New renewables investment is about technologies that can fix structural gaps

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Gavin Smart is Head of Analysis and Insights at the Offshore Renewable Energy (ORE) Catapult, the UK’s leading technology innovation and research centre for offshore renewable energy. From 24thNovember, ORE Catapult is holding a series of lunchtime investor webinars to showcase the maturity of tidal stream technology with leading tidal power developers – The Tidal Power Express.

With the world conducting its carbon stock-take at COP26, the time is ripe for investors to re-evaluate their renewables investment portfolios. Extra diversification can be found overseas outside of the saturated UK market, but, for me, the sea-of-change opportunity is with less familiar technologies, specifically those that can solve energy imbalances.

Solar and wind have well-known intermittency issues – they do not generate power when the sun doesn’t shine or the wind doesn’t blow – leading to a continued reliance upon other fuel sources, such as nuclear or fossil fuels. To compound matters, not all locations on Earth have the climate, geography or resource that are suited to solar and wind infrastructure. Renewable energy sources that can plug these structural gaps offer both fresh opportunity and a way of generating new investment streams.

A technology on the cusp

Tidal stream power is, in my view, the most promising of these alternative sources. A scientific review out this week for our TIGER project confirmed that it could supply 11% of the UK’s current electricity demand

Before we get into the whys and wherefores, I should say that this is an area that the definition of ‘tidal power’ is not straightforward. Tidal stream (capturing the energy in fast-flowing bodies of water using underwater turbines) is a very different technology to tidal range, which involves building dam-like barrage and impoundment structures and has tended to hit the mainstream headlines far more over the years.

Far from being ‘new’ or ‘experimental’, tidal turbines are now well-established at several key sites in the UK, producing power to local homes, businesses and cars. The pioneers are UK SMEs with many years of development, knowledge and experience behind them: Edinburgh’s SIMEC Atlantis, Orbital Marine Power and Nova Innovation are the Top 3 in terms of technology readiness and business longevity.

Their technologies ably address the challenges of extracting energy from the myriad of tidal sites, generating a power supply that is clean, secure and predictable hundreds of years in advance. As such, this is a highly complementary power source to intermittent wind and solar.

Suitable for waters that would not easily accommodate offshore wind (both in terms of geography and cost of infrastructure), tidal turbines are ideal for communities living on islands, archipelagos, alongside gulfs streams and remote coastal areas. The UK developers mentioned have racked up an impressive list of contract wins with international governments and regional administrations, including India, Japan, Indonesia, Canada, France, Wales and Scotland.

The ability of tidal stream turbines to deliver baseload power to the grid provide a unique opportunity to displace coal, diesel and nuclear in many of these regions – something that solar and wind are unable to do. They also save investment in storage solutions, some of which are dependent upon rare earth metals. 

Most importantly for investor confidence, these technologies can evidence clear cost-reduction pathways. Europe’s flagship tidal energy project EnFAIT (enabling Future Arrays in Tidal), a €20 million project to build, operate and cleanly decommission a six-turbine tidal array in Shetland, is on track to deliver its promised 40% cost reduction in tidal energy by next year. Similar work is underway in the Channel region under the €45 million TIGER project that is led by our Cornwall office, providing further cost reduction evidence working with leading tidal developers and supply chains in the UK and France.

So much promise, but when?

We are talking about a sector ‘on the cusp of commercialisation’, but the burning question for investors is ‘If so, when?’ 

To date, tidal stream’s development and pioneer sites have been state-sponsored, receiving the same support that offshore wind enjoyed at the same stage of development. The next step is about achieving the scale-up that will make tidal power competitive with other forms of energy like nuclear and diesel. Our analysts expect that once we reach 1GW of installed capacity, tidal stream will be cost-competitive with other forms of energy (at £90 per megawatt hour). That is an extremely fast trajectory when you consider that it took offshore wind 2.5GW of installation to get to £125 per megawatt hour! 

We know this is achievable too: using current technologies, we can extract 12 times that needed capacity from just 30 key sites across the UK (11% of the UK’s net electricity supply). What is more, investors that back this expansion will have first-mover advantage in an ocean energy market that will be worth £76 billion by mid-century.

Get the inside track at our free lunchtime webinars

Investing in technologies that are outside of the generalist renewables portfolios requires specialist knowledge.  That’s why, starting on 24thNovember 2021, we are organising weekly lunchtime webinars where you will meet the CEOs of the UK’s leading tidal stream companies, renewables experts and policymakers in short, 30-minute sessions. Register now

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