Channeling the Energy - Marine Renewables Canada

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18 5. Costs for Developing Marine Technology The previous sections have discussed how Government intervention can impact development and reviewed the perspectives of private investors toward the UK marine energy industry. To further aid the development of a coherent policy and financial support framework the following section will examine the effectiveness of government funding to date and present evidence on the cost of technology development for the three stages of industry development Figure 5.1 - Cost of Stage 1 Industry development, taking a technology from test tank to first full-scale grid-connected prototypes. The ranges apply to the overall cost of each stage and represent the full ranges quoted by the developers. Beneath each bar is the upport 1980–2000) Figure 4 ratio of public to private money. mark First and Next Generation Prototype - TRL1-7 - Up to 1MW Marine energy is still an immature technology at a pre-commercial stage of development, with efforts to date concentrating on the demonstration of UK first generation full-scale grid-connected prototypes. To understand the estimated cost of developing and proving marine energy devices RenewableUK undertook a survey of technology companies active in the UK. 69 Figure 5.1 depicts the average costs of developing technology from test tank through to first full-scale grid-connected prototype. As stated in Chapter 2, RenewableUK believes that Gap Stage 1 of industry development (First ETI and Next Generation Prototype) can be divided into three specific SWRDA phases for technology development. TSB Round In relation 1 to NASA technology readiness levels as follows: 70 TSB Round 2 122 141 31 0 5.4 240 • Phase 1 - Concept Development and Tank testing (TRL 1-3) • Phase 2 - Greater-Scale Prototype (TRL 4-5) 70 • Phase 3 - Full-Scale Estimated Grid-Connected Prototype 60 Private (TRL 6-7) 7 Figure 8 WATERS £ million 30 25 20 15 10 5 0 50 Private Overseas Public UK Public Phase 1 1:2 Whilst we expect the cost of energy 40 to decrease dramatically as installed capacity increase, 30 it is also evident that the costs of developing and proving £ million 20 Overseas Public UK Public Phase 2 1:3 Phase 3 1:2 technology are high. The data collected by RenewableUK suggests that a total average investment of £30 million will be required to take a technology from concept through to construction and installation of the first full-scale gridconnected prototype. 71 This assumes that technology development is sequential and that there is limited need for development iterations during this process. ocation 69. Contributors included - Aquamarine MRPF Power, Pulse Tidal, Marine Current 10 Turbines, Pelamis Wave Power, Minesto, Atlantis Resource Corporation and Voith Hydro. 70. NASA, 2010. http://esto.nasa.gov/files/TRL_definitions.pdf Viewed - 15/10/2010 Allocated 0 71. N.B. Cost estimates do not take into account additional company overheads Phase (e.g. staff 1 and Phase rates) 2 and are based Phase on deploying 3 First only 5 one MW demonstration First 10 MW per phase. (TRL 1-3) (TRL 4-5) (TRL 6-7) 1:2 1:3 1:2 TRL 1-7 Gap Stage 1 - First and Next Generation Prototype - TRL 1-7 Stage 2 - First Wave and Tidal Farms (TRL 8-9)
Project Management/Development R&D and engineering design studies Device structure & Components -manufacture & construction Grid Connection, Subsea and Onshore Infrastructure Installation O&M 19 Members of RenewableUK also provided data relating to the sources of investment, the aggregated proportional split for each phase of development can been seen in Figure 5.3. Angel funding does not exist for any Phase 3 projects and private venture capital continually decreases, whereas the proportion of industry funds and grants increase during the later stages of development. This supports the assumptions made in Chapter 2 and the responses from the private sector investors in Chapter 3, which concluded that industrial investors are required to deliver technologies at scale and that capital grants can stimulate their involvement. Whilst the UK has invested relatively significant sums on infrastructure and test centres, relatively limited amounts have actually been spent on device R&D to date, with the funds allocated Other in the last year being Revenue support broadly equivalent to that spent in the Angel Investor last decade. Private Industrial Initial work Private reviewing Venture Capital the delivery Public Venture Capital of a long term marine energy financial Grants support framework highlighted three funding gaps in the UK’s existing support framework, which correlate to the stages of industry development outlined in Chapter 2 (Figure 5.4). 72 Since the publication of the work from Figure 5.4, the UK and devolved Phase 3 Governments have committed an estimated £51m in Stage 1 of industry 74, 75, 76, 77, 78 development (Figure 5.5). Project Management/Development R&D and engineering design studies Device structure & Components -manufacture & construction Grid Connection, Subsea and Onshore Infrastructure Installation O&M Figure 5.3 - Sources of funding for marine technology development Figure 52 100% 90% 60 80% 50 70% 40 60% % Market Share £ million 50% 30 40% 20 30% 10 20% 10% 0 0% 2,500 2,000 1,500 1,000 500 - R&D, Manufacturing Project O&M Grid Connection, Engineering Management, Subsea & & Design Phase 1 Development Phase 2 Phase Onshore 3 & Installation Infrastructure Funding gap Available finance Stage 1 - First and Next Generation Prototype TRL 1-7 Figure 6 Other Revenue Proportional support Project Angel Costs Investor (based on commercial project Private with Industrial nominal size of Private 30MW). Venture Capital Public Venture Capital Grants Domestic 2020 Domestic 2050 Export 2020 Export 2050 Figure 5.4 –Cumulative support required for the UK to reach early deployment. 73 Stage 2 - First Wave and Tidal Farms TRL 8-9 Stage 3 - Second Farms and Beyond TRL 8-9 Total 72. Carbon Trust, 2009. Focus for success - A new approach to commercialising low carbon technologies. 73. Carbon Trust, 2009. Focus for success - A new approach to commercialising low carbon technologies. P 75. Investment analysis assumes process of selection which starts with 21 devices in the development phase (Stage 1), 13 of which make it to the demonstration phase (Stage 2), then 11 devices enter MRDF (at 10MW scale) operating for five years of which 9 devices go on to operate post-MRDF (at 20MW scale) for a further 10 years (Stage 3) - giving total operating capacity at this stage of 180MW. 74. Marine Renewables Proving Fund (£22m) - http://www.carbontrust.co.uk/emerging-technologies/current-focus-areas/marine-renewables-proving-fund/pages/ default.aspx Viewed - 15/10/2010 75. Scottish Enterprise - Wave and Tidal Energy: Research, Development and Demonstration Support fund (£13m) - http://www.scottish-enterprise.com/your-sector/ energy/energy-support/energy-funding/energy-grants/Wave-and-Tidal-Energy-Fund.aspx Viewed - 15/10/2010 76. Technology Strategy Board (Round 1 £7m allocated and Round 2 £3m) - http://www.innovateuk.org/content/competition/wave-and-tidal-stream-energytechnologies-reducing.ashx https://ktn.innovateuk.org/web/wave-and-tidal/articles/-/blogs/1430493;jsessionid=06156D025B2104F9BB4FA97C135722E5.9OphE wv4 Viewed - 15/10/2010 77. South West Regional Development Agency (£1.5m) - http://www.press.southwestrda.org.uk/2010/07/29/minister-announces-further-investment-in-marinerenewables-during-wave-hub-visit/ Viewed - 15/10/2010 78. Energy Technology Institute (public proportion £4.6m) - http://www.energytechnologies.co.uk/Home/Technology-Programmes/marine.aspx Viewed - 15/10/2010
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