RenewablesOffshore

Marine Renewable Developers: Can You Answer These Questions?

This past Sunday's New York Times Magazine (10/5/08) contains an outstanding article by Jon Gertner on what it takes to bring a clean energy project from concept to commercialization (aptly, from C to C - get it, sea to sea?!). The article doesn't mention marine renewables at all, and it's lengthy, but worth a read because it offers an excellent view of the process, and the hurdles that new clean technologies must overcome.

Here's a segment of the article that sets forth a four factor test that all clean energy technologies must meet to succeed:

To begin with, there is technology risk. As Ted Schlein, a Kleiner partner, put it one morning: “Can it be built? How hard is it to build it? And if you can build it, can other people build it just as well?” Next, Schlein said, is what he and his partners call “people risk.” How good is the team pitching the idea, and can its members execute their idea well? The third risk involves selling a product in the market, which most Kleiner partners believe is the hardest to gauge before making an investment. In Schlein’s words: “O.K., let’s say we can build it and get great people. Will anyone buy it?”

The final risk is financial. Venture capitalists who back a company in its earliest stages, as Kleiner did with Bloom, typically invest only a fraction of what it takes to bring a business to market; as the company grows, the rest of the financing necessary comes at later stages — known as “B rounds,” “C rounds” and so forth — from other V.C. firms and outside investment funds. Companies that have problems with their technology, management teams or marketing have difficulty attracting more financing. With green tech, this may prove especially dire. Software or Web-site development can be fast and relatively cheap — a couple of years, say, and a total of $50 million before a company can go public. A medical venture can cost double that amount and take up to a decade to mature. Green tech may well require more time and money than either.

For marine renewables, these four factors are just a start, and indeed, may underestimate the true risk. That's because the financial risk for marine renewables is greater than most. While other clean energy ventures may have an easy time finding later stages of investment, marine renewables often face difficulty here, because much of that funding goes towards the cost of permitting and compliance. And many companies are loathe to pay for these costs, particularly, where the licensing process takes so long.

I'm certain that marine renewables can overcome the first three risk factors that Gertner identifies. The financial risk may prove more difficult, and that may be the point where government support - either in the form of subsidizing permitting compliance for early projects or removing regulatory barriers - might make the biggest difference.

What are your thoughts on this article? Do marine renewables face other risk factors that Gertner failed to identify? And can marine renewables succeed through private capital alone, or do they still require government support? Please post your comments below.

Marine Renewables in the Wall Street Journal

Here's some encouraging news for marine renewables -- the financial industry is finally paying attention. Last week, the Wall Street Journal included a feature story on marine renewables - from wave to tidal - and included a quote from my colleague, Sean O'Neill at the Ocean Renewable Energy Coalition. This is yet another sign that the industry is gaining traction.

Congress Includes Marine Renewables in PTCs

Update - Apparently, the legislation, which I've now read more closely extends the PTC through the end of 2012 for wave energy, but due to a technical error, awards only half the value of the PTC to marine energy projects.

The economic bailout legislation, signed into law by President Bush last week, also contains the long awaited extension and expansion of the production tax credit, reports Business Gree and others. As summarized here, the legislation extends the production tax credit for wind set forth in Section 45 of the Tax Code until the end of 2009. And of significance to marine renewables, the legislation expands eligible renewables to include marine renewables, and confers a two year production tax credit.

Since the legislation passed, I've been asked by several reporters whether a two year PTC makes any sense for the marine renewable industry. After all, even in the best circumstances, only a few projects will be operational by that date. And to be honest, it's unlikely that they'll be turning enough of a profit to make a production tax credit (which is a revenue offset) worth much.

Still, the PTC represents an important step for the marine renewables industry. Above all, it shows that Congress has enough confidence in the technology to include it in the legislation and more importantly, it gives marine renewables parity with other renewable sources. Though personally, I'd like to see accelerated depreciation (which is a more valuable benefit particularly for capital intensive projects) and an investment tax credit, (to incent investment in marine renewables at a time when the technology is in need), at least, expanding the PTC to cover marine renewables gets the industry into the game.

DOE Funds Marine Renewables Project

For the first time since 1992, the United States Department of Energy has received congressional appropriations for marine renewables -- and to the industry's benefit, DOE is already burning a hole in its pocket with the cash. As reported in Renewable Energy World, DOE has announced the companies that received awards through the Water Power Competitive Grant Solicitation. The winners are:

Technology Development

* Electric Power Research Institute Inc. for "Fish-Friendly" Hydropower Turbine Development & Deployment
* Verdant Power Inc. for Improved Structure and Fabrication of Large, High-Power KHPS Rotors.
* Public Utility District #1 of Snohomish County for Puget Sound Tidal Energy In-Water Testing and Development Project
* Pacific Gas and Electric Company for the WaveConnect Wave Energy In-Water Testing and Development Project
* Concepts ETI Inc. for Development and Demonstration of an OWC Power System
* Lockheed Martin Corporation for an Advanced Composite OTEC Cold Water Pipe Project

Market Acceleration

* Electric Power Research Institute for Wave Energy Resource Assessment and GIS Database for the U.S.
* Georgia Tech Research Corporation for Assessment of Energy Production Potential from Tidal Streams in the United States
* Re Vision consulting LLC for Development of Protocol to Identify streamlined Best Siting Practices for Marine And Hydrokinetic Technologies With Respect to Environmental and Navigational Impacts
* Pacific Energy Ventures LLC for Siting Protocol for Marine and Hydrokinetic Energy Projects
* PCCI Inc. for Marine and Hydrokinetic Renewable Energy Technologies: Identification of Potential Navigational Impacts and Mitigation Measures.
* Science Applications International Corporation for International Standards Development for Marine and Hydrokinetic Renewable Energy

National Marine Energy Centers

* Oregon State University for the Northwest National Marine Renewable Energy Center
* University of Hawaii for a National Renewable Marine Energy Center in Hawaii

Winners in the first category will receive up to US $600,000 for up to two years, winners in the second category will receive up to US $500,000 and those in the third category could receive up to US $1.2 million per year for up to five years.

Pelamis Makes Waves With First Commercial Plant

Back in May 2005, I posted on Pelamis' plan for a commercial energy station in Portugal that the company expected to bring online imminently. Now, three years later, the Pelamis Wave Energy Company achieved that goal, with the completion of its wave energy project in Portugal. To paraphrase from the law, the wheels of water (or sea snakes, as the case may be) may grind exceedingly slow, but in time, they do move.

Big Names In Marine Renewables...But How Long Will the Good Times Last?

Some big name companies are expressing an interest in marine renewables, reports CNN.
What's interesting, however, is that the companies aren't investing in marine renewable technology, per se, but rather in projects that which either facilitate delivery to market, in the case of GE and its investment in Smart Grid technologies) or utilize marine renewables, in the case of Google, with its proposed offshore data storage centers that will use the Pelamis wave energy device to supply power (though Google has made a direct investment in geothermal technology). [For more on Google's neat offshore data storage center, see here...full disclosure: my husband works at Google, though not on any energy related projects.]

Rounding out the celebrity A-list of marine renewables supporters is US based investment bank, Morgan Stanley, which has increased its stake in a Singapore based tidal power company, says Reuters. There's more information on the company and its technology here.

But how long will financial interest in marine renewables last, particularly in light of the recent credit crunch. Over at Tech Crunch, there's a sobering analysis of the impact of the credit crunch on the availability of venture capital. And if credit does in fact dry up, even larger companies may want to keep a reserve for a rainy day instead of investing it in other ventures. Let's hope that turmoil on Wall Street settles soon, so that the green energy industry doesn't go into the red, or fade to black.

It's the Industry, Stupid

Remember It's the economy, stupid, the phrase coined by political strategist James Carville back in 1992? A similar iteration of that phrase comes to my mind with increasing frequency when I think of the marine renewables industry: it's the industry, stupid.

What I mean by that is while the United States should be developing marine renewables because they'll help lead to energy independence and address climate change, let's face it...those goals are a long way off. Moreover, it's unlikely that marine renewables, even when fully mature will meet the majority of our energy needs. Yet even with these considerations, there are compelling reasons to pursue marine renewables, and that's...the industry, stupid.

I'm Baaack!

Well, it should be obvious but after a month away from this blog, I'm back with lots to share. Right now, I'm playing catch up, so the next few posts will highlight the most important developments of the past weeks. Also, I'll be chairing a panel at the Marine Renewable Energy Center's New England Conference on October 6, so if you're there, please stop by and introduce yourself.

I'm Back to Posting...Almost

I'm back from vacation, and chomping at the bit (or the buoy, as we like to say around here!) to resume posting. But my day job at my law firm has been keeping me busy, as has the task of preparing comments for the MMS Proposed Rulemaking on Alternative Energy on the OCS on behalf of the Ocean Renewable Energy Coalition . (You can view the OREC Comments here).

So bear with me...the tide will turn and the posts will start rolling in.

Taking A Recess, But Here's Something for You

Welcome to the flood of new subscribers. Unfortunately, it's August, so I will be taking a short recess from posting, for personal holiday but also for work responsibilities, including the mammoth task of responding to the MMS rules that I mentioned here (by the way, my preliminary reactions have proved correct). In the meantime, for your personal reading enjoyment, here are two summary tables on present tax credits, incentives and subsidies available for marine renewables. Pro Con Table of Benefits and
Summary Table.

I'll see you at the end of the month!