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The Barriers and Challenges
Technical Challenges
Status of Marine TechnologiesMarine energy technologies are still in their development stages and therefore no fully commercial plants exist to practically prove the viability of the technology. With so many concepts and ideas being developed, efforts have become decentralized and divergent. This has resulted in the little research grants available for marine energy projects having to be shared amongst many projects. However it is hoped that when the first concept goes fully commercial, it will lead to standardization in the industry to help concentrate efforts to reduce device costs, improve reliability and improve overall efficiency of the devices. Grid Connection Issues
With the UK grid still needing expansion to be able to bring on board electricity generated from marine projects, the developments of these marine projects until then will be hampered. If the situation is not improved, the implications will be that the overall renewable energy targets of Scotland will not be met and the overall objective of having a firm grip on the leadership position in marine energy will be lost together with all its added benefits. In redeveloping and expanding the grid, a more decentralized grid structure should be adopted with emphasis on distributed generation. It should be capable of dealing with diverse generation options and patterns as it attempts to manage supply from both conventional and renewable sources. It is hoped that with DTI’s sponsored study of the grid issue by Scottish power, Scottish and Southern Energy and National Grid – Transco, something very positive will emerge to help improve the situation. Reference: Developing the Electrical Grid 2020 Vision “Building Scotland’s Renewable Future” report for the Scottish Executive www.scotland.gov.uk/resource/Doc/1086/0006289.pdf
Economic Challenges
Standing up to the competition
With current estimations of 7p/kWh for electricity produced from wave/tidal plants, the technology is without doubt non competitive against those from coal/natural gas fired power plants and hydro schemes which have their prices pegged at lower than 3p/kWh. However just as prices of wind and solar have fallen over the years, it is expected that marine technologies will have cost decreasing over time to make it competitive. Aside learning curves helping to reduce cost per kWh of marine energy over time, nurturing and managing the market with enough incentive packages and promotion mechanisms to encourage investment in the sector will make the technology become competitive shortly. Funding Marine projectsGenerally new venture projects are funded in two main ways; short term financing or long term financing with short term financing sources being trade debts or supplier credits or bank overdrafts. Long term financing sources on the other hand are from the equity market (ordinary preference share capital) and/or through the debt or loan market (bonds, debentures and commercial bank loans). Current Funding Structure of Marine Projects
Marine projects are categorised into four main stages;
All projects start from the R & D stage which is basically an idea development stage and as a result projects under this stage are non – grid connected. When the idea are deemed to be feasible, they are then further developed and tested as demonstrational projects at the pre – commercial stage. Successful demonstration projects are further developed from small or medium scale prototypes of which some are grid connected to large scale prototypes that are grid connected at the supported commercial stage which later grows into a self supported commercial project. In terms of funding, the R & D stage projects rely on government support in the form of research grants whiles the projects under the supported commercial stage are funded by a 10% capital grant and funds from the renewables obligations. Without a 10% capital grant, the renewables obligation is the main source of funding at the fully supported stage. The pre – commercial stage is thus the only stage without any form of external funding and therefore rely solely on device developers’ own equity with the main reason being that projects at this stage are considered to be highly risky from an investor perspective. This funding gap has resulted in the slow transformation of marine projects from R & D stage projects into supported commercial stage projects and subsequently commercial projects. |
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