Venture capitalists’ reticence to provide finance to immature technologies is hitting marine energy developers. Two much-trumpeted wave energy developers - Orecon and Wave Dragon - have recently issued urgent calls for investment.
At the end of November, Cornish firm Orecon issued a press release calling for funding after its backers, Advent Ventures, withdrew support.
Orecon’s device - a ‘multi-resonant chamber’ - has been talked-up as a leading technology since the early 2000s (ENDS Report 332, p 29 ). The motion of waves rising and falling within the device pushes air through turbines to generate electricity.
The company had planned to build a 1.5 megawatt peak capacity demonstration unit for deployment off the Cornish coast and had recently won through to the final round of the government’s £22m Marine Renewables Proving fund. The Carbon Trust is due to announce winners of the fund by the end of the year.
The company had also long been in discussions with the South West Regional Development Agency about deploying the device at its Wave Hub project (ENDS Report 412, p 12 ). And it had established a joint venture with Portuguese energy firm Eneólica looking to build up to three devices in Portugal.
According to David Crisp, Orecon’s chief executive, Advent Ventures was due to provide £9m earlier this year, but the company missed a deadline for developing the technology. "By the time we did reach it, the reality was venture capitalists were unable to raise new funds and only wanted to finance projects close to making a profit," he said.
"This isn’t just affecting us. I wouldn’t be surprised to hear in coming months if more firms suspend operations," he added.
Several other wave developers are reliant on venture capital funding (see table).
And Danish firm Wave Dragon has also put out a call for funding.
It intended to install a seven-megawatt device off the Pembrokeshire coast in 2011, but its applications for consent are in abeyance until it secures funding, according to UK manager Iain Russell.
Even industry leader Pelamis Wave Power has suffered. Last year, it installed three of its 750kW machines in Portugal (ENDS Report 405, pp 13-15 ). But these are now sitting dockside following the collapse of the project’s main backer, Babcock & Brown.
Orecon needs to raise £15m to build its 1.5MW device, but it is considering building a 500-kilowatt device instead. This would require £3.5m. "We’d deploy that off Plymouth or Falmouth and could build it next year. We wouldn’t connect it to the grid as that would be too expensive, but it’d allow us to prove [the technology]."
Other wave developers ENDS spoke to agreed with Mr Crisp that there are great difficulties securing finance at the moment and that more firms may suspend operations. But all were hopeful this is just a blip and pointed out that several other wave developers have either just installed devices or are close to doing so.
In November, Edinburgh’s Aquamarine Power launched its near-shore Oyster device at the European Marine Energy Centre (EMEC), Orkney. This has a peak capacity of 315kW. During 2010, Pelamis is due to install an updated version of its machine at EMEC. Ocean Power Technologies (OPT) is also due to install its 150kW PowerBuoy unit at EMEC next year.
However, whether some of the announced projects will materialise is uncertain. OPT has been awarded a grant to help build a 19MW project in Australia - a massive step up from its current operations. But details of timescales and funding are vague.
Oliver Wragg, wave and tidal development manager at the British Wind Energy Association, said: "It’s not just this industry that’s being affected [by lack of venture capital] - it’s all industries looking to prove technology. We’ve made government aware of this as it’s a real problem, but I don’t think it’ll thwart the industry."
He pointed to the Marine Renewables Proving Fund as something that should get several more devices into UK waters by the end of 2011. Wave and tidal power schemes could also receive a share of funding from auctioning of 300 million EU emissions allowances under the third phase of the EU emissions trading scheme (ENDS Report 407, pp 4-5 ).