Analysis of the Potential Economic Benefits of Developing Ocean Energy in Ireland

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Analysis of the Potential Economic Benefits of Developing Ocean Energy in Ireland The Potential Economic Benefits of Developing Ocean Energy in Ireland Marine Institute Sustainable Energy Ireland Galway Technology Park Glasnevin, Dublin 9 Parkmore, Galway. Analysis of the Potential Economic Benefits of Developing Ocean Energy In Ireland Final Report Report No. 4P307A-R2 Peter Bacon Associates ESB International Economic Consultants Future Energy Solutions Peter Bacon & Associates 1 ESB International Economic Consultants The Potential Economic Benefits of Developing Ocean Energy in Ireland Table of Contents EXECUTIVE SUMMARY ..................................................................................................................II 1. INTRODUCTION.........................................................................................................................1 2. THE ENERGY CONTEXT IN IRELAND.................................................................................3 2.1 ELECTRICITY DEMAND AND SUPPLY PROJECTIONS FOR IRELAND..........................................3 2.2 IRELAND’S ENERGY POLICY AND RENEWABLES ....................................................................5 2.3 IRELAND’S OCEAN ENERGY RESOURCES ...............................................................................6 2.3.1 Wave Power......................................................................................................................6 FIGURE 2.2 ...........................................................................................................................................8 2.3.2 Tidal Power ......................................................................................................................9 3. THE OCEAN ENERGY SECTOR INTERNATIONALLY..................................................12 3.1 RESEARCH INTO OCEAN ENERGY.........................................................................................12 3.2 REVIEW OF POLICY INTERNATIONALLY ...............................................................................13 3.2.1 EU Policy........................................................................................................................13 3.2.2 National Policy in Selected EU Member States..............................................................16 FIGURE 3.2: CALCULATION OF MONTHLY REMUNERATION IN PORTUGAL.........................................18 3.2.3 Other Areas ....................................................................................................................24 3.3 ISSUES FOR CONSIDERATION ................................................................................................25 4. SCENARIOS FOR OCEAN ENERGY DEVELOPMENT IN IRELAND............................27 4.1 STRATEGIC OPTIONS ............................................................................................................27 4.2 SCENARIOS FOR DEVELOPMENT OF OCEAN ENERGY............................................................30 5. ASSESSMENT OF POTENTIAL ECONOMIC BENEFITS.................................................35 5.1 APPROACH TO IDENTIFYING BENEFITS.................................................................................35 5.2 EMPLOYMENT POTENTIAL OF THE INDUSTRY.......................................................................36 5.3 VALUATION OF ENERGY PRODUCED AND OTHER IMPACTS..................................................39 6. INDUSTRY REQUIREMENTS AND POTENTIAL.............................................................45 6.1 REQUIREMENTS FOR DEVELOPMENT....................................................................................45 6.2 THE ACCESSIBLE INDUSTRIAL BASE IN IRELAND .................................................................51 6.3 INFRASTRUCTURE ................................................................................................................54 6.4 REGULATION AND SUPPORT .................................................................................................56 6.5 FACTORS DETERMINING FUTURE COMPETITIVENESS OF WAVE ENERGY IN IRELAND..........59 7.1 ROLE OF POLICY ..................................................................................................................62 7.2 POLICY DESIGN....................................................................................................................63 7.3 OUTLINE OF A DEVELOPMENT PROGRAMME ........................................................................66 7.4 INCENTIVISING ACTIVITY.....................................................................................................70 REFERENCES .....................................................................................................................................74 APPENDICES ......................................................................................................................................77 Peter Bacon & Associates i ESB International Economic Consultants The Potential Economic Benefits of Developing Ocean Energy in Ireland Executive Summary 1. This report examines the potential of harnessing Ireland’s ocean energy (OE) resources to produce electricity and the associated opportunity to develop an OE industry in Ireland. Existing work, both in Ireland and internationally, suggests that there are opportunities to develop a competitive industrial sector around ocean energy in Ireland. The technology is at an advanced experimental stage and there are prospects of commercial production being possible in the near future. However, a key question is whether the potential is sufficient to warrant Ireland engaging in a long-term programme of development. A Consultation Process undertaken by Sustainable Energy Ireland and the Marine Institute indicates the potential. It also indicates that there are considerable risks. The aims of the study are to identify the potential economic contribution of ocean energy to Ireland and to devise a rational, viable, and economically feasible strategy to promote the development of the sector. 2. Ireland’s ability to develop an ocean energy industry can be summarised in a SWOT analysis, which provides an assessment of the overall capability of the Irish economy. This indicates the following: Strengths • The Irish wave resource is extremely rich relative to the energy needs of the country. • The technology to build functional wave converters is developing rapidly but the opportunity to gain a lead remains. • Ireland is, academically, well represented at the cutting edge of wave and tidal technology due to the technical competence of several universities and their participation in projects with other international participants. • There is a manufacturing and construction industry available capable of the manufacture of components, systems and converters and their later installation. • A unified embryonic licencing system exists that can facilitate development. • Installation skills broadly similar to those needed for the growing offshore wind industry will be required for O&M. Weaknesses • There is, as yet, no proven ‘winning’ wave converter design available. • There is little commercial investor confidence because the technology is at an early stage and the economic and performance risks associated with technologies at pre- commercial stage are very large. • There is currently no power purchase regime in place for early stage projects, unlike that which is available in some other markets, such as Portugal. • There is a lack of publicly available data on the characteristics and extent of the Irish resources, due to incomplete measurement and lack of dissemination. • Research funding has been sparse and intermittent. This has slowed the rate of progress that could otherwise have been possible. • There is an unrealistic demand for industry to provide counterpart funding for research projects. • There is a lack of integrated understanding at utility level as to the merits of wave and tidal relative to wind energy. • The tidal barrage option appears to face very severe economic and environmental obstacles and is ultimately excluded from consideration in the development strategy. Opportunities • The fact that there is, as yet, no proven ‘winning’ wave converter design available provides a significant opportunity to place Ireland in a frontline position in the sector. Peter Bacon & Associates ii ESB International Economic Consultants The Potential Economic Benefits of Developing Ocean Energy in Ireland • There is a very significant resource globally and a potentially large market in a number of key countries, in addition to niche markets elsewhere. • Ireland has still the prospect of establishing commercially viable designs and exploiting these locally, or in collaboration with overseas players, in terms of supply and services, although this opportunity will not last for much longer. • Direct synergies exist with offshore wind, which should accelerate the development of wave and tidal service capabilities. • Wave and tidal resources provide sustainable demand in the medium to long term. Threats • Designs developed elsewhere will become the norm and ‘capture’ the market. • Better pre-commercial support, e.g. capital grants, power-purchase terms, being provided elsewhere, may delay of stultify Ireland’s development in the field. • Greater market size and the development of standard designs abroad, coupled with economies of scale in production and rising costs in Ireland, may lead to manufacturing being carried out elsewhere. • The research resource could easily disappear as it is primarily led by a small
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