Driving the Low Carbon Economy - Policy Paper 4 - Wave and Tidal

8/8/2019 Driving the Low Carbon Economy - Policy Paper 4 - Wave and Tidal

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DRIVING THELOW CARBON

ECONOMYPAPER 4: wave and tidal energy


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PaPer 4: wave and tidal energy2


ECONOMY

RECOMMENDATIONs

Providing financialsuPPort through tocommercialisation ofdeveloPments

acceleratingaffordable gridaccess

ensure a clear andtimely consentsProcess

suPPort suPPly chaindeveloPment

building a strongskillsbase

introductionSd ss 25% f Eurpes d srem d

10% f Eurpes wve pwer, reg med33 GW1 pe f pr mre eergy

Ss wers.

Whilst policy makers are wrestling with three major

challenges: reviving economic growth, reducing carbon

emissions and securing energy supplies, current

predictions are that, with an installed capacity of 1.5

GW by 2020, the industry could generate at least

10,000 jobs. Capital and operating expenditure could

top 3.7billion annually with at least 1.3billion retained

in Scotland. However, this investment can only be

realised with the right balance of legislative, regulatory

and scal framework.

This paper draws on the views of leading industry

bodies in Scotland and the UK and complements the

2009 FREDS Marine Energy Group Road Map2 and

RenewableUKs recent report, Channeling the Energy:

A way forward for the UK wave and tidal industry

towards 20203. It sets out actions for legislative,

regulatory and nancial change which will support this

new industry to become the world-leading sector it

deserves to be.


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PaPer 4: wave and tidal energy 3


ECONOMY

POLICIEs TO DRIVEPROGREss...

financePrvdg e rg pkge f eves d

support to drive condence and certainty

Market pull upport through RenewableObligation Certicate

The implementation of an enhanced Renewables

Obligation Certicate (ROC) banding regime offering

ve ROCs for wave energy and three for tidal energy

has placed Scotland at the global forefront for

investment in marine energy and offers investors and

utility partners a clear, stable and well-understood

market pull mechanism to incentivise early

investment.

However, investment in early array projects (of up to

30MW rating, consistent with the Further Scottish

Leasing round in support of the Saltire Prize Programme)

will only take place if the ROC multiple level fully reects

their costs. For both wave and tidal, costs are such that

a ROC multiple of ve is needed to ensure the industry

benets from its rst-mover advantage.3

Technology puh invetment in earlymarine energy array

A major challenge for the marine energy industry

is securing nance to move from deploying single,

full-scale marine energy devices to installing the rst

small arrays. Technologies are not yet sufciently

mature to make the rst arrays commercially justiable

investments without government support. To capitalise

on its global lead, Scotland must put in place a

mechanism which will supplement the Renewables

Obligation Scotland (ROS) and enable technology

and/or project developers to bridge this technological

and nancial gap. Due to the range of levels of

maturity of marine technologies, there must be

diversity in nancial mechanisms to support those

leading technology developments, while not blocking

new entrants.

Putting marine energy on the EU funding map

The New Entrants Reserve 300 (NER300) is a common

fund of 300 million EU Emission Trading Scheme (EU

ETS) allowances set aside for supporting 8 Carbon

Capture and Storage and 34 renewable energy

projects. The value of the fund is estimated to be at

least 4.5bn. The Department of Energy and Climate

Change (DECC) has stated that they will support one

UK bid for a wave or tidal project 4.

NER300 is the opportunity to mark wave and tidal

technologies on the European funding map opening

up the possibility of wave and tidals inclusion in

the Strategic Energy Technology (SET) Plan and anassociated European Industrial Initiative (EII). Whilst

DECC have stated that it will not underwrite the pre-

nancing of a successful project, it is unlikely that a

successful project would be deliverable without pre-

nancing, therefore this European funding would be

lost from the sector.

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ECONOMY

grid

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Tranmiion charging

Scottish generators produce 12 per cent of UK

generation, but account for 40 per cent of the

transmission charges - or about 100 million per year

more than their proportionate share.

High transmission charges are acting as a signicant

disincentive to investment in large scale projects which

is having a consequential knock-on effect on potential

grid infrastructure upgrades. Without grid upgrades

to the Western Isles, Shetland and Orkney, Scotland

cannot aspire to meeting its marine energy goals.

Grid infratructure

There remain major concerns that grid connections

will not commence in time for early-mover developers

to connect their energy to the grid. A favourable grant

and loans scheme could enable a small number of

developers to progress with 5-30 MW projects by 2015.

However, they will require upgraded grid connections

to be in place by 2013.

For example, at present there is no spare capacity

between Orkney and the UK mainland. With theabsence of developer commitment to grid connection

agreements no further work will be undertaken by

Scottish Hydro Electric Transmission Ltd (SHETL).

This excludes the initial feasibility work and subsea

route surveys carried out over summer 2010. A lead

time of three to four years from the date of National

Grid Energy Transmission (NGET)/SHETL entering into

connection agreement contracts should be assumed to

bring grid reinforcements to Orkney.

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Aquamarine Power Oyster


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ECONOMY

Planning and environment

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efcient and inclusive decision making.

Marine (scotland) Act 2010 implementation

National Marine Plan

Marine Protected AreaThe development of the network of Marine Protected

Areas (MPAs) by 2012 must take into account, as

stated in the Marine (Scotland) Act 2010, the social and

economic impacts of MPA designation and the MPA

network, and MPAs should not be designated where

these impacts are unacceptably high.

Deploy and Monitor Policy

The industry welcomes the use of a risk-based

approach to consenting wave and tidal energy

renewable, interpreting the precautionary principle in away that allows responsible progress.

Environmental Impact Aement

We have concerns that requests within the

Environmental Impact Assessments (EIA) for onerous

information as part of the consenting process for early-

stage marine energy developments risks jeopardisingScotlands aspirations to continue our global lead in

marine energy.

Regulators should recognise the small scale of

development likely to take place over the next few

years and adopt a pragmatic, risk-based approach

to regulation, which is in proportion to the scale of

development.

Community policy

Renewable energy has a legacy of good

communication with communities through all, and

especially the early stages, of a project. This will

be strengthened offshore by the pre-application

consultation process built into licensable marine

activities under the Marine (Scotland) Act 2010.

There are many benets that renewables bring to

communities including the boost to local business andthe creation of local skilled jobs that will increasingly

grow as marine technologies reach commercialisation.

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Open Hydro


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ECONOMY

Licening and Conent

To ensure the timely delivery of the industry, it is

vital that consents are obtained at reasonable and

proportionate cost. Gaining planning consent is a vital

milestone that can unlock future funding to carry outdetailed site assessment investigations that then inform

the nal project design.

There is a clear precedent from offshore wind

consenting following the Rochdale Envelope

approach, within which consents are obtained for a

range of options based on the worst case scenario

when assessed by the EIA process.

The adoption of such a process mitigates the risk that

design changes required post consent to deliver a

project do not contravene agreed licence conditions,

even if these design alterations are not substantive in

overall environmental terms.

This process is equally important for applications where

it is intended to deploy a known technology concept

and where a range of technology concepts (technology

neutral) are still under consideration

Leaing

The leasing round activity that has been delivered by

The Crown Estate is welcomed by industry as it plays

a signicant role in Scotlands lead in this industry.

With the announcement of the Further Scottish LeasingRound (in support of the Saltire Prize Programme) it

would be of benet to the industry that the whole of

Scotlands territorial waters be available in this round

including the Pentland Firth and Orkney Waters

(PFOW) strategic area, on the proviso that new leases

will not interfere with existing lease agreements. This

will ensure that investment in PFOW infrastructure is

seen to have longevity.

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ECONOMY

skills and educationThe supply chain study commissioned by the Scottish

Governments Marine Energy Group (MEG) concluded

that about 53 per cent of overall capital expenditure

on marine energy will be retained within Scotland.The challenge for the Scottish Government, Scottish

Development International and the enterprise agencies

will be to increase this gure by strategically targeting

activities currently being taken forward outside of

Scotland which could be located within Scotland.

There is no reason why Scotlands industrial base

and capability could not be extended to increase

its share of the supply chain to 75 per cent or more.

Scotland already has an experienced offshore industry

supporting the oil and gas sector, with additional skills

base in sheries and shipping.

However MEG concluded that demand from the

emerging marine and offshore wind renewable industries

will create a heavy demand on the available workforce.

A strategic approach is required to the transfer of

existing skills and development of new skills across

Scotlands workforce, not only in terms of working in

an offshore environment but also for engineering and

technical support during the development, design and

construction of planned projects.

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suPPly chainThe industry welcomes the publication of the National

Renewables Infrastructure Plan Stage 2 and its

recognition of the different port and infrastructure

needs of the wave and tidal sector. We alsowelcome the introduction of the 70 million National

Renewables Infrastructure Fund to strengthen port

and manufacturing facilities and supply chain provision

for manufacturing offshore wind turbines and related

components. Successful development of supply chain

infrastructure will require attention on both the need for

technology development and commercial roll out.

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1 The Offshore Valuation, a valuation of the UKs offshore renewable energy resource,

2010.

2 FREDS Marine Energy Group Road Map, www.sd.gv.uk/Resure/

D/281865/0085187.pdf

3 Channeling the Energy: A way forward for the UK wave & tidal industry towards 2020,

RenewableUK. 2010.

4 DECC Initial Guidance on EU Funding Mechanism NER300 for Carbon Capture and

Storage (CCS) and Renewable Demonstration Projects. www.de.gv.uk/sses/

de/w%20we%20d/uk%20eergy%20suppy/eergy%20mx/r%20

pure%20d%20srge/333-de--gude--eu-fudg-me-

sm-er3.pdf

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conclusion

To develop Scotlands marine energy potential requiresa series of actions by government in the widest sense.

Delivering solutions to the challenges set out in this

paper will lead to massive environmental, economic

and social gains for our country.

Marine energy development will be technically

challenging, taking industry into largely uncharted

waters. Acting on the recommendations will reduce

uncertainty and provide the necessary catalyst for

developers to achieve commercialisation.

Scotland has both the resource and drive for a low

carbon economy. With the expertise and experience

gained from our successful hydropower, onshore wind

and oil and gas sectors we can realise our full potential

in our new, world-leading wave and tidal industry.

Contact Offhore Policy Manager

Johanna yates

E-mail: j@.

Tel: 0141 353 4987


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ECONOMY

ABOUT sCOTTIsH RENEWABLEsScottiSh REnEWablES s Sds gree eergy dusry dy w

memersp f mre 300 usesses d rgss wrkg mke

reewe eergy suess Sd.

Scottish Renewables is member-led and has been operating since 1996. It seeks to work

with all stakeholders and decision makers to ensure that renewable energy in Scotland is able

to make a telling contribution in the ght against climate change, to deliver affordable and

reliable supplies of energy and to drive sustainable economic development in Scotland.

Ss Reewes

t: 0141 353 4980

E: [email protected]

W: www.ssreewes.m

Scottish Renewables Forum Limited.

A company limited by guarantee in Scotland Number 200074

Registered Ofce: c/o Harper Macleod, The Cadoro, 45 Gordon Street, Glasgow G1 3PE

Driving the Low Carbon Economy - Policy Paper 4 - Wave and Tidal

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