Memorandum submitted by Tony Trapp, the
Engineering Business Limited
1. Following oral evidence given on 6 November,
the Committee requested further information on estimated commercial
generating costs, timescale for commercial deployment and the
potential energy production during this timescale. EB was also
asked to comment on the proportion of government funding provided
to advisors and consultants, and any collaboration with oil and
gas companies and whether they were receptive to transferring
their technologies to wave and tidal power.
2. The Engineering Business (EB) has key
staff and directors with 25 years of experience in designing,
building and operating shipboard and seabed equipment mainly related
to the offshore oil and gas and the submarine telecom industries.
The business headquarters is in Northumberland but manufacturing
is based on the resources of Tyneside and NE England. EB employs
50 permanent staff, mainly professional engineers. In September
2001 EB started a feasibility study into the Stingray tidal stream
generator concept with financial assistance from the DTI. Following
a review by the DTI Waptap committee, Brian Wilson announced a
further award of £1.1 million on 10 January 2002. This part
funded the programme to design, build, install and operate a 150kW
Stingray generator in Yell Sound in Shetland. The 180 tonne machine
was installed on the seabed in 36 million of water in September
2002 and has provided much useful and encouraging data and has
largely validated the dynamic mathematical model for the Stingray
system. The plan now is to carry out further offshore testing
in summer 2003 to develop the technology and gather more data.
The mathematical modelling activity will be extended with dynamic,
economic and computational fluid dynamics activities. At the same
time EB has started a programme aimed at commencing installation
of a 5MW Stingray power station in 2004.
3. EB has also taken over the development
of the Lancaster University wave power technology known as Frond.
DTI support has been provided for a feasibility study and if this
produces encouraging results then EB hope to raise support to
allow for the installation of a commercial size demonstration
machine, as early as autumn 2003.
4. EB has extensive experience in the offshore
markets where its engineers played a leading part in developing
effective systems to trench oil and gas pipelines, and submarine
telecom and power cables. In both of these industries, complex
technologies were rapidly developed from an initial team at Newcastle
University. North East England is now recognised as the leading
development area and supplier of seabed trenching systems to the
world market and sales of systems from this region has totalled
about £300 million over the past 25 years.
5. Wave and tidal stream power technologies
have also been under development for at least 25 years in the
UK. An over-ambitious programme initiated in the seventies was
stopped in the early eighties. Significant programmes have re-started
over the past five years with government backing. However this
has not yet led to the deployment offshore of any successful devices
or the establishment of clear leading technologies. The magnitude
of the technical challenge does not seem very different to that
involved in developing seabed trenching technologies and the basic
engineering is reasonably well understood. It is clear to EB that
wave and tide technology can be effectively developed to exploit
the resources around the UK using established UK intellectual
and industrial capabilities. It is equally clear that the UK is
well placed to lead the development of these new industries providing
the prospect of major new UK businesses with significant employment
and export potential. Within the renewable technologies that offer
scope for developing new industries, wave and tide systems offer
the best chance for UK industry to lead the world.
6. EB requested comments on costs and technology
potential from two wave and two tidal technology developers. Replies
were received from Ocean Power Delivery (OPD) for wave power,
and Marine Current Turbines (MCT) for tidal stream power. Some
of their comments are included below, but all opinions expressed
here are those of EB only, unless otherwise indicated.
7. Tidal and wave technology is still in
the early stages of development and the industry has not had a
good record in predicting the rate or the cost of development.
The Stingray programme in 2002 has proved that it is possible
to deliver ocean energy projects to a timetable and a budget.
Until large-scale demonstration units have been designed and built,
and successfully deployed in a real marine environment, predictions
of costs and timescale must be treated with great caution.
8. EB has estimated the generating costs
for its proposed 5MW tidal stream demonstration power station
based on extrapolating the costs from the 2002 Stingray programme.
This gives an overall electricity price in the range 5p/kWh to
19p/kWh taking account of the most optimistic and the most pessimistic
cost predictions. There is significant potential to reduce these
prices with technology developments and cost reduction programmes
associated with large-scale production of generators. The cost
of marine operations to install, maintain and decommission generators
will also fall if large numbers of generators are deployed. Encouragement
should be taken from EB experience where substantial cost reductions
have occurred in the submarine telecom cable industry as it became
a widespread and mature technology. It is therefore possible that
tidal stream power stations will be price-competitive with other
major generating technologies after about 10 years of development.
9. MCT estimate 6p/kWh to 7p/kWh for early
stage commercial technology, falling to less than 3p/kWh for large
projects. OPD say that initial costs for a reasonable sized project
should be at a similar level to offshore wind. In the longer term
wave energy has the potential to be one of the lowest cost forms
of electricity generation, with long term cost projections of
1.5p/kWh to 3p/kWh, according to OPD.
10. In trying to estimate the timescale
for commercial deployment, the next stage of development for Stingray
is to install a 5MW demonstration tidal stream power station in
2004-05. This will include further testing and development using
the existing demonstration machine in 2003. If this programme
produces encouraging results then larger installations would be
planned for installation in 2005 and beyond. It is possible to
envisage a rapid rise in installed capacity from 2006 onwards
but this depends on the commercial viability of the technology
and the attractiveness of the power generation industry to investors.
Offshore experience with Stingray in 2002 means that there is
little doubt that the technology can be made to work effectively.
The level of support and encouragement available from the market
and government will determine the pace and extent of the development.
11. MCT estimate that their first commercial
tidal stream systems will be installed in 2005-06 with the first
100MW project in 2008-09 and the first 1,000MW installed by 2012-13.
OPD say that if initial machines are successful then the first
wave farms could be begun as early as 2004-05 with the potential
for several 100MW to be installed before the end of the decade.
12. In trying to estimate the potential
energy production from wave and tide generators in the next few
years, EB is not aware of any significant long-term energy production
data available for any offshore wave or tidal stream device. Part
of the 2003 Stingray programme is to start to gather this data
from the demonstration machine. More realistic data should be
available from the proposed 5MW power station from 2005 onwards.
EB has a conservative estimate of an actual output from this power
station of 10GWh to 14GWh per year. By the end of 2006 this station
should have generated about 10GWh of energy. This represents about
5% of electricity consumption in Shetland, apart from the Sullom
Voe oil terminal, which has its own generators.
13. EB engineers have developed and supplied
equipment for the oil and gas and submarine telecoms markets for
25 years. These markets have produced sufficient revenue to allow
for the development of new technologies in a rapid and effective
way. However, the submarine telecom market is now in severe difficulties
with many companies throughout the value chain going out of business.
Some of the installation and maintenance contractors are now trying
to diversify into offshore renewables activities with some success.
EB has not yet seen any great interest in tidal stream power generation
from oil and gas companies, although BP at Sullom Voe has been
very helpful during the Stingray programme based in Shetland in
14. There is agreement between OPD, MCT
and EB that there is great potential for wave and tidal stream
power generation, and that the technology can be successfully
developed. EB remains cautious in predicting future wave and tide
energy prices, without further evidence from successfully installed
commercial sized plant that has operated reliably over an extended
period of time. Wave and tidal energy technology is still at a
very early stage of development and costs are high. Development
costs of all previous new power station technology has been high
and has taken significant time. The nature of the offshore environment
means that demonstration wave and tide machines are large and
expensive to install and the programmes involve significant risk.
During this early stage considerable and consistent support is
required from government, and industrial and financial organisations.
The energy market background should provide support in a way that
makes allowance for the fragile commercial status of wave and
tide technology at the moment.
15. OPD comment that a "market pull"
tariff is urgently needed to allow commercial partners to make
reasonable returns on early projects, recognising that the higher
perception of risk associated with these projects, and the fact
that power projects can take two to three years to develop. There
is no reason why the commercial development of the wave industry
should be any different from that of the wind industry; a key
step in this was the early establishment of a supported tariff,
which allowed the initial market to develop in Denmark. If this
had not occurred Denmark would not have the industry it has today
and wind would not be the option that it is today in meeting climate
16. There is considerable urgency in the
development of wave and tide technology if the UK is to obtain
maximum benefit from the large industry that might emerge in the
next decade. It is essential to get real large-scale machines
into the ocean so that real data and financial and offshore experience
can be accumulated. This will provide investor confidence and
ensure that the correct technical and environmental challenges
are identified and met in the shortest time and at the lowest
cost. This type of new technology is best developed by relatively
small businesses such as EB, MCT and OPD. However these companies
do not have deep pockets and all require the confidence of external
investors to generate the necessary support. Given a favourable
market and political environment, these companies are confident
in their abilities to produce competitively priced energy from
renewable resources. EB has self-funded the Stingray programme
to date and this is very unusual in the industry, however an external
fund raising exercise is now in progress to provide investment
for the 5MW demonstration power station.
17. Tide and wave energy technology developers
are intending to make huge progress on large-scale systems in
a very short time scale, all on low budget programmes. The challenge
for government is to decide how desirable it is to generate significant
power from wave and tide resources, and how important it is to
develop these new industries based on British companies using
existing UK skills and infrastructure. If the answer to both of
these questions is yes, then we are confident that we can deliver
and the only requirement is to provide market conditions that
encourage this to happen.
18. Further information on the government
funded 2002 Stingray programme can be found at the EB web site,
8 January 2003