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# 52014SC0013

**COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT Accompanying the document Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions Ocean Energy Action needed to deliver on the potential of ocean energy by 2020 and beyond /\* SWD/2014/013 final \*/**

  

TABLE OF CONTENTS

COMMISSION STAFF WORKING DOCUMENT IMPACT
ASSESSMENT.......................

1........... Introduction.................................................................................................................. 5

2........... Procedural Issues and
Consultation of Interested Parties............................................ 5

2.1........ Organization and timing............................................................................................... 5

2.1........ Consultation and expertise........................................................................................... 5

2.2........ Impact Assessment Board............................................................................................ 6

3........... Policy Context, Problem
Definition and Subsidiarity.................................................. 6

3.1........ Policy Context.............................................................................................................. 6

3.2........ The ocean energy sector today..................................................................................... 9

3.2.1..... Ocean energy technologies and
state-of-play............................................................... 9

3.2.2..... National policy support overview............................................................................... 11

3.3........ The Ocean Energy growth potential........................................................................... 11

3.4........ Problem Definition..................................................................................................... 12

3.4.1..... Cost, financial and profitability
issues........................................................................ 12

3.4.2..... Infrastructure issues.................................................................................................... 13

3.4.3..... Administrative & regulatory issues............................................................................. 14

3.4.4..... Environmental issues.................................................................................................. 15

3.5........ Business as usual scenario........................................................................................... 16

3.6........ EU's right to act.......................................................................................................... 17

3.7........ Who is affected?......................................................................................................... 17

4........... Objectives................................................................................................................... 17

4.1........ General objective........................................................................................................ 17

4.2........ Specific objectives...................................................................................................... 17

4.3........ Operational objectives................................................................................................ 17

4.4........ Consistency with other EU
policies............................................................................ 18

5........... Policy Options............................................................................................................ 18

5.1........ Option 1: Current Policy Framework ('business as usual').......................................... 19

5.2........ Option 2: Enhanced political and industry coordination............................................ 20

5.3........ Option 3: Targeted structural actions......................................................................... 22

6........... Analysis of Options.................................................................................................... 23

6.1........ Methodology and limitations...................................................................................... 23

6.2........ Analysis of individual measures/sub-options.............................................................. 24

6.2.1..... Cost reduction, financial and
profitability issues....................................................... 24

6.2.2..... Infrastructure.............................................................................................................. 25

6.2.3..... Administrative barriers............................................................................................... 26

6.2.4..... Environmental issues.................................................................................................. 26

6.3........ Economic impacts....................................................................................................... 27

6.3.1..... Levelised cost of electricity (LCoE)........................................................................... 27

6.3.2..... Costs for electricity consumers................................................................................... 29

6.3.3..... Competitive position of the EU in
ocean energy........................................................ 30

6.3.4..... Supply chains and ports, regional
economic growth and development of clusters.... 31

6.3.5..... Synergies with other sectors....................................................................................... 32

6.3.6..... Benefits of energy diversification.............................................................................. 32

6.3.7..... Administrative
burdens.............................................................................................. 32

6.4........ Environmental impacts............................................................................................... 32

6.5........ Social impacts............................................................................................................. 34

7........... Comparison of Options............................................................................................... 37

8........... Monitoring and Evaluation......................................................................................... 39

9........... Annex 1: Acronyms & Glossary................................................................................. 41

10......... Annex 2: References................................................................................................... 43

11......... Annex 3: Results of the Public
Consultation.............................................................. 48

12......... Annex 4: Overview of Recent EU
Funded Ocean Energy Projects.......................... 63

13......... Annex 5: Detailed Description of
Ocean Energy Technologies................................. 73

14......... Annex 6: Resource Location...................................................................................... 76

15......... Annex 7: Current Deployment and
Planned Capacity............................................... 79

16......... Annex 8: Policy Overview.......................................................................................... 84

17......... Annex 9: Support Schemes and their
Impact on the Renewable Energy Market...... 91

18......... Annex 10: Scenario Modelling for
Economic, Environmental and Social Impacts... 95

19......... Annex 11: Development of the
Offshore Wind Industry........................................ 100

20......... Annex 12: Overview of Emission
Factors................................................................ 102

21......... Annex 13: Environmental Impacts........................................................................... 103

22......... Annex 14: Job Creation Estimates............................................................................ 106

23......... Annex 15: Supply Chain........................................................................................... 107

24......... Annex 16:  Overview of Marine
energy technologies and their European potential 108

COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT

Accompanying the document

Communication from the Commission
to the European Parliament, the Council, the European Economic and Social
Committee and the Committee of the Regions

Ocean Energy
Action needed to deliver on the potential of ocean energy by 2020 and beyond

Disclaimer: This report commits only the
Commission's services involved in its preparation and does not prejudge the
final form of any decision to be taken by the Commission.

1.           Introduction

This Impact Assessment (IA) identifies and
assesses the EU policy options available to support the growth of Europe's ocean
energy sector. Ocean energy is one of the five pillars of the Blue Growth
Strategy that was set forward in the Blue Growth Communication[1], adopted on 13
September 2012. Marine renewable energy resources not only have a role to play
in Europe's energy portfolio but they can also provide the EU with new opportunities
to stimulate technological innovation, commercial activity and competitiveness.
Furthermore, the deployment of ocean energy could make a meaningful
contribution to the EU's drive to become a low-carbon economy.  As the EU
contemplates its renewable energy and climate change objectives post 2020, it
is opportune to explore future avenues that could assist in fulfilling them

Energy from the oceans and the seas can be
derived from waves, tides, salinity gradients and thermal gradients. For the
purposes of this impact assessment the term "ocean energy" is used to
refer to the technologies used to harvest these energy sources. The term
"marine renewable energy" is used more broadly to refer collectively
to ocean energy and offshore wind energy. Ocean energy  is at a much earlier
stage of development than offshore wind, itself an offshoot of the onshore wind
industry. While representing only a very small portion of the current renewable
energy market, ocean energy technologies are getting closer to patented
commercialisation[2].
Given the long investment time horizons for new technologies, it makes sense
for the EU to already consider now all possible avenues for their support. This
impact assessment therefore looks over the horizon at a promising new
technology and considers how the EU could usefully support its development.

2.           Procedural
Issues and Consultation of Interested Parties

Lead DG: DG MARE. Agenda planning/WP reference:
2012/MARE/006.

2.1         Organization
and timing

An Impact Assessment Steering Group (IASG)
was formed in July 2012 and met on 4 July, 7 November and 10 December 2012 and
31 January 2013. The following Commission services were invited to participate:
AGRI, CLIMA, COMP, EACI, EMPL, ENER, ENTR, ENV, JRC, MARKT, MOVE, SG, REGIO,
RTD and TAXUD. Various bilateral meetings and consultations were held in
particular with DG ENER, DG RTD and the JRC.

2.1.        Consultation
and expertise

DG MARE held an online public consultation
on ocean energy from 14 June to 14 September 2012[3]. Questions related to
technical assessment issues, research needs, training and employment,
environmental and administrative issues and marine knowledge. 128 submissions
from 16 Member States and 4 non-EU states were received. All the Commission's
minimum consultation standards were met. The vast majority of submissions (82%)
supported the need for a specific policy to support ocean energy at EU level. Annex
3 provides a detailed summary of the findings.

The Commission engaged in consultations
with some Member States particularly in the context of the Atlantic Forum, regional
representations, industry associations, regional organisations and individual
stakeholders. A number of reports and studies by stakeholders and academics
were used, including those funded under EU programmes. The JRC prepared a
specific report on marine energy technologies and their European potential (see
Annex 16) to support this impact assessment. Additionally, the Commission
contracted an independent external study to assist specifically with the
quantitative analysis of impacts[4].

2.2.        Impact
Assessment Board

The draft impact assessment report was
presented to the Impact Assessment Board (IAB) on 21 February 2013 and a positive
opinion was issued on 22 March 2013. The IAB asked to further strengthen and
improve the impact assessment by i) clarifying the initiative's added value and
objectives; ii) better presentation of the content of the options and the way
in which they address the problems; iii) improving the assessment and
comparison of options; and finally iv) better presentation of stakeholders'
views.

The impact assessment has been revised to
satisfy these requirements in the following way. In section 3.1, the scope of
the various initiatives in the renewable energy and maritime policy fields was
better defined and the value added of a new initiative, focusing solely on
ocean energy as a promising new sector, was highlighted. The presentation of
the options in Section 5 was redrafted to better clarify and specify the nature
of the measures proposed. To show clearly how the measures were grouped into
options, a table was included. This table also links the measures with the
corresponding bottlenecks and expected outcomes to further illustrate the
intervention logic. In Section 6, the regional impacts were explored in more
depth and, where possible, examples given of equivalent measures already
implemented and the impacts they had to underpin the analysis (the European Wind
Initiative was used as one such example). Section 7, which includes the
comparison of options, was redrafted to ensure better coherence with the impact
analysis. Finally, references to stakeholders' views were strengthened
throughout the text, indicating, where appropriate, which stakeholder groups
the particular views pertain to. Complex technical language was avoided and a
glossary was included to allow for easier navigation among the specific terms
used.

3.           Policy
Context, Problem Definition and Subsidiarity

3.1.        Policy
Context

The Blue Growth Communication identified
five areas of the blue economy where targeted EU action could stimulate
economic growth and jobs in Europe. One of these was the ocean energy sector[5]. The Blue Growth
initiative underpins Integrated Maritime Policy (IMP)[6] that aims to address
the challenges of globalisation and competitiveness, climate change, energy
security and sustainability by harnessing the untapped potential of Europe's
oceans, seas and coasts. It also ties in with a number of the flagship
initiatives of the Europe 2020 Strategy[7]
for smart, sustainable and inclusive growth, notably the Innovation Union,
Resource-Efficient Europe, Integrated Industrial Policy for the globalisation
era, and Agenda for new skills and jobs[8].

The blue economy received additional impetus
in the 'Limassol Declaration' adopted by the Member States and the Commission
on 7 October 2012[9].
A commitment was made to "contribute to the objectives of the Europe 2020
Strategy with respect to carbon emissions and renewable energy, and create new
employment opportunities by increasing marine renewable energy production, so
as to strengthen the EU's global leadership position"[10]. President Barroso
reiterated that the Declaration represents a basis on which to develop the blue
economy in Europe, which provides a strong maritime pillar to the Europe 2020
strategy[11].

The development of the ocean energy sector
dovetails with the EU's renewable energy policy to achieve a sustainable and
secure energy future. This includes various initiatives notably the 2009
Renewable Energy Directive[12]
(hereafter "RES Directive"), which sets out legally binding targets
for the EU to achieve a 20% share of renewable energy by 2020; the 2008 Strategic
Energy Technology (SET) Plan[13]
established to accelerate the development and deployment of cost-effective low
carbon technologies; the 2011 Energy Roadmap 2050[14] which investigates
possible ways to move towards a low-carbon energy system from 2020 to 2050 and
the 2012 Communication on Renewable Energy[15],
which, amongst other things, advocates higher priority to be given to ocean
energy research. In 2013, the Commission published a Green Paper to launch a
reflection process on the possible contours of a new integrated policy
framework for climate and energy policies for the period up to 2030[16].

A number of European Industrial Initiatives[17] (EIIs) were developed
under the SET-Plan, which is the technology pillar of the EU's energy and
climate policy. An EII aligns the activities of the industry, the research
community, Member States and the Commission in order to strengthen R&D,
boost innovation and accelerate technology deployment, bringing added value to
the EU. EIIs have been developed for a number of renewable energy technologies
but not yet for ocean energy. Nonetheless, ocean energy featured in the 2009
and 2011 Technology Maps[18]
of the SET-Plan.

Although ocean energy's contribution to the
renewable energy mix up to 2020 is expected to be modest, its potential over
the medium to long term has been recognised. The European Parliament and the
Council have encouraged the Commission to undertake policy initiatives on ocean
energy similar to the 2008 Communication on offshore wind energy[19] , which had sent a
signal of political support to the sector which has since grown exponentially[20]. The Atlantic Forum[21] established by the
2011 Atlantic Strategy Communication[22]
has highlighted the potential of ocean energy as a source of renewable energy
and sustainable growth and jobs in that region. The 2013 Action Plan for the
Atlantic[23]
recognises the need to consider ways to accelerate the development of marine
energy. Lately, the Communication on Energy Technologies and Innovation[24] highlights the need to
accelerate innovation in low carbon technologies including emerging ones like ocean
energy in the context of the SET-Plan and the proposed Horizon 2020 programme[25].

The EU is already supporting ocean energy
through research and development (R&D) projects, pre-commercial
demonstration projects, and market uptake projects notably through its 6th
and 7th Framework Research Programmes (FP), the Intelligent Energy
Europe  programme and the NER-300 programme. Within the EU Cohesion Policy
budget significant funding is dedicated to sustainable energy, with a strong focus
placed on research and innovation[26].
The mandatory development by Member States or regions of national or regional
research and innovation strategies for smart specialisation (RIS3) will
represent a major opportunity for Member States and regions to design and
implement strategies that include or are largely focused on innovation in the
energy sector. Financial support for ocean energy is expected to continue under
the Horizon 2020 Programme, for instance under the Societal Challenge 'Secure,
clean and efficient energy'. Annex 4 provides an overview of the more recent ocean
energy EU-funded projects.

As outlined above, a number of initiatives
pertaining to the broader energy and climate policy area are already in place
today and some are evolving. Nevertheless, based on stakeholder, industry and
Member State input, the Commission believes there is scope to bring the various
policy strands together into a sector-specific initiative on ocean energy at
EU-level.  As this impact assessment shows, the ocean energy sector has the
potential to make an important contribution to the EU's long-term
decarbonisation and its growth and jobs agenda. Furthermore, decreasing
dependence on fossil fuel imports[27],
while increasing the share of indigenous renewable energy sources, will enhance
Europe's energy security and stability. While new and indigenous sources of
fossil fuels such as shale gas may be increasingly exploited in the future in
the EU, this could have an adverse impact on decarbonisation targets[28]. In this context,
further diversification and expansion of the EU's renewable energy portfolio
clearly has merit.

These are important considerations in view
of the Commission's continued evaluation of the possible contours of a 2030
energy and climate change framework. A dedicated and operational ocean energy
initiative focusing exclusively on the maritime policy component of a future
renewable energy mix will complement the broader remits of other important
initiatives such as the ETI Communication and the Atlantic Action Plan. The
primary aim of an ocean energy initiative is to tackle the barriers
constraining the growth of the sector in a coordinated manner by bringing the
main stakeholders i.e., Member States, the industry and the Commission
together. While the policy focus of this impact assessment is ocean energy, it
is recognised here that offshore wind can also make an important contribution
to the EU's overall renewable energy, climate and industrial objectives. There
are important lessons that the ocean energy industry can take from offshore
wind development as well as potential synergies that can be exploited to
enhance blue growth.

3.2.        The
ocean energy sector today

3.2.1.     Ocean
energy technologies and state-of-play

A variety of technologies are under development
to harvest ocean energy. Wave energy convertors (WECs) vary
substantially in design depending on the way energy is absorbed, on water depth
and location. The wave resource has most potential along the length of the
European Atlantic coast, i.e., France, the UK, Ireland, Portugal and Spain. Tidal
stream technologies are similar in principle and design to wind energy
turbines. Energy is generated from the flow of water so the technology is best
placed in high velocity currents in narrow channels.  The UK, Ireland, France,
Greece and Italy have high potential. Tidal range technologies (or
'tidal barrages') operate on principles similar to conventional hydro-power
installations. Tidal water is captured in a dam across an estuary or a bay and
is then forced through a hydro-turbine during low tide[29].

Ocean thermal energy conversion technologies ('OTEC') generate electricity from the temperature
difference between surface and sub-surface water. It has the greatest potential
in tropical areas, including the Outermost Regions. Salinity gradient power
(or 'osmotic power') relies on the difference in salinity between salt and
fresh water, which can be exploited for the production of energy. Favourable locations include the fjords in
Norway. OTEC and salinity gradient technologies are much less developed than
wave and tidal ones. More details
can be found in Annexes 5 and 6[30].
Hybrid solutions present additional potential. Synergies might include
offshore wind farms incorporating ocean energy devices[31], aquaculture facilities
co-located with marine energy technologies and sea water desalination coupled
with salinity gradient technology.

Over 100 different ocean energy technologies
are currently under development in more than 30 countries[32]. Most types of technologies are currently at demonstration stage or
the initial stage of commercialisation[33].
SETIS predicts that fully commercial systems could become
available between 2015 and 2025[34].
Eight EU countries have included ocean energy in their
National Renewable Energy Action Plans (NREAPs) – UK, Ireland, France,
Portugal, Spain, Finland, Italy and the Netherlands. In 2020, the installed
capacity of these plants is projected to reach 2253MW, representing 0.5% of the
total installed electricity capacity in the EU-27 (JRC in Annex 16).

At the moment, the combined operational
capacity in Europe is 10 MW[35],
a three-fold increase from 3.5 MW four years ago[36]. The figure below
shows the geographical distribution of currently operational installations.
EMEC refers to the European Marine Energy Centre in Orkney.

Figure 1: current installed capacity in Europe

The progress that Member States have made
towards achieving the above targets varies substantially. The
UK is currently the European and international leader in terms of development
and deployment of ocean energy
technologies. Other Member States like France and
Ireland[37]
intend to upscale their ocean energy sectors in the coming years. Over 2GW of ocean
energy projects are in the planning pipeline in Europe. Annex
7 provides a more extensive overview of projects in operation including the
technologies they deploy.

Test centres are
operating or are being developed in the EU. The most advanced is the European Marine Energy Centre (EMEC) in Orkney, in the UK. Others
include Wave Hub in Cornwall, UK, the Biscay Marine Energy Platform (BIMEP) in Spain, SEMREV in France[38], the Atlantic Marine
Energy Test Site (AMETS) and the Galway Bay Test Site in Ireland, Ocean Plug in
Portugal, the Wave Power Project in Lysekil in Sweden, the Wave Energy Centre
(DanWEC) and the Nissum Bredning Test Station for Wave energy in Denmark.

Until recently the ocean energy sector was
populated by a large number of independent, entrepreneurial SMEs and university
consortia[39]. Recently larger companies such as utilities and manufacturers have
become increasingly involved in device development (e.g., EDF, ESBI, Iberdrola,
Scottish Power, SSE, Vattenfall, RWE, Alstom, GdF, DCNS, Siemens etc.)[40]. Utilities play a key role as they provide financial support for
demonstration of ocean energy
technologies. Investment from the finance sector has, however, been limited so
far.[41]

International initiatives supporting the
industry have emerged recently. In 2011, the International Energy Agency
launched the Ocean Energy Systems[42]
(IEA-OES) technology initiative. Its aim is to coordinate the actors and help
industry development. Ten of the 20 members are European (9 EU Member States
and Norway). The European Ocean Energy Association (EU OEA)[43] is an industry association
which currently has 70 members, including Alstom, Statkraft, DCNS, EDF, GDF
Suez and Rexroth. It represents national government agencies, large utilities
and industrial companies, national trade associations and universities. A
Member States' Ocean Energy Interest Group, comprising the UK, Spain, Ireland,
Denmark, France, Belgium, the Netherlands, Portugal and Sweden collaborates
with the EU-OEA. Europe's global position in ocean energy is relatively strong. According
to the OES[44]
its share worldwide in 2011 (including plants under installation) is close to
50%[45].
Europe's share in ocean energy
electricity generation is expected to remain very strong in the coming 20 years
having a share of more than 55-65% worldwide[46].
This could translate into substantial export opportunities, both for technology
and expertise.

3.2.2.     National
policy support overview

Policy support for ocean energy exists in a
variety of forms, the six main categories being (1) capacity and generation
targets, (2) capital grants and financial services, (3) market incentives, (4)
industry development, (5) research and testing facilities and infrastructure
and (6) permitting/space/resource allocation regimes[47]. There appears to be a
clear correlation between the strength of the policy support given and the
level of progress made in the sector[48].
Compared to other parts of the world, the policy support for ocean energy is
relatively strong in Europe[49].
There is a broad agreement, in the literature as well as among the consulted
stakeholders, that market-push (e.g. grant support) as well as market pull
(i.e. revenue support) policies are needed at this stage. Over a dozen
countries currently have dedicated support for ocean energy[50], with nine EU
countries having some kind of a revenue support in place, mostly
feed-in-tariffs[51].
Only four countries, however, have differentiated revenue support schemes. For
a more detailed account of grant and revenue support in the EU see Annex 8.

3.3.        The
Ocean Energy growth potential

The global theoretical potential of ocean
energy technologies has been estimated to be 7400EJ/year[52], which well exceeds
present and future human energy requirements[53].
In Europe, the theoretical potential of the wave resource alone is estimated to
be at least 2800TWh/year (corresponding to about 80% of 2010 EU electricity
generation). Ocean energy resources are less variable and predictable to a much
larger extent than some other renewable energy resources such as wind and
solar. Moreover, the resource fluctuates in different patterns to solar and
wind energy, which can help smooth out the electricity supply curve and
facilitate network balancing. Another important benefit is the fact that ocean
energy installations are likely to face much less severe space constrains for
installation compared to onshore RES technologies.

The technical potential of ocean
energy is much more modest compared to the theoretical potential predominantly due
to current high technology costs. The estimates vary widely; the industrial
goal set out by the IEA-OES is 337GW worldwide by 2050; the Carbon Trust
estimates approximately 190GW of wave energy and 55GW of tidal energy in the
best case scenarios by 2050; and Sims et al. (2007) propose 500GW for
wave energy only, without specifying the timescale. In Europe, SETIS (2011)
estimate the maximum potential capacity for wave energy to be up to 10GW
installed capacity by 2020 and 16GW by 2030, which would equate to 0.8% and
1.1% of EU27 electricity projected consumption respectively for 2020 and 2030[54]. According to industry
estimates[55]
by 2020 the installed capacity could be 3.6GW and by 2050 100GW, which would
satisfy 15% of European electricity demand. Whilst some of these estimates
should be viewed with a degree of prudence, the overall picture emerging from
independent assessments is that investments into ocean energy are likely to
lead to a significant growth of the sector post-2020.

As a capital-intensive and relatively
labour-intensive emerging industry, ocean energy has a high economic
potential. According to the EU OEA, the industry could create around
314,000 direct jobs[56].
More optimistic academic sources claim 1 million jobs could be created
worldwide[57].
The ocean energy industry has so far invested approximately €600 million in
Europe over the last seven years and is willing to invest further[58]. On a more global
level, the development of a leading EU ocean energy industry can serve an
international market that may expand dramatically in the next few years[59]. The Carbon Trust
estimated its total value to be approximately €575 billion, cumulative and
undiscounted, between 2010 and 2050[60].

3.4.        Problem
Definition

The ocean energy sector is currently small but it can grow substantially
in the future. A number of technological and non-technological bottlenecks that
hamper the sector's development have been identified in various studies and
through the Commission's public consultation. These are outlined below.
Addressing these bottlenecks may go some way towards enabling the ocean energy
sector to move closer to industrialisation and to demonstrate that it is a
credible contender in the renewable energy market.

3.4.1.     Cost,
financial and profitability issues

The cost of electricity generated from ocean
energy is currently high compared to that generated from other renewable energy
sources or fossil fuels due to high technology costs. At present, the levelised
cost of electricity generation from wave devices is around €0.37per kWh and
€0.25 per kWh for tidal stream. In comparison, the levelised cost of
electricity from offshore wind is €0.18 per kWh, from nuclear technologies
€0.067/kWh, combined cycle gas €0.061/kWh, and coal without carbon capture and
storage €0.052/KWh[61].
The relatively higher costs can be attributed, among other things, to residual
technical uncertainties, lack of know-how and comparatively high operation and
maintenance costs. An additional challenge facing the ocean energy sector is to
find ways to scale down the high risk of damage to ocean energy devices due to
extreme and adverse weather conditions. At this stage both capital (CAPEX) as
well as the operational (OPEX) costs need to be reduced.

At the moment, the profitability of modern ocean
energy technologies depends on sufficient grant and revenue support, without
which ocean energy would be unattractive to investors[62]. Cost reduction can be assisted through various means such as funding
through R&D programmes and market-pull policies. The provision of stable
revenue support is an effective means of propelling the development of
renewable technologies[63],
as is proved by the success of solar energy and onshore and offshore wind. In
these cases, the costs of technologies decreased rapidly[64]. See Annex 9 for
examples of the link between support schemes and their success in different
Member States. Due to the current economic downturn, several governments have
substantially scaled back revenue support for renewables[65]. Such developments can
erode investors' confidence thus undermining further development of the sector.
A long-term political commitment by governments is decisive to helping emerging
technologies successfully compete in the market.

Private and public banks play a vital role
in financing renewable energy development[66].
The leveraging of funds through venture capital and the European Investment
Bank, for example, can ensure financial sustainability for emerging
technologies such as ocean energy. When assessing investment choices, however, ocean
energy is perceived as 'high risk' by financing entities because of specific
characteristics such as the novelty of the technology, small project sizes,
high capital costs relative to operating costs, lack of full competitiveness on
the market and, by implication, strong dependence on policy[67]. It is only once
profitability is established in a longer-term timeframe that private investors
will be drawn to the sector[68].
The ocean energy sector has been traditionally dominated by SMEs; utilities are
relatively new to the field[69].
For an industrial scale-up, the endorsement of utilities, which are in a better
position to raise capital off their balance sheets, will be essential.

Another factor which complicates access to
finance is the fact that the industry is characterised by a diverse range of
technologies[70].
While a certain degree of variety is desirable as it allows for the
exploitation of diverse resources in different locations, the complexity of the
technological landscape leads to a dilution of R&D efforts, which slows down
the progress toward capital cost reduction for the sector as a whole.

3.4.2.     Infrastructure
issues

The uncertainty and high cost of grid
connection is considered to be a significant constraint on ocean energy
development[71].
The resources available to generate power from wave and tidal energy are often
located in low population density and peripheral regions. The grid capacity in
these locations is limited as is the transmission network, which transfers
electricity further to centres of high demand[72].
Investment in grid infrastructure is often undertaken solely based on existing
requests without sufficient consideration of future needs. Given the current
small scale and low profile of the ocean energy industry, grid connections may
not be planned in the areas where they are likely to be needed. As in the case
of other renewables, the expansion of deployment of ocean energy would also be
facilitated by strengthening grid interconnections in Europe[73].

Besides the physical constraints, there are
also financial and administrative difficulties. The question as to who bears
the costs of connection is a particularly important one to clarify, as
practices on sharing grid connections as well as access costs differ
substantially between Member States[74].
The lead times[75]
remain long and the costs borne by project developers tend to be substantial.
The developers also have to bear the commercial risk of permits not being
granted or not granted on time. The experience of the offshore wind sector
shows, for example, that the administrative costs faced by offshore wind park
developers can be higher than those involved in the construction of onshore
wind projects[76].
From an investor's point of view, reassurance on timely availability of the
necessary grid infrastructure is seen as a crucial factor.

Another infrastructural challenge relates
to the availability of suitable port services and specialised vessels. These
are required for the transportation, assembly, installation and repair of
devices and foundations, the installation of underwater cables and connectors,
and operations and maintenance (O&M) services[77]. Europe has a number
of ports that are already being used for offshore marine energy installations
in the Irish Sea and North Sea[78],
while other ports are being remodelled ports to service the offshore marine
energy industry[79].
However, suitable port facilities are often lacking in the areas where the
potential for ocean energy development is the highest and therefore further
investments in port facilities will be needed to underpin growth in the ocean
energy sector.

3.4.3.     Administrative
& regulatory issues

Managing the sustainable use of the marine
space requires the implementation of different legal and administrative
policies ranging from authorisation procedures, maritime spatial planning as
well as environmental regulations and SEA and EIA requirements. Respondents to
the Commission’s public consultation highlighted various administrative
barriers that hinder the development of ocean energy such as lengthy and
complex regulatory and consenting procedures, insufficient coordination amongst
public bodies responsible for reviewing applications, as well as a lack of knowledge
of ocean energy[80].

Given that the sector is a relatively new
player, Member States tend to deal with projects on a case-by-case basis, using
existing regulatory requirements applicable to other sectors such as oil and
gas, aquaculture or offshore wind[81].
Some Member States (e.g. Belgium, Germany and Sweden) apply different processes
in their territorial seas to those applied in their Exclusive Economic Zones
(EEZs). Additionally, multiple consents for a project may be required if the
marine and coastal (terrestrial) zones overlap or if they fall under the
responsibility of a number of public bodies with different competencies. This
patchwork of national administrative and regulatory rules and procedures can be
time-consuming and ultimately financially costly for project developers. 'Blue
tape', as it is referred to by the IEA-OES, translates into years of delays and
millions of euros of additional costs[82].
The recent Windbarriers report[83],
dealing with wind energy, found that the total administrative costs for
offshore wind (excluding those related to grid connection) are comparatively
much higher than onshore wind, at nearly 14% of total project costs. Similar observations can presumably be applied to the ocean energy sector, which is, relatively
speaking, less developed.

It should be noted that a few Member States
have already made efforts to simplify procedures, for example, by designating
"one-stop-shops" to deal more effectively with consenting processes
(e.g. in Scotland and Denmark)[84].
Furthermore, in some cases, test sites (e.g. EMEC in Scotland and AMETS in
Ireland) are “pre-consented”, which means that developers do not have to go
through the full consenting process themselves thereby saving time and reducing
costs[85].

Maritime Spatial
Planning (MSP) comes into play when determining offshore site developments for marine
renewables. The majority of Member States practice some form of MSP. A few,
notably Germany[86],
Portugal, Sweden, the Netherlands and the UK, have quite advanced MSP systems
in place while others are in the process of developing MSP regimes e.g.
Ireland, Denmark and Italy. Nevertheless, so far there are few MSP regimes that
specifically take ocean energy development into account[87]. Indeed, there was
broad agreement amongst respondents to the public consultation that ocean
energy should be included in national MSP so as to mitigate conflicts over the
use of marine space. Taking ocean energy deployment into account would also
help to alleviate some of the negative environmental impacts resulting from ocean
energy installations. The recently concluded Seanergy 2020 project[88] examined the need to
develop MSP instruments to take offshore generation technology and related grid
infrastructures into consideration and made policy recommendations to develop
such instruments.

3.4.4.     Environmental
issues

As ocean energy technologies approach
commercialisation, the need to take account of their impact on the environment
becomes increasingly important. The majority of the negative environmental
impacts related to ocean energy deployment are equally relevant for all marine
energy technologies, including offshore wind, but also other marine
infrastructure installations. The most frequently quoted environmental costs
include destruction of habitats, killing of fish through direct 'blade
strikes', underwater noise, electromagnetic effects, or the entanglement of diving
birds and marine mammals. The uncertainties about the environmental impacts of
specific ocean energy technologies combined with the need to apply
environmental requirements in an appropriate manner affect the authorisation
process.

The data on the environmental impact of ocean
energy currently available is limited. A full assessment will only become
possible as larger commercial arrays come on stream, and the results of
environmental monitoring become available. The lack of information about the
marine environment more generally is argued to be an important problem[89], especially given that
the seabed remains relatively unexplored compared to terrestrial ecosystems. Yet,
the research is often too expensive for project developers to undertake alone[90]. More R&D and a
better flow of information will, therefore, be required to understand and
mitigate the adverse environmental impacts of ocean energy installations.

The Habitats Directive[91] and the Birds
Directive[92]
are key pieces of legislation safeguarding environmental quality in the EU and
as such are vital to ensure ocean energy is deployed sustainably. The
relatively high environmental quality standards legislated in Europe should
therefore, in theory, support the development of this emerging industry. Yet,
uncertainties on the application of some EU environmental legislation, given
that national authorities prefer to err on the side of caution, can in some
instances disproportionally prolong the consenting procedures and place an
additional administrative burden on project developers.

3.5.        'Business
as usual'  scenario

In the absence of a sufficient degree of
internal momentum within the industry itself and without political support at
national and EU level, the ocean energy share of the renewable energy mix and its
contribution to growing electricity demand will likely remain small. The rate
of cost reduction will be limited and the potential to contribute to the EU’s
2050 decarbonisation objective will be curtailed. The horizon for full
commercialisation of the sector will be long term (2050) rather than medium
term (2030). Economic, export and employment opportunities will not be fully
exploited.

If no additional action is taken, the ocean
energy sector would likely be limited to implementation of ocean energy targets
in existing NREAPs. The sector's growthpath will be adversely affected by the current
unfavourable economic climate where investors and authorities may prefer to
rely on more developed renewable energy technologies and even on unconventional
or cheaper 'traditional' fossil fuel generation. Despite this, it can still be
assumed that activity in the sector would continue, perhaps in anticipation of
more a favourable economic environment as well as increased support at EU level
e.g., financial support for R&D projects under current and future research
programmes. Efforts to foster consolidated and joint Member State activities and
to move to larger projects will be made e.g., through an ERA-NET (European
Research Area Network) on ocean energy. Although technology refinement will
occur, the path to technological convergence will likely be substantially slower.

Infrastructure improvements such as grid
connections will continue at their current rate but the future needs of ocean
energy will not necessarily be taken into consideration because the deployment
rate is presently too slow to warrant factoring it into the equation. Given
that ocean energy uptake is likely to be quite small in the short term, its
integration into national planning and management strategies, including MSP, is
not likely to be a priority compared to more traditional offshore activities or
even of offshore wind. Nonetheless, the adoption of a proposal for a MSP
Directive[93]
may help the situation to some extent. Similarly, the proposal for a revised
EIA Directive[94]
could assist in reducing some of the administrative burdens involved in scoping
out offshore marine energy sites. At the current deployment rate, however, knowledge
of the environmental impacts of ocean energy may not be so readily available or
extensive.

3.6.        EU's
right to act

The EU’s competence in the area of energy
is set out in the Treaty on the Functioning of European Union, Article 194 (energy),
Article 114 (internal market) and Article 192 (environment). While duly considering
their respective competences, action in this area by both the EU and Member
States would provide better opportunities to develop ocean energy resources and
make best use of R&D budgets.  Large scale investments for renewable energy
technologies are more feasible and cost-effective in EU-wide markets while
large R&D budgets can be mobilised and organised more effectively at
European level especially to enable the rapid development of key energy
technologies for which barriers, scale of investment and risk can best be
addressed collectively.

3.7.        Who
is affected?

Development of ocean energy will affect the energy
industry at all points of the supply chain, including device developers and
manufacturers, project developers, service providers and investors; marine
industries, including SMEs in areas such as shipbuilding, ports, marine
operations, mechanical, electrical and maritime engineering,  R&D and
logistics; consumers through changes in electricity prices (which will depend on
national support and on installed capacity); government bodies through their
involvement in the selection of optimal policy to support ocean energy, allocation of research funding, administrative
procedures and a broader engagement with  stakeholders; and other users of the
marine environment.

4.           Objectives

4.1.        General
objective

The general objective is for ocean energy
to contribute to sustainable economic growth, jobs and innovation in the EU in
line with the Blue Growth Strategy and the Europe 2020 Strategy, to assist in the
achievement of the EU's renewable energy and decarbonisation goals in the
medium to long term and to increase energy security.

4.2.        Specific
objectives

This initiative aims to bring together policy
makers, technology developers, investors and other stakeholders to foster the
competitiveness of the ocean energy sector through coordinated actions to
enhance technological innovation, including reliability and efficiency; to facilitate
the industry's access to finance and to improve administrative practices and environmental
monitoring.

4.3.        Operational
objectives

The operational objective over the short to medium term is to consolidate
R&D activities to enable cost reductions; improve the efficiency of
planning and licensing procedures; enhance synergies with other industries,
such as offshore wind, including on grid planning matters, and assist with
monitoring of environmental impacts as well as the application of environmental
protection legislation.

4.4.        Consistency
with other EU policies

This initiative complements the Europe 2020
flagship initiatives and the Blue Growth initiative that envisaged a follow-up
Communication on ocean energy in 2013. It is consistent with and complementary
to the Commission’s 2050 Energy Roadmap and to on-going initiatives on renewable
energy, including the SET-Plan, energy efficiency and climate change mitigation
and adaptation.

5.           Policy
Options

This section outlines three policy options
to tackle the challenges identified in Section 3.4. The table below summarises
these options and shows the link between the individual policy measures as a
response to the specific bottleneck together with their expected output to help
the development of ocean energy. The measures deemed most feasible would be
formulated in a Communication in the form of an action plan. Option 1 relies on
the current policy framework to support ocean energy while Options 2 and 3
suggest a series of non-legislative measures. Certain sub-options, such as
those relating to administrative or environmental guidelines, may be more
feasible at a later stage, as argued in the impacts section, but are included
here for the sake of completeness. An unambiguous statement of support for an
EU policy on ocean energy was called for by numerous stakeholders, including
the industry association, utilities and certain regional representations in the
Member States (e.g. in the UK and France).

Discarded Option: at the initial stages of the impact assessment preparations,
consideration was given to a review of EU energy and environmental legislation
in order to examine if there were any specific provisions that hampered the
development of ocean energy. Upon further internal reflection and discussions with
concerned Commission services, including in the IASG meetings, it was concluded
that pursuing this option was not feasible or desirable due to several reasons.
Firstly, this option would weaken the stability of the legislative framework,
which could be potentially detrimental to the renewable energy sector,
including ocean energy. Secondly, a wholesale review of existing legislation to
accommodate a particular sector was considered unwarranted and disproportionate.
Thirdly, any potential legislative review would have to be accompanied by
in-depth consultation and assessment that was beyond the scope of this impact
assessment. For these reasons it was decided to discard this option and instead
to examine the feasibility of alternatives such as developing guidance on the
application of certain directives.

               Options Bottlenecks || Option 1 - Current policy framework || Option 2 - Enhanced political and industry coordination || Option 3 - Targeted structural actions || Expected outcomes

Cost reduction and financial issues || Strengthening research coordination between  Member States through an ERA-net on ocean energy Raising awareness about EU funding opportunities || Industry roundtable with Commission facilitation  feeding into a Strategic Roadmap Reinforced support for ocean energy under EU R&D programmes (Horizon 2020, NER300) and European Investment Bank instruments Member State guidance on financial incentives || As in option 2 Possible inclusion in the SET-Plan and a European Industrial Initiative || Easier access to research funding and more efficiency in R&D, leading to acceleration of cost reductions Positive impact on the bankability of projects

Infrastructure || Investment in offshore grid infrastructure through Projects of Common Interest Continued support for the European Electricity Grid Initiative || Promoting a dialogue between ocean energy industry and grid planning authorities in the context of existing initiatives. Mapping out needs related to port services and infrastructure and other supply chain issues || As in option 2 Setting up a dedicated sector-specific platform to discuss strategic grid planning needs and non-grid related infrastructure needs (e.g. ports and vessels) || Shorter lead times, with a positive impact on the bankability of projects Spill-over economic and social benefits

Administrative barriers || Adoption by the Commission of a MSP directive Continued discussion on the Commission's proposal on a revision of the EIA Directive || Voluntary best practice sharing amongst MS  Identification of the specific needs as regards the integration of ocean energy into MSP. Promoting results of EU-funded projects. || As in option 2 Guidance document to assist with the implementation of Art. 13 of the RES Directive Specific guidance on MSP for ocean energy projects || Wider uptake of best practice in Member State planning and market support Shorter lead times, with a positive impact on the bankability of projects

Environmental issues || Research and monitoring of environmental impact through existing projects e.g., SOWFIA || Encouraging the sharing of environmental monitoring data Industry exchange of experience and best practice in conducting EIAs || As in option 2 Assessing need for ocean energy guidelines to promote sound implementation of relevant EU environmental legislation || Lower cost of environmental monitoring and facilitated compliance with environmental legislation compliance

5.1.        Option 1: Current Policy Framework ('business as usual')

This option entails a continuation of
policy initiatives at EU level that are already in place and which affect ocean
energy either directly or indirectly. No supplementary EU action in favour of
the ocean energy sector is envisaged.

EU funding for R&D projects
under the existing FP7 programme as well as the second call under the NER300
programme will continue. An ERA-Net on ocean energy is expected to be
established in 2013 which will strengthen research coordination and encourage
joint calls for funding amongst Member States thus capitalizing on national and
regional research efforts to accelerate ocean energy development. The Commission,
Member States and stakeholders will continue discussions on the future priority
areas for renewable energy under the new Horizon 2020 programme.

Option 1 sees the continuation of on-going
EU projects such as SI Oceans (2012-2014), which is, inter alia, examining
policy and other non-technological barriers that impede the growth of the ocean
energy sector and developing a market deployment strategy to accelerate the
deployment of wave and tidal devices. This activity will interface with the
2013 Industry Vision Paper which outlines a plan to develop a unified strategy
to manage technical, project-related and financial risks. Other relevant on-going
projects include the SOWFIA project dealing with research and monitoring of
environmental impacts. Additionally, the InnoEnergy KIC[95] is expected address ocean
energy following its inclusion in the 2012 Strategy and Roadmap for Renewable
Energies.

In terms of grid infrastructure
developments, the Northern Seas Countries Offshore Grid Initiative provides a
framework for regional cooperation to find common solutions to grid
infrastructure developments in the North Sea and Baltic. It promotes
coordinated planning and grid investment, albeit with a focus on the more
advanced offshore wind sector. The technological development needed for
realising the offshore grid is programmed in the framework of the European
Electricity Grid Initiative, which receives and will continue to receive EU
funding support through FP7 and Horizon 2020.

On spatial planning, the Commission's
proposal for a Directive aims to establish a framework for MSP and coastal
management in the form of a systematic, coordinated and trans-boundary approach
to integrated maritime governance. The Commission's proposal amending the
EIA Directive aims to strengthen the quality of EIAs as well as to simplify
the procedures and reduce unnecessary administrative burdens e.g., it proposes
a 'one-stop-shop' allowing for the coordination of procedures under the EIA
Directive. Both these proposals are currently going through the legislative
process in the Council and the European Parliament so their final contents and
potential impacts on the ocean energy sector are not yet known.

This option would not be in line with the
views expressed by a majority of respondents to the public consultation; only
4% considered additional action at EU level in support of ocean energy unnecessary mostly because they favour a more holistic
approach to energy generation without a support for any particular technology.

5.2.        Option 2: Enhanced political and industry coordination

The overarching measure envisaged in Option
2 is the setting up of an industry-led roundtable to promote innovation by
bringing together technology developers, researchers, utilities and investors
as well as Member States as appropriate. The Commission would play a
facilitating role. The objective would be to evaluate viable solutions to the
challenges facing the industry by formulating a cost reduction, financing
and technical innovation strategy. It would take the form of a strategic
roadmap which should also take into account matters relating to infrastructure
and administrative challenges and set out industrial development
milestones within a clear timeframe (up to and beyond 2020) as well as an
indicative implementation plan. The results of the SI Ocean project should
provide valuable input into this exercise.

To enable the integration of research
priorities identified in the roundtable, Option 2 would include awareness-raising
about upcoming funding proposals. This could be carried out, e.g., through
information workshops or presentations by the Commission to the roundtable. A
more informed and targeted use of EU funding based on specific stakeholder
needs will avoid a 'dilution' of efforts. The roundtable would also assess the
possibilities for private-public partnerships in R&D projects to share
investment risk. Technology developers would also be encouraged to publish
performance data as far as this is feasible to help investors make more
informed decisions. Implementation of the Atlantic Action Plan could also
provide opportunities to enhance cross-border cooperation, in particular
through European Territorial Cooperation programmes.

Properly designed revenue support
schemes send a strong signal to investors and are an important element in leveraging private investment in renewable
energy development. To support diversity in the renewable energy portfolio there
is a need for a differentiation in revenue support according to maturity.  Yet,
differentiated production-based support, taking account
of the emerging status of ocean energy technologies, is currently in place in only four Member States[96]. The Commission's formulation of clearer
guidance for Member States on how to determine the level of financial incentives
for different renewable energy technologies as announced in the 2012 RES
Communication is therefore an important component of Option 2. State aid rules,
including the guidelines on state aid rules for environmental protection[97] must be taken into account
in this context.

As existing initiatives to tackle the grid infrastructure
bottleneck do not yet take ocean energy needs into account, a more pro-active
dialogue between the ocean energy industry and the parties responsible for grid
planning is needed; this would also involve the offshore wind sector. To make its case, the industry must have a clear vision of its needs
in the short- as well as in the longer-term. As a first step, option 2
therefore proposes that the industry roundtable includes a thorough assessment
of grid-related needs. Other infrastructural needs
such as those pertaining to port services and the supply chain would also be
identified. Lessons learnt from the results of relevant on-going and recently
concluded EU-funded projects should provide valuable input into the process.
Particularly relevant here are SI Ocean, ORECCA, Waveplam, SOWFIA, EquiMar and
RES Legal[98].
Taking ocean energy into account in grid planning was highlighted as important
by several stakeholders in the public consultation, including by Member States'
regional representations.

In order to tackle the administrative
barriers, option 2 envisages voluntary best practice sharing amongst
Member States' authorities to make use of their experience on ocean energy permitting
and consenting practices. This would be part of the industry roundtable. Mainstreaming
of ocean energy -specific issues in existing fora such as Concerted Action
(CA-RES)[99]
is also possible. Additionally, as a part of the roundtable discussions the
industry could identify its specific constraints and needs in order to
encourage improved integration of ocean energy in national MSP. Site selection for ocean energy installations can be optimized through increased research,
monitoring, knowledge-sharing and better use of marine spatial planning which
will also help to ensure minimal negative effects on the surroundings and
ecosystems. The industry could also be encouraged to
exchange experiences and best-practices on EIAs.

The individual elements of this option were
sourced from consultations with stakeholders; in the public consultation
several stakeholders noted that it would be beneficial to emulate successful
practices in certain Member States and thus accelerate deployment.

5.3.        Option 3: Targeted structural actions

Option 3 builds on option 2 so as to
further strengthen industrial cohesion and Member State involvement. To
consolidate stakeholder cooperation and give the industry a robust support
framework, a European Industrial Initiative (EII) would eventually
be set up in agreement between the Member States, the Commission and the
industry.  This particular instrument was demanded by a wide range of
stakeholders including the industry association, concerned regions (e.g. Lower
Normandy and Scotland), the Member State ocean energy Interest group, utilities
and the academia.

The strategic roadmap outlined in Option 2
would form the basis for the development of an EII which normally requires the
elaboration of a technology roadmap and implementation plan. These forward-looking
action plans aim to align the efforts of the EU, Member States (in the context
of the SET-Plan Steering Group[100])
and industry to achieve common goals and accelerate the development of
technologies to enable them achieve larger market share over time.  As evidenced
by the experience from other sectors, such as wind and solar energy, an EII can
deliver progress in research and enhance access to finance through
risk-sharing, ultimately helping the technologies to become more competitive.
An EII could also provide a forum in which to communicate
the benefits of ocean energy as
a clean technology and contribute to increased public acceptance.

Regional cooperation on infrastructural
developments has a clear cost-cutting potential. Option 3 proposes the setting
up of a dedicated grid-planning platform, with the sole purpose of
advancing the grid-planning interests of the ocean energy industry. Other
infrastructural bottlenecks could be addressed through a sector-specific body
or sub-group tasked with identifying and assessing the specific needs and
exploring possible synergies with other sectors, notably offshore wind, in a
bid to rationalise costs and enhance efficiency.

A guidance document to address administrative
barriers could be considered in particular to assist Member States with the
implementation of Article 13 of the RES Directive. According to this provision,
Member States should ensure that national authorisation and licensing rules
applied to RES installations are "proportionate and necessary". Clearer
guidance would help Member States strike the right balance between the
obligations of public authorities and the interests of the different
stakeholders, including the ocean energy industry. As many of the challenges
relating to permitting and consenting procedures are ‘structural’, i.e., they
derive from specific jurisdictional features, the development of any form of
guidelines would have to be deeply rooted in national experience and developed
in close collaboration with Member States.

With regard to MSP, it may be
beneficial to build on option 2 (identification of specific needs and
constraints) and develop sector-specific guidelines for ocean energy in view of the potential
development of the sector. Given that the offshore wind sector encounters
similar challenges, the scope for coordination between the two industries in
identifying common challenges should also be considered.

As shown by the stakeholder consultation,
administrative delays can sometimes be linked to sub-optimal implementation of
EU environmental directives and overlap with various national administrative
procedures on permitting. To mitigate some of these administrative issues, it
may be appropriate to develop guidance to promote the sound implementation
of the relevant environmental directives such as the Marine Strategy
Framework Directive[101]
and Habitats Directive[102].

6.           Analysis
of Options

6.1.        Methodology
and limitations

This section analyses the economic,
environmental and social impacts of the 3 policy options. The analysis is
proportionate to the nature of the policy document proposed i.e., a
Communication. This analytical exercise has various limitations: (1) given that
all of the measures proposed in this impact assessment are 'soft', their
marginal impacts are difficult to assess and quantify; (2) empirical data and
evidence-based source material on ocean energy is limited due to its early stage of development and its current
low level of deployment; (3) there are many external factors affecting the industry's
development which are difficult to predict e.g., development of other RES, the
post-2020 RES framework, the evolution of fossil fuel prices, political
appetite to support RES in a period of economic downturn and the readiness of
the industry to cooperate and coordinate its activities.

Section 6.2 is purely qualitative.
It considers how the individual measures help to unlock the four corresponding
bottlenecks identified in Section 3. This evaluation will be presented in broad
terms; assessing the specific economic, social and environmental impacts of the
individual measures or sub-options in isolation is not possible as tackling one
bottleneck without addressing the others is not likely to deliver a tangible
effect. This qualitative evaluation will nevertheless feed into the final
comparison of options in Section 7.

Sections 6.3 to 6.5 will present an
additional, partially quantitative, assessment of the possible impacts
that a more concerted policy intervention in support of the ocean energy industry can have at the EU
level. To allow for this analysis, indicative market uptake scenarios were
developed for each policy option in an attempt to show the possible different
levels of uptake of ocean energy resulting from different levels of intervention. The possible
impacts were then extrapolated. 'Low market uptake' and 'high market uptake'
scenarios were established demarcating a range of installed capacity which is
theoretically possible to achieve by the measures proposed. Annex 10
provides a full explanation for the scenario modelling. The modelling is to be
approached as an illustration, complementary to the qualitative assessment of
individual measures. The three options and the market uptake scenarios are
tentatively linked based on the general assumption, supported by a wide range
of literature, that supportive policy intervention is likely to play an
important role in stimulating emerging industries, all other things being equal.
It is appreciated, however, that the supportive measures presented here can fail
to deliver increase in the uptake of ocean energy, if other landscape factors, such as the price of fossil fuels, are
unfavourable.

It should be noted that even the 'high
market uptake' scenario is very conservative; the available estimates from the
IEA and from certain academic sources present a much more optimistic picture,
predicting a steep growth of the industry in the next two decades similar to
that experienced by the offshore wind industry from 1990 - 2010[103]. However, founding
the scenarios on the development of offshore wind was considered overly
optimistic for several reasons, as explained in Annex 11. At the present stage
of development a more cautious approach seems appropriate, in line with the
assumptions of the 2050 Energy Roadmap.

6.2.        Analysis
of individual measures/sub-options

6.2.1.     Cost
reduction, financial and profitability issues

In Option 1, the effect on cost
reductions from the just-published Industry Vision Paper 2013 will not be
immediately felt but is a tangible step forward to collectively streamline and
rationalise industry efforts to accelerate market uptake. Once available, the
results of the SI Ocean project on market deployment and resource and
technology assessment are expected to pave the way for a more agenda-driven
approach to tackle certain bottlenecks, including cost reductions and
technological convergence.

R&D efforts will be strengthened
through the anticipated ERA-Net on ocean energy that will foster collaboration amongst more Member States. An
increased focus of research calls on larger projects, to optimise technologies
to increase capacity and improve reliability, could lead to greater convergence
and larger-scale pre-commercial deployment of ocean
energy arrays with increased capacity. If implemented
successfully, the three ocean energy projects under the NER-300 programme are expected to have a
positive impact on increasing investor confidence, improving and optimising
technological performance and reliability, lowering costs and managing risks. A
modest level of direct employment creation (manufacturing, installation and O&M)
could be expected as well as some scope for indirect job creation (increase in
opportunities for collaborative research).

The industry roundtable set up under Option
2 would be tasked with developing a strategic roadmap to improve
competitiveness. Although the precise impacts of this action cannot be
quantified, establishing a set of deliverables within a set timeframe will
stimulate the industry to tackle common challenges in a coherent way (e.g.,
through investment commitments and increased R&D coordination) thereby
avoiding fragmentation and duplication which should result in cost reductions
and increased investment in the longer term. Wider political buy-in and
commitment from both Member States and the Commission can help to achieve this
objective by mitigating some risk and facilitating the industry’s access to
finance. Setting up a roundtable will entail a level of administrative effort for
all parties involved. As R&D coordination and awareness-raising about
funding opportunities will be strengthened under this option, the expectation
is that political, investor and public awareness of the opportunities available
will increase as will confidence in the sector.

Issuing Commission guidance for Member
States with respect to financial incentives for different RES technologies
could reduce uncertainty and enhance project bankability, provide the industry
with incentives to become more competitive and help Member States keep overall
support costs under control. This is important, as supporting new high cost
technologies can lead to higher costs for consumers and/or taxpayers, at least
initially, and will therefore impact on public acceptance if not appropriately
managed. Guidance on authorisation procedures or MSP and including ocean energy in the debate on strategic grid
planning could result in lowering lead times in constructions and enhancing
synergies with other sectors which will contribute positively to market uptake
and to overall cost reductions and profitability.

Voluntary publication of performance data,
particularly when publicly funded, will have a positive impact on investors and
developers in that lessons learnt from device performance will contribute to
improved innovation, convergence and standard-setting. On the other hand,
developers may be reluctant to openly provide such information until device
performance and reliability is sufficiently improved or due to a reluctance to
share proprietary information.

The evaluation of the Intelligent Energy
Europe programme[104]
suggests that 'soft' measures similar to those outlined under option 2 can
effectively help to pull new energy technologies into the market.

Option 3: According
to several stakeholders, an EII would go the furthest in fostering
private-public partnerships, enhancing investor confidence and increasing
opportunities for collaborative projects between technology developers,
utilities and manufactures, all leading up to larger-scale commercial ocean energy deployment. For example, the Wind
EII, despite only being launched in 2010, has already yielded a number of
achievements including the establishment of the main EU Programme for wind
energy R&D and improved allocation of relevant EU and national public funds
on priorities identified by the sector (through TPWind). According to the EWEA
(2013)[105],
the Initiative contributed to technology cost reductions[106]. It seems reasonable
to assume, therefore, that cost reductions will be achieved through increased
design optimisation, increased economies of scale and lessons learnt from
production, constructions, installation, operation and maintenance fostered via
the EII. Increased market penetration of ocean energy will bring with it additional economic and employment activity.
However, an EII does come at a financial cost to implement as private and
public investments are required to support the programmed activities. It is not
possible to quantify the amount required for an ocean
energy EII at this stage but indicative costs for the
wind sector for the period 2010-2020 were estimated at €6 billion. Associated
administrative costs to set up, implement and monitor the EII are also
expected.

Increased awareness-raising of funding
opportunities in the context of the forthcoming Atlantic Action Plan and the industry
roundtable will provide a structured framework within which Member States could
leverage the benefits of inter-regional cooperation on joint projects.

6.2.2.     Infrastructure

A number of initiatives relevant to this
bottleneck are already implemented within the current policy framework (Option
1). The Northern Seas Offshore Grid is formally recognized as a one of the
priority corridors in the new TEN-E Infrastructure Guidelines. Its development,
including finding regulatory solutions for integrated infrastructure, is
supported through the cooperation of national governments, regulators, TSOs and
the Commission in the framework of the Northern Seas
Countries Offshore Grid Initiative. The technological
development needed to develop the offshore grid is programmed in the framework
of the European Electricity Grid Initiative and supported through the
successive EU RTD framework programmes (to be continued in Horizon 2020). Due
to early stage of development of the ocean energy industry and lack of visibility on roll-out of commercial scale devices,
the main focus of the above fora and initiatives is, however, on the
development of offshore wind so the impact on ocean
energy is negligible.

Option 2 enables
a better engagement of the ocean energy industry in the grid planning process. A thorough assessment by the
industry of its needs and its accommodation in existing bodies could be a
cost-effective way of addressing the bottleneck. Given the very nature of strategic
grid planning it can in any case be assumed that more cost-efficient solutions
will emerge if ocean energy
producers will consolidate their requirements and feed them into the on-going
grid planning process within existing structures. Discussions about appropriate
approaches towards anticipatory investments as e.g. planned within the Northern Seas Countries Offshore Grid Initiative may also provide scope to begin to anticipate ocean energy needs.

The proposed dedicated grid-planning
platform under Option 3 would send a stronger signal to investors and
other market players; the extent of the beneficial impact on supply chains and
financiers' interests is nevertheless difficult to predict. This option might,
however, not only involve additional substantial administrative costs, but
could also be less effective as to its outcome than option 2 as it would risk
creating a separate and competing forum. The setting up of dedicated platforms
and bodies for the promotion of ocean energy interests in the grid planning procedures, as well as the
development of guidance documents to complement certain EU directives (option
3) is likely to increase administrative burden at the EU and possibly also
at the national and regional levels. Option 2, which proposes to use
existing platforms and initiatives to a highest possible degree, could deliver
a better overall result.

In Options 2 and 3 a concrete
formulation of the industry's port and supply chain needs coupled with a wide
endorsement of the key players could stimulate the supply chain thereby
creating job opportunities and more economic activity. Sections 6.3.4 and 6.3.5
provide additional information on economic impacts.

6.2.3.     Administrative
barriers

The administrative barriers are partially
addressed within the Option 1 e.g., the proposed MSP Directive, while
sector-neutral does call for a consideration of renewable energy when
developing national MSPs. It can be assumed that administrative costs as a
proportion of the total project costs would decline over time even without
additional intervention as the relevant authorities become better acquainted
with the technology; nevertheless, the process could be expected to be
relatively slow. In the meantime, administrative hurdles would take their toll
in terms of longer construction times and undermining investor confidence.

In option 2 the exchange of best
practice in the framework of the roundtable is potentially an effective first
step to tackle administrative barriers. National authorities would be given
access to information about effective practices from other MS, which could
yield improvements over time. A structured exchange of views would in any case
be a necessary first step to enlarge the knowledge base before further steps
can be taken. Option 3 goes further to tackle some of the issues related
to the implementation of Article 13 of the RES Directive by proposing the
development of implementation guidelines. However, the current lack of
experience on the authorisation process for ocean
energy means that the guidance documents could not be
developed at this stage but rather once experience is available from several
commercial-scale plants. It remains to be seen whether these are indeed
necessary and when, if at all, they should be developed.

A similar guidance document could be
devised to address the sector-specific issues related to MSP to relieve the
institutional risk aversion stemming from limited familiarity with the sector.
In the case of MSP it would be necessary to re-evaluate the need for specific
guidance once the outcomes of negotiations on the proposed Directive are known.
Reducing the bureaucratic burden would facilitate the transition from pilot
projects to commercial deployment, provided the other bottlenecks are also
addressed. Consideration should be given to a stepped approach whereby a
decision on whether or not to provide explicit guidance is made in view of the
experience gained under option 2, and for MSP, the outcome of the Directive.

6.2.4.     Environmental
issues

Under option 1, the lack of data
regarding environmental impacts of installations would be partially resolved by
the gradual accumulation of data by the industry itself, but this implies a
substantial burden on the project developers. Sharing of privately acquired
data will likely be limited, and the process slow and inefficient. As for
issues relating to implementation of EU directives the revision of the EIA
Directive in particular should contribute to a simplification of the EIA
process and consequently reduce the costs borne by developers as well as
alleviate some of the administrative burden on the Member States authorities.
The SOWFIA project is expected to make a contribution by taking the stock of
the European experience of consenting processes, EIAs and SIAs relevant for
wave energy.

Under Option 2 a more integrated
approach at promoting data-sharing and collaborative working between the
industry and academia/research organisations could result in an accelerated
accumulation of information on the environmental impact of ocean energy devices. The industry would be
also encouraged to share experience and best practice in conducting EIAs which
would hopefully lead to better outcomes for the responsible authorities as well
as for the developers. Yet these actions would be undertaken by the
stakeholders on a voluntary basis and therefore their results are uncertain. The
evaluation of the Intelligent Energy Europe programme[107] has nevertheless
shown that best-practice exchange can be an effective means of tackling
non-technological barriers such as this one.

Option 3 proposed
the development of implementation guidance documents to complement the relevant
environmental directives. This measure was called for by several stakeholders
in the public consultation. Whilst these guidelines could potentially alleviate
the administrative bottlenecks by giving the authorities targeted information
and instructions, they involve a certain degree of additional administrative
costs to both Member States and the Commission. In addition, the current lack
of data on the environmental impact of ocean energy means that the guidance documents could not be developed at this
stage but rather once data is available from several commercial-scale plants.
It remains to be seen whether these are indeed necessary and when, if at all,
they should be developed. It may be more appropriate to opt for these measures
as a second step, following the measures outlined under option 2. The outcome
of the discussions on the revised EIA Directive, which ultimately has a higher
legal value than guidelines, will also have a bearing on this process.

6.3.        Economic
impacts

6.3.1.     Levelised
cost of electricity (LCoE)

This section draws on the market uptake
scenarios provided in Annex 10. It is assumed here that additional supportive
action could stimulate market uptake, which would lead
to accelerated cost reduction through learning effects and economies of scale. A
learning curve approach is used to determine the future cost reductions of ocean energy [108] to see how the different policy options would impact on the LCoE[109] of ocean energy over time. Learning
curves normally display the relation between costs and production/installed
capacity; the modelled market uptake scenarios in this impact
assessment will instead link installed capacity to time[110]. Learning rates (LR) range
from 0% to 20% in academic sources; at the same time it is noted that the cost
of small, modular products tends to decrease more rapidly than the cost of
large, non-modular units or plants[111].
Since tidal and wave energy technology cannot be considered particularly small
and modular, a learning rate of 5-10% is considered realistic for ocean energy investments. This is comparable
to learning rates for the development of the investment costs of offshore wind,
ranging from 2.5-10%[112].

As costs depend strongly on the numbers of
devices installed, a practical difficulty in discussing current costs is the
present industry status. The most robust evidence of costs and performance
comes from large-scale prototypes.[113] 
2.2 GW of ocean energy capacity
are expected to be installed in European waters by 2020 (based on NREAPs), and the
assumptions regarding the lowering costs due to learning experiences will therefore
be applied from that basis. The indicative modelling of LCoE reduction over
time based on the market uptake scenarios presented in Annex 10 is shown in the
figures below for both wave and tidal energy. Two different learning rates were
used to derive a range.

Figure 2: Wave Energy Levelised Cost of Electricity, source Ecorys (2013)
based on JRC (2013)

Figure 3: Wave energy estimated cost decrease under options 1, 2 & 3

Wave energy LCoE || Option 1 (€/kWh) || Option 2 (€/kWh) || Option 2 / Option 1 || Option 3 (€/kWh) || Option 3 / Option 1 || Option 3 / Option 2

2020 || 0,208 || 0,208 || || 0,208 || ||

2035 (LR=0,95) || 0,157 || 0.153 || 97% || 0,148 || 94% || 96%

2035 (LR=0,90) || 0,149 || 0.1411 || 94% || 0,131 || 88% || 93%

Figure 4: Tidal Energy Levelised Cost of Electricity, source Ecorys (2013)
based on JRC (2013)

Figure 5: Tidal energy estimated cost reductions under options 1, 2 & 3

Tidal energy LCoE || Option 1 (€/kWh) || Option 2 (€/kWh) || Option 2 / Option 1 || Option 3 (€/kWh) || Option 3 / Option 1 || Option 3 / Option 2

2020 || 0,151 || 0,151 || || 0,151 || ||

2035 (LR=0,95) || 0,127 || 0,123 || 97% || 0,119 || 94% || 96%

2035 (LR=0,90) || 0,120 || 0,114 || 94% || 0,106 || 88% || 93%

Ocean energy technologies are relatively young and therefore their technological
development and the related progress in cost reduction can be expected to be
faster compared to conventional technologies. Based on increasing fossil fuel
cost and decreasing technology costs, it can be assumed that the gap between
conventional and new renewable electricity generation technologies will
eventually close and a break-even point will be reached. When this will occur
depends to a large extent on the policy support provided[114].

Figure 6: LCoE of Ocean Energy v. Fossil Fuel Technologies: Ecorys (2013) based on JRC (2013)

Figure 6 above shows that in 2035 the cost
of electricity generated from wave and tidal sources will still be above the
electricity costs generated from fossil fuels but there is a converging
tendency. No definitive conclusion can be made as to when and how fast ocean energy can be cost competitive with
other forms of energy generation. It can be said, however, that option 3 could
lead to an accelerated LCoE reduction thus narrowing the gap between wave and
tidal with other alternatives such as offshore wind in the period up to 2035. The
accelerated cost reduction under option 3 is to be attributed primarily to the
establishment of an EII and inclusion of ocean energy in the SET-Plan, as well as to the alleviation of non-technological
barriers through other measures. According to the JRC analysis (2010)[115], the SET-Plan does
not only play a key role in reducing technology costs but also in ensuring
their availability and reliability. Option 1 shows that if there is no
additional action, the likelihood of ocean energy becoming cost competitive lies further ahead in the future. As
stated earlier, the approach in the impact assessment is conservative compared
to some other sources. Esteban and Leary (2011)[116] predict that wave and
tidal energy will be cost competitive around 2021, with an LCoE of around 0.06
€/kWh.

6.3.2.     Costs
for electricity consumers

Increasing the burden on consumers due to development
of renewable energies and of the relatively more expensive ocean energy technology in particular is an
important concern. Indeed the 'High RES' scenario on which Option 3 scenario is
based would entail a rise in electricity prices compared to the 'business as
usual' scenario. Only a minor part of this increase would, however, be directly
attributable to ocean energy
generation as this will only make a relatively small contribution to the energy
mix compared to other renewables, even in the most optimistic scenarios. It
should also be noted that electricity prices will rise compared to the status
quo even under the 'business as usual' scenario due to the need to replace generation
infrastructure in the next 20 years[117].
It is cautious to assume, however, that a higher installed capacity of ocean energy (option 3) could be projected
in a proportionally higher electricity price than lower installed capacity
(options 1 and 2), at least in the short term, all other things being equal.

Whilst the design of revenue support
schemes remains within the exclusive competence of Member States, the measures
proposed in options 2 and 3 could stimulate a wider uptake of ocean energy under schemes which follow 'best
practice in the design, structure and reform'[118]. In theory, such
support would be digressive (i.e. reduced with time) to reflect the cost
reductions resulting from lessons learnt, avoiding overcompensation. Assuming
that the measures proposed under options 2 and 3 are successful in promoting best
practice, the cost reductions resulting from accelerated learning would be
reflected in a proportional decrease in the support given. This would at least
partially offset the price increase caused by growth in installed capacity. In
the literature, it is indeed often argued that the increase in electricity
prices attributable to renewables is relatively minor, because of the
digressive nature of revenue support[119].
According to the Energy Roadmap 2050 "substantial RES penetration does not
necessarily mean high electricity prices".

The extent to which a wider uptake of
digressive support schemes would offset the rising electricity prices due to
increased proliferation of renewables is, however, uncertain. Taking a
conservative and precautionary approach, it is assumed, as mentioned
previously, that a 'high ocean energy uptake' scenario would lead to an increase in electricity prices
for consumers. The negative impact on consumers from higher electricity prices
is considered to be proportionally higher under Option 3 than under Options 1
and 2.

6.3.3.     Competitive
position of the EU in ocean energy

The development of a leading EU ocean energy industry can serve an international
market that could be worth up to €575 billion in the
period 2010–50, reaching up to €50 billion/year by 2050[120]. The size of the EU's share of this market will depend to some
extent on its ability to strengthen the link between the research community and
the industry. The EU possesses a strong research basis, as evidenced by the
fact that 44% of the marine energy-related publications have been released in
the EU between 2001 and 2010[121].
The amount of global ocean energy -related patents has been constantly growing (664% between 2001 and
2010) which is a higher rate than in any other marine sector[122]. Yet, the EU only
accounts for a 20% share of the patents registered[123].

Under Option 1, the EU could be expected to
maintain the current low rate of conversion of scientific research into
patented technology and could lose its share of the global market. More
conscious R&D programming with stronger industry involvement under Options
2 and 3 will allow the EU to move ahead and maintain or even increase its share
in the emerging global ocean energy market. This trend would be enhanced through the establishment of
an EII which will foster strong relationships between the industry and the
research community. The impacts of the proposed measures on export potential cannot
be easily quantified but they can reasonably be expected to be relatively larger
under Option 3 than under option 2. Enhanced cooperation in R&D activities
could potentially lead to competition problems between individual companies, however,
as borne out in the public consultation, the majority of stakeholders favour coordinated
collective approaches in recognition of the individual gains incurred through
increased efficiency of R&D spending.

6.3.4.     Supply
chains and ports, regional economic growth and development of clusters

The number of dedicated suppliers currently
remains limited due to the relatively small scale of the industry and uncertain
future growth. Large equipment suppliers can, however, develop their
capabilities and change their existing products/services to supply the ocean energy sector provided the market
grows in a similar fashion to solar and wind. With a leading position in the
high value/high complexity segments of shipbuilding and offshore platform
development, European-based equipment manufacturers would benefit from the
increased demand for components and specialised ships. The higher the uptake of
ocean energy the greater the
impetus for strong supply chains to develop. Option 3 offers a relatively more
robust support to the sector and therefore could be expected to provide the better
opportunities for suppliers, compared to Options 1 and 2.

Provided that options
2 and 3 lead to a faster development of ocean energy, positive consequences for ports in the affected areas can be expected.
According to the ORECCA Roadmap, opportunities exist to develop ports on the
coasts of Scotland and Ireland. Several ports have already transferred into
major hubs for servicing the construction process of offshore wind parks and
continue to play a role in providing O&M services.[124] A planned ocean energy project in West Normandy is expected
to help revitalize the port of Cherbourg; it is estimated that more than 150
SMEs will provide their expertise and around 17 000 jobs will be created by
2030[125].
Investments are also being made to expand various port facilities in the Orkney
Islands to service the needs of the offshore renewable energy sector. There are
obvious synergies with the offshore wind sector in this domain as the
construction and O&M needs of ocean energy can potentially be met by ports that are geared up for the offshore
wind sector[126].

From consultations with regional
representatives it is evident that ocean energy can play a very important role for local economies. The region of
Lower Normandy, general council of La Manche and the urban community of
Cherbourg, for example, collectively established a dedicated body for the
promotion of ocean energy.
Whilst the impact on regional and local economies is difficult to predict at
this stage, some estimates are available for the contribution of ocean energy into national economies. For
instance, it is estimated that if the UK successfully competes in the global
market then ocean energy could
contribute £1.4 - 4.3bn3 to UK GDP up to 2050[127]. Over time, it can be expected that supply chains become more
established, products and components, especially those that are large and
heavy, will be sourced regionally or locally to shorten lead times and reduce
costs. Local and regional industry can develop on the back of local ocean energy installations, and it may lead
to establishment of specific regional clusters of ocean
energy industrial and R&D activity as can be
observed in offshore wind sector.

6.3.5.     Synergies
with other sectors

Apart from building supply chains, future developments of the wave and tidal energy sector will be
linked with developments in other sectors such as offshore wind energy, oil and
gas, and hydropower. There will be significant opportunities for co-location of
technologies; e.g., for wave, tidal and offshore wind energy and utilizing
common platforms. Mutual learning processes, shared infrastructure and
innovations from a shared supply chain will be of great benefit to the future
expansion of both the ocean energy sector and related sectors[128].
Industry cooperation initiatives as pursued under
options 2 and 3 can also pave the way for increased cross-supply chain
cooperation and knowledge sharing with other marine sectors. Initiatives
previously taken in the shipbuilding sector, which now acts as a supplier to
many marine sectors including offshore energy, are a good example in this
regard.

6.3.6.     Benefits
of energy diversification

Electricity generation from ocean energy sources is less variable and
more predictable than other renewable energy sources such as wind and solar.
Benefits can especially be expected from combining ocean
energy and other variable RES such as wind due to the
complementarity of their output[129].
This has the potential to reduce the requirements for backup and reserve
capacity, allowing for higher RES production levels with less installed
capacity and reducing the amount of "spilled energy". For the UK this
effect has been quantified to yield annual cost savings of as much as 3.3% of
the annual wholesale cost of electricity under specific assumptions[130]. On a broader level, a more diverse mix of energy at EU level will
contribute to the goals of increasing energy security and a better integration
of the internal market.

6.3.7.     Administrative
burdens

The interventions proposed under option 2
and 3 are likely to lead to an overall decrease in administrative burdens
compared to the current policy scenario. In particular, the best practice
exchange on authorisation and licensing procedures proposed in Options 2 and 3,
and the guidance documents to complement the MSP and environmental directives
in Option 3 aim to facilitate the implementation of ocean
energy project by reducing red tape. This is
particularly important for SMEs, which constitute an important part of in
sector today. Due to their size and scarce resources, SMEs are badly positioned
to deal with long lead times, which substantially increase the costs of
projects and threaten their bankability.

Given the non-legislative nature of the
measures proposed, the additional administrative costs their implementation imposes
on stakeholders are expected to be small. Measures under option 2 and 3 are
predominantly voluntary and therefore stakeholders who judge the costs of
participation to be higher than the benefits can decide not to take part.
Whilst the organisation of roundtables, for instance, entails costs e.g., staff
costs, travelling expenses, etc., these are likely to be minimal compared to
the potential benefits that can be reaped through increased effectiveness in
R&D spending or reductions in financing costs, for example.

6.4.        Environmental
impacts

Like other renewable energies, ocean energy has the potential to contribute
to a reduction in greenhouse gas emissions (GHG). The real extent of ocean energy's contribution to GHG
reductions will depend on a variety of factors such as the carbon intensity of
the energy mix in a given country. Projected estimates for the CO2
avoidance potential of ocean energy vary greatly in the literature mainly because they apply different
methodologies and carbon intensity factors. These estimates are collated in Annex
12. The potential contribution of ocean energy to GHG reductions until 2035 under the 3 policy options proposed is
estimated here using the carbon intensity indicators of the Current Policy
Initiatives (CPI) scenario available in the Energy Roadmap 2050[131].

As shown in Annex 10, the total installed
capacity in 2035 is tentatively projected to be 4.3GW (option 1), 6.4GW (option
2) and 10.5GW (option 3). To estimate the CO2 abatement, assumptions
about the capacity factors were made[132];
two different capacity factors of 25% and 35%[133] are used to
illustrate the range of possible savings. The lifecycle emissions were not
included in the calculation as they are known to be very low; see Annex 12 for
more detail.

Figure 7: annual CO2 reduction in million tons/year using
capacity factors of 25% & 35%, source Ecorys (2013)

As shown in figure 7 above, the annual
range in CO2 reduction could potentially vary from 0.01-0.02 Mt/year
in 2012 to 1.09-1.52 Mt/year in 2020 (for all three options), to 1.47-2.05
Mt/year (option 1), 2.13-2.99 Mt/year (option 2) and 3.47-4.85 Mt/year (option
3) in 2035. The cumulative CO2 savings are presented in the table
below. The figures are derived by adding each of the individual annual
reductions expected per option from 2012 to 2035 as plotted in the figure above
(lower figure refers to 25% capacity factor; higher figure refers to 35%
capacity factor).

Figure 8: CO2 reduction
in million tons 2012 to 2035

|| 2012 || 2020 || 2025 || 2030 || 2035

Option 1 || 0.01 - 0.02 || 3.5 - 4.9 || 9.5 - 13.5 || 16.5 - 23 || 23.5 - 33

Option 2 || 0.01 - 0.02 || 3.5 - 4.9 || 10 - 14 || 18 - 25.5 || 28 - 39

Option 3 || 0.01 - 0.02 || 3.5 - 4.9 || 10.5 - 15 || 21.5 - 30 || 37 - 51.5

Difference 1&2 || 0 || 0 || 0.5 || 1.5 - 2.5 || 4.5 - 6

Difference 1&3 || 0 || 0 || 1 - 1.5 || 5 - 7 || 13.5 - 18.5

Besides contributing to decarbonisation,
all 3 policy options will have a proportionally positive effect on air
quality as SO2, NOx and particulate matter pollution is
progressively decreased through displacement of conventional energy sources.
This would have a positive impact on the health of the population.

Long-term monitoring data of the local ecological
impacts of ocean energy
installations are rather limited as there are few operating installations
worldwide. Available information derives mostly from the operation or testing
of single devices and is likely to be highly location-specific. A number of
projects financed by the EU, such as SOWFIA, Equimar, ORECCA and Mermaid have
carried out research in this domain but no definitive conclusions can as yet be
drawn. The majority of stakeholders participating in the public consultation
argued that the environmental impacts will be limited; it should be noted,
however, that a large proportion of these stakeholders have a vested interest
in the development of ocean energy.

The effects on sea-bed morphology, sediment
transport, species distribution, disturbance through noise and vibration of
turbines or the magnetic fields of power cables, entanglement of marine mammals
in mooring lines or rotating turbines, and collisions of birds with
infrastructure above sea-level should not be discounted. The impacts could grow
substantially as ocean energy
installed capacity increases progressively under each option. Annex 13 outlines
possible specific environmental impacts of individual ocean
energy technologies. Environmental impacts may also be beneficial,
as voiced in the public consultation. For instance, because ocean energy farms are likely to constitute
prohibited areas for commercial fisheries and navigation, they could prevent
over-fishing and trawling and thus help the regeneration of certain species as
well as provide a bio-diverse refuge around the foundations of the devices
(providing 'artificial reefs'). The displacement of GHG emissions will also
reduce acidification of the atmosphere and the seas[134].

In terms of the options proposed, options 2
and 3 will be more effective in tackling the related problems as they provide for
a more structured framework in which to exchange information and share
knowledge on environmental impacts. At the same time, all options require
compliance with existing environmental legislation. Options 2 and 3 will
enable a better understanding of how to optimally apply the relevant directives
that the ocean energy sector
develops in a sustainable manner.

6.5.        Social
impacts

The development of the ocean energy industry has the potential to
generate new commercial activity and create a significant number of jobs in
various sectors. Employment opportunities in the ocean
energy industry are expected to fall broadly into four
categories – project development, component manufacturing, project deployment
and operations[135].
The precise impact on employment in the period up to 2035 cannot be projected
with absolute certainty; as with any commercial activity real growth depends on
a number of economic, political and other factors. Indeed, while the impact of ocean energy on employment is generally
assumed to be positive, estimates about the magnitude of job creation provided
in the public consultation varied between thousands to tens of thousands.[136]

The differences in the figures may be
explained by the approach taken e.g., some sources distinguish between direct and
indirect jobs while others do not; others make no distinction between temporary
and permanent jobs. Furthermore, the lower jobs/MW ratio for the 2050 timeframe
may be explained by the fact that, after an initial rapid growth in (mainly
temporary) employment due to capacity build-up, (manufacturing and installation),
employment rates (mainly permanent jobs in e.g. operations and maintenance) are
expected to increase more slowly as the sector matures.[137] A tentative estimate
is made here about the level of permanent employment in operations and
maintenance in 2035 under the different policy options. A multiplier of 1.67
and 0.84 for direct and indirect jobs respectively is used based on the figures
provided by the EU-OEA, which distinguish between direct and indirect jobs. The
multiplier is comparable to that in the Irish and US studies referred to in Annex
14. [138]
The results are shown in the table below.

Figure 9: Permanent jobs forecast in 2035 (operations & maintenance)

|| Direct || Indirect || Total

Option 1 || 3.000 – 7.500 || 1.500 – 4.000 || 4.500 – 11.500

Option 2 || 4.500 - 11.000 || 2.000 - 5.500 || 6.500 – 16.500

Option 3 || 7.000 – 17.500 || 3.500 – 9.000 || 10.500 – 26.500

Difference 1&2 || 1.500 – 3.500 || 500 – 1.500 || 2.000 – 5.000

Difference 1&3 || 4.000 – 10.000 || 2.000 – 5.000 || 6.000 – 15.000

This is a rather conservative estimate
compared to figures supplied by the industry[139].
The resulting number of permanent jobs in 2035 can be compared with the levels
expected by Rutovitz and Atherton who estimate direct jobs at about
10.000-20.000 in a pro-renewable scenario[140].
As for jobs in construction and installation, which are considered to be more
temporary and tend to decrease in magnitude due to scaling up of technology and
efficiency gains, it is possible to estimate around 2 000 to 3 000 jobs under
option 1 and between 10 000 to 14 500 under option 3.

Given the currently limited installed
capacity and developing supply chains, the exact regional economic and
social impacts are difficult to predict. A positive impact could be expected to
take place in those EU Member States with the biggest ocean
energy potential such as Spain, Portugal, Ireland,
France and the UK, some of which currently suffer from relatively high
unemployment. While it is assumed that a large proportion of jobs created will
mainly affect coastal regions (port services, installation, operation and
maintenance), the regional impacts of job creation and on labour mobility will
ultimately depend on the specificities of individual regions, the skill base
present and the ability of the ocean energy sector to attract skilled workers. Job growth will not necessarily
be limited to the coastal regions; specialised manufacturing including
turbines, foundations, spare parts etc. can take place further inland, including
in industrialised countries which do not necessarily have a high, or any, ocean energy resource potential[141]. The diagram in Annex
15 clearly shows that the ocean energy supply chains are pan-European. Examples include the manufacture of
tidal turbines, hydro-turbines and steel spare parts for power plants in
Austria, wave power plants and generators in Germany and wave power attenuators
and over-topping devices in Denmark. Manufactures of water turbines, e.g.,
could increase their commercial activities by expanding their competences to ocean energy power plant spare parts.

Increasing reliance on indigenous ocean energy will have beneficial effects on
communities in the more remote parts of Europe such as the Canary Islands
(Spain) which relies almost exclusively on fossil fuel imports or the Orkney
Islands (UK) where 70% of electricity demand in 2012 derived from indigenous
renewable energy and is anticipated to rise to 100% by 2013. The importance of
such impacts will vary by region and will also depend on improvements in grid
infrastructure.

Overall, higher investments in ocean energy under option 3 in particular
and also option 2 can boost economic development and job creation in various
regions. Whilst it could be argued that the jobs created in ocean energy will to some extent displace
jobs in conventional electricity generation, it could be expected that the
overall effect will be positive as relatively labour intensive production of
electricity within the EU partially replaces imports of fossil fuels from third
countries. However, a quantification of net effects is beyond the scope of this
study.

As for education and training, it is
useful to differentiate between skills that are transferable between different
sectors such as offshore wind (e.g. engineering, naval architecture, financial
services) and those that are more ocean energy-specific (e.g., project management, quality assurance,
standard-setting, occupational health and safety). Under option 1, demand for
both general and specific skills may not be high enough to pose a significant
challenge to the more established sectors such as offshore wind. Under Option 2
and especially Option 3 an increase in demand for skilled engineers will
tighten the competition with offshore wind and possibly even oil and gas. At
the same time, a growth in the ocean energy sector could lead to an orientation of educational curricula for
specific renewable energy courses[142].
Ocean energy, as an emerging
industry could also absorb the jobs lost in declining sectors such as
shipbuilding and fisheries; existing skills which former employees of these
sectors possess can be highly relevant for ocean energy.

The offshore energy sectors, conventional
and renewable, are regarded as more dangerous than onshore ones due to adverse
weather conditions. It is possible to learn from and develop synergies between
emerging sectors such as ocean energy and more established ones such as oil and gas[143] on issues relating to
health and safety. Whilst potentially more workers will be exposed to
risk as the sector grows, this could be offset by the improvement of health and
safety standards resulting from accumulation of experience.

The progressive growth of the sector under
the three options will affect the level of public acceptance on matters
ranging from environmental impacts, competition for marine space as well as
concerns about the visual impacts. Early stakeholder engagement will ensure
that the impacts of ocean energy farms and potential conflicts arising from the use of marine space
will be properly addressed and reduced[144].
Wave and tidal devices, with their smaller profiles, will be less visible and
so less likely to provoke an adverse reaction than other onshore and offshore
renewable energy installations. Overall, public acceptance can be assumed to
decrease with increasing capacity, as the arrays take up more space. If the
negative impacts of ocean energy are perceived to be high and acceptance is low, projects could be
delayed or stopped altogether whereas if acceptance is high, ocean energy could fully develop its
economic potential as well as contribute to overall decarbonisation and climate
change mitigation. Option 3 is expected to be more effective at raising
awareness in particular as many of the initiatives proposed involve
mainstreaming of ocean energy
into the policy debate at EU level. Option 2 will also contribute to this
process to a lesser extent whereas under option 1, it will mainly be the
responsibility of the public authorities in individual MS to secure public acceptance
so awareness will possibly remain at a lower level.

7.           Comparison
of Options

This section will evaluate the options
against the objectives identified in section 4. The impacts of the options are
summarised in the table below. The scoring of option 1 is informed by the fact
that even if no additional action is taken, negative, neutral or positive
developments can be expected on the issues under consideration. The cost of
electricity, for instance, is expected to increase even if no additional action
to support ocean energy is taken.[145]

Figure 10: Comparison of options

|| Option 1 || Option 2 || Option 3

Economic Impacts

Levelised cost of electricity of ocean energy || + || ++ || +++

Consolidate R&D || 0/+ || ++ || +++

Cost for consumers || - || -- || ---

Competitiveness of EU || - || + || ++

Grid developments || 0 || +/0 || +/0

Supply chains and ports || 0 || + || ++

Synergies with other sectors || 0 || + || +

Administrative costs\* || - || ++/- || ++/-

Environmental Impacts

Climate change mitigation || + || ++ || +++

'Other' ecological impact\*\* || - || -- || ---

Treatment of uncertainty regarding environmental impact (best practice exchange) || 0 || ++ || +++

Facilitation of implementation of environmental legislation || 0 || 0 || +

Social Impacts

Job creation || + || ++ || +++

Creation of jobs in areas of high unemployment || + || ++ || +++

Education and training || NA || NA || NA

Skills mapping || 0 || ++ || ++

Health and safety || NA || NA || NA

Public acceptance\*\*\* || 0 || +/- || +/-

Key: + positive impact, ++ substantially
positive impact, - negative impact, -- substantially negative impact, 0 no
impact, NA – not applicable/very difficult to assess

\*    Whilst the proposed measures under options 2 and
3 would reduce the administrative cost over time, there are also costs
associated with the administrative effort necessary to implement these
measures.

\*\* The nature and extent of other ecological impacts
is highly technology specific, but it is prudent to assume that with ocean
energy proliferation, the risk of adverse ecological impact would increase.

\*\*\* Depends on the level of stakeholder engagement.

Effectiveness

As an emerging industry, the sector
requires stable and supportive policy so that it can compete with other energy
technologies on a level playing field. The first section of the impact analysis
evaluates the effectiveness of individual measures in addressing the specific
objectives in more detail. There are clear trends to be observed; whilst
certain relevant measures are currently under way under option 1 (e.g.
some funding allocated to ocean energy under FP7 and NER300, ocean energy ERA-net, EIA Directive revision, the EU infrastructure package), 
these address the bottlenecks only partially, and often with no consideration for
the specific needs of the industry. ocean energy is, for instance, currently not included in the SET-plan, which
implies limited visibility, political endorsement and access to finance.

Option 2
measures seek to tackle the bottlenecks predominantly through the establishment
of discussion/collaboration fora and best practice exchange, enhancing
industrial cohesion and tapping into the experience already acquired by the
industry and regulatory authorities. As argued and evidenced in Section 6, these
instruments are likely to promote positive developments relevant to the
fulfilment of the objectives. The magnitude of the positive impacts, however, depends
to a great extent on the willingness of the parties to cooperate. Option 3
consists of option 2 measures and additional structural interventions. There is
substantial evidence to suggest that the inclusion of ocean
energy in the SET-plan and the creation of an EII in
particular are potent instruments, likely to be effective in fulfilling the first
two operational objectives. The development of guidance documents to facilitate
the implementation of certain EU directives in the context of ocean energy project development could
tackle the administrative issues highlighted in the stakeholder consultation in
an effective manner; however, a sufficient amount of accumulated experience and
detailed scoping are essential prerequisites for their elaboration.

Given that option 3 contains additional and
more robust measures compared to option 1 and 2, it is likely to be most effective
in tackling the identified problems. However, due to practical constrains (such
as lack of available knowledge), some measures may be best pursued as a second
step. The development of guidelines to assist with the implementation of EU
environmental law, for example, may be best developed only after the specific
issues are known and discussed in the framework of the roundtable. Overall, a
stepped approach combining elements of options 2 and 3 may be more effective.

Efficiency

Taking no additional action on the EU
level, in option 1, would not involve any additional costs. Whilst the
sector would still probably continue to grow at a slow pace, much of its
economic potential would be foregone and therefore it cannot be considered the
most efficient option. Option 2 measures are likely to entail low costs;
whilst the establishment of roundtables and best practice/data sharing platforms
requires a certain effort, the associated administrative costs are not likely
to be substantial. Although the extent to which these voluntary initiatives
will achieve the objectives is uncertain, they are likely to yield some
improvements. The cost to effectiveness ratio of this option as a whole is
therefore likely to be favourable.

Option 3
includes more robust measures, the inclusion in the SET-plan and the creation
of an EII are likely to be instrumental in helping the industry attain greater political
saliency and achieve substantial technology cost reductions through
collaboration. Weighed up against the administrative costs, this is likely to
be a beneficial step to take. It was speculated that, overall, option 3 will
lead to a market uptake which is higher than that stimulated by option 2 and
option 1 measures in particular because recognition of ocean
energy as a strategic energy technology would inspire
more confidence in the sector and, as a result, the industry would attract more
investment. However, the investment costs related to an EII can be substantial.
Whilst a higher market uptake of an emerging, high-cost energy technology may
initially have a negative impact on the cost to consumers because of the
necessary financial incentives, this may be offset, at least in the medium
term, by the systemic savings enabled through the balancing benefits of ocean energy, health benefits and
environmental benefits.

From the perspective of efficiency it is
beneficial to use existing structures to the highest possible degree. Option 3
proposes to establish a dedicated body to advance the interests of the offshore
renewable industry related to grid infrastructure in the North Seas and in the
Atlantic. Given that effective bodies with an overlapping remit (such as the Northern Seas Countries Offshore Grid Initiative) already exist, this particular measure is not deemed efficient.

Coherence

Given the non-binding nature of all of the
measures assessed in the impact assessment, there are not likely to be any substantial
trade-offs between the social, economic and environmental impacts they are
likely to deliver. As such, the scope for a negative impact is limited.
Although the post-2020 renewable energy and decarbonisation agenda is unknown
at this stage, the political commitment to reduce CO2 emissions by
80% - 95% compared to 1990 levels by 2050 remains in place. The competition for
energy commodities is likely to grow as emerging economies develop and their
energy demand increases. Energy security and decarbonisation are therefore
likely to be important features of the future European energy policy framework.
The measures proposed under option 2 and 3 fit well into this context. All of
the instruments proposed here are also coherent with the current policy
framework.

Feasibility

Whilst some measures, particularly those
under option 2, are feasible in the short-term, certain measures from option 3
are only likely to be viable in the longer-term. To enable the establishment of
an EII, for example, the industry must have prepared a strategic roadmap
including milestones. The development of guidance documents to complement the
Habitats and the Birds directives, in turn, requires the availability of a
substantial body of knowledge on the environmental impacts of ocean energy. Similar considerations apply
to the drafting of guidance documents to complement the provisions of Article
13 of the RES Directive. The sector-specific guidance to complement the MSP
would likewise only be possible to conceive once the directive itself is
adopted, implemented and its real impacts are known.

Rather than deciding between option 2 and
3, it is recommended that elements of both are adopted with the exception of
the establishment of a dedicated strategic grid-planning body due to the
reasons stated above. Furthermore, it is recommended that option 2 measures (namely
the setting up of roundtables, mapping out of needs related to port services,
identification of the specific constraints related to MSP etc.) are adopted as
a first step and their results used as a basis for the stronger option 3
measures, which will help the industry to advance further. This could be done
by setting out a concrete plan of action in a Commission Communication that
will also set out the role that the industry, Member States and the Commission
can play to advance the ocean energy sector.

8.           Monitoring
and Evaluation

It is proposed that the Commission monitors and evaluates the progress of the ocean energy industry on
the basis of the following indicators. The data on installations, projects in
planning and all the other elements outlined below will be acquired through
surveys, which will be distributed to relevant stakeholders including
technology developers, project developers, investors and targeted research
institutions. The European Ocean Energy Association and the regular reporting
by Member States on their progress towards the 20% renewable energy target
should provide additional data. A first comprehensive evaluation could take
place either within five years of adoption of the Communication on Ocean Energy
or at the latest by 2020.

Figure 11: Core indicators to assess ocean energy development

Indicator || Relevance

Installed capacity || Technology commercialisation

Number of projects planned || Investor confidence and political saliency

Magnitude of investment into the sector || Perceived reliability, efficiency and cost-effectiveness of the technologies

Capital cost reduction || R&D efficiency

Capital cost reduction/R&D spending over a given period of time || R&D consolidation and efficiency

Number of collaborative undertakings || Industry cooperation and collaboration, synergies

Amount of Member State financial support for ocean energy, including differentiated revenue support schemes || Political saliency

Lead time length (i.e. the total time taken to get building consent and grid connection permits) || Efficiency of planning and licensing procedures

Proportion of the administrative cost compared to the total project costs || Efficiency of planning and licensing procedures

Availability of relevant baseline environmental data || Monitoring of environmental impacts

Time and resources spent satisfying the requirements of the EIAs || Optimising the application of environmental protection legislation

9.           Annex 1: Acronyms
& Glossary

Baseload Power                      Power
generation plants which do not change production to match demands and instead
operate constant production levels because it is more economical. Baseload
generators (e.g. nuclear and coal) tend to have high fixed costs and low
marginal costs

CAPEX                                   Capital
expenditure

Carbon Intensity
Factor          Measure of the amount of carbon dioxide (CO2) emitted per
megawatt-hour of electricity

Capacity Factor                       Ratio
of an actual output of a device over a period of time to its potential output
if it was operated at full nameplate capacity

EIA                                         Environmental
impact assessment

EII                                           European
Industrial Initiative

EMEC                                     European
Marine Energy Centre

ERA-net                                  European
Research Area Network

EWEA                                                European
Wind Energy Association

EU-OEA                                 European
Ocean Energy Association

FP7                                          EU
Seventh Framework Research Program

GHG                                       Greenhouse
gas emissions

Grant support                          Investment
incentive

GW                                         Gigawatt
(rate of energy output)

GWh                                       Gigawatt
hour (unit of energy)

IEA                                         International
Energy Agency

IEA-OES                                International
Energy Agency – Ocean Energy Systems

IMP                                         Integrated
Maritime Policy

JRC                                         Joint
Research Centre (of the European Commission)

KIC                                         Knowledge
and Innovation Community

LCoE                                      Levelised
cost of electricity

MSP                                        Maritime
spatial planning

MW                                         Megawatt

MWh                                       Megawatt
hour

NER300                                  New
Entrants Reserve Programme

NREAPs                                 National
Renewable Energy Action Plans

O&M                                       Operations
and Maintenance

OES-IA                                   Ocean
Energy Systems Implementing Agreement

OPEX                                                 Operational
expenditure

ORECCA                               Offshore
Renewable Energy Conversion Platform Coordination Action

RES Directive                         Directive
on the promotion of the use of energy from renewable
sources

RES                                         Renewable
energy sources

Revenue support                     Production-based
financial incentive

SET-Plan                                 European
Strategic Energy Technology Plan

SETIS                                     Strategic
Energies Technologies Information System

SIA                                         Social
Impact Assessment

SI Ocean                                 Strategic
Initiative on Ocean Energy Programme

SOWFIA                                Streamlining
of Ocean Wave Farm Impact Assessments

WAVEPLAM                         Wave
Energy Planning and Marketing

10.         Annex
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COM (2007) 72, 'A European Strategic Energy
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11.         Annex
3: Results of the Public Consultation

Introduction

Ocean energy is one of the focus areas
identified as a potential source of growth in the European Commission's Blue
Growth Communication[146].
It is widely recognised that developing the energy resource in our seas and
oceans could benefit European citizens by increasing energy security, enhancing
economic growth and job creation, and mitigating the negative impacts of
climate change. There are, however, significant investment costs and
bottlenecks that would need to be overcome. Ocean energy is believed to be able
to supply up to 15% of EU energy demand in 2050[147] but only 248MW[148] are currently
installed equivalent to approximately 0.02%[149].

This public consultation on ocean energy
was carried out in order to gain insight into the development of these energy
resources. The responses will serve as a basis for an assessment of the policy
options available to support this sector at the EU level. The consultation
process took place over two months (14 June – 14 September 2012); as of 9th
October 2012, 128 responses were received from a variety of stakeholders. The
key findings of the public consultation are reported below.

Section
1: Profile of respondents (Q1-Q4)

i)
Occupational profile of respondents

The private sector was well represented
among the respondents, with 34%. Electricity companies and technology
developers constituted the majority of this group. Civil society was
represented predominantly by environmental associations and individuals and the
public sector by public authorities at various levels. Research institutes
accounted for 23% of the respondents.

ii)
Respondents' place of residence

Stakeholders from 16 EU Member States and 4
non-EU states (Canada, Norway, Channel Islands and Australia) took part in the
public consultation. The largest proportion of the respondents (39%) came from
France, followed by the United Kingdom (11%) and Spain (10%). With a few
exceptions, there is a correlation between the respondents' place of residence
and the places where ocean energy has the greatest known potential, i.e. in the
countries bordering the Atlantic Ocean.

Section
2: Technical Assessment (Q5-Q9)

i)
Potential for growth

The responses indicate that there appears
to be a strong consensus that ocean energy does have a substantial potential
for development. Only 1% of respondents claimed that ocean energy does not have
a potential to contribute to the electricity supply mix in a significant way.
We have to take into account, however, that a large proportion of the
respondents consist of stakeholders, who may have a vested interest to
accelerate the development of the sector; it is natural that responses from
this group should be rather optimistic. Similar caution may also have to be
applied when interpreting other questions.

The respondents were asked to assess the
magnitude of the potential and the timeline over which they expect it to be
developed. Different approaches were adopted – whilst some respondents quoted
published studies, others supplied their own estimates. Some only specified the
expected timescale, for example stating that that substantial contribution from
ocean energy is likely to materialise from 2040 onwards; these are marked in
the table below with an 'x'. Predominantly, respondents have made their
forecasts in terms of installed capacity or percentage of EU electricity
production. The geographical scope also varied, with some giving their
assessment for a single country and others for the whole of Europe or the
entire world.

2,5-3,5GW -> 5-14 TWh/yr in France || Public sector

0,30% || || || 12% || Research institute

|| || x || || Environmental association

|| || x || || Environmental association

|| 24-70 TWh/yr (<2%) || || || Environmental association

|| 5% || || || Individual

x || || || || Individual

x || || || || Individual

|| || 100GW || || Individual

10-50MW || 100sMW || || || Individual

x || || || || Individual

|| x || || || Utility

|| 500MW || || 3GW || Utility

<1% || 3% || 10% || 10% || Utility

30GW || || 80GW || || Utility

2,5-3,5GW -> 5-14 TWh/yr || Utility

100MW || 1GW || 10GW || || Private company

3GW in France || || || || Private company

1,7GW || 5GW || || || Utility

x || || || || Private company (ports)

|| x || || || Individual

|| || 5 - 10% || || Private company (port services)

1GW || 10GW || 50GW || 100GW || Technology developer

|| 20GW || || || Technology developer

2GW || Matching offshore wind || || || Technology developer

16GW -> 80TWh || 66GW - > 300TWh || 120GW ->600TWh || 240GW -> 960TWh || Technology developer

189GW || Technology developer

1GW || 15GW || || || Technology developer

x || || || || Technology developer

300MW || 2500MW || 15GW || 100GW || Technology developer

1GW || 10GW || 50GW || 200GW || Public sector - energy agency

1GW || || || || Research institute

2,5-3,5GW -> 5-14 TWh/yr in France || Public sector

2,5-3,5GW -> 5-14 TWh/yr in France || Public sector

2,5-3,5GW -> 5-14 TWh/yr in France || Private company (shipbuilding)

2,5-3,5GW -> 5-14 TWh/yr in France || Research institute

|| x || || || Public authority

2,5-3,5GW -> 5-14 TWh/yr in France || Public authority

300MW || || || 2-3GW || Public authority

160-200MW || 1,6GW || || || Public authority

|| || <1% || || Research institute

30MW || 1GW+ || || || Research institute

120GW || Research institute

|| 50GW || || || Research institute

5GW || 6GW || 7GW || 8GW || Research institute

|| x || || || Research institute

1% || 5% || || 20% || Research institute

1GW || 10GW || 50GW || 200GW || Research institute/think tank

10MW || 100MW || 1GW || 3GW || Research institute/think tank

|| || || 337GW globally || Research institute/think tank

2,1 GW || || || 152 GW || Utility

|| 3,6 GW || || 188 GW || Utility

2,5-3,5GW -> 5-14 TWh/yr in France || Private company

The figure below shows some of the
stakeholders' estimates and the trends they forecast until 2050. For the sake
of coherence, only the estimates for EU-27 were considered; the estimates where
either the timescale or the quantity was not specified were omitted. Responses
were converted into the same units, i.e. equivalent installed capacity.

Unfortunately there is not enough data
available to make robust claims as to how individual stakeholder groups
perceive the potential of ocean energy. Generally speaking, however, private
sector actors appear to have a more optimistic outlook on the development of
ocean energy potential compared to other stakeholders. The forecast figures
provided by research organisations vary widely, with some being conservative
and others optimistic. Very few public authorities and civil society actors
provided quantified estimates.

On the whole, most stakeholders seem to
have a relatively cautious approach as to the potential of ocean energy until
2020; most estimated that the installed capacity would be up to 10GW. For the
period after 2020, however, the responses diverge into two directions – one
group of respondents believes that the contribution of ocean energy to the
energy mix will remain modest but the second group is more optimistic,
forecasting a steep growth and estimating that in 2050 energy from seas and
oceans could contribute up to 10-12% of projected EU electricity consumption,
the equivalent of approximately 150GW of installed capacity. Several
respondents stated that the speed at which the technology is taken up by the
market will depend on the policy support provided.

ii)
Technical barriers

In this section respondents were asked
about barriers to the deployment of ocean energy. Specific comments on the
stage of technology development as such were solicited in subsequent chapters.
Against this background, issues with grid connection were the most frequently
quoted barrier to the development of ocean energy overall, with 56% of
respondents indicating that this is a problem. 'Other' barriers (46%; viz.
table below for more detail), the lack of agreed standards and technical
specifications (39%), and lack of construction and installation vessels (31%)
followed as the most frequently mentioned barriers.

There appears to be no significant
divergence as to the perception of the relative importance of these barriers
among the different stakeholder groups. In all groups except the private
sector, grid connection issues feature as the most frequently mentioned
barrier.

Grid connection issues || Technical || Reliable low-cost connectors, HVDC systems to reduce power losses, prevention of corrosion, active power controllability, need of further R&D for 'intelligent' grid

Economic || Long lead times – "financing reinforcements in a timely manner is critical", deficiencies in all parts of the grid infrastructure (nodes, hubs, storage, interconnectors), lack of certainty - negative impact for the sector and sub-sector industries, reinforcements needed, current use of system charges in certain Member States, distribution of costs – "developers alone cannot carry the cost"

Administrative || Long and complex planning procedures, lack of experimental data from prototypes

Given the early stage of development of
ocean energy, it might perhaps be surprising that grid connection problems are
given so much attention. From the detailed responses, however, it becomes
apparent that stakeholders are conscious of the grid-related complications that
have impeded renewable energy projects, both onshore and offshore, in the past
. Even though ocean energy technologies are largely in the pre-commercial
stage, the lack of certainty and excessive costs of grid connection are already
seen to be a risk, eroding stakeholders' confidence and therefore slowing down
the progress of the sector.

According to one technology developer,
"having in place a clear and accessible process for guaranteeing grid
access to early stage ocean projects is a fundamental step, without which ocean
energy projects cannot progress. Experience in a number of Member States has
shown the process to gain access to grid can be long and complex and can
preclude ocean energy." The relativively small size and, in some
instances, remoteness of ocean energy projects make grid connections
economically unviable, according to one utility stakeholder who stated
that"major transmission projects are only viable at >500MW".

Among 'other' barriers, respondents
mentioned a wide variety of issues, some of a technical nature relating to the
devices themselves but most of the highlighted problems were administrative and
economic. The table belows shows a more detailed breakdown.

Other || Technical || Lack of proven designs, proving reliability and survivability of devices and materials, lack of availability of marine space, technology-related obstacles, variety of designs - lack of convergence, subsea converters and transformers

Economic || Insufficient cable manufacturing capacity, financing and insurance issues, electricity storage, investment security, inappropriate capital grants and revenue support, skill shortages, lack of research funds, weak supply chains, small SMEs in the sector - lack access to finance

Administrative || Public acceptance - problem with co-usage of marine areas e.g. for fishing, aquaculture, agreement between countries over deep sea offshore platforms

iii)
Grid planning

Regional cooperation on grid development in
sea basins is largely seen as beneficial (77%). While electricity from ocean
sources is not expected to be produced at a commercial scale in the short-term,
several stakeholders emphasised that integrated grid planning is crucial to
provide a basis for long-term industrial plans and that an integrated approach
will reduce costs. The North Sea offshore grid development is considered to be
a good example of successful cooperation, beneficial for ocean energy
development, and also because it facilitates supply and demand balancing.

iv)
Cost reductions

The vast majority of respondents agreed
that there is a clear scope for cost reductions in the installation and
maintenance of projects (80%). Only 3% of respondents believe that cost
reductions cannot be achieved over time and 17% gave no answer.

Respondents were also asked for their
assessment of the magnitude and the timeframe over which cost reductions will
take place, and about their drivers. A large proportion of respondents only
gave a generic answer, stating that as the technology progresses down the
learning curve, and economies of scale materialise, reductions in cost will
take place automatically. Several respondents argued that cost reduction is
likely to happen at a similar pace to the offshore wind technology, as ocean
energy technologies face similar constraints.

Among those respondents who gave a
quantified assessment, the average for estimated cost reduction is 50% over the
next two decades. The estimates of cost reduction potential, however, vary
widely as well as the assumed starting points, which are 250-480EUR/MWh for
power from wave technology and 200-330EUR/MWh for power from tidal stream
technologies. There is an agreement that costs can be reduced faster if R&D
is well supported.

v)
Synergies, multi-purpose platforms and multi-use of maritime space

Two distinct issues were under scrutiny –
the possibility for synergies in infrastructure use (e.g. multi-purpose platforms)
and the synergies in the use of marine space.

The majority of respondents agreed that
joint utilisation of infrastructure including multi-purpose platforms presents
a considerable opportunity for cost reductions in the longer term, but is not
likely to materialise in the short to medium-term. Respondents referred to the
risks involved (the development of offshore wind and ocean energy is at
different stages, which could imply problems with project financing) and, at
large, argued that priority should be given to the optimisation of individual
technologies. Many respondents also drew attention to the fact that the scope
for combined use of both infrastructure and marine space varies depending on
the technology combination considered – whilst wave energy and offshore wind
can co-exist, others may not (e.g. this may be more relevant for wave than for
tidal energy).

Despite the caveats, there is a broad
agreement that cooperation, integration and combined infrastructure use should
be actively promoted through policy. Effective Maritime Spatial Planning was
often mentioned as key to the selection of appropriate sites for ocean energy,
avoiding their interference with other maritime space use and helping to
identify synergies. Strategic Environmental Assessment, streamlined consenting
and leasing procedures and high-level grid planning are some of the other
policy/administrative tools suggested to promote efficient use of marine space.

Funding of multi-purpose platform projects
(similar to those which already exist under FP7 energy related and Oceans of
Tomorrow programmes such as the MARINA Platform and TROPOS), can, in turn, help
to champion infrastructure multi-use. One respondent suggested that
multi-purpose platform technologies could also be given priority in the
consent/lease round procedures.

Section
3: Research Needs (Q10-Q12)

i)
Research needs

There is a strong consensus, across all
stakeholder groups, that further research is needed to support the development
of ocean energy (81%). Given that the sector is in its infancy, a wide range of
issues were identified as deserving of new research. The table below details
some of the most often quoted areas and specific issues that need to be
targeted by R&D efforts.

Category || Examples

Resource mapping and ambient conditions || Meteorological and oceanographic modelling, impact of climate change, bathymetry, economic value of different marine space usages

Array and multi-device interactions || Wake effect, multi-purpose platforms

Environmental impacts || Baseline state of the environment, vulnerability of bird, fish and marine mammal species to habitat loss, collision risks, entrapment and disturbance/displacement

Technology optimization || Demonstration of prototypes, design optimisation (2nd and 3rd generation concepts), floating devices, mooring and foundations, materials, cost reduction, reliability, control systems

Enabling technologies || Grid connection, vessel design, submarine converters and transformers, storage

O&M improvements || Corrosion resistance, bio-fouling prevention, maintenance systems for osmotic power

ii)
Scope for coordination and cooperation

Several respondents mentioned that there is
a significant scope for collaborative working in research and development. A
common research agenda, whereby a comprehensive, planned programme would
converge around ocean energy rather than individual technologies would be
welcomed by 69% of respondents, 11% are against it and 20% gave no answer.

Respondents broadly agree that there is a
clear opportunity for efficiency gains and accelerated development from
cooperation, and it would be especially beneficial in certain domains such as
assessing the cumulative impact of ocean energy on the environment, various
trans-boundary issues and developing enabling technologies such as vessels etc.
Several respondents mentioned that the EU is uniquely positioned to coordinate
research in this area. Some, however, also pointed out the risks, including
possible competition problems and the danger of 'picking winners' on which research
efforts would be focused.

Respondents also called out for adequate
funding of research. According to one respondent, for example, EU research
spending on ocean energy is "relatively modest", however, "it
has the potential to have a disproportionately high impact by increasing
coordination, avoiding duplication, and ensuring complementarity across the
research already being funded".

International cooperation

The majority of respondents (68%) agree
that cooperation with international partners would have a beneficial impact on
the development of ocean energy, 12% are against and 20% gave no answer. The
most frequently quoted international partners include the USA, Canada,
Australia, Japan, South Korea and China. Non-EU European states, Norway and the
Channel Islands, were also identified as possible cooperation partners.

The main benefits include knowledge sharing
and resource pooling. Stakeholders have pointed out that because of the nature
of the sector (highly specialised, technical and capital-intensive)
international cooperation is a necessity and will create new opportunities in
Europe. One respondent drew attention to the risk of Europe losing its
technology lead and argued that Europe must maintain attractive conditions for
ocean energy development to maintain its international leadership.

Section
4: Training, Employment, Social Implications (Q13-Q14)

The overwhelming majority of respondents
claimed that the impact of ocean energy development on employment will be
positive and that jobs will be created in engineering, manufacturing and
shipbuilding, as well as in operations and maintenance and other areas. It was
mentioned that there may be some loss of jobs in the fishing and tourism
sectors due to ocean energy developments but that these are likely to be more
than offset by the gains in the new industry. The estimates with respect to the
magnitude of job creation vary between thousands to tens of thousands but some
have remarked it is too early to assess it at this stage.

Another positive social impact is related
to the distribution of the potential employment growth. Several respondents
have drawn attention to the fact that jobs are likely to be created in rural
coastal areas where opportunities are currently scarce, and would replace the
jobs that are disappearing in declining maritime industries. Ocean energy
could, therefore, contribute to the revitalisation and diversification of
marine economies.

There is a consensus that new technologies
will require new skills in the workforce. Whilst it might be possible to
recruit workers from shipyards or the offshore oil & gas and wind sectors,
new specialised qualification programmes are likely to be needed.

Section
5: Environmental Issues and Climate Change (Q15-Q16)

There appears to be a wide consensus among
the respondents that the overall environmental impact will be positive or
mostly positive (68%). Only 2% of respondents believe that the net
environmental impact will be negative.

The most commonly held view is that whilst
certain short-term local negative impacts on marine wildlife are to be
expected, these are likely to be more than offset by the benefits to marine and
land-based ecosystems. The geographical distribution of environmental costs and
benefits incurred through the development of ocean energy was highlighted –
whilst the negative impacts will tend to be local, the most important benefit
i.e. climate change mitigation will be global.

Respondents also drew attention to the fact
that the most potential for environmental harm exists during the early and
final stages of project implementation i.e. when sites are selected, during
construction and decommissioning. The underpinning proposition expressed by
many is that all forms of energy technology deployment have a negative impact
on the environment and ocean energy is superior in this respect compared to
alternatives.

The environmental costs and benefits
mentioned in the consultation are listed below:

Costs || Benefits

· Habitat change or destruction · Noise and vibration · Possible local extinction of fish species when tidal barrages are deployed · Bird collisions with infrastructure above water · Rotating turbines can be a risk to fish, marine mammals and diving birds · Entanglement of marine mammals in mooring lines or floating devices · Certain species respond to the magnetic field around electricity cables || · Prevention of trawling · Displacement of greenhouse gas emissions (associated reduction in temperature rise and acidification) · Artificial reefs locally enhancing biomass and providing a sanctuary for some species · Better monitoring and understanding of marine ecosystems · Most severe disruption likely to be short-lived (construction phase)

Several respondents pointed out that the
empirical evidence currently available regarding the environmental impacts of ocean
energy is limited. Single devices are likely to have negligible environmental
impact whilst whole arrays can have a more substantial effect. A more realistic
picture of the overall environmental impact ocean energy installations can have
will therefore emerge as more data from demonstration sites becomes available.

Thorough monitoring, data availability,
more research on the environmental impact of large arrays of devices, and
designation of protected areas in Maritime Spatial Planning have been mentioned
by respondents as some of the means that should be employed in order to
minimise the adverse impacts of ocean energy on the environment and to maximise
the benefits.

Climate
change

According to 53% of the respondents,
climate change will not be a significant impediment to the development of ocean
energy. 20% believe it is, and 27% did not respond to this question.

The majority view is that climate change
will not have a significant impact on tidal technologies, because the resource
is influenced by lunar patterns. Climate change will, however, raise the sea
level, which can to a certain extent affect wave height, tidal flow and
salinity gradient; glacial melt could also alter the flow of ocean currents.
Climate change impacts on weather systems and extreme events may also have
important implications on weather windows for deployment, operation and
maintenance of devices.

In order to minimise the negative impact of
climate change on ocean energy deployments, certain measures can be taken.
Respondents mentioned the need for careful planning, on-going monitoring and
continual improvement in the design of devices and operational strategies.

Section
6: Administrative Issues and Knowledge (Q17-Q23)

i)
Support for Ocean Energy development at EU level

There is a large majority opinion (82%)
that there should be a specific policy supporting ocean energy development at
EU level. 4% of respondents disagree and 14% gave no answer. There was no
significant divergence as to how this issue is perceived by different stakeholder
groups.

When asked to specify the nature of the
initiatives that should be undertaken, many stakeholders only offered general
statements, claiming that policy should focus on cost and risk reduction. There
is a broad agreement that at this stage of development, the public sector has a
key role to play and that a well-designed stable policy will be vital in order
to attract private investment.

Below are of the more concrete legislative
and non-legislative initiatives suggested by respondents, listed in the order
of frequency at which they were mentioned:

·
Enhanced and better coordinated research agenda,
along with adequate funding (including capital grants; FP7 and NER300 were
commended but need to be strengthened)

·
Clear declaration of support for ocean energy
(possibly including a roadmap) and stability of the policy environment

·
Revenue support (e.g. incentives for Member
States to support ocean energy, minimum feed-in-tariff guarantee, ensuring
support stability, more coherent or harmonised deployment of support schemes to
create a larger undistorted market etc.)

·
Sharing of best practice

·
Streamlining and harmonising of regulatory and
licensing procedures and reducing red tape

·
Strategic planning of grid infrastructure to
facilitate deployment

·
A plan to include ocean energy in Maritime
Spatial Planning initiatives

·
Indicative targets for the amount of energy
produced from ocean energy by 2030/2050

By far the greatest number of respondents,
across stakeholder groups, called out for enhanced efforts in research. It was
often argued that more funds should be made available, but also that research
in this domain should be better coordinated. One civil society stakeholder, for
example, suggested that "research and development incentives could run on
ten year funding cycles to help developers stay with the program over the long
haul" and that a "centralised "clearing house" organising
and commissioning R&D" could be set up to endure that efforts are
coordinated. More specifically, some respondents recommended that ocean energy
should be included in the Strategic Energy Technology plan (SET-plan) in the
future which would include a European Industrial Initiative for ocean energy.

Private sector actors in particular
demanded a clear demonstration of support for the development of ocean energy
technologies, as this can help to harness private investment. They also
frequently called out for enhanced revenue support. The level of revenue
support for renewable energy generation is determined by Member States, in line
with the principles of the Renewable Energy Directive[150], but some respondents
nevertheless suggested potential EU-level initiatives such as incentivising
stability, or proposing a minimum Feed-In-Tariff guarantee.

The main justification of policy support
for the sector at the EU level, quoted in the public consultation, is to
accelerate its development. This would bring a variety of benefits to EU
citizens, including environmental benefits and strengthening of climate
security, enhancement of energy security and would deliver economic benefits
including job creation and domestic investment. Potential for technology export
and the need to maintain Europe's 'first mover advantage' is often quoted as
one of the specific benefits as technologies reach commercialisation.

Of those who disagree (4%, consisting of
civil sector stakeholders, a business federation and one technology developer),
most claim that whilst the EU should support the development of renewable
energy, there should be no specific provisions for particular technologies. One
respondent claimed that sufficient policy support is already in place.

ii)
Administrative constraints

The most often quoted administrative
constraint impeding the development of ocean energy is the length and
complexity of authorisation/certification/licensing procedures in individual
Member States, regions or areas, with 55% respondents of the total claiming it
to be a major obstacle. This is then followed by a lack of qualified staff and
the length and complexity of licensing across borders, with 26% and 27%
respondents respectively highlighting it.

In the space respondents were given to
specify the issues, many have described the licensing procedures as
"excessively lengthy, "onerous" and "complex". In many
Member States several authorities are involved in the consenting procedures.
This slows down and complicates the process and, as a consequence, increases
project costs. Stakeholders have drawn attention to the fact that there are
issues with interpretation of existing EU legislation. Local authorities can
sometimes be cautious in awarding authorisation over possible infringements of
environment-related directives. The Environmental Impact Assessment
requirements also appear to present a significant challenge for developers.
Whilst no transnational ocean energy projects exist at the moment, conflicts
might arise in the future if projects have trans-boundary impacts and more
coordination will be required.

There is a wide agreement that
one-stop-shop licensing (Scotland and Denmark were quoted as successful
examples) presents an optimal solution. A clear legal framework, particularly
with respect to revenue support is seen as essential. Pre-permitted areas for
ocean energy development were also suggested as a possible solution to the
licensing problem. Stakeholders also call for a more integrated pan-European
planning framework.

The lack of trained qualified personnel is
a limitation at both the administrative and technical levels. Insufficient
administrative capacity was particularly highlighted as a problem, as it
contributes to the delays in the licensing process. According to several
stakeholders, civil servants often lack the technical understanding of ocean
energy and the capacity to deal with existing EU legislation. Bottlenecks with
regards to availability of technical staff are not foreseen in the short-term,
nevertheless several respondents called for additional training schemes and for
resolution of some of the issues related to compatibility and transferability
of national professional qualifications.

Among 'other' issues, respondents often
mentioned the following:

·
Problems arising from conflicting legislation
(the rigorous application of the Habitats Directive was particularly mentioned
as an obstacle encountered in the permitting process)

·
Problems with project financing and insurance –
the administrative requirements are often too stringent for emerging
technologies

·
Public acceptance

·
Excessive administrative requirements and lack
of certainty with respect to market support policy

·
Length and complexity of authorisation for port
infrastructure

·
Burdensome Environmental Impact Assessment and
Strategic Environmental Assessment requirements

Stakeholders
also proposed solutions to some of the aforementioned problems. The issues with
project financing and insurance can be partially alleviated through wider
availability of data proving performance and reliability of the technology. In
order to resolve problems related to public acceptance, it is essential that
the permitting procedure is transparent and that stakeholders are properly
consulted to ensure acceptance. This is seen as particularly important in the
case of the fishing industry.

iii)
Spatial planning

The inclusion of ocean energy in national
maritime spatial planning is seen as very important (68%). 6% disagree and 26%
gave no answer.

A small group of respondents argued that
competition over maritime space will be negligible because it is abundant and
various maritime activities can co-exist without impeding one another. The
majority of stakeholders, however, were of the opinion that conflicts could
occur with other maritime activities, especially with fishing, military uses,
shipping and nature conservation.

The suggestions for mitigation of these
conflicts primarily included effective Maritime Spatial Planning but also other
measures such as long-term planning and transparency in the permitting process,
early consultation, awareness and information campaigns, multiplatform
solutions, designation of large zones for ocean energy to offer flexibility in
array locations and compensation schemes. The potential for conflict with
fishermen featured as the most prominent but it was also pointed out that ocean
energy developments could offer a career change opportunity for fishermen,
whose livelihoods could be in danger as a result of overfishing. The 'sanctuary
effect' that ocean energy development could also offset some of the loss of
fishing space through faster recovery of fish stocks.

iv)
Data

Resource mapping

73% of respondents believe that there is a
need for mapping of available resources for different ocean energy
technologies, of which 55% think it should be done at high resolution and 18%
think it should be done at low resolution. With respect to who should carry out
the mapping there is a large consensus (69%) that it should be done by the
public sector. Only 17% think it should be done by the private sector.

Other data

66% of respondents believe that other data,
such as data about ecosystems, the seabed, environmental impact and climate
change are needed to ensure the sustainable development of ocean energy.
Bathymetry data and ecosystem data were the two types of information most
frequently mentioned. The data is deemed essential in order to inform Marine
Spatial Planning and Environmental Impact Assessments. The need for localised
climate change scenarios and information on local economic activity was also
brought up by respondents.

Several respondents argued that data
collection should be undertaken on a large-scale, collective basis – requesting
developers to collect detailed environmental data for each project is seen as
excessively burdensome and inefficient.

12.         Annex
4: Overview of Recent EU Funded Ocean Energy Projects

Over the last twenty years, the EU has
injected around €133 million into R&D and pre-commercial demonstration
projects for ocean energy. This
figure refers to total amounts up to June 2012, including the 'Ocean of
Tomorrow' cross-cutting ocean-wind projects but not including projects under
negotiation. ocean energy projects
have also featured in the Intelligent Energy Europe programme as well as under
the more recent NER-300 funding programme.

I.          6th and 7th
Research Framework Programmes (FP6 & FP7)

Many of the projects under FP5 (1998-2002)
were mainly focused on single devices design for wave and tidal energy. Those
under FP6 (2003-2006) moved on to single devices lab tests while the more
recent FP7 (2007-2013) projects exhibited a bigger focus on device arrays
together with more cases of Member State coordination. An example of the latter
is the EQUIMAR project on testing and evaluation of ocean
energy extraction devices, which saw collaboration
amongst 11 Member States. EquiMar delivered a suite of protocols (general
principles to allow fair comparison of marine energy converters testing and
evaluation procedures) in order to measure and compare the dozens of tidal and
wave energy devices, proposed locations and management systems currently
competing for funds, so governments can invest in the best ones and get marine
energy on tap fast.

In 2007, one research project was funded on
new components and concepts for ocean energy converters and another on pre-normative research. In 2008, 4
demonstration projects on innovative full size systems were supported. The 2012
call supported 2 projects aimed at demonstrating the first ocean energy farms. The 2013 calls target
design tools, enabling technologies and underpinning research to facilitate ocean energy converter arrays.

There are also 2 Future Emerging Technology
(FET) projects on ocean energy supported
by the FP7-ENERGY programme focused on salinity (CAPMIX - funding € 2.4m) and a
complete new technology for wave energy conversion (POLYWEC - funding € 2.1m).
FET projects refer to those where the time to bring the technologies to market
is projected over a much longer time frame.

Ocean Energy RTD and Demo-projects funded under FP6
and FP7

Year || Topic description || Project Names || EC contribution €

2007 || New components and concepts for ocean energy converters || CORES || 3.449.588

Pre-normative research for ocean energy || EQUIMAR || 3.990.024

2008 || Ocean: demonstration of innovative full size systems || PULSE STREAM 1200 STANDPOINT SURGE             WAVEPORT || 20.694.439

2010 || Capacitive mixing as a novel principle for generation of clean renewable energy from salinity differences || CAPMIX || 2.400.000

2012 || Demonstration of first ocean energy farms || TIDES AEGIR || 23.002.736 (under negotiation)

2012 || New mechanisms and concepts for exploiting electro-active Polymers for Wave Energy Conversion || POLYWEC || 2.100.000

2013 || Design tools, enabling technologies and underpinning research to facilitate ocean energy converter arrays || DTOcEAn || 4.100.000 (under negotiation)

The Oceans of Tomorrow Initiative

Joint-calls under "The Ocean of Tomorrow"
initiative were also carried out in 2010 and 2011. This is one of the key
initiatives regarding the seas and oceans in FP7. It concerns the launch of
cross-thematic calls for proposals on major sea-related challenges. Those calls
are implemented jointly between different themes of FP7 because they address
major cross-cutting issues that require cooperation between various scientific
disciplines and sectors. This approach will help deliver sustainable and
innovative solutions to fully reap the potential of the oceans. While there was
no joint call in 2012, the common effort was pursued with the launch of 9
topics dedicated to support of the Marine Strategy Framework Directive. One
project in 2010 covered aspects relating to the impact of marine renewables in
the ocean.

In the 2011 call, 3 projects on multi-use platforms (integrating
renewable energy) were funded. Although the primary focus of the work in the
Ocean of Tomorrow projects is not on ocean energy conversion, the results might be beneficial for the ocean energy sector too. The 3 projects are:

H2OCEAN - development of a wind-wave
power open-sea platform equipped for hydrogen generation with support for
multiple users of energy - is a project aimed at developing an innovative
design for an economically and environmentally sustainable multi-use open-sea
platform. Wind and wave power will be harvested and part of the energy will be
used for multiple applications on-site, including the conversion of energy into
hydrogen that can be stored and shipped to shore as green energy carrier and a
multi-trophic aquaculture farm.

MERMAID - Innovative Multi-purpose
off-shore platforms: planning, design and operation - will develop concepts for
the next generation of offshore platforms which can be used for multiple
purposes, including energy extraction, aquaculture and platform related
transport. The project does not envisage building new platforms, but will
theoretically examine new concepts, such as combining structures and building
new structures on representative sites under different conditions.

TROPOS - Modular Multi-use Deep Water
Offshore Platform Harnessing and Servicing Mediterranean, Subtropical and
Tropical Marine and Maritime Resources - the key objective is the development
of a floating modular multi-use platform system for use in deep waters, with an
initial geographic focus on the Mediterranean, Tropical and Sub-Tropical
regions but designed to be flexible enough not to be limited in geographic
scope. The modular TROPOS multi-use platform system is able to integrate a
range of functions from the transport, energy, aquaculture and leisure sectors.

Other FP7 projects not exclusively focused on ocean energy

ORECCA - Off-shore Renewable Energy
Conversion Platforms Coordination Action – the key objective was to create a
framework for knowledge sharing and to develop a roadmap for research
activities in the context of offshore renewable energy (wave, tidal and wind).
It published a comprehensive European Offshore Renewable Energy Roadmap in
September 2011 together with a number of sub-function reports. The Roadmap's
objective is to guide policy makers to support the accelerated development of
the offshore renewable energy sector in Europe, to identify synergies, to
overcome barriers and facilitate significant cost effective commercial scale
deployments by 2030.

MARINA Platform - Marine
renewable integrated application platform - aims to bring offshore renewable
energy applications closer to the market by creating new infrastructures for
both offshore wind and ocean energy converters. It addresses the need for
creating a cost-efficient technology development basis to kick-start growth of
the nascent European marine renewable energy (MRE) industry in the deep
offshore a major future global market. It will establish a set of equitable and
transparent criteria for the evaluation of multi-purpose platforms for marine
renewable energy.

IOWAGA - Interdisciplinary Ocean wave
for geophysical and other applications - proposes a systemic investigation of
ocean waves for improving the ocean surface wave compartment of Earth system
models. The project will integrate existing and new wave-related observations
from multiple sources, including remote sensing, seismic records, and in situ
measurements, from climate and global scales to coastal scales and single
events. This modelling tool will include multiple applications to geophysics at
large and will have other practical applications with associated societal
benefits (ocean energy planning and management, marine safety, pollution
mitigation &).

RTD and Demo-projects not exclusively focused on ocean
energy funded under FP7

Duration || Project Name & Website || Acronym || EC Contribution €

2010-2011 || Off-shore Renewable Energy Conversion Platforms Coordination Action http://www.orecca.eu/home || ORECCA || 1.600.000

2010-2013 || Marine renewable integrated application platform http://www.marina-platform.info/ || Marina Platform || 8.700.000

2010-2013 || Interdisciplinary Ocean wave for geophysical and other applications http://wwz.ifremer.fr/iowaga/ || IOWAGA || 1.099.040

|| Joint call "The ocean of tomorrow": Multi-use offshore platforms: || || 5.000.000 (\*14.887.256)

2012-2014 || http://www.h2ocean-project.eu/ || H2OCEAN ||

2012-2015 || http://www.mermaidproject.eu/ || MERMAID ||

2012-2015 || http://www.troposplatform.eu/ || TROPOS ||

\* These projects are funded for a total of €14m of which
€5 derive from the RTD-Energy budget lines and €9.9m from the RTD-Transport
lines.

Supporting projects funded under FP7

FP7 does not only finance research and
demonstration projects, but it also supports 'non-technological' projects which
can be beneficial for the innovation process in a certain sector, like training
of people, opening access to research infrastructure, or stimulating Member
States working together via an ERA-NET. Some of these projects are listed
below:

An ERA-NET to support the coordination
of national research activities is foreseen under FP7 in 2013. The objective of
the ERA-NET scheme is to step up the cooperation and coordination of research
programmes in the field of ocean energy at national and/or regional level in the Member or Associated
States through the networking of organisations involved in the support to ocean energy R&D. The coordination
offered by this ERA-NET will allow collaboration and alignment with the work of
the EERA Ocean Energy Joint Programme and will enhance synergies and raise the
scattered profile of a sector having difficulties to build a mature industrial
and commercial status.

WAVETRAIN 2 - the overall objective was to create a pool of specialised wave energy
research professionals to support an emerging industry in a field with a very
strong anticipated growth and no dedicated existing training curriculum.
Although most jobs can be done being a trained engineer in one of the adjacent
fields, the existence of interdisciplinary skilled researchers trained in
direct connection to the technology development is vital for successful
development. In the predecessor, almost all fellows where immediately absorbed
by industrial players in the field or continued research in the host
institution.

MARINET is an EC-funded network of research centres and
organisations that are working together to accelerate the development of
marine renewable energy technologies - wave, tidal & offshore-wind - by
offering periods of free-of-charge access to their world-class testing facilities
and conducting joint activities in parallel to standardise testing,
improve testing capabilities and enhance training and networking.

Supporting projects focused on ocean energy funded
under FP7

Duration || Project Name || Acronym || EC Contribution €

2008-2012 || Networks for Initial Training for wave energy research professionals: http://www.wavetrain2.eu/ || WAVETRAIN 2 || 3.579.635

2011-2015 || Marine Renewables Infrastructure Network for Emerging Energy Technologieshttp://www.fp7-marinet.eu/ || MARINET || 8.999.997

2013 || ERA-NET: supporting the coordination of national research activities of Member States and Associated States in the field of ocean energy || Call closing on 28/02/2013 || 2.000.000 (maximum funding)

II.        Intelligent Energy - Europe
Programme

The Intelligent Energy Europe programme[151], launched in 2003,
supports EU energy efficiency and renewable energy policies, with a view to
reaching the EU 2020 targets. 8 projects supporting ocean
energy and offshore wind energy were funded for a total
of €11.3m of which the EC contribute €8.2m. These projects support actions
creating favourable market conditions, shaping energy policy development and
implementation, and preparing the ground for investment.

SI Ocean, SOWFIA
and WAVEPLAM are the 3 ocean energy -specific projects that were funded for a total EC contribution of
€2.7m (total eligible costs is € 4m).

SEANERGY 2020 focused on Maritime Spatial Planning and addressed both the
offshore wind and wave/tidal energy sectors although with a stronger focus on
offshore wind. The EC contribution for this project was €0.9m (total eligible
costs €1.2m).

WINDSPEED, GP
WIND, OffshoreGrid and NorthSeaGrid are the 4 projects
focused on offshore wind for a total EC contribution of €4.6m (total eligible
costs for all 4 projects €6.1m).

Projects supported by the Intelligent Energy Europe programme
having a maritime dimension

Project title || Strategic Initiative for Ocean Energy

Acronym || SI OCEAN

Website || www.si-ocean.eu

Duration || 2012-2014

Description || Aims to deliver a common strategy for ensuring maximal wave and tidal installed capacity by 2020 – paving the way for exponential market growth in the 2030 and 2050 timeframe. Identify and develop a wide consensus on the most effective way to tackle the key barriers to delivering a commercial wave and tidal energy sector in Europe. A key focus will be on increasing participation and input from the commercial sector, namely utilities, large industrials and technology developers.

Expected Results || The project is expected to deliver practical recommendations on removing the barriers to ocean energy. The project is based around three focus areas: Substantiated Wave and Tidal Energy Production Maps and Projections: the first validated trans-Europe assessment of actual resource production potential using a harmonized methodology and integrating existing resource assessments maps, projections of wave and tidal energy production in 2020, 2030 and 2050. This will underpin the Market Deployment Strategy. Strategic Technology Agenda: a thorough assessment of the current status of technology development and cost of energy, identifying development priorities and quantifiable scope for future cost and risk reduction. Market Deployment Strategy: identification of primary barriers to market growth and delivery of recommended policy and strategic initiatives to tackle them. It will cover issues such as how to target financial support and resources to accelerate technology commercialization, using best practice examples from key Member States to improve and standardize regulatory and administrative frameworks across Europe, key recommendations on pan-European strategic supply chain & infrastructure planning. Stronger and unified network of key stakeholders, by generating new partnership opportunities whilst ensuring accurate and representative results from the project.

Project title || Streamlining of ocean wave farm impact assessments

Acronym || SOWFIA

Website || www.sowfia.eu

Duration || 2010-2013

Description || Aims to facilitate the development of European-wide coordinated, unified and streamlined environmental and socio-economic Impact Assessment (IA) tools for offshore wave energy conversion developments. Regional coordination via the SOWFIA project collaboration will enable the exchange, sharing and transfer of IA and policy experience and associated knowledge and good practices.

Expected Results || Compilation of the pan European experience of wave energy development approval process. Identification of barriers and accelerators in existing IA processes in EU member states. Recommendations for approval process streamlining to help remove legal, environmental and socio-economic barriers to the development of offshore power generation from waves.

Project title || Wave Energy Planning and Marketing

Acronym || WAVEPLAM

Website || www.waveplam.eu

Duration || 2007-2010

Description || To develop tools, establish methods and standards, and create conditions to speed up the introduction of ocean energy onto the European renewable energy market, tackling in advance non-technological barriers and conditioning factors that may arise when these technologies are available for large-scale development.

Main Results || Detailed picture of the state of the art of wave energy, identifying existing technologies and those that were at demonstration phase. Survey of the non-technological barriers and conditioning factors that may hinder the large-scale development of wave energy and recommendations to minimise their effects. Methodology for site selection, based not only on the wave resource but also other important issues, such as e.g., conflicts of interests (interaction with competing uses), environmental impact, availability of grid connection points, harbours, shipyards, tidal and currents level, ocean bottom bathymetry and soil, etc. Guideline for implementing wave energy projects oriented to the decision makers, promoters and investors will be published, tested and presented to these key actors. Networking and dissemination activities

Project title || Delivering Offshore Electricity to the EU: spatial planning of offshore renewable energies and electricity grid infrastructures in an integrated EU maritime policy

Acronym || SEANERGY 2020

Website || www.seanergy2020.eu

Duration || 2010-2012

Description || To formulate concrete policy recommendations on how to best deal with maritime spatial planning (MSP) and remove MSP obstacles that stand against the deployment of offshore power generation.

Main Results || Selection of good examples of national MSP practices, taking into account (1) policy and legal framework; (2) information management mechanisms; (3) permitting and licensing procedures; (4) stakeholders consultation; (5) sector conflict management practices; (6) cross-border cooperation and (7) MSP implementation and enforcement. Analysis of the different international MSP instruments and their compatibility with the implementation of offshore renewable power generation sources. Policy recommendations for developing existing, and potentially new, international MSP instruments and for promoting a more integrated and coordinated cross-border MSP, taking into consideration offshore generation technology and related grid infrastructures. Case study illustrating the benefits of integrated strategic maritime spatial planning and cross-border coordination. Acceptance of the results by the main target groups and stakeholders, including regional and national authorities, EU decision-makers, planners and regulators, offshore generation developers and other users of the sea. Communication and dissemination: transfer of best practices towards the countries where MSP has been less developed.

Project title || Spatial Deployment of Offshore Wind Energy in Europe

Acronym || WINDSPEED

Website || www.windspeed.eu

Duration || 2008-2011

Description || To identify a roadmap for the deployment of offshore wind power in the Central and Southern North Sea basin. The roadmap included (a) the definition of an ambitious but realistic medium-term offshore wind energy target, (b) the identification of risks and barriers, and a set of coordinated policy recommendations for the deployment of offshore wind in the above-mentioned sea basin.

Main Results || Developed an overall integrated approach to assess the realistic deployment potential for offshore wind energy across 5 countries in the Central and Southern North Sea basin, taking into account the spatial, policy and growth as well as market and grid integration constraints. Developed a cross-border (planning) tool to assess the potential for deployment of offshore wind energy in relation to other sea use functions and costs for the Central and North Sea countries. Provided input to on-going European initiatives with respect to development of RES, in particular offshore wind energy.

Project title || Good practice in reconciling onshore and offshore wind with environmental objectives

Acronym || GP WIND

Website || www.project-gpwind.eu

Duration || 2010-2012

Description || To address barriers to the development of onshore & offshore wind by developing good practice in reconciling objectives on renewable energy with environmental objectives and actively involving local and regional communities.

Main Results || Building evidence-based support for the design, planning and implementation of projects which are sensitive to environmental and community concerns Increasing the consenting rate for on- and offshore wind projects, and reduce the processing period for applications Securing endorsement of project outputs by participating partner administrations, and commitment to adopt relevant good practice.

Project title || Regulatory Framework for Offshore Grids and Power Markets in Europe: Techno-economic Assessment of Different Design Options

Acronym || OffshoreGird

Website || www.offshoregrid.eu

Duration || 2009-2011

Description || OffshoreGrid was a strategic project which developed a design for the offshore grid in Northern Europe along with a suited regulatory framework considering technical, economic, policy and regulatory aspects. OffshoreGrid provided inputs to the preparation of the Commission's "Communication on Energy infrastructure priorities for 2020 and beyond - A Blueprint for an integrated European energy network"- COM (2010) 677 final.

Main Results || A selection of blueprints for an offshore grid in the Baltic and North Sea taking into account a) the costs of the various options, b) their socio-economic value, c) the regional/ internal power market designs and d) the regulatory framework for the remuneration and operation of the grid, based on: Detailed offshore wind power scenarios with generation time series for Northern Europe and high-level renewable energy and grid scenarios for the Mediterranean region. Interaction of different design drivers for an offshore grid and the associated costs and interaction of power prices, market design and energy economic parameters in a market comprising the regions around the Baltic and North Sea. Discussions and consultations on the clustering of wind farms at hubs versus radial connections to the shore, the possibility of teeing in offshore wind farms to planned interconnectors, and the integration of wind farm hubs with interconnectors in meshed grids.

Project title || Offshore Electricity Grid Implementation in the North Sea

Acronym || NorthSeaGrid

Website || tbd

Duration || 2013-2015

Description : || The lack of development of an offshore grid is due to a variety of barriers including the regulatory frameworks, incompatibility of support schemes, lack of political support, difficulty to attract financing, and uncertainty of risk. The project will be centred around three case studies for an offshore interconnection integrating offshore wind energy, located in the North Sea. These case studies will be chosen through close cooperation between the consortium, the European Commission and the Northern Seas Countries Offshore Grid Initiative, ensuring they are both relevant to the advancement of development of an offshore grid, and that they support the work being performed by the relevant decision makers. The barriers investigated will focus on the domains of financing, regulation and risk, areas which have not yet been covered by previous or on-going actions. Conclusions and policy recommendations will be drawn explicitly for the different case studies with the goal to facilitate efficient and timely project implementation. In a second step the effort will be made to draw some general conclusions that also hold for projects in other areas, such as the Baltic Sea or the English Channel.

Expected results: || A detailed cost inventory for each concrete case study, for different scenarios, and a calculation of the benefits of the interconnection Different models for cost and benefit allocation to different countries and stakeholders, such as project developer, TSO, etc.; including the identification of risk and the financial effects of this risk, with respect to each stakeholder Evaluation of the compatibility of support schemes and the regulatory frameworks in the different countries, with the proposed interconnection design Discussion surrounding the political barriers identified and solutions to overcome them. The results will be consolidated in specific recommendations for European and regional policy

III.       New-Entrants Reserve (NER300)

NER300 is a grant scheme to support carbon
capture and storage demonstration projects and renewable energy innovative
projects, including ocean energy. It was established by Article 10a(8) of the revised Emissions
Trading Directive 2009/29/EC and further developed through Commission Decision
2010/670/EU (NER300 Decision). Managed jointly by the European Commission, the European
Investment Bank and Member States, it will use the money raised from the sale
on the carbon market of 300 million allowances (rights to emit one tonne of
carbon dioxide) in the New Entrants’ Reserve (NER) of the EU Emissions Trading
Scheme. NER-300 funding will leverage a considerable amount of private
investment and/or national co-funding across the EU. The European Investment
Bank plays an important role as it monetises the allowances and manage revenues
and provides technical and financial due diligence assessment of the projects.

On 18 December 2012[152], the Commission
awarded over €1.2 billion to 23 innovative renewable energy technology
projects, including 3 for ocean energy. The funds were raised from the sale of
the first tranche of 200 million allowances. They will help to lower costs,
manage risks and tackle knowledge barriers. The chosen projects had to fulfil
strict eligibility criteria and show they are financially and technically
robust, with the potential to be scaled up and replicated. The deadline for
entry into operation of the projects is the end of 2016. Projects will receive
funding annually based on proven performance. In the case of the renewable
energy projects, this will depend on the amount of clean energy produced each
year for the first five years following entry into operation. The three ocean energy projects awarded funding are
listed below:

Selected projects funded from stu

Kyle Rhea - United Kingdom

An array of tidal turbines with a nominal capacity of
8 MWe will be built in the narrow strait between the Isle of Skye and the Scottish
mainland. The project consists of four tidal energy twin rotor turbines; each
one rated at 2MWe, and is based on a significant scaling up of the operational
test turbine, which has a three-year track record in Northern Ireland. Maximum
NER-300 funding: €18.4m

Sound of Islay - United Kingdom

An array of ten 1 MWe grid-connected tidal current
turbines will be installed in deep water in the Sound of Islay off the west
coast of Scotland. The tidal turbine technology will have a 3-bladed, seabed
mounted design to deliver the overall net capacity of 10 MWe. Maximum NER-300
funding: €20.7m

Ocean West Wave - Ireland

A project located off the west coast of Ireland plans
to demonstrate the potential of scaling up wave energy. Six wave energy capture
devices will be placed at a depth of 15 metres. A prototype has already been
tested at the European Marine Energy Centre (EMEC) in Orkney. The results of
recent design changes and tests of an improved 800 kW design will feed into the
final design, installation and operation of the project. Maximum NER-300
funding: €19.8m

13.         Annex
5: Detailed Description of Ocean Energy Technologies[153]

Wave Energy
Converters (WECs)

Wave energy is
harnessed from the movement of a WEC device, which can be floating on the
surface or moored to the ocean floor. Several different techniques and designs
are currently under development.

Attenuators are floating devices that are aligned perpendicular to the waves. These devices capture energy from the relative motion of the two arms as the wave passes them. || ||

Surface point absorbers are floating structures that can absorb energy from all directions. They covert the motion of the buoyant top relative to the base into electrical power. || ||

Oscillating wave surge converters are near-surface collectors, mounted on an arm which pivots near the sea bed. The water particles in the waves cause the arm to oscillate and generate power. || ||

Oscillating water column technologies convert the rise and fall of waves into movements of air flowing past turbines to generate power. || ||

Overtopping devices have a wall over which waves break into a storage reservoir which creates a head of water. The water is released back to the sea through a turbine to generate power. || ||

Submerged pressure differential devices capture energy from pressure change as the wave moves over the top of the device causing it to rise and fall. || ||

|| ||

Tidal stream devices || ||

Horizontal axis turbines work in a similar manner to wind turbines. The turbine is placed in the water and the tidal stream causes the rotors to rotate around the horizontal axis and generate power. || ||

Vertical axis turbines work in a similar manner to horizontal axis turbines but the tidal stream causes the rotors to rotate around the vertical axis and generate power. || ||

Reciprocating Hydrofoils have a hydrofoil attached to an oscillating arm. The lift caused by the tidal stream causes the arm to oscillate and generate power. || ||

Venturi Effect Devices are devices which funnel the water through a duct, increasing the water velocity. The resultant flow can drive a turbine directly or the induced pressure differential in the system can drive an air turbine. || ||

A tidal kite is tethered to the sea bed and carries a turbine below the wing. The kite ‘flies’ in the tidal stream, swooping in a figure-of-eight shape to increase the speed of the water flowing through the turbine. || ||

The Archimedes Screw is a helical corkscrew-shaped device (a helical surface surrounding a central cylindrical shaft). The device draws power from the tidal stream as the water moves up/through the spiral turning the turbines. || ||

Tidal barrage designs

Tidal Barrages involve building a dam across an estuary with a high tidal range. The tidal barrage plant generates energy by allowing water to flow in and/or out of the estuary through head hydro turbines. ||

Bunded tidal barrages operate in a similar way to conventional tidal barrages but do not fully obstruct an estuary. ||

Single Basin Offshore tidal lagoons would be built on tidal flat in areas with high tidal ranges. ||

Multiple Basin Offshore Tidal lagoons are built on tidal flat in areas with high tidal ranges. ||

OTEC operating principles

These are two main conversion systems – open
and closed. In the closed cycle a working fluid is pumped through a heat
exchanger and vaporised; the steam then turns a turbine. The cold water in the
deep sea then cools the steam back to a liquid state. In an open system, the
warm surface water is turned to steam in a pressurised vacuum chamber. The
steam is then, again, used to drive a turbine and cooled back to liquid by the
cold water below the surface.

Several problems have been encountered in the
development of this technology such as biofouling and corrosion. The process
can, however, have useful by-products such as hydrogen, lithium and other rare
elements which potentially enhance its economic viability.

Salinity gradient
operating principles

Two different concepts are under development to exploit the energy
from a salinity gradient – reversed electro-dialysis (RED) and
pressure-retarded osmosis (PRO). RED uses the chemical potential difference
between fresh water and salt water to generate voltage across a membrane. PRO
uses naturally occurring osmosis, and exploits the pressure that is exerted by
the fluid on the membrane.  For seawater and freshwater the osmotic pressure
difference tends to be between 2.4 to 2.6 MPa (24 to 26 bar), depending on
seawater salinity.

14.         Annex 6: Resource Location

European wave energy potential[154]

Wave energy is the result of interaction between wind and ocean
surface. The best waves in terms of energy content occur between 30° and 60° latitude. Wave energy availability varies seasonally.

European tidal stream potential

Tidal currents result from the rise and fall of the tide; they are
influenced by seabed bathymetry and by the shape of the coastline. Prominent
locations in Europe include UK, Ireland, Greece, France
and Italy. The best resource tends to be located in channels between islands
where the current velocity is the highest. Over 106 promising

locations have been identified, mostly in the UK (CEC, 1996 in IPCC,
2011).

European tidal barrage potential

Tides are generally regular and predictable. They are driven by the
graviational forces between the Earth, Moon and the Sun; whilst in some
locations only one tide per day occurs, in others there are two high tides and
two low tides a day. The timing and magnitude of a tide is dependent on the
shape of the shoreline and the seabed but also on the global position. Bays and
estuaries are the best locations, the Severn Estuary in the UK, for example,
offers a tidal range of 15m. Although the global
theoretical potential is significant, only a fraction of the possible locations
are suitable for energy exploitation.

Global
OTEC potential

Ocean thermal energy is originates as solar energy. It is a
relatively low-energy resource compared to waves and tides but it is widely and
continuously available, which makes it suitable for base-load power. A minimum temperature
difference of 20°C is considered necessary to operate an OTEC power plant, over
a distance of less than 1000 m. The resource is available in certain Outermost
regions.

European salinity gradient potential[155]

Whilst resource maps are not
readily available for this resource, substantial resources in Europe are located
in Norway as the fjords alow for exploitation of a steep salinity gradient.
Significant potential also exists in the Netherlands. The picture below
features the 30-km long Afsluitdijk dam; its salinity-gradient energy potential
is comparable to a 221m high Hoover Dam in Nevada.

15.         Annex
7: Current deployment and planned capacity

Total Current
Installed Capacity in Europe

Location || Total Currently Operational (kW)

EMEC (Orkney, Scotland) || 7800

UK (except EMEC) || 1620

Portugal || 700

France & Pacific Territories || 0

Scandinavia || 200

Ireland || 0

Spain || 500

||

TOTAL || 1082

UK - European Marine Energy Centre
(EMEC):

Type || Name of device || Company || Technology stage || No. of devices installed || Installed capacity (kW) || Year of installation

Wave || Pelamis P2 || E-ON || Pre-commercial (Testing) || 1 || 750 || 2010

Wave || Pelamis P2 || Scottish Power Renewables || Pre-commercial (Testing) || 1 || 750 || 2012

Wave || Penguin || Wello Oy || Pre-commercial (Testing) || 1 || 500 || 2012

Wave || Oyster 800 || Aquamarine Power Ltd || Pre-commercial (Testing) || 1 || 800 || 2011

Wave || Oyster 801 || Aquamarine Power Ltd || Pre-commercial (Testing) || 1 || 1000 || 2015

Tidal || HS1000 || Andritz Hydro Hammerfest || Pre-commercial (Testing) || 1 || 1000 || 2011

Tidal || DeepGen || Tidal Generation Ltd || Pre-commercial (Testing) || 1 || 500 || 2010

Tidal || ReDAPT || Tidal Generation Ltd || Pre-commercial (Testing) || 1 || 1000 || 2013

Tidal || Open Centre Turbine || Open Hydro || Pre-commercial (Testing) || 1 || 250 || 2008

Tidal || AR1000 || Atlantis Resources Corporation || Pre-commercial (Testing) || 1 || 1000 || 2010

Tidal || SR250 || Scotrenewables Tidal Power Ltd || Pre-commercial (Testing) || 1 || 250 || 2011

Wave || Seactricity Float || Seatricity || Pre-commercial (installing) || 1 || 800 || 2012

Tidal || Voith || Voith || Pre-commercial (installing) || 1 || 1000 || 2011

Tidal || Blue TEC || Bluewater || Pre-commercial (Contracted 2013) || 1 || 1000 ||

Tidal || Kawasaki || Kawasaki Heavy Industries Ltd || Pre-commercial (Contracted 2013) || 1 || 1000 ||

Tidal || Alstom || Alstom || Pre-commercial (Testing) || 1 || 1000 || 2014

Wave || AWS lll || AWS || Pre-commercial (Testing) || 1 || 2500 || 2015

Wave || Pelamis P2 || Vattenfall || Pre-commercial (Contacted 2014) || 1 || 750 || 2014

TOTAL (currently installed ) || 7800 || kW || || || ||

TOTAL (expected) || 8050 || kW || || || ||

UK (outside EMEC):

Type || Name of device || Company || Technology stage || Installed capacity || Capacity planned || Installation year

Tidal || Technology Neutral || SSE Renewables || Pre-commercial || || 30 || 2018 onwards

Tidal || Technology Neutral || SSE Renewables || Commercial || || 170 || 2022 onwards

Tidal || Open Hydro || JV Cantick Head Tidal Development Ltd || Pre-commercial || || 25 || 2018 onwards

Tidal || Open Hydro || JV Cantick Head Tidal Development Ltd || Commercial || || 175 || 2022 onwards

Tidal || SeaGen S 2 || SeaGeneration (BroughNess) Ltd || Commercial || || 100 || 2018 onwards

Tidal || Technology TBC || Scottish Power Renewables || Commercial scale project || 1 || 95 || 2017 onwards

Tidal || SRT 1001 || Scot Renewables Tidal Power || Saltire Lease || 1 || 30 || 2014-15 onwards

Tidal || Technology Neutral || Meygen || Commercial || || 400 || 2015-16 onwards

Wave || Aquamarine, Oyster || JV Brough Head Wave Farm Ltd || Pre-commercial || || 40 || 2018 onwards

Wave || Aquamarine, Oyster || JV Brough Head Wave Farm Ltd || Commercial || || 160 || 2022 onwards

Wave || Pelamis P2 || E.ON || Pre-commercial (Testing) || || 50 || 2020 (date under review)

Wave || TBD || E.ON || Pre-commercial (Testing) || || 50 || 2020 (date under review)

Wave || AWS lll || JV Costa Head Wave Company Ltd || Pre-commercial || 2500 || 10 || 2018

Wave || AWS lll || JV Costa Head Wave Company Ltd || Commercial || 2500 || 190 || 2022

Wave || technology TBC || Scottish Power Renewables || Commercial scale project || || 49,5 || 2017 onwards

Wave || Ocean energy Buoy || OceanEnergy Ltd || Pre-commercial (Testing) || || ||

Wave || BOLT Lifesaver || Fred. Olsen Ltd || Pre-commercial (Testing) || 240 || || 2012

Tidal || Evopod E35-01 || Oceanflow Development Ltd || 1/4 scale mono-turbine demonstrator || || 0,035 || 2013

Tidal || Evopod TE70-01 || Oceanflow Development Ltd || 1/4 scale twin-turbine demonstrator || || 0,07 || 2014

Tidal || SeaGen S 1.2 || Marine Current Turbines, A Siemens Busines || Pre-commercial (Testing) || 1200 || 1,2 || 2008

Tidal || SeaGen S 2 || SeaGeneration (Kyle Rhea) Ltd || Demonstration Array ||   || 8 || 2015

Tidal || SeaGen S 2 || SeaGeneration (Wales) Ltd || Demonstration Array || || 10 || 2015

Tidal || Technology Neutral || Bord Gais || Commercial Array || || 100 || 2017 onwards

Tidal || Technology Neutral || DP Marine Energy || Commercial Array || || 100 || 2018 onwards

Tidal || Technology Neutral || DP Marine Energy || Saltire Lease || || 30 || 2016 onwards

Tidal || Minesto || Minesto || 1/4 scale demonstrator || 30 || 0,003 || 2012

Tidal || Swan Turbines Cygnet 300kw || Smith Glaxo Kline || Commercial || || 4,5 || 2015

Wave || Oyster 1000 || Aquamarine Power Ltd || Pre-commercial || || || 2017

Wave || Oyster 1001 || Aquamarine Power Ltd || Commercial || || || 2018

Wave || Oyster 1002 || Aquamarine Power Ltd || Commercial || || || 2019

Wave || LIMPET || Voith Hydro Wavegen || Pre-commercial (Testing) || 150 || 150 || 2000

TOTAL (currently Installed) || kW || || || ||

TOTAL (expected) || kW || || || ||

Portugal

Type || Name of device || Location || Company || Technology stage || No. of devices || Installed capacity (kW) || Year of installation

Wave || WaveRoller || Peniche || AW-Energy || Demonstration || 3 || 300 || 2012

Wave || Pico (OWC) || Azores, Portugal || WavEC || Pre-commercial || 1 || 400 || 1999

TOTAL || 700 || kW || || || || ||

France and Pacific Territories

Type || Name of device || Location || Company || Technology stage || Capacity planned || Expected capacity || Year of installation

Tidal || Voith HyTide || Voith HyTide || GDF SUEZ Energy France || Pre-commercial || || 12 || 2016

Tidal || Technology Neutral || Raz Blanchard || GDF SUEZ Energy France || Commercial || || 100 || 2019

Tidal || Technology Neutral || Fromveur || GDF SUEZ Energy France || Commercial || || 100 || 2019

Tidal || Open Hydro || Paimpol Bréhat || EDF || Tidal test site || 2 To 4 MW || 2 || 2012-2014

Tidal || Open Hydro || Raz Blanchard || EDF-DCNS || Pre-commercial farm || 8 || 17 || 2015

Tidal || Open Hydro || Alderney || DCNS || Pre-commercial farm || 1 to 2MW || 2 || 2015

Tidal || Sabella || Ouessant || Sabella || Prototype || || ||

Tidal || Voith || Raz Blanchard || GDF - Voith || Pilot farm || || ||

Tidal (estuary waters) || SEENEOH || Bordeaux || Energie de la Lune - France Energies Marines || Tidal test site in estuary waters || 250KW || 0,25 || 2013

Tidal || Alstom || Raz Blanchard || Alstom || Pre-commercial farm || 200MW plus || || 2016

Wave || CETO || Reunion island || EDF || Prototype || 200 kW || 0,2 || 2013

Wave || Wave Roller || Baie d'Audierne || DCNS - FORTUM || Pilot farm || 1,5MW || 1,5 || 2015

Wave || SEMREV || Le Croisic || Région Pays de la Loire, France Energies Marines || Test site: Wave and offshore wind || 8MW || 8 || 2013

OTEC || PAT ETM || Réunion Island || DCNS - Région Réunion || OTEC Land Based prototype || || || 2012

OTEC || || Réunion Island || DCNS - Région Réunion || Feasibility study || || || 2009-2010

OTEC || || Tahiti || DCNS- Pacific OTEC || Feasibility study || || || 2010-2011

OTEC || || Martinique || DCNS || Pilot plant project || 10 MW || 10 || 2016

SWAC || || Saint Denis, Réunion Island || GDF || Bid for commercial application || || ||

SWAC || || Saint Pierre, Réunion Island || EDF || Bid for commercial application || || ||

ESTIMATES || || || || || ||

Tidal || Open Hydro || Raz Blanchard || EDF-DCNS || Commercial farm || Several hundreds of MW || Several hundreds of MW || From 2018

Wave || Pelamis || Réunion Island || Seawatt || || || ||

Spain

Technology stage || No. of devices installed || Installed capacity (kW) || Capacity installation planned || Expected capacity || Year of installation || Grid connected? (Y/N)

Demonstration Array || 16 || 300 || 300 || 300 || 2011 || Y

Pre-commercial (Testing) || 1 || 200 || || || 2013 || Y

Pre-commercial (Testing) || || || || || 2012 || Y (2013)

Pre-commercial (Testing) || 1 || 150 || || || 2013 || Y

|| || || || || 2014 || ?

|| || || || || || ?

Pre-commercial (Testing) || 1 || 250 || || || 2011-12 || Y

TOTAL (currently installed) || 500 || kW || || || ||

Scandinavia

Company || Technology stage || No. of devices || Installed (kW) || Capacity planned || Expected || Year of installation || Grid connected? (Y/N)

Seabased Industries AB || Pre-commercial/ Commercial || || || 10 MW || 10 MW || 2012-2015 || Yes

Fred. Olsen Ltd || Pre-commercial (Testing) || 1 || 30 || || || 2009 || Decommissioned?

Wave Star || Pre-commercial (Testing) || 1 || 150 || || || 2010 ||

Dexa Wave || Pre-commercial (Testing) || 1 || 50 || || || 2011 ||

TOTAL || 200 || kW || || || || ||

Ireland

Technology stage || Expected capacity (MW) || Year of installation || Grid connected? (Y/N)

Pre-commercial || 5,4 || 2016 || y

Prototype test site || 10 || || y

Commercial demonstration || 5 || ||

TOTAL || 20,4 || MW ||

Source:
European Ocean Energy Association (31 January 2013)

16.         Annex
8: Policy overview

The policy support instruments for
renewables include the following[156]:

·
Feed-in tariffs (FIT) are an energy-supply policy greatly reducing project risk. The
producer is insulated from energy market prices and receives a fixed amount for
the electricity. With Feed-in Premiums, the producer must sell the electricity
in the market, and then receive a "green" premium. Thus the producer
is, at least partially, exposed to market price risk and is integrated into the
market.

·
Certificate schemes with quota obligations typically require suppliers to derive a
certain percentage of their energy from renewable energy sources and provide
"green certificates" as proof. Renewable energy producers operate as
normal market players, but receive a green premium from the sale of the green
certificates they are issued upon the production of the renewable energy. In
this instance, the producer is exposed to market risks.

·
Fiscal incentives
in the form of tax exemptions or tax reductions generally exempt renewable
energy products from certain taxes (e.g. excise duty) in accordance with the
Energy Tax Directive. This Directive allows Member States to apply tax
exemptions or reductions in order to compensate for the extra costs involved in
the manufacture of these products as compared to conventional energy products
with external costs. In addition, Member States would be able to provide
further tax reductions during a transitional period (until 2023) to compensate
for the higher costs involved in the manufacture of sustainable biofuels where
the standard system of taxation does not suffice to promote their use.

The
most relevant policy instruments[157]
adopted in Member States are listed in the table below i.e. predominantly those
that apply to the offshore marine or to ocean energy specifically. The list is
not exhaustive.

Member State || Policy in place

UK || The UK has funding schemes which cover almost the entire range of incentives.  Most of the funding schemes identified are specifically designed for off-shore energy. The Renewable Obligation Certificate (ROC) - provides enhanced revenue support for wave and tidal energy. Each year the electricity suppliers are required to generate a certain amount of power from renewable sources. If they do not meet their target they have to pay a penalty into a fund that is then used to pay the holders of ROCs. ROCs can be earned by any licensed renewable energy generator for each Megawatt hour of power they generate from renewable sources. Feed-In-Tariffs - cover all types of electricity generation up to 5 MW by wind power. The tariff applies to any renewable electricity generation installed after 15th July 2009. There is a payment made for all electricity produced, and any excess that is fed back into the power grid attracts an additional payment. Harnessing Wave and Tidal Energy (RD&D grant) - to increase the ocean energy deployment in the UK and to reduce electricity costs. The funded activities are: design, development and testing of key sub-systems (including foundations and/or moorings systems) and component technologies optimised for the ocean energy sector; studies to assess practical device and array performance; studies to understand positive and negative environmental impacts, including sediment transfer. Funding rates are up to 100% of the eligible costs. Marine Energy Accelerator (RD&D grant) - helps marine energy cost reduction through 3 distinct strands: next generation concepts (new device concepts to reduce costs); device components (research into lowering costs of specific components in existing marine energy devices); and installation, operation & maintenance (development of strategies on how to improve ways marine energy devices can be installed, operated and maintained at a lower cost) Marine Renewable Proving Fund – aims to finance demonstration of promising wave and tidal energy devices through demonstration of full scale prototypes. Projects should last up to 2 years. Marine Renewable Deployment Fund - the objective is the commercial demonstration of devices and performance monitoring. Manufacturers can apply and get a funding up to £5m per project + £100 per megawatt-hour (MWh) of electricity produced for up to seven years, limited to an overall cap of £9million per project. The MRDF requires that devices have been tested continuously for a minimum of three months before they can enter the scheme

UK (Scotland) || Renewable Obligation Scotland - mirrored by almost identical Obligations covering suppliers in England and Wales, and in Northern Ireland; between them, these Obligations act to create a UK market for renewable electricity and ROCs. The Scottish Government has introduced higher levels of support for wave and tidal stream generation under the ROS, compared to the UK scheme (currently 2 ROCS per MW) with the enhanced wave band set at 5 ROCs and the enhanced tidal band at 3 ROCs per megawatt hour (MWh) of eligible renewable output generated. Offshore Wind remains at 2 ROCS per MWh as per the UK scheme. Wave and Tidal Energy: Research, Development and Demonstration Support fund (WATERS) - supports the development and testing of new wave and tidal stream prototypes in Scottish waters. This includes related infrastructure and the costs of very small arrays. WATERS will also support the development of technologies which increase the effectiveness of the installation, operation and maintenance of marine energy devices. WATERS supported 5 projects for a total of £13 million. £6 million will be provided under WATERS 2. The National Renewables Infrastructure Fund (N-RIF) - the N-RIF was established to support the development of port and near-port manufacturing locations for offshore wind turbines and related developments including test and demonstration activity, with the overall aim of stimulating an offshore wind supply chain in Scotland. Renewable Investment Energy Fund (REIF) – launched in October 2012, the fund of £103 million aims to promote the use of energy from renewable sources by supporting projects that accelerate the growth of the marine renewable energy sector in Scotland, increase community ownership of renewable energy projects in Scotland and provide for district heating networks that utilise renewable heat technologies.

Ireland || Sustainable Energy Incubator Programme - aims at fostering business development on the following thematic areas: bioenergy, ocean and wind energy, microgeneration, energy efficiency and demand reduction, fuel cells and hydrogen. Prototype Development Fund for demonstration - aims at stimulating industry-led projects for the development and deployment of ocean energy devices and systems. Collaborative development programmes between manufacturers or service companies and research institutions or other centres of learning are actively encouraged. Funding varies according to the type of involved organisations and to the type of activities. Renewable Energy RD&D Programme - to stimulate the deployment of renewable energy technologies that are close to market, and assess the development of technologies that have prospects for the future.  ocean energy represents one of the priority areas. Funding depends on the type of activities. Marine Research Sub-Programme 2007-2013 - is implemented via 3 Research Measures and 2 Supporting Programmes. The Discovery Research Measure, in particular, deals, among the other areas, with renewable ocean energy). Funding can be project based or research based. Renewable Energy Feed-in-Tariff (REFIT) - The REFIT scheme currently covers onshore wind (large and small scale), small scale hydro, biomass landfill gas and other biomass. Subject to state aid clearance, REFIT will also be offered for anaerobic digestion/high efficiency Combined Heat and Power, ocean (wave and tidal) energy and offshore wind. Provide subsidies to renewable energy electricity producers based on a per kWh basis.

Spain || Renewable Energies Bonus (Ocean Energy) - R.D. 661/2007 established an especial regime for electric energy production through renewable energies and introduced an incentive for every kWh produced. A bonus has been outlined for ocean energy. Plant operator can choose among two kinds of bonus: a) Putting all the electricity in the distribution system, through the grid, and cashing a fixed feed-in tariff. b) Selling the electricity in the market and receiving a bonus besides the market price. CENIT Programme - CENIT Programme fosters private-public cooperation in all topics of R&D activities, having the off-shore energy theme included in the topic Energy and Environment. CENIT is addressed to large budget projects which last several years (not less than 5). Funding rate can reach up to 100% of eligible costs. CONSOLIDER Programme - CONSOLIDER is a Programme financing R&D projects with a high level of innovation and technological advance and fostering the creation of large research teams, composed at least of more than 5 public or private Research centres. Integrated Projects – Demonstration loan for experimental projects which should develop an innovative technology and get to the installation of a pilot plant. Projects should last between 2 and 3 years and have a minimum budget of 3 M€ and should have a consortium composed at least by 3 enterprises, of which one must be a large enterprise and one a research centre.

Portugal || Decree law 225/2007 establishing a feed-in tariff of 26c/kWh for demo projects up to 4MW, feed-in tariff of 16-21c/KWh for pre-commercial devices up to 20MW and a feed-in tariff of 10-16c/kWh for commercial projects. National Maritime Spatial Plan in preparation. Wave Energy Pilot Zone established.

France || Feed-In-Tariffs – the obligation to buy the produced energy by the energy distributors, at a fixed price, established in 2000 by the National Ministry of Economics, has been guaranteeing fixed sales price for renewable energy, with 15-year contracts for on-shore wind projects and a 20-year contracts for off-shore wind projects.

Italy || No funding specifically addressing off-shore renewables is available. Green Certificates - The Certificates are issued by the National Authority deputed to the legislation accomplishment and control of the system. GCs can be assigned to any licensed renewable energy producer for each MWh they generate from renewable sources. The GCs can be sold to those energy producers who have to accomplish with the 2% duty. The price of GCs is established in free market conditions. Nowadays (2010), the GCs average value is 84 € per MWh. Innovation contracts - aims at supporting large projects able to improve the technological heritage of the country through the development of new products and new industrial processes. Projects shall imply research and development activities. Programme Contracts - to support investment and R&TD programmes in several economic sectors in the Convergence regions of Italy. One of the foreseen thematic area concerns the renewable energy production. The Investments projects focused in Energy sector shall concern renewable energy production plants (Ocean Energy and Wind Farm) with no more than 50 MW nominal power.

Netherlands || No production incentive is available although there are 7 programmes from which offshore energy projects can benefit, the most relevant ones are outlined below. Energy Investment Allowance (tax credit) - With the EIA scheme, the Dutch government wants to stimulate energy efficient investments including renewable energy sources by allowing Dutch companies investing in energy efficient equipment and renewable energy sources to deduct a percentage of such investments from their fiscal profit. Only those corporate assets that are placed on the energy list for the specific year of investment are eligible for EIA. Fund for Sustainable Energy Technology - the fund objective is to invest in innovative companies actively developing new technologies for the production of clean energy, alternative fuels, CO2 reduction and energy savings. The areas of investments are Energy production and Energy Efficiency. Investments size may range from € 0.5 million to a max of € 5 million over the lifetime of the participation.

Germany || Feed-in-Tariff - the Renewable Energy Act is an incentive of the federal government that supports the expansion of renewable energy sources in electricity and the electricity production through off-shore wind energy. The fees are paid for electricity generated by wind-powered plants; the minimum fee to be paid for electricity production depends on the wind farm installation site

Denmark || DKK 25 million fund for installations and demonstration of wave power projects in the period 2014-2015.

Belgium || Green energy certificates - supports all entities producing green electricity for every MWh of green electricity produced. A contract between the concession holder and the Belgian HV (high voltage) electricity network manager (Elia) is required. Incentives vary according to the MW of installed capacity of the offshore concession. Green certificates are guaranteed until 20 years after the installation has been put into use. Tax credit - Investment deduction for energy-reducing investments, including the energy production based on renewable energy sources. Only commercial enterprises can apply. Percentages are evaluated yearly. A certificate needs to be applied for within 3 months after closure of the taxable period when the investments were made.

Changes to Renewable Energy
Support schemes[158]

Whilst it is important that Member States reform and improve their
support schemes to reflect

decreasing costs of renewables and to encourage greater
competitiveness on the part of renewable energy, they also need to avoid
creating uncertainty and thereby discouraging investment from occurring.
Recently a number of Member States have undertaken reforms that have caused
disruption to industry and investors. Without prejudging possible
justifications for the reform, such examples include:

·
Stopping biofuel blending after only recently
having introduced it.

·
Avoiding legal constraints in cutting PV tariffs
by imposing a levy instead, cutting expected returns to existing
investors/producers retroactively.

·
Reducing tariffs for most existing energy
producers without notice.

·
Proposals to apply new lower tariffs in exchange
for an existing green certificate scheme, again, retroactively applied to
existing producers.

·
Ad hoc deferral of direct aid payments for
biofuel production.

·
Changes to an existing green certificate regime
regarding technology eligibility and duration, directly affecting the price of
green certificates for existing producers.

·
A moratorium on support for new renewable energy
production, which has an obvious direct and crushing impact on local renewable
energy investment.

·
Modifications of feed in tariffs for existing
producers, cutting expected returns to investors significantly.

·
Changes to timetables applying new, lower
tariffs before announced or legally possible.

·
Adding complicated project registration
procedures to the authorisation process.

On the contrary, best practice in the design,
structure and reform of support schemes should strike a balance between
certainty and sufficient incentives to invest in new technologies, on the one
hand; and avoiding overcompensation on the other. Principles for support
schemes need to be established that address transparency and predictability,
including greater use of feed in premium schemes, the need for "off
budget" financing and common approaches to methods for calculating costs
and premiums, scheme structure and technology banding5. If the scheme is flexible
and able to adapt to changing market and economic circumstances (cost
reductions, fiscal constraints, excess production), forced or unexpected
changes are not necessary. Thus schemes with planned forms of automatic tariff
digression with clear rules for support evaluation and revision are able to
provide revenue stability to producers whilst introducing a quantity constraint
on production. The method of tariff calculation and the nature of technology
banding are all important determinants of the nature and development of the
renewable energy market. Thus consistency between Member States on such issues
facilitates creating a single, coherent European market for renewable energy
equipment. Applying criteria commonly across Member States could also increase
coherence and convergence of approach and thus reduce distortions arising from
different national support schemes.

17.         Annex
9: Support Schemes and their impact on the
renewable energy market[159]

The effect and
importance of support schemes on the market uptake of renewable energy has been
shown extensively in literature[160].
In the words of IEA (World Energy Outlook 2012): “To foster the deployment of
renewable energy, governments use subsidies to lower the costs of renewables or
raise their revenues, helping them compete with fossil fuels. The justification
is that imperfections in the market fail to factor in externalities (such as
environmental costs attributable to other fuels) or deny nascent technologies
the opportunity to mature.”

It is not only the level of support but
also the stability and continuity of support which is crucial in this respect
given payback times of investments in renewable energy. The three examples
below illustrate the implementation of renewable energy and the link between
support schemes and their success in different Member States.

UK: Success of a green certificate
scheme

Currently the UK is ranked as the world’s
eighth largest producer of wind power, having increased total installed
capacity by 30% in 2012. Since 1990, the two most important support mechanisms
for renewable electricity and heat generation are the Non-Fossil Fuel
Obligation (NFFO), which ran from 1990 to 2002, and the Renewables Obligation
(RO) scheme, which began in 2002. The NFFO programme was designed to allocate
money to new renewable projects via a series of bidding rounds whereby
renewable energy (RE) projects bid for an inflation-indexed per-kWh price for
initially 8 and later 15 years. Onshore wind costs fell from 10 pence/kWh in
1990 to 2.88 pence/kWh in 1998 during the five rounds of NFFO in England and
Wales. NFFO did well on cost of the policy, but even though the installed
capacity of wind power increased, the overall performance on the quantity of
renewables delivered was not that good. Also, the policy failed to deliver
actual investment by the winning bidders[161].

The RO programme is a mechanism designed to
incentivise the generation of electricity from renewable energy sources by
imposing a certain level of renewable generation obligation on suppliers and
creating a market for Renewable Obligation Certificates (ROCs). ROCs are green
certificates issued for eligible renewable electricity that is generated within
the UK and supplied to customers in the UK. Producers can trade their ROCs on
the ROC market and sell their electricity on the normal electricity market. The
remuneration they receive is the sum of the ROC price and the market price for
electricity[162].
The cost of this policy is relatively high compared to the NFFO, but the policy
did better on quantity delivered[163].

Development
of generated wind energy in the UK

Sources: Ecorys, based on Mozelle et al., 2010 and DECC, 2012[164].

Germany

After some previous experience with feed-in
obligations (mainly designed to support existing, especially small hydro, power
plants), Germany introduced feed-in tariffs in March 2000. The “Erneuerbare
Energien Gesetz” (EEG; Renewable Energies Law) had the clear aim to
stimulate the development of electricity generation methods which were immature
at the time – especially wind, PV, geothermal and biomass. The scheme follows a
fixed price model; it obliges the closest distribution network operator to pay
the tariff valid at the time of construction for 20 years, without inflation
adjustment[165];
the additional costs are then passed on to the consumers. The tariff for
biomass started at 8.7 ct/kWh, while PV electricity was far from market
readiness at the time and was granted a tariff of 50.6 ct/kWh. The reduction of
PV electricity production cost that came with the massive deployment under the
EEG is thus a success story of support policies.

Market uptake really started with the first
amendment of the law in 2004 (which increased the rates for PV but also
included a yearly degression rate of 5%): between 2003 and 2004, installed
capacity increased from 435 MWp to 1105 MWp. In the second amendment of the law
in 2009, policymakers already had to take into account the rising costs of the
scheme caused by the massive PV deployment, and introduced flexible degression
rates depending on deployment rates in order to put a cap on the costs. Another
amendment in 2012 brought a one-time decrease of the tariffs for PV by 15% - reflecting
the dramatic decrease in costs of solar panels - followed by a monthly
degression, again flexible according to deployment rates. As of March 2013, the
tariff is between 11.3 and 16.3 ct/kWh (depending on the size of the
installation) and installed capacity is at 32,875 MWp[166]. The feed-in tariff
is valid for 20 years for an installation built in the respective year.

Development of PV in Germany following
the "EEG" (renewable energies law)

Sources: Ecorys based on BDEW, 2013; BMU, 2004; BMU, 2011 and SFV,
2013[167]

Spain

Spain is the world’s third biggest producer
of wind power. In 2008, more than 11% of Spain’s electricity came from wind
power. For more than a decade renewable energy promotion has been a national
energy priority[168],
resulting in a detailed renewable energy plan, a feed-in tariff system for
electricity from renewable energy sources (starting in 1998) and a commitment
by all political parties to maintain the system and avoid discontinuities in
support, which negatively affects investment in renewables. It has been shown
that an absolute negative correlation exists between wind electricity promotion
and the wholesale market price, leading to a reduction of retail electricity
prices.

18.         Annex
10: Scenario Modelling for Economic, Environmental and Social Impacts

Methodology and approach

This this section will outline
the likely market uptake scenarios for ocean energy under
each of the three policy options. A speculative link between the
instruments/actions proposed under each option to tackle the identified
bottlenecks and the potential market uptake scenario is necessary in order to
assess the economic, environmental and social impacts.

The most
recent estimates regarding the installed capacity of ocean energy will be used
to develop market uptake in the short term while the medium to longer term will
be based on existing scenarios.[169] Option ('business as usual') is considered to be the baseline scenario;
it is linked to a continuation of current policy initiatives and realisation of
current commitments with no additional measures. Option 2 and 3 will be set
against this baseline scenario to assess the incremental effect on ocean energy
market deployment in Europe. The scenario for option 2 will be assessed
relatively to the baseline option 1 and the targeted structural actions option
3; hence the market uptake scenario for Option 3 is presented first, followed
by the scenario for option 2.

Market-uptake scenarios

Scenarios looking at a long term future are
inevitably bound with uncertainties as external factors (e.g. changing
government policies, energy price developments etc.), which may influence the
actual market uptake. In that sense scenarios are projections rather than
forecasts[170]. Nevertheless these market uptake scenarios are a useful tool
enabling a comparison between the different policy options.

The market-uptake scenarios and the
subsequent analysis of impacts will refer to the periods 2012-2020-2035. Beyond
2035, the uncertainty surrounding the development of ocean energy, together with other factors
affecting its development is believed to be too
indeterminate to derive reliable forecasts.  Installed ocean energy capacity
for all scenarios has been assessed for the years 2011, 2020 and 2035. For the
period 2011-2020, no distinction between the scenarios is applied as it is not
expected that differences will occur in terms of installed capacity before
2020. After 2020, the scenarios start to differentiate.

Ocean energy installed capacity under Option 1

The current installed capacity of
modern wave and tidal installations amounts to approximately 10 MW[171]. For the development up to 2035 the 'business
as usual' scenario predominantly follows the Current Policy Initiatives (CPI)
reference scenario in the Commission's Energy Roadmap 2050[172]. This scenario reflects the impacts of the policies that are
already in place. In the CPI scenario, installed capacity increases to 1.6
GW in 2020, and 4.3 GW in 2035[173]. This is slightly more conservative than the latest IEA World
Energy Outlook which foresees an installed capacity of 6 GW in 2035[174] under their reference scenario.

For the short term, up to 2020,
the scenario is refined with recent plans from the Member States in their
NREAPs. As mentioned in Section 3.3.4, six countries plan to have wave and
tidal plants operating by 2020. In 2020, the installed capacity of these plants
is projected to reach 2243MW, representing 0.5% of the total installed
electricity capacity in the EU-27[175]. This projection up to 2020 is in line with other sources that
point to a strong growth of ocean energy over the coming years[176].

The figure below shows the
resulting development of ocean energy installed capacity for electricity
generation in the EU until the year 2035 under policy option 1. In line with
the above assumptions ocean energy installed capacity will grow to 2.2 GW in
2020 and 4.3 GW in 2035.

Data source: Ecorys study (2013), based on
JRC (2012) and Energy Roadmap 2050 (2011)

The market uptake scenario for
Option 3 is based on the "High RES” scenario in the Energy Roadmap 2050[177] as the types of measures proposed in this scenario are seen to be
broadly comparable to the actions undertaken in Option 3. The High RES scenario
aims at a high RES share in overall power generation in 2050 together with
strong support and facilitation of RES in general. Despite the fact that it
does not require the setting of post-2020 renewable energy targets, it does
imply an overall decarbonisation goal of reducing EU GHG emissions along the
line of the Low Carbon Economy Roadmap.

Option 3 relies on a series of
policy measures related to the objective of enhancing R&D for low carbon
energy technologies, including the mainstreaming of ocean
energy in existing and future funding instruments
(e.g., Horizon2020, NER300 and structural funds) as well as the eventual
setting up of a European Industrial Initiative. These measures would enable the
exploration of new co-operation opportunities, lead research programmes through
dedicated joint calls and encourage demonstration programmes of full-scale
projects. Similar policy requirements are also accounted in the high RES scenario,
in which the enhancement of the European capacity for innovation, appropriate
R&D investments and education and training are considered to be
instrumental for an effective transition to a low carbon economy. For instance,
the scenario includes support to early demonstration and first of a kind
commercial plants for all low-carbon technologies, including renewables.

Concerning infrastructure, policy
option 3 implies that, for renewable energy production to increase, additional
measures could be needed beyond current policy initiatives. Tackling this
specific issue is fundamental, if one considers that infrastructural needs have
been identified as one of the specific bottlenecks hindering the potential
growth of the ocean energy sector. In this regard, the response brought by the
High RES scenario is consistent with such needs, since it assumes that stronger
growth of interconnection capacity will be key preconditions for higher
RES-based electricity trade to occur. On this matter, a dense DC interconnection
system is foreseen to develop mainly offshore. Moreover, the high RES scenario
also expects the facilitation of power flows through the de-congestion of
specific grid links, the reinforcement of DC lines and additional grid
development coordination.

The sustainable development and
market uptake of ocean energy also depend on knowledge and best practice
sharing across EU Member States. This is included in Option 3 which consists of
policy initiatives similar to those in the High RES scenario and originates
mainly from the full implementation of the RES Directive. The latter, for
instance, establishes a transparency platform to facilitate and promote
cooperation among Member States. In addition to this, the High RES scenario
refers to the use of cooperation mechanisms or convergent support schemes for
the promotion of market integration allowing for more RES trade.

The figure below reflects the
expected development of ocean energy installed capacity in the EU until 2035
under policy option 1 (the baseline scenario) and option 3 (targeted structural
actions). Under the Option 3 scenario installed ocean energy capacity is
expected to increase to 10.5 GW in 2035[178].

Source: Ecorys study (2013) based on Energy
Roadmap 2050 (2011)

Ocean energy installed capacity under option 2

Option 2 consists of a set of
soft measures that support the creation of a receptive climate towards ocean
energy and accelerate the exchange of information and best practices both among
and within industry, research institutes, NGOs and relevant governmental
organisation within Members States. It thus creates a more favourable attitude
towards ocean energy and increases awareness of its potential hence lowering
thresholds in various fields which are now seen as a bottleneck in the market
uptake of ocean energy, including access to finance, unknown environmental
impacts of ocean energy etc. As such it is giving a positive impulse to its
market uptake which places it above the baseline scenario (Option 1).

Since Option 2 is less tangible
in its actions, the outcomes and impacts will dependent strongly on the
interaction between government and industry stakeholders, but no robust
statement can be made on its effectiveness. Consequently, no firm market uptake
scenario has been developed for this option. Instead, an assessment of a
plausible potential impact vis-à-vis the other two options is made. This is
shown in figure below where the market uptake for Option 2 in terms of
installed capacity is higher than Option 1, but significantly less than Option
3. This shows a market uptake level at one-third of the difference in
development between Options 1 and 3. In 2035 this would mean an installed
capacity of 6.4 GW under Option 2. This number is merely illustrative,
used for the facilitation of assessment.

Ocean energy installed capacity in scenario Option
2, in comparison with Option 1 and Option 3

Source: Ecorys study (2013)

19.         Annex
11: Development of the offshore wind industry

A recent study argues that the current situation in ocean energy
technology is comparable to the position of offshore wind in the beginning of
the 1990s[179].  If the historical development of offshore wind is plotted on
ocean energy (the situation for ocean energy in 2008 is assumed equal to
offshore wind energy in 1991) we can see that it could be expected to take off
dramatically after 2025 reaching roughly 23 GW in 2035. The green line
represents the option 1 baseline scenario.

Source: Ecorys (2013) based on Esteban & Leary
(2012)

Offshore wind and modern ocean energy share similarities in
technology, installation & operation techniques, regulatory environment
(Maritime Spatial Planning, support schemes) and the two sectors seem to have a
substantial potential for synergies. However, modelling the development of
ocean energy based on offshore wind deployment would be inaccurate and
unrealistic for several reasons.

Firstly, the measures proposed under this impact
assessment are of a soft, non-binding nature. In contrast, the European
offshore wind industry enjoyed strong legal interventions in several Member
States such as the 2006 German Infrastructure Planning Acceleration Act for
offshore wind grid connections. The figure below shows additional detail.

Source:
Ecorys (2013)

Secondly, the political and economic
climate has changed. During the past two decades, there has been a strong focus
on increasing the share of renewables in the European energy mix. The wind
energy industry (both onshore and offshore) was stimulated by ambitious
environmental policy in Member States and EU targets. The policy framework
provided a strong impetus to the development of renewable energy technologies
more generally, with on- and offshore perceived to have a strong potential to
contribute to the targets at the time. The situation has changed;
however, with the economic crisis substantially diminishing the amount of
investment into the renewable energy industry.[180] The current policy
landscape is focused on the period up to 2020 may not provide a substantial
impulse to ocean energy,
especially given the competition from more mature renewable energy technologies
and the limited extent to which ocean energy can contribute to the 2020 targets. Specific policy to support ocean energy is therefore deemed necessary.

Thirdly, there are substantial
techno-economic differences between the ocean energy and offshore wind energy; not only is ocean
energy characterised by a more diverse array of designs
and technologies, but the offshore wind industry could readily establish itself
on the existing onshore wind industry so, e.g., there was only a need for
incremental advances in R&D and the technological risks were perceived to
be lower. Nevertheless, even though ocean energy is presently still at an early stage of development, significant
changes could realistically occur in the future provided that the appropriate
policy context is created, addressing the identified bottlenecks.

20.         Annex
12: Overview of Emission Factors

Comparison
of avoided GHG emissions expected by various literature sources.

Source || Total emissions from ocean energy || Kg CO2 per MW/h || Assumptions

Valuation offshore || 100 million tonnes from 2010 to 2050 || 430 (2010-2030) 20 (2030-2050) || Technologies considered: Tidal and wave DECC 2010 GHG appraisal guidance

Carbon trust || 1 to 3.3 million tonnes a year for 1 to 2.5 GW || ||

JRC  EU OEA || 2.61 million tonnes per year in 2020 136.3 million tonnes per year in 2050 || 300 Kg || Technologies considered: Tidal and wave An estimation of NOx and SOx is proposed

Source: Ecorys (2013)

21.         Annex
13: Environmental Impacts

Infrastructure
projects affect the environment by definition.[181] As ocean energy
technologies approach commercialisation, the concern over the impact of their
deployment on the environment becomes increasingly important. At the same time,
however, available data is limited and too many unknowns remain for a full
assessment of the environmental costs and benefits of ocean energy.

Although some are specific, the majority of
the negative environmental impacts related to ocean energy deployment are
equally relevant for all of the technologies, including offshore wind, but also
other marine infrastructure installations unrelated to renewable energy. The
most frequently quoted environmental costs include destruction of habitats,
killing of fish through direct 'blade strikes', underwater noise,
electromagnetic effects, or the entanglement of diving water birds and marine
mammals. Potentially, negative impacts can also be expected with the
construction of access roads, channels and connections to the electricity grid,
as natural habitats can be damaged, disturbed or lost in the process. Whilst in
most cases the harm to the concerned populations is temporary, extreme cases
could result in a local extinction of a given species.[182] Mitigating measures
and further research are therefore essential to prevent such irreversible
damage.

According to numerous studies, the adverse
environmental impacts ofocean energy deployment are expected to be far lower than those for conventional
sources of energy (e.g. coal mining, shale fracturing), which also exacerbate
global environmental problems such as climate change[183].

Wave and Tidal stream

The
lack of deployment experience currently precludes a full assessment of the
environmental impact of wave and tidal stream technologies.

Tidal stream turbines are considered to
be more environmental benign than tidal barrages as they do not block channels
or estuarine mouths, interrupt fish migration or alter hydrology. Noise and
vibration during installation and decommissioning, disruption of habitats, and
entanglement of birds and marine mammals are, however, some of the most
important adverse impacts. Chemical leakage of paints and anti-fouling
chemicals could have an adverse impact on water quality. The visual impact is
likely to be limited because devices are normally partially or entirely
submerged[184].
Bird migratory routes, feeding and nesting are likely to be largely
unaffected.

Tidal Barrage

Estuaries
are highly complex and unique habitats. Tidal range or tidal barrage
plants sited at the mouths of estuaries pose many of the same environmental
threats as large dams as they alter the flow of saltwater into and out of
estuaries which could affect the hydrology and salinity of these sensitive
environments.

There
is a broad agreement in the literature, that damning estuaries tends to
have a very substantial impact on the environment resulting from the change in
the amplitude and timing of tides in the basin, which alters water salinity and
sediment movements in the estuary. By consequence, these changes alter the
local habitat and can lead to a loss of biodiversity.[185] Environmental concerns have, for example,
blocked the development Severn estuary in south west England.[186]

Salinity gradient and OTEC

Water
temperature and salinity are among are two key water quality factors, decisive
for the composition of species in a given aquatic environment. The main waste
product of salinity gradient technology is brackish water, its discharge in
large quantities into the surrounding waters can substantially alter the
aquatic environment. OTEC technology can alter the biodiversity through the
intake of warm water and alteration of the nutrient characteristics[187].  There is a risk of
chemical spills for both technologies if the fluids used during the process
spill[188].

The deployment of ocean energy technologies
can, however, also have a wide range of positive impacts on the environment. It
could, for example, result in the exclusion of fishing and trawling in the
areas concerned. This was found to be highly beneficial for fish population
recovery[189],
the diversity levels in these areas could even be comparable to marine
protected areas.[190]

The public consultation on ocean energy showed that directly engaged
stakeholders are generally aware of the double-edged nature of the effect of ocean energy on the environment and of the
possibilities for mitigation of some of the adverse effects. For instance,
because ocean energy farms are
likely to constitute prohibited areas for commercial fisheries and navigation,
they could locally prevent over-fishing and trawling and thus help the
regeneration of certain species as well as provide a bio-diverse refuge around
the foundations of the devices (providing 'artificial reefs'). The displacement
of GHG emissions will also reduce acidification of the atmosphere and the seas.
Many of the negative impacts can also be successfully mitigated, for example by
installing sensors which detect approaching seals etc. Site selection for ocean energy installations can be optimized
through increased research, monitoring, knowledge-sharing and better use of
marine spatial planning.

Lifecycle
emissions of ocean energy technologies

While
ocean energy is generally
considered to be a 'zero carbon' technology, some carbon emissions will
inevitably be produced throughout the device life-cycle during the
manufacturing, construction, transportation, installation, maintenance and
decommissioning. Only a limited number of lifecycle assessment studies are
available for ocean energy but
these show that when compared to fossil fuel technologies, the lifecycle GHG
emissions are very low. For instance, the largest contribution in the energy
balance of wave converters is the energy needed for the materials used (usually
steel) but the energy needed for transport assembling and decommissioning is
low[191].

Source: IPCC, 2011[192]

22.         Annex
14: Job Creation Estimates[193]

Geographic area || Total jobs created || Capacity created in MW || Time horizon || Jobs/MW

Europe[194] || 40.000 (26.000 direct) || 3.600 || 2020 || 11.1 (7.2 direct)

471.320 (314.213 direct) || 188.000 || 2050 || 2.5 (1.67 direct)

Ireland[195] || 70.000 || 29.000 || 2050 || 2.4

United Kingdom[196][197] || 2.500 || 2.300 || 2030 || 1.08

68.000 || 70.000 || 2050 || 0.97

U.S.[198] || 36.000 || 15.000 || 2030 || 2.4

U.S. Department of Energy[199] || 1.400.000[200] || n/a || 2025 || 14

23.         Annex
15: Supply Chain

The diagram below[201]
shows the manufacturing capacity supporting the ocean
energy sector (represented by dark blue circles) across
Europe. The industry can support economic growth even in countries which do not
have the resource potential for deployment.

24.         Annex
16:  Overview of marine energy technologies and their European potential[202]

1. Preamble

The resource
potential of marine energy (wave, tidal, offshore wind and other forms of
energy such as saline gradient and thermal energy conversion) is undeniable.
Still, the marine environment remains Europe’s last, untapped renewable energy
source, despite its potentially significant role in the decarbonisation of the
European economy and the security of the European energy supply. Moreover,
marine energy can have a positive impact on economy and stimulate job creation.
The manufacturing, transportation, installation, operation and maintenance of
marine energy facilities are expected to offer employment opportunities to communities
often in remote coastal areas with low and/or decreasing employment rates; thus
actively supporting communities and local economies across Europe.

Reducing the
cost of marine energy technologies and improving and expanding the electricity
grid infrastructure to more readily integrate these new technologies with the
European energy system are key challenges for harvesting the marine energy
potential. Simpler planning and licensing processes in compliance with
environmental regulations, along with increased public awareness and
acceptance, will also facilitate the large scale deployment of marine energy
technologies.

The most developed
marine energy technology is offshore wind. Offshore wind in Europe is expected
to grow from 2.9 GW in 2010 to almost 42 GW by 2020. Reaching this target will
require massive investments, hence, it is of utmost importance that costs are
reduced by designing bigger, smarter and more reliable turbines; and by
stream-lining the supply chain, installation, operation and maintenance
processes. In contrast, wave and tidal energy technologies are still in their
infancy. The key issue with these technologies is to achieving the transition
from early demonstration of single projects to deployment of the first arrays
of multiple devices, allowing the industry to pursue the commercialization of
such technologies. Synergies between offshore wind and wave and tidal energies
can be found in the necessity to develop design concepts, dedicated ports and
fleets of installation vessels as well as access to grid and maintenance. Other
forms of marine energy, such as thermal energy conversion and saline gradient
are expected to be of limited relevance for the European energy system in the
short to medium term (up to 2030), hence they are not considered in this
report.

Europe is currently a world leader in marine energy, both in terms of wave
and tidal technology demonstration and offshore wind farm deployment. Europe is very active in developing wave and tidal energy conversion concepts, in system
design and engineering, and in single- and multiple-device testing aiming at
demonstrating the commercial viability of technologies. The European test
centres, e.g. the European Marine Energy Centre (EMEC), the Wave Hub, the
Biscay Marine Energy Platform (BiMEP) and the Danish Wave Energy Centre
(DanWEC), are state-of-the-art facilities. Developments in offshore wind have
mainly centred in the North Sea with the UK representing the largest individual
market while major projects are also under development in Germany, Denmark, Sweden and Belgium.

2. Current market status and future potential

2.1       Current situation

2.1.1    Wave and new tidal

Currently,
there is only one commercial tidal energy plant in Europe, located in France, the La Rance tidal barrage power station. Its capacity is 240 MW and generated 476 GWh[203]
of electricity in 2010. The potential of tidal barrage technology is limited to
few favourable geographic locations. Furthermore, such projects require
intensive civil work: the La Rance plant has a 750 meter long barrage. As such,
this Annex does not address tidal barrage technology; it focuses on ‘new’ tidal
stream technologies, which convert tidal energy to electricity in favourable
tidal stream areas with high flow speeds. With regards to wave energy, existing
facilities are concentrated in the UK, where the installed capacity reached 2.6
MW in 2010, generating 1.8 GWh[204].

Wave
and "new" tidal energy technologies are still in their infancy and a
number of devices are currently being tested in real environmental conditions.
The 1.2 MW Marine Current Turbines tidal device in Northern Ireland leads the
market in terms of power generated on a continuous basis by a utility-scale
tidal or wave machine. The second largest installation is the 500 kW Wavegen
Limpet device at Islay (UK), which has also been generating electricity on a
continuous basis. This installation uses the oscillating water column (OWC)
technology. A similar plant with a nominal power of 300 kW has been built in Mutiku, Spain. Wave energy manufacturers include also Aquamarine with its 315kW Oyster
devices installed in 2009 in Orkney islands and 800 kW in 2011; Pelamis Wave
Power, which presented the 750 kW Pelamis module in 2008 and a second
generation device (P2) in 2010; Carnegie Wave Energy, Wave Dragon and
Eneolica.  In Norway, Langlee Wave power is expected to make major steps when
presenting its 28 MW and 24MW wave demonstration projects in 2013. Table 1
shows examples of wave and tidal energy converter designs that have been installed
in European waters. Intensive testing and demonstration activities have been
carried out in recent years by EMEC in the UK, including Pelamis machines, one
Aquamarine installation and a Wavegen plant.

Finally,
it is noted that three new projects will receive funding from the NER300
programme: the Kyle Rhea 8 MW tidal energy project in the UK, which will
receive EUR 18.4 million; the Sound of Islay 10 MW tidal energy project in the
UK, which will receive EUR 20.7 million; and the West Wave 5 MW wave energy
project in Ireland, which will receive EUR 19.8 million.

Table 1: Examples
of wave and tidal energy technologies installed in European waters

Developer || Country of Origin || Nominal power [kW] || Projects to date

Pelamis Wave Power || UK || 750 || 2 units at EMEC, UK

Ocean Power Technologies || USA || 40 / 150 || 2 units of 40 kW in the USA, one 150 kW unit in Scotland

Seabased || Sweden || 30 || Many 30 kW units in Sweden

Aquamarine Power Oyster || UK || 315 / 800 || 315 and 800 kW units at EMEC, UK

AW Energy WaveRoller || Finland || 300 || 1 unit in Portugal

Voith Hydro Wavegen || UK / Germany || 300 / 500 || One 300 kW unit in UK and one 500 kW unit in Spain

WavEC || Spain || 400 || 1 plant in Portugal

Wave Dragon || Denmark || 20 || 1 unit in Denmark

Wello Oy || Finland || 500 || 1 unit in the UK

2.1.2    Offshore wind energy

According
to the Renewable Energy Progress Reports[205]
of the EU Member States, the installed capacity of offshore wind energy in the
EU27 reached 2925 MW in 2010 (Table 4); 87% of which was located in the UK,
Denmark, Netherlands and Belgium. In the same year, the offshore wind energy
production in EU27 was 6226.6 GWh (22.4 PJ) (Table 4), which corresponds to
0.4% of the total EU renewables (total RES) energy generation and approximately
0.26% of total electricity generation in that year (Table 5)[206]. According to
industrial sources, the installed capacity of offshore wind energy in the EU
reached 4950 MW by the end of 2012.

There
were approximately 70 offshore wind farms in operation in Europe in 2012. The
average wind farm capacity was 90 MW whereas the maximum capacity was 630 MW.
These farms have been erected relatively close to the shore (at a distance less
than 50km) and in shallow-to-medium water depths (less than 50m). However,
although most future wind farms will remain at a maximum depth of 50m, there
are a significant number of projects planned for deeper waters, at 50-350 m
depth. By 2012, three wind energy projects have been built on floating
substructures, in waters deeper than 50m: a 2.3 MW turbine at a depth of 220
meters, off the coast of Norway (Hywind); a 2 MW turbine at a depth of 50m off
the coast of Portugal (WindFloat); and an 80 kW turbine at a depth of 113
meters off the coast of Brindisi in Italy (Blue H)[207]. The latter was
decommissioned after 6 months of research.

Figure 1 shows the
mean depth[208] of existing and planned[209] European wind farms based on the 4COffshore wind farms database[210]. Denmark, the Netherlands and Sweden were the first European
countries to build demonstration offshore wind farms starting in the 1990s.
However, the timeline starts only at year 2000 to give more space in the graph
for the major cluster of offshore wind developments, starting around 2005. For
the same reason, the wind farms developed or planned for waters deeper than 150
m have been omitted in the graph. Those include one wind farm in Norway in 2012 and two wind farms each for Croatia, Estonia and Spain planned for the period
2015-2020. Currently Germany and the UK have the largest numbers of planned
wind farms.

Figure 1: Mean depth of existing and planned
European offshore wind farms[211]

However, as the
figure shows, the majority of future wind farms are still planned to be erected
at a distance of less than 50km from the shore: both Germany and the UK have consistently placed all of their planned wind farms in maximum 50m deep waters.

Norway, on the other hand, plans to go deeper with wind farms at depths of
several hundred meters, while staying relatively close to the shore. Also Spain has some wind farms planned for deep waters but only around 2020.

A general trend of
erecting farms at deeper waters – especially where shallow waters are not
available – has been observed but this trend is counter-balanced by the related
increased technical demands. According to Deloitte[212] this leads to an upward trend in offshore project costs during the
next 10 years.

2.2       Future potential

2.2.1    Wave and tidal

According
to the National Renewable Energy Action Plans (NREAPs) prepared by the EU
Member States, six countries plan to have wave and tidal plants operating in
their territories by 2020: UK, France, Portugal Ireland, Spain and Italy. The
installed capacity of these plants is projected to reach 2253 MW in 2020 (Table
2), representing 0.5% of the total RES electricity in EU27 that year (Table 3).
This implies an approximately 10-fold increase from 2010 levels (Figure 2).
These plants are expected to generate 6506 GWh (21.6 PJ) in 2020, see Table 2.

The
largest amount of wave and tidal energy in 2020 will be generated in the UK and France: 3950 GWh (14.2 PJ) and 1150 GWh (4.1 PJ), respectively (Table 2). Their aggregated
energy generation will represent 85.1% of the total wave and tidal energy
production in EU27, with UK alone providing 65.9%. In 2020, the total amount of
wave and tidal energy generated in the EU-27 will represent 0.2% of the
renewable energy mix of that year (Table 3). Hence, between 2010 and 2020, the
amount of wave and tidal electricity is projected to increase by a factor of 13
with a compound annual growth rate (CAGR) of 29.2%. The UK, Ireland and Portugal will have the highest wave and tidal energy share in domestic renewable
electricity generation, with 3.4%, 1.7% and 1.2 %, respectively. The UK and Ireland will also have the highest domestic share of wave and tidal energy in the total
renewable energy in 2020, with 1.7% and 0.9%, respectively (Table 3). The
highest growth in wave and tidal energy in 2020 compared to 2010 is expected to
be in the United Kingdom (Figure 3a).

Table 2: Wave and tidal energy
installed capacity and generated energy by Member State up to 2020, as
described in the EU Renewable Energy Progress Reports and NREAPs (National
Renewable Energy Action Plans). Countries not shown in the Table below have not
planned for wave and tidal energy for the period to 2020

|| Installed Capacity (MW) || Generation Potential (GWh)

  || 2005 || 2010 || 2015 || 2020 || 2005 || 2010 || 2015 || 2020

IE || 0 || 0 || 0 || 75 || 0 || 0 || 0 || 230

ES || 0 || 0 || 0 || 100 || 0 || 0 || 0 || 220

FR || 240 || 240 || 302 || 380 || 535 || 476 || 789 || 1150

IT || 0 || 0 || 0 || 3 || 0 || 0 || 0 || 5

NL || 0 || 0 || 0 || 135 || 0 || 0 || 0 || 514

PT || 0 || 0 || 60 || 250 || 0 || 0 || 75 || 437

FI || 0 || 0 || 10 || 10 || 0 || 0 || 0 || 0

UK || 0 || 2.6 || 0 || 1300 || 0 || 1.8 || 0 || 3950

EU || 240 || 242.6 || 372 || 2253 || 535 || 477.8 || 864 || 6506

Table 3: Share of wave and tidal energy in
total RES and renewable electricity in each Member State in 2020. Source: EU
Renewable Energy Progress Reports and NREAPs

|| Share in total RES energy (%) || Share in RES electricity (%)

  || 2010 || 2020 || 2010 || 2020

IE || n.a || 0.9 || 0 || 1.7

ES || n.a || 0.1 || 0 || 0.2

FR || 0,2 || 0.3 || 0.6 || 0.7

NL || n.a || 0.6 || 0 || 1

PT || n.a || 0.6 || 0 || 1.2

UK || n.a || 1.6 || 0 || 3.4

EU 27 || 0,03 || 0.2 || 0.08 || 0.5

Figure 2: Wave and tidal energy installed
capacity and energy generation in EU27, according to EU 27 Renewable Energy
Progress Reports and NREAPs

Figure 3. (a) Wave and tidal energy
and (b) offshore wind energy development according to EU 27 Renewable Energy
Progress Reports and NREAPs

2.2.2 Offshore wind

According to NREAPs,
the installed offshore wind capacity is projected to reach 42 GW in 2020 (Table
4, Figure 4) representing about 20% of installed wind. Although, as stated
above, in 2010, the UK, Denmark, the Netherlands and Belgium hosted about 87%
of the total offshore wind installed capacity in the EU, in 2020 these
countries are projected to host 70% to the total offshore wind installed
capacity in EU27, indicating a wider spread of offshore wind power among the
Member States.

The
offshore wind energy production in 2020, reported by Member States in the
NREAPs, is expected to reach 137 TWh (492 PJ) (Table 4) in EU27, meeting 4.8%
of the total renewable energy generation (Table 5). In 2020 offshore wind will
represent 3.6% of the total electricity generation in the EU27.

The
highest offshore wind domestic share in renewable electricity will be in Malta, the Netherlands and the UK with 46.1%, 37.8% and 37.7% respectively, followed by Estonia and Belgium with 29.4% and 26.8%. Malta will also have the highest offshore wind domestic
share in the total renewable energy generation in 2020, i.e. 31.9%, followed by
the Netherlands (24%), the UK (18.3%), Belgium (9.8%) and Denmark (9%), see Table
5.

The largest offshore
wind energy development in 2020 from 2010 levels will be in the United Kingdom and Germany, followed by the Netherlands and France (Figure 3b).

Table 4: Offshore
wind installed capacity and generation potential by Member State up to 2020, as
described in the EU Renewable Energy Progress Reports and NREAPs

|| Installed capacity (MW) || Generated electricity (GWh)

  || 2005 || 2010 || 2020 || 2005 || 2010 || 2020

BE || 0 || 196.5 || 2000 || 0 || 189.6 || 6200

DK || 423 || 765 || 1339 || 1456 || 1622 || 5322

DE || 0 || 180 || 10000 || 0 || 210 || 31771

EE || 0 || 0 || 250 || 0 || 0 || 563

IE || 25 || 25 || 555 || 0 || 70\* || 1742

GR || 0 || 0 || 300 || 0 || 0 || 672

ES || 0 || 0 || 750 || 0 || 0 || 1822

FI || 0 || 26[213] || 900 || 0 || 73\* || 2500

FR || 0 || 0 || 6000 || 0 || 0 || 18000

IT || 0 || 0 || 680 || 0 || 0 || 2000

LV || 0 || 0 || 180 || 0 || 0 || 391

MT || 0 || 0 || 95 || 0 || 0 || 216

NL || 0 || 228 || 5178 || 0 || 765 || 19036

PL || 0 || 0 || 500 || 0 || 0 || 1500

PT || 0 || 0 || 75 || 0 || 0 || 180

SE || 23 || 163 || 182 || 62 || 450 || 500

UK || 213.8 || 1341 || 12990 || 403 || 2847 || 44120

EU || 685 || 2925 || 41974 || 1921 || 6226.6 || 136535

\* Values estimated by the JRC-SETIS based on
capacity factor values derived from the NREAPs.

Figure 4: Offshore wind installed capacity
and generated energy in EU27, according to EU 27 Renewable Energy Progress
Reports and NREAPs.

Table 5: Share of offshore wind electricity
production in total RES energy, total RES electricity, total electricity
production and gross final energy consumption (GFEC).

|| Share in total RES energy (%) || Share in RES electricity (%) || Share in total electricity production (%) || Share in GFEC (%)

|| 2010 || 2020 || 2010 || 2020 || 2010 || 2020 || 2010 || 2020

BE || 0.8 || 9.8 || 2.7 || 26.8 || 0.17 || 5.34 || 0.04 || 1.3

DK || 3.8 || 9.0 || 13.1 || 25.8 || 6.75 || 12.84 || 0.86 || 2.8

DE || 0.1 || 7.0 || 0.2 || 14.6 || 0.05 || 5.19 || 0.01 || 1.4

EST || 0 || 5.6 || 0.0 || 29.4 || 0.00 || 5.09 || 0.00 || 1.4

IE || 0.9 || 6.5 || 1.6 || 12.5 || 0.25 || 5.10 || 0.04 || 1.1

GR || 0.0 || 1.2 || 0.0 || 2.3 || 0.00 || 0.94 || 0.00 || 0.2

ES || 0.0 || 0.8 || 0.0 || 1.3 || 0.00 || 0.44 || 0.00 || 0.2

FI || 0.1 || 2.0 || 0.3 || 7.5 || 0.00 || 2.46 || 0.02 || 0.8

FR || 0.0 || 4.2 || 0.0 || 11.6 || 0.00 || 3.01 || 0.00 || 1.0

IT || 0.0 || 0.8 || 0.0 || 2.0 || 0.00 || 0.49 || 0.00 || 0.1

LV || 0.0 || 1.7 || 0.0 || 7.5 || 0.00 || 3.91 || 0.00 || 0.7

MT || 0.0 || 31.9 || 0.0 || 46.1 || 0.00 || 6.39 || 0.00 || 3.5

NL || 3.2 || 24.0 || 6.5 || 37.8 || 0.70 || 14.01 || 0.13 || 3.2

PL || 0.0 || 1.2 || 0.0 || 4.7 || 0.00 || 0.74 || 0.00 || 0.2

PT || 0.0 || 0.3 || 0.0 || 0.5 || 0.00 || 0.27 || 0.00 || 0.1

SE || 0.2 || 0.2 || 0.5 || 0.5 || 0.14 || 0.29 || 0.11 || 0.1

UK || 5.2 || 18.3 || 10.2 || 37.7 || 1.27 || 11.09 || 0.18 || 2.8

EU || 0.4 || 4.8 || 1.0 || 11.3 || 0.26 || 3.57 || 0.05 || 1.0

Bulgaria, Cyprus, Latvia, Poland, Romania and Slovenia have no plans to introduce offshore wind before 2020. Italy has planned to introduce offshore wind in 2013 whereas Estonia, Greece, Spain, Latvia, Malta, Portugal and Spain will not introduce offshore wind before 2015. The largest
growth in offshore wind energy from the 2010 levels is expected in the United Kingdom and Germany, followed by the Netherlands and France (Figure 3, right).

For the period
2013-2015, a number of sources estimate that the annual global wind energy
market (onshore and offshore combined) could reach between 43 GW and 58 GW,
increasing afterwards mainly due to growth of offshore installations. JRC-SETIS
estimates that in 2020 the European wind energy installed capacity could reach
215 GW[214]
of which 33 GW offshore, reflecting on the latest delays in materialising grid
infrastructure projects. Global capacity of wind energy could reach 715 GW in
the same year, of which 50 GW will be offshore.

In Europe, the 2020
projections based on the NREAPs suggest that offshore installations will
increase significantly, from 2.9 GW today to 42 GW, demonstrating a 15-fold
increase. The industry[215]
expects that the installed capacity in 2020 in Europe will reach 230 GW, of
which 40 GW will be offshore, and 400 GW by 2030 of which 150 GW offshore.

Table 6 shows the
JRC-SETIS estimates on likely deployment of wind energy for the European Union
and the world as a whole.

Table 6: Estimated installed capacity
of wind energy up to 2050, in GW. Source JRC-SETIS

|| EU || World || EU share of World capacity

|| Total || Onshore || Offshore || Total || Onshore || Offshore || Offshore

Cumulative capacity 2011 || 94 || 90 || 3.7 || 240 || 236.1 || 3.9 || 95%

Installed 2012-2015 || 51 || 43.7 || 7.3 || 175 || 162.9 || 12.2 || 60%

Annual installation rate || 12,8 || 10,9 || 1.8 || 43.8 || 40.7 || 3 || 60%

|| || || || || || ||

Installations 2016-2020 || 70 || 48 || 22 || 300 || 266 || 34 || 65%

Annual installation rate || 14 || 9.6 || 4.4 || 60 || 53.2 || 6.8 || 65%

Cumulative by 2020 || 215 || 182 || 33 || 715 || 665 || 50 || 66%

|| || || || || || ||

Installations 2021-2030 || 135 || 50 || 85 || 750 || 550 || 200 || 43%

Annual installation rate || 13.5 || 5 || 8.5 || 75 || 55 || 20 || 43%

Cumulative by 2030 || 350 || 232 || 118 || 1465 || 1215 || 250 || 47%

|| || || || || || ||

Installations 2031-2050 || 200 || 40 || 160 || 1075 || 725 || 350 || 46%

Annual installation rate || 10 || 2 || 8 || 54 || 36 || 18 || 44%

Cumulative by 2050 || 550 || 272 || 278 || 2540 || 1940 || 600 || 46%

3. The cost of marine energy

The successful
penetration of marine energy in the European energy system will depend by and
large on the future trajectory of costs, for both marine energy technologies
and their established technological ‘competitors’. Data are not available on
actual costs of electricity per generating technology and Member State; nevertheless, useful conclusions about the competitiveness of marine energy technologies
can be drawn based on calculations by the JRC-SETIS of the levelised cost of
electricity (LCoE) for the main power generating technologies. The following
section presents the results of this analysis. This is followed by a section
that addresses the main barriers to marine energy cost reductions. This chapter
is concluded by a brief overview of indirect costs that may affect the
competitiveness of marine energy and in particular those of electricity
networks and of electricity storage.

3.1       Average electricity generation cost from conventional technologies

The LCoE for a
number of power generating technologies has been calculated using the most
updated set of energy technology operational and performance indicators
available to the JRC-SETIS. Table 7 below shows the input data used for natural
gas, nuclear, oil and coal (both conventional and carbon capture and storage
–CCS- options) technologies and the calculated LCoE for the period 2010 - 2050.
The fuel and carbon costs assumed in this analysis are those considered in the
2050 Energy Roadmap[216].
It is noted that no carbon cost was considered for the year 2010.

Table 7a: LCoE of nuclear energy
technologies

LCoE, Nuclear energy

|| 2010 || 2020 || 2030 || 2040 || 2050

Specific investment [€/kW] || 4803 || 4337 || 4061 || 3938 || 3938

Economic lifetime [yr] || 40 || 40 || 40 || 40 || 40

Discount rate [%] || 7 || 7 || 7 || 7 || 7

Load factor [%] || 90 || 85 || 80 || 75 || 75

Fixed O&M cost [%] || 2 || 2 || 2 || 2 || 2

Variable O&M costs  [c€/kWh] || 0.22 || 0.23 || 0.24 || 0.24 || 0.24

Fuel cost [c€/kWhe] || 1 || 1 || 1 || 1 || 1

Direct GHG emissions [tCO2/GWh] || 0 || 0 || 0 || 0 || 0

Carbon cost [€/tCO2] ||    || 19 || 42 || 54 || 52

LCoE [c€/kWh] (2010 €) || 6.72 || 6.53 || 6.55 || 6.77 || 6.77

Note: The construction cost of the reactor does not vary much between
today and 2050, but a learning factor is considered based on the reduction in
the construction time from 8 years at present down to 5 years on the longer
run. A decrease in the load factor is assumed in the future due to higher
penetration of wind and solar power in the power mix. The fixed operating and
maintenance (O&M) costs are expressed as a share of the reactor
construction cost.

Table 7b: LCoE natural gas combined
cycle energy technologies without CCS

LCoE, Natural Gas Combined Cycle power plants without carbon capture and storage

|| 2010 || 2020 || 2030 || 2040 || 2050

Specific investment [€/kW] || 855 || 820 || 761 || 750 || 740

Economic lifetime [yr] || 25 || 25 || 25 || 25 || 25

Discount rate [%] || 5 || 5 || 5 || 5 || 5

Load factor [%] || 80 || 70 || 60 || 60 || 60

Fixed O&M cost [%] || 2.4 || 2.4 || 2.4 || 2.4 || 2.4

Variable O&M costs  [c€/kWh] || 0.23 || 0.23 || 0.23 || 0.23 || 0.23

Fuel cost [c€/kWh] || 2.61 || 3.05 || 3 || 2.8 || 2.41

Average annual efficiency [%] || 56 || 57 || 58 || 58 || 58

Direct GHG emissions [tCO2/GWh] || 308 || 308 || 308 || 308 || 308

Carbon cost [€/tCO2] || || 19 || 42 || 54 || 52

LCoE [c€/kWh] (2010 €) || 6.05 || 7.44 || 8.07 || 8.08 || 7.32

Note:   A decrease in the load factor is assumed in the future due to
higher penetration of wind and solar energy in the power mix. The fixed O&M
costs are expressed as a share of the investment.

Table 7c: LCoE for natural gas
combined cycle energy technologies with CCS

LCoE, Combined Cycle power plants with carbon capture and storage

|| 2010 || 2020 || 2030 || 2040 || 2050

Specific investment [€/kW] || || 1244 || 1155 || 1124 || 1093

Economic lifetime [yr] || || 25 || 25 || 25 || 25

Discount rate [%] || || 5 || 5 || 5 || 5

Load factor [%] || || 85 || 85 || 85 || 85

Fixed O&M cost [%] || || 2.9 || 2.9 || 2.9 || 2.9

Variable O&M costs  [c€/kWh] || || 0.09 || 0.09 || 0.09 || 0.09

Fuel cost [c€/kWh] || || 3.05 || 3 || 2.8 || 2.41

Average annual efficiency [%] || || 50 || 53 || 55 || 58

Direct GHG emissions [tCO2/GWh] || || 54 || 50 || 47 || 45

Carbon cost [€/tCO2] || || 19 || 42 || 54 || 52

LCoE [c€/kWh] (2010 €) || || 7.96 || 7.51 || 6.94 || 5.95

Table 7d: LCoE for coal energy
technologies without CCS

LCoE, Coal power plants without carbon capture and storage

|| 2010 || 2020 || 2030 || 2040 || 2050

Specific investment [€/kW] || 1620 || 1500 || 1350 || 1300 || 1300

Economic lifetime [yr] || 25 || 25 || 25 || 25 || 25

Discount rate [%] || 5 || 5 || 5 || 5 || 5

Load factor [%] || 90 || 85 || 85 || 80 || 80

Fixed O&M cost [%] || 4 || 4 || 4 || 4 || 4

Variable O&M costs  [c€/kWh] || 0.25 || 0.25 || 0.25 || 0.25 || 0.25

Fuel cost [c€/kWh] || 1.13 || 1.23 || 1.28 || 1.18 || 1.03

Average annual efficiency [%] || 43 || 48 || 48 || 48 || 48

Direct GHG emissions [tCO2/GWh] || 695 || 695 || 695 || 695 || 695

Carbon cost [€/tCO2] || || 19 || 42 || 54 || 52

LCoE [c€/kWh] (2010 €) || 5.16 || 6.37 || 7.85 || 8.52 || 8.07

Note:   A decrease in the load factor is
assumed in the future for coal power plants without CCS due to higher
penetration of wind and solar energy in the power mix. The fixed O&M costs
are expressed as a share of the investment.

Table 7e: LCoE for coal energy
technologies with CCS

LCoE, Coal power plants with carbon capture and storage

|| 2010 || 2020 || 2030 || 2040 || 2050

Specific investment [€/kW] || || 2456 || 2356 || 2315 || 2275

Economic lifetime [yr] || || 40 || 40 || 40 || 40

Discount rate [%] || || 5 || 5 || 5 || 5

Load factor [%] || || 85 || 85 || 85 || 85

Fixed O&M cost [%] || || 3 || 3 || 3 || 3

Variable O&M costs  [c€/kWh] || || 0.29 || 0.29 || 0.29 || 0.29

Fuel cost [c€/kWh] || || 1.23 || 1.28 || 1.18 || 1.03

Average annual efficiency [%] || || 36 || 40 || 43 || 46

Direct GHG emissions [tCO2/GWh] || || 126 || 114 || 107 || 100

Carbon cost [€/tCO2] || || 19 || 42 || 54 || 52

LCoE [c€/kWh] (2010 €) || || 6.86 || 6.76 || 6.36 || 5.75

The required inputs
to calculate the LCoE for wave and tidal energy are the capital costs and the
discount rate, the amortization period, equivalent annual utilization time
(load factor) and the fixed and variable O&M costs.  There are no fuel and
carbon emission costs, since life cycle-based carbon emissions are not included
in the calculations. In practice, the variable O&M costs are minor. Capital
costs take into account the capital and the accumulated interest until the
start of operation of the plant. Load factors have been assumed based on a
conservative approach; nevertheless these should be addressed with caution in
view of the uncertainty of performance of any non-commercialised technology.
For example, the average load factor calculated from the Member States’
estimates of energy production in the NREAPs is 33%, while the present analysis
assumes values less than 30%. The discount rate for wave energy is assumed to
be relatively high on the short term, reflecting a high-risk investment (10%). 
On the long term, a discount rate of 5% is considered. Tidal energy is a more
proven technology, hence capital costs at any time before 2050 are lower than
those of wave energy technologies.

The assumed economic
performance indicators for offshore wind for the calculation of LCoE are mainly
adopted from the JRC wind status report[217].
Capital expenditure and fixed O&M costs are decreasing with time, which is
supported by the general trend within the industry, e.g. expected reduction in
raw material costs, current manufacturing overcapacity and increasing
competition. The somewhat high discount rate reflects the high perception of
risk related to offshore wind projects by investors. Regarding the load factor,
at European level there are two counteracting trends: increased reliability
will generally increase the load factors whereas the geographic spread of
offshore wind farms to sites with lower mean wind speeds than in the North Sea
will lead to lower average load factors. Thus, a conservative increase in load
factor has been assumed.

The results of the
calculation of LCoE for marine technologies for the years 2010 to 2050 is
presented in Tables 8 (wave and tidal) and 9 (offshore wind). The cost breakdown
for both wave and tidal energy technologies in 2050 is shown in Figure 5 and
similarly for offshore wind in Figure 6. The capital costs have by far the
highest share in the wave and tidal electricity cost. The fixed O&M costs
are also significant. All other costs are minor. Similarly, for offshore
wind, the highest share in the LCoE in 2050 comes from the capital costs,
followed by the fixed O&M costs. However in this case, the variable O&M
costs play a more significant role than for tidal and wave energy.

Table 8: Input
data and calculated LCoE for wave energy and for tidal energy

LCoE, Wave energy

|| 2010 || 2020 || 2030 || 2040 || 2050

Specific investment [€/kW] || 5650 || 4070 || 3350 || 3062 || 2200

Economic lifetime [yr] || 25 || 30 || 30 || 30 || 30

Discount rate [%] || 10 || 8 || 6 || 5 || 5

Load factor [%] || 22 || 23 || 24 || 25 || 26

Fixed O&M cost [%] || 2 || 2 || 2 || 2 || 2

Variable O&M costs  [c€/kWh] || 0.05 || 0.05 || 0.05 || 0.05 || 0.05

Direct GHG emissions [tCO2/GWh] || 0 || 0 || 0 || 0 || 0

LCoE [c€/kWh] (2010 €) || 37.3 || 21.9 || 14.8 || 11.7 || 8.3

LCoE, Tidal energy

|| 2010 || 2020 || 2030 || 2040 || 2050

Specific investment [€/kW] || 4340 || 3285 || 2960 || 2700 || 2200

Economic lifetime [yr] || 25 || 30 || 30 || 30 || 30

Discount rate [%] || 8 || 7 || 6 || 5 || 5

Load factor [%] || 22 || 23 || 24 || 25 || 26

Fixed O&M cost [%] || 2 || 2 || 2 || 2 || 2

Variable O&M costs  [c€/kWh] || 0.05 || 0.05 || 0.05 || 0.05 || 0.05

Direct GHG emissions [tCO2/GWh] || 0 || 0 || 0 || 0 || 0

LCoE [c€/kWh] (2010 €) || 24.9 || 16.4 || 13.1 || 10.3 || 8.3

Note:  The fixed O&M costs are
expressed as a share of the investment.

Table 9: Input data and calculated LCoE for
offshore wind

LCoE, Offshore wind

|| 2010 || 2020 || 2030 || 2040 || 2050

Specific investment [€/kW] || 3500 || 3000 || 2560 || 2290 || 2060

Economic lifetime [yr] || 20 || 25 || 25 || 25 || 25

Discount rate [%] || 10 || 9 || 8 || 7 || 6

Load factor [%] || 36 || 39 || 41 || 42 || 43

Fixed O&M cost [%] || 3.4 || 2.8 || 2.8 || 2.8 || 2.8

Variable O&M costs  [c€/kWh] || 1 || 0.8 || 0.6 || 0.55 || 0.5

Direct GHG emissions [tCO2/GWh] || 0 || 0 || 0 || 0 || 0

LCoE [c€/kWh] (2010 €) || 17.81 || 12.21 || 9.27 || 7.62 || 6.3

Note:  Increased load factor due to
design upgrades is assumed.  The fixed O&M costs are expressed as a share
of the investment.

The LCoE for all the
technologies is presented in Table 10 and in Figure 7 below.

Figure 5:   Cost breakdown of LCoE in 2050 for wave and tidal energy

Figure 6: Cost breakdown of LCoE for
2050 for offshore wind energy

Table 10: Summary of LCoE for all
power generation technologies

LCoE, all technologies [c€/kWh] (2010 €)

|| 2010 || 2020 || 2030 || 2040 || 2050

Nuclear || 6.7 || 6.5 || 6.6 || 6.8 || 6.8

Combined Cycle || 6.1 || 7.4 || 7.5 || 6.9 || 6.0

Coal || 5.2 || 6.4 || 6.8 || 6.4 || 5.8

Offshore Wind || 17.8 || 12.2 || 9.3 || 7.6 || 6.3

Tidal || 24.9 || 16.4 || 13.1 || 10.3 || 8.3

Wave || 37.3 || 21.9 || 14.8 || 11.7 || 8.3

Note: The LCoE for combined cycle and
coal power plants considers conventional plants until 2020 and the lowest cost
option between conventional and CCS plants for 2030 onwards.

The analysis shows
that offshore wind can be competitive with other mainstream power generation
technologies from about 2030 onwards. However, wave and tidal energy
technologies at the current rate of development will only become marginally
competitive at around 2050, based on the assumptions made above. Therefore, to
make wave and tidal competitive with other mainstream technologies sooner, for
example by 2030, their capital costs need to be reduced more rapidly and their
load factors need to increase, implying the necessity for intensified RD&D
investments.

Figure 7: LCoE projections for the
main power generation technologies

3.2       Cost reductions for marine energy technologies

The current costs of
both wave and tidal energy are considerably higher than these of conventional
and other renewable energy generation technologies, as described in the
previous section, given the early stage of their technological maturity,
particularly since projects are constrained to demonstration of individual
devices and thus there are very limited economies of scale.

According to
CarbonTrust[218],
the current costs reflect the high uncertainties and lack of know how. The cost
of devices decreases through deployment at choice sites or dedicated test
sites. Reduction cost efforts are focused on new generation devices by means of
increasing the energy yield in deeper waters and greater swept area per unit of
support structure and foundation and per unit of capital costs and O&M
costs.

Cost reduction in
wave and tidal energy will be achieved through design improvement,
optimizations in applied materials and mass production. These factors will lead
to significant reductions in investment costs, increase of the capacity factor,
higher reliability and extended lifetime.

At the current early
stage, wave and tidal technologies are based on a wide variety of different
designs. For instance, current wave energy converter technologies include the
following types: attenuator, point absorber, oscillating wave surge converter,
oscillating water column, overtopping, pressure differential, bulge wave and
the rotating mass type, among others. Tidal energy converts include, among
others: horizontal and vertical axis turbines, oscillating hydrofoil, enclosed
tips, helical screw and tidal kite. In the future, it is expected that the
current technological diversity on the RD&D level will crystallize to
standard solutions with strong synergies so that significant cost reduction
through the learning rate would be achieved with the increase in the cumulative
installed capacity.

Figure 8 presents
the cost reduction curve for wave and tidal energy during the period 2010 to
2050, based on JRC-SETIS estimates.

Figure 8: Capital cost reductions in wave and tidal energy technologies

The offshore wind
industry experienced a period of fierce internal competition between 2000 and
2004, resulting in capital cost reductions. However, since 2005, capital costs
have shown a continuous increase. During the last six years, R&D in
offshore wind technology has focused on increasing the reliability of turbines
which also has caused an increase in capital cost. Increased reliability
should, however, be reflected on a reduced cost of energy, albeit with a lag.

Therefore, the two
key issues for offshore wind are increasing reliability and reducing costs.
Increasing reliability will have an impact on a number of current challenges in
offshore wind farms. For example, increasing reliability reduces maintenance
stops, which in turn translates to reducing the need to access the wind farm,
which is currently a costly activity. Therefore, reduction of costs is partly met
by increasing reliability, but also by improving the design of the whole
system, e.g. the coupling between the foundation and the installation vessels
in order to reduce installation time; more cost-effective foundations and
installation for sites in deeper waters and farther away; and by reducing the
cost of interconnections, currently representing about 20–25 % of the capital
expenses.

In fact, the design
of foundations and cable connection has become as important as that of
turbines. Currently, monopiles are the most popular foundations, followed by
gravity-based foundations for shallow-to-medium water depths. Jacket
foundations are more expensive than monopiles but they have become more common
mainly because of their less steep cost increase with increased turbine size,
in particular above 4 MW and in increased water depths of beyond 40 m.

Much less common
and, in fact, nearly experimental, are tripod, tripile and floating
foundations. The latter are being explored in order to capture the very large resource
available in deep-water areas. The first deep-water wind farm is envisaged in Japan in 2020. In Europe the projects VertiMED and Wind float[219] aim to install
floating wind farms of 26-27 MW around the same year.

The trend towards
ever larger wind turbines, which slowed in recent years, has resumed. The
largest wind turbine now in commercial operation has a capacity of 7.5 MW, and
most manufacturers have introduced designs of turbines in the 4.5 – 10 MW range
(up to a total of 42 different designs) mostly for offshore use. Both industry
and academia see even larger turbines (10 – 20 MW) as the future of offshore
machines[220].

The market uptake of
innovative offshore foundations is affected by the long time that it takes for
a new foundation to become commercially established. Public support for
full-size tests of new foundations and/or first-of-a-kind use in a new wind
farm would help accelerate this process. Initiatives such as the European
Energy Programme for Recovery (Offshore Wind Energy) did just this at Thornton
Bank offshore wind farm and others[221].

Monopiles, caissons
or tripods, all have very different port requirements, and it has been hard to
justify the development of dedicated port facilities until uncertainties are
reduced. Over the past year the situation has become much clearer and as the
wind farms have gone from 30 turbines each to several hundred, it is now
possible to foresee dedicated port facilities being built. It is very likely
that two or three such facilities will be built along the European littoral to
supply European needs.

Synergies exist
between the marine energy sector and the oil and gas (O&G) industry in
areas such as the manufacture of installation vessels. The O&G sector can
bring in experience and knowhow to the marine energy sector, in particular on
substructure installations and on operation and maintenance issues.

However, the
logistics of offshore wind energy are less efficient than in the O&G
industry. For example, with new wind farms being built further offshore, vessels
will need to carry more wind turbines in order to do less trips and to better
use weather windows. In addition, they should be able to install both turbines
and foundations. Certain new standards are needed: the wind industry is working
with standards designed for the O&G industry, and sometimes these are not
optimal.

In summary, offshore
wind is expected to maintain high costs until 2015 but it has room for actions
that can reduce costs, including technology improvements (e.g. to reduce
foundation and installation costs), learning-by-doing, improved supply chain
and more competition, which could lead to a reduction of approximately 30% by
2020, based on an average from various estimates from the industry. The
industry values range from 40% cost reduction by 2015 to 20% cost reduction by
2020.

Public bodies could
possibly have the largest impact on cost reduction if they focus on reducing
the risks and uncertainties existing in the different phases of a wind farm
project. Examples include the identification and reduction in the uncertainty
of wind energy yield calculations (which would result in lower risks for
financial institutions providing debt); and the reduction of the risks of the
permit process, e.g. through streamlining the permit schemes, public planning
of preferred wind deployment areas, etc.

Many of the issues
mentioned above for offshore wind are likely to become applicable to wave and
tidal energy technologies, once they reach a similar revel of maturity.

Figure 9 presents the cost reduction curve for offshore wind, for the
period 2010 - 2050[222].

Figure 9: Cost reduction curve for offshore
wind power

3.3       Connecting marine energy to the European grid

The
integration of large amounts of marine energy, especially of variable offshore
wind, with the power system can be a challenge for the current transmission
system in a liberalised background. It is noted that tidal and wave energy is
predictable to a large extent, hence less challenging for the reliability of
the power grid. This makes wave and tidal energy suitable for hybrid systems
with balancing power from pumped storage or gas[223]. To address
this potential bottleneck, a more flexible transmission grid would be needed as
well as the large scale deployment of electricity storage devices. An overview
of the power grid technology options, which could be explored to integrate
marine (and other RES) energy in the power system are presented next, followed
by an overview of costs for the transmission grid and electricity storage.

3.3.1    Power grid technology options for the integration of marine
energy

The
on-going energy market liberalisation process in Europe causes a steady rise of
power exchange between Member States, generally increasing transmission network
congestion. The solution of enhancing power transmission capacity,
traditionally realised by adding new high voltage alternating current (HVAC)
lines, is nowadays seriously hampered by economic, social and environmental
constraints. Thus, a need emerges in Europe for the evolution in the design and
operation of transmission networks, which will necessitate re-engineering of
the system. The different options to support such a process include advanced
power transmission devices like FACTS (flexible alternating current
transmission system) and HVDC (high voltage direct current) technologies.

FACTS
and HVDC may play a significant role towards the development of the future
pan-European transmission system. These devices could help to increase
transmission network capacity and flexibility and generally enhance system
reliability and controllability with a limited environmental impact. These
properties are especially important in a deregulated environment, where, in the
presence of more frequent and severe corridor congestions, fast-reacting FACTS
and HVDC elements can efficiently avoid or relieve network constraints. This
can then lead to a reduced need for building new HVAC lines with consequent
environmental and economic benefits. Thus, FACTS and HVDC elements may provide
European transmission system operators (TSOs) with effective solutions to the
several criticalities they encounter nowadays in their grid planning processes.
Particular attention should be paid to different specific technical, economic
and environmental features of FACTS and HVDC that have to be taken into account
in a transmission expansion plan. Finally, it has to be noted that in a highly
meshed network, as the European one, if HVDC and FACTS become extensively
deployed, they will deliver real benefits only when subjected to a coordinated
and hierarchical control.

3.3.2    The cost of electricity transmission

The
investment costs for an undersea transmission system, as calculated by the FP7
REALISEGRID project[224],
are illustrated in Figure 10. These costs refer to transmission lines connecting
offshore wind farms with capacity close to 1000 MW and include costs for
equipment, project engineering and installation. Each transmission type (AC and
DC) in Figure 10 is represented by two lines showing minimum and maximum costs.
The minimum value refers to installation costs in European countries with low
labour costs, while the maximum value refers to installation costs in European
countries with high labour costs, e.g. Germany, The Netherlands and France.

Figure 10: HVAC and HVDC undersea cable
costs for a 1000 MW wind farm. The vertical lines give the percentages of
existing and planned offshore wind farms at a distance less or equal to the
corresponding value in km from shore.

It
can be noticed in Figure 10 that HVAC transmission cables have lower costs for
power transfer of 1000 MW. However, the costs presented here are the investment
costs only; therefore, it is very important that maintenance costs are also
included in any assessment. Maintenance costs would represent a significant part
in the total costs for AC cables, since the AC power transmission is associated
with the presence of reactive power. The reactive power in the cable does not
do any useful work, but increases the current in the cable. So, the losses and
loading increase as well. These results indicate that for short distances
(until 100 km) the HVAC option could be more efficient for offshore cabling
purposes. However, for offshore cabling for long distances (200 km and more)
HVDC is the only feasible solution. This discussion is also relevant to wave
and tidal energy transmission, where a good approach would be to consider
connection costs similar to offshore wind cabling costs.

3.3.3    The cost of electricity storage

Electricity
storage has attracted significant political and commercial attention in the
light of development of renewables and distributed generation, as a way to
improve grid stability and to control fluctuations of variable resources, such
as offshore wind, and to a lesser extent, of wave and tidal energy.  There are
many storage technologies commercially available or under development, such as
pumped hydro storage (PHS), compressed air energy storage (CAES), hydrogen,
flywheels, super-capacitors, superconducting magnetic energy storage (SMES) and
conventional/advanced/flow batteries. Figure 11 gives an overview of power
storage technologies, as a function of their commercial maturity stage and the
power investment cost.

Pumped
storage schemes currently provide the most commercially viable means of large
scale electricity storage, and it is expected to maintain this position in the
short / medium term. The main technical and economic features of PHS are
summarized in Table 11 below[225].
In Europe, the installed capacity of pure PHS is approximately 40 GW. It is estimated
that by 2030, about 50 % of the current PHS will have to be refurbished due to
ageing. Some of these projects have already started to increase their
generation capacity, for example, in the Alpine region, where new and larger
converter units have been added to existing storage basins[226]. The
capacity of planned or on-going projects in Europe is estimated to be about 7
GW to be built by 2020 mainly in Switzerland, Austria, Portugal, Germany and
Spain[227].
Additionally, the large PHS potential of Norway, estimated to be 10-25 GW of
new projects, could be further exploited, triggered by the large deployment of
wind power in the North Sea[228].

Main
barriers to the installation of new PHS plants are the environmental concern
and the public acceptability when projects might affect the resource
availability and inundate the ecosystem. New PHS plants usually require large
electricity transmission infrastructure in their vicinity, which might raise
political, social and regulatory issues. The initial investment costs are high,
and the construction time can be long, up to 15 years taking into account the
time needed for obtaining the approval for concession rights and connection to
the grid[229].
Non-technological issues include market uncertainty, the need to further develop
regulatory aspects on power quality at the European level and to contribute to
the integration of storage while defining grid extension planning and renewable
integration targets, and unfavourable economics. A detailed treatment of these
barriers can be found in the 2011 Technology Map of the European Strategic
Energy Technology Plan, prepared by SETIS[230].

Overall,
an increase in European PHS installed capacity would allow for more system
flexibility. More reservoir-hydro capacity would contribute to grid support and
this would enable the large scale deployment of marine and other renewables
into the system.

Table 11: Main features of PHS

PHS

Power rating, MW || 100-5000

Energy rating || 1-24h+

Response time || Seconds to minutes

Round-trip efficiency || 75-85

Lifetime (years) || 50-100

Power cost (Euros/kW) || 500-3600

Power cost (Euros/kWh) || 60-150

Figure 11: Power storage technologies as
function of their costs and development stage (JRC-SETIS)

4.         Coastal, marine and maritime activities in synergy with
marine energy

The
future development of the wave and tidal energy sector will be linked with
developments in offshore wind energy, exploiting positive synergies in
technological progress (e.g., components), infrastructure, supply chain and
policies. There will be significant opportunities for co-location of
technologies; for example for wave, tidal and offshore wind energy, utilising
common platforms for wind/wave or wind/tidal hybrid systems. Mutual learning
processes, shared infrastructure and innovations from a shared supply chain
will be of great benefit to the future expansion of the marine energy sector[231].

As mentioned
earlier, synergies also exist between the marine energy sector and the oil and
gas industry in areas such as the manufacture of installation vessels. The oil
and gas sector can bring in experience and knowhow to the marine energy sector
on substructure installations, health and safety and other operation and
maintenance issues.

Wave and tidal
energy projects share grid-related issues with offshore wind and even with
onshore wind at a lower level. Other sectors that have possible synergies with
wind are the grid components, in particular for offshore installations, and
electricity storage sectors. The latter, along with the automotive industry for
electric cars, and with the support of smart grids/metering, would create a
demand-management scenario able to adapt and assimilate mainly surplus offshore
wind electricity.

5. Social impact of marine energy

5.1       Employment

The estimated
employment in the wave and tidal energy sector, according to the European Ocean
Energy association (EU-OEA)[232],
in 2020 may reach 26000 direct jobs (and 40000 in total, both direct and
indirect). The number of new jobs that will be created depends by and large on
the actual penetration level of these technologies.

A
significant increase is also foreseen for employment in offshore wind. A study
by Cambridge Econometrics for RenewableUK examines three scenarios for
employment growth in the offshore wind sector by 2020: 31 GW of installed
offshore wind would create 42400 direct full time employees (FTEs) and 25300
indirect FTEs; 23 GW would create 29700 direct FTEs and 17500 indirect FTEs;
and finally, 13 GW would create 1800 direct FTEs and 6400 indirect FTEs[233].

However, projections
of growth in wind-related employment should be re-interpreted in the context of
the ongoing process of delocalisation. Delocalisation causes a reduction of the
production capacity in Europe with important consequences on wind energy
employment. New wind markets do not necessarily involve employment growth in
Europe as some of these markets (e.g. Canada, South Africa) impose local
content, which aims to create local jobs. In addition, new markets without
local content requirements, but away from Europe, will be supplied by European
manufacturers from their factories located nearer to those markets.

5.2 Reduction in greenhouse gas (GHG) emissions

Assuming
that marine energy technologies get dispatch priority in the European energy
system, each MWh of marine energy fed to the grid would dispatch an equal
amount of electricity generated from the power generation infrastructure in
place (at least as long as the amount of marine energy is still small compared
to the total amount of power generation). This implies that marine energy
technologies ‘displace’ fossil fuel power plants, which leads to reduction of
CO2 emissions. The amount of CO2 avoided by the
introduction of marine energies is directly linked to the carbon intensity of
electricity production. Based on the 2050 Energy Roadmap, the carbon intensity
of the European energy system in 2010 is 320 kg of CO2 per MWh,
hence the generation of 1 MWh of marine energy could lead to CO2
reductions of 320 kg. The amount of CO2 avoided in the future
depends on the future technology mix. The carbon intensity in 2020 is 230
kg/MWh in the Reference scenario, and 200 kg/MWh in the ‘diversified supply
technologies’ and the ‘High RES’ scenarios of the 2050 Energy Roadmap. It is
apparent that the total CO2 emissions which could be avoided by the
deployment of marine energy technologies will depend on the installed
capacities of marine energy technologies and the portfolio of power generation
technologies already in place at any time. The EU-OEA estimated that 2.61 Mt CO2
/year in 2020 and 136.3 Mt/year by 2050 could be avoided by the envisaged
deployment of wave and tidal energy. Similarly, in 2021, offshore wind power is
estimated to avoid the emissions of 104 Mt CO2, a figure that will
rise to 315 Mt CO2 in the year 2030. Cumulatively, this corresponds
to over 2.3 Gt CO2 avoided by 2030[234].

6. Marine energy technology innovation in Europe and international
competition

6.1. European capacities for innovation

In 2010, the
European R&D investments (public and corporate initiatives) in marine
energy (Table 12) amounted to EUR 214 million (EUR 360 million if the effective
payments of the European Energy Programme for Recovery –EEPR- are included). The
aggregated R&D investments in the wave and tidal energy technologies
concentrate in four European countries: the United Kingdom, Germany, Sweden and Norway (that account for 86% of all investments). In the United Kingdom and Sweden the public participation to relevant projects is more evident than in
other countries (around 40% of national R&D investments). Offshore wind
energy R&D investments concentrate in 2 countries (the United Kingdom and Germany) which together account for 70% of total offshore wind investments. The
contribution of Germany would be larger when adding the funding from EEPR.
Until March 2012[235],
92 % of the total effective payments of EEPR funding for offshore turbines and
structures were made to 4 German projects (BARD Offshore, Global Tech I,
Nordsee Ost and Borkum West II).

The regional
distribution of public and corporate R&D investments is sensitive to market
size; the correlation coefficient between aggregated (public and corporate)
R&D investment and GDP is 0.76. Therefore, larger economies tend to invest
more in marine energy R&D technologies than smaller countries. Long
coastline countries, such as the United Kingdom, France, and Sweden, together with Germany account for 73% of these investments.

Table 12: Public and corporate
R&D investment in marine energy across the European Member States in 2010
(amounts are presented in millions of euro)

|| Offshore wind energy projects || Wave and tidal energy projects

EEPR effective payment in 2010 || 146 ||

Member State R&D investment (from IEA RD&D Statistics database)[236] || 5.6 || 44

Corporate R&D investment (JRC-SETIS calculations) || 62.4[237] || 102[238]

Table 12 presents
the R&D investments in marine energy in 2010, using the methodology
described hereafter. For corporate R&D investment it was assumed that the
distribution of patents across the relevant technologies is a proxy for the distribution
of R&D expenditures[239],
as there is evidence of significant correlation between patents and R&D
spending[240].

Data on public
RD&D investments in wave and tidal and offshore wind energy, for many (but
not all) EU Member States are collected using the IEA RD&D Statistics
database[241].

6.1.1 R&D investment in wave and tidal energy in 2010

Based on an analysis
of WIPO patent applications, Asian countries such as Japan (early investor) and
Korea show large interest in the development wave and tidal energy technologies.
The intensity of their research displayed a different pattern: from 2003 to
2011, a declining trend is observed for the share of patent applications from Japan and increasing one for Korea[242](Figure
12).These countries account together for approximately 50% of WIPO patent
applications.

Figure 12: Wave and tidal energy
patent applications by the main patent offices around the world during the
period 2003 to 2011

Compared to the
above mentioned countries, European research efforts seem to be low in the
early 2000s, but significantly increasing after 2007. European patents, based
on data from the European Patent Office (EPO), show an annual average increase
of 16 patents during the period 2002 – 2011, rising to an annual increase of 50
to 70 after 2007. Most of the patent applications originated in the United Kingdom and Germany.

Using the share of
wave and tidal energy patents in the total applications of main corporations as
intensity of research in marine energy) the present assessment has estimated
that EUR 102 million were invested in 2010 by the European industry in related
projects. Corporate investments in wave and tidal energy are higher than public
investments and account for 70% of total wave and tidal investments in 2010.
Such high corporate share for RD&D investment turns out to be in line with
the Lisbon strategy, according to which two thirds of R&D expenditure
should be financed by the business enterprise sector. Despite the high commitment to marine energy technology development
exhibited by corporate initiatives, their efforts remains limited with respect
to the considerable efforts made for other energy technologies. For example,
the corporate R&D in wave and tidal energy investments represent barely 5%
of investments in non–nuclear energy technologies addressed by the European
Strategic Energy Technology Plan (wind, solar, bioenergy, carbon capture and
storage and electricity grids), and about 22% of corporate R&D investments
in wind energy (onshore and offshore).

Figure 13: Estimate of corporate RD&D investments in wave and tidal
energy projects by European country for the year 2010

An examination of
the regional distribution of corporate R&D investments in wave and tidal
energy projects reveals that countries such as The United Kingdom and Germany account for an important share of total corporate initiatives (Figure 13). The
regional distribution of corporate R&D investments seem however to be less
concentrated than the public investments. The public R&D investments in
wave and tidal are highly concentrated in Europe, with the United Kingdom, Sweden, France and Denmark accounting for more than 90 % of public R&D
investments (Figure 14).

Figure 14: Estimate of public RD&D investment in wave and tidal energy
projects by European country for the year 2010. Data was collected from IEA
RD&D database

With
a total installed wave and tidal energy capacity in 2010 reaching 2 MW, the United Kingdom is one of the countries that show an early commitment to this technology.
Public RD&D investment in the United Kingdom shows an annual average
increase of EUR 3.3 million during the period 2001 to 2010. In order to improve
current technology market gaps, governmental spending complements and
reinforces private investments, which according to RenewableUK had been around
GBP 41 million in 2009. The National Renewable Energy Centre, the European
Marine Energy Centre, Wave Hub and QinetiQ support industrial initiatives.
Public funding is targeting early technological stages such as first and next
generation prototypes, up to 1MW[243].

In Sweden, the
realization of the tidal energy potential is encouraged through public funding,
in particular in the case of large scale projects: benefitting from public
support[244],
companies such as Seabased AB and Fortum had announced in 2010 the start of the
construction of a wave power plant at the coast of Smögen in Sotenäs, with a
capacity of around 10 MW. The Swedish Energy Agency has announced a special
fund for the demonstration and commercialisation of new technologies with a
budget of 101.4 million euro (SEK 875 million) to be distributed from 2009 to
2011. Through this fund, 16.11 million euro were used to finance wave power
plants at the coast of Smögen.

A long term
commitment towards marine energy technologies is also made by Denmark. Public RD&D investment in Denmark shows EUR 1 million annual average increase from 2001
to 2010. In contrast, Germany is one of the countries that started investing
only recently, but significantly in marine energy projects (2.77 million euro
in 2009). German investments might increase in the future, as wave and tidal
initiatives are highly correlated with offshore wind projects, an area in which
Germany has recently intensified its efforts.

Surprisingly, the
continental country of Austria has also developed small marine initiatives in
the last three years; in 2009 Austria invested 246000 euro on related projects.

Overall, from 2001
to 2010 the number of European countries involved in wave and tidal RD&D
projects has increased from 5[245]
to 11 and the public investment in wave and tidal related projects has
increased tenfold (from EUR 4.2 million euro in 2001 to 44 million euro in
2010).

6.1.2 R&D investment in offshore wind energy in 2010

The recent years are
characterized by an increase in public investments in offshore wind projects.
Apart from national initiatives, one of the main support actions has been the
European Energy Programme for Recovery (EEPR), a specific funding programme
designed to stimulate Europe's economic recovery and to promote offshore wind
initiatives. By the end of 2010, EUR 146 million was disbursed through EEPR for
offshore wind projects in Germany, United Kingdom, Netherlands and Belgium. Five out of the 9 offshore wind projects involve German partners that received for
offshore turbines and structures EUR 136 million by March 2012. Such public
initiatives have been set in place to reinforce and complement private
investments that might be suboptimal in the presence of uncertainty related to
the market potential of the technology and in the presence of uncertainty
related to future benefits from investment in the new technology[246].

To some extent, the
intensification of public and private efforts has been correlated. The
intensification of corporate research efforts for offshore wind energy
technology is reflected through the patent applications at WIPO (Figure 15).

Figure 15: Offshore wind patent applications at WIPO between 2002
and 2011

From 2008 to 2012,
WIPO patent applications have been increasing with an average rate of 17
patents per year. During the same period, Germany shows an annual average of 6
patent applications in offshore wind; Denmark and Netherlands an annual average
of 3; while other European countries (France, Italy) follow with 1 patent
application. The number of Asian and American applicants increases constantly
during the same period. The regional distribution of patent applications among
the Member States in 2010 for offshore wind technology is shown in Figure 16.

Figure 16: Offshore wind patent applications at WIPO by European country
for the year 2010

A further
examination of offshore wind patents reveals that many of them are owned by
established wind manufacturers, such as Vestas, Siemens and Gamesa. The
research intensity related to offshore wind of the main wind turbine
manufacturers during the period 2002-2012 remains constant (1-2 patents per
year). For the year 2010, offshore wind applications of the main wind turbine
manufacturers represented 2.5-3% of total wind patent applications of the main
wind manufacturers. Having as goal a monetary assessment of research efforts
for offshore wind projects, the present assessment includes both research
efforts of the main wind manufacturers, as well as new entrants in offshore
wind industry (AREVA, Siemens and Alstom). These new entrants show a higher
intensity in offshore wind research activities (measured by their number of
patent applications) than the established wind turbine manufacturers. A high
commitment for offshore wind projects is also noted for wind energy developers,
such as Dong Energy and Acciona Energy. Using a patent analysis to distribute
offshore wind R&D investments, JRC-SETIS has estimated that EUR 62.39
million was invested by the European private sector in offshore wind in 2010.
The spatial distribution of the corporate offshore wind R&D expenditure is
shown in Figure 17.

Figure 17: Estimate of corporate RD&D investment in wind offshore
energy projects by European country for the year 2010

Public expenditure in
offshore wind related projects (according to IEA database) remains limited: in
2010 only 5.62 million euro were invested in offshore wind in Denmark and France. However, a patent analysis from 2010 to 2012 reveals additional public
investments in offshore wind in Norway and Germany (see Figure 18).

Figure 18: Estimate of public R&D
for wind offshore energy projects by European country for the year 2010

In conclusion,
countries such as Germany, Denmark, the UK and France demonstrate a particular
commitment to the development of marine energy projects.

6.2 Assessment of the European offshore wind innovation ecosystem

The
assessment and monitoring of the marine energy innovation ecosystem is an
important step to increase the chance of the successful development and
deployment of the European marine energy sector. Through this effort one can
evaluate how the innovation system functions and identify the problems that
need to be addressed by policy. The JRC in a recent study assessed the offshore
wind innovation ecosystem following the “Technological Innovation System
Approach (TIS[247])”
methodology[248],
in a number of countries along the Atlantic arc; all together they accounted
for 93% of the total offshore wind installed capacity in the EU in 2010.

The
study identified the system weaknesses that hinder the proper functioning of
the offshore wind innovation system in the focus countries. All studied
countries have both specific and common barriers that hinder the innovation
process, which are summarised below. It is noted that although this study was
specifically focused on the offshore wind energy sector, useful conclusions can
also be drawn for the wave and tidal energy sectors, due to their similarity.

Entrepreneurial
activities are most hindered by limited domestic offshore wind markets.
Changing regulatory regimes for renewables and ineffective support programmes
also have negative impact on support of technology deployment. Entrepreneurial
activities can be held up by the underdeveloped value chain, in particular lack
of any manufacturing capacity and poor availability of skilled labour. This
causes a quite significant presence of large foreign incumbent companies in the
value chain and little space for national new entrants. In countries where the
government is committed and the feed-in tariff is effective, entrepreneurial
activities are not hindered by any specific factor.

Slow
knowledge development, another barrier to innovation, is due to the lack of
cross-fertilisation between knowledge produced at universities and by
industrial parties. Limited public commitment results in a poor domestic market
and unfavourable R&D conditions, as well as funding cuts for higher
education. Lack of specialisation in any of the offshore wind areas and
shortage of manufacturing capacity in a country may be both the outcome of and
the reason for the poor knowledge base in that country.

Knowledge
diffusion is mainly hindered by the dominance of the tacit/technological type
of knowledge and the problematic transfer of university knowledge to a specific
context of application. In countries where wind industry sector employs great
numbers of people, there are large and informal industry-university networks,
hence diffusion of technology is comparatively good. In countries with a small
domestic market there is limited feedback from the industry to university;
while other countries quite strongly depend on the knowledge transferred from
abroad. In the situation when the offshore wind innovation system is driven by
the tacit /technological type of knowledge, companies are not very eager to
share their know-how in fear of losing their competitive advantage.

Guidance
of the search is in all studied countries hindered by the uncertainties around
wind turbine technology, vessels, cables supply (especially high voltage
cables), increasing energy costs and a protracted permitting procedure. Also,
since offshore wind is a young technology it strongly depends on political
support and commitments. Lack of clear grid strategy and of a truly European market,
as well as long consenting procedures, are issues that hold up the guidance of
the search.

Market
formation barriers include: connection to the existing grid, high costs,
shortage of experts and of funds, and poor support schemes. Resource mobilisation
is mostly hindered by the financial crisis and growing risks, lack of skilled
labour and of regulations and strategies on grid improvement, and the
availability of interconnector cables. Legitimacy creation is hindered by
competition with other renewables, competition for space in the North Sea, lack of targets beyond 2020, uncertainties around grid connection, and social
acceptance of the technology applied. These barriers for the above-mentioned
three processes (market formation, resources mobilisation and creation of
legitimacy) in all four studied countries are in common, which require
particular policy attention for improvement from an innovation perspective.

The
functioning of the innovation system can be enhanced by policy intervention
through structural elements. Clear institutional challenges are differing
national policies, instruments and regulatory framework. Most importantly,
offshore wind requires stable and long-term political support. Another systemic
challenge is the absence of specific actors in the value chain. Particular
countries specialise in specific aspects/phases of the value chain and in
specific aspects of knowledge. Policy supporting the creation of a complete and
highly competent European value chain would be very beneficial to the offshore
wind system in general and to the European strategic position in the field in
particular. Another, urgent challenge is the shortage of skilled labour. The
third systemic challenge concerns infrastructural aspects. Knowledge
infrastructure is needed on both technical and non-technical issues of offshore
wind energy (cost-effectiveness of technology). Physical infrastructure
challenges concern mainly the need to enhance harbour infrastructure and grid
enhancements. Regarding financial infrastructure, the availability of finance
to both R&D and the capital costs of wind farm installation are essential.
Lastly, the connectivity between some actors could be enhanced such as between
science and industry. In particular, industry is reluctant to share their
technological knowledge while knowledge institutes not always produce knowledge
that industry finds useful and applicable.

6.3 The international scene

The
global installed capacity of wave and tidal energy more than doubled in 2011
due to the commissioning of the 254 MW Sihwa Lake Tidal Power Plant, near
Seoul, South Korea, in August 2011. Although the rate of growth of wave and
tidal energy is otherwise relatively slow at present, it may experience similar
rates of rapid growth between 2030 and 2050 as offshore wind has achieved in
the last 20 years [249].

Beyond
Europe, wave and tidal activities have been developed mainly in Australia, Canada, China, Korea, Mexico, New Zealand and the USA[250].
Japan, with a high potential for marine energy, such as waves, tidal range
and tidal currents, ocean thermal energy, etc. has launched many research
projects on the development and optimization of various marine energy systems.

In
2011, the federal government of Canada launched the ecoENERGY Innovation
Initiative programme with a budget of 97 million Canadian dollars to support
research, development and demonstration projects, including marine
technologies. 2011 was the year in which the concept of the Fundy Ocean
Research Centre for Energy (FORCE), in Nova Scotia, was recognised as a model
for incubation of this industry, its collaborative agreement with the European
Marine Energy Centre being part of this. 2011 also saw the development of a
river-current energy project with the RER TREK demonstration in Montreal and prototype testing by Clean Current, MAVI and Sabella Energie. In the USA, open-water tests of wave and current energy devices have been performed. Environmental
research for marine energy systems began to show results as resource
assessments are reaching completion and databases are being launched. The
marine energy arena is also very active in Australia and Korea, with a number of projects moving from R&D, through demonstration and towards
commercialization. In China, the first survey of marine renewable energy
resources, the project of “National survey and utilization evaluation of
offshore ocean energy in China”, has been successfully completed. The national
project of a pilot zone and testing sites construction, which will serve for
the sea trial of wave and tidal current devices, has been initiated. A hybrid
power system of 100 kW with wind, solar and wave energy has been constructed
and operated by the National Ocean Technology Centre.

Although
UK and Germany are likely to maintain their dominance in the offshore wind
market for the next years, competition is rising mainly from China[251].
Over 51 billion euro of capital expenditure is expected for projects coming
online between 2012 and 2016, according to the World Offshore Wind Market
Forecast 2012-2016[252].
The UK and Germany are expected to invest roughly 34 billion euro in offshore
wind projects, while China could invest about 6 billion in the same period.

Offshore
wind deployment plans for China grow from 2 GW by 2015 to 6 GW by 2020 and to a
total capacity of 12.6 GW by 2030. Another country with significant plans for
offshore wind is Taiwan, aiming at 600 MW installed capacity by 2020 and 3 GW
by 2030. In addition, South Korea has entered the offshore wind market with two
pilot installations and plans to build a 84 MW offshore wind farm by 2015.

Table 13: Annual installations of
offshore wind, in MW. Intertidal wind farms included but not shoreline. Source:
JRC database

Country || < 2003 || 2003 || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010 || 2011 || 2012 || Total

Belgium || || || || || || || 30 || || 165 || || 185 || 380

China || || || || || || 1.5 || || 71 || 270 || 66 || 103 || 512

Denmark || 210 || 210 || || || || || || 230 || 207 || || 50 || 908

Finland || 0.5 || || || || || || 18 || || 2.3 || || || 21

Germany || || || || || || || 5 || 60 || 40 || 88 || 80 || 273

Ireland || || || 25 || || || || || || || || || 25

Netherlands || 19 || || || || 108 || || 120 || || || || || 247

Norway || || || || || || || || 2.3 || || || || 2.3

Portugal || || || || || || || || || || 2 || || 2

South Korea || || || || || || || || || || 2 || 3 || 5

Sweden || 23 || || || || || 110 || || 30 || || || 4.1 || 168

UK || 4 || 60 || 60 || 90 || 90 || 100 || || 382 || 556 || 667 || 940 || 2948

Vietnam || || || || || || || || || || || 16 || 16

Total || 160 || 270 || 85 || 90 || 198 || 212 || 173 || 775 || 1240 || 825 || 1381 || 5506

[1]               COM(2012) 494.

[2]               See e.g. Messinger & Almon (2009).

[3]               http://ec.europa.eu/dgs/maritimeaffairs\_fisheries/consultations/ocean\_energy/index\_en.htm

[4]               Ecorys, 'Study in support of impact assessment work
for ocean energy', (2013).

[5]               The others are biotechnology, deep-sea mining,
tourism and aquaculture.

[6]               COM(2007) 575.

[7]               COM(2010) 2020.

[8]               COM(2010) 546, COM(2011) 21, COM(2010) 614 and COM(2010)
682 respectively.

[9]               The 20-plus point Limassol Declaration or 'A Marine
and Maritime Agenda for Growth and Jobs' refers to a broad agenda of promising
maritime sectors, including the five sectors highlighted in the Blue Growth
Communication: http://www.cy2012.eu/index.php/el/file/TphGtH7COdr2nxXo9+AUZw==/

[10]             Limassol Declaration, paragraph 13.

[11]             http://europa.eu/rapid/press-release\_SPEECH-12-696\_en.htm

[12]             Directive 2009/28/EC.

[13]             COM(2007) 72 and COM (2009) 519.

[14]             COM(2011) 885.

[15]             COM (2012) 271.

[16]             COM(2013) 169.

[17]             European Industrial Initiatives include those on
bioenergy, solar energy, wind energy, carbon capture and storage, energy
efficiency, electricity grids, fuel cells and hydrogen and nuclear energy.

[18]             Technology Roadmaps are produced by the Commission's
SET-Plan Information System, SETIS, and provide an assessment of the state of
development of various low-carbon energy technologies, including their market
penetration potential and the barriers to their large-scale deployment. http://setis.ec.europa.eu/about-setis/technology-map/2011\_Technology\_Map1.pdf/view.

[19]             COM(2008) 768.

[20]             The Council stressed the
importance of the offshore production of renewable energy, including tidal
power: IMP Conclusions, 8 December 2008, document 16862/08; European Parliament Resolution on IMP of 21 October 2010 P7\_TA
(2010)0386. See also European Parliament Resolution of 9 March 2011 on the European Strategy for the
Atlantic Region, P7\_TA (2011)0089.

[21]             http://ec.europa.eu/maritimeaffairs/policy/sea\_basins/atlantic\_ocean/atlanticforum/index\_en.htm

[22]             COM(2011) 782.

[23]             COM(2013) 279.

[24]             COM(2013) 253.

[25]             Horizon 2020 is the financial instrument proposed by
the Commission for the 2014-2020 Multiannual Financial Framework. It aims to combine
all research and innovation funding currently provided through the Framework Programmes for Research and Technical
Development, the innovation-related activities of the Competitiveness
and Innovation Framework Programme and the European Institute of Innovation and
Technology.

[26]             Examples of projects supported include the Wave Hub in
South West England, aiming to create the world’s largest test site for devices
that generate electricity from the power of waves, supporting large-scale
deployment of devices in the final stage before full commercialisation, and the
Great Tank of Maritime and Coastal Engineering in Cantabria, Spain, designed to
simulate wave conditions using any type of stream or wind.

[27]             The EU's dependency on energy imports increased from
46.7 % in 2000 to 52.7 % in 2010, an increase of 6 percentage points: Eurostat
Pocketbook on Energy, transport and environment indicators (2012). Between 2000
and 2010, EU-27 dependency on oil imports grew by 8.6 percentage points. From
2000 to 2010, EU-27 dependency on natural gas grew by 13 percentage points
(from 48.9 % in 2000 to 62.4 % in 2010).

[28]             The Commission (DG Environment) commissioned a number
of studies on shale gas including one on the 'Potential Risks for the
Environment and Human Health Arising from Hydrocarbons Operations Involving Hydraulic
Fracturing in Europe' (September 2012). In December 2012, it launched a public
consultation on the future development of unconventional fossil fuels such as
shale gas in Europe.

[29]             The only large scale commercial tidal power station in
Europe is at La Rance, in Brittany, France. In operation since 1996, it
currently generates 240MW of power. Tidal barrage technologies are included
here for completeness but they are out of the scope of this study for the following
reasons: (1) the technology is mature and therefore it would not substantially
benefit from the measures outlined below; (2) despite the significant global
potential, the number of locations which could be exploited for energy use is
limited (IPCC 2011);and (3) the environmental impacts of building barrages tend
to be judged as high which also sets limits to possible expansion (e.g.
Boehlert and Gill, 2010).

[30]             See e.g., the ORECCA European Offshore Renewable Energy
Roadmap, September (project financed under FP7 See Annex 4).

[31]             E.g., the Wavestar project which is evaluating the
possibility of combining wind and wave technologies:
http://wavestarenergy.com/.

[32]             IEA-OES (2009).

[33]             Esteban and Leary (2012).

[34]             EUR 24979 EN – 2011.

[35]             Data from EU-OEA (see Annex 7). This figure is 250MW if
the 240MW generated by La Rance is factored in.

[36]             European Ocean Energy Association (2013).

[37]             Ocean energy is a focus area in Ireland's 2012
Integrated Marine Plan, "Harnessing our Ocean Wealth".

[38]             France is developing five sea-trial sites for all
marine renewable energies (wave, tidal and offshore wind). See e.g., De Roeck
et al. (2012).

[39]             Jeffrey et al. (2012).

[40]             EUR 24979 EN – 2011.

[41]             Lewis et al. (2011).

[42]             http://www.ocean-energy-systems.org/

[43]             http://www.eu-oea.com/

[44]             IEA-OES 2011.

[45]             This is strongly influenced by
the large tidal barrage in La Rance, France (240 MW) and the Sihwa Tidal
barrage in Korea (254 MW). When these two are excluded Europe share is reduced
to 30%.

[46]             IEA (2012).

[47]             Lewis et al. (2011).

[48]             Ibid.

[49]             Katofsky (2008).

[50]             IEA-OES (2009).

[51]             EU-OEA and the Member States Ocean Energy Interest
Group Position Paper (2011).

[52]             Lewis et al. (2011).

[53]             The global electricity supply was approximately 1800TWh
or 54EJ in 2008. 1 Exajoule [EJ] is equivalent to 278 Terawatt hour (TWh)
rounded off to 3 significant figures.

[54]             EUR 24979 EN – 2011.

[55]             EU-OEA (2010).

[56]             EU-OEA (2010).

[57]             Esteban and Leary (2012).

[58]             EU OEA  (2013).

[59]             Ecorys (2012).

[60]             Carbon Trust (2011).

[61]             Figures come from JRC Study in Annex 16.

[62]             IEA-OES
(2012), EU-OEA (2010).

[63]             Gross
et al. (2007).

[64]             UNEP Collaborating Centre and Bloomberg New Energy
Finance (2012).

[65]             SEC(2012) 146 provides a list of examples, p.7. See Annex
8 of this IA.

[66]             Ecofys (2011).

[67]             Ibid.

[68]             IEA-OES (2012).

[69]             Lewis et al. (2011).

[70]             In the wave energy converter domain, hundreds of
prototypes exist in several different categories. Compared to the wave sector,
tidal stream technologies exhibit a relatively higher degree of technological
convergence, although even here some 50 innovative designs have been reported.

[71]             Barriers relating to grid planning were highlighted in the
Commission's OE public consultation. The ORECCA Roadmap examines this issue in
some detail for wave, tidal and offshore wind energy.

[72]             Institution of Mechanical Engineers (2013).

[73]             SWD (2012) 149. One of the industrial initiatives under
the SET-Plan is the European Electricity Grid Initiative (EEGI) which deals
with accelerating innovation and technological deployment in European
electricity grids: http://www.smartgrids.eu/node/20. 
Upgrading and modernising Europe’s grid infrastructure to meet increasing
consumer demand is a crucial element in the continued integration of the EU’s
energy markets.

[74]             E.g., a significant issue for developers in Scotland is
said to be the underwriting of liability costs as well as current transmission
charges, which are unfavourable to generators that are furthest away: Scotland
Marine Energy Group, 'Marine Energy Action Plan', June 2012.

[75]             The total time it takes to get the building consent and
grid connection permits.

[76]             WindBarriers report (2010).

[77]             The requirements for port facilities depend on the type
of structure involved (fixed or floating), its size and weight and the type of
foundations used (which also depends on the type of energy devices - wave,
tidal, wind). These factors also have a bearing on the types and size of the
vessels needed to transport the devices and spare parts or carry out operations
and maintenance.

[78]             ORECCA Roadmap (2011).

[79]             E.g. DCNS has been remodelling the port infrastructure
at Cherbourg, France, and has a new building dedicated to ocean energy
equipment. The Scottish Government is making significant investment in pier and
shore-side developments in the Orkney Islands to support and encourage the
development of the marine renewables industry.

[80]             Administrative barriers to ocean energy development
were cited in the Blue Growth Study and the Waveplam Report. See also Simas et
al. (2012),  Murray et al. (2011).

[81]             O'Hagan (2012).

[82]             IEA-OES (2011).

[83]             WindBarriers Report (2010).

[84]             O'Hagan (2012).

[85]             Ibid.

[86]             Germany, e.g., has developed a Maritime Spatial Plan
for the EEZ of both the North Sea and the Baltic Sea which prescribes priority
areas for wind energy development.

[87]             O’Hagan (2012), in IEA OES-IA (2011).

[88]             Seanergy
Report (2012).

[89]             Public
consultation; Langhamer et al. (2010).

[90]             Public
consultation.

[91]             92/43/EEC.

[92]             2009/147/EC.

[93]             COM(2013) 133.

[94]             COM(2012) 628.

[95]             KICs bring together the 'knowledge triangle' made up of
the research, higher education, and innovation-entrepreneurship-business communities.
KIC InnoEnergy was designated in 2009 by the EIT as a one of the first three
KICs. It addresses sustainable energy as its priority area and aims to foster
the integration of education, technology, business and entrepreneurship and
strengthening the culture of innovation: http://www.kic-innoenergy.com/.

[96]             Scotland/UK, Italy, Portugal and Ireland have
production-based incentives (PBI) in place for OE which is significantly higher
than the PBI for offshore wind in the same country. In Denmark, France and the
UK (excluding Scotland), the ocean energy PBI is comparable to the offshore
wind PBI: ORECCA Roadmap, p.51.

[97]             Community Guidelines of 1 April 2008 on State aid for
environmental protection, OJ C 82 of 1.4.2008.

[98]             See Annex 4 for a description of these. RES Legal
provides information on important legislation related to support schemes, grid
issues and policies for energy from renewable sources. The scope of the
database covers all the EU 27 Member States, the EFTA Countries and some EU
Accession Countries.

[99]             The "Concerted Action supporting the transposition
and implementation of the RES Directive" is a project supported by
Intelligent Energy Europe. It is coordinated by the Austrian Energy Agency
(AEA): http://www.ca-res.eu/.

[100]            The SET Plan Steering Group, composed of EU Member
States, is mandated to conceive joint actions and make resources available to
implement the SET-Plan.

[101]            2008/56/EC.

[102]            See e.g., EU Guidance on wind energy development in
accordance with the EU nature legislation http://ec.europa.eu/environment/nature/natura2000/management/docs/Wind\_farms.pdf.

[103]            Esteban and Leary (2012) argue that the year 2008 for OE
is comparable to the year 1991 in offshore wind.

[104]            Deloitte (2009).

[105]            Information provided to the Commission by the EWEA
(2013).

[106]            It is, however, naturally difficult to determine the
extent to which the Initiative contributed to cost reductions relative to other
factors including the wider EU policy framework and private investment.

[107]            Deloitte (2009).

[108]            A learning curve expresses the decrease in costs of a
product or technology by a constant fraction with each doubling of the total
number of units produced.

[109]            The levelised cost of electricity (LCoE) is the cost of
a kWh produced by a certain technology. Several variables come into play
including efficiency, lifetime of the technology, load factor etc.

[110]            In the case of option 2, a range for the predicted
future market uptake is used and the average of the boundary values is used to
determine the development of costs for this option.

[111]            Neij (2008).

[112]            UK Energy Research Centre (2010).

[113]            Carbon Trust (2006).

[114]            Junginger et al. (2008).

[115]            Wiesenthal et al. (2010).

[116]            Esteban and Leary (2012).

[117]            SEC(2011) 1565.

[118]            SWD(2012)164, p. 7.

[119]            German Institute for Economic Research (2011).

[120]            Carbon Trust (2011).

[121]            Ecorys (2012).

[122]            Ibid.

[123]            Ibid.

[124]            See e.g., the case study on Oostende presented in the
Blue Growth study (Ecorys, 2012).

[125]            Information provided to DG MARE by West Normandy Marine
Energy: 'Le potential de production d'énergie hydrolienne en Basse-Normandie'
(2013).

[126]            Thalemann and Bard (2012). It is argued that OE
operations have much lower port requirements than the offshore wind industry
mainly because of the smaller size and weight of the OE devices.

[127]            Technology Innovation Needs Assessment (2012).

[128]            E.g., the projects TROPOS http://www.troposplatform.eu/ and Marina
http://www.marina-platform.info/

[129]            Redpoint (2009).

[130]            Ibid.

[131]            Under the CPI scenario the carbon intensity levels start
at 330 kg per MWh in 2010 and then continuously decrease over time to reach a
level of 150 kg/MWh in 2035 , reflecting the progressive decarbonisation of the
European energy mix.

[132]            According to SETIS, marine technologies may be able to
provide capacity factors of 30-45%.

[133]            The more optimistic 35% capacity factor is in line with
recent studies in the UK e.g., 'Cost of and financial support for wave, tidal
stream and tidal range generation in the UK', Black and Veatch Ernst and Young
(October 2010).

[134]            Similar observations have been made by the EWEA: http://www.ewea.org/fileadmin/files/members-area/information-services/offshore/research-notes/120801\_Positive\_environmental\_impacts.pdf

[135]            Navigant Consulting (2009).

[136]            Several estimates on potential job creation derived from
various studies are presented in Annex 12.

[137]            E.g. Esteban  and Leary (2011).

[138]            The results have been further compared with the UK
scenarios using a multiplier of 1.025 permanent jobs/MW (derived from the
average of UK jobs/MW in 2030 and 2050) and assuming a ratio similar to that of
the EU-OEA i.e. two-thirds direct to one-third indirect permanent employment.
The lower ends of the ranges shown in the table are the result of using the UK
multiplier while the higher ends are estimates using the OEA multiplier.

[139]            The EU-OEA estimates around 314 000 direct jobs and 470
000 (direct and indirect) in 2050: Oceans of Energy Roadmap (2010).

[140]            Rutovitz and A. Atherton (undated).

[141]            The Blue Growth Study (2012) shows that the blue economy
value chain includes the closest direct and indirect supporting activities
necessary for the functioning of those economic sectors; these can be located
anywhere, including in landlocked countries.

[142]            E.g. the International Centre for Island Technology
(ICIT) in the Orkney Islands, UK, which is part of Heriot-Watt University's
Institute of Petroleum Engineering, provides Masters Courses in Marine
Renewable Energy.

[143]            See e.g. http://www.windplatform.eu/events/

[144]            See e.g. Simas et al. (2012) and Ascoop et al. (2012).

[145]            SEC(2011) 1565.

[146]            COM (2012) 494

[147]            European Ocean Energy Agency (undated) 'Towards European
Industrial Leadership in Ocean Energy in 2020'

[148]            Ocean Energy Systems (2011) 'Annual Report'

[149]            Estimation based on the assumption of gross EU
electricity generation of 3410 TWh (SEC(2011) 1565) and capacity factor of 35%.

[150]            Directive 2009/28/EC of the European Parliament and of
the Council of 23 April 2009 on the promotion of the use of energy from
renewable sources and amending and subsequently repealing Directives 2001/77/EC
and 2003/30/EC. OJ L 140, 5.6.2009

[151]            http://ec.europa.eu/energy/intelligent/about/index\_en.htm

[152]            Commission Implementing Decision of 18.1.2.2012 Award
Decision under the first call for proposals of the NER300 funding programme, COM(2012)
9432 final.

[153]            All pictures and information sourced from aquaret.com;
IPCC, 2011; NREL (2009)

[154] Pictures and information sourced from aquaret.com and IPCC, 2011

[155]            Jan Wilem Post (2009) Blue Energy: electricity
production from salinity gradients by reverse electrodialysis at
http://www.waddenacademie.nl/fileadmin/inhoud/pdf/06-wadweten/Proefschriften/thesis\_jan\_Post.pdf.

[156]            Excerpt taken from Commission Staff Working Document
SWD(2012)164, pg. 6.

[157]            Information was predominantly sourced from ORECCA, 2011;
but additionally from Danish Ministry of Climate, Energy and Building (2012) for
Denmark and Jeffrey et al. (2012)   for the UK.

[158]            Excerpt taken from Commission Staff Working Document
SWD(2012)164, pg. 7.

[159]            Sourced from Ecorys (2013)

[160]            See for example: European Commission (2008), ‘The
support of electricity from renewable energy sources’, SEC(2008)57  http://ec.europa.eu/energy/climate\_actions/doc/2008\_res\_working\_document\_en.pdf;
OPTRES (2007). ‘Assessment and optimisation of renewable energy support schemes
in the European electricity market – Final report’. http://www.optres.fhg.de/OPTRES\_FINAL\_REPORT.pdf;
Couture, T., and Y. Gagnon (2010). ‘An analysis of feed-in tariff remuneration
models: Implications for renewable energy investment’. Energy Policy 38 (2010)
955–965; Ecofys (2011). ‘RE-Shaping: Shaping an effective and efficient
European renewable energy market’. http://www.ecofys.com/files/files/re-shaping%20d17\_report\_update%202011.pdf;

[161]            Mozelle, B., J. Padilla and R. Schmalensee (2010). ‘Harnessing Renewable Energy in Electric Power Systems – Theory,
Practice, Policy’. Published by RFF Press, an imprint of Earthscan, London, UK.

[162]            Hiroux, C. and M. Saguan (2010). ‘Large-scale wind power
in European electricity markets: Time for revisiting support schemes and market
designs?’. Energy Policy 38, 3135-3145.

[163]            Mozelle et al., 2010

[164]            Department of Energy and Climate Change (2012). ‘Digest
of United Kingdom Energy Statistics. Internet Booklet’. https://www.gov.uk/government/uploads/system/uploads/attachment\_data/file/82879/5950-dukes-2012-internet.pdf.

[165]            Couture
& Gagnon, 2010

[166]            BNetzA
– Bundesnetzagentur / Federal Network Agency (2013). ‘Photovoltaikanlagen:
Datenmeldungen sowie EEG-Vergütungssätze‘. Webpage last
visited at: 3 April 2013. http://www.bundesnetzagentur.de/cln\_1912/DE/Sachgebiete/ElektrizitaetGas/ErneuerbareEnergienGesetz/VerguetungssaetzePVAnlagen/VerguetungssaetzePhotovoltaik\_node.html;jsessionid=5FB37E783D1B53708E11C751A0177C13#doc149586bodyText4

[167]            BDEW – Bundesverband der Energie- und Wasserwirtschaft e.V.
(2013). ‘Erneuerbare Energien und das EEG: Zahlen, Fakten, Grafiken - Anlagen,
installierte Leistung, Stromerzeugung, EEG-Auszahlungen, Marktintegration der
Erneuerbaren Energien und regionale Verteilung der EEG-induzierten
Zahlungsströme’. 
http://www.bdew.de/internet.nsf/id/17DF3FA36BF264EBC1257B0A003EE8B8/$file/Energieinfo\_EE-und-das-EEG-Januar-2013.pdf; 
BMU - Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit (2004).
‘Mindestvergütungssätze nach dem neuen Erneuerbare-Energien-Gesetz (EEG).
http://www.dlr.de/Portaldata/1/Resources/portal\_news/newsarchiv2011\_2/ee\_in\_zahlen\_2010\_bf.pdf;
BMU - Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit (2011).
‘Erneuerbare Energien 2010’. Publication can be found at:
http://www.dlr.de/Portaldata/1/Resources/portal\_news/newsarchiv2011\_2/ee\_in\_zahlen\_2010\_bf.pdf; 
SDV - Solarenergie-Förderverein Deutschland e.V (2013). ‘Solarstrom-Vergütungen
im Überblick’. Webpage last visited: 3 March 2013. http://www.sfv.de/lokal/mails/sj/verguetu.htm.

[168]            Sáenz de Miera, G., P. del Río González and I. Vizcaíno
(2008). ‘Analysing the impact of renewable electricity
support schemes on power prices: The case of wind electricity in Spain’. Energy
Policy 36, 3345– 3359.

[169]            IEA World Energy Outlook 2012

[170]            See also SEC(2011)1565/2 Impact Assessment accompanying
the Energy Roadmap 2050.

[171]            IAE OES (2011), with another 5.7 MW under construction.
This excludes the old tidal barrage built in La Rance, France in 1966 that has
a capacity of 240 MW.

[172]            SEC(2011)1565 Impact Assessment accompanying the Energy
Roadmap 2050.

[173]            SEC(2011)1565, p 67. For wave and tidal the heading
“other renewables (tidal etc.)” is used.

[174]            Corresponding with an electricity generation of 20 TWh.
See IEA (2012) World Energy Outlook 2012. For 2030 they assess a total
installed capacity of 2 GW.

[175]            JRC (2012)

[176]            See Blue Growth Study, DG MARE( 2012), Marine Energy in
the UK State of the Industry Report, RenewableUK2012, Implementing Agreement on
Ocean Energy Systems, IEA, 2010 and The World Wave and Tidal Market Report
2011-2015, Douglas-Westwood, 2010.

[177]            SEC(2011)1565

[178]            This is clearly lower than the mirrored offshore wind
development path described earlier, but also slightly more conservative than
the strong RES scenario adopted by IEA in their latest World Energy Outlook
(the 450 ppm scenario which assumes the adoption of policies that put the world
on a pathway that is consistent with having a 50% chance of limiting the global
increase of average temperature to 2 degrees Celsius in the long term). Under
this scenario installed capacity in the European Union is expected to grow to
14 GW in 2035. For consistency reasons we rather adopt the High RES scenario as
explained earlier.

[179]            Esteban, Miguel and Leary, David (2012): “Current
developments and future prospects of offshore wind and ocean energy”, In
Applied Energy (90) 2012. They argue that the year 2008 of ocean energy is
comparable to the year 1991 in offshore wind.

[180]            Financing Renewable Energy in the European Energy
Market, Ecofys (2011); commissioned by European Commission, DG Energy

[181]            Langhamer et al. (2010) 'Wave power—Sustainable energy
or environmentally costly? A review with special emphasis on linear wave energy
converters Renewable and Sustainable Energy Reviews', 14 (2010) 1329–1335,
Boehlert and Gill (2010) 'Environmental and Ecological Effects of Ocean
Renewable Energy Development: a Current Analysis, Oceanography, vol. 23/2

[182]            Boehlert and Gill (2010) 'Environmental and Ecological
Effects of Ocean Renewable Energy Development: a Current Analysis,
Oceanography, vol. 23/2

[183]            E.g. House of Commons 'Science and Technology – 7th
Report, House of Commons Science and Technology Committee Publications, UK,
(2001); Lewis, A., S. Estefen, J. Huckerby, W. Musial, T. Pontes, J.
Torres-Martinez, 2011: Ocean Energy. In IPCC Special Report on Renewable Energy
Sources and Climate Change Mitigation.

[184]           Ibid.

[185]            Bonnot-Courtois (1993) Comparative study of dredging and
flushing effects of sedimentation in the upper part of the Rance estuary, La
Houille Blanche, 8, pp. 539-550

[186]            DECC (2010) 'Severn tidal power: feasibility study
conclusions and summary report' at:
http://www.decc.gov.uk/assets/decc/what%20we%20do/uk%20energy%20supply/energy%20mix/renewable%20energy/severn-tp/621-severn-tidal-power-feasibility-study-conclusions-a.pdf

[187]            Lewis, A., S. Estefen, J. Huckerby, W. Musial, T.
Pontes, J. Torres-Martinez, 2011: Ocean Energy. In    IPCC Special Report on
Renewable Energy Sources and Climate Change Mitigation.

[188]            Boehlert and Gill (2010) 'Environmental and Ecological
Effects of Ocean Renewable Energy Development: a Current Analysis,
Oceanography, vol. 23/2

[189]            Sanchirico  J. N., Malvadkar U., Hastings  A., Wilen  J.
E. (2006) 'When are no-take zones an economically optimal fishery management
strategy?', Ecological Applications, 16, pp. 1643–59.

[190]            Halpern B. S. (2003) 'The impact of marine reserves: do
reserves work and does reserve size matter?', Ecological Applications, 13, pp.
117–37

[191]            Douglas (2007), University of Edinburgh.

[192]            Lewis, A., S. Estefen, J. Huckerby, W. Musial, T.
Pontes, J. Torres-Martinez, 2011: Ocean Energy. In IPCC Special Report on
Renewable Energy Sources and Climate Change Mitigation.

[193]            Ecorys 2013

[194]            Ocean Energy Association (2011): Position Paper Towards
European industrial leadership in Ocean Energy in 2020

[195]            Sustainable Energy Authority of Ireland: Ocean Energy
Roadmap

[196]            Energy and Climate Change Committee of the House of
Commons (2012): The Future of Marine Renewables in the UK. Eleventh Report of
Session 2010-12 Volume II

[197]            Includes offshore wind

[198]            Ocean Renewable Energy Coalition (2011): U.S. Marine and
Hydrokinetic Renewable Energy Roadmap

[199]            U.S. Department of Energy (2012): Water Power for a
Clean Energy Future

[200]            Cumulative number

[201]            Presentation of European Ocean Energy Association

[202]            Prepared by the Joint Research Centre (JRC-Petten) of
the European Commission.

[203]            EU 27 Renewable Energy Progress Reports: 
http://ec.europa.eu/energy/renewables/reports/2011\_en.html

[204]            UK Department of Energy and Climate Change, 2011 -
"Digest of UK Energy Statistics 2011"
–http://webarchive.nationalarchives.gov.uk/20130109092117/ -
http://decc.gov.uk/assets/decc/11/stats/publications/dukes/2312-dukes-2011--full-document-excluding-cover-pages.pdf

[205]            See footnote 243.

[206]            According to EU 27 Member State Renewable Energy
Progress Reports the total RES in 2010 was 147.9 Mtoe (6190 PJ),  RES
electricity 55.9 Mtoe (2340 PJ) and gross final energy consumption 1175.1 Mtoe
(49197 PJ) – The Czech Republic has not submitted the first renewable energy progress
report

[207]            JRC 2012, JRC wind status report
– Technology, market and economic aspects of wind energy in Europe, JRC
Technical Reports, Report EUR 25647 EN

[208]            Mean depth is calculated from
the minimum and maximum depths estimated from nautical charts.

[209]            Data up to 2011 can be considered as existing wind farms
whereas data from 2012 onwards reflect planned wind farms, with increasing
uncertainty especially beyond 2020.

[210]                  4COffshore: database
of offshore wind farms. Available at www.4coffshore.com, accessed August 2012.

[211]            JRC, based on 4COffshore database of offshore wind
farms. Available at www.4coffshore.com, accessed August 2012.

[212]            Deloitte ,2011, Analysis on the furthering of
competition in relation to the establishment of large offshore wind farms in Denmark. Report for the Danish Ministry of Climate and Energy, 2011. Available at
www.ens.dk/en-US/supply/Renewable-energy/WindPower/offshore-Wind-Power/Future-offshore-wind-parks/Documents/Deloitte%20-Summary.pdf,
accessed 15.11.12.

[213]            EWEA Datasheet offshore wind energy 2010,
http://www.ewea.org/fileadmin/ewea\_documents/documents/statistics/Data\_sheet\_offshore2010.pdf

[214]            JRC 2012, JRC wind status report
– Technology, market and economic aspects of wind energy in Europe, JRC
Technical Reports, Report EUR 25647 EN

[215]            EWEA 2011, Pure Power – Wind
energy targets for 2020 and 2030, A report by the European Wind Energy
Association.

[216]            European Commission, Energy
Roadmap 2050, COM(2011)885.

[217]            JRC 2012, JRC wind status report
– Technology, market and economic aspects of wind energy in Europe, JRC
Technical Reports, Report EUR 25647 EN

[218]            Carbon Trust 2011, “Accelerating marine energy”, July
2011,
http://www.carbontrust.co.uk/publications/pages/publicationdetail.aspx?id=CTC797

[219]            Both projects are funded by the New Entrant Reserve 300
(NER300) programme.

[220]            European Wind Technology
Platform (TPWind), 2010. Wind European Industrial Initiative Team, 2010-2012
Implementation Plan, May 2010. Available at
setis.ec.europa.eu/implementation/eii/implementation-plans/Wind\_EII\_Implementation\_Plan\_final.pdf/

[221]           European Commission (2012): European Energy Programme for
Recovery. Information available at ec.europa.eu/energy/eepr/index\_en.htm,
accessed 15.11.12.

[222]            JRC 2012, JRC wind status report
– Technology, market and economic aspects of wind energy in Europe, JRC
Technical Reports, Report EUR 25647 EN

[223]            Bloomberg 2011, New energy finance. Marine research
note. 4 May 2011

[224]REALISEGRID 2010, http://realisegrid.rse-web.it/content/files/File/Publications%20and%20results/Deliverable\_REALISEGRID\_1.2.1.pdf.

[225]            European Commission, JRC, 2011 Technology Map of the
European Strategic Energy Technology Plan (SET-Plan), Technology Descriptions,
EUR 24979 EN – 2011.

[226]            Research Reports International, 2008. Enhancing the
value of wind power with energy storage, USA.

[227]            Deane, J.P., O´ Gallacho´ir, B.P., McKeogh, E.J., 2010.
Techno-economic review of existing and new pumped hydro energy storage plant,
Renewable and Sustainable Energy Reviews, 14, 1293–1302.

[228]            Haaheim, J.U., 2010. Balancing North Sea wind power.
Utilizing Norwegian reservoirs for energy storage and regulating capacity, in
Proc. of Energy Storage Forum, Barcelona.

[229]            Energy Technology Systems Analysis Program (ETSAP),
2010. Technology Brief E12.
http://www.etsap.org/E-techDS/PDF/E07-hydropower-GS-gct.pdf

[230]            See footnote 23

[231]            OES, IEA, An International Vision for Ocean Energy 2012.

[232]            EU-OEA 2010, “Ocean of energy – European ocean energy
roadmap 2010 -2050”: http://www.eu-oea.com/index.asp?bid=436

[233]            RenewableUK, 2011: Working for a greater Britain, Volume 2. Available at www.renewableuk.com

[234]            EWEA, 2011, “Wind in our Sails - The coming of Europe’s offshore wind energy industry”, A report by the European Wind Energy Association,
2011.

[235]            No previous detailed data of effective payments by
project is available before march 2012

[236]            IEA RD&D Statistics, http://www.iea.org/stats/rd.asp

[237]            The amount was obtained using information related to
offshore patent applications gathered from WIPO database. The WIPO  search
codes for offshore wind applications include a combination of keywords
“offshore” “wind” “turbine” and IPC codes such F03D, B60L 8/00.

[238]            The amount was obtained using relevant information
related to wave and tidal patent applications gathered from WIPO database. The
WIPO  search codes for wave and tidal applications includes IPC codes such as
E02B9, F03B13, F03B 15/00 - F03B 15/20, F03B17/02 , F03G7/00 F03G-7/05

[239]            An important source for information on marine energy
corporate R&D investments is WIPO – the World Intellectual Property Organization.
WIPO patent applicants comprise both public and private companies, as well as
universities and non-profit organizations that seek exclusive property rights
for an invention. Patent applications of large multi-technology companies were
used to estimate the amount dedicated to R&D investment in marine energy
technology: in order to assess the intensity of R&D expenditure for marine
energy in such companies, the share of marine energy related patent
applications in the total patent applications of a company was used as a proxy.
A lag structure of one year was used to take into account the delay between the
time when research takes place and its impact on innovation. The availability
of data for the overall R&D budget of corporations is crucial for such an
analysis. Large companies listed in the stock exchange have the obligation to
disclose some financial information, while small companies can opt for not
revealing this kind of information. In order to deal with this limitation, for
smaller companies, R&D investment was approximated using the average
R&D investment per marine energy patent, which was previously calculated
for companies who make public their overall R&D expenditures.

[240]            Griliches, Z., 1990. Patent Statistics as Economic
Indicators: A Survey, Journal of Economic Literature 28(4), 1661-1707

[241]            IEA RD&D Statistics

[242]            Patent applications from 2002 to 2011 increase at Korean
Patent Office and Japan with an annual average of 36 patents and 8 patents
respectively.

[243]            Renewable UK 2010, Channelling
the Energy A Way Forward for the UK Wave & Tidal Industry Towards 2020,
http://www.renewableuk.com/en/publications/reports.cfm/Wave-and-Tidal-Channelling-the-Energy

[244]            Swedish Energy Agency is financing 56% of the project

[245]                  United kingdom, Denmark, Norway, Netherland and Portugal

[246]            Arrow K.J.(1962) The Economic Implications of Learning by Doing. Review of Economic
Studies 29 (The Review of Economic Studies, Vol. 29, No. 3) 29 (3): 155–73.

[247]            Hekkert, M.P., Suurs, R.A.A., Negro, S.O., Kuhlmann, S.,
Smits, R. E. H. M., 2007. Functions of innovation systems: A new approach for
analysing technological change. Technological Forecasting and Social Change 74,
413-432.

[248]            European Commission, JRC, A systemic assessment of the
European offshore wind innovation: insights from the Netherlands, Denmark, Germany and the United Kingdom., EUR 25410 EN, 2012.

[249]            OES IEA 2011, OES Implementing agreement Annual Report
2011.

[250]            OES EIA 2011

[251]            Wright, Frank, 2012, What's In Store for Offshore Wind
in the Next Five Years?, Renewable Energy World,
http://www.renewableenergyworld.com/rea/news/article/2012/09/the-next-five-years-for-offshore-wind,
viewed in December 2012.

[252]            Douglas & Westwood, 2011, World Offshore Wind Market
Forecast 2012-2016 LEAFLET http://www.douglas-westwood.com/news/info.php?refnum=662#.UO1J5eS7NA8

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