Investing in Our Energy Future

By Dr Gareth Stockman, Chief Executive Officer, Marine Power Systems (MPS)

Today we unveil our quarter scale WaveSub prototype. It is a momentous day for the company and all those who were involved in the project over the last nine years of its creation. As we prepare for the unveiling, we take a moment to reflect on recent events in a very much changed renewable energy landscape.

One of the defining features of the 21st century will surely be the dramatic change we have seen unfold in the renewable energy sector. From a point of relative naivety, we are now watching it evolve at a scale and speed which is unprecedented. As reported earlier this year by the UN Environment Programme and Bloomberg New Energy Finance in their report Global Trends In Renewable Energy Investment, more money was invested in renewables than in traditional fossil fuels – both in the UK and across the globe – last year. In 2007, the UK was generating less than 10% of its energy from renewable sources – a mere 5,000MW. Four years ago this figure was 32%. Today we’re looking at figures over 50%, according to the National Grid. Across the world, countries are recognising the environmental imperatives and economic arguments for investment in renewables. Even in the face of President Trump’s recent policies, leading companies are confident that the renewable energy sector can grow irrespective of government support. In short, we’re in the midst of an energy revolution.

My sense of an incipient energy revolution was reinforced by the outcome of the second Contracts for Difference auction (CfD), held last month. In these auctions, the Low Carbon Contracts Company (LCCC) offers a guaranteed price – the strike price – to wholesale generators of electricity.  In the recent auction, two developers agreed to build offshore wind farms at a record-low strike price of £57.50 per MWh of energy produced. Assuming the wholesale price of electricity is in line with the recent average of £45 per MWh, the Government will only need to subsidise the cost of the offshore wind energy by £12.50 per MWh.  This remarkable result was widely commented on, particularly in the context of nuclear power. With the £92.50 per MWh strike price awarded to nuclear power plant Hinkley Point C last year, we can see that nuclear will need to be topped up by nearly four times as much (£47.50). Ultimately this auction result is testament to the rapid evolution of the offshore wind sector, and evidence of how fast prices can drop when effective support mechanisms are in place.

So how did offshore wind prices drop so dramatically? According to energy analysts, government policy nurtured the fledgling industry, providing stability needed for investment. With early growth followed incentives for it to expand before firms were required to bid in auction for subsidies. This renewable energy success story comes with a drawback: the UK now has a two-tiered renewables sector in which more mature technologies are competing for investment with more innovative, younger ones. In the aftermath of the CfD auction, Scotland’s minister for Business Innovation and Energy Paul Wheelhouse pointed out that huge progress is being made in the tidal and wave sectors yet it was unrealistic to expect these innovative, new technologies to compete for subsidy or investment with the big players. He is right and we are delighted to see that the Government also recognise this, following its commitment only two days ago to invest as much as £557 million in less established renewables so it can focus its support on developing and creating new technologies and new businesses in the fast growing renewable sector.

Marine is one of these sectors and its potential – particularly in the UK – cannot be ignored. In our recent report Making Wave Power Work we outline how our coastal waters represent 35% of Europe’s wave energy potential. The UK has already invested £450 million into its marine energy supply chain and the Welsh Government recently pledged to ring-fence £4 million for investment in the sector. Our own techno-economic studies show that the Levelised Cost of Energy (LCOE) for the WaveSub can with time match prices being reached by offshore wind. Ultimately, decades of R&D are now reaching fruition. As such, we are in position to take wave energy technology to the next level and reap the economic and environmental benefits it will bring.

Over the ten years that Graham and I have been working on the WaveSub we’ve witnessed a shift in attitudes and interest surrounding marine energy. Starting out in 2008 we had just a handful of academics to work with. Today, we employ many skilled marine engineers and collaborate with six universities on a raft (pun intended) of research projects that are running alongside the WaveSub’s development – further supporting the aforementioned fact that the UK is recognised as a global leader in this sector.

Today is a huge day for us all and we’re grateful for the support that we’ve received from our own team, all our investors and all those who have supported us through the last decade dedicated, determined work. Following the outcome of the recent CfD auction, The Times, in its leader, wrote: ‘There are times when policy, technology and entrepreneurial energy combine to realise a positive goal, and this is one.’ The same thing can be written about wave energy. We look forward to celebrating the entrepreneurial energy, cutting edge technology and visionary investment that gets us there. As was the case with offshore wind, it could well be sooner than you think.