The Scottish Renewables 3rd Marine Energy conference last week in Inverness - sponsored by Highlands and Islands - was one of the most vibrant and exiciting wave and tidal events I’ve been at in the past few years. I was delighted to be asked to give an opening keynote. Here it is in full.
“Good afternoon and welcome, welcome to the 3rd Scottish Marine Energy conference, welcome to Inverness and welcome to Eden Court. Like a number of us here in the room Eden Court is a product of the 70’s, as is I guess the modern Renewables industry, born as a child of the oil crisis of that decade.
So in Inverness in the 70’s, in 1976 in fact, a couple of things were happening that would – in retrospect – prove to be pivotal in the creation of a city, and an industry. On the 15th April Eden Court theatre was opened by the actor Alasdair Cruickshank MBE, better known to those of us in the room of a certain age as Dr Cameron in “Dr Finlay’s Casebook”. Over the next 35 years Eden Court in its role as a cultural centre for the city and the wider Highlands and Islands, has played a crucial part in turning Inverness from a small county town in to a modern northern European city, at the heart of a vibrant regional economy.
At the same time as Dr Cameron was cutting the ribbon, a group of University researchers were installing the first sea trial of Dr Stephen Salter Nodding Ducks, just eight miles from here, in Dores bay on Loch Ness. A small beginning, and at the time perhaps seen as a false start, but those nodding ducks were the first step in the creation of a Scottish Marine Energy industry, now thirty five years on, just on the cusp of moving from Research and Development to full scale commercial deployment, with a dramatic target for deployment of the equivalent of a full size thermal power station in the waters around the Highlands and Islands by 2020, and Government support at the highest level.
Quite a different place to that of the 70’s, 80’s and 90’s.
So let’s just take a moment to look at where the industry is in 2011.
Device development
Scottish technology companies are at the forefront of device design and development, with both first and second generation devices covering deep water and near shore wave, seabed and floating tidal, as well as on-shore wave capture. Full scale devices are now being deployed.
Device testing
The Orkney based European Marine Energy Centre (EMEC) is the global leader for the testing of wave and tidal devices, and still the worlds only grid connected test centre for both the wave and tidal industry. Starting in 2000 a HIE led public sector investment of £35m has delivered a test centre that is now scheduled to be fully occupied by 2012, is self supporting in revenue terms, and is seen, by both industry and government as the natural home for research, testing and deployment of prototype marine energy devices.
Indeed this year has seen the largest concentration of wave and tidal devices anywhere in the world getting very wet in the waters around Orkney.
I think its important to remember that whilst there can be a lot of talk in this industry, the one place where there is a lot of action is here in the Highlands and Islands of Scotland.
Industry Incentives
The current ROC regime in Scotland offers developers the highest levels of support in the world, while the Saltire Prize is Scotland’s unique £10 million challenge to accelerate the commercial development of marine energy. And remember that the Scottish Government’s 2020 electricity target will require the deployment of many hundred’s of MW of wave and tidal devices.
Device Deployment
The Pentland Firth and Orkney Waters leasing area remains the world’s first and only commercial wave and tidal leasing round, with TCE approving 1.6GW of development rights for large scale wave and tidal arrays during 2010, for installing by 2020. A number of other smaller sites, all in the Highlands andIslands have since been awarded leases by the Crown Estate for array deployment, for both further testing and in pursuit of the Saltire Prize.
Of course its also important to remember that this is a global industry, with global opportunities, and a major milestone was reached when Inverness based Wavegen on-shore wave plant went live earlier this year in the Basque country.
Supply Chain
A supply chain continues to grow, encouraged and supported by the public sector, based around an amalgam of environmental services firms, technology and R&D start ups, oil and gas fabrication companies, marine service and installation interests and specialist electrical businesses, and which is developing a particular expertise in the research, design, manufacturing, deployment and testing of wave and tidal devices.
But of course significant challenges face the industry
Technology developers are small, significantly undercapitalised and the sector fragmented.
Major device testing and array deployment challenges have yet to be overcome, and this will require new investment and sources of funds.
Whilst large corporates and utilities are increasingly showing interest in marine energy, their primary focus (and resources) will be largely on the development of off-shore wind. Having said that the French giant Alstom’s investment in Inverness wave company AWS was an important stage both in the development if that company, and the industry.
As new UK and international test and deployment centres come on-line, and the Crown Estate initiates new wave and tidal leasing rounds elsewhere in the UK, Scotland’s first mover advantage risks being eroded.
The recently announced EMR proposals also raise questions about the future delivery and scale of market support for these technologies.
There is a risk that the wave and tidal sector could be marginalised by the policy, investment and consenting requirements of the off-shore wind sector.
But remember the marine energy sector offers Scotland an almost unique opportunity to create a long term world leading energy industry. In order to capture the maximum opportunities offered by marine energy for the Scottish economy strong leadership, co-ordination, direction and investment will be required from Scottish Government, Enterprise Agencies, key stakeholders and of course Industry.
So what are we doing about it? Well lots of activity across government and industry with a clear focus
Appropriate market incentives are critical - both through the RO and its possible replacement.
Grid – we need to securing a positive outcome on grid regulation and charging issues. More on that in a moment
Capital support - how best to ensure and deliver funds at sufficient scale is a strong focus for Government and HIE and SE, and is being explored in depth at next weeks Low Carbon Investment Conference inEdinburgh.
Innovation support - R&D support needs to remain available, focused and effective.
Planning and Regulation – There will be a continued focus on simplifying and streamlining environmental, planning and licensing procedures. I know the Minster Fergus Ewing - who is opening tomorrows session – is particularly keen on overcoming these barriers.
Supply Chain - connecting the scale of the potential capacity and opportunity with potential Scottish businesses and suppliers will be a key activity over the next few months and years.
Infrastructure – meeting the fabrication, deployment and build-out needs for the sector. Indeed we are now just about to kick off Phase three of the National Renewables Infrastructure Plan – NRIP 3 – looking specifically at the fabrication and deployment needs of the Marine Energy Industry.
Skills – ensuring that the developing sector has access to an appropriately skilled workforce is of course critical.
Finally, Grid and Charging issues still remain a major barrier to the development of our industry. As you will have heard on the radio this morning the huge financial disparity between the North of Scotland and the SW of England is real and continuing – indeed Neil was on Radio Scotland at 6:45 this morning talking about the costs of delivering power from the Pentland Firth and Orkney waters at many tens of millions of pounds.
However I’m pleased to say that there is some movement in other parts of the grid policy jigsaw that we all face.
Almost a year ago to the day, Ofgem announced its fundamental review of transmission charging, Project TransmiT. In our response to the proposed scope of TransmiT we (HIE) urged the Regulator to include underwriting liability and to treat it with the same gravitas as transmission charging as one of the ‘dual barriers to renewable energy deployment’ in the Highlands and Islands. We supplied evidence of independent, consented projects that had either failed to proceed or had to dilute ownership because of extreme costs of securing a grid connection.
Ofgem listened to our concerns and instructed National Grid to establish an industry Working Group to examine the relationship between user commitment and the securities developers must post in order for the grid works required to connect the to be undertaken.
I am delighted to share with you that the Working Group recognised the significant barrier underwriting commitment poses to projects in areas remote from to the main interconnected transmission system – which by definition means projects in the North of Scotland and the Islands, including marine. There is industry consensus for a much higher socialisation of costs, reducing user commitment from the current 50% to 25% pre-consent, dropping to 10% post consent.
This has the potential to unlock significant finance at the development stage which would otherwise be tied up in posting securities. It also carries an important message in that it recognises that if marine renewables are going to contribute to diversity and security of supply and binding UK carbon reduction targets; further socialisation of the cost of connecting to the grid is required.
Ofgem is yet to consider the findings of the working group but we hope that the industry consensus will be accepted, implemented and guide the Regulator’s activity on their deliberations on the second of the dual regulatory barriers to the deployment of marine renewables: transmission charging.”