DG MARE, a body responsible for the EU Commission’s policies on maritime affairs and fisheries, has published an ocean energy market study which outlines the financial needs of the ocean energy sector in the EU.
The scope of the study, co-authored by WavEC Offshore Renewables and Italian business management consultants COGEA, was to estimate the financial needs of the ocean energy sector in the EU, identify potential financing gaps and possible financing solutions, and to analyse recommendations of the ocean energy roadmap in that context.
Three scenarios have been developed – analyzing situations where all projects in the pipeline are deployed and start at the proposed date, over those where projects are deployed, but some are delayed, to the final ‘plot’ where projects are delayed or cancelled.
In an ‘optimistic’ scenario, and given the current level of political support – about 3.9GW of cumulative installed capacity are expected globally until 2030. The capacity falls to 2.8GW in a second scenario, and to just above 1.3GW in a ‘pessimistic’ scenario, according to the report.
The study has also found that most of the financial resources injected in the sector come from private equity – with over 75% coming from private finance to reach over €6 billion invested to the sector so far on a global scale.
Excluding tidal range, the report notes that the investments for the sector could amount to €9.4 billion in Europe until 2030, according to the optimistic prognosis, whereas the ‘worst-case scenario’ out of the three predicts €2.8 billion, tops.
There is also the case where the ocean sector could garner €7 billion, it is affirmed in the report.
The study has confirmed that there are several funding instruments at national and EU level for prototypes and demonstration projects.
What is lacking, the report states, is a critical mass of finance to further develop the sector and scale it up to a fully commercial dimension.
“Ocean energy projects are usually too capital-intensive for venture capitalists and too risky for private equity. By the same token, borrowing from banks is often too costly. As a result, private investment in the ocean energy sector often involves own financing. While on the one hand this shows a certain dynamicity and optimism in the sector, on the other it seriously limits the overall availability of resources,” the report reads.
By using public money to leverage private capital, the funds proposed in the Ocean Energy Roadmap might accompany the industry until it reaches the desired level of maturity – however – the funds alone will most likely not be sufficient to reach the tipping point after which the sector can stand on its own feet, without strong and stable public support, according to the report.
“The injection of public money via the funds will certainly lower the level of risk for private investors, but these will continue seeking investments based on projected returns. Hence, a form of revenue support is of paramount importance to accompany the funds and maximize their effectiveness.
“It is thus highly recommended to take action towards the implementation of revenue support mechanisms, as much as possible consistent across Member States, so as to create certainty. Besides legislative and financial support, forward looking and determination are key,” the report advises.
Revenue support essential, industry body agrees
Responding to the report, Rémi Gruet – the CEO of the Brussels-based industry body for Europe’s ocean renewable energy Ocean Energy Europe – said:
“This study puts figures on how great an economic opportunity ocean energy represents for Europe – €2.6 billion already invested in the EU with 75% coming from private companies; 3.9GW of projects by 2030, representing €9.4 billion of investments – just to name a few.
“Crucially, those figures are calculated.”
Commenting on the current level of political support in the EU, Gruet remarked: “The EU has been a great supporter of ocean energy in the last years, politically and financially.
“Yet revenue support is essential for any emerging energy technology to make it to market.
“It is now up to France and the UK to give the right signals to investors so that this opportunity can materialize in those countries and in Europe.”