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Case study 3: Issues and barriers in the development of a wave and tidal energy industry

a. Introduction

Marine energy, often referred to as ‘blue energy’, is a renewable and sustainable energy resource with relatively limited impacts on the environment and marine life. Although the ‘Marine Energy’ definition can encompass energy derived from offshore winds, ocean currents, heat and salinity exchange, and marine biomass conversion, the focus of this project is on devices to generate energy from wave action and tidal currents.

New Zealand is particularly suited to wave and tidal energy production as it:

  • is surrounded by ocean

  • has a large wave energy resource in the western and southern coasts from waves generated in the Southern Ocean and Tasman Sea

  • has significant tidal currents in Cook Strait, French Pass and Foveaux Strait

  • has a number of harbours (eg, the Kaipara and Hokianga) with tidal movements.

The concentration of the New Zealand population along the coastline also provides many potential opportunities for the deployment of wave and tidal devices as options for localised or distributed generation, supplanting the need for high-cost transmission network upgrades.

A recent EECA fact sheet on Marine Energy19 highlighted some additional commercial arguments for the deployment of wave and tidal energy devices, including the shorter transmission distances from localised utilisation; modular and incremental deployment options that minimise installation costs and capital requirement; and the more rapid installation timeframes compared to hydro or thermal fuel plants (although this is not always the case).

Table C3.1: Types of Wave and Tidal Devices

Wave Wave power system devices Generate energy by translating wave displacement into hydraulic force to rotate onshore turbines
Oscillating water column devices Generate energy when rising and falling waves move air in a fixed volume chamber, which rotates a turbine
Tidal Barrage devices Generate energy by forcing water through turbines along a dam
Tidal fences Generate energy when tidal currents rotate turnstiles along a fence stretching across a strait
Tidal turbines Generate energy when tidal currents rotate turbines more to the seafloor – similar to the generation of wind energy

b. Wave and Tidal Devices

At 2 March 2006, there were seven wave energy and six tidal energy devices nearing, or being at, commercialisation stage worldwide (Table 2).

Table C3.2: Current Market Readiness of Wave And Tidal Devices 20

 

System

Company

Country

Size*

Status

Wave

PowerBuoy

Ocean Power Technologies

USA

20 kW

Commercial

Pelamis

Ocean Power Delivery Ltd.

UK

750 kW

Commercial

Limpet

Wavegen

UK

500 kW

Commercial

‘Buldra’

Fred Olsen Ltd

Norway

500 kW

Prototype testing complete – set for commercialisation

‘Parabolic Wall’

Energetech

Australia

300 kW

Prototype testing complete – set for commercialisation

‘Manchester Bobber’

The University of Manchester Intellectual Property Ltd

UK

Variable

Prototype testing

Archimedes Wave Swing

Teamwork Technology BV

Netherlands

2 MW

Prototype testing

Tidal

Turbine

Verdant Power

USA

36 kW

Commercial

Turbine

Hammerfest Strom

Norway

300 kW

Commercial

Seaflow

Marine Current Technologies

UK

1 MW

Prototype testing complete – set for commercialisation

Tidal lagoons

Tidal Electric

UK

Variable

Planning developments

Vertical axis turbine

Blue Energy

Canada

250 kW

Planning full-scale prototype

TidEl

SMD Hydrovision

UK

1 MW

Planning full-scale prototype

* The size of the device given here is the rating for one device though many are designed to be built as an array utilizing multiple units.

Literature references suggest that wave power is likely to be best suited to small to medium-sized generation extending to 20 MW capacity at any single site. Tidal current systems are likely to be a magnitude greater.21

c. The International Wave and Tidal Energy Industry

Tidal barrages have been generating energy in Europe since 1966 (the 240 MW La Rance plant in France) and in the US since 1984 (the 20 MW Annapolis plant).22 Despite falling out of favour due to its adverse environmental effects, a new 254 MW tidal dam is currently being built in South Korea. Their contributions have, however, been small and development has been slow.

This is despite tremendous support internationally (and from European governments in particular) for the development of commercial devices within 3–5 years,23 including:

  • the opening of the European Marine Energy Centre (EMEC) in 2004

  • a £50m UK Marine Energy Development Fund

  • a pledge of £42m (NZ$111m) in 2005 by the UK Minister of Energy to facilitate wave and tidal energy feeding into the UK national grid by 2008.24

The WaveGen and the Pelamis devices are already producing energy for local grids in a number of locations; other devices are expected to come on stream shortly. The availability of these devices commercially is leading to the emergence of a New Zealand wave and tidal industry.

d. The New Zealand Wave and Tidal Energy Industry

There are currently 12 wave and tidal projects underway in New Zealand at various stages of development.25 Most of the projects appear to be relatively small, privately funded, led by entrepreneurs and enthusiasts, and focused on testing or proving devices developed overseas in New Zealand conditions.

One government-funded project was identified: the FRST-funded NIWA-IRL-Power Projects Ltd joint venture (FRST Contract C08X0401). This project commenced in 2004 with the objective of deploying a nominal commercial device in New Zealand waters by July 2008.26 The joint venture is currently evaluating a range of potential devices while one of the partners, Industrial Research Ltd, is understood to be developing a device of its own.

Power companies, who would be expected to be involved in evaluating both devices and potential installation sites as part of a balanced generation portfolio, reported low levels of interest and activity in wave and tidal energy, merely maintaining of ‘watching briefs’. They cited the more established and predictable resource consent outcomes for wind projects, lower comparative generation costs, proven technology and existing policy support as factors for their focus on wind (rather than wave and tidal energy).

None of the New Zealand projects reported deployment horizons of less than 24 months. Reasons include capital; availability of suitable devices; and timeframes for consent applications, for construction of on-site and site-to-shore transmission infrastructure, and for negotiating grid access.

However, the Aotearoa Wave and Tidal Energy Association (AWATEA) noted at its inaugural meeting in Wellington on 10 March 2006 that the association was expecting the deployment of a pre-commercial or demonstration technology in New Zealand within 3–5 years. This seems optimistic.

A more realistic scenario, however, may be a deployment horizon as far out as 10 years from 2006. This was the consensus that emerged at a Renewable Energy Technology Scanning Workshop run by CAE for MED and New Zealand Trade and Enterprise (NZTE) in Christchurch in February 2006.

Deployment and installation timeframes for wave and tidal devices will be shorter than for large-scale hydro or thermal energy, due to their modular design and scalability and also their relatively low environmental impact. Nevertheless, timeframes are dependent on the availability of installation equipment (eg, ‘jack up’ rigs to drill mooring points into the sea bed), specialist staff, access to transmission infrastructure, and securing both use rights and resource consent approval.

Whilst a promising technology, international experience suggests that without some form of government assistance wave and tidal projects, in the near term, will be unlikely to achieve the price point at which they are competitive with wind or other conventional forms of renewable energy.

e. Reported Barriers

The following issues were raised by the respondents as potential barriers to the development of a wave and tidal energy industry in New Zealand.

1. Policy

The policy issues reported by respondents were centred on the scope and resulting cost of the RMA process, the perceived inconsistent processing of applications and the need for a specific protocol for wave and tidal energy applications to potentially address the former. The RMA difficulties reported are largely anecdotal and have not been validated.

Resource Management Act

It was argued that the RMA was too blunt an instrument to support the development of the emerging wave and tidal industry because:

  • the extensive data and consultation requirements were disproportionate to the small scale of the predominantly proof-of-concept or demonstration projects proposed

  • the respondents would bear a disproportionate share of the costs of developing a standardised protocol for assessing wave and tidal applications

  • the costs to meet the above were consequently disproportionate to the scale of the projects and were diverting capital away from expenditure items on engineering and other project activities

  • as a relatively new activity, a standard protocol to specifically assess wave and tidal applications is not available. Respondents were anticipating high direct and opportunity costs while such a protocol was developed and refined. This is anticipated to lead to relatively high application and opportunity costs for the respondents as the data requirements for the consent application (eg, effects, hazards and resources) are still undefined, baseline data to measure potential effects is not available and may need to be developed from scratch

  • the ‘not in my back yard’ syndrome and the relatively easy process for objections were cited as major concerns, along with concerns related to so-called ‘vexatious’ objectors within the RMA legislation

  • uncertainty was also deemed to be compounded by the varying levels of expertise among regional councils in processing applications for offshore projects; this in turn was expected to create delays in the approval process as consent officers sought external advice to process new and unfamiliar scenarios. It is worth noting that none of the respondents had actually applied for consent although an application was likely from one respondent within 6 months.

  • provisions of the Marine Reserves Act, the Aquaculture Moratorium and the Foreshore and Seabed issues were cited as having a significant impact on risk management plans and capital raising activities due to the resulting uncertainty surrounding their ability to secure use, occupancy and/or property rights

  • related issues of ‘first in, first served’ and ‘the free rider problem’ were cited as barriers to development of the industry in general. Better-resourced respondents expressed a reluctance to expend capital to ‘blaze a trail’ and develop a new industry, when doing so would lower entry barriers to ‘cowboys’. It is worth noting that one respondent was thinking tactically about this issue and planned to exploit perceived loopholes in the RMA legislation to secure occupancy rights and block potential competitors. No detail on these loopholes was provided on the grounds of commercial sensitivity.

Allocation Regime

  • The issue of consent ‘squatters’ was raised, with parallels to the aquaculture industry where speculators sought to lock up, through the consent process, and then sell access to significant areas of coastline to aquaculturists.

  • Respondents operating as entrepreneurs or enthusiasts generally seemed to fixate on the bad news surrounding the RMA process, particularly with respect to cases from parallel industries like aquaculture and coastal development.

Restricted Activities

  • Respondents cited fragmentation in policy, implementation (by regional councils) and regulation (by government departments and agencies) as significant issues. Funding issues were perceived as being the reasons for lack of interest among specific government departments to address issues impacting on their industry – unless specifically tasked to do so and only for the areas in which they have been tasked.

  • The extent and the complexity of consultation were raised as an issue. Large-scale consent applications for wave and tidal are likely to be treated as a restricted coastal activity. As such, consent applications would require to be approved by the Minister of Conservation as the final decision maker under the RMA. The likelihood of additional information being sought by regional councils and other stakeholders all contribute to higher costs disproportionate to the scale of the anticipated projects.

  • The establishment of a responsible allocation regime was raised as a priority activity for government due to potential competition for the relatively few optimal tidal sites and more extensive wave sites.

  • The effect of possible retrospective policy changes as the new Oceans Policy regime is implemented was raised as another issue that respondents felt could impact on their projects. We suggest however, that this is simply a project risk management issue.

2. Information

Respondents suggested that resolution of the following issues would greatly assist them in their projects:

  • resource data needs to be centralised, as it is currently fragmented and not easily accessible

  • resource data needs to be updated as the currently available information dates back to the late 1980s to work undertaken by ECNZ as part of its limited evaluation of wave and tidal energy technology. It could be argued that this is a private good and ultimately the responsibility of a developer. A comparison with current wind projects indicates that in the case of wind, project sponsors have gathered the site information at their own volition

  • reasonably priced access to resource data needs to be facilitated. Respondents have reported issues accessing the ECNZ resource information from Shell, who purchased the information from ECNZ in the mid 1990s

  • at a national level, more extensive resource mapping and collation of site-specific data would allow better matching of sites to projects of a particular scale or utilising specific technologies. The availability of site-specific information could have a positive impact on the allocation regime by moderating competition for sites. See comment above. However, there is a public-good element in data gathering and collection but it is a matter of achieving the right balance

  • more extensive and accurate site-specific baseline data would enhance the impact assessment requirements of the RMA process. We suggest that this is a sponsor’s responsibility

  • more information is required on the environmental effects of subsurface structures. While structures would increase biodiversity, they could also attract more intelligent organisms eg, dolphins wanting to play

  • more resource information will be required for ocean tidal vs. harbour tidal, in situ production opportunities (eg, hydrogen), materials design and development. These comments reflect the realities faced by the current wave and tidal project sponsors in that the requirements being placed on them for detailed baseline data is inappropriate given the lack of information in the public domain. As a result, a potentially unfair burden is placed on such frontier activities. We refer to our comments in the main body of the report that in these situations, a greater risk tolerance is an appropriate response.

3. Technology and specialist equipment

The issues reported centred on the availability and cost of the devices and the availability of equipment for their installation and deployment:

  • technology licensing costs are high despite lack of investment-grade information (eg, licence for Pelamis device estimated at NZ$400k despite no info on power curve or whole-of-life costs)

  • respondents believe that they will face delays in accessing specialist technologies (eg, rigs) for installation of their devices due to the tight supply internationally.

4. Investment

As discussed previously, most of the projects are small in scale, run by enthusiasts (rather than power companies) and appear undercapitalised.

The following factors were cited as impacting on investment into their projects:

  • uncertainty caused by policy issues such as the Foreshore and Seabed debate and the Aquaculture Moratorium (around the perceived ability or otherwise to secure resource approvals, suitable sites and long-term operating approvals)

  • legislation restricts certain potential investors/strategic partners from entering the market. For example, the Electricity Industry Reform Act requires separation of ‘generation’ from ‘networks’ or distribution and restricts, for example, lines companies’ ownership of power plants.

5. Infrastructure

The following infrastructure-related issues were reported:

  • some level of government assistance will be required to kick-start the development of offshore, on-site infrastructure

  • access to the national grid will need to be facilitated;

  • responsibility for back-up storage or co-generation facilities to smooth generation peaks needs to be determined.

6. Other

  • The lack of a wave or tidal energy focused courses within existing Renewable Energy programmes courses at New Zealand universities will limit the development of the necessary skill base to service the industry. This is already being seen in the inability of the respondents to secure qualified people for small-scale proof-of-concept or demonstration projects. The study team considers this irrelevant as core skills in mechanical engineering, power engineering, control systems and related skills areas are well covered by conventional tertiary engineering programmes. The issue is that these skills are in high demand and there are excellent other opportunities in the marketplace.

  • The single tank testing facility at Auckland University is not designed for testing and development of wave and tidal devices. Respondents suggested that inadequate facilities will limit activity in the industry and force proponents to test technology offshore. We note on the other hand, that overseas technology developers do not see this as a major issue as presumably they have access to their own in- house facilities or similar.

f. Suggested Interventions

Policy issues

Government should consider:

  1. taking the lead on facilitating the development of a specific assessment protocol for wave and tidal energy projects which reflects the risk profile of these types of activities. The protocol should take into account the scope of proposed projects (ie, demonstration or proof-of-concept vs. commercial projects) and scale the data and consultation requirements accordingly, which should expedite the consent process to the advantage of the project sponsor

  2. better communication on resource consent applications, outcomes and corresponding rationales could address the respondents’ general fixation on failures in the RMA process

  3. establishing a web directory for directing wave and tidal practitioners to appropriate experts and advisers would ensure that they receive timely advice to prevent poor information and misconceptions from becoming entrenched

  4. developing a training programme for regional councils around the Taranaki Regional Council’s expertise in offshore resource permits, in order to address the reported processing inconsistencies across other councils

  5. centralisation of the approval process for offshore consent applications is a further intervention for streamlining the consent process, to ensure consistency of application of the RMA across the regional councils

  6. the policy framework to prevent the emergence of a wild-west scenario for wave and tidal energy previously seen in the aquaculture industry (‘first come, first served’, squatting, overlapping permits). One mechanism may be to implement an oil and gas exploration-type work programme regime or fishing quota-type regime

  7. facilitating wide consultation around the development of a Code of Practice to test RMA and identify issues specific to wave and tidal projects.

Resource information issues

  1. FRST support for a National Wave and Tidal Resource Database should be investigated. An estimate of $4.6m over 5 years has been provided for the development of a nationwide wave-rider buoy network that could provide data for wave and tidal, hazard investigations, navigation advisory, hydrodynamic modelling, marine structure design analysis. The precedence for FRST support for such an initiative has been set by its funding of the National Water Resources database established in the 1950s. Benefits would include more moderate competition for sites by allowing closer matching of technologies and generation capacities with specific sites.

Investment issues

  1. Addressing the policy issues discussed above will probably resolve the sovereign risk issues affecting inwards investment.

  2. Government should probably consider mechanisms to facilitate information sharing regarding wave and tidal or renewable energy funding programmes;

Infrastructure issues

  1. Government could facilitate discussion around industry funding the development of a ‘Marine Energy Park’ similar in concept to Wave Hub UK or the European Marine Energy Centre (EMEC).

  2. This Marine Energy Park could operate as a technology incubator, testing ground for new devices and perhaps as a conduit for commercial energy parks located in close proximity. It could be expected that establishment of a tank testing facility onsite would be integral to the Energy Park.

  3. Government should be facilitating discussion between wave and tidal proponents, other power companies and the transmission company to develop a grid access protocol, and also issues around the scale and responsibility for back-up storage facilities.

g. Commercial Opportunities

  1. The establishment of a Marine Energy Park in New Zealand with a technology incubation focus could attract more wave and tidal R&D and demonstration projects from overseas. A number of respondents reported approaches from overseas companies interested in conducting wave and tidal R&D projects in New Zealand on the basis that New Zealand’s lower population density will provide better access to test sites than Europe.
  2. Respondents have also suggested that government support for an international conference on wave and tidal energy, given the current interest in the industry and the number of devices currently being commercialised, could go some way towards establishing New Zealand as a centre for wave and tidal energy R&D. We note that government may have other priorities under its Growth and Innovation Strategy in respect of where New Zealand might reasonably expect to achieve world class performance in new technology development.

Summary and Conclusion

Based on the interest and activity in the industry, and the range of devices currently being commercialised, the study team’s provisional conclusion is that one or more business cases are about to emerge that could establish the platform for the growth of the wave and tidal energy industry in New Zealand.

In the short to medium term, the early wave and tidal energy projects are likely to address niche opportunities by seeking to offset some level of financial return against the opportunity to leverage, or demonstrate the technology and/or secure access to the marine resource. Their underlying business cases are likely to be sub-commercial (or commercial only on a small scale), where their economic value is likely to be in terms of supporting network reliability rather than from pure generation potential.

While the respondents have indicated a preoccupation with resource issues, it is the study team’s position that the wave and tidal energy industry represents a technology rather than a resource opportunity. We believe that technology risk issues, rather than access to the wave and tidal resource, will form the main impediments to fully commercial deployment.

Finally, the study team suggests the following areas for further investigation:

  1. a review of the development of the wind power industry to provide a relevant ‘guide’ or critical success factors for the development of the wave and tidal energy sector (more so than the Maui success story used for this investigation)

  2. an analysis of the impact of relevant marine legislation and policy, and the Marine Reserves Act in particular, on the economic implications to the economy from the exclusion of optimal wave and tidal energy sites from commercial use

  3. a review of the aquaculture sector to provide lessons towards the development of an allocation regime for the wave and tidal industry, that would encourage development of the industry while sanctioning inefficient use of the resource and anti-competitive use of the consent process.


19 Energy Efficiency and Conservation Agency (no date). Fact Sheet No 5: Marine Energy.

20 Sherman, M & Fisher, GW (no date). The Current Status of Wave & Tidal Energy, Pacific Clean Energy, p 2.

21 Centre for Advanced Engineering (1996). New & Emerging Renewable Energy Opportunities in New Zealand: pp 169–188.

22 Sherman, M & Fisher, GW (no date). The Current Status of Wave & Tidal Energy, Pacific Clean Energy.

23 Energy Efficiency and Conservation Agency (no date). Fact Sheet No 5: Marine Energy.

24 Huckerby, J (2006a). Maritime 21 Presentation, February.

25 Huckerby, J (2006b). Presentation at inaugural AWATEA Meeting, 10 February. Aotearoa Wave and Tidal Energy Association.

26 Huckerby, J (2005). Wave & Energy Conversion. Presentation to the Maritime 21 Oceans of Opportunities Workshop, Lincoln University, February.