Monday, 1 April 2013

The importance of big industry in wave power

An understanding of the importance of large industrial partners to the wave energy industry can give important insights into some of the challenges currently facing wave energy. The main reason large industrial partners are essential is that demonstration projects typically have large capital and operating costs. 

There are a number of reasons why costs are high:

  • The costs of the balance of plant (everything other than the wave energy converter) do not scale well with the device size; some overheads apply to projects of all sizes.
  • The variable balance of plant costs increase stepwise. For instance, when hiring a crane, you pay for the maximum weight the crane can lift rather than the weight lifted.
  • The experience of the wind energy industry has shown that moving offshore results in more expensive operations and equipment, more specialised training, and smaller weather windows for installation and maintenance.
  • As the balance of plant costs for offshore power plant are high, cost of energy can be reduced by building large arrays of devices with high power ratings.
  • The variability of the wave energy resource also puts an economic incentive on large arrays: power smoothing is not only a grid issue, but reduces costs by closing the gap between average and peak power flows in the array.

To summarise, to bring down the per kWh cost of wave energy, individual projects will need to be large and expensive. This poses a difficulty for demonstration projects. Where the capital costs are larger than the value of the device developers, getting insurance and customers is difficult without a large backer who can cover unexpected costs. Large arrays will require a significant scaling up of manufacturing capability. This will need financial backing, and will benefit from know-how in large energy projects.

Apart from financial clout, large industrial partners provide a level of quality assurance to new technologies. It is difficult for insurers and customers to judge the level of risk involved with a particular unproven technology. Large industrial partners have both the need (maintaining their brand) and the means (expertise) to be better judges of the risk involved.

What are large industrial partners looking for?
We've established that industrial partners are necessary for demonstration projects with capital and maintenance costs greater than the assets of the device developer. These demonstration projects are vital for technology development and the associated cost reductions. It is worth considering what industrial partners need from wave energy companies, because this will influence the winners that get picked. In short, they are interested in devices that have made some progress towards technical maturity, are big, and have some promise of a competitive cost of energy once mature.

Investment criteria: technical maturity
There is an upper limit of risk that large industrial companies will accept. They are looking for devices that have the most proof of workability. The appropriate jargon is technology readiness level (TRL). There are several tables indicating criteria for TRLs from 1-9. The scale (model size) at which a concept is tested generally increases with the TRL. One way of demonstrating readiness is to sea trial a large scale prototype.

Investment criteria: large markets
Large industrial companies are interested in big markets. They are not particularly interested in niche markets as an end goal. No matter how badly island dwelling villagers want wave energy to ease their diesel habit, they do not have the collective buying power to warrant the development spend needed to bring wave energy to maturity. The end goal for large industrial backers of wave energy is to be in the position to generate lots of low carbon power if this becomes a necessity in the future. This means that the focus will be on developing technology that can be deployed in high energy sea states.

Investment criteria: low cost of energy once mature
It is the cost of energy of the mature technology that is important. At the moment this is very uncertain. We can't apply the known learning rates of wind energy to wave energy with much certainty because the scaling laws and the resource are so different. It is also very risky to assume that all types of wave energy converters will have similar costs of energy. It is reasonable to be optimistic that step changes in design will improve cost of energy. We do not yet know whether the design space in wave energy has been thoroughly explored: has the device, towards which all mature concepts will converge, been invented yet?

The assumption that wave energy will make a large contribution to affordable low carbon energy in the future is risky. However, it is equally risky to assume that this will not be the case. For large engineering companies, the risk of not having a market share in emerging technologies outweighs the risk of slow cost reductions. This is witnessed by the recent investment in tidal developers by several large engineering companies.

The uncertainty about the mature cost of energy will be resolved by operational data from several wave device developers. We would also benefit from academic research that charts the design space and objectively suggests which regions are promising for low cost of energy. Cost models developed in academia suffer from the lack of validation data; perhaps there is an opportunity for collaboration with industry in this respect?

Image credits:
Hippo and Duck: Copyright Michael Parker:

1 comment:

  1. This article addresses discussions on the LinkedIn 'Wave Energy Group'. Comments on this article can be found in this discussion: