Select Committee on Science and Technology Appendices to the Minutes of Evidence


APPENDIX 53

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 2002.

  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 change obligations.

  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, www.engb.com

8 January 2003



 
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