 state of the industry report Wavegen Western Isles 2000 0.5 MW (Figure 1). Seagen - Marine Strangford 2008 1.2 MW Current Loch Turbines European Open Hydro Marine Energy 2008 0.25 MW Centre Humber Pulse tidal 2009 0.1MW Estuary Oyster – European Aquamarine Marine Energy 2009 0.35MW Figure 1: Potential UK Cumulative Installed Capacity for Power Centre Marine Energy Projects to 2020 (11) Table 2: UK Installed Technology [9] The Marine Energy Action Plans provided a In order to track these figure more accurately different approach to targets. Rather than setting a RenewableUK will be developing the UK Renewable specific installed capacity, it takes the view that by Energy Database. This will record the information 2020 the UK wave and tidal industry anticipates and listed above in Table 2, along with information on the fully expects to be deploying marine energy arrays at a stage of development and generating capacity, as has scale of 100 MW (Figure 2). been recorded for wind energy with in the UK since 2004, through the UK Wind Energy Data Base [12]. The Crown Estate recently awarded 1.2GW of projects in the Pentland Firth and Orkney waters. This consisted of eight projects ranging in size from 50MW to 200MW (Figure 3).

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4. RenewableUK Recommendations - Technology Pathway The development of marine energy technology and industry is inextricably linked to two elements, which are required for the development of any energy technology industry. The first is the provision of public funds to de-risk private investment and to stimulate development. It is very important to remember that both the Danish wind and Japanese Solar industries benefited from roughly £1 billion of public finance [15]. The allocation and breakdown of finance and funding will be discussed in more detail in section 7. The second point of note is the need for Figure 3: Pentland Firth and Orkney Water Round 1 standardisation. The marine energy industry and the Development Sites [13] British Standards Institute have already begun work on this area with the production of a set of standards by 3. The Marine Energy Action Plan the European Marine Energy Centre [16]. This work has progressed to the development of the International The MEAP was intended to set out an agreed vision Electrotechnical Commission performance standard for the marine energy sector to 2030 [9]. Similarly to 62600-100/200 and a UK mirror group PEL-114. the Marine Energy Road Map [8], it outlines the actions required from both private and public sector to 4.1 Key Action facilitate the development and deployment of marine RenewableUK has highlighted to need to develop a energy technology. cost-of-energy benchmark that should in turn to be used There were 74 organisations involved, just over a for standardised entrance to public sector funding quater from the public sector and 77% of the private programmes. Along with continued and coordinated sector participants are members of RenewableUK. capital funding for enabling technologies, Figure 4 provides a more detailed brake down of the standardisation will be vital in facilitating increased organisations involved. reliability and driving cost reductions across the marine Public Sector energy industry. A key point to note is that for standards to be of value they must be truly adopted by the industry and Utilities and Major Manufacturers that an overly prescriptive standard runs the risk of impeding development and innovation. Technology Developers 5. RenewableUK Recommendations - Private Sector Other (Supply Chain, Ports, Finance Environment, Planning and Consent Community, Consultants) In order to facilitate the marine energy industry moving from R&D projects to full scale Figure 4: Breakdown of Organisations involved in the commercialisation, a country must provide project Marine Energy Action Plan developers with a The Marine Energy Action Plan was split into 5 • Clearly defined strategic plan for deployment to work streams: minimise environmental impacts [5]. • Technology Pathway • Transparent and defined seabed leasing • Environment Planning and Consent programme [4]. • Infrastructure, Supply Chain & Skills • Clearly defined licensing and consenting process • Finance and Funding [4]. • Tidal Range Whilst the UK does not have these elements With the exception of Tidal Range, the work streams established across its entire marine environment, action listed above coincide with the key barriers to is being taken in all three areas. deployment that have been highlighted by 5.1 Strategic Environmental Assessment RenewableUK and “The Next steps of marine energy” (SEA) [14] outlines the key recommendations from each A key barrier to achieving the UK’s 1-2 GW target section. is the pre-requisite of SEA for commercial leasing rounds. In 2008 the Scottish SEA was completed [17], allowing the Crown Estate to open a call for applications for leases in the Pentland Firth and Orkney Waters. An SEA has recently been completed for Northern Ireland, which outlined the potential to install

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300MW of tidal stream energy without danger of other strategic areas across the UK, the same principle having any significant environmental impact [18]. In should also be applied to other strategic areas across March 2010 DECC launched the offshore energy SEA Europe by other member states. [19] in England and Wales. Due for completion in As noted within the Marine Energy Action Plan, 2011, this final assessment will provide the Crown RenewableUK supports the development of a ‘Deploy Estate the ability to award commercial leases across the and Monitor’ strategy. This should be developed by entire UK renewable energy zone. Government, academia, statutory nature conservation bodies and the industry, with efforts focued upon 5.2 Seabed Leasing providing ‘off the shelf’ monitoring methodologies, As the sole landlord of the seabed the Crown Estate monitoring technologies and mitigation measures to is in a monopoly position, with a substantial marine facilitate consents and prove full scale demonstration estate. Having worked proactively to encourage the projects. development of the UK offshore wind energy industry , the Crown Estate have developed a transparent competition system to award seabed leases which the 6. RenewableUK Recommendations - industry is on the whole comfortable with [20] and with Infrastructure, Supply Chain and Skills further leasing rounds, will help to define the UK It is widely recognised that the UK has some of the marine energy market. worlds leading marine energy testing facilities that Investors have stated that a clear leasing system is a have helped to develop and attract world leading strong asset to the UK industry that helps provide technology developers [11]. stability and the Crown Estate have stated they will After the deployment of initial prototypes the next respond to industries demand for projects through development to commercialisation is the deployment of future leasing round announcements. initial arrays and there is important work being 5.3 Licensing and Consent undertaken within the UK to upgrade port facilities and Once a developer has obtained a lease, they must further support this emerging sector. Notably in the still acquire the necessary license to install and operate South West, thanks to South West Regional a marine energy project. Currently to install an Development Agency [22] and in the North of Scotland offshore energy project in the UK a developer must with assistance from Highlands and Islands Enterprise adhere to a myriad of licences from varying [23]. To draw a comparison with the development of organisations [21]. However, in the coming years this the UK offshore wind industry, RenewableUK has will be simplified with secondary legislation that will undertaken work to outline the various types of ports arise from the Marine and Coastal Access Bill required for full commercialisation, these include such providing: categories as operations and maintenance, installation • Marine Management Organisation which will and super-ports. A natural progression for the marine facilitate a “one stop shop” for marine licensing energy industry would be to undertake similar work. and will take on all of its powers in Q2 2011. For grid the inevitable strengthening of the • The Marine Policy Statement to be published in Scottish’s network is a key priority within the UK and March 2011 will define the UK Governments high there are opportunities to capitalise on the policy work level objectives for the marine environment, laying being undertaken in offshore wind industry in areas the foundations for marine spatial planning. such as Offshore Transition Owner’s regime, which • Marine Conservation Zones will for the first time will outline how large scale offshore energy projects take into account both socioeconomic and connect to the grid. conservation objectives, in an effort to make the RenewableUK recognise that the best way to UK seas truly sustainable. accelerate deployment is to capitalize on existing • Marine spatial planning is currently expected to be knowledge. As a result RenewableUK has organised completed by 2024 and will further ease the three supply chain events to encourage this knowledge consenting process. transfer. Whilst Marine Scotland are the body that lead the 6.1 Key Action development of the processes outlined above within RenewableUK believes the Government (notably the Scotland and the Marine Consents Unit within Welsh Department for Energy and Climate Change and the Assembly Government will also play a role within the Department for Business, Innovation and Skills) and 12nm zone; overall the process is anticipated to be industry should complete an industrial strategy to help more streamlined, reducing the time taken for project the growing marine energy sector to make the most of consents to be awarded and ensuring the role out of the emerging skills and expertise clustered around commercial scale projects. particular nodes in the value chain. 5.4 Key Action To address grid access and transmission charging for Currently the cost of collecting baseline data is far marine energy in the Scottish Islands; Ofgem, National outside the budget of individual developers. Grid, industry and other interested parties should devise RenewableUK believes that the efforts in Scotland to a more acceptable charging system, potential through collect strategic baseline data should be applauded and Project Discovery. UK Government should seek to replicate these within

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7. RenewableUK Recommendations - the existing research and development (R&D) Finance and Funding stimulation mechanisms. The primary gap today exists when devices are ready As stated previously in section 3, the path to for open ocean deployment; at this point capital needs commercialisation for marine energy will be similar to rise rapidly. It is estimated that the capital expenditure that of any other form of energy generation technology. (CAPEX) of deploying a full-scale prototype in real sea It will require government support to overcome the conditions is in the region of £10 million. Device initial high R&D costs and deliver commercially viable developers are generally small and medium enterprises technology. Figure 5 below provides a basic outline of (SMEs) that do not have the financial backing to fund industry development, showing the transition from such projects, and the initial risk exposure is too high capital support to revenue support, from prototypes and for utilities to commit investment or for any next-generation devices through first farms and manufacturer to underwrite performance. Hence, beyond. capital support from government is required to de-risk investment in technology development and stimulate the private sector backing. Once a device is ready for deployment, RenewableUK believes that its commercial potential is determined by a combination of technology and Figure 5: Basic Outline of Industry Stages to company expertise. This is particularly true in the Commercialisation and Types of Support Required [14] marine power sector, where ocean operations require Revenue incentives are important; however, outside specialised skills not normally found in early-stage of Scotland they are currently insufficient and will not technology companies, which are typically SMEs with work in isolation from capital support measures in the limited resources. early stages of industry growth. Revenue incentives are Professional investors are experienced at finding this powerful where electricity production can be predicted winning combination of technology and company, and reasonably accurately. The marine energy industry industry should ensure that it uses that market expertise recognises that it is currently not at this stage of to select the companies that receive support, to deliver development. match funding for the development of initial projects. When marine energy devices become ready for The key driver of their investment decisions is a deployment in small arrays, revenue incentives play an risk–reward balance and investors are currently placing important part in making the projects economically their money into projects that require less capital viable, and offsetting operation and maintenance cost exposure before revenues are produced. risk. However, with sufficient revenue incentive, In the past year the UK Government has committed upfront capital grant is also required to de-risk a total of £48.6 million to technology development. investment for first arrays. Under this scenario, a RenewableUK estimates that an additional £250 marine energy project starts to become attractive to million is required over the next five years. private investors. However, to secure investment, 7.1 Key Action device offerings have to be on a par with alternative The next step for funding and finance is to ensure options. In particular, device manufacturers have to be the provision of a significant market signal to increase able to offer potential investors (a) sufficient operating activity in early stage development, whilst also experience to offer guarantees in performance and ensuring the provision of coordinated grant funding for reliability and (b) involvement of major manufacturers full scale prototype and initial array deployment. able to underpin these guarantees both technically and financially. Following these initial small-scale projects, and with 8. Conclusions sufficient revenue support, it is likely that marine In conclusion the UK marine energy industries key energy projects could start to move towards attracting activates are to ensure delivery of Marine Energy debt finance, one of the key requirements in facilitating Roadmap and Marine Energy Action Plan rapid deployment at the large scale. In turn this will recommendations. This should be achieved in tandem deliver associated cost reductions that would reduce the with a coordinated private and public support to required revenue support. develop an European Industrial Initiative. The industry Because revenue support alone will not drive the will also need to continually define public finance industry forward through the first array phase, very few requirements to establish a world leading marine marine energy projects have reached this stage of energy industry. development to date. As outlined in Figure 5, a capital The UK marine energy industry has an ambitious element is needed in combination with revenue support target, which is very much achievable if the industry to drive initial delivery. acts with policy support from UK Government. Capital support is vital to the industry today. Very early-stage devices – those that are years away from ocean deployment – require continued support through

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Acknowledgements [15] The Carbon Trust (2006); Future Marine Energy CTC 601. RenewableUK would like to acknowledge all of its members who have actively contributed to the [16] EMEC (2009); Guidelines for Marine Energy Converter development of policy and industry positions reflected certification Schemes. ISBN 978-0-580-65040-6 within this paper. [17] Scottish Executive (2008); Post Adoption Statement; Marine Renewables SEA. Job No 43471IALE References Reference PAS_FINAL_JULY08 [1] Commission of the European Communities (2001); [18] Department of Enterprise, Trade and Investment NI Directive of the European Parliament and of the council (2009); Offshore Wind and Marine Renewable Energy in on the promotion of electricity produced from renewable Northern Ireland Strategic Environmental Assessment – energy sources in the internal electricity market. Non-Technical Summary. Directive 2001/77/EC http://www.offshorenergyni.co.uk/Data/NTS_FINAL_D EC_09.pdf - Date Viewed 29/05/2010 [2] UK Government (2008); Climate Change Act 2008. c.27 [19] UK Government, Department for Energy and Climate Change (2010);UK Offshore Energy SEA 2. [3] UK Government (2002); Renewables Obligation Order http://www.offshore- 2002. No. 914 sea.org.uk/downloads/OESEA2_Scoping_Document.pdf - Date Viewed 29/05/2010. [4] UK Government (2009); The Marine and Coastal Access Act 2009. c. 23 [20] UK Government House of Commons – Treasury Committee (2010) The management of the Crown Estate [5] UK Government (2004), The Renewable Energy Zone Eighth Report of Session 2009–10. Volume I, HC 325-1 (Designation of Area Order 2004. No, 2668 [21] Knowledge Transfer Network (2010); Policy and [6] UK Government, Department of Energy & Climate legislation Rules – Marine Renewables. Change (2009); The UK Renewable Energy Strategy. https://ktn.innovateuk.org/c/document_library/get_file?p Cm 7686 ISBN: 978-0-1017-6862-7 _l_id=57159&folderId=130246&name=DLFE-3533.pdf [7] UK Government, Department for Business, Innovation – Date Viewed 29/05/2010 and Skills, Department of Energy and Climate Change [22] South West Regional Development agency (2010); (2009); The Low carbon Industrial Strategy. URN http://www.southwestrda.org.uk/news_and_events/2010/ 09/1058 march/%c2%a35m_marine_energy_investment.aspx – Date Viewed – 29/05/2010 [8] Forum for Renewable Energy Deployment in Scotland, Marine Energy Group (2009); Marine Energy Roadmap. [23] Highlands and Islands Enterprise (2010); ISBN 978-0-7559-9083-2 http://www.hie.co.uk/Default.aspx.LocID- [9] UK Government, Department for Energy and Climate 0finewlzh.RefLocID-0fihiesv500g.Lang-EN.htm - Date Change (2010); Marine Energy Action Plan, Viewed - 29/05/2010.

[10] British Wind Energy Association (2009), Annual Report [24] European Wind Energy Association (2009); EWEA 2009. briefing on Commission Communication on Financing http://www.bwea.com/pdf/BWEA_annual_review_2009. the Development of Low Carbon Technologies (SET- pdf - Date Viewed - 29/05/2010 Plan). http://www.ewea.org/fileadmin/ewea_documents/docum [11] RenewableUK (2010): Marine Renewable Energy – ents/publications/briefings/091007_EWEA_briefing_on_ State of the Industry Report. Commission_Communication_Investing_in_the_Develo http://www.bwea.com/pdf/press/RenewableUK_Marine- pment_of_Low_Carbon_Technologies.pdf - Date Action-Plan.pdf - Date Viewed - 29/05/2010 Viewed 29/05/2010

[12] RenewableUK (2010), [25] European Ocean Energy Association (2010); Oceans of http://www.bwea.com/ukwed/index.asp. - Date Viewed - Energy – European Ocean Energy Road Map 2010 – 29/05/2010 2050. http://www.euoea.com/euoea/files/ccLibraryFiles/Filename/000000000 [13]The Crown Estate (2010); 827/ocean%20vectorise%2010%20mai%202010.pdf – http://www.thecrownestate.co.uk/our_portfolio/marine/w Date Viewed – 29/05/2010 ave-tidal/pentland-firth-orkney-waters.htm - Date Viewed - 29/05/2010

[14] RenewableUK (2010): The Next Steps for Marine Energy, the industry view on the marine energy action plan.