Tidal Technology in the Highlands

Written by Brian Hicks
Posted September 21, 2005

Dear Wealth Daily reader:

I received an e-mail last week from a gentleman who told me that I shouldn't sing the praises of ocean-based energy, as it is clearly inefficient and expensive according to an old U.S. Department of Energy study he referenced.

And that got me thinking.

Not about that particular study, but rather the validity and timeliness of random studies - whether they're from the D.O.E. or a marketing firm.

You see, the D.O.E. study that this person referenced is a fifteen-year-old study that assessed the potential of ocean-based energy. But after dropping close to a quarter of a million dollars on the project, it was determined that the oceans' electricity contribution would be too small, and the return on the investment would be marginal at best.

Of course, this study was also conducted when oil was trading around $20 a barrel!

Increased investment and profits in the renewable energies sector has changed dramatically in the last fifteen years. (Thus the reason that 15-year-old D.O.E study is irrelevant today) In fact, the potential of these renewable energy companies is only now becoming fully-realized; as evidenced by all the record highs so many of these companies have been hitting since the beginning of the year.

It's also important to point out that this particular D.O.E. study concentrated nearly all its focus on ocean thermal energy. While tidal and wave energy have proven to be the most efficient and cost-effective up to this point.

In fact, last week the tidal and wave energy sector got a huge boost in Scotland when Enterprise Minister, Ninol Stephen announced that he was taking action to award additional renewable obligation certificates (ROCs) to wave and tidal output, in an effort to kick-start multimillion pound investments in marine energy.

(All UK suppliers must purchase an increasing percentage of the energy that they supply from renewable energy sources. The ROCs are issued by the Office of Gas and Electricity Markets, which serves as the UK's energy regulator, and certify that one Megawatt hour has been generated from a qualifying renewable energy source.)

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Industry experts have advised that the potential exists to install over one gigawatt of wave and tidal capacity in Scottish waters - or approximately one-tenth of the country's total energy production.

(It has also been estimated that this initiative will create up to 7,000 new jobs.)

When it comes to the development of ocean-based renewable energy, Scotland has clearly taken the lead.

Back in 2003, in an effort to stimulate and accelerate the development of marine power devices, Highlands and Islands Enterprise, the government's economic development agency for northern Scotland and its adjoining islands, launched the European Marine Energy Centre in Orkney.

The state-of-the-art research facility boasts four test berths (with individual armored cables connected to the onshore substation) and a substation with switchgear, metering equipment, power factor correction equipment, communications equipment, an emergency generator and a grid isolator.

An observation point equipped with video cameras and a wireless communication link to the test site was also constructed, as well as a solar powered meteorological station that is linked to the data center.

The first wave energy converter used at the European Marine Energy Centre was the Pelamis P-750, designed by Ocean Power Delivery, Ltd.

The Pelamis P-750 was installed on August 23, 2004, and immediately completed its first week of electricity generation into the UK grid.

Less than one year later, on May 19, 2005, Ocean Power Delivery announced that it had signed an order with a Portuguese consortium, led by Enersis (ENI:NYSE) to build the initial phase of the world's first commercial wave-farm to generate renewable electricity from ocean waves.

The project will have an initial installed capacity of 2.25 MW, and is expected to meet the average electricity demand of more than 1,500 Portuguese households.

Subject to performance, a letter of intent was also issued to order an additional thirty Pelamis machines (20MW) before the end of 2006.

High Tide in South Korea

The South Koreans are diving head-first into the tides too.

What developers are calling the largest tidal energy plant in the world, the Sihwa Tidal Power Plant is projected to generate 260 MW from the constant flow of water in and out of a seaside bay.

Consisting of ten 'bulb-type' turbines with direct driven generators, the $250 million project is designed to allow up to 60 billion tons of seawater to be circulated annually.

Equipment contracts were quickly awarded following the announcement.

VA Tech Hydro (VAT:ATX), an international supplier of equipment and services for hydropower plants, received an order from Daewoo Engineering and Construction for the engineering and delivery of the electromechanical components for the Sihwa Plant.

The Sihwa project is expected to reach completion by 2009.

Of course the question still remains…where does the U.S. fit into all of this?

Well, according to a February, 2005 study conducted by the Electric Power Research Institute, in collaboration with the D.O.E.'s National Renewable Energy Laboratory and utilities from six states, it has been suggested that ocean and tidal energy technologies could be economically feasible off U.S. shores in the very near future - as soon as investments are made to enable wave technology to reach a cumulative production volume of 10,000 to 20,000 MW.

Conceptual designs for 300,000 MWh plants were performed for five states (Hawaii, Maine, Massachusetts, Oregon and California).

As the U.S. ocean-based energies sector closes in on these targeted production capabilities (which some have estimated to be as soon as 2007), Green Chip Stocks expects to see a number of 'already-established' hydroelectric companies and equipment manufacturers to supply the capital and 'technical muscle' to push the industry forward.

I will keep you posted in the Green Chip Review as more develops.

Until next time,

Jeff Siegel
Editor, Green Chip Stocks