Has Scotland’s wave energy industry gone with the wind?

26/01/2015
CommonWeal

Is there a comparison to be drawn between the struggles of Scotland’s once promising wave energy industry and the failure to build a world leading wind industry in the 1980’s? Ben Wray investigates.

SCOTLAND’S wave energy industry, heralded by politicians as a cornerstone of the green energy revolution, is now in perilous waters. Pelamis, a wave energy technology company considered to be a world leader in its field, has gone bust, and no energy company has been forthcoming to buy it. The assets are now being taken up by the Scottish government for a new wave energy research institute. Aquamarine Power, another wave energy company which received significant public sector investment, is significantly ‘downsizing’, with its long-term future uncertain. The danger of the skills and the technological development going elsewhere, like Portugal or Ireland which are international competitors, is very real.

There is a historic parallel here with Scotland’s – and the UK as a whole – wind industry, which lost out almost completely to Denmark in the 1980s, just as the technology was becoming commercially viable. The Danes invested heavily in wind energy, while the UK government, which has all the natural resources to capitalise on the potential of wind power, failed to make a serious investment to turn emerging technology into a commercial world leader. Now we import most of our wind turbines from abroad, while Denmark accrues billions every year from its dynamic and reliable wind industry.

Could wave be going the same way as wind?

Professor Andrew Cumbers, of the University of Glasgow Adam Smith Business School, argues that the comparison may well be apt.

“The lesson of Denmark is that these start-up industries take time and they need long-term, patient investment to make these things work,” Professor Cumbers, who has written extensively on the Danish wind industry, says. “They need to be part of a proper industrial strategy which is willing to back them over established vested interests in the fossil fuel industries.”

“The lesson of Denmark is that these start-up industries take time and they need long-term, patient investment.”

“The UK government, which at the end of the day has control over the energy sector, has never been willing to do any of this, which is why you see Pelamis go bust, because in the short-term, small private enterprise can’t compete in the UK’s energy market.”

The collapse of Pelamis led to the Scottish government setting up Wave Energy Scotland the following day. The intention is to build a research institution bringing engineering and academic minds together. They plan to offer jobs to Pelamis workers, to keep the skills and expertise in Scotland.

A Scottish government spokesperson told CommonSpace that the assets of Pelamis would be put towards ensuring Wave Energy Scotland was a success, saying that this was a sign of how seriously the government takes the future of wave energy in Scotland: “We are looking at what’s holding back investments in the industry and what can be done because the potential in Scotland for wave energy is huge.”

But the Scottish Greens have criticised this as being too little, too late. A Greens spokesperson added that Wave Energy Scotland “has no staff, no funding and no timescale as yet – it appears to be window dressing.”

“Jobs and expertise risk being lost from Scotland while other countries advance on the technology. Ministers need to reassess their priorities because they are abandoning wave.”

Pelamis was no ordinary company. Its website stated that it was “the world’s most advanced wave energy technology company”. It said that it was “the world’s first wave energy company to deliver electricity from offshore wave power to the national grid”. Indeed, Pelamis secured the first export order for a wave energy device in Scotland.

Pelamis was no ordinary company.

In 2012, the inventor of the Pelamis wave energy device, Professor Richard Yemm, was presented by Alex Salmond with the Saltire Prize medal at the Scottish Renewables annual conference dinner for outstanding contribution to the marine renewables sector.

During its lifetime, Pelamis received PS2.5m from the Marine Renewables Commercialisation Fund and PS12.9m from Scottish Enterprise.

How could a company with such award-winning credibility backed by government investment, in an industry that is estimated to be worth a potential PS4.5bn by 2030, collapse so quickly?

Kyle Smith, a renewables electrical engineer, foresaw potential problems in a paper he wrote for Aquamarine Power in 2011. He argued that while government action was “proving sufficient to attract early-stage investment”, significant challenges lay ahead.

“The industry is… faced with the need for developers to underwrite the capital costs of transmission upgrades, and they are also required to pay punitive transmission charges for connections to the prime development locations of Orkney, the Western Isles and Shetland,” he wrote.

“As long as these charges remain in place, it is unlikely these island communities will be able to benefit from the natural advantages their islands confer, and the industry’s growth will be impeded as a consequence.”

Smith continued: “If the UK and Scottish governments were to put in place a consistent Renewables Obligation Certificates banding regime for wave and tidal energy across the UK, or a clear and well understood feed-in tariff which offered long-term price security and address the urgent issues of transmission upgrades and charging, then they will have put in place two of the fundamental elements on which a successful new industry can be built.”

Smith articulated this argument in a study of the Danish wind industry from 1980-2010, comparing it to the wave industry today. He warned of government, both Scottish and UK, not learning the lesson of the need for patient long-term investment.

Smith detailed how the Danish wind industry developed slowly over the 1980s and even into the 1990s, only fully emerging as the dominant global exporter in the 2000s. It was consistently backed by Danish Government investment; PS800m over a 20-year period, from the development of the technology to the building of a viable and sustainable industry including price support mechanisms. The government gave the wind industry favourable access to the national grid and improved infrastructure to enhance wind capacity. At the same time it “prohibited the development of nuclear power plants”.

The UK wind industry suffered from chronic underinvestment, with the emphasis upon nuclear, oil and coal energy. “While research and development investments were made in the wind energy sector,” Smith says, “the industry was not considered a priority from a policy perspective.

“This resulted in the majority of economic benefit… being lost to other countries, including Denmark.”

However, Smith told CommonSpace that he believes wave energy “is a different situation compared to the wind industry in the 1980s”.

“What has happened recently in Scotland is the withdrawal of grant funding for private companies which acts as a ‘push’ mechanism in the absence of private investment,” he explains.

“It is important to remember that there is still a strong ‘pull’ mechanism in place in the form of premium pricing for energy produced from wave and tidal energy that is still the highest premium pricing in the world for marine energy.

“As a result, companies from Australia, the USA and Scandinavia will continue to test and eventually develop wave farms in Scotland.”

Smith believes the wave industry in Scotland is going through a necessary process of “maturing” as no technological design consensus currently exists that the industry can unite around.

“Private companies are motivated to perpetuate development funding for their own design while discrediting competitors.” he says. “This model is a barrier to cooperation, slows the arrival of the optimum wave energy convertor design and is a poor use of public money.”

“Private companies are motivated to perpetuate development funding for their own design while discrediting competitors.”

Smith’s hope is that Wave Energy Scotland can “act as a public sector technology developer by hiring the top engineers from the existing private wave energy companies” so that a design consensus can be reached which will provide the platform for commercialisation of the industry.

Professor Cumbers’ outlook for green energy development as a whole is not so optimistic. As the UK and Scottish governments fret over the extent of tax relief for the North Sea oil industry as prices fall, Professor Cumbers only sees an energy strategy in the UK based on “short term solutions to defend existing and established interests, rather than trying to find answers that are sustainable and will help save the planet.”

Peter McColl, Policy Unit director of the Common Weal, also expresses his concern for the future of the wave industry in Scotland.

“We can’t let offshore and tidal go the way wind energy did in the 1980s when a lack of UK government investment meant we gave away our position as a leader in wind energy to Denmark and Sweden,” he says.

“Scotland needs an industrial strategy with renewables at its heart, which means investment in wave and tidal energy.”

The development of Wave Energy Scotland over the coming year will be an indicator of whether wave energy has a future on Scottish shores.

Picture courtesy of the Scottish Government.