1 OCEAN ENERGY: current state of the sector and anticipated developments

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1 EUROPEAN COMMISSION JOINT RESEARCH CENTER DIRECTORATE-GENERAL Institute for Energy Energy Systems Evaluation Unit Petten, 13 June 2007 Subject: Report on the Workshop on Hydropower and Ocean Energy part I: Ocean Energy Participants: European Commission: EVANS G., GIGANTINO A., JARVILEHTO P.; KOTRONAROS A., MERCIER A., SCHMITZ B. (Chair) OCEAN Stakeholders: FRIGAARD P., GARCIA F., GEANKOPLIS G., LEWIS T., NIELSEN K., WEINSTEIN A., ROUSSEAU N., J. WEILLEP Venue: Renewable Energy House, Brussels, May 7, 2007 (14:00-17:30) 1 OCEAN ENERGY: current state of the sector and anticipated developments In the last couple of years, there has been a resurgent interest for wave energy worldwide and in Europe. The developments in this sector are comparable to those of wind energy a few decades ago with similar economic potentials. A new industry is currently being created. This sector also provides opportunities for spin-offs for off-shore activities (e.g. oil industry, ship buildings). Depleted off-shore platform facilities can be easily utilised as ocean energy collectors. There is an important resource potential in the EU, which if harnessed can make a significant contribution to the EU energy mix. Ocean energy consists of several sectors among which wave energy, tidal power and ocean current. Only the former is addressed during the workshop. Worldwide, the estimated technically and economically energy production potential for ocean wave energy is estimated at about TWh/year. In the EU, the Atlantic arc from Scotland to Portugal is the most favourable area in terms of resources. Norway has also an important resource base. Measurements, for instance, in the west coast area of Ireland miles away and on Horns Rev wind farm - 20 km away - showed that there is strong correlation between west cost winds and waves distribution. The ocean acts, schematically, as an energy transmission line of wind energy. High levels of energy are reached in this area, which are persistent with a predictability of supply of about 6-8 hours Large scale wave power demonstration facilities are currently being erected or planned to be in a very near term. European companies are active, for instance, without being exhaustive, in shoreline and off-shore based devices. Among the different converters capable of exploiting off-shore wave power, the Pelamis Wave Energy Converter developed by Ocean Power Delivery is in an advanced stage of development. A 750 kw size unit is already in operation in Scotland. This technology is the object of a commercial contract for installation of a farm in Portugal. At present, three machines, with a total capacity of 2.25 MW, are in an installation phase. The Danish manufacturer Wave dragon is developing an off-shore overtopping based technology. A ¼ th scale prototype has been installed and grid connected. A 5 MW demonstration project based on this technology is planned to be built in Wales. Wavegen, another European manufacturer, is currently developing an oscillation water column (OCW) based system with nameplates capacity of 500 kw units. In Portugal a similar 1/5

2 technology is currently being tested. In Norway, Wave energy develops and tests offshore devices that can be fixed to offshore installation such oil de-commissioned platforms. In Ireland, the Marine Institute, in association with Sustainable Energy Ireland, has established an Ocean Energy Test Site (at 1/4 th scale) for scaled prototypes of wave energy devices in Galway Bay. A large number of devices and designs are currently being studied and/or developed. Capturing the energy waves is a complex issue due to the fact that various forces and directions are simultaneously at work. It is also very location specific. Therefore, it is not expected a convergence in design as achieved with the three blades scheme for wind turbines. Nonetheless, it is recommended to focus efforts on concepts and principles that managed to go through the research/conceptual stage and to mature them. This will avoid a scattering of resources and develop a generation capacity. For the time being, producing electricity from waves remains too expensive to be exploited cost-competitively. The cost of electricity from ocean energy is of the order of about a factor 2 compared to other electricity renewable energy sources. The cost is strongly influenced by the location or local resource potentials. Another important element is the needs for maritime cables and on-shore grid connections. Laying down cables to shores costs about half a million per mile. For an installation located at 100 km from the shore, the grid component can represent up to one third of the cost. Grid connections to on-shore grids can be problematic, as in some cases the grid is too weak to absorb the electricity production from wave energy power stations. This is a crucial barrier that can hinder developments and prevent economies of scale. Besides, the cost of licensing and authorisation is very high and trouble making. It can take up to 1 to 2 years to obtain the permit, with a cost of up to one million euros. It is a long process due to a lack of dedicated or experienced administrative structures. Some countries are making advances but this does not represent the majority. Maintenance and plant construction are also a key component in the cost. Their costs are very expensive, especially in the starting phase. There is currently little experience on maintenance for offshore facilities. For the time being, off-shore infrastructures from oil industry (ships, platform equipments) are used to carry out these operations which turn out to be costly. Equally, there is a need for specific engineering capacities. Currently, most of the engineering know-how derives from the off-shore industry. However, this know-how is not always applicable for wave energy systems. As the forces and operating functionalities are different, non tailored modelling predictions bring a risk of an oversizing of equipments such as for the moorings. This impacts directly the capital investment cost. All in all, significant cost reductions can be expected if dedicated infrastructures were developed. As a consequence of the current situation, technology learning is slow and expensive. Large industries are already involved, but to invest further they need to see a long term vision of the sector to secure their investments and to be able to foresee technology improvements and timelines for costcompetitiveness break-even. Fully fledged development and operating costs are beyond the capacities of Small and Medium Enterprises (SME's). There is a need for financial support such as feed-in tariff schemes to kick start and support developments and deployment, and to help the SMEs to go through the well know valley of death funding stage, common to any emerging innovative technologies. Currently, Portugal has set up a feed-in tariff of 22.5 c /kwh for the first 5 MW installed. This mechanism attracts investors. It is considered that such feed-in tariff combined with investment incentives should be promoted across the EU. Concerns among the experts have been voiced about the cost objective of 5 to 10 c /kwh as mentioned in the 7 th framework Programme for 2020 horizon. Current cost performance is in the range of 30 to 35 c /kwh. Setting low cost targets can be detrimental to the whole filiere and can jeopardize current efforts by giving a wrong message. For instance, a project targeting a 20 c /kwh could be disqualified in the light of such objectives whereas it would be a rather good concept. Having 2/5

3 realistic numbers is of utmost important to give an overall credibility of the sector and to attract investors, such as large industry. 2 Technology Penetration targets and the expected impact on energy policy goals Assuming that significant R&D efforts are invested in ocean technologies, the experts consider that 10 to 14 GW could be installed in the EU by 2020, amounting to 50 GW by Accounting for the large scale off-shore project in Portugal to be commissioned this year of a power capacity of around 2 MW and the planned wave hub in the UK of a capacity of 15 MW, it is estimated that by 2010, 5 to 20 MW could be reasonably expected by The Canarian Power Plan PECAN foresees to install 50MW before In its white paper on energy released in March, the Irish government has set a target for ocean energy to 500 MW by Most benefits derived from ocean energy tackle four main fields: security of supply, CO 2 reduction from the avoidance of additional fossil fuels power capacity, and job creation, especially in remote areas. No quantitative assessment on the contribution of ocean technologies to EU policy goals has been provided by the experts during the workshop. In terms of environmental impacts, three studies performed recently have concluded that the environmental impact on marine life is minimal. Mammals tend to avoid these areas. The main impact is expected on human activities due to conflict of space and potential needs for exclusion zone or allocated zones for energy production. Nonetheless, as highlighted in some studies, these areas act often as reproduction sites for certain fishes, which could be beneficial to fishery activities. 3 Interaction with other competing or synergetic technologies and community policies and initiatives Environmental policies play a critical role in the development of ocean wave energy sector. Coastal management is a critical issue. With the advent of the deployment of ocean energy technologies, conflicts for the use of coastal space may arise and may impinge on its development. The UK and Portugal have already addressed this issue by allocating specific areas. The experts suggest that this issue should be raised at the EU level. This problematic is also shared with off-shore wind technologies. One option could be to dedicate specific areas for wind and ocean technologies (covering areas encompassing water depths of 10 to15 m for wind and 50 to 60 m for ocean energy), with shared grid connections. On the technology front, the ocean wave energy sector is more naturally focussed on wind developments. There are significant communalities with off-shore wind technology. The knowledge transfer both on hardware and engineering capacities with the wind energy sector is more important than with other sectors. Technology learning in the field of ocean energy is expensive. The costs and efforts can be reduced by fostering cross-sectoral knowledge and know-how transfer. Synergies with hydro technologies notably on turbine technology are perceived as important. No definitive design as to the turbine technology is fixed yet for some wave energy technologies. Therefore cooperation and partnerships on hardware developments are recommended. Looking at the international dimension, the latest technology developments in the EU enable to envisage and to foster international cooperation. Canadian companies are expressing interests for cooperation although they consider the non possibility of having access to Community funding as a barrier. Substantial interests for cooperation, expressed notably through the IEA implementing Agreement, are noted from countries like India, Indonesia, China but also South Africa and America. 3/5

4 4 The role of innovation Business as usual is not considered as an option. At this stage of development, ocean wave energy technologies entail financial risk and important infrastructure investment. Public intervention is essential to share the risks between private and public stakeholders. There is a need for funding support, support mechanisms for demonstration and testing facilities, as well as a build-up of tailored design and engineering capacities. At present, the experts conveyed the message to focus R&D efforts on the installation of the first few MWs. New concepts should be pursued, but by no means at the expense of acquiring demonstration feedback on the most advanced prototypes. There is a need for technology convergence rather than proliferation. The experts highlighted the resource challenge to install and demonstrate the technology, which is a barrier to capacity expansion and investment attraction. Pooling development resources is an option. Dedicated testing locations to share the costs for grid infrastructure, research and monitoring facilities are already established in several Member States (MS), e.g. the wave hub in the UK and the infrastructure zone in Portugal. In the latter, the Portuguese government provides a general permitting agreement and cable facilities. Nonetheless, although this will help to reduce up-front investments at this stage of development of the technologies and help the sector to organise itself, the experts stressed that this scheme bears some limitations and may be of limited extent due to the variety of devices needed to address different resource base - off-shore and on-shore premises. Learning and experience sharing is also crucial for streamlining and optimising investments needs and for speeding up technology advances. Limited feed-back information on technology developments is currently available due to IPR issues. One way to circumvent this barrier is to condition support onto the obligation to release feedback information. This could be implemented within the EC framework programmes. Establishing standards like ISO standards and dedicated reference testing centres is also instrumental in making the sector progress faster and in a more focused way. It is suggested, for instance, that research organisations such as the European marine test centre could be in charge of technology referencing, and could provide the industry developers with capacities to test their own devices. Moreover, the wave ocean energy community needs to acquire a sufficient critical size. Information exchange and coordination efforts among the stakeholders as already supported through the EC framework programmes are important and should be continued. It is equally important that the field of wave energy trains a new generation of scientists and attracts people from different horizons such as off-shore wind energy to foster know-how transfer. In parallel to testing and demonstrating the technology, it is stressed that market pull schemes such as feed-in tariff are of utmost important to foster market deployment, with a need to account for the specific operating conditions and locations in its design. Schemes such as developed in Portugal with feed-in tariff in addition to grid and cable installation provisions, or in the UK with a 20c /kwh feed-in tariff combined with a 25% capital grant are example of existing mechanisms. Capital grant to support demonstration projects are important to the current development phase to acquire data and knowledge, notably on operation and maintenance. It is noted that in the light of current developments, the goal of demonstration projects is to install the first few MWs. Finally, the reduction of bureaucratic burdens such as permitting licensing is seen as a critical issue. There is a need for simplified procedures to kick start plant installations and to address coastal management at the EU level. 4/5

5 5 Experts recommendations for Actions to be considered in the SET-Plan The workshop did not produce a clear recommendation for a large scale initiative to be undertaken at the European scale in order to promote further the use of wave power systems. The design and implementation of support measures based on feed-in tariffs, capital investment incentives have been emphasised as essential to back-up the fledging development of ocean wave energy. With large expansion of ocean wave energy, the requirements for grids will become acute. In many cases, there is no grid for connections. On the Atlantic arch, significant investments will have to be made. Capitalizing on regional resources along the Atlantic arch, it is suggested to investigate the possibility of developing joint programmes and market instruments between the relevant MS. Pooling efforts and resources, establishing unified processes are perceived among the experts as crucial at this stage of development of the technology. It is underlined that for the time being, fostering an integrated approach at the EU level should take precedence over MS competition. Nonetheless, it is stressed that a prerequisite to this proposal is the willpower of the MS to work together. The technology is location specific, which could imply different costs and promotional measures. As an example, implementing the technology in Denmark will require on average 20 km of cables whereas in Portugal, Spain, France and Ireland, shorter distance may be expected. It is also noted that the situation is different for Island based systems. These systems are isolated and they only permit lower generational loads. As such, there is a need for dedicated actions accounting for the remote and isolated conditions of Island territories as opposed to continental areas. 5/5