Is marine energy about to go mainstream?

As the marine industry gathers in London for its annual get together one thing is clear; the sector is growing up fast.  So fast that it looks like it will soon be defying its critics and getting its feet seriously wet after many years of tests, tanks and prototypes. 

A fresh optimism is running through the fledgling industry.  The holy grail of marine energy could soon be upon it.  Yes it's no longer just a world of tinkering academics and innovators, disappointed venture capitalists, fresh faced start-ups and government advocates.   A new important investor has arrived with a different kind of money and a fresh impetus.  Yes at long last the big corporate investor has arrived. 

Over the past few months the marine industry has witnessed a number of significant commercial developments from the acquisition by Siemens last year of Marine Current Turbines to Alstom's purchase of Tidal Generation Limited (TGL) a few weeks ago.  The purchase of TGL builds on Alstom's purchase of a 40% stake in wave energy company, AWS, in 2011.  These investments run alongside Andriz Hydro investing in the tidal energy company Hammerfest, and French shipbuilder DCNS just last month buying a $176 million majority stake in tidal developer Open Hydro. 

So why does all this matter and what are the implications?  Well up until now the marine energy industry has developed on the back of government grants, fairly expensive venture capital cash, and some forward looking utilities prepared to procure technology at the prototype stage.  Everyone knows that this is not sustainable in the longer term, given the long journey to develop these technologies.   Now a number of marine companies look to have made the leap across the 'valley of death' to the other side to meet the all-important corporate investor.

These larger corporates, like Siemens and Alstom, have deeper pockets, longer term investment time frames and invest in technology which aligns with their corporate strategies.  They also tend to be more risk averse and better informed than conventional investors. So read from these recent commercial developments that there is now a growing confidence that the technology is close to maturity.  With the entry of these heavyweights the risk of commercial failure has been much reduced.   The technology development path should get easier too.  These new corporate investors also happen to be major world leading engineering companies who, working alongside the technology originators, can help the move from innovative prototypes to reliable, robust machines suitable for serial production for first arrays.

We are at a real turning point for the sector.  Not only is there useful corporate money at the table with a longer term outlook, but Governments in London and Edinburgh have put in place solid policy measures through the Energy Bill and have made significant financial support available to construct the first arrays of wave and tidal farms.

So what's next? Does this fresh injection of corporate cash mean its job done and Governments can walk away?  Well not quite.  Over the next few months the UK and Scottish Governments will allocate £40m of funding to the best marine technologies to enable projects that have been tested at our world leading test site in the Orkneys to move to the open sea.

Carbon Trust has estimated that these first 5MW prototype wave arrays will generate electricity at around 35-40p/KWh; more than two times the cost of offshore wind.  But by 2020, if things go well, and the corporate and public finance stays in the game we expect marine energy to reduce in costs pretty dramatically and to be generating at some 20p/KWh at sites around the Pentland Firth and Orkney.

At that point with proven technologies we will we be in a position to take advantage of really energetic sites further offshore.  Our initial analysis indicates that at these sites the costs can be cut further to some 10p/KWh making wave and tidal energy competitive with other low carbon energy sources such as nuclear and onshore wind.

The promise is huge and in a carbon constrained world providing a fifth of the UK's electricity needs from marine energy offers obvious advantages for us.   But the benefits are not just environmental.  As economic growth continues to be elusive power from the waves and tides could also help power up the UK economy.  The International Energy Agency has estimated a global market of up to 200GW of marine power by 2050.  If the UK were to capture some 15% of this the UK economy would receive a £4 billion boost.

Now that's even more of a reason for us all to get serious. And perhaps explains why the big corporates are now in town and investing.