This is the first in a 3-part series on marine-related investments, led by Dr Christine Negra. Part I focuses on renewable energy, Part II will focus on fisheries and aquaculture, and Part III on investments in coastal infrastructure. Christine, a long-term technical advisor to Clarmondial, has been leading the development of sector-specific guidance for the marine-related sectors for the Climate Bonds Initiative.
Part I. Renewable energy
When it comes to global investment in renewable energy, wind and solar are the big stars on the stage, but several ‘understudy’ technologies are waiting in the wings for their moment in the spotlight. Indeed, the renewable energy revolution will depend on the full ensemble cast.
Well-designed and appropriately sited marine renewable energy facilities contribute to the transformation of the global energy economy by displacing fossil fuel sources. They help to diversify a utilities’ mix and can also be a solution in specialized circumstances such as base-load power generation or water desalination for island nations or remote coastal areas. [1]
There are many ways to extract energy from the ocean and over 250 companies are operating hundreds of projects around the world. [2] Marine renewable technologies use waves, ocean current, river current, Ocean Thermal Energy Conversion (OTEC), and salinity gradients as well as offshore wind and solar. Technologies continue to emerge and the ratio of development and lifetime operating cost to power generation will continue to evolve. [3]
Although still less than 1% of the more than 2 million MW generated using renewable technologies worldwide, installed capacity of marine renewable energy has doubled in the last decade. [4] Growing rapidly, renewable sources are projected to generate 26% of global power by 2020. [5] Innovation is increasing with increasing public Research & Development (R&D) expenditures and numbers of patents in marine renewable energy technologies. [6] As it progresses from research and prototyping to commercial scale, marine renewable energy offers potential to meet a relevant share of global power needs.
Full-scale prototypes of wave energy converters have been tested and tidal stream technology is poised for full-scale demonstrations. Salinity gradient systems have commercial potential, although still in the R&D phase, and a 14 MW OTEC project in Martinique has shown the potential for this technology in tropical regions. [7] Benefitting from on-shore technology advancements, off-shore wind is currently in the lead for marine renewable energy investments as these installations can be built close to consumption centers at gigawatt-scale. [8] In Europe, France was a very early actor in marine renewables with construction of a 240 MW tidal range project in 1966 and new additions bring European capacity to over 270 MW today with estimated deployment of 850 MW by 2020. [9]
Investing in marine renewable energy
As global investment in renewable energy generation has taken off, financing of marine-based projects has also materialized such as the climate-certified EUR 650 million bond from China Three Gorges Corporation to finance offshore and onshore wind projects in Germany and Portugal. Investment has also flowed to smaller-scale efforts such as Atlantis Resources’ GBP 4.3 million bond to develop Europe’s largest tidal power project and the world’s first commercially funded tidal array. [10] Despite some turbulence in the wave energy sub-subsector, the Australian government is supporting demonstration projects by Carnegie Wave Energy and BioPower Systems and Finnish AW-Energy recently secured a EUR 10 million loan from the European Investment Bank (EIB) to support its WaveRoller technology. [11]
Bringing the marine renewable energy sector up to its full potential will require investments in various forms (Public Private Partnerships, Blended Finance, Climate and Impact Bonds, etc.) and by various investor segments, including: [12]
- Governments supporting R&D consistently and in a coordinated way.
- Companies developing the technologies and initiating projects.
- Green investment banks and state-backed financial institutions de-risking early stage investments.
- Venture capital and private equity investing in technology development companies.
- Utilities and commercial banks getting involved as technologies are demonstrated.
While global investment is still nascent – approximately USD 200 million per year [13] – marine renewable energy is poised for growth. In addition to establishing and expanding marine renewable energy facilities, key finance needs include R&D that pushes for more efficient or lower impact technologies as well as building out monitoring and early warning systems that can reduce losses from sea level rise and other climate change impacts.
Exploring opportunities
In the process of developing the Marine Renewable Energy Criteria under the Climate Bonds Standard, it became clear that while the foundation for developing and deploying these technologies is solid, the next big opportunity will be in matching the right technologies to the right investment and policy context. This includes identifying high-potential geographies and and evaluating them based on technical suitability, policy support, and financing considerations. For example, China has indicated it plans to deploy 50 MW of ocean-based energy and the UK, Korea, Canada, Ireland, and Norway are the top five countries projected to increase marine generation by 2020. [14]
As an independent advisory firm with experience in mobilizing investments for sustainable natural resource management, Clarmondial is interested in partnering with public and private investors to scope opportunities and to structure transactions in a way that reduces, or eliminates, the need for tariff incentives.
Notes
[1] Kempener R. 2015. Off-grid renewable energy systems: status and methodological issues. International Renewable Energy Agency.
[2] http://en.openei.org/wiki/Marine_and_Hydrokinetic_Technology_Database
[3] http://www.oceaneconomics.org/offshore_renewables/costs/
[4] https://www.irena.org/en/ocean
[5] IEA. 2015. Medium-Term Renewable Energy Market Report.
[6] Ang G. Röttgers D. Burli P. 2017. The empirics of enabling investment and innovation in renewable energy. OECD Environment Working Papers, No. 123, OECD Publishing, Paris.
[7] Ocean Energy Europe. 2015. Draft Ocean Energy Strategic Roadmap, building ocean energy for
Europe.
[8] IRENA. 2016. Innovation Outlook: Off shore Wind, International Renewable Energy Agency, Abu Dhabi.
[9] Ocean Energy Europe. 2015. Draft Ocean Energy Strategic Roadmap, building ocean energy for
Europe.
[10] https://www.abundanceinvestment.com/projects/atlantis-ocean-energy
[11] Frankfurt School-UNEP Centre/BNEF. 2017. Global Trends in Renewable Energy Investment. http://www.fs-unep-centre.org
[12] Catapult. 2014. Financing solutions for wave and tidal energy.
[13] http://resourceirena.irena.org/gateway/dashboard/?topic=6&subTopic=11
[14] IEA. 2015. Medium-Term Renewable Energy Market Report.