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HARNESSING SCOTLAND'S MARINE ENERGY POTENTIAL
SECTION C
- AN ACTION PLAN -
69. The challenge to grow a world-leading marine energy industry in Scotland cannot rest solely with any single sector or organisation. Technology developers have to demonstrate that they can make the transition from testing tank to full-scale deployment in a challenging marine environment. Developers and investors need to show vision and the confidence to back commercial scale marine energy projects. And Government has the responsibility to create a policy, planning and fiscal framework that will encourage investors and developers to make that commitment.
70. The next 5 years will be crucial in determining whether the UK, and Scotland in particular, can build on our technology advantage and create a viable domestic and international market for marine energy devices. The conclusions and suggested actions that follow are not listed in order of priority or sequence. Rather, they describe a range of complementary themes and issues that MEG believes can and must be addressed in parallel if marine energy is to make a significant contribution to the Government's renewable energy aspirations and targets beyond 2010.
CREATING MARKET PULL AND REDUCING FINANCIAL RISK
71. Scotland has a clear lead in the development of marine energy technologies, but these are still at an early stage. Recent injections of Government research funding have been crucial to the development of many promising designs and prototypes. However, the DTI/Carbon Trust Renewable Innovation Review and more recent studies carried out for the British Wind Energy Association and the Renewable Power Association have identified a major funding gap between demonstration/testing and pre-commercial/commercial deployment.
72. An economic appraisal carried out for MEG (see Annex C) confirms the existence of a funding gap and identifies a strong case for additional Government support to help bridge it. Without such support, private investment in marine technology would be inefficiently low and it is unlikely therefore that a marine energy industry would develop in the UK. As well as the economic development opportunities that could be lost, a failure to support a marine energy industry could significantly undermine the Government's renewable energy targets beyond 2010.
73. The current market support levels available through the Great Britain Renewable Obligations (GBROs) and Climate Change Levy are valuable, but will be insufficient in themselves to close the funding gap and attract investors. Additional support might be delivered in a variety of ways - via a new capital support scheme; through some form of revenue support, where developers are rewarded for actual output (by way of a new tariff for marine output, or through additional ROCs for marine output subsequent to suitable amendments to the GBROs); or a combination of these. Although early stage capital support for construction and grid infrastructure will be important, MEG believes that operating aid is the best way to accelerate commercialisation. MEG is pleased to note that the Scottish Executive has already commissioned an independent study by IPA Consulting to assess the levels of support required to deliver installed marine energy capacity on the scale suggested in this report, how that support might best be delivered, and the possible implications for other participants in the renewables market.
74. We believe it is essential that the Scottish Executive and the UK Government should consider jointly how best to provide the necessary and appropriate financial support for marine energy. Whilst we recognise that any new support mechanism could not be introduced immediately, a clear and early commitment from Government that it will make available additional financial support, sufficient to deliver real progress, would be invaluable in reducing risk and creating confidence amongst developers, potential manufacturers and investors alike. At the same time, there is a clear responsibility on the industry to continue to demonstrate that it can use its experience and learning to reduce significantly the cost of marine energy devices to a level that would, over time, be competitive with other renewable technologies.
Actions
- The Scottish Executive and UK Government should acknowledge the case for additional public sector support for marine energy, and give a clear and early commitment to work together to determine the most efficient method and level of financial assistance that can be provided.
- Both administrations should also ensure that the evidence gathered by MEG and in the various studies mentioned here is fully utilised to inform the forthcoming major review of the GB Renewables Obligations.
- The marine energy sector itself must demonstrate the ability to achieve greater efficiencies and drive down capital and operating costs.
DEVELOPING THE ROLE OF EMEC
75. Good testing facilities are essential if device developers are to make the transition from the laboratory to the sea. The creation of EMEC has provided a major boost to the marine sector; continued commitment from its funding partners and the industry is needed to consolidate EMEC as the pre-eminent global testing facility. An important element in attracting developers will be ease of planning - MEG welcomes the recent change to the procedure for acquiring consent for developments at the test site which reflects and supports the unique intentions underpinning the facilities. The relevant procedures should remain under review
76. The establishment of tidal test facilities at its site in Orkney represents the next important stage in establishing EMEC as a comprehensive marine energy test centre - this will be invaluable to tidal device developers, among whom there is clear evidence of demand. Moreover, it makes sense to build on the investment already made in EMEC rather than see the development of a tidal test facility elsewhere. EMEC also needs to market its services to technology developers overseas. This will be essential in establishing the Centre's importance internationally and encouraging project development, technology capture and inward investment.
Actions
- Subject to the production of a satisfactory business case, EMEC's funding partners should confirm their willingness to support the required extension to accommodate tidal device testing, without delay.
- EMEC should work with Scottish Development International and other trade partners to actively promote overseas marketing of its services, facilities and expertise.
ESTABLISHING SCOTLAND AS THE CENTRE FOR MARINE ENERGY CERTIFICATION
77. The development of independently verifiable standards for the performance and testing of marine energy devices will assist technology developers in proving concepts and provide much needed assurance for potential investors.
78. MEG firmly believes that if Scotland is to become a world leader in marine energy, we must seize the initiative to build on the investment at EMEC and establish this country as the primary centre for development of international standards. There are strong parallels to be drawn with the strategy adopted so successfully by the Danes at the Risø wind laboratory. Robust standards, established in partnership with the appropriate national/international bodies, will be a key part of opening up the opportunity for marine energy by building confidence and helping encourage private equity funding.
79. If we can get this right, there will also be opportunities in associated parts of the marine sector such as due diligence provision. Much of this early standardisation work can take place alongside device testing at EMEC, which can play a pivotal role in providing authoritative benchmarks for industry participants and investors. But collaborative partnerships must be established across Europe and with key bodies such as the British Standards Institute, the International Energy Agency, the Carbon Trust and others . An important first step is to establish what standards the industry and the financial sector need.
Actions
- EMEC must be supported in the work it has already begun to establish Scotland as the internationally recognised centre for marine energy technical, operating and safety standards.
- EMEC, in partnership with the Carbon Trust, SuperGen, the Scottish Executive and the DTI, should jointly sponsor a programme of work with representatives of the industry, developers, standards agencies and the financial sector, to identify the standards required and agree how these will be developed as quickly as possible.
DEVELOPING A SUPPORTIVE PLANNING AND REGULATORY FRAMEWORK
80. Under legislation shortly to be introduced in Scotland and elsewhere in the UK, the full-scale commercial development of marine renewable energy will need to be preceded by a Strategic Environmental Assessment (SEA) of Scotland's coastline and territorial waters. MEG consider it essential that the Scottish Executive and the DTI commission this work as a matter of urgency.
81. A comprehensive SEA of Scotland's marine environment would provide the Scottish Executive and its agencies with valuable information to inform the development of appropriate planning guidance for marine energy developers. The Executive should give consideration to establishing a suitable forum to enable its various Departments and agencies to contribute to such guidance.
82. Ownership and operation of the consents regime for offshore renewable energy developments also needs to be established with absolute clarity. MEG recognises the progress made by the Executive in putting in place a single point of contact for the various consents required for offshore developments within territorial waters. We also welcome the fact that, subject to assent for the UK Energy Bill, the Executive will have responsibility for extending these arrangements into the Scottish part of the Renewables Energy Zone. MEG is, however, concerned that the proposals within the Energy Bill in respect of decommissioning consents will mean a return to multiple consenting authorities within Scottish waters.
Actions
- The Scottish Executive, with the DTI must, as a matter of urgency, commission an SEA of Scotland's coastline.
- The Scottish Executive, working with the Crown Estate, should agree and publish clear guidance on the marine energy consents procedure.
- The Scottish Executive should give consideration to the need for a suitable forum to enable its various Departments and agencies to contribute to appropriate planning guidance for marine energy developers, grid operators and the relevant local planning and environmental agencies.
PROVIDING A ROUTE TO MARKET
83. In order to make the move to large scale commercial developments, the industry needs access to sufficient and affordable grid capacity. However, at the present time, there is high demand for new connections that is leading to a lack of capacity for renewables developments across much of Scotland. Work is in progress from the Scottish System Owners (SSOs), Scottish Hydro Electric Transmission Limited and ScottishPower Transmission Limited, to bring forward proposals for upgrading parts of the Scottish grid network. Two of the upgrades proposed which could have particular relevance for marine energy are from Beauly to Denny and Beauly to Ullapool.
84. Before approving the necessary investment in infrastructure, the regulator and SSOs will take into account the levels of financial and planning commitment from both developers and Government. In authorising upgrades, the regulator must take account of investment risk, and achieving best value for supply customers. Government policy, and the current commitment across Scotland and Great Britain, will also be an important consideration. Once this authorisation is in place, it is important that the relevant planning processes are observed and negotiated as speedily and efficiently as thoroughness allows.
85. Alongside this, developers need to be assured that transmission charges from the GB System Operator and the Regulator will not be so prohibitively high that they inhibit renewable energy development in remote parts of the country, both on-shore and offshore.
Actions
- The regulator and grid operator should prioritise action on transmission investment, with particular regard to connecting those remote mainland and island locations that can provide the greatest renewable generation capacity. The cost of this investment must be shared equitably amongst users and beneficiaries, and cannot be borne by host communities and developers alone.
- The Executive and UK Government should consider supporting early commercial development of marine energy by underwriting grid connection for 1 st and 2 nd generation projects.
- The Executive should continue to press the regulator to ensure that infrastructure charging mechanisms do not discriminate against emerging industries such as marine energy.
DEVELOPING ACADEMIC CAPACITY AND SUPPORTING R&D
86. Scotland has a long history of excellence in research and development of marine energy. The Universities of Edinburgh, Heriot Watt, Robert Gordon and Strathclyde are internationally recognised centres of expertise.
87. The continued development of marine research and academic expertise is vital if Scotland is to maintain its pre-eminence in this field and support its emerging marine energy industry. The sector needs Scotland's research base to play a significant role in securing the future of first generation marine energy devices; developing second generation marine technology and evolving components, performance monitoring and maintenance techniques. If the Scottish academic sector is to rise to this challenge the Scottish Higher Educational Funding Council and individual institutions need to review their commitment to and investment in the teaching and research needs of the emerging marine energy industry. The SuperGen programme can contribute by coordinating and expanding research programmes to include further institutions and companies.
88. The recently established Intermediary Technology Institute - Energy (ITI(E)) has a key role to play in forging stronger links between Scotland's research community and industry. While industry has already taken on and developed a few first generation solutions for marine energy capture, MEG considers that the ITI(E) can make a significant contribution to the development of a thriving marine energy sector in Scotland through fast-tracking development of new device concepts, monitoring and measurement equipment, as well as 2 nd and 3 rd generation device technology. MEG recommends that ITI(E) embraces such opportunities as part of its technology foresighting work.
89. The new UK Energy Research Centre is an important milestone in encouraging joint working and coordination of energy research within the UK academic sector. Plans articulated to develop a Centre for Marine Energy, closely linked to the overall Centre strategy, are to be welcomed. There is a need to ensure that this initiative links appropriately with the ITI(E) and other funding sources. A Scotland based Marine Energy Centre could significantly inform ITI(E)'s decisions on investments in the emerging marine energy sector. MEG strongly supports this development - such initiatives can help coordinate and maximise the benefits of activity between the academic research base, commercialisation bodies and the emerging marine energy industry.
Actions
- The Scottish academic sector - funding councils, Universities Scotland and individual institutions - should review and reinforce existing capability in marine energy undergraduate teaching, research and development to meet the future demand for graduate skills and to consolidate the research base.
- Scottish Executive, the enterprise agencies, EMEC and ITI(E) should continue to work with existing and new initiatives such as SuperGen, Marine Energy Challenge and UKERC to maximise the synergies and opportunities that will establish marine energy technology and its manufacturing industry.
SUPPORTING SKILLS AND MANUFACTURING CAPABILITY
90. Scotland possesses the skills necessary to support a successful marine energy sector. MEG believes that sufficient manufacturing and technical capability exists in Scottish-based companies. Moreover, the Scottish oil and gas sector has 30 years expertise of building, deploying, operating and maintaining offshore structures in a hostile marine environment. The scope for diversification is significant, enabling a Scottish marine energy manufacturing sector to grow and flourish. However, the sector will need nurturing and support in the early years.
91. The recent report Renewables Supply Chain Gap Analysis, prepared for the DTI and the Scottish Executive, highlighted significant growth opportunities. The report's findings and recommendations should be built upon, and programmes developed that can effectively support the emerging marine energy sector. Scottish Enterprise and Highlands & Islands Enterprise will play a vital role in developing expertise and capacity in their areas, and must ensure that their support programmes are robust and relevant.
92. MEG believes that industry must also take a lead. Bodies such as the Scottish Renewables Forum (SRF) should ensure that they are providing the correct support services - helping to coordinate learning and information sharing, and acting as a source of expert advice and information. The enterprise agencies can also play a role, although this initiative should be viewed as industry led.
93. The SRF, working alongside Scottish Enterprise and Highlands & Islands Enterprise, as well as in partnership with fellow members of the Scottish Energy Industries Group should lead on the development of an industry network for this emerging sector. This could be tremendously productive, balancing the need for coordination with the growing importance of industry representation. It is vital that the emerging marine energy sector builds strong links with the established oil and gas sector
94. MEG believes that the potential for this network to develop into a separate marine energy trade association in co-ordinating and providing valuable support to the sector should be thoroughly scoped. There could also be merit in Scotland hosting a major international conference as a platform to showcase our marine energy industry and the opportunities that exist in this country.
Actions
- The enterprise agencies should review their economic development strategies and policies to ensure that they can adequately support a vibrant Scottish manufacturing and supply chain for marine energy.
- The enterprise agencies should use the Gap Analysis Report to produce a detailed assessment of the effects of skills gaps on the marine energy sector, and produce a list of specific actions to tackle the issues raised.
- The enterprise agencies, alongside the Scottish Renewables Forum, should support the development of an industry-led Marine Energy Network.
- Scottish Renewables Forum should organise a major international conference to showcase progress and future opportunities for marine energy in Scotland.
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