The Saltire Prize

The Scottish Government made an announcement on the Saltire Prize yesterday evening. Although some opponents point out that this is twelfth time this has been announced, this announcement adds some new specifics - most notably the target of 100 GWh over two years from wave or tidal devices in Scottish waters.


The text is here:

Purpose
The purpose of the Scottish Government’s £10 million Saltire Prize is to stimulate innovation across the world that will lead to delivery of the best wave and tidal energy technology.

Challenge
The Saltire Prize will be awarded to the team that can demonstrate in Scottish waters a commercially viable wave or tidal energy technology that achieves a minimum electrical output of 100GWh over a continuous 2 year period using only the power of the sea and is judged to be the best overall technology after consideration of cost, environmental sustainability and safety.

Outline of the Challenge
The Prize will be open to any individual, team or organisation from across the world who believes they have wave or tidal technology capable of fulfilling the Challenge.

Competitors will be challenged to deploy a device (or array of devices) in Scottish waters which uses wave and tidal technologies to generate over 100GWh of electricity in any 2 consecutive year period. Having reached this output threshold, competitors will be judged on the cost, environmental sustainability and safety of their projects.

Next Steps
The Saltire Prize is now open for initial registration. To register interest in the Saltire Prize, the registration form can be found at www.saltireprize.com

Registering interest in the Saltire Prize will ensure that you receive a copy of the Consultation paper on the Saltire Prize guidelines in January 2009. As part of our design process, the Scottish Government is keen to seek comments on the draft Saltire Prize guidelines in advance of publication. Following consideration of the comments received, the finalised guidelines will be published by 30 June 2009 and registration of interest will also ensure you receive a copy of the full application pack and guidelines at this time.

Speaking for Redfield, we'll be registering an interest, specifically to see the consultation paper in January. We have previously suggested a prize of this kind, although our initial reaction is that 100 GWh is maybe 5 times too high as a target...it would imply around 25 MW of installed capacity running at a capacity factor of 25% for the full two years - we think 10 MW running for a year would do the trick.

Present power prices and multiple ROCs (which make a MWh of marine power worth maybe £200) mean that the winning project would have received £20 million in revenue. In the context of such a project, the value of the prize is relatively small, but experience with the X-Prize (and other similar prizes) was that a chunky cash prize triggered development work worth a multiple of the prize fund, and that's clearly what aimed for here.

For reasons too complex to go into here, Redfield feels rather proprietorial about the Saltire Prize, so we're very pleased to see this announcement firming up the prize terms. We'd be keen that the subjective bit about "consideration of cost, environmental sustainability and safety." should be downplayed, or addressed very early so there's no question when a project crosses the 100 GWh finish line.

Ten more years!

Just listening to the soporific Alistair Darling and the pre-budget statement.

High excitement as he extends the RO by ten years to 2037 - which should at least give a boost to companies exposed to ROCs (Novera springs to mind, and I think it means that companies which substantially don't meet their obligation under the RO (Eon, RWE, British Energy, Centrica based on 2006/07 RO data) might face more costs than they thought at this point yesterday.

Don't forget shares can go down as well as up, and I'm not licensed to give investment advice etc

Additions to tidal list

Following a couple of interesting recent conferences, we've added some new companies to the list of tidal device developers on the Redfield website links page.

They are:

• C-Energy - EcoFys led Wave Rotor (workable in tidal setting too)


• Cetus Energy - Australian-based horizontal axis bladed turbine


• Firth Tidal Energy - no website available yet (although the link is there)


• Hydro Mine - high energy tidal turbine concept


• Minesto - developing new "Deep Green" tidal plant concept


• Verderg - marine engineering firm with energy capture technology applicable to tidal fences

And we've updated the links for Hydro-Gen and Tidalstream too.

Trident joins the "metal in the water" club

Trident Energy was covered in the Eastern Daily Press online news site the other day.

Trident is joining the somewhat exclusive club of companies which have deployed significantly-rated wave (or tidal stream) devices in the water. The plan is to deploy this scale prototype for 3-6 months, before designing and deploying a 1 MW device.

Redfield's reaction to this prototype is

1. gosh- Trident's emerged from the left field, we weren't previously aware that Trident was at this stage of development (largely as the website was essentially a placeholder until very recently(/li>
2. it looks a bit flimsy (although East Coast waves are relatively benign)
3. there looks to be a fair bit of material for the rated power output (which we interpret as well under a MW, based on comments on the company's website

This announcement comes as part of the launch of the Orbis Centre (the Renewables East hub building - aiming to generate employment in offshore renewables.

SSE sells down on Greater Gabbard

SSE has just announced the sale of a 50% interest in the Greater Gabbard offshore windfarm development to RWE (in the guise of npower renewables) for £308 million (which includes reimbursement of the 50% share of past capital costs).

So let's look at the values:

GG is planned to be 504 MW and is fully consented. A price of £308 million for 252 MW equates to £1.2 million per MW, but this number is confused by the capital reimbursement being made to SSE for money they've already spent on RWE's behalf.

SSE bought the 50% interest in GG from Fluor for £40 million earlier this year before any real money had been spent. So, if there's no uplift in the actual value of the project, this implies that the partners have spent around £500 million on turbines, steel orders and other big-ticket items since May.

Our instinct is that it's unlikely that SSE could have gone through all of this amount in six months (although it's not impossible: the turbine supply agreement was announced in May and might be worth a total of £750 million, although its unlikely that a large proportion of that money has been spent).

If our instinct is right, it suggests that SSE has pulled off an extremely nifty deal, stepping into a consented project and reaping all of the benefit of taking it to financial close., but the developers won't have spent all of that yet.

As an aside, we'd expect RWE to have negotiated the right to acquire the ROCs from the project, but this may not concern SSE which is currently in almost full compliance with the Renewables Obligation and presumably thinks it would have been oversupplied with ROCs if it owned all of GG. We also note the interesting detail that the project cost is now described as £1.3 billion excluding the connection to the electricity grid.

Lost at sea

New Energy Focus has reported here that the Titan 1 jackup installation barge has been lost at sea. I'm glad to say that no injuries or loss of life was reported.

The Titan was on the way across the Atlantic on the way to undertake a long term (until 2022) contract for Siemens, including installation of the Rhyl Flats turbines.

The bigger question is how much of a hole this loss will leave in the general installation capacity for offshore wind as the UK (and much of the rest of Europe) over the coming years.

And the picture? It's the Lutine Bell, rung at Lloyds of London when a ship is lost.

Bang!

Alex Salmond just announced that the crown estate will be leasing "substantial" areas of the pentland firth for tidal development...and Scottish power is at the front of the queue.

More later

The mighty Pentland Firth

Ok a rainy September evening the Pentland Firth doesn't look like the Saudi Arabia of anything!

I'm here for a tidal energy conference on which I'll blog more later.

The Americans are coming...

The US Department of Energy has announced grants to marine Renewables totalling up to $6.6 million for technologies and Market acceleration and up to $12 million for test centres in Oregon and Hawaii.

More details here.

Pelamis goes live in Portugal

After what can fairly be described as an extended commissioning period, Pelamis announced today that the Portuguese project comprising 3 750 kW devices has been officially inaugurated by the Portuguese Economy Minister.

There's some interesting stuff in the press release. The project has an installed capacity of 2.25 MW and cost €9 million: put another way, that's £3.16 million/MW. Compared with recently published figures for Greater Gabbard offshore windfarm, which estimate capital costs at around £2.8 million/MW, this suggests that wave is almost competitive with offshore wind already. And wave gets 2 ROCs/MWh in the UK (maybe 5 in Scotland), against 1.5 ROCS/MWhr for offshore wind.

So unless there's a load of hidden cost in the Portuguese project, this is really encouraging for wave power.

OpenHydro's got themselves a boat

Irish tidal stream energy company OpenHydro have commissioned their new dedicated barge (at a cost of €5 million) to enhance their capacity to install and maintain their equipment.

This is the first specialist bit of equipment I've heard of, and it's a strong statement of intent by OpenHydro. And better than that, it works!

Nothing new under the sun (or waves)

Interesting article in the Guardian today about a horizontal axis transverse tidal turbine: a cylindrical rotor is placed across the tidal stream, and rotates in the tidal stream. I've borrowed the Guardian's illustration here, and their article is here.

The article quotes all sorts of Dons claiming fantastic unit generation costs (£1.7 million/MW installed - better than offshore wind), and a typical THAWT (Transverse Horizontal Axis Water Turbine) comprising two units with a total capacity of 12 MW.

Apparently the technology has been tank tested, and plans are afoot for a half scale device to be sea-tested in 2009 but there's not a peep about where the money will come from.

And why have entitled this blog entry as I have? Because we know of at least one other horizontal transverse axis device out there, among the more than 60 companies we follow on the main Redfield website.

Aquamarine gets (really) serious

Aquamarine has just announced the appointment of a new CEO, Martin McAdam, who was last seen at Airtricity where he was Chief Operating Officer. Details here.

This is interesting, as Martin's clearly a serious player in the renewables space. Now, I think it's fair to say that some of the marine developers are thinly capitalised (putting it politely) and might struggle to attract a candidate of this calibre. So we take this appointment as very positive for Aquamarine, as we (perhaps rashly) infer a real commitment from Scottish and Southern to the success of the business, which might well take more investment than the £6.5 million it's put in so far.

An alternative interpretation would be that perhaps Mr. McAdam made such a huge pile of cash out of the Airtricity sale that he doesn't have to worry about money!

Cheeky Wavegen aiming for the Saltire Prize?

In a press release in late July (here), Wavegen announced the "official start" of a 100 kW turbine at the Islay LIMPET site.

The odd thing is that the LIMPET has been operational since 2000, with turbines of more than 100 kW installed in the past. It's not clear to us how this is really news, although there is some limited discussion of "new breakwater turbines" being tested. Is this just Wavegen seeking to position itself as a contender for the Saltire Prize?

It's all go in Strangford Lough

Oceanflow Energy has just deployed a 1:10 scale "Evopod" device in Strangford Narrows, presumably a hop and skip away from MCT's SeaGen device. The Evopod is a semi-submersible, moored energy converter which floats and yaws to optimise turbine alignment with tidal flow.

This company's been below the radar a bit, but seems to be making good technical progress. It's leading light is Graham Mackie, last seen as Technical Director at Wavegen, and founder of renewable energy consultancy Overberg (which has now morphed into Oceanflow.

Looking at Oceanflow's website, it appears that the plan is to develop a 1.5 MW evopod design.

MCT exports power to the Grid

MCT has now joined the exclusive club of marine renewables developers who have exported power to the Grid. See their press release here.

The exciting and different thing about MCT's news, relative to earlier announcements from OpenHydro, WaveGen's Limpet, Ponte de Archimedes and a few others, is that the Sea Gen is a commercially sized device, with 1.2 MW installed capacity. Its competitors at this stage are in the hundreds of kW range, so this is a different level of achievement.

Well done MCT!

Don't let the windfarm spoil the view!

Just back from a trip to the Mull of Kintyre. No sign of mist rolling in from the sea, but also it's hard to accuse the windfarms on the Mull (there are at least 3 - I couldn't find two) spoiling the view.

More posts later on the trip.

Minch madness(?)

Just saw this in the Hebrides News. Seems like ideas for floating wind turbines are taking shape, although we remain extremely sceptical.

This new idea is for semisubmersible offshore wind turbines, generating hydrogen which they pipe to shore.

In addition to our earlier questions around the engineering challenges of floating turbines and bearing wear associated with the movement, our additional worries are:

1. How much will the offshore to onshore hydrogen pipelines cost?


2. Doesn't hydrolysis of seawater produce Chlorine gas - both poisonous and corrosive? How will the technology deal with this?

River power - time for some sums

Just back from Budapest, where the Danube transects the city in a stately curve. It seems to run at a reasonable walking pace (this in June - faster in March/April, I'll bet), and must contain a fair slug of energy available for capture. Of course, this is exactly what Verdant are doing in New York at the moment.

The difference here is that Budapest has lots of lovely bridges, which could potentially act as foundations for tidal turbines (as Southampton University demonstrated at a small scale on Yarmouth Pier).

What the world needs now is some calculations on the possible power available from the Danube in Budapest. And once you've covered the Danube, there's the Rhine, the Rhone, the Volga, the Thames....

"have been deployed"?

The Economist this week has a section on wave energy technology, and intriguingly refers to Pelamis as follows:

"Three such devices...have been deployed (my italics) off the coast of Portugal.

Now, the Economist is usually pretty reliable on its fact checking, but the Pelamis Wave Power website makes no reference to a successful installation. I wonder who's right...has the Economist got ahead of itself, or is PWP being unexpectedly modest?

Dollars vs Euros

I thought it might be interesting to see how the oil price has changed in Euros over the last few months, rather than focussing on the headline dollar price (in a world where the dollar's melting).

The graph shows how the 38% dollar increase from $90 to $125 is equivalent to a 33% increase from euro60 to euro80. So the dollar weakness doesn't seem to have had that much effect over the past few months.

Tidal power into the Grid

Congratulations to OpenHydro, who have achieved the first power export into the National Grid from a tidal turbine (at least that Redfield is aware of). The Telegraph's coverage of the story is here.

They've narrowly beaten Marine Current Turbines, who are installing and commissioning their device in Strangford Lough at the moment.

Floating wind technology - crazy or just mad?

StatoilHydro has just announced that it plans to spend MMNOK 400 on a floating 2.3 MW wind turbine prototype to demonstrate the potential to build windfarms in water which would otherwise be too deep.

Now, there's a couple of things here. Redfield's experience in wind turbine tower construction tells us that the turbine nacelle is extremely sensitive to its orientation. The tolerance within which turbine towers must be delivered is extremely tight, because we understand that the turbine bearings would wear irregularly causing early and expensive failure if the turbine nacelle was not absolutely horizontal in space. So we're worried that it will be very hard to orientate the nacelle with the accuracy and stability required.

Even if you can achieve this stability, that assumes that the tower doesn't move at all. We're not sure that's realistic in a 65m tower (with a 100m spar anchor). Can bearings be developed which can tolerate the accelerations at the top of a tower like this? I'm going to try to do some sums on this, as I suspect the g forces may well be much more than bearings can take.

More apocryphally, at last week's All-Energy exhibition, I noticed that StatoilHydro couldn't even get their lovely shiny model of an offshore wind farm to work properly (half of the lights and turbines weren't working). Now, if you can't even get the model to work...

OPT joins the multi-MW club

Ocean Power Technology has just announced a 10 MW wave energy project in Australia with potential for expansion up to 100 MW later.

It joins the exclusive club of wave energy developers with multi MW projects at some stage in development. Others which come to mind are Pelamis Wave Power with 2.25 MW in Portugal and Scotland, with expansion options, the WaveHub - comprising a few MW from each of Pelamis, OPT, Oceanlinx and Fred Olsen - and Finavera which has a couple of projects in the Pacific NorthWest.

Some other developers might claim to be near to joining the club (WaveDragon, Archimedes WaveSwing), but they're some way off yet (unless I've missed some!)

Northeastern NIMBYs

It's enough to make you tear your hair out.

A company wants to build a 50 MW waste incinerator in Peterhead in the northeast of Scotland. They have commissioned an environmental review which states “An environmental study on behalf of the company found that, in the worst-case scenario, emissions would have no significant adverse impact on the health of residents.”

"No significant adverse impact in the worst case." So what's the response in Peterhead? - a 600 signature (and counting) petition against the proposal. It's enough to drive you mad. The proposed plant would dispose of up to half of Aberdeen and Aberdeenshire's residual waste (the stuff which would ordinarily go to landfill), and would power up to 10,000 houses.

Where do these people think economically priced power is going to come from if we don't allow developments like this? And since the proposed plant is situated on an industrial estate, I don't think there can be any great visual impact either.

Blog improvements

I've added to the blog with a ZoomCloud tag cloud, so you can see where we have previously blogged on a topic. I'd thoroughly recommend www.zoomcloud.com.

Meanwhile, also on Lewis

Elsewhere in the Western Isles, and in an announcement with slightly unusual timing, npower has announced that it has formally submitted a planning application for the 4MW wave-powered breakwater project at Siadar.

With the recent "no" decision on the Barvas Moor project, it will be interesting to see if the active community in the Western Isles is supportive of this much smaller project or not.

With 4MW of installed capacity, average output might be 1MW (based on a capacity factor of 25%). The usual rule of thumb is that a household uses c. 5,000 kWhr/yr. This is an average of just over half a kW - which sounds low to me, especially for the often electrically-heated Western Isles. If this is right, this project could power around 2,000 houses. There are probably 6,000-10,000 homes on Lewis (based on 2-3 people per home, and Wikipedia's population figure of 19,000), and if this average power usage figure is right, this would mean that 20% - 33% of local homes would be powered by this project.

There are many heroic assumptions in this back of an envelope assessment, but it's clear that the project could make a real local impact.

RIP Barvas Moor Windfarm

The Scottish Executive has announced the decision that the Lewis Wind Power project for the development of up to 181 turbines on Barvas Moor in the Western Isles' Isle of Lewis will not go ahead.

Unsurprisingly, the antis are jubilant. They're not letting the decision get in the way of the self-righteous NIMBY dance: saying "we're in favour of windfarms, but just not in this particular special case".

The pros are obviously crestfallen, with the decision not to go ahead likely to sound the deathknell (again) for the Arnish yard, as well as for economic development in the Western Isles. No Barvas Moor probably also means no interconnector for other wind (and wave) projects, limiting development potential for the Isles.

An opportunity tragically missed, in our view, as this was one of the few areas where the Western Isles geographic position - in the area with second densest natural energy flux on the planet - could offer a rare developmental advantage.

Verdant Power - virtual tour of the RITE project

It's not every day that the Pope has any impact on the marine renewables industry. But he did yesterday, as the security arrangements for his talk to the United Nations in New York made it logistically difficult for the delegates at the Global Marine Renewable Energy Conference to get from the conference hotel (Broadway and 44th St) to Roosevelt Island (aerial tram from 59th Street and 2nd Avenue).

So Verdant brought a virtual tour of the facility to the hotel, and very impressive it was too.

For me, the key points were

• Verdant has generated nearly 50 MWh over 7,000 turbine-hours


• The technology is on version 5 - this isn't an easy or quick process


• The units are currently rated at 35 kW, and achieve a capacity factor in a tidal setting of c. 30%, but maybe 70%in run-of-river


• Verdant was extremely coy about costings


• Verdant has spent "as much" on environmental studies (lots of money on fish monitoring) as on the technology

I'm very impressed with the step-wise Verdant approach (reminiscent of the Pelamis staged development approach) and by the progress achieved.

Global Marine Renewable Energy Conference - New York, April 2008 - an investigation of wave energy and tidal energy

The Global Marine Renewable Energy Conference finished yesterday with a tour de force by Verdant Power. More of that later, but first my reactions to the main agenda. I've summarised the highpoint of each session here

Session 1: George Hagerman, Virginia Tech: Resource potential and technology status - excellent and knowledgeable overview of technology

Session 2: Keynote addresses. For me, the best was Matt Simmons. Matt is author of "Twilight in the Desert" and founder of Simmons & Co. International, an oil-oriented investment banking firm. I first met Matt a few years ago, when I talked to him about a large UK offshore windfarm project. From memory, he was deeply sceptical then, but his thesis is now that oil production is soon to rapidly decline, and to avoid massive social dislocation and wars over limited resources, it's essential we now pursue alternative energy sources. It's a compelling thesis and convincingly presented. Matt's putting money where his mouth is, by supporting the new Ocean Energy Institute (to be built in Maine).

Sessions 3 and 4: Lots of worthy technical commentary and review of support mechanisms, from which nothing in particular lodged in the memory. Nice to see the UK well represented though.

Session 5: the main event - developers talking about financing their technologies. An interesting range of experiences and firms at different stages in the process. There was still some evidence of the wishlist - more complaining about the difficulties of getting across the "valley of death" than constructive suggestions on how to do it, though. Although, I suppose if you've got a great idea for closing the deal, you're going to want to keep it to yourself.

And that was day one. Unless you count the Canadian reception (and not a Labatt's in sight) and rumours of a bash at the Irish Embassy.

Day 2 opened with Congressman Jay Inslee, who put forward a very positive legislative agenda, which he promises he's working night and day to get through the House. These include a feed in tariff and a renewables obligation- which the conference participants rated the most important stimuli for the rollout of marine renewables.

Session 1 was a chance for EMEC and WaveHub to talk about their regulatory experiences, and for FERC and the MMS to talk about how consenting might work in the US.

Session 2 went through some of the environmental issues facing the Portuguese wave centre, and some other environmental matters. Bit of a chance for the academics to lobby for the "research feast" warned of by Neil Kermode of EMEC in the previous session.

Finally: closing remarks by Senator (R-AK) Lisa Murkowski. Unable to resist a certain partisan finger-pointing, but (unsurprisingly for a representative from Alaska), the Senator was pretty positive on marine renewables. Apparently, Alaska has more coastline than the rest of the US out together!

The final keynote was from NTSERDA's CEO, who's spending $2.5 million on R&D in the New York area (substantially on Verdent, I suspect), compared with a national total of $13 million from federal funds over the next two years.

In summary, as always with conferences the real value came from the talking to new people over the water cooler (or donut stand). I was very impressed that about 300 people made the trip to New York from all over the world, but also that many were from the US (where I hadn't thought so much was going on in marine renewables). The demographic split showed the largest groups were developers and academics - so the industry still needs to be attracting more investors, bankers and (probably) lawyers.

Off to New York

So it's off to New York for the ambitiously-named "Global Marine Renewable Energy Conference."

I'm particularly keen to hear about developers, including

• Ron Smith, Verdant Power, United States


• George Taylor, Ocean Power Technologies, United States


• John Cooper, Ocean Renewable Power Company, United States


• Des McGinnes, Pelamis Wave Power, Scotland


• Andrew Parish, Wavebob Ltd., Ireland


• Martin T I Wright, Marine Current Turbines Limited, Scotland

and also about financing and revenue support in the US and Canada.

It's an early start: 0720 on Thursday, so I'm glad I'm flying west to attend the conference!

I'll be sure to report back as the conference progresses...

Pulse Generation - pulls the rabbit out of the hat

John Hutton, the BERR Minister today announced that it has granted planning permission for a £2 million 150 kW (yes, kW) device in the Humber.

This project has been in the offing for a couple of years. The Pulse Generation website talks about hoping to install a prototype in 2007, and the magical £878,000 BERR grant is mentioned even then. Clearly getting through the planning process has taken longer than Pulse had hoped.

On the upside, the technology is a novel reciprocating hydrofoil device (imagine two of the Engineering Business's Stingrays back to back) but with the generator above the waterline. The site looks interesting too, with a sheltered wave climate and probably quite nicely bi-directional flow.

So the population of devices in the water looks like it's getting larger again.

Islay community steps up for tidal

According to report in the Guardian (not dated 1st April, before you ask), the good folks of Islay are planning to install commercial scale tidal power (to go with the LIMPET wave device).

A look at the consultation document (on the Islay Energy Trust website) shows that the first £750,000 will be spent over the next three years as follows:

• Phase 1 Consultation


• Phase 2 Pre-feasibility


• Phase 3 Feasibility


• Phase 4 Consents

Impressively, the document includes a list as long as your arm of people who the Islay Energy Trust hopes might be convinced to pay for various elements of this work. This document goes on to say that the installed cost of the turbines will be £1.4 million/MW - £3 million/MW and aiming for a target electricity cost of 8.5p/kWh.

These figures would certainly offer a commercial return, but I don't think anyone could achieve these costs yet. So the project is relying on the technology advancing to meet the island's need, and there are plenty of companies seeking to develop their concepts to this point.

The document says that no choices have been made as to the technology to be deployed, so it would seem that the door is open for all developers!

Verdant Power - pluses and minuses

In an earlier post, I promised to write more about my recent visit to Verdant Power...but first, don't let the picture fool you - there's a 19 hour non-slack period in this stretch of water, running at up to 3 m/s.

On the plus side:

• Verdant's got kit in the water (at least I think it was in the water, the East River's a bit murky)


• Verdant has made real progress with the technology, through umpteen refinements


• It's got further development plans, both in the East River and elsewhere


• The design is simple, with relatively few things to go wrong, and may be scalable


• The site is fantastic, with well-behaved bi-directional flow at up to 3 m/s, within a 4-iron of the United Nations building (well, one of Tiger Woods' 4-irons), and better still a short taxi ride from Wall Street


• The company's already raised some significant finance (exploiting that taxi ride from Wall St)

On the "still to do" side:

• Installation is still difficult and expensive


• Labour costs in New York are high


• Reliability is still unproven, despite time in the water (due in part to the fast technology iterations)
  
• Revenue support mechanisms in the US are not as clear as in the UK

On balance, I was very impressed with the company's progress, technology and concept. There's still a fair way to go, but it seems to me that there could well be commercial applications for the technology, particularly in more accessible run-of-river style applications.

In summary, nice one Verdant!

Saltire prize - £10 million (got your attention now?)

Alex Salmond has announced the Saltire Prize - a £10 million prize for advances in clean energy.

Remember the Ansari X-Prize - the privately sponsored prize for the first people to put a craft into space twice within two weeks? Or the Orteig prize, which pushed Lindbergh to fly the Atlantic? Well, the Saltire Prize is intended to trigger and stimulate the same kind of step change in renewables. Obviously Alex Salmond wants the prize to nucleate industries in Scotland, where the wave and tidal (and wind) resources are exceptional.

To my way of thinking, the success of these earlier prizes was driven by the clear and unambiguous targets (getting into space, flying the Atlantic). It's not clear yet, from Alex's speech at least, what the criteria for winning the prize will be. There's a waffley bit in the press release:

The key elements of the Saltire Prize are:

• capturing imaginations: challenge that can inspire a revolution in green energy


• global challenge: high profile prize open to teams from across the world


• relevant to Scotland: relevant to area in which Scotland has strong natural resource and can be demonstrated in Scotland


• capitalises on Scotland's expertise: challenge will reflect area in which Scotland has strong technical expertise and people already working


• achievable in the short-medium term: challenge ideally achievable within a 2-5 year timeframe

I hope the criteria are clearer when they get defined, as this prize won't pull in the effort and investment unless people know what it takes to win.  I love the idea though (mainly because it's an idea I've had myself, but Redfield Consulting doesn't have the budget that Alex has), so let's hope it really gets things moving in the sector.

WaveHub "retimetabled"

The Southwest Regional Development Agency has just announced a new timetable for the WaveHub project. The project has been pushed back by a year, to allow the developers to have another go around with tendering to try to get a better price on the deal. This has to be the most positive spin on a project delay that I've seen in a long time!

WaveHub says that it is still " at the forefront of wave energy development on a worldwide basis", but it's not really very clear how this can be the case when there's nothing in the water yet.

The remorselessly upbeat WaveHub website has yet to mention the news.

Newsflash - MCT installs in Strangford Lough

Congratulations to MCT for getting into Strangford Lough. It's well known that the installation has been the victim of a number of spanners in the works, so a big hand is due. We'll be keenly interested to see how commissioning goes, and hope that MCT is successfully powering those thousand local homes in short order.

The Guardian has covered the story pretty thoroughly here.

Meanwhile, in the US...

From this unprepossessing container, Verdant Power is running a 6 turbine, 200 kW installation of tidal turbines in the East River of New York.

Verdant has had devices in the water since 2006, and is now on the fourth iteration of its technology.

A simple-looking self-yawing downstream three bladed turbine (see second picture)

operates in this fast flowing branch of the East River (peak stream speed up to 3.1 m/s. I'll be writing more about this interesting technology when I'm back in the office on Monday.

Have a great weekend!

Lunar Energy £500 million project!

Wow! Lunar Energy has announced a £500 million contract in South Korea to build a 300 turbine tidal farm.

The press release, also on Lunar's website, says that the project will involve 300 1MW turbines, implying a cost per MW of £1.67 - better than anything else we've seen by some margin!

It seems amazing that this contract has been landed without the technology being proven in the water at full scale yet, and we're also not clear how Lunar will deliver for this price. You can bet on much of the fabrication taking place in Korean shipyards, though.

I hope it all works out - it would be a fantastic boost for the tidal energy industry, but it's a long time to 2015 when the turbines are expected to be operational.

Lunar's got a fabulous visualisation here...

Relative costs of carbon abatement

Here's a thought from the skeptical environmentalist school.

If we're worried about carbon abatement (and I am), shouldn't we be looking for best value least cost solutions? If so, let's look at the relative costs of abated carbon from difference sources:

Roughly speaking, a marginal MWh of power in the UK, as provided by gas-fired CCGT, involves 0.4 tonnes of CO2. A MWh from coal is responsible for around 1 tonne of CO2, and nuclear and renewables are effectively zero carbon (not including embedded carbon in construction, decommissioning and operation). There's an interesting factsheet here...

The current carbon price in the ETS is around €22/tonne, so a permit to emit this MWh from CCGT (in principle somehow magically making it carbon neutral, or at least "allowing" it), would cost around £12/tonne or around £5/MWh. For coal, the same permit would cost c. £12/MWh.

Now, I realise that the ETS doesn't correctly internalise the carbon cost yet. Or put another way, the current ETS price isn't sufficient to make generators indifferent between renewables and fossil-fired generation.

Under the Renewables Obligation, onshore wind gets an effective subsidy of 1 ROC/MWh, and a ROC is currently worth around £50. So the additional cost of a wind-generated abated MWh is around £45 relative to gas and £38 relative to coal. Wave and tidal power will get 2 ROCs per MWh from April 2009, and offshore wind 1.5 ROCs, making these premia nearly £100/MWh. There are good strategic national reasons for encouraging these technologies, not least that as fossil prices go up, having renewables capacity offers security of energy supply and also that these businesses, specifically offshore wind, wave and tidal, could be nucleated in the UK (which has world-leading resources in these areas).

At the moment, there's a lot of heat and not much light about Carbon Capture and Storage. At the moment, CCS looks as if it will benefit from the ETS value of the the carbon not emitted - but this benefit is nothing close to the value of RO. How about including CCS in the Renewables Obligation, to help meet these targets and provide a more attractive incentive mechanism?

Progress for Renewable Energy Holdings

This, from the Renewable Energy Holdings website today...

Second CETO II Wave Energy Unit deployed & Sites under review in EDF EN collaboration

Renewable Energy Holdings plc (AIM: REH), the AIM quoted investor and operator of proven and innovative renewable energy technologies, is pleased to announce the successful deployment of the second CETO II Wave Energy prototype off the CETO test site at Fremantle in Western Australia.

In short, the CETO technology appears to use wave motion captured at tethered buoys to pump high pressure seawater which is then used to spin a turbine onshore. It's a great idea to keep the electrics out of the water, but I do wonder what kind of hydraulic losses there are. This schematic helps to describe the CETO technology.

This and the ORECon news in the same week - maybe wave's picking up steam again. Let's hope Pelamis can get deployed soon too, to really get some momentum in the sector.

In the meantime, nice one REH and CETO - we'll keep eyes open for more news.

ORECon closes $24 million fund raising

ORECon, the southwest UK-based wave energy developer which had seemed to be somewhat dormant of late has just announced a $24 million fund raising.

This is terrific news, as it means another wave energy developer now has the wherewithal to fund the building of a full scale prototype.

Turnberry conference

Just back from the Turnberry Infrastructure Journal conference. The photo was taken from my hotel room and shows the snow on Arran's Goat Fell this morning. Lovely.

Lots of interesting presentations and people to meet - developers, manufacturers, funds, but (shockingly) nobody from Government (except the European Commission).

Eddie O'Connor wasn't short of opinions, and when you've just sold a £1 billion business which you've built over seven years, you've got a right to be heard!

Lots of infrastructure funds were there, showing a real interest in renewables of all kinds, although a real warning shot to the UK industry that clarity of incentive was vital to attracting internationally mobile capital.

Lots of reminders, too, about how much additional renewables capacity is going to be required to meet the 15% of all energy from renewables targets. Roughly 40-45% of electricity from renewables would do the trick (cue Eddie on the need for an offshore SuperGrid).

One last thought: Chinese demand growth is equivalent to a new Germany in demand each year. Astonishing, but what a market opportunity.

Landfill valuations

A recent potential deal, 3i's bid for Novera, has stimulated a need for a rule of thumb on the value of landfill gas.

Existing landfill projects receive 1 ROC per MWh, making their total electricity price around £90/MWh (electricity £40/MWh, ROC £35/MWh, recycle value c. £15/MWh).

Analysis of the OFGEM ROC register shows that, in a typical month, the UK's 800MW of operational landfill capacity generates 130,000 ROCs. Each MW of capacity therefore generates 165 ROCs in a month or 2,000 per year. 1 MW therefore enjoys revenues of £180,000/yr (at £90/MWh)

No, we know that landfill was economic even before ROCs, but only just, so let's assume £40/MWh of operating costs run at around the electricity price in those days, say £30/MWh, making the gross profit £120,000/yr/MW.

Now, If we assume this goes on in perpetuity (which on a DCF basis is fair enough, as landfill sites typically operate for 20 years or so - effectively infinite in DCF terms). With a discount rate, this would make 1 MW worth £1.2 million pretax.

The deals we found in the analysis of the Novera offer reassuringly bracket this figure: one was 7 MW for £25 million - about £3.5 million per MW, and the other was £30 million for 45 MW or £0.67/MW.

So a rule of thumb of £1 million/MW may be about right.

Novera in play

Over the past few days, Novera has announced that it is in talks which may lead to a bid for the company at a price of 90p. 3i has just broken cover to day that it's the possible bidder. Now, there's many a slip twixt cup and lip, but let's see what this means.

A bid at 90p values Novera at £111 million. According to the company's website, there was a cash balance of c. £10.8 million at 31st December 2007, making the wind and other renewables assets worth near enough £100 million.

On a multiple basis, Novera's revenue for 2007 was expected to be around £34 million, making the offer price 3 times turnover. Figures for 2007 aren't available yet, but EBITDA in 2006 was just shy of £10 million on revenue of £31 million. Since the company was apparently debt free in 2006, let's assume that interest is minimal and the accounts show that depreciation was very small and there was no tax charge as tax losses exceed profits, so we can probably infer that the post tax profit was around £10 million, making the multiple an apparently conservative 10 times 2006 earnings.

Looking at the valuation from the asset side: the portfolio is dominated by the wind assets:

Status Capacity
Operating sites: Mynydd Clogau, Wales 14.5 MW
Consented sites: Lissett Airfield, East Riding 30 MW
Sites in Planning: Mount Boy, Angus, Scotland 6 MW
Sites in Planning: Fleeter Wood, Cumbria 10 MW
Sites in Planning: Glenkerie, Scottish Borders 22-27 MW
Sites in Planning: A'Chruach, Argyll and Bute 40-48 MW
Additional sites in pre-planning: 300 MW

The recent Airtricity experience suggests that buyers are prepared to pay £2 million/MW or more for installed capacity, and perhaps £1 million/MW for consented sites (leaving the other £1 million/MW to pay for the actual development costs of the project). This would amount to £29 million for Mynydd Clogau and £30 million for Lissett.

We think that Novera still has the 112 MW of landfill gas capacity it had in 2005. So looking for landfill analogues...

In 2004, Viridor paid £30 million for 45 MW of landfill capacity, and in 2006, Pennon paid £25 million for 7 MW of landfill capacity. Taking the lower basis for valuation, Novera's landfill would be worth around £60 million. (Taking the higher, it would be worth nearly £400 million, which seems extraordinary - there must be more in that deal we haven't seen).

So we've found £60 million of wind value, without the development pipeline, and £60 million of landfill value and £10 million of cash.

In the mid 2007 trading statement, net debt was around £72 million with £17 million in the bank, so if this hasn't changed, the asset value is £130 million plus the value of the development pipeline minus £90 in debt.

With the bid at £100 million, the development pipeline is being implicitly valued at around £60 million by 3i. For, say, 80 MW in planning you might apply a risk factor of 50% and value as if it's consented (ie, half the project capacity eventually gets consented). This would give you another £40 million, so you're getting the development pipeline for £20 million. If you were to risk this at 20% and apply the same valuation of £1 million/MW - you get to £60 million. On this basis, the development pipeline is worth £100 million, but it would seem that 3i is offering £60 million for it.

So either we've missed something important, or 3i is risking future developments more aggressively (or thinking they'll cost more to deliver) or 3i's getting a bargain if the deal goes through!

MCT/npower

Interesting announcement from MCT and npower. npower has joined with MCT in a new company Seagen Wales, which will pursue the project.

They say that "Development of the site will start with a full assessment and detailed surveys of the environment and tidal resources, followed by preparation of an outline scheme incorporating the studies' outcomes.

Studies are about to get started and will last throughout 2008, with a consent application likely to be submitted in mid 2009. Construction and commissioning timescales will be subject to the length of the planning process, but it is anticipated this could take place between 2011 and 2012."

Of the big six utilities (Centrica, EdF, Eon, RWE, SSE, Scottish Power), five have now announced marine renewables aspirations:

EdF has a shareholding in Marine Current Turbines;
Eon has an involvement in the Lunar/Rotech Pembrokeshore tidal project
RWE (npower) has just announced this investment
SSE has the Neptune tidal and Aquamarine wave interests
Scottish Power (Iberdrola) has its Orkney Pelamis project

Surely Centrica's got to move soon?

More on the airtricity deal

Latest information is that onshore developments might be costing as much as £1.5 million per MW installed, making SSE's deal look even smarter. Of course the nub of the thing is how much of the future capacity SSE can really make happen. With the SSE balance sheet and its share price's resilience in recent difficult market conditions, you've got hope a fair bit.

SSE/Airtricity - analysis

So, we know that SSE paid around £1 billion for Airtricity.

The detailed breakdown of the portfolio from SSE's website is:

• The principal assets of Airtricity which SSE will acquire comprise (net of joint venture interests):


• a 308MW (megawatt) portfolio of operating onshore wind farms in Scotland, Northern Ireland and the Republic of Ireland;
  
• a 187MW portfolio of onshore wind farms in Scotland, Northern Ireland and the Republic of Ireland which have full consent and are under construction, and on which €77m had so far been invested by 31 August 2007;


• a further 104MW of onshore wind energy capacity in Scotland, Northern Ireland and the Republic of Ireland which has full consent but is not yet under construction;


• a 50% stake in a 504MW offshore wind farm development, with full consent, at Greater Gabbard off East Anglia. Subject to a final investment decision, construction work on the first phase is expected to start later this year and turbines have been reserved;


• a 288MW offshore wind farm in Germany which has full consent;


• the 483MW onshore wind farm proposed for Clyde, between Biggar and Moffat in southern Scotland, which is at an advanced stage in the consent process;


• a 1,434MW portfolio of other onshore wind energy projects in the UK and Ireland that are in various stages of development but not yet with full consent;


• an option to participate in a 350MW offshore wind farm in Ireland;


• a 1,222MW portfolio of early stage European wind energy development projects in Portugal (587MW) and the Netherlands (635MW; offshore);


• a 6,675MW portfolio of wind energy development projects in China;


• and an electricity supply business providing power to around 35,000 mainly commercial customers in Ireland, with related trading and risk management functions operating in the all-island electricity market.

In summary, it appears that Airtricity's portfolio comprises

308 MW in operation
187 MW onshore in construction on which €77 has already been invested
104 MW consented onshore
540 MW offshore consented
483 MW onshore near consent
1434 MW onshore unconsented
1222 MW in development in Europe
6675 MW in development in China

A rule of thumb for onshore windfarm development used to be around £700,000/MW installed, although recent increases to turbine, steel and associated costs have probably driven this up to £1 million/MW. So perhaps £300 million of the purchase price could be sensibly applied to the producing capacity (unless SSE is paying a premium to capture guaranteed capacity, rather than taking time and planning risk to develop its own portfolio).

If SSE is valuing installed capacity at £1 million/MW, that would make the price for the consented development £190 million (once developed). If our rule of thumb is right, there's a further £130 million or thereabouts to spend, around £60 million of the consideration might relate to this capacity.

In the past, a typical price for a fully consented offshore windfarm has been around £5 million for 100 MW consented. This might be be a sensible place to start with the development assets. This adds up to (generously) 1,000 MW, of which about half is offshore. Let's assume that onshore consented developments are worth £10 million per 100 MW, and the total value of this element of the portfolio around £75 million.

Valuing assets in the development pipeline is very hard: if we assume that they're worth 10% of the consented value, the 8,000 MW of (assumed most onshore) projects would be worth £60 million.

Finally, an electricity supply business with 35,000 customers might be worth...well, the only analogy I could find was a Canadian gas and electricity supply business which sold for C$130 per customer, which would come to around £2 million.

Summarising this analysis, we can find around £500 million of value. So, it must be that either we've woefully underestimated the future value of the development pipeline, or SSE is paying closer to £2 million/MW for installed and productive capacity.

Any way you slice it, this is a useful benchmark. It also gives a clue about how hard developers must consider it to be to drive a material development portfolio to justify a premium like this over ordinary development costs.

SSE buys Airtricity, sets a benchmark?

Just announced, SSE has won the auction for Airtricity for around £1.1 billion (according to the Herald. The deal involves a purchase price of some £800 million and the adoption of around £300 million of Airtricity debt (which you'd expect SSE to be able to refinance cheaply).

The Airtricity website claims that the company has 455 MW in operation, with 636 MW under development and up to 9,000 MW of longer term projects in planning and pre-planning. The majority of these last projects appear to be offshore and aren't specifically identified.

The Herald article quotes from SSE's own press release and says "...Among the Airtricity assets to be acquired by SSE are a 308-megawatt portfolio of operating onshore windfarms in Scotland and Ireland, plus a further 187 megawatts of windfarms that have been given consent and are under construction. There is also a proposed 483-megawatt windfarm between Biggar and Moffat in the Borders, which is "in an advanced stage in the consent process"."

Over the next few days, I'll be undertaking an economic assessment of the deal...