U.K. Wave Energy Needs Strike Price Six Times Higher Than Coal

Technologies that make electricity from waves need subsidized prices almost six times tariffs paid for coal-fired power if British developers are to bring their devices to market, an adviser to the government said.

Under the U.K.’s Electricity Market Reform, wave energy providers need at least 300 pounds ($461) a megawatt-hour if support is given over 20 years or 350 pounds over 15 years, said Richard Yemm, chairman of the EMR sub-group of the Marine Energy Programme Board, which advises the government on the industry. That compares with $78 a megawatt-hour price paid for coal-fired power, according to a Bloomberg estimate.

The government is expected next month to publish proposals on how much the guaranteed prices, known as strike prices, will be for each renewable energy technology. Yemm said that the government is “responding positively” to industry recommendations and the economic case behind them.

“If the Department of Energy and Climate Change chooses to build on the current momentum in the sector with supportive strike prices, it would of course be a major boost and would consolidate the current U.K. lead in this space,” said Yemm, who is also the new chief executive officer of Pelamis Wave Power Ltd., a Scottish developer.

Marine energy developers are mostly still testing single unit devices to gather data for larger machines and multiple arrays as they bring their technologies to market. While no commercial-scale projects are operating in the water, large industrial companies are starting to invest in the industry. Alstom SA (ALO), DCNS SA and Siemens AG (SIE) all own stakes in companies.

Strategic Investor

If support levels are too low, Yemm said it will be difficult for projects to proceed without “significant” additional capital through the early stages.

Energy from the waves currently costs about $496 a megawatt-hour, according to Bloomberg estimates.

“Pelamis will secure a strategic investor to work with us through commercialization over the coming years -- we need to do that, and we are making encouraging progress,” Yemm said of his company. “Utilities and other project investors need to see strong backing from a major industrial to place orders for large commercial systems.”

Pelamis already is testing two machines in Orkney, Scotland, for Germany’s EON AG and Iberdrola SA’s ScottishPower Renewables Ltd. Vattenfall AB is helping the company build a 10-megawatt project off the Shetland Islands.

To contact the reporter on this story: Louise Downing in London at ldowning4@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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