Frost: Marine Energy Market Holds Huge Potential for U.K.

November 25, 2008 // Published as a news service by IHS

According to Frost & Sullivan, ocean energy is a predictable and abundant source of energy with the ability to supply approximately 10% of the world's electricity needs.

The value of worldwide electricity revenues from wave and tidal stream projects could ultimately be between €77.40 billion and €245.10 billion per year.

Analysts said the U.K. is a clear leader both in terms of activity and in terms of support to the sector. It possesses 50% of Europe's wave energy potential.

Like all renewable energy technologies, the marine energy sector is now trying to reduce costs and reach grid parity. Support from the government, private investor interest and the relatively untapped resource will spur expansion, analysts said.

"After the loss of interest in the sector following the fall in oil prices in the '70s, marine energy has now been given a new lease of life," said Frost & Sullivan research analyst Gouri Nambudripad.

"Countries in Europe that are rich in marine resources - both wave and tidal - such as the U.K., Ireland and Portugal are investing in and supporting this technology."

Within Europe, the U.K. is a front-runner in the marine energy industry. Analysts estimate that 20% of U.K.'s total electricity requirement can be harnessed from ocean energy. The Carbon Trust has also predicted that marine energy could contribute up to one-sixth of the U.K.'s 20% renewable energy by 2020.

Scotland, with its rich ocean energy resources, plays an important role. In fact, 25% of Europe's tidal resources and 10% of Europe's wave energy resources are found in Scotland, analysts said. One-fifth of U.K.'s electricity needs could be fulfilled by marine energy production in Scottish waters. Estimates show that Scotland has the resource potential to install 1.3 gigawatts (GW) of capacity from marine energy by 2020.

One of the biggest barriers to industry growth is the competition it is facing from other mature and growing renewable energy sources, such as wind and solar. Analysts said the renewable energy sector is very dependent on support from the government and there is only a limited amount of funding that the government can provide. This situation is dampening the prospects of the European marine energy sector.

"The marine energy sector has a number of technological hurdles to overcome, with the most significant being the ability to survive the harshness of the ocean environment," said Nambudripad. "While marine energy currently lags behind many other renewable energy technologies, it is, over time, poised to catch up and provide meaningful amounts of electricity."

Private investors are showing considerable interest in the sector, analysts said. These range from private equity and venture capitalists to utilities that are partnering with device developers to assist them in taking their devices from pre-commercial and testing phase to full-scale commercialization. With steep learning curves, government support and private funding, the sector is set to contribute significantly in the next five to 10 years.

There have been estimates that investments exceeding €645 billion would be necessary for wave energy to contribute 2000 terawatt hours per year (TWh/y) worldwide. At the same time, analysts estimate that if ocean energy technologies continue to be supported and achieve their predicted potential, approximately 3 GW of installed capacity could be available in the EU by 2020.

Source: Frost & Sullivan.