Navigant Research Blog

Offshore Wind’s New Neighbor

— April 4, 2012

Results from a recent offshore wind industry survey show concern among offshore wind farm operators, manufacturers, and policymakers in Germany, Denmark, the UK, China, and Japan that other forms of offshore energy could eclipse wind.  Based on Pike Research’s reports on the offshore wind and marine and hydrokinetic (MHK) industries, we concur that MHK technologies have the potential to be more cost-effective than offshore wind, but it will ultimately depend on the specific technology and location of the installation.

Put simply, the growth of the MHK industry does not pose a direct threat to the offshore wind energy industry in the next five years.  In some cases, there might even be areas where the two technologies can be integrated or even share transmission costs.  All eyes will be on the UK which is home to 90% of offshore wind installations currently installed and may see as much as 700 MW of wave and tidal projects installed by 2017.

Pike Research’s analysis of the offshore wind market shows that with 4 gigawatts (GW) currently installed, the industry has proven it can overcome the major engineering challenges of installing colossal turbines in some of the world’s harshest operating environments.  While offshore wind installations typically generate more megawatt-hours (hence greater revenue potential) per unit due to their higher capacity factor (up to 45%, compared to 30% for onshore) and larger design (2.3-5 megawatt nameplate capacity), the jury is still out on its overall cost-effectiveness when you factor in operations and maintenance costs (which can be up to 60% of the lifetime cost) and transmission.

For comparison, the MHK industry is where the offshore wind industry was five to seven years ago – with several 10-50 MW commercial deployments expected in the next few years.  MHK companies are all targeting a levelized cost of energy that would make them competitive (or better) with offshore wind, when deployed at scale.  Like offshore wind, the biggest unknown is the operations and maintenance costs for these systems.  Pike Research’s recent MHK report revealed that although wave power companies have been in the spotlight for the past few years, corporate interest and investment in tidal power technologies could make it the lowest cost MHK technology in the near-term.  Rolls Royce has invested in tidal power for a number of years.  Siemens’ recent acquisition of Marine Current Turbines shows that they think the technology is ready for primetime.

There is a sense that both industries are facing a make-or-break  phase.  If MHK can replicate the experience of offshore wind in the next few years, with a slow and steady rollout, it will be considered a major success by virtue of the high level of difficulty for installing 700 ton machines under water.  But neither industry will be out of the woods.  Both will need to continue to find ways to reduce O&M costs and minimize their impact on marine life.  We’ll be watching closely.


Maturing Cleantech Sector Faces Tough Questions

— March 15, 2012

In today’s maturing cleantech marketplace, cleantech companies are going to increasingly face resistance and deeper questions about their products, and should be prepared.  By no means have cleantech companies gotten a free pass on the health, environmental, and safety side of the ledger to date – but in general, it’s fair to say that the view of the general public, led by early adopters and advocacy groups, was that cleantech installations = carbon reduction = good.  But now that cleantech has moved (in the view of the general public) from an intangible intellectual and political exercise to the public’s backyard, many are asking, “How clean is clean technology?”

There is no complete answer to this question, but the trend is clear: The more that wind farms and other cleantech installations become part of the landscape, the more of an uptick we’ll see in the number of spectacular technology failures, accidents, complaints, and research into the effects of living with these new technologies at scale.  One of the most interesting trends in the 2010 and 2011 editions of Pike Research’s Energy & Environment Consumer Survey was the eroding support among consumers for clean energy concepts.  As with any ubiquitous technology, these issues are inevitable and they will have to be adequately addressed at risk of delaying or delaying or permanently damaging an entire industry.  The issues generally fall into the following categories:

  • Feedstocks & fuel sources: Corn-based ethanol is the poster child for the importance of considering the full lifecycle of a fuel and the dangers of reallocating agricultural land.  Similarly, although plug-in electric and hybrid-electric vehicles are head and shoulders cleaner than gasoline, even when powered by coal power, in some cases plug-in electric vehicles produce more GHG emissions than hybrid electric vehicles.  Furthermore, the growing demand for lithium to make advanced batteries is resulting in a flurry of mining interest in remote parts of Bolivia that could pose serious human rights and environmental issues.
  • Manufacturing processes & labor practices: As more and more cleantech manufacturing is ramping up in China, will companies ensure their facilities maintain similar levels of worker safety as in the US or Europe? The American public briefly looked up from their iPhones to take notice of investigations into Foxconn’s poor labor practices, and workplace conditions could be damaging to many companies if similar conditions are discovered at cleantech manufacturing facilities.
  • Siting & malfunctions: The desert tortoise (and the importance of its habitat) stalled the installation of massive solar farms in the Mojave Desert, pitting former allies against each other as environmental NGOs and clean-tech developers sparred for years.  Also, several rare but catastrophic wind turbine failures have resulted in mounting opposition to new developments in many communities around the world.
  • Public health & product recycling: Companies rely on potentially toxic chemicals, including mercury for compact fluorescent light bulbs, cadmium telluride for thin film solar panels, and cadmium for batteries, to drive down costs and increase efficiencies.  Numerous independent and government studies have concluded that these technologies are safe when used correctly and company recycling programs are adequate.   But as solar becomes a commodity and we increasingly look to batteries for storing renewable energy, the potential for public health concerns mount.

None of these are close to being deal-breakers for cleantech, and the impact on the planet of NOT installing clean technologies at scale and quickly far outweigh the risks of doing so.  Still, the industry must address these critical issues if it wants to reduce costs and avoid potential pitfalls and political blowback.


In the U.S., Marine Energy Founders

— March 5, 2012

The allure of marine and hydrokinetic (MHK) energy is clear:  water is 800 times more energy dense than wind, MHK technologies have two to three times the capacity factor of solar, and the growth in offshore wind has demonstrated that despite the unforgiving marine environment, energy can be harvested offshore.  But, as we point out in Pike Research’s recently released report, Marine and Hydrokinetic Energy, it’s time for the industry to deliver.  A brief look at the markets on both sides of the Atlantic highlights the opportunities and challenges facing the nascent MHK industry.

The United Kingdom recently approved leases for 1.6 gigawatts (GW) of wave and tidal projects toward its target of 2 GW of installed marine and hydrokinetic capacity by 2020.  The U.K. currently offers 5 Renewable Obligation Certificates (similar to U.S.  Renewable Energy Credits) per megawatt-hour (MWh) of MHK electricity generation and has a four-tiered MHK feed-in tariff scheme that extends out to 2021.  The U.K. is home to multiple grid-connected marine energy testing centers that host a dozen prototypes.  In February, Siemens announced it was acquiring Marine Current Turbines, a leading technology company in which Siemens has been investing in for several years, and is now heading toward large scale deployment.  Over the next six years, the a series of “phase 1” commercial scale deployments ranging between 50 MW and 200 MW will determine the feasibility for scaling projects up to as much as 1 GW.  The questions are: Will these “phase 1” deployments perform as well at scale as they have over the past several years at testing centers? And can these massive arrays survive for 20+ years underwater without maintenance costs sinking ROI?

Meanwhile, in the latest version of the proposed 2013 budget, the United States reduced its funding commitment for marine energy by 66%.  Over the next six years, only a few projects at limited capacity will move forward, despite years of testing.  Three “National Marine Renewable Energy Centers” have been designated, but have very limited financial resources.  The most experienced U.S. MHK company, Verdant Power, recently received FERC’s first-ever issuance of a commercial license for tidal power – for a whopping 1 MW tidal project.  This came six years after Verdant became the first company in the world to install a grid-connected tidal array.  Lockheed Martin is the only major corporate entity that has seriously delved into marine energy – but with ocean thermal energy conversion technologies that are not likely to see broad commercial viability before 2020, if ever.  U.S. river hydrokinetic companies may fair better in the next six years as Pike Research forecasts up to 300 MW installed by 2017. The questions are: Can the US government create an adequate enabling environment to green light quality MHK projects? And if so, how many US companies will remain by the time they get through the extremely long (and costly) permitting process?

Both countries have insisted, correctly, that given the immense technical and environmental challenges presented by MHK, it is critical to “get things right”. But the bottom line is that in the U.K., the industry is getting a clear shot at proving its muster, while the nascent U.S. MHK industry is falling into a familiar pattern that has prevented other clean-tech industries from reaching their full potential: lack of investment certainty, lack of policy direction, inconsistent federal funding, and severe regulatory restrictions.


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