This thought-provoking seminar provided much pragmatic optimism and frank discussion of often taboo subjects.
Noteworthy quotes on popular themes
'Over-optimistic assessment of readiness'
This observation was made by Ross Eddy (BMT Defence services Ltd), who also suggested that the technology was not aligned with the schedule for installation. Charlie Blair (Carbon Trust) observed that 'we've seen companies jump the steps (in proof of readiness) without success'. Andrew Scott (Pelamis) concurred that stakeholder 'expectations exceeded readiness'. He highlighted the potential pitfalls: 'stakeholder fatigue, opposition, non-participation or destructive engagement', and called for 'management of expectations' to avoid this undesirable situation. He reminded the audience of the flip-side of high expectations: 'the Danish government's belief in wind energy exceeded the technology's capability' at the time; their confidence transformed wind into a commercial technology.
'The Electricity Market Reforms are a slow motion train smash'
This was Martin Wright's (Aurora ventures Ltd) apprehensive opinion of the replacement of ROCs with Contracts for Difference. Frank Fortune (Royal HaskoningDHV) said the community was 'waiting with bated breath' to see whether the CfD would deliver the 'certainty, predictability, consistency and commitment' required for investors to back marine renewables. David Krohn (Renewable UK) noted that 'detail is not forthcoming'. He also highlighted the disparity between the 15 year contracts and the typical 20 year design lifetimes of renewable energy projects.
'Venture capitalists don't have the appetite and resources to deliver'
Andrew Scott's comments highlighted that marine renewables could not be commercialised with venture capitalist funding. He noted that 'the resources and objectives of VCs were not aligned with the requirements of commercialisation', and in particular, that VCs did not have 'the balance sheet to provide security'. Martin Wright agreed that private equity and venture capital were not suitable for funding commercialisation of marine renewables. David Krohn suggested that 'financial arrangements have driven up costs'.
'Government are aware that the risks can put investors off'
Janine Kellett (Scottish Government) pledged continuing Scottish Government support in light of the funding gap. She highlighted the Scottish Government's optimism and foresight in funding EMEC a decade ago, when only Pelamis was capable of using it; berths are now in high demand. Andrew Scott put the ~£32 million spent by the UK government on wave and tidal into context by noting that a comparative amount had been spent on an Olympic sports complex. He drew attention to the '1:7 capital grant to equity or customer investment'. As this unlocked funding is largely spent on UK jobs, this has a net positive impact on the UK economy. He suggested that the '5 ROCs has not cost the consumer anything, but has been the largest pull mechanism to date'. Paul Catterall (Crown Estate) announced that the Crown Estate was 'considering investing in ~10MW first arrays, to increase investor confidence and unlock funding'.
'Innovation is needed to get costs down; an industry is not feasible with just technology learning'
Charlie Blair made the case for innovation as a requirement for commercialisation, noting that 'the balance between design fixation and innovation' was an interesting challenge. Frank Fortune agreed with this opinion. He noted that a 'design freeze was important in reducing risk, by aligning engineering and development programs', but that flexibility was important to avoid supplier lock-in, and to address the technical barriers, which he identified as 'foundations, vessel costs, array (interactions), and cables'.
'To drive down costs we know we need big projects'
The more conventional view that technology learning was required to drive down costs was also widely expressed. John Thouless (SSE) is quoted above. Paul Gardner (GL Garrad Hassan) expressed 'the value of being in the water', and went as far as suggesting present grid restraints should not be allowed to delay the learning by doing of sea trials. He suggested a 'connect and manage' approach, where non-firm renewables are paid compensation for the generation not accepted by the grid. Frank Fortune suggested that 'proven projects in water' would attract more funding.
'There are fundamental reasons why it needs to be big'
The size of individual devices was a recurring theme. During coffee, I questioned Charlie Blair about the fundamental reasons referred to in his comment. The Carbon Trust have developed cost models, furnished with confidential data from developers, so he was not able to elaborate, but he pointed to the large overheads in balance of plant costs. David Krohn gave the Renewable UK's view that 'power uprating' was required for cost reduction. Janine Kellett said that the Saltire Prize 'requires the winning team to have 20-25 devices in the water'. Although intended to illustrate the scale of the challenge, it shows that ~1.5MW is thought of as a typical rating for the Saltire prize. Pelamis's Andrew Scott was the only person to express a lukewarm opinion on going large. He emphasised that 'there is a huge scrutiny on CoE at the moment', but indicated that up-sizing was not the present focus.
'This race only gets run once'
Paul Gardner expressed concerns that competition could have a negative impact on wave energy. He warned that there was a danger that if 'tidal gets all of the funding, it will become mature quicker', leading to a positive feedback situation as more funding gets diverted from wave to tidal projects. His suggested solutions of ring-fenced funding and support differentiation will be detailed in an industry newsletter article to be published soon. David Krohn gave details of the support differentiation that was hoped for with the new CfD system. Martin Wright suggested that the competition was less between wave and tidal, but between renewables and shale gas, new nuclear, and carbon capture coal. Douglas Henderson (Napier University) asked whether there is a 'risk that we won't get an industry' if limited investment is too thinly spread and we don't pick a winner. David Krohn pointed out that competition within a particular class, e.g. tidal power, is important, as customers are reassured by choice.
'Too much focus on the bits that whizz around'
Martin Wright's comment reflected a sentiment shared by many other speakers. He drew attention to the importance of O&M, accessibility, and operating 'in the widest possible range of conditions'. Andrew Scott reiterated the oil adage 'if you need to work offshore, don't'. John Thouless made a point of stating SSE's prioritisation of survivability over performance.
'Prototypes within prototypes'
There was unanimous agreement that using untested bespoke components in prototypes was undesirable. Vincent de Laleu (EDF energy) mentioned installation delays due to a winch failure on Open Hydro's bespoke barge, which illustrates that some developers are relying on prototype equipment. Andrew Scott said that Pelamis's use of a hydraulic PTO have allowed them to tap into an existing supply chain. He went on to offer Vestas as a role model: they used tractor gearboxes rather than developing their own, which meant that they did not need to prototype the one of the most vulnerable components in their power chain. Vestas have long since outgrown tractor gearboxes but these were the right choice for their prototypes.
A question to the floor
I wanted to know why the first prototypes were being tested at the most energetic sites in the UK. In particular, Pelamis's staged approach for proving survivability to their customers has involved clocking up operational hours at less energetic sea states, an exercise which could have been achieved at a less energetic site, and perhaps at lower cost, due to easier accessibility and grid connection.
Andrew Scott answered that Pelamis wanted to get realistic data with regards to performance (and presumably costs). Martin Wright answered that the choice had to do with 'application of capital'. The grid, supply chain and ports required for commercial operations need to be built up. It is more efficient to build up geographic clusters in the places where they will eventually be required.
Calls to action
- Find out what's to offer on http://www.waveandtidalknowledgenetwork.com/ (Paul Catterall)
- Government should lead collection of environment data, to assist with consenting, and to provide a baseline for comparison with monitoring of ongoing projects. (Frank Fortune)
- Surprise delays and budget excesses in grid connection are hindering first wave arrays. (Paul Gardner)
- Get around grid constraints with a 'connect and manage' approach: grid does not have to accept generation exceeding constraint volumes (Paul Gardner)
- Manage stakeholder expectations to avoid fatigue (Andrew Scott)
- Better communication would allow regulators in England, Scotland and Ireland to share experiences. (Frank Fortune)
- Avoid large steps in development programs (Charlie Blair)
- Ring-fenced funding and differentiated support for wave and tidal would reduce the risk of a funding gap (David Krohn and Paul Gardner)
- More information and assurances are required regarding the EMR (widely agreed)
AcknowledgementsI'd like to acknowledge the IET's support in allowing me to attend on a concession pass.
'Expecting this ?' by 'badjonni' http://www.flickr.com/photos/badjonni/884780627/in/photostream/
Sleepwalking into an energy crunch