OES Annual Report 2012 - Ocean Energy Systems

128
WAVE
TIDAL
Operations &
maintenance
Operations &
maintenance
Structure
Structure
Grid
connection
Station keeping
Grid
connection
Station keeping
Power take-off
Installation
Power take-off
Installation
FIGURE 1: Cost Components for Wave and Tidal Energy Projects (source: Carbon Trust)
Refining real costs, avoiding delays caused by not being a favoured-customer and having to make one-off
decisions on installation and operations can mean that the learning from device trials may not actually
contribute to an understanding of the necessary industrial approaches. The breakdown of the cost
components indicate that generator structures are only part of the total cost of the power plant.
Team building for industrial scale delivery
Multi-device projects will require the human and financial resources that will resemble those required in the
‘developed’ industry. Financing and delivering the first array projects present challenges that are beyond
the capacity of the device developers who out of necessity have been playing project development roles for
their early device testing and demonstration. The need to engage in site characterization, permitting and
all of the other “project” development activities has meant that device developers have had to incorporate
skills that draw on financial resources, yet may not be part of the long-term business plan. In some cases
and at some stages the “burn rate” associated with this non-core business has exceeded that for the core
device development.
Delivery of these projects is a new challenge and the 2012 launch of Nautimus (Vattenfall, Abengoa and
Babcock) is a significant development triggered by the needs of the first projects.
This evolution will push technology developers to move into the business of manufacturing series of devices
for these projects – the engagement of major integrator/manufacturers (Alstom, Andritz, DCNS, Lockheed
Martin, Siemens, Voith Hydro and others) over the last year or two are bringing that transition into focus.
These array projects will enable electricity companies like Emera, EDF, E.ON, RWE, Scottish Power, SSE,
Vattenfall and others to understand the scope and opportunity that future development presents. The
electricity industry is accustomed to power projects in the hundreds of MW or even gigawatt scale and
typically sees high transaction costs, interconnection challenges and attrition rates when dealing with large
numbers of smaller projects. Reliability and availability risks are perceived to be higher when managing
small projects. Against this background it is not surprising that utilities want to see arrays of devices in order
to build confidence in the generation method and to have operations that at least are indicative of a small
operating power plant.
Finance is a continuing challenge as projects require the amount of capital normally addressed by project
finance, but without the experience expected by the project finance players. Narec Capital is advancing
an effort to manage risk and mobilize finance 8 . Morgan Stanley has been attracted to the sector through
the UK’s Meygen array project. Strategic financiers like the European Investment Bank are seeing the
opportunity to make these early industrial-scale projects the learning experience that financiers need.
8
www.nareccapital.com
ANNUAL
REPORT 2012