Creation of investor confidence: The top-level drivers for reaching maturity in marine energy

Abstract

Electricity generation by tidal current and wave power arrays represents a radical innovation and is confronted by significant technological and financial challenges. Currently, the marine energy sector finds itself in a decisive transition phase having developed full-scale technology demonstrators but still lacking proof of the concept in a commercial project environment. After the decades-long development process with larger than expected setbacks and delays, investors are discouraged because of high capital requirements and the uncertainty of future revenues. In order to de-risk the technology and to accelerate the commercialisation process, we identified stakeholder-wide balanced and realisable strategic targets. The objective is to name the top-level drivers for facilitating technology maturation and thus achieving market acceptance. Our analysis revealed that the two major risks for multi-megawatt projects (funding and device performance) are directly interlinked and that coordinated action is required to overcome this circular relationship. As funding is required for improving device performance (and vice-versa), showcasing an "array-scale success" was identified as the interim milestone on the way towards commercial generation. By this game-changing event, both mentioned risk complexes will be simultaneously mitigated. We observed that system dynamics modelling is appropriate for an unbiased analysis of complex multi-level expert interview data. The applied research model was found to be efficient and allows a regular re-assessment of the strategic alignment thus supporting the adaptation to a complex and continuously changing socio-technical environment.

Strategic timing of commercial-scale tidal energy investment

“…Bucher et al [1] noted one way to attract investors is to demonstrate device performance but the financing needed to do it cannot be raised. They sought methods to de-risk the technology in order to gain investor confidence and market acceptance.…”

“…However, in practice, managers may find compelling qualitative or hard-to-quantify reasons to exercise before expiry. 1 The option to delay an investment has value because, while waiting, conditions change. As well, with the passage of time, some uncertainty is resolved.…”

“…Investors have become cautious as more is understood about the challenges to be overcome. In a financing impasse of sorts, the ability to reduce the uncertainty by deploying devices and logging operating hours is thwarted by the absence of financing to undertake such projects [1]. Companies have been persevering, however, by staging their investments [2].…”

Updatable Probabilistic Evaluation of Failure Rates of Mechanical Components in Power Take-Off Systems of Tidal Stream Turbines

“…One of the barriers is uncertainty [4], a major source of which is the reliability of devices, including HATTs, used for tidal energy harvesting [5]. In addition, the reliability concerns were identified as the top-ranked non-commercial risk for both tidal stream turbines and wave energy converters, while poor reliability of these devices was mentioned as the main operational risk [6].…”

“…At the same time, their maintenance and repair are costly due to difficult and time-restricted accessibility. Thus, the energy production and costs depend strongly on the device reliability and, unsurprisingly, experts recommend introducing reliability modelling into the device design process [6]. The large uncertainty associated with the reliability is due to the fact that this is mainly untested technology so that historical data on failures of tidal stream turbines and their components are still extremely scarce.…”