RenewableUK Response: Technological Innovations and Climate Change: Tidal Power Call for Evidence
RenewableUK support over 400 member companies to ensure increasing amounts of renewable electricity are deployed across the UK and access markets to export all over the world. Our members are business leaders, technology innovators, and expert thinkers from right across industry.
We support a green economic recovery, following the impacts of Covid-19, with renewables at its heart. This will accelerate the decarbonisation of the economy, enhance our position as a world leader in the low carbon technologies of the future and deliver benefits to local communities across the UK. Further information can be found in our “Recommendations for a Green Economic Recovery” document[1].
Our response to this inquiry is focused on tidal stream energy projects. Tidal stream devices, more often turbines, generate electricity from the flow of currents in the ocean due to the motion of the tides. As the tide flows in and out of narrow ocean channels, fast and energetic currents create a kinetic energy which can be captured by the technology. Currently there are 22 tidal stream developers in the UK. The main differences between the device types are related to the size of the device, the method of securing the turbine in place (seabed-mounted or floating), the number of blades and whether and how the pitch of the blades is controlled.
The UK’s tidal stream industry is in a world leading position, but it is at a critical time in its development. Demonstration projects of single devices and small arrays, in the UK and across the world, have proven the technology and gained significant public support. However, without a revenue support mechanism which would provide a route to market and support the deployment of technology beyond a handful of devices per project, it is difficult for the industry to achieve the necessary economies of scale, learning-by-doing and innovation which would support the further the cost reduction required to make them commercially competitive with mature technologies in the market today. Such revenue support was essential to driving deployment and cost reductions in wind and solar energy, the benefits from which the world is reaping today. Indeed, other countries have revenue support in place for tidal stream and the UK is at risk of losing its world leading position.
However, UK developers are ready to move ahead with a pipeline of tidal stream projects. The Government can adapt its existing mechanism for procuring renewable energy – Contract for Difference Auctions – to support tidal stream development, as well as establishing new policies to transform the Power Purchase Agreement market in favour of innovative new technologies. Both of these (or similar) mechanisms are essential to the development of a successful UK tidal stream energy sector.
In doing so, the Government can keep the UK at the forefront of the development of this technology; establish a new green industrial manufacturing base unlocking thousands of new jobs and GVA, concentrated in coastal areas in need of regeneration; diversify the UK’s sources of clean energy supply, with a predictable renewable electricity source; and capture a global market of £20 billion per year by 2050.
Question 1: What contribution can forms of tidal power play towards the UK’s energy mix?
The United Kingdom is estimated to have more than 30GW of tidal stream resource, representing roughly half of Europe’s tidal energy resource. Studies have shown an extractable resource of more than 6GW from 30 key tidal sites across all regions of the UK[2], equivalent to approximately 11% of the UK’s net electricity supply in 2019. Committee on Climate Change reports to Parliament have recommended 1GW of tidal energy deployment by 2030[3].
Distributing diverse sources of clean energy supply in various locations of the UK is an important parameter to consider when building the energy supply of tomorrow. Tidal energy, in particular, can provide a predictable volume of power that is not related to the prevailing weather conditions, which makes it a great partner to wind and solar generation and, as a result, helps satisfy demand at low costs in 2050. Developers are willing to drive their innovation forward and we are seeing projects joining with electrolysis facilities to couple up the efficient production of power from marine sources with the production of renewable (green) hydrogen – a much-needed technology in the transition. This year, the European Marine Energy Centre in Orkney confirmed it will be home to a world-first project to combine flow battery technology with tidal power to produce continuous green hydrogen.
Question 2: Why, despite the considerable marine resources available, have relatively few developers established tidal projects?
A number of industry pioneers have successfully funded and deployed “first array” projects through a combination of public and private sources.
Scotland is home to Atlantis’ 6MW MeyGen tidal stream project - the world’s first large-scale tidal energy farm – was deployed in the Pentland Firth in 2016. Each turbine has a capacity of 1.5MW, and the array has now exported 35GWh to the grid, soon to be supported by a subsea hub to simplify future inter array cabling. Orbital Marine’s 2MW tidal stream device was tested at the European Marine Energy Centre tidal test site in Orkney in 2017/18, at which it generated over 3.2Gwh of electricity in seven days, around 7% of the requirement of the Orkney Islands. Notable also is the Nova Innovation site in Shetland, the world’s first tidal array, the success of which has helped the company to secure financing for new projects in Canada and Wales this autumn.
The tidal sector’s central issue is that whilst tidal technologies such as these have been deployed and proven in the UK by UK companies, with global interest from investors, companies are struggling to finance larger deployment without a route to market which is supported, as with other renewable technologies, by Government policy.
The message that the industry has consistently received from investors is that, given the operational data it has now collected, subject to an appropriate revenue incentive being in place, their appetite for investment could, and would, change. It is clear that the current lack of route to market, primarily due to lack of a suitable revenue incentive, is having a significant detrimental impact on private sector investment opportunities and is dampening the sector’s development and value creation potential.
We have outlined what support could be given to assist technological and project development in Question 4 of this inquiry.
Question 3: Are there certain locations where one type of tidal technology is best suited?
Locations in the United Kingdom
The United Kingdom is home to around 50% of Europe’s tidal energy, with resources spread across England, Scotland, Wales and Northern Ireland. Tidal stream devices are best suited to narrow channels where tidal currents are strongest, shown on the map below. Consequently, the majority of projects in the UK are located on the coasts of Orkney, Caithness and Shetland in Scotland, west coast of Scotland, Antrim coast in Northern Ireland, north and south Wales and in the south of England.
Source: The Crown Estate, UK Wave and Tidal Key Resource Areas Project, Summary Report
Key existing industry hubs have reflected the geography of tidal resource.
The European Marine Energy Centre (EMEC) was established in Orkney (North East Scotland) in 2003 and is the first and only centre of its kind in the world to provide developers of both wave and tidal energy converters with purpose-built, accredited open-sea testing facilities. Orkney is an ideal base with its strong tidal currents, excellent wave regime, grid connection, sheltered harbour facilities and the renewable, maritime and environmental expertise that exists within the local community. There are 13 grid-connected test berths and there have been more marine energy converters deployed at EMEC than at any other single site in the world. EMEC also operates two scale test sites where smaller devices, or those at an earlier stage in their development, can gain real sea experience in less challenging conditions than those experienced at the grid-connected wave and tidal test sites.
This autumn the Perpetuus Tidal Energy Centre (PTEC) opened on the Isle of Wight. PTEC is a tidal energy demonstration facility 2.5 km south of St Catherine’s Point. It is currently set up to incubate 30MW of tidal energy projects, enough to generate electricity to power more than 15,000 homes, and has the potential to expand to hold ten times this volume of generation if successful. The centre builds on the wider work of the Offshore Renewable Energy Catapult’s TIGER project (Tidal stream Industry enerGisEr pRoject) - a £47 million scheme to bring forward the development of tidal stream technologies at five sites along the English Channel.
Given the volume of opportunity along its coastline, Wales is an established hub of tidal energy. This autumn plans were confirmed with Nova Innovation to make Bardsey Island the first in the world to be totally powered by tidal energy. Five 100kW turbines will be installed on the seabed off Gwynedd. Wales is primed to take forward more tidal stream and wave development in future. It has as a 35 km2 area of seabed near Holy Island, Anglesey – the ‘Morlais project’ - capable of supporting up to 240MW of tidal stream array demonstration projects, as well as the 90km2 Pembrokeshire Demonstration Zone supporting the development of floating offshore wind and wave energy generators.
The geographical clustering of industry and tidal stream resource brings with it significant economic and social benefits for those areas concerned, which we have outlined in Question 7 of this inquiry.
Locations across the world
The United Kingdom is not unique in its tidal resource. As a result, there are several nations competing with the UK to be global-leaders in the development of tidal stream and to capture the global market.
Source: IRENA NOVELTIS’ Global Marine tidal currents map, accessed Dec 2020
The Energy Innovation Needs Assessment of tidal stream, commissioned by the Department for Business, Energy and Industrial Strategy, estimated that global sales of tidal stream will increase to over £20billion annually by 2050, with around 50GW of global deployment at this point[4]. Growth of UK tidal stream exports could add over £540 million GVA and nearly 5,000 jobs per annum by 2050. Export GVA will be driven by the sale of turbines and O&M services. Continued investment and support for these tidal stream technologies will establish the UK as the leading global industrial centre for marine renewables and secure associated economic and trade benefits.
Case study of a future market: Indonesia
Indonesia is the 4th most populated country and the 16th largest economy in the world[5]. Comprised of over 17,000 islands, Indonesia has a coastline of 54,716km with strong ocean energy potential. The Indonesian government taken field measurements of its tidal resource, along with other marine renewable resources, to locate some candidate sites for tidal energy - shown it the below “Ocean Energy Resources Map”.
Source: Ahmad Firdaus et al (2017) ‘Opportunities for Tidal Stream Energy in Indonesian Waters’ Department of Engineering Sciences, University of Oxford.
RenewableUK have facilitated live discussions between the Indonesian Government and tidal stream developers. Many islands in Indonesia are disconnected from the grid, relying on expensive diesel generators. Tidal stream devices can not only provide predictable clean electricity generation to these remote/disconnected communities, but may be able to become cost-competitive with existing power sources in the near-future. The ability of tidal stream in reducing the reliance of island communities on diesel generators is already being demonstrated by Nova Innovation in Shetland, where generation from the Shetland Tidal Array, coupled with a Tesla battery, is providing predictable, flexible power to displace diesel generation. The company aims to repeat this feat on the Welsh Island of Bardsey, where tidal power will soon be providing the island’s electricity needs.
However, across the world, countries with good marine resources are now aggressively supporting this industry – including Canada, China and Japan. The UK faces competition from the global market for the investment, expertise and intellectual property we’ve already established. UK companies remain at the forefront of marine energy technology development and could be well-placed to capitalise on this opportunity, but this is uncertain and under threat given the level of activity and support on offer in other countries.
Case study of a global competitor: Canada
Nova Scotia in Canada has one of the most ambitious tidal stream strategies. About 160 billion tonnes of water flows through the Bay of Fundy each tide, equal to four times the estimated flow of all the freshwater rivers in the world combined. Nova Scotia aim to install 300MW. The target is underpinned by the 2015 Marine Renewable Energy Act which provides a clear, predictable and efficient process to support the sustainable growth of the sector. A vital part of the strategy is a feed-in tariff that makes progress commercially attractive for developers. An important feature is 
the different rates for small and large projects and for testing. So far, five developers have received approval through the programme for a total of 22MW of capacity.
The UK’s Nova Innovation has recently secured a deal to deploy 15 of its new 100kW direct drive tidal turbines to Canada, and are currently deciding where to build a factory to manufacture these turbines. This highlights the potential export opportunity, but also the risk that, without a UK market and Government policies to support the development of tidal stream, the industrial benefit an expertise of the sector is at risk of following the market opportunity and moving overseas.
Reform of the CfD auction parameters is needed to ensure that tidal stream developers can successfully compete for contracts, deploy devices at scale, and through it, continue to reduce costs through economies of scale, learned experience and innovation.
RenewableUK support the actions already taken by Government to reform the CfD auction process ahead of the next Auction Round (4) in 2021. Offshore wind has been moved into a newly created ‘Pot 3’, onshore wind and solar will compete against each other in ‘Pot 1’, with ‘Pot 2’ then established for emerging technologies. However, it is now important to ensure the actions parameters are in place within Pot 2 to successful bring forward tidal stream projects.
The industry has an active development pipeline of almost 1GW of sites today; of which 124MW of sites are in an advanced stage of development in Scotland, Wales and England, preparing to bid into the CfD Auction Round 4.
Projects under development preparing and for AR4
Consequently, there is sufficient capacity for Government to ensure 100MW of development, whilst also keeping competitive tension in the auction. Furthermore, industry believes an administrative strike price of £250 per Mega Watt hour[6] is sufficient to reflect the current costs of generation.
As outlined further in our response to Question 5, we expect the costs of tidal stream to fall in subsequent auctions as developers and the supply chain learn, innovate and reduce costs through project development. Combined with a signal of similar support structures in AR5 and AR6 and beyond, at the sites already under development alone, over 1GW could be ready to bid in the next few CfD rounds, with up to 4GWs in the 2030s as further sites are developed. Entering into the 2030’s, this roll out trajectory would see tidal energy well on the way to deploying at sub £90/MWh.
A number of secondary changes to the CfD scheme that could further support tidal energy include holding more frequent auctions, reducing the gap between auction award and delivery years, enabling CfD to be combined with grant funding and extending the delivery years to minimise the stop-start nature of development that the current CfD regimes creates
We would advise that the Government accompany this with a long-term target for marine energy (wave and tidal stream) development, up to 2030. We have already seen that, in fixed and floating offshore wind, a clear long-term target increases investor confidence in the sector and it’s supply chain, unlocking investment in plant and innovation which supports cost reduction.
Although the Contract for Difference Auctions do establish a route to market for tidal stream, and one well understood by investors, RenewableUK would strongly advise that they are coupled with a secondary policy mechanism to ensure that a) a greater number of smaller innovative tidal stream projects also have a route to market, including wave technologies and b) that projects continued to be developed between the two year cycles of the Contract for Difference Auction process. A more rapid succession of project development should further expedite learning, innovation and, ultimately, cost reduction.
RenewableUK believe there is an opportunity to establish an effective secondary mechanisms though Government-supported Power Purchase Agreements – known as a ‘Innovation Power Purchase Agreement’ (IPPA). Driven in part by an ambition to net zero carbon emissions, increasing numbers of businesses and public bodies are procuring their own renewable energy through ‘Power Purchase Agreements’ (PPAs). The Nissan car plant in Sunderland, for example, procured their own onshore wind turbines. Transport for London have recently signed an agreement to be powered solely by zero carbon sources by 2030.
The marine energy industry are proposing Government establish a new scheme, whereby organisations who choose to agree a PPA with a marine energy company - at a price set by BEIS which will digress over time as technology costs fall - are then able to then reclaim any difference between the higher strike price and the market price as a tax rebate through the normal tax return process. Industry estimate this scheme would cost the Treasury around £50million per annum over its duration, with the remaining costs covered by those private and public ‘offtakers’ who agreed the PPA. There would be in-built thresholds, managed by Ofgem, to reduce the level of support available as technology matures, ensuring that Government’s overall exposure is limited.
This scheme will enable a more rapid succession of new marine energy developments, which will enable the sector to learn-from-doing, innovate and grow economies of scale; ultimately reducing the costs of marine energy, making it competitive in the long term. Engagement RenewableUK have had with businesses and public interested in PPAs would suggest that there would be significant interest in the scheme should it be established. Furthermore, as these could be smaller contracts, this policy supports companies who need early-stage investment in smaller-scale projects to drive technology down the cost-curve to commercial competitiveness.
Question 5: How might tidal schemes reduce costs to become commercially competitive with other low carbon or renewable options?
A landmark study from the Offshore Renewable Energy Catapult projected that tidal stream has the potential to significantly the reduce the LCOE to £150 per MWh by 100MW installed, £130 by 200MW and £90 per MWh at 1GW of global deployment[7]. This would put marine energy on a cost-competitive par with other mainstream forms of low carbon generation, such as nuclear energy.
The ORE Catapult study believe that “initially, significant cost reduction will come with modest deployment as supply chain and developers can confidently commit to investing in the industry and overcome early design and operational challenges. As the technology matures, cost will continue to fall with incremental innovation and continuing learning”. The report details where initial cost reductions could occur; through economies of volume (i.e. lower costs per unit in production), economies of scale (e.g. in site size and turbine rating), accelerated learning, innovation in reductions in the cost of capital which will come as the industry matures and is considered less risky to financial institutions.
Source: Offshore Renewable Energy Catapult (2018) Tidal stream and wave energy cost reduction and industrial benefit: summary analysis
This analysis can be supplemented by that conducted for the Energy Innovation Needs Assessment for tidal stream commissioned by BEIS in 2019, which found potential for innovation across; structures and prime movers, power take-off and control, foundations and moorings, connection, installation, and Operations and Maintenance[8].
Furthermore, tidal stream developers have already demonstrated that they are willing and able to work collaboratively to reduce costs across the sector and are consistently striving to reduce costs within their projects[9].
In addition to our hydrogen and energy system members, RenewableUK represent the leading developers of offshore wind, onshore wind, wave, tidal stream, and their supply chain. We have experience in seeing how a consistent revenue support mechanism for wind energy development, coupled with long term deployment targets, supported that sector in innovating and reducing costs. Wind energy is now one of the lowest cost technologies for new electricity generation. We believe, with a similarly supportive policy environment, innovation and cost reduction could be replicated in tidal stream.
Furthermore, RenewableUK’s Project Intelligence unit tracks live developments in the markets and supply chain of the aforementioned industries. RenewableUK are aware of 185 companies operating in the supply chain of tidal stream in the UK. 133 of those companies also operate in the offshore wind market and 101 in onshore wind. There is a significant opportunity for innovations in one sector to cross-pollinate cost reduction in the other (for example in nacelle components). This cross-pollination may further intensify with the UK’s planned development of 1GW of floating offshore wind up to 2030 which, for example, may spur innovations dynamic cabling and moorings which could be transferred into tidal steam.
Question 7: What are the wider economic benefits and what potential disadvantages could tidal schemes bring to regional areas?
The marine energy sector has driven the development of industrial clusters in coastal communities across the UK. This technology has brought high-skilled jobs to these regions and can deliver even greater investment and economic opportunity if Government supports the sector. It presents a huge regional economic opportunity to the UK, particularly in Scotland, Wales and the South West.
The UK’s tidal stream industry could bring significant economic benefits to the UK, supporting 4,000 jobs by 2030 and 14,500 by 2040. These high-wage, high-value jobs, and the £1,400million net GVA benefit, would be focused in coastal areas of industry development outlined earlier in our submission, which are in need of economic regeneration[10]. 50-60% of the economic benefit in terms of both GVA and jobs is expected to be generated in coastal areas the Government are looking to regenerate as part of its ‘levelling up’ ambitions.
In large part as a result of the UK’s leadership in this technology, the industry have established a strong supply chain across the UK. Consequently, projects will generally have around 80% UK content, compared with offshore wind projects (around 50%) and onshore wind (around 70%).
For example, Nova Innovation’s project in Shetland had 80% UK supply chain content, including 25% supply chain spend on the island itself where they’ve worked with over 40 local suppliers. This includes Shetland Composites, who produced the blades for Nova’s turbines, who are now the leading tidal blade manufacturer in Europe. Operation of the array has seen 98% UK supply chain content.
Similarly, Orbital Marine Power’s supply chain for their O2 project covers 157 companies across the UK, who provide 80% UK content of the project’s CAPEX.
Orbital Marine Power O2 supply chain map
Orbital O2 supply chain analysis
Work package | Total spend | Non-UK | Scotland | Wales | North England | South England | UK |
|---|---|---|---|---|---|---|---|
Blades | 9% | 0% | 0% | 0% | 0% | 9% | 9% |
Pitch & Hub | 11% | 0% | 0% | 0% | 11% | 0% | 11% |
Nacelle | 17% | 17% | 0% | 0% | 0% | 0% | 0% |
Electrical skids, C&I, Aux Systems and Outfitting | 9% | 0% | 2% | 0% | 1% | 6% | 9% |
Leg Retraction System | 5% | 0% | 3% | 0% | 2% | 0% | 5% |
Structure | 30% | 0% | 29% | 0% | 0% | 0% | 30% |
Moorings | 10% | 3% | 0% | 4% | 3% | 0% | 7% |
Dynamic Cable | 1% | 0% | 0% | 0% | 0% | 1% | 1% |
Marine Operations & Logistics | 7% | 0% | 7% | 0% | 0% | 0% | 7% |
Ancillary | 2% | 0% | 1% | 0% | 1% | 0% | 1% |
Total | 100% | 20% | 42% | 4% | 18% | 16% | 80% |
Furthermore, tidal stream has the potential to further utilise existing and developing expertise within the communities it is co-located with. Synergies with floating offshore wind development have been outlined in our response to Question 5, but there are further opportunities for synergies with the existing maritime sector in the Solent region and the oil and gas industry in northern Scotland, the latter being particularly important for a ‘just transition’.