With over 70% of our earth covered by oceans, Australia’s 25,780 kilometres of coastline provides access to hundreds of terawatts of untapped potential energy from its waves and tides. With over 85% of Australia’s population living within 50km of this coastline and its Blue Economy [1] projected value of $100 billion per annum by 2025[2], one would believe that energy from the ocean would be commonplace; yet it’s not!
While ocean energy is following identical development pathways as solar, onshore and offshore wind, battery storage, green hydrogen production and other forms of renewables, funding and investment support for development of energy extracted from waves and tides has been and continues to be elusive.
A key challenge in this nascent ocean energy industry is the significant imbalance of supply and demand. While global “supply” includes a diversity of innovative wave and tidal technologies, along with corresponding technology development support mechanisms in different countries, such as government grant programs, applied research, test centres, etc.; little to no customer demand exists for these technologies, as yet.
To realise the substantial sustainability benefits that ocean energy can provide for the Blue Economy, it is necessary to bring investment in ocean energy on par with other renewables. This raises a critical question for impact investors willing to be first movers in this nascent industry:
- Does one invest in individual technologies that produce the electricity (providing ‘supply’)?
- Or, should one help create demand by investing in the projects that generate customers for the technologies, such as pilot commercial ocean energy demonstrations projects for islands, aquaculture, ports/harbours, offshore wind, coastal protection, desalination and more?
- Or, both? (spoiler…it’s both!)
Consider the analogy about the beginning of the automobile industry to further illustrate. In the late 1800’s, investment was supporting innovation in the ‘horse-less or gas-powered carriages’ for what we know today as ‘the car’. It wasn’t until car dealerships or car showrooms were established that brought the car to life for people, connecting buyers with the car producers. Ultimately, this led to a commercial automobile industry.
Ocean energy refers to harnessing the high energy density from ocean waves and the ebb & flow of tidal streams which can be converted to into electricity, potable water and/or high pressure.
Wave and tidal energy are a predictable, perpetual source of electricity, either from stand-alone devices or leveraged within a microgrid when connected with other renewables.
Integrated ocean energy microgrids provide a number of advantages. They have the ability to generate more power, increase reliability by filling intermittency gaps in solar and wind generation, reduce storage requirements and ultimately reduce capex and opex costs. This approach provides a real decarbonisation solution for a variety of end-users. A fit-for-purpose integrated ocean energy system has the potential to provide baseload energy for Blue Economy businesses, communities and industries.
The Innovation Outlook on Ocean Energy Technologies report, prepared by the International Renewable Energy Agency (IRENA), documents the potential value of the global ocean energy industry.
Similar to the innovation of the car, development of ocean energy technologies require capital. They cannot innovate without the resources to support their growth and manage risk.
While the myths that ocean energy is too risky, too costly and unpredictable have hindered early-stage investment; there are several reasons why early investment presents a compelling opportunity.
- It creates a pipeline of cutting-edge technologies, producing a continuous supply of ‘products’ for the market. In turn, more ‘products’ become available to meet a wide range of end-user (‘customer’) energy transition needs, creating ‘market demand’.
- Early-stage investment enables technology developers to “co-design” with an end-user to “co-develop” fit-for-purpose energy solutions. Currently, the end-user may not have the knowledge or resources to support their internal energy transition, especially to a new technology such as ocean energy. Therefore, both parties need to collaborate on development to achieve energy transition success. This approach ultimately reduces risks and improves cost/benefits.
- Early investment helps reduce time to market by providing a ‘bridge’ to get through the uncertainty of government permitting necessary to install devices in the water, leading to reduced investment risk.
- Provides opportunities to be in on the ground floor of future commercial technologies, similar to the early days of offshore wind. The following Australian and New Zealand ocean energy technology developers (members of the AOEG – see below) are leading examples of the innovation technology diversity emerging for Blue Economy markets.
- Carnegie Clean Energy, wave energy
- Altum Green Energy, tidal energy
- Wave Swell Energy, wave energy
- Bombora, wave energy
- AZURA Ocean Technologies, wave energy
- Smart Barge, Tidal Energy
- OneTide Energy Solutions, Integrated energy systems
- Bio-Oscillator (National Institute for Water and Atmospheric Research, affiliate member, NZ)
- Ruka Marine Turbine (affiliate member, NZ)
On the forefront of building market demand for ocean energy is the Australian Ocean Energy Group (AOEG), an industry-led cluster.
AOEG believes that the value of the technologies will not realised until there are customers for the power or water generated from tidal or wave devices and/or systems.
Through its desire to see ocean energy supply balanced with demand, AOEG is working to change the industry paradigm from a “technology push, to a market pull”.
It views the benefits of early-stage investment on the demand-side of the industry to be:
- Reduced time to market for the technology development companies through increased visibility and identification of early-adopter markets with “co-development” opportunities.
- Critical issues addressed that individual technology development companies cannot do for an industry, such as working with government regulators to establish local, regional and national permitting consistency, incentive plans and blended finance models.
- The emerging renewable energy market is rapidly evolving. Whilst an investor must realise that financial returns will be longer term, first mover investors gain foundational knowledge about the industry, diversity of technologies and emerging markets.
- Opportunities to be in on the ground floor of pilot commercial demonstration projects that will serve as the “showroom” for “co-design/co-development” ocean energy initiatives and catalysts for commercialisation.
Here are AOEG’s market-demonstration initiatives currently in development:
- Integrated ocean energy Marketplace, an innovation hub for ocean energy – Albany, WA. This integrated ocean energy microgrid system designed to catalyse commercial ocean energy project development. It will be a place where future end users (markets) can see a real-life operating ocean energy system and receive the tools, knowledge and expertise to develop their own ocean energy projects. Click HERE to view the concept video.
- Market-led demonstration of an Ocean-powered ‘Smart’ Observation System, Townsville, QLD. The Australian Institute for Marine Science (AIMS) requested AOEG leadership to ‘co-design’ and implement an ocean energy solution to their battery-powered, high cost, system of scientific ocean observation buoys. This is a scalable pilot commercial project.
- Tidal/offshore wind “co-location” project, Tasmania. With the explosive growth of offshore wind projects in Australia, this project will develop at the nexus of tidal energy and offshore wind in the Banks Strait. Its aim is to demonstrate the energy delivery advantage as well as the cost and efficiency benefit of shared infrastructure and supply chain. This location is validated for commercial development by the State as well as the University of Tasmania.
Reflecting on the question of where early-stage investment is best placed, the answer is both!
For those first mover investors who share the vision for a decarbonised Blue Economy, investing in initiatives that generate market demand, while simultaneously supporting a continuous supply of ocean energy ‘products’ in development, will achieve meaningful decarbonisation impact and establish pathways for future financial success.
Stephanie Thornton is Manager at the Australian Ocean Energy Group
[1] The World Bank defines the blue economy as the “sustainable use of ocean resources for economic growth, improved livelihoods, and jobs while preserving the health of ocean ecosystem.”
[2] Australia’s National Marine Science Committee, 2021