Alan Moore is a Non-Executive Director at ORE Catapult. He provided the keynote address at the International Conference for Ocean Energy in Nova Scotia in November examining why marine energy is taking so long to progress to commercialisation. His speech is published below.
I’m speaking today entirely on my own behalf. What follows are my own thoughts based on twelve years involvement with, and close observation of, the ocean energy industry, mainly in the United Kingdom. My principal qualification today is this grey hair.
I’ve entitled my presentation “Ocean Energy – Why aren’t we doing it already?”
It’s a good question.
Indeed I guess if I asked everyone at the conference they’d all give me an answer, and those answers would be wide-ranging. What’s more, I could probably arrange those answers into some kind of Venn Diagram grouped predominantly by whereabouts they sit in our industry – and by “industry” I include engineers, financiers, legislators, environmentalists – anybody and everybody who interacts with Ocean Energy. I’m also guessing that the answers would tend to point to some other group on that Venn Diagram, rarely their own area of responsibility. By profession I am an engineer and I know we never make mistakes – well hardly ever!
And of course, some might even say that “we are doing ocean energy already” – and, to a degree, they would be right.
But that is not why I chose that question. I chose it because when I talk to laymen – people who aren’t in our industry – they almost invariably ask exactly that: “Why isn’t it happening?”
To the outside world ocean energy offers a limitless source of free energy. And even engineers say that all we are doing is converting kinetic or potential energy into electricity. Much easier than heat engines, laws of thermodynamics and all that. Ocean energy is a much more concentrated energy source than highly diffuse wind power. Fewer marks on the landscape and much more predictable too. Hardly “rocket science”!
And of course, they are right! The fundamentals are undoubtedly sound.
So we set off with a huge advantage. The public wants us to be successful, almost without exception. Our colleagues in nuclear, wind power, fossil fuels would love to be able to say that.
I have spent most of my career in one or other of those sectors being hugely distracted from the day job by battles with the media and objectors. Ocean energy won’t get a completely free ride, but at least the slope’s in our favour.
So why aren’t the oceans and estuaries of the world full of wave and tidal devices when all of those less popular generating technologies are providing the bulk of our electricity supplies?
I guess the simple answer is “because we are in the sea and that’s a very tough environment”. Which is, of course, true – but so is offshore wind, the oil and gas industry – even fishing – and they are all succeeding.
It seems to me that a successful ocean energy device developer needs three things to stand a chance of success:
Firstly, we need to have a technology which:
Our history is that there are very many of us who think we have exactly that. About ten years ago, when RenewableUK first expanded its remit to embrace ocean energy, we published a booklet devoting a page to each wave or tidal device we were aware of. That book had well over a hundred pages – more than a hundred devices! …….And I shall return to this topic.
Secondly, we need an excellent management team. I spent a large part of my career in a large utility. We thought we knew about management; indeed, we did a lot of it! For the last decade I have worked with a number of small companies, all of them start-ups. The challenges facing the senior management teams of these small companies far exceed those in the big corporates. The CEO needs to have a grasp of technology (in all its forms), finance (control, management,fundraisingg), people management, public relations, shareholder relations, government relations, regulation, environment, health and safety – the list goes on. Jack – or Jill – of All Trades neatly summarises the job spec; however “master of none” just doesn’t cut it.
As the company progresses, the balance of skills changes. Whilst we’re in the test tank, technology dominates but as we progress through the TRLs, the funding requirements and the team grows and the balance of skills required at the top change. The successful companies realise that. The successful shareholders also realise that and manage the transition sensitively. The shareholders’ most valuable asset is the team – it’s a cliché but undoubtedly true.
And thirdly, we absolutely need funding. Goodness knows we engineers wish this wasn’t the case! If only we could devote our time and energies to developing our devices and not hunting the next dollar to pay for our next – naturally vastly improved – [phase] machine. Not to mention to pay for the monthly wage bill. The Board of nearly every small company, nearly every year, has to think very hard before signing off its annual accounts on the basis of the business continuing for a further 12 months.
Fund raising is a constant challenge. Whether that’s family-and-friends, venture capital, JV or government grants. An awful lot of frogs must be kissed before a prince emerges. Not for one moment will I criticise those who provide those funds; indeed they have generally been very supportive of our sector.
However if I have one suggestion it is to Governments: a wide range of different funding streams are made available from a large number of government entities, be they international, national, regional, technology- or TRL- specific. Development companies have a significant task simply keeping abreast of what grants are available, let alone how best to qualify for them. This is a huge distraction which, I suggest, could be improved by coordinating and consolidating the available funding. I’m genuinely not ungrateful; I simply think we could all progress faster if we did this better.
But my observations are not one-sided. We on the industry side have frequently been guilty of over-promising and not delivering. I think I understand the reasons for this and they are associated with the problems of fund raising. When we are trying to attract equity we need to talk up our ideas, the chances of success, and our likely rates of progress: I’m not suggesting that we lie, but we certainly err on the optimistic side of the ‘central case’. Investors know this and deal with that optimism by requiring high rates of return on their investments to reflect the risks involved.
Having sold one story to investors we are compelled to tell the same story to potential providers of grant-funding. Disappointment is almost guaranteed, but there is no mechanism for dealing with that disappointment. One of the worst sins a departmental Civil Servant can make is to persuade his Treasury to provide grant funding and then not spend it because the developer has failed to meet budgetary deadlines.
I’m suggesting that a healthy dose of honesty should be applied on one side, and an equal degree of scepticism on the other. At the Offshore Renewable Energy Catapult in the UK we sit at the intersection of this continual negotiation. It’s not easy!
As I said earlier, we know there are well over a hundred technologies out there – many of them are represented here today. Some are still in the test tank, some in small scale trials, a few in MW scale ocean testing, and others on the verge of sea trials in arrays. One or two have leapt the hurdle from SME (the UK jargon for Small and Medium Enterprise) to being bought up by major corporations. Most of the teams have dreams of taking their babies all the way into the ocean, possibly manufacturing themselves, possibly selling on to larger companies.
All hundred devices have something unique about them. Each one has an ‘intellectual nugget’; the great idea that sets it apart from the others – the reason that the team believes it has the winning solution. And they might just be right. The problem is that the ultimate winning solutions will have successfully integrated lots of winning nuggets into a single device; it might be a blade, an anchor, a control system, a survival strategy, a grid coupling, an installation method, a repair methodology. It is most unlikely that one company will invent more than a few of the many nuggets it needs to make a successful machine – the winning machine.
One thing is certain – there will not be a hundred winning solutions. In the early days of modern wind turbines there were many designs: vertical axis, horizontal axis, up-wind, down-wind; lattice towers, tubular towers; two blades, three blades, even single blade. However by the time we reached MW scale the three bladed horizontal axis upwind machine had become ubiquitous, and there were only a handful of manufacturers making them.
We can confidently expect a similar convergence to emerge in our own industry. How can we best accelerate that convergence?
What we need is some method of collecting those intellectual nuggets into a small number of breakthrough machines. Then we can put our precious funds and resources into just a few pathways rather than into a completely free market, wasteful scatter-gun approach. Our Government is frequently heard to say “we are not in the business of picking winners” – and they are probably right – but we do need a way to encourage and support the likely winners.
In essence each of the ocean energy technology development companies has just one significant asset – its Intellectual Property. That is what the investors have invested in. And within that IP the jewel in the crown is their nugget – the successful idea that differentiates them from all the rest. We don’t want them to be thinking about sea anchors when their nugget is in fact a brilliant blade control system. We want somehow to put the team with the brilliant anchorage system together with the brilliant control system, and then add a brilliant grid connector, and a brilliant condition monitoring package, and so on.
Knowledge Transfer Networks are part of the solution, but the real IP has monetary value and will never be shared willingly: the investors want a return on their investment. Consolidation of companies by merger or acquisition can move IP around, but it is slow, expensive and frequently inefficient. Sale or licensing of patents can and does work but, I contend, is not the sole answer.
The question I ask is “are there other ways of marketing nuggets, monetising them and gathering them into clusters of IP which result in a rapid route to a winning machine?” I don’t know. But I do know it is a slow process when a hundred different nuggets are held by a hundred different small companies, each with a duty to maximise shareholder value.
In the UK the Government has recently set up the Offshore Renewable Energy Catapult of which I am a part. One of its roles is to accelerate the development of ocean energy through innovation. Innovation in its widest sense: technical; commercial; organisational. It’s early days but these are the questions we are asking ourselves. If you have ideas we’d like to hear them – and maybe we can develop those ideas together.
My final observation is a reminder that we don’t have to invent everything from scratch. Our brothers and sisters in the offshore wind industry have gained more than a decade lead on us. Many of the problems they have faced and solved are similar if not identical to our own. It was for this reason that I persuaded the UK trade association RenewableUK, previously the British Wind Energy Association, to expand its remit to embrace ocean energy. Generating electricity in a harsh marine environment will never be easy but offshore wind has successfully made the transition to large-scale commercial operation. That is our ultimate objective and if we can learn from the mistakes they made on the way we can save ourselves a lot of time and money. No doubt we will make enough mistakes of our own.
If what I have had to say is blindingly obvious, I apologise.
If it’s made you think – that was the plan.
I started by asking “Why isn’t it happening already?” I sincerely hope that by ICOE 2016 we won’t have to ask that again.