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HARNESSING SCOTLAND'S MARINE ENERGY POTENTIAL

SECTION B
OPPORTUNITIES AND CHALLENGES

15. This section briefly discusses some of the key opportunities and challenges facing Scotland's nascent marine energy sector.

THE OPPORTUNITIES

Scotland's Marine Energy Resource

16. The UK, most notably Scotland, possesses a huge wave and tidal energy resource. Scotland's Renewable Resource, published in 2001, estimated that up to 21.5GW (79.2 TWh/yr) of wave and tidal energy could be generated from the waters around Scotland. This is greater than the total amount of electricity likely to be generated in Scotland in 2020. Wave energy is intermittent but relatively predictable, tidal current energy is intermittent but largely predictable. Some of the best resources however are located off the north-west coast and northern tip of Scotland, where the electricity supply network is currently least able to accommodate the power that could be delivered to the mainland markets. While the marine resource could readily support 10% of Scotland's 2020 electricity production, the energy must be captured from wave energy fields and tidal current sites that are predictable, reliable and environmentally sustainable. They must also be network accessible, particularly in the early days of the marine energy industry and market.

Scotland's Wave Resource

17. Figure one shows the worldwide, European and UK wave resources available in kW/metre of wave-front. Scotland's sizeable resource compares well with wave regimes elsewhere in the world. The world-wide potential and opportunity for wave energy technology is also clear.

18. The wave energy that may be exploited off Scotland's west coast is limited by environmental, shipping and bathymetric constraints and the wave climate itself. Scotland's Renewable Resource calculates that 14GW (45.7TWh) of wave energy is available at under 7p/kWh. Figure Two shows the expected costs of developing the predicted wave resource in key locations.

19. The ability to develop the wave energy fields depends largely on their power levels and location relative to the mainland electricity network. A separate study by the University of Edinburgh for MEG explored the marine-constrained deployment of large, medium and small devices of capacities that may typify emerging equipment. It separated the wave energy fields by incident and device power levels and into broad geographical areas. The overall total power established compares with that reported above after all envisaged offshore constraints are applied. The division of potential power from the wave energy fields favours larger plant in the northern and western approaches, and medium to smaller plant in the mid and southern fields. The typical capacities of plant that may be deployed in each of the areas have been superimposed on figure two. In every case they represent a small percentage of the potential in that area. MEG therefore concludes that wave energy generation could make a full or large-part contribution to providing 1300 MW of marine energy by 2020.

Scotland's Tidal Resource

20. Figure Three (below) shows the UK tidal current sites with the greatest potential. Scotland has significant resources clustered around the Pentland Firth, Orkney, Shetland and the western coast of mainland Scotland. Scotland's Renewable Resource showed that some 7.5 GW (33.5 TWh) of tidal current energy could be available at under 7p/kWh.

21. The Robert Gordon University assessed for MEG the power and potential energy at a number of key Scottish tidal locations, shown in Figure Four. Figures on the left hand side of Figure Four show the potential that might be developed by the full installation of prototype tidal current devices (i.e. devices available and operational after 2005). These capacities increase dramatically if developed by the first and second generation commercial plant to emerge from the new industry. Increasing technological sophistication, alongside ongoing project development and growing operating experience, could realise capacities on the right hand side of Figure Four from full deployment of the best technology available in 2020.

Figure Four: Tidal Current Potential from Generation Two-Four Devices (2005 -2020)

SCOTLAND's RESEARCH AND DEVELOPMENT CAPACITY

22. Scotland's universities carry out some of the world's leading wave and tidal current research. Much of the renaissance in marine energy development that is underway has been enabled by foundations laid by engineers trained in the Scottish academic research base. Many pioneering companies and organisations are developing full scale prototypes of vanguard wave and tidal current energy converters. Much will be learned in their early deployment to increase predictability, performance, manufacturability, reliability and survivability to enable machines produced by the emerging industry to realise their full commercial potential. This will require there to be a sustained and properly equipped research base within easy reach of the locus of the new industry.

23. Scotland has a uniquely active and compact community of marine energy researchers in the Edinburgh, Heriot Watt, Robert Gordon and Strathclyde Universities. If Scotland is to accelerate its wave and tidal development programme this knowledge base and associated facilities must be reinforced to support the establishment of a Scottish industry. Research work is funded from blue-skies to commercialisation by UK research funding councils, The Carbon Trust, DTI Future Energy Solutions and potentially the Intermediary Technology Institute (Energy). While Scotland is relatively successful nationally in winning support for marine energy, there are still gaps down the technology funding chain and across the skills base. Some of the existing initiatives are summarised below.

The SuperGen Marine Energy Consortium

24. The Engineering and Physical Sciences Research Council (EPSRC) has funded a multi-technology research programme in Sustainable Power Generation and Supply (SuperGen). One of nine competitively-formed consortia, the Marine Energy Consortium was launched in October 2003 and unites Edinburgh, Heriot Watt, Lancaster, Robert Gordon and Strathclyde Universities with twenty industrial partners in a four-year collaboration. The aims of SuperGen are: to increase knowledge and understanding of the extraction of energy from the sea; to reduce uncertainties for future stakeholders in the development and deployment of the technology and to enable progression of new marine energy concepts and devices into their true position in a future energy portfolio. There are many other institutions in the UK active in ocean engineering, naval architecture and offshore technology that have a significant contribution to make to the future of marine energy.

The UK Energy Research Centre (UKERC)

25. Research Councils UK have funded the establishment of a UK Energy Research Centre. One of three technology themes, 'Future Sources of Energy' includes marine energy. The UKERC co-director with responsibility for this theme has been appointed at the Institute for Energy Systems at the University of Edinburgh. A complementary theme, 'Environmental Sustainability of Offshore Energy' also covers marine energy and is led by the Centre for Environmental Change and Sustainability at the University of Edinburgh.

The Carbon Trust - Marine Energy Challenge (MEC)

26. The Marine Energy Challenge programme has been established in response to a Carbon Trust strategic study entitled 'Building Options for UK Renewable Energy' carried out in 2003, which highlighted that the UK has significant wave and tidal stream resource, a strong competitive position and, therefore, the potential to become a global leader in the medium term if these technologies can become cost competitive. Through partnering large engineering design organisations with existing wave and tidal power technology developers, the MEC programme will undertake detailed engineering design and performance analysis to identify if, and how, tangible reductions in the generation costs are achievable.

Maintaining Research Capability

27. The marine energy research community faces a significant challenge as many of the eminent and senior staff who have been working in the sector since the 1970s near the end of their formal careers. Replacing them from the small UK marine energy research community will be difficult given the specialised nature of their experience and the increased competition from other countries and the newly forming industry.

28. Greater investment in people, both from the UK and abroad, is needed to attract in top class scientists from all of the disciplines, including: oceanologists, engineers, physicists, biologists, materials scientists, manufacturing technologists and economists. Such people will only join the Scottish research base if Scotland and the UK demonstrate that they are serious about investing in marine energy research and the associated career infrastructure. While existing sources fund existing research activity, there needs to be parallel investment in the research facilities and career infrastructure to secure and retain a sustained skills-base in a world-class supportive environment.

EMEC's Role in Technology Development

29. The decision to fund the European Marine Energy Centre (EMEC) in Orkney was visionary, and a clear demonstration of the public sector's commitment to supporting the infrastructure necessary to grow a new industry in this country. The availability of test facilities at EMEC provides a huge opportunity for Scotland and the UK to lead in the development of testing and accreditation standards that will be vital to the progress of marine energy technologies worldwide.

30. EMEC is funded by the Scottish Executive, Highlands & Islands Enterprise, Scottish Enterprise, the DTI, Orkney Island Council and the Carbon Trust. EMEC's infrastructure provides device developers with a purpose built facility for testing their devices in real open sea conditions. It comprises:

• four high voltage 11kV cables, each connecting a test berth to the switching station
• a grid connection for 7MW, with electricity output conditioning
• a SCADA system collecting data from waverider buoys, met station and electricity metering points, as well as from the devices under test
• a location in a wave regime among the best in the world

31. EMEC will become increasingly important for developers of marine energy devices. Already, EMEC has secured its first contract to test a device at its facilities, and has made a number of contacts with developers and is negotiating with them. MEG believes that EMEC must play a pivotal role in supporting delivery of a Scottish based marine energy industry, both through providing appropriate testing services and through the development of appropriate standards and certification processes.

32. EMEC currently provides a test facility for wave energy converters. It is now looking to develop a similar facility for tidal device testing. These two facilities combined would enable EMEC to develop as the world leading centre in marine energy.

33. Looking ahead, EMEC sees its role as providing test, validation and certification services to the industry, not only at its test facility but wherever devices are being deployed experimentally or commercially. It plans to develop its skills and knowledge base to enable it to offer consultancy services to device and project developers. This will further enhance its international reputation and ensure that EMEC is recognised as the global centre of excellence.

34. EMEC must begin by establishing a reputation for excellence through its measurement, verification and RD&D role. It must then build on this reputation by offering certification, consultancy and support to the industry. This can be achieved by leading programmes on standards, research both with commercial and academic partnerships, and developing standard testing packages and methodologies. By doing so it will provide an industry lead benefiting the whole of the industry and enhancing Scotland's international reputation.

COMPARING SCOTLAND WITH OTHER INTERNATIONAL MARKETS

35. A key driver in developing Scottish wave and tidal energy capacity is the economic benefits that will flow from device deployment. It is the development of commercial scale wave and tidal farms (as opposed to demonstration projects), and the orders for devices this will create, that will produce significant job benefits. Scotland needs a strong domestic market to provide a firm base for developing an export market.

36. Much has been made of the "Danish model" that was used to develop wind power in the 1970's and '80's, alongside warnings for Scotland not to repeat the mistakes during this period when the UK ceded an early advantage to Denmark. While Denmark's success was based on a number of other factors, the main lesson of its success - that the jobs follow project development - still holds true.

37. While Denmark still holds a major stake in the international wind market, other countries with significant wind programmes (such as Spain, Germany and the US) have developed manufacturing capability and used this manufacturing base to serve export markets. However, Denmark, despite its small size, has managed to maintain competitive advantage and survive in a fierce global market; this is largely down to Denmark's early establishment of its own domestic market.

38. Scotland and the UK should be aware, in seeking to develop its wave and tidal capacity, that other countries are similarly active, and have (or are developing) support programmes to assist their emerging industries. If we are to succeed, the support mechanisms available in this country must compare to those provided elsewhere.

Portugal: A Market Comparison

39. Portugal is currently viewed as the benchmark against which other countries are compared in the race to achieve competitive advantage from being early movers in the sector.

40. The key element of Portugal's support is a fixed tariff available for wave technologies. Wave companies are currently being offered €23c/kWh for energy from wave devices. This figure is set for the first 20MW of connected power, although we understand discussions are underway to increase this to the first 50MW. With an assumed capacity of 50% for wave devices and 90% availability, this support equates to around €45m (£30m) per year.

41. A key element of this support is to attract device developers to locate in Portugal, and begin manufacturing there. Not surprisingly therefore, discussions are underway between Portuguese energy companies and a number of UK-based device developers.

42. However, it is too soon to declare Portugal as the front runner to secure the market lead in marine energy devices. Whilst the country has a good academic support network, it is probably not as strong as Scotland's. Moreover, Scotland has potential for tidal power which Portugal does not come close to matching. Scotland has also developed testing support through EMEC that is a vital first step for developers wanting to get devices into the water. Finally, Portugal cannot match the manufacturing and engineering expertise that exists in Scotland, hence its keenness to attract developers by seeking to grow the market first.

Other Countries

43. Other countries (most notably Ireland) have been assessing Portugal's support system and considering similar structures of their own. Out of this wider group, which includes Denmark, France, Ireland, Canada, Australia, USA, Australia and New Zealand, Canada was, until recently, the furthest forward, with developments planned in Vancouver by utility BC Hydro. However, changes in Government have led to support schemes here being shelved. Figure Five summarises current activities in other countries.

Figure Five: Wave and Tidal support in leading countries

44. Most of the international support is currently focused on R&D programmes. This is demonstrated by the wide array of wave and tidal devices known to be in development throughout the world. However, some countries are now seeking to put in place wider support measures that will help move technologies on towards commercialisation. We believe that there are currently over 40 companies working internationally to take forward wave and tidal device concepts.

Other Regions of Great Britain (GB)

45. Within GB there is significant activity in the South West and North East of England. In the North East, the New and Renewable Energy Centre (NaREC) has established a strong commercialisation programme, with financial support available for investment in North East firms, and good testing facilities available. Work between Highlands & Islands Enterprise, EMEC and NaREC may bring strategic alliances between the two centres. Test facilities such as those at NaREC could be a future stepping stone for devices on the way to full test in EMEC.

46. In SW England, Renewables SW have proposed the development of a "wave hub" that would provide common infrastructure for early stage commercial devices. Work is at an early stage, and funding has recently been secured for a feasibility study. Clearly, if the UK is to secure an early competitive advantage it will be important to ensure that additional infrastructure investments in different parts of the country are complementary to the public sector investment that has already gone into the testing facilities at EMEC.

Working with other areas

47. The Scottish marine industry needs to consider how best to work alongside other countries and regions. While deployment of marine energy is certainly a race, developments are still at an early stage, so there remain opportunities for forming strategic alliances, and serious consideration should be given to whether relationships can and should be formalised here. MEG believes that emerging industrial and academic networks and trade bodies in Scotland should take a lead in pursuing strategic alliances with similar groups elsewhere.

THE CHALLENGES

48. There are a number of risks inherent in supporting marine energy technology. This is essentially due to the nature of marine energy as an emerging sector in a renewables market dominated by maturing technologies, particularly wind power. Just as the marine energy technologies are still evolving, so the infrastructure and regulatory framework needed to support this new industry have also still to be developed.

49. MEG believes it is precisely because of these uncertainties that additional financial incentives and structural support are required to help ensure that the domestic market and associated policy, planning and fiscal environment develop in ways that support marine energy technologies. Support is necessary to increase market pull to levels that will encourage learning, streamline development and thus reduce investor risk. The key challenge for the industry is to demonstrate that costs can be reduced to a level that would see marine energy as competitive with other more established technologies.

An unproven technology?

50. While independent experts tend to agree that Scottish companies are amongst the leaders in marine energy technologies, no device is yet fully proven. Funding to date has been research driven, and has helped prove a number of concepts. However, we have yet to see any single technology operating on a commercial scale.

51. The current situation in marine energy is equivalent to that of the wind energy sector in the 1960s and 1970s. Then, there were a number of competing designs and concepts for how best to capture wind energy effectively. Provision of market support, alongside the development of standards and testing, enabled industry to take forward, test and develop the most promising technology concepts. Today, the wind industry has settled on a standard design, and competition and choice within the wind sector comes from commercial decisions made about cost, reliability and size.

52. It is likely that within the next 10 years we will see a plethora of wave and tidal energy devices emerging onto the market, followed by a period of rationalisation and the subsequent improvement and development of a small number of designs. This process is necessary and will help not only to improve devices and their energy capture, but should also help reduce costs. The key here is to provide a support framework that creates market pull and encourages "learning by doing". But if additional financial support is to be provided for marine energy on an efficient basis, it will be important to ensure that the chosen mechanisms reward success.

An uncompetitive technology?

53. MEG's analysis of the expected opening operating costs of a number of wave and tidal developers shows that such technologies cannot compete against existing mature power generation technologies - be they conventional or renewable. However, this is to be expected, given that all technologies start life as expensive options, and only seriously begin reducing their costs as market share and opportunity present themselves.

54. MEG believes that the expected operating costs of marine energy devices can achieve a level that would justify some initial financial support. The key areas which we considered were the gap between the current forecast costs for wave and tidal devices and those of currently competitive generation technologies, and the scope for reducing that gap as rapidly as possible.

55. Figure Six (below) shows the operating costs of wind, and the expected opening costs for marine energy. The wind industry has shown itself capable of driving down costs as market share increases, and it is to be expected that marine will be able to follow this path. The fact that marine is starting from a comparatively low cost (as an early technology) should give investors, be they public or private, some reassurance.

Figure Six: Learning By Doing. A comparison between wind energy and the opening costs of marine energy

Testing, Certification and Standardisation

56. Even with a viable financial support mechanism in place, industry and government will need to continue working together to develop appropriate testing, certification and standardisation facilities and work programmes.

57. We have already commented on the vital role that EMEC has to play in leading to the development of certification and standardisation. A key lesson from the development of wind energy was that independent verification of performance data is critical, both in proving a concept and in satisfying the needs of private investors. Work is now underway to ensure that certification and standardisation work takes place in tandem with device testing and deployment. This is being led by the Carbon Trust through its Marine Energy Challenge.

58. EMEC is working with the Carbon Trust and SuperGen to ensure that their respective initiatives on standards are appropriately coordinated. Supported by funding from HIE and One North East, EMEC has produced a standard for the marine renewables industry entitled "Performance Assessment - For Wave Energy Conversion Systems in Open Sea Facilities". This is the first detailed standard in this area. EMEC has also been working with device and project developers, academic institutions and other interested parties to promote the role and need for recognised industry standards.

59. Progressing this work will require the identification of those standards that are required by the industry, and their subsequent development. The Marine Energy Challenge initiative has employed DNV to begin identifying the codes and standards required for the design and building of devices. Supergen also has a work package addressing design guidance for MECs (Marine Energy Converters). Together, these initiatives will lay the ground work for the identification of the required codes and standards. It is essential that this work also takes account of initiatives being developed elsewhere in Europe. EMEC is ideally suited to lead this work, but it will require support - intellectual, technical and financial - from industry, academia and Government.

Grid access and availability

60. A problem facing all renewables generators in Scotland is the constrained nature of the transmission and distribution network. Substantial development of marine energy will only occur if developers have access to an electricity market at a national, rather than local level. This means having the ability to export electricity to the population centres in Scotland around the central belt, as well as to markets further south in England.

61. However, the need for new investment in the grid, combined with substantial interest in developing onshore wind energy projects throughout Scotland, means that the transmission owners now have offers for connections above a level they can provide without major grid upgrades. The GB Transmission Issues Working Group has reported on this topic, and has proposed grid upgrades across Scotland in three stages (which emerged from the Renewable Energy Transmission Study, or RETS). There are substantial time pressures and risks to the successful delivery of some of these proposals.

62. There is a serious risk that without timely provision of new grid infrastructure, and the targeted provision of a part of this capacity for marine energy developments, marine energy in Scotland may not progress beyond the demonstration phase. There is therefore the potential for technologies to be proven in Scotland, but then be forced to migrate to other areas outside Scotland to develop fully. With this comes the risk that manufacturing opportunities and the jobs they could provide will not be realised in Scotland but will migrate elsewhere with the successful technologies.

63. Alongside the problem of developing a GB transmission infrastructure that can accommodate marine energy, device developers are also facing problems in how to gain access to the distribution grid in Scotland. Demand for grid access is particularly strong in Orkney, Shetland and the Western Isles, but these local networks are currently operating at full capacity. This problem is particularly acute on Orkney, where EMEC is seeking to increase its connection capacity to allow future tidal test facilities to connect. Despite the active cooperation of the distribution network operator, there are substantial challenges to making this happen.

64. April 2005 will see the introduction of the British Electricity Trading and Transmission Arrangements (BETTA). While BETTA will allow Scottish generators access to a GB electricity market, at present no decisions have been made about how to release investment to include island communities in the GB transmission network. Furthermore, no work has been done to ensure charges for generators on island communities will not be prohibitive. MEG calls on Ofgem, National Grid Company, transmission owners and all other relevant parties to work constructively to enable, and not frustrate, future large-scale generation on island communities.

65. MEG is seriously concerned that a lack of national and local grid capacity remains one of the key barriers and risks to developing a successful marine energy industry in the UK. Whilst we recognise that through the work of the GB Transmission Issues Working Group progress is being made in agreeing the investment necessary to upgrade the national grid, we believe that early innovative solutions need to be found if marine energy devices are to gain access to the relatively modest grid capacity essential for their demonstration and development.

An uncharted planning environment?

66. The regime governing marine energy development in Scotland is extremely complex. A number of consents are required in order to construct and operate electricity generating plant in Scotland's waters. The procedures and timescales required to obtain these various consents are a potential constraint on the future development of the sector, and it is vital that they are co-ordinated and streamlined as far as possible.

67. In order to achieve this, it will be essential to understand as far as possible the nature of the interaction between marine energy devices and the environment in which they will operate. This means that as much information as possible about any impacts on (for example) navigation, marine life, sea birds, tidal flow patterns and coastal erosion should be collated and made available to aid and guide developers, consultees and consenting authorities.

68. A Strategic Environmental Assessment (SEA) of Scotland's offshore environment for wave and tidal technologies will play a hugely important role in allowing the industry to progress with commercial developments in waters around Scotland. MEG believes that a Scottish SEA should begin as soon as possible, in order to allow such development to take place in the period before 2010.

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