This market was particularly hard hit by the recession because it relied so heavily on venture capital and private equity investment. But now, it looks as though the UK government and the EU will extend long-awaited lifelines helping companies continue to develop this predictable and abundant energy source that is capable of one day supplying 10 percent of the world’s electricity needs. Government support and new investments are key factors to boost the market.
Frost & Sullivan (power.frost.com) estimates that if ocean energy technologies continue to be supported and achieve their predicted potential, approximately 3 gigawatts (GW) of installed capacity could be available in the EU by 2020.
The recession has effectively bottlenecked investment, temporarily slowing down development. In response, the UK government recently announced a raft of rescue measures. The UK Carbon Trust granted 250,000 GBP and 150,000 GBP to Pelamis and MCT respectively to focus on installation and maintenance, while the Marine Renewables Deployment Fund has offered a 22 million GBP grant to wave and tidal developers. A part of a 20 million GBP of venture capital from the budget for low carbon technologies has been earmarked for marine energy technology developers.
The EU is also supporting the sector. A consortium led by the Finnish wave energy company AW Energy, signed a 3 million EUR contract with the EU in October 2009 under the CALL FP7 -Demonstration of the innovative full size systems. The project will focus on deploying a 300kW device, known as the WaveRoller, in Portugal for a one year testing period.
"Continued government intervention is absolutely necessary to boost the marine energy market," says Frost & Sullivan Industry Analyst Gouri Kumar. To a certain extent, this is an inevitable consequence of the fact that the sector is still in the prototype development stage. "Consequentially, the injection of venture capital, private equity or government grants is critical, especially since the financial crisis effectively sank contributions from private investors," Kumar adds.
Now more than ever, government support is imperative. However, such support alone will not be enough to boost the market and push it in the right direction. Investment from venture capital and private equity players would be ideal at this stage, but is unlikely to be extended at sufficient levels until the economy starts to recover.
It remains, then, for companies to try to weather the current economic climate. To do so, major players should strive to differentiate the merits of their technology in order to showcase the future potential of the device and solicit enough capital to be able to reach commercialisation. With investors getting pickier these days, the overall environment is becoming much more difficult and competitive.
The Copenhagen summit in December may pose further challenges as there is growing concern that it will not be able to produce a successor to the Kyoto Protocol, thereby undermining the carbon markets. "This will have very little effect on the marine energy market in Europe – explains Gouri Kumar –. Although a high long-term price of carbon will contribute to the growth of the renewable energy sector, there are other factors that will play a greater role in the growth of the industry. The high price and volatility of oil and gas in the future, energy security, the falling cost per kilowatt hour of renewables electricity and the ambitious renewable energy targets set by various governments and regions will collectively continue the push for renewables.The credit crisis and government support are the most important factors affecting the industry at the moment due to the stage of development the market is at."
For more information on Frost & Sullivan’s research on the Marine Energy Market in Europe, please contact Chiara Carella, Frost & Sullivan Corporate Communications, at chiara.carella[.]frost.com, with your full name, company name, title, telephone number, company email address, company website, city, and country.
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