HC 1624 Energy and Climate Change CommitteeMemorandum submitted by the Department of Energy and Climate Change

DECC RESPONSE TO THE ENERGY AND CLIMATE CHANGE SELECT COMMITTEE INQUIRY ON FUTURE OF MARINE RENEWABLES IN THE UK

Introduction

Wave and tidal stream energy technologies are at an early stage of development with only a few megawatt scale devices currently being tested. The development of these devices has been assisted by Government funding but commercial scale demonstration and deployment is yet to begin. As such, marine energy is likely to only make a modest contribution to our energy mix to 2020 but it is a technology which provides an option for bulk renewable energy generation as part of our energy mix to 2030 and 2050.

The UK Renewable Energy Roadmap published by the Department of Energy and Climate Change (DECC) in July 2011 estimates that, in “central range” modelling, small pre-commercial wave and tidal stream array demonstrations will be carried out between 2013 and 2015. Commercial scale deployment will then increase through the second half of the decade, reaching in the order of 200–300MW by 2020. The figure below, extracted from the Roadmap, gives an indication of the range of potential deployment for marine energy in the UK to 2020.

Figure 17

DEPLOYMENT POTENTIAL TO 2020 FOR MARINE ENERGY

batch 1 folio 1.eps

A variety of sources suggest there is a wide range of possible deployment levels beyond 2020. The levels of deployment forecast in these studies are dependent on a range of factors. These include the success of the marine technology development in reducing cost, the economics of the alternatives and the assumptions made on the sector’s ability to overcome potential financial, technical and other barriers to deployment. DECC 2050 Pathways analysis suggests that deployment could range from a negligible level (in a worst case scenario) up to, at the higher end of the range, around 27 GW by 2050.

The Government recognises the potential of marine energy and is committed to harnessing the benefits which a successful marine renewables sector could bring to the UK. This commitment is acknowledged by marine energy being an explicit part of the Coalition Agreement which states: “We will introduce measures to encourage marine energy”.

The UK is recognised as the world leader in the research, development and deployment of wave and tidal stream technologies. The world’s two largest tidal turbines are deployed in the UK: the 1.2MW SeaGen turbine in Strangford Lough, N. Ireland and the 1MW Atlantis AK1000 turbine at the European Marine Energy Centre (EMEC) in Orkney. Similarly, two of the world’s most advanced wave energy devices (Pelamis and Aquamarine’s Oyster) are currently deployed in the UK, at EMEC. Further deployments of both wave and tidal pre-commercial prototypes are scheduled over the next 12 months.

With its indigenous academic and technical expertise and unique testing infrastructure the UK is seen as an attractive location for overseas device developers to develop their technology. As a result of this, of our excellent marine energy resources and of Government support for the sector, many of these leading overseas device developers have offices in the UK.

However, the marine energy sector is currently reaching a critical stage of development. The challenge for the sector is to move from a research and development focus towards, initially, demonstration of small arrays (in the range of 5–10MW) and subsequently commercial scale deployment in the period to 2020. As part of this process, the sector will need to prove that its technology will operate on a commercial basis in arrays and demonstrate that it can reduce costs of generation sufficiently to make the technology cost effective in the longer term (with respect to other forms of renewable generation).

Analysis carried out for DECC suggests considerable variation in the levelised cost of energy (LCoE) from marine technologies, ranging from £162 to £340 per MWh in 2020. This reflects cost differences between the individual technologies considered, uncertainties about anticipated levels of learning and of global deployment, and technology risk. Capital costs are expected to fall as projects move from prototype stage to commercial scale deployment, but the scale of the decrease is hard to predict and will depend, for example, on the intensity of the marine resource exploited.

DECC (along with other public sector partners) is working to put in place a number of policies and instruments which will facilitate the process of array demonstration and commercialisation and secure the development of the sector in the UK. This includes support for innovation and demonstration of devices, revenue support under market-based instruments and the acceleration of supply chain growth through the development of Marine Energy Parks. This work is coordinated by the UK Marine Energy Programme Board, which is chaired by Greg Barker, Minister of State for Energy and Climate Change.

As agreed with the Select Committee, this paper only considers wave and tidal stream technologies. It does not cover tidal range energy or other forms of marine energy, which are not relevant for mass deployment in the UK such as ocean thermal energy conversion or salinity gradient technology.

The Benefits of Marine Energy

What are the potential benefits that marine renewables could bring to the UK and should Government be supporting the development of these particular technologies?

Carbon abatement potential: Successfully developing the marine energy sector will provide the UK with an additional solution with which to combat climate change and limit CO2 emissions. There are significant uncertainties but under deployment projections of 2.6GW installed capacity in 2030, wave and tidal stream could provide carbon abatement benefits of 17Mt of CO2 valued at £490 million to 2030 (real, discounted with central projections for the EU-ETS carbon price). By 2050, for a high deployment scenario of 27GW installed capacity, wave and tidal stream technologies could save 61Mt of CO2 valued at £1.1bn to the UK economy (real, discounted).

Diversity of generation, security of supply and grid balancing: The successful development of marine energy could help ensure a more diverse portfolio of generation technologies. This could increase the UK’s security of supply and reduce over-reliance on one type of technology or fuel. Due to their limited contribution to renewable electricity to 2020, marine energy technologies will only contribute to the energy mix in the longer term.

The development of the sector could also provide benefits for grid balancing. For instance tidal energy intermittency is predictable and, with the phasing of the tides around the coastline, could form part of the energy system’s baseload to provide bulk electricity to the grid, unlike offshore wind. In addition wave energy is much more predictable over longer periods than wind giving more scope for short-term planning of grid usage. A diversified renewables mix with marine energy as well as wind intermittent generation will likely reduce the need for back-up and reserve capacity, and hence lead to fuel and CO2 savings. This was supported by the conclusions of a report commissioned from Redpoint by Renewable UK (then BWEA).

Economic and financial benefits: The UK is at the forefront of marine energy with UK companies having a significant marine design and engineering experience and already a sizable share of device developers and patents. In 2008–09, the UK market size for wave and tidal was £78 million, while UK employment in the sector was approximately 600 people.

The successful development of the marine energy sector could lead to a substantial marine energy generation industry in the UK but also a substantial supply chain, a large proportion of which could be based in the UK if the country’s technological lead is maintained. This would result in an attractive environment for both domestic and inward investment in manufacturing facilities as well as the potential for UK export to international markets. Development of the domestic facilities will also provide significant opportunity for exports of both technology and knowledge.

The Carbon Trust suggest that, if the sector succeeds in achieving substantial levels of deployment, there is the potential for up to 16,000 jobs arising from the wave industry alone by 2040s with 25% supporting UK exports. Other estimates indicate a potential for around 14,000-19,000 , direct marine industry jobs, but excluding the supply chain.

The role of Government: The UK is ideally placed to capitalise on the marine energy potential described above. Whilst the industry is not expected to make a strong contribution to the 2020 renewables target, Government support is assisting the industry to establish the basis for commercial scale deployment in the period to 2020. This would enable the technology to contribute to the energy mix carbon reduction targets and economy in the 2020s and beyond.

Innovation Funding And Other Support

Is publicly provided innovation funding necessary for the development of marine technologies and if so, why?

The wave and tidal stream sector is still at an early stage of development with a few wave and tidal prototypes having been deployed at, or approaching, megawatt scale. Significant development and demonstration of the current technologies will be needed before the sector begins commercial scale deployment. The risks entailed in bringing forward marine technologies are being addressed by Government largely though innovation funding. In addition, once commercial scale deployment of devices commences this will be supported through Government market support mechanisms allowing the sector to reduce costs of generation and move through to commercialisation.

The development of marine energy prototypes carries a very high technology risk, demonstrated by the slow progress of the sector towards testing of full-scale devices. This, coupled with the large cost of developing such prototypes, has made it difficult for prototype developers—mostly SME start-ups some years away from achieving any commercial return—to raise the necessary capital to support development. Indeed, a study by Kreab & Gavin Anderson for DECC showed that the financial markets have perceived the marine energy sector as inherently risky.

It is only recently, with the development of promising near-megawatt scale devices, that major industrial players have begun to invest in the sector. Whilst larger investors are taking more interest, financial modelling carried out by DECC has shown that the first demonstration arrays (ranging in size from 5–10MW) will require both grant and market instrument support to generate the internal rates of return which will be necessary to justify investment from funding partners such as utilities and large industrial organisations. This has been corroborated by commercial information provided by both technology and project developers.

Up to this point the Government has targeted innovation support largely towards the development of large-scale prototype devices. Following the success of the Marine Renewables Proving Fund (MRPF, see below), DECC’s focus is now shifting towards the demonstration of a small number of marine technologies through the deployment of small commercial-scale arrays. Government support at this stage of development is needed as, although arrays are the next crucial step towards wider commercial scale deployment, they are viewed as high risk by investors due to their uncertain success rates and considerable cost.

In addition, where demonstration projects are successful, further innovation will often be required, so that the reliability, performance and durability of devices can be improved, before companies can move to commercial scale deployment. Other public funding bodies (eg within the Low Carbon Innovation Group or the Devolved Administrations) will be best placed to address funding gaps for such issues.

Once the sector has entered a commercial scale deployment phase (likely to be in the latter half of this decade) we do not see a strong rationale for continuing grant support to the sector for technology development other than targeted innovation support aimed at cost reduction. Commercial scale deployment of energy devices is more effectively supported under the framework of market incentives which DECC has in place, namely the Renewables Obligation (RO) and, beyond 2017, the outcomes of the Electricity Market Reform.

Coordination of Government Innovation Policy: Given the current constraint on public spending, it is crucial that Government support for marine innovation is well coordinated to focus support in a most effective manner to the sector’s need. The Low Carbon Innovation Group (LCIG), which brings together the key organisations that use either in whole or in part public funds to invest in low carbon innovation, ensures such a focused, co-ordinated approach to the delivery of UK Government’s support.

The core members of the LCIG are: the Technology Strategy Board (TSB), the Energy Technologies Institute (ETI), the Carbon Trust, DECC, Department of Business Innovation & Skills (BIS) and the Research Councils. Each member has a specific remit and brings a unique perspective and skill set to the area. Greg Barker (DECC) and David Willetts (BIS) co-chair the LCIG Steering Board.

Over the last year, one of the key activities for the LCIG has been the development of Technology Innovation Needs Assessments (TINAs). Currently focusing on nine low carbon technologies, including marine energy, the TINAs will provide detailed analysis of the key innovation needs in each technology, an assessment of the likely impact and value of those innovations and an assessment of the need for UK government support in addressing those needs. Key findings from the TINAs are expected to be published in late 2011 or early 2012.

The work to date on the marine TINA together with other sources of evidence and insight have been used by the members of the LCIG in developing plans for a coordinated portfolio of support to innovation in marine energy that together will help address the range of innovation challenges the sector faces. Details of future schemes are still under development but the expected relationship between the planned key marine innovation programmes from LCIG members is summarised in the diagram below.

Overview of Uk Government Policies for Marine Energy

How effective have existing Government policies and initiatives on marine renewables been in supporting the development and deployment of these technologies?

Government support for the marine energy has been largely aimed at supporting each stage of the technology development of the sector. A summary of Government support for marine energy is detailed below. This has largely been aimed towards the development of prototype devices—from design through tank testing to full-scale prototype development.

To underpin innovation, the Government, Devolved Administrations and regional authorities have provided support to the UK’s marine testing facilities. A package of funding from DECC and BIS totalling £28 million supported the expansion of EMEC in Orkney, the National Renewable Energy Centre (NaREC) in Northumberland and Wave Hub in Cornwall. This has led to the UK possessing a unique device testing, development and demonstration offer which has acted as a draw to overseas device developers.

UK Marine Energy Programme: In January 2011 the Department established the UK Marine Energy Programme. A Marine Energy Programme Board has been created to oversee the development of the Programme and advise Ministers on what actions the Programme should address to advance the industry. The Board is chaired by Greg Barker, Minister of State for Energy and Climate Change, and comprises energy utilities, industrial companies, technology developers, financiers as well as Government. DECC has worked closely with the Board and its financial working group which have provided evidence to underpin the Department’s RO Banding Review. They have also assisted in DECC reaching a decision on the allocation of the innovation funding of up to £20 million for marine energy and will provide advice over the coming months to assist detailed design of the scheme.

Marine Energy Parks: At the first meeting of the Marine Energy Programme Board in January 2011 Greg Barker issued a challenge to the marine energy sector to come forward with plans to develop Marine Energy Parks which would help drive forward the commercialisation of marine energy. The development of marine energy parks throughout the UK will encourage the clustering of activities with the aim of bringing together R&D capabilities, manufacturing, marine energy infrastructure, environmental expertise and other activities to drive the marine sector forward to commercialisation and encourage the development of its supply chain.

Key South West stakeholders are developing proposals to establish the UK’s first such park. This public/private partnership aims to mobilise the resources and expertise of the South West and provide strong industry leadership, to attract investment and encourage the growth of a global marine energy industry based in the UK. This model, which will need to be truly sustainable and build on the strengths of the region, could form the basis for other regions looking to establish their own Park. Should any device deployment be associated with plans to create a Marine Energy Park, these would be taken forward through the existing mechanisms which exist for seabed leasing (eg through The Crown Estate) and marine planning and licensing (eg through the Marine Management Organisation and IPC).

Summary of Innovation support initiatives: The Government has provided considerable support to research and development in the wave and tidal sector in recent years. This has led to a significant number of wave and tidal energy devices being pulled through the development process to a point where they are being tested at megawatt scale. It has also led to the UK’s unique innovation testing infrastructure thus putting the UK in the position of world leading player in the development, testing and deployment of marine energy.

Innovation support has been provided through a number of channels (see annex A for details). These include:

The Research Councils’ on-going marine energy programmes across EPSRC and NERC and through the Supergen marine programme.

The TSB’s on-going funding for marine projects from which many of the leading device developers have already benefitted, allowing them to bring early-stage devices to pre-commercialisation prototypes stage.

The ETI’s existing marine programmes covering, among other, resource modelling and deployment technologies.

The Carbon Trust’s Marine Energy Accelerator Programme and Applied Research Programme.

The former Regional Development Agencies and the Devolved Administrations.

In addition, DECC has had a number of funded schemes which were devised to complement and enhance commitment from the members of the LCIG and other bodies such as the Devolved Administrations.

The £50 million Marine Renewables Deployment Fund (MRDF) was originally set up under the DTI. It aimed to support, through a combination of capital grants and revenue support, the construction and operation of early-stage commercial scale wave and tidal stream projects using technologies that had completed their initial R&D phase. The scheme which opened in 2006 did not receive any suitable applications. The next section highlights the lessons learnt from the MRDF.

The £22 million Marine Renewables Proving Fund (MRPF), created in 2009, provided grant funding for the testing and demonstration of pre-commercial wave and tidal stream devices. The MRPF has driven forward the development of six of the leading wave and tidal devices, four of which have already been deployed at the EMEC with the remaining two due to be deployed in the next year. The success of the MRPF has paved the way for the sector to begin demonstration of small arrays of devices in the coming three to four years.

In June up to £20 million marine innovation funding was announced, which, subject to value for money assessment, will facilitate demonstration projects over the next four years. Although details of the scheme remain to be defined, we anticipate it will be based on a competitive process which will aim to support the demonstration of up to two 5–10 MW marine energy arrays. The first small arrays will be critical to accelerating the learning-by-doing elements of cost reduction across the industry, while demonstrating that marine energy can be successfully generated at scale. This programme is expected to be launched in 2012 with the majority of funding available in years 2013–14 to 2014–15.

In addition to UK funding we expect the sector to be supported by European funding from the EU Framework 7 Programme and, potentially, the EU New Entrants’ Reserve Fund 300 (NER300) to which DECC recently submitted one wave and three tidal stream array projects for consideration.

These activities have all been designed to complement each other and together they add up to broad and coherent UK government backed support for Marine Energy which should help the sector achieve its potential.

Market support and investment initiatives: The Government has put in place the following market support and investment mechanisms, which have the potential to support the commercial scale deployment of marine energy:

Renewable Obligations (RO): Under the RO, marine energy technologies receive an enhanced level of support. The Government is currently undertaking a Banding Review to consider the levels of support provided under the RO for all renewable energy technologies, including marine, for the period 2013–17. The Government intends to publish its consultation shortly and announce its decision on banding levels as soon as possible after the consultation ends. The new bands for marine will come into effect on 1 April 2013, subject to Parliamentary and State Aid approval.

Electricity Market Reform (EMR): “Planning our electric future: a White Paper for secure, affordable and low-carbon electricity” published in July 2011 includes proposals for a new system of long-term contracts in the form of Feed-in Tariffs with Contracts for Difference (FiT CfD), providing clear, stable and predictable revenue streams for investors in low-carbon electricity generation. To provide flexibility, once the FiT CfD is introduced and until 31 March 2017, new renewable generation will have a one-off choice between the RO and FiT CfD. The RO will close to new accreditations on 31 March 2017. No generation will be able to accredit under the RO from that date.

The Green Investment Bank (GIB) which is currently being developed by Government will play a vital role in addressing market failures, unlocking significant new private investment into green infrastructure projects. Ministers will set the GIB’s strategic priorities in due course, to ensure that the Bank remains an effective instrument of green policy. The GIB will be an enduring institution, seeing an acceptable level of return on investment. In time, therefore, commercial scale marine energy deployments could benefit from the GIB investment.

Regulatory initiatives: Last year, the Crown Estate (TCE) announced the successful bidders for the world’s first commercial scale wave and tidal leasing round, for eleven sites in Scotland’s Pentland Firth and Orkney waters. The 1.6 GW (600 MW from wave and 1000MW from tidal stream) proposed by the developers, could, if developed to full capacity, meet the electricity needs of up to three quarters of a million homes. The Crown Estate is expected to launch a leasing round for Northern Ireland waters later this year.

DECC recently completed the Offshore Energy Strategic Environmental Assessment (OE SEA) for wave and tidal energy in English and Welsh waters. DECC’s post-consultation report on the assessment should be published on the SEA website shortly. The SEA for English and Welsh waters will complement the existing work on SEAs for Scotland, Northern Ireland and the Severn estuary. This should open up suitable sites across the UK for consideration for potential deployment of marine energy devices.

These two developments have been key in allowing the sector to begin planning future commercial scale deployment.

Case Study

The role of coordinated Government initiative in pulling projects through to commercialisation

An example of how these complementary initiatives have best been used to achieve success is the Marine Current Turbines’ 1.2MW SeaGen tidal turbine. SeaGen, the first full-scale commercial scale tidal energy device to be deployed anywhere in the world, was initially developed with support from the TSB research programme and from the Carbon Trust’s Marine Energy Accelerator programme. Successive support from DECC’s MRPF, complementary TSB support and the RO have allowed SeaGen to move from unproven prototype to a grid-connected device supplying electricity to Northern Ireland since December 2008.

Lessons Learned from Prior Government Funding of Marine Energy

What lessons can be learnt from experiences within the UK and from other countries to date in supporting the development and deployment of marine renewables?

In developing policies and funding instruments to support marine energy the Government has actively sought to include the lessons learned through appraisal and monitoring of previous policy initiatives. Close working with the sector through initiatives such as the Marine Energy Action Plan and the UK Marine Energy Programme has given the government access to data which has allowed us to target our limited resources to address demonstrable market failures and innovation need, in a manner in which it will have the most positive effect.

The development of the MRPF provides a good example of this approach. The fund was created in response to the failure of the sector to access the MRDF (see case study below). When additional innovation funding became available to DECC in 2009, the lessons learned from the MRDF strongly informed the design of the MRPF, specifically to address the failure of the sector to progress to large scale prototype deployment and testing. The design of the MRPF also reflected a need to focus limited government support towards the leading devices in the sector so as to maximise progress towards array deployment.

The closer targeting of the objectives of the MRPF on leading devices and specific market failures allowed more effective coordination of the fund with other support measures. For example the support provided to developers under the MRPF was underpinned by further investment in the UK’s wave and tidal energy testing facilities and by complementary research calls from TSB, totalling £12 million. The scheme provided six grants with all but one of the recipients due to have deployed their devices for testing this year. The remaining device is due for testing in Orkney next year.

One of the lessons learnt from the MRPF was the benefit of having a “technical services team” of independent experts “mentoring” the projects alongside the Carbon Trust programme managers. Although this added to the apparent programme management costs of the scheme, this was highlighted as a success by several participants as it ensured better delivery against the scheme’s objectives, increased reliability of the devices and maximised the value obtained from the projects. We will consider whether a similar approach would be beneficial for future grant funding schemes.

On the basis of the work undertaken under the MRPF we now estimate that several device developers should be in a position to commence deployment of small pre-commercial arrays in the period from 2013 to 2015. This was taken into account in DECC’s decision to allocate up to £20 million of its innovation budget to a new scheme which, subject to value for money consideration, will support the demonstration of small pre-commercial wave and tidal arrays. We plan to use the Finance Working Group of the UK Marine Energy Programme Board to provide sector input into the design of the new scheme in the autumn. In doing so we will look to incorporate the lessons learned from the MRDF and the operation of the MRPF.

The Department is also working closely with colleagues in the EU to support the inclusion of wave and tidal energy within EU energy and R&D initiatives. We will continue to use our links with organisations such as Renewable UK, the European Ocean Energy Association, the British Irish Council and the International Energy Agency Ocean Energy Systems Implementing Agreement to promote the UK marine energy sector internationally, to collaborate and to learn lessons from international activities in the sector.

Case Study

Lessons learned from the MRDF

Government funding for wave and tidal energy has largely mirrored the development path of the sector. The exception was the £50 million MRDF, launched in 2006 to support the demonstration of small arrays of pre-commercial wave and tidal energy devices. The scheme was instigated on the basis of discussions with the sector between 2004 and 2006, which asserted that such a support scheme was urgently required to allow the sector to progress to commercialisation. In hindsight the industry claims were premature as developers have found it more difficult to develop, deploy and test prototypes to full-scale than anticipated.

The Department repeatedly faced criticism from the sector that the MRDF entry criteria were too strict and should be relaxed to allow technologies to be able to take advantage of the fund. However, there would have been significant risks with a relaxation of the entry criteria—to both the public purse and to the sector alike. Devices would have been deployed prematurely, leading to a high risk of (catastrophic) project failure. This could have severely undermined investor confidence across the sector (making finance raising for technology and project development even more difficult), risked failure of those companies undertaking premature MRDF projects and wasted public money.

The Renewables Advisory Board (RAB) report on the scheme, concluded that the MRDF was a basically sound scheme and its lack of uptake was not related to its design but to the delays in technology developers progressing devices to a pre-commercial level. DECC addressed the sector’s need for funding to develop and prove their large scale prototypes through the MRPF.

Non-Financial Barriers

What non-financial barriers are there to the development of marine renewables?

The main non-financial barriers affecting the development and deployment of wave and tidal technologies are centred around planning and consenting requirements, knowledge sharing, grid connection and the development of an established supply chain.

Planning & Consenting: It is clearly necessary to ensure that deployment of marine energy does not cause unacceptable effects on the marine environment. However, the data available on the environmental effects of wave and tidal technologies are limited as individual devices have only recently started to be deployed.

Because of this lack of data a number of different approaches have been adopted by different regulatory authorities for deployments to date. In some cases a more precautionary approach to granting consent and environmental monitoring and mitigation measures has been taken. In others a more flexible “deploy and monitor” approach has been used for the limited levels of deployment to date (largely single test devices). Where a more precautionary approach has been taken the cost of surveys, analysis and reporting are not insignificant to developers. The data being gathered in these surveys are potentially of great value to Government and regulatory authorities and to the industry as a whole. However, these data are not always being shared because of its commercial value and the cost of obtaining it. In response to the current difficulty in data management the Marine Management Organisation (MMO) are currently building up an evidence base for marine planning including gathering socio-economic and environmental information. Having one organisation collate and manage the data will ensure standardisation and consistency. The MMO are working with industry to ensure as much information as possible is shared with Government and regulatory authorities.

The implementation of the Marine Strategy Framework Directive and marine conservation legislation, specifically for Marine Protected Areas, may also have an effect on the deployment of wave and tidal technology (ranging from potentially restricting deployment in specific areas to requiring additional environmental mitigation and monitoring, with associated cost implications). DECC and DEFRA are working together to achieve the right balance between conservation objectives and deployment of offshore renewables.

The Marine and Coastal Access Act 2009 established a framework to manage our seas better and included the introduction of marine planning and a new streamlined licensing system. Marine planning has been introduced to ensure the sustainable development of our seas. It will provide greater certainty for developers, allowing growth, whilst reducing burdens on industry and ensuring cumulative effects of development are within eco-system limits. It will also ensure greater integration with terrestrial planning. The MMO commenced planning in April 2011 in the East inshore and offshore areas between Flamborough Head to Felixstowe. Once a marine plan is in place all licensing decisions must be made in accordance with the plan therefore ensuring decisions are made in a sustainable manner. The new licensing system was introduced on 6 April and the MMO are working with industry to ensure clarity on how these processes fit together.

To consider these and related issues, the UK Marine Energy Programme has set up two working groups covering Planning & Consenting and Knowledge Sharing. These groups will consider measures to ensure an appropriate balance can be struck between protection of the marine environment and the production of marine renewable energy and how to broaden access to data of value across the sector.

The Planning & Consenting working group is led by the MMO and Marine Scotland through their Offshore Renewable Energy Licensing Group (that is also looking at offshore wind). The working group will, among other things, take an overview of licensing and permitting processes associated with deployment of wave and tidal deployment, examine regulatory processes and particularly, identify and propose solutions to issues that affect efficient and timely licensing. The first meetings of the group are expected to take place over the autumn.

The Knowledge Sharing working group is being led by the Crown Estate, working with Renewable UK and other interested parties. The group will explore ideas and discuss the possible creation of a network for knowledge development, based on collaboration and sharing. The first meeting of the working group is scheduled for mid-September

Both working groups will feed back to the Marine Energy Programme Board.

Grid availability: There are currently a number of grid connected marine energy devices operating in the UK. Because these are single devices or relatively small installations (eg EMEC and Wave Hub) connection has been via the distribution network. The next phase of deployment for the sector being small pre-commercial arrays of devices (in the range of 5–10MW) and these will also in all likelihood be connected into the distribution network. It will not be until the sector begins the deployment of much larger commercial-scale array deployments in the latter half of the decade that grid availability and capacity is likely to become a consideration (albeit that project developers will need to factor timing of any needed grid enhancement into their developing business plans at a much earlier stage).

Work is already underway to put in place the changes needed to the grid which may be required to accommodate the general increase in offshore renewable generation expected by 2020. This includes the need for timely and potentially significant investment in the grid, both to bring electricity ashore and to strengthen the onshore transmission network. Given the geographical distribution of marine energy resource the longer term needs of the sector are being included in network company considerations for accommodating the offshore renewables sector.

Further information on offshore grid developments is contained in the Renewable Energy Roadmap (pages 54–56). Electricity transmission network company Business Plans for the period 2013-21 have been submitted to Ofgem. Further information is available at:http://www.ofgem.gov.uk/Networks/Trans/PriceControls/RIIO-T1/Pages/RIIO-T1.aspx

Supply Chain Development

To what extent is the supply chain for marine renewables based in the UK and how does Government policy affect the development of these industries?

The Government’s planned development of Marine Energy Parks will assist in promoting the development of the UK’s supply chain for marine energy. However, that supply chain is still at a very early stage of development as the sector has not yet progressed beyond the manufacturing of single prototypes or pre-commercial devices. It is difficult at this stage to know if the current suppliers for prototypes will end up forming a significant part of the supply chain once manufacturing is scaled up for commercial scale production or whether components and services will be sourced elsewhere. The oil & gas, maritime and offshore wind supply chains are ideally suited to diversify and seek opportunities in the wave and tidal sector because of the synergies between the sectors, particularly in areas such as drive trains, sub components, installation & maintenance vessels and cabling.

By providing the appropriate framework both in terms of regulation and financial support the Government aims to encourage investment and deployment of marine energy technology in the UK to help embed a home based supply chain industry, maintain the UK’s lead in the sector and benefit from the potentially substantial export opportunities in the sector once it expands into overseas markets. Confidence in the wave & tidal sector will also build confidence in the supply chain sector and encourage it to invest in innovation and gearing up for commercial scale production.

DECC is working with The Crown Estate and the industry Trade Associations to stimulate a UK supply chain by highlighting the opportunities in the offshore renewables sector through initiative such as: seminars/workshops, publishing supply chain directories and booklets.

Summary

The Government and Devolved Administrations have provided significant levels of support to developing the wave and tidal stream energy sector in the UK. To date this has largely been directed towards research and development activities aimed at developing successful megawatt-scale prototype devices. This, including the Department’s recent £22 million Marine Renewables Proving Fund, has allowed the sector to bring forward a number of promising devices to the point where several are now ready for pre-commercial demonstration in small arrays (5-10MW) over the coming three to four years. This is the precursor to commercial-scale deployment of devices in the second half of the decade which will pave the way for the commercialisation of the sector.

To support the commercial-sale deployment the Government is providing long term support through market-based instruments such as the Renewables Obligation and the outcomes of the Electricity Market Reform process.

In conjunction with this the Government is working with the sector and other key stakeholders, principally through the UK Marine Energy Programme, to address financial and non-financial barriers to the development of a commercial market for marine energy in the longer term.

September 2011

Annex A

EXAMPLE OF RECENT AND FUTURE INNOVATION INITIATIVES BY LCIG MEMBERS

The Research Councils concentrate on funding projects in the early stages of development. They have recently invested £7.7 million to push marine technology from initial concept through to deployment, including the marine energy Supergen programme. A further £2.4 million budget focuses on the environmental benefits and risks of up-scaling marine renewable energy.

The Technology Strategy Board focuses on bringing early stage project to a pre-commercialisation prototype stage and many of the leading device developers have already benefitted from TSB funding. Their on-going funding for marine projects (£12 million announced in 2010) supports underpinning technology development, cost reduction and improved performance through innovation. The TSB are in the process of establishing a Technology and Innovation Centre (TIC) in offshore renewable energy, including marine energy. This aims to establish a critical mass of activity in accelerating the commercialisation of new concepts and research, and will be one of a new network of elite centres. The centre is planned to start mid 2012, and will have core funding of its own, but will also competitively tender for public money through competitive funding and private contracts. The TSB and Scottish Enterprise plan a joint programme targeting technical barriers to initial array deployment. This programme, developed in partnership with the industry will develop solutions to common challenges across the industry, such as cabling and electrical infrastructure, installation methods and corrosion/fouling issues. In addition, there is likely to be a “next generation device” programme which will help to bring on individual devices that can step-change the cost of energy in the longer term.

The Energy Technologies Institute’s unique partnership between international industrial companies and the UK Government aims to bridge the gulf between laboratory proven technologies and full-scale commercially tested systems. ETI has launched a range of calls supporting marine energy. Existing programmes cover resource modelling and deployment technologies. Two key further projects are planned to fund tidal and wave array design developments that target whole system levelised cost of energy (LCoE) reduction.

The Carbon Trust has just reported on its Marine Energy Accelerator Programme first phase following their delivery of the MRPF which helped many of the devices now leading the way to develop their technologies. Through the £3.5 million Programme, the Carbon Trust, working with the industry and developers to progress key component technologies, has set out clear pathways to achieve the future cost of energy reduction needed to make marine technologies competitive with other forms of renewable generation. The Carbon Trust also fund a number of wave and tidal projects under its Applied Research Programme.

Annex B

SUMMARY OF GOVERNMENT FUNDING MARINE FOR MARINE ENERGY

As requested by the Select Committee, this annex summarises the funding which the Government and Devolved Administrations have allocated to development of marine energy over the last 5 years.

DECC Funding

Marine Renewable Proving Fund (MRPF)—Total: £19.5 million to date (Six leading technologies supported)

Marine Renewables Deployment Fund (MRDF)

Below is the funding allocated through the MRDF (Marine Renewable Deployment Fund) for wave and tidal energy performance and standards protocols, contribution towards the construction of the wave & tidal testing facility at EMEC, Wave & Tidal environmental research and a contribution towards the Sustainable Development Commission’s Tidal Study.

Contractor

Description

Total

Hartley Anderson Ltd

W&T environmental research

£960,000

EMEC Infrastructure phase 2

EMEC tidal facility (incl extension)

£934,000

EMEC Infrastructure phase 1

EMEC wave facility,

£197,000

Sustainable Development Commission

SDC Tidal Study

£132,000

EMEC Ltd

Draft Performance Measurement Standard for Tidal Stream Devices

£34,000

Edinburgh University

Wave energy device performance assessment protocol.

£25,000

Edinburgh University

Tidal current device performance assessment protocol.

£22,000

EMEC Ltd

Rewrite of Wave Performance Testing Standard

£11,000

Total

  

£2,315,000

In addition the management costs of the MRDF totalled £460k (over the life of the scheme, 2005–11). This breaks down into a number of different activities. Overall management charges and tasks related to the demonstration scheme: £205k (this includes the development and promotion of the scheme, evaluating applications and dealing with developer enquiries). Environmental and Related Research: £175k. Advice underpinning policy development: £80k

EMEC phase 3 Infrastructure improvements (2009–10 to 2010–11) for three additional grid connect berths and construction of a four berth non-grid connected nursery site—Total: £8 million.

BIS Funding (mostly through the dual-key BIS/DECC Low Carbon Innovation Fund)

Wave Hub—construction of the wave array testing facility:

Total £9.5 million

Nautilus—marine drive-train test rig at NaREC:

Total £10 million

Hayle Harbour—infrastructure to facilitate marine energy

  

business park: (NB this funding was from the RDA):

Total £4.5 million

Plymouth Marine Building—including wave tank:

Total £4 million

(£0.5 million contribution from the RDA)

  

Research Council Funding

Supergen Marine programme for generic research

Supergen Marine Phase 1 2003–07

Total: £2.6 million

Supergen Marine Phase 2 2007–11

Total: £5 million

TSB Funding

TSB has funded 23 projects in the past five years (since 2006/7) in marine renewables, totalling £20.7 million of grant allocation, £11.6 million of which has been claimed to date. In addition, there is one project yet to start, comprising a further £1.1 million of grant.

Carbon Trust Funding

Marine Energy Challenge

Total: £3 million

Marine Energy Accelerator

Total: £2.3 million

Applied research/incubation/Entrepreneur Fast Track

Total: £2.6 million

Energy Technologies Institute Funding

Total expected “funding” overall (public and private)—Total marine 2008–17 as at 31/08/11 per the plan £32 million (£16 million public and £16 million private).

Total funding from the public sector on the marine projects:

(i)to date: £2 million; and

(ii)currently committed going forward: £10 million public funding as per values contracted/announced.

Specific breakdown for expenditure at EMEC. Spend to date £0.3 million total (£0.15 million public & £0.15 million private) and contracted £1.5 million total (£0.75 million public & £0.75 million private).

Northern Irish Assembly Funding

Total: £400k—expenditure incurred has been for offshore renewables and not specifically marine. This has been in relation to the Strategic Environmental Assessment, Habitat Regulations Assessment and other related environmental/locational studies.

Scottish Government Funding

Wave and Tidal Energy Support scheme (WATES)

£2.5 million—support related to on and offshore infrastructure work (moorings, substations) at the European Marine Energy Centre in Orkney (EMEC).

£7.3 million—grants to wave and tidal technology companies.

Wave and Tidal Energy: Research Development and Demonstration Support (WATERS): Budget £13 million. Approximately £130,000 disbursed by SE to date.

Support to the European Marine Energy Centre (EMEC): £5.9 million at Orkney over the last five years.

Saltire Prize:

The £10 million Saltire Prize will be awarded to the consortium that best demonstrates commercially viable wave or tidal stream energy in Scottish waters by achieving a minimum electrical output of 100 GWh over a continuous two year period.

Welsh Assembly Government Funding

Marine Renewable Energy Strategic Framework (MRESF)—£0.9 million: Study to analyse the available practical wave and tidal resource in Welsh territorial waters. The project included research into key data gaps to help with the data confidence levels.

Low Carbon Research Institute Marine Programme (LCRI Marine)—£7 million (2010–13) Marine LCRI has been funded from the Welsh European Funding Office (WEFO) to undertake significant multidisciplinary, pan-Wales research through the Wales Low Carbon Research Institute (LCRI). The £7 million LCRI Marine Consortium aims to enable, support and help build a sustainable marine energy sector in Wales. Programme of applied R&D.

Deltastream Project—£7 million: Direct funding via the ERDF through the Welsh Government towards environmental research, modelling and manufacture of the Deltastream 1.2MW full scale tidal demonstrator. Two awards: £600k in 2009 and £6.4 million in 2011.

Sustainable Expansion of the Applied Coastal and Marine Sectors (Seacams)—£12.6 million (2010–13): Funded via ERDF through the Welsh Government, SEACAMS offers businesses with interests in the marine sector access to the research, expertise and knowledge base of universities in Wales. (This funding is not restricted to marine energy.)

Marine Energy Infrastructure Study—£0.1 million: Forthcoming study appraising marine energy infrastructure requirements to support the development of the marine energy industry and device deployment in Wales.

Prepared 15th February 2012