Interview: Winning back investor confidence in wave energy – Mocean Energy’s guide
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As one of the world’s largest untapped renewable energy resources, wave energy stands to significantly contribute to decarbonization efforts driven by the global energy transition. Not solely due to its potential, but rather to the great momentum gathered by the advancements made with the second-generation wave energy technologies – like those being developed by Mocean Energy – the wave energy sector is now on the cusp of commercialization. The future prospects for the industry have never looked brighter.
- Nothing replaces learning that comes with doing
- Off-grid applications as a starting point for wave energy tech
- The most commercial traction from the O&G and CCS industries
- Blue Horizon 250 as solution for decarbonization of islands
- Trends in wave energy industry and co-location with other renewables
- More innovation funding and more uniformed approach needed
- Winning back the confidence of investors
When the co-founders of Scotland-based wave energy company Mocean Energy – Chris Retzler and Cameron McNatt – first started working on their technology, it was clear to them, as well as funders, that significant innovation was needed since the first-generation wave energy solutions were not sufficient.
Through innovative thinking and by leveraging software and optimization in the design process, the partners moved away from the standard-shaped hull designs to come up with more radical hull shapes for their hinged-raft wave energy converter. The device features two hulls connected by hinge, and produces electricity when waves induce a reciprocating rotation about the hinge that drives a generator.
But first, it is important to understand why the world needs wave energy, McNatt said in an interview for Offshore Energy.
“The value in any type of renewable energy is not just its cost of energy, but it is in when that power is delivered – power needs to be available when people need to use it. Wave energy provides power at times when other renewables are not available,” noted McNatt.
Recent studies have shown that even small amounts of wave and tidal energy in a grid can have disproportionate positive impacts on reducing gas turbine usage and costs to the consumer – where, for example in the UK in 2030 – an energy system that includes 0.6% of capacity coming from marine energy reduced CO2 emissions by 3%, compared to the system with the same total renewable capacity but without marine energy.
Beyond this, there are applications and markets where other types of renewables are not suitable solutions. For example, onshore solar, wind, and offshore wind may not be appropriate for islands and coastal communities due to space constraints, concerns about visual impact, or insufficient or variable resource.
“While we see the important role that wave energy has to play in our global energy system and in mitigating climate change, we recognize that our journey of developing and commercializing wave energy is just as important,” McNatt pointed out.
Nothing replaces learning that comes with doing
Designing and developing any type of device that will be subjected to the harsh environment of the sea for long periods of time has never been an easy feat. Numerous factors have to be taken into account and addressed appropriately, otherwise the risk of technology failing is anything but abstract.
“We wrote software to explore the geometry design space, and it was the software that pointed to new shapes that would generate more power, which neither Chris nor I would have anticipated or considered based on logic and experience alone. We still use this process and software tools, which have matured significantly. We have also developed IP in the generator, and tremendous learning through experience with our offshore trials,” McNatt said.
As a result, Mocean Energy’s technology has been designed with improved ‘power to structure ratio’, where more power is obtained from a smaller structure which moves with the waves more efficiently, therefore significantly reducing the costs.
One of the main benefits of the company’s wave energy technology is that it is self-referencing – meaning it can be deployed in deep waters as it does not rely on its mooring for power extraction, unlike some other wave energy devices.
Aside from mooring systems that are more conventional, the added advantage of the device is that it is basically an easily accessible platform with an above-water surface area on which solar panels can be installed to create a combined renewable solution.
“Our Blue Horizon 250 device will also feature our innovative Vernier Hybrid Machine (VHM) low-speed, high-torque generator that we are developing with our partners, Fountain Design. This will greatly improve reliability and power-conversion efficiency.
“Finally, our future projects and products benefit from the significant operational experience we have gained through two test campaigns with our Blue X prototype – while software can drive step-change innovation, ultimately we are building things, and there is nothing that replaces the learning that comes with doing,” McNatt said.
Off-grid applications as a starting point for wave energy tech
As a second-generation wave energy company, Mocean Energy started off knowing it needed to do something different commercially. While first-gen companies went big – big machines to be deployed in big wave farms – the Edinburgh-based company started small.
Its Blue Star product is rated at 20kW and will provide power in offshore, off-grid applications, where fundamentally power is difficult and expensive to provide.
“In this market, the problem is: how to get kW’s of power to equipment deployed far offshore on the water surface or seabed. Their power needs are more than a few solar panels can provide, but are too small for large, expensive, floating-wind solutions – another example of where existing renewables don’t meet the requirements.
“The current industry solution is to run long cables along the seabed – to form a ‘subsea grid’ – which are very expensive, and have a high environmental impact. In contrast, our robust, efficient, appropriately sized Blue Star – coupled with subsea energy storage – provides a consistent, reliable distributed renewable energy solution,” McNatt said.
According to the co-founder of Mocean Energy, the advantages of commercializing in this market are that the product is less capital intensive to develop, as demonstrated by the fact that the company’s Blue X trials enabled its Blue Star product to be built for commercial orders in the next year.
Also, the sales process is quicker and easier as one product is being sold to one customer, rather than developing a complex long-time-frame project. This approach also drives faster commercial deployment allowing more runtime on the products, and provides a good revenue stream much more quickly, which is essential to any early-stage business.
This is evidenced through the Renewables for Subsea Power (RSP) project in which Mocean Energy’s Blue X prototype is providing power to project-partner equipment – Verlume’s subsea battery system, a Baker Hughes subsea control system, and a Transmark Subsea resident autonomous underwater vehicle.
The most commercial traction from the O&G and CCS industries
The RSP project is the world’s first project where the above mentioned offshore system is powered completely by wave energy, and operated over-the-horizon.
It is being supported with funding from three O&G operators, Harbour Energy, Serica Energy, PTTEP and the Net Zero Technology Centre (NZTC), but McNatt revealed that two other majors are about to announce their involvement soon.
“We have also carried out several studies with customers, and signed memoranda of understanding with Tier 1’s Baker Hughes and Aker Solutions, and we are seeing interest build and build.
“This path is bearing fruit, but it was not easy. We first started to investigate the offshore market through the NZTC TechX program in 2019. Our solution made sense to prospective customers and partners, but they were justifiably skeptical – we were a small company, and our technology was not yet proven.
“The RSP project and our growth investment has allowed us to prove the technology and build capabilities. However, the offshore industry is risk averse because technology failures offshore often have large financial consequences. So, we still have work to do technically and commercially,” McNatt said.
This engagement benefits these offshore industries directly, and is a high-growth business model, but it is also a stepping stone, as the revenues and technology track record support the deployment of the company’s larger-scale Blue Horizon technology, according to McNatt.
“Blue Star has a solid financial and CO2-savings value proposition. And interestingly, we have had the most commercial traction from the oil & gas and carbon capture and storage (CCS) industries, because they need to lower costs and operational CO2 emissions,” said McNatt.
Blue Horizon 250 as solution for decarbonization of islands
The large-scale wave energy device Blue Horizon is where Mocean Energy foresees the most impact on climate change. One of its first markets for Blue Horizon will be islands.
Islands are at the forefront of climate change – many are running on diesel generators, and existing renewables are unlikely to meet all their needs as there are often space constraints for onshore renewables, and concerns about the visual impact of wind.
“We ultimately envision Blue Horizon machines being deployed in large farms, likely alongside other renewables like offshore wind, or floating solar, maximizing the utility of offshore projects, and providing diverse and balanced renewable power,” said McNatt.
The vision is bound to become the reality soon enough, considering that Mocean Energy was recently selected as finalist in the EuropeWave project, securing close to €4 million to develop and deploy a 250kW Blue Horizon device offshore in Scotland.
According to McNatt, the Blue Horizon machine designed for the EuropeWave project can generate two to four times more energy per tonne of displacement than first generation wave energy converters.
“It is a well-engineered, robust, reliable, survivable design. This is particularly significant for our hinged-raft wave energy converter where all the power take-off is due to one floating body moving relative to another, and is in contrast to taut-moored heaving wave energy converters, which can be lighter, but rely on the seabed for reaction forces,” said McNatt.
While the EuropeWave funding was scoped for smaller devices, as Mocean has already built and tested Blue X, the company felt that building a larger device would provide more learning and progress toward the grid-scale technology and markets.
“We are engaging strategic go-to-market partners where we intend to put together a consortium of interested customers and partners for the EuropeWave project just as we did for the RSP project.
“Following the EuropeWave project, by 2027-28, we will deploy our first pilot arrays of multiple wave energy converters, demonstrating innovative mooring and operational solutions.
“By the end of the decade, Mocean will be deploying commercial wave farms in a variety of potential settings such as island projects, grid projects funding by mechanisms like the UK’s contracts for difference (CfD), and/or early combined offshore energy projects, like wind-wave farms,” said McNatt.
The first Blue Horizon device will be built at Texo in Dundee, Scotland. It will then be tested at the European Marine Energy Centre (EMEC) in Orkney, which is scheduled to begin in spring 2025 and run for one year.
Trends in wave energy industry and co-location with other renewables
There are a number of trends across the wave energy industry, in which Mocean Energy is leading the way, but is not alone.
This includes the ideas of using wave energy for off-grid applications, for islands, and combining wave energy in multi-use offshore energy projects, particularly with offshore wind.
As the industry progresses, there will be more of these concepts materializing into reality by Mocean Energy and other industry leaders, McNatt expects.
“Combining wave farms with wind farms either by deploying wave energy converters in the 1-2 km gaps between wind turbines or in adjacent farms presents several advantages. It reuses expensive infrastructure like the cable, maximizes the energy produced from a given space of sea, creates potential efficiencies in processes like consenting and O&M, and provides the project owner with two forms of renewable energy which can occur at different times,” said McNatt.
A recent study by Wave Energy Scotland showed that combined wind-wave farms could reduce the cost of energy of the wave farm and also the cost of energy of the wind farm.
“Combined wind-wave is a popular concept within the wave energy industry and offers a lot of potential, but it is still in early stages, and more work, engagement with the offshore wind energy industry and demonstration wind-wave projects are needed.
“It’s also worth comparing wave energy to floating wind. Within floating wind, one is deploying existing technology – with an existing supply chain – on very large and innovative structures. Floating offshore wind farms will consist of dozens of structures the size of oil platforms. There are very real challenges around the port infrastructure to build the floating wind turbines and the vessel availability to install and maintain these technologies,” said McNatt.
In contrast, McNatt argues, wave energy technologies are new and innovative with a not-yet-established supply chain, but they have inherent advantages. For one, the structure is the energy producer itself. Also, they will be smaller – around 1MW rather than 10MWs and higher, and weighing hundreds of tonnes rather than thousands.
This means that they could be built in smaller ports and installed with smaller, much more available vessels. With an established supply chain, it stands to reason that wave energy converters should be cost-of-energy competitive with floating offshore wind, McNatt noted.
“There are many other combined offshore project concepts: wave and wind could be combined in projects with offshore solar, hydrogen production, aquaculture, electric vessel charging, and more.
“The ocean is – and will continue to be – a key environment from which humans will continue to meet their needs and address climate change. It is essential that offshore projects are carried out with all the careful consideration that is needed to de-risk negative environmental and social impacts,” McNatt said.
More innovation funding and more uniformed approach needed for wave energy industry
Talking about the reasons which may have hindered the commercial take off of wave energy sector so far, a number of factors came up – mostly related to funding, technology development and lack of uniformity within the industry.
There are a lot of different wave energy concepts and designs, which, according to McNatt, is an issue for the industry as it is difficult for investors and customers to understand these various technologies and compare them.
“As an industry, we need to come together and first present a uniform message about the benefits of wave energy and the direction the industry is going, but we also need give stakeholders a more consistent way to understand and compare our technologies,” McNatt said.
There are existing frameworks like the IEA-OES guidance, and the technology performance level (TPL) assessment, and there are efforts to compare and provide technical due diligence like the EuropeWave program, but the industry needs to do more itself – like agreeing specifications, applying those uniformly and publishing them, McNatt suggests.
“As the technology approaches commercial readiness, as projects reach the water, and as customer and investor abilities to compare them improve, there will be fewer types of technologies on the market.
“Ultimately though, just as the world needs a variety of types of renewables, there will still be different types of wave energy converters that have their own unique advantages,” McNatt said.
When it comes to funding – and more specifically, the government funding mechanisms in the UK – McNatt believes that there should be more support for developing technologies structured in a different form than that in the current CfD scheme.
“The CfD is a tempting subsidy for the wave energy industry, and because there really are no other mechanisms to develop wave farm projects in Europe, it is something that Mocean Energy cannot ignore.
“Consideration must be given to ringfencing for wave energy, and to non-price factors in which projects can make their case on the value to the energy system.
“The CfD strike price for wave energy, and any ringfencing also sends important market signals to investors and project developers that the UK government sees wave energy as part of its mix.
“However, the CfD is not the best support mechanism for a developing technology – it is really for technologies that have proven themselves technically, but need to scale and build out the supply chain.
“We need to recognize that wave energy is making significant steps forwards but isn’t quite at the array scale-up stage yet – there are only a scattering of individual devices deployed at the moment and no demo wave farms.
“It is therefore our view that more innovation funding should be made available for wave energy, and there should be market-pull mechanisms that are more contractually forgiving, and more rapid to develop projects in than the CfD. This will be fundamental before CfD-like mechanisms can be really capitalized upon,” McNatt said.
Winning back the confidence of investors
Developing the company from a start-up to fully commercial business is challenging in any industry.
Reflecting on Mocean Energy’s beginnings to the current stage of business development, McNatt said: “I think of developing a start-up business or a new technology or project as a kind of ratchet with three levers: technology, commercial, and funding.
“Technology demonstration drives commercial interest; commercial interest drives funding; and funding supports technology development. We really need to continue to tweak all three aspects to ratchet development to the point where wave energy is an established technology in its key markets (and even once it’s established, that process will drive it through its growth phase).
“On the technology side, we need to get innovative solutions in the water and get runtime on offshore projects – including demo projects and, importantly, early commercial projects – building confidence in the technology for customers, partners, and funders.
“On the commercial side, we need customers and project developers committing to projects even if they are early demo projects. This will provide important revenue to companies and send important signals to funders.
“On the funding side, wave energy has been well supported by public funding, and that will need to continue because it is a large-scale high-impact technology, but importantly, we need private funding: equity investors, project investors, and debt funders.”
According to McNatt, the wave energy industry needs to win back the confidence of investors that was damaged by the failures of the past, which is already being done by showing them that the technology works reliably, robustly, and cost effectively, and that there is market pull – customers paying for projects.
“The practical value of wave energy at the small and large scales, and its potential for financial returns, is nicely complemented by the impact it can have – creating jobs, providing solutions where other renewables cannot, and reducing global CO2 emissions potentially by 100’s of millions of tonnes per year.
“There are strong positive indicators for Mocean Energy – customer projects for Blue Star, equity investment, and large-scale Blue Horizon development over the next year. It’s exciting to have reached the point where commercial wave energy is now just over the horizon,” McNatt concluded.
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