Analysis of wave park announcement and potential

Ocean Power Technologies, Inc. (OPT) recent agreement with Pacific Northwest Generating Cooperative (PNGC Power) to work cooperatively to develop the Reedsport OPT Wave Park in Douglas County, Oregon is another sign of utilities growing interest in using emerging wave and tidal technologies to help meet their renewable energy requirements. In supporting the development of wave technologies, PNGC is helping to lay the ground work for the growth of a renewable generation form that offers great potential and responds to aesthetic and reliability concerns associated with other renewable energy sources such as wind and solar.

The Reedsport project along with projects in Hawaii and Makah Bay, WA are among the first domestic projects to use wave energy to meet the growing need for reliable, domestic, renewable energy. The Electric Power Research Institute (EPRI) estimates that this emerging hydro technology could yield as much as 2100 TWh/yr or approximately 10% of the U.S. domestic demand for electricity.

EPRI studies estimate the total wave power flux potential in the U. S. at 2100 TWh/yr. The majority of this capacity is along coasts of:

Alaska

Hawaii

California

Oregon

Washington

The technologies to develop these resources are in their very early stage of development, comparable to wind development in the early ‘70’s. Harnessing wave energy for electric production offers several advantages over other renewable energy sources. Wave energy is more predictable and therefore more dispatchable then other energy forms. Because of its significantly lower profile, it has fewer aesthetic issues than wind. With proper siting it should also offer fewer environmental impact concerns.

Although this represents a significant domestic resource there are several major issues that will effect how quickly the technology can be developed and deployed for commercial scale application. These issues fall into 3 primary categories:

Research

Regulatory Process

Incentives

Research

Because these are new technologies in a new application there are a number of open questions both regarding operations issues and environmental impacts. On the technical side, work in the U. S. is building on the more advanced efforts in Europe. Several technologies have been deployed at the European Marine Energy Center (EMEC) and are demonstrating promising performance.

Environmental impacts due to the actual operation of the equipment are believed to be relatively minor due to the limited motion of most of the systems. The area needed for commercial deployment of many of the systems may be an issue due to the size of the area necessary to install a commercial scale development. Demonstrations such as the Reedsport project will begin to answer these questions.

Because many of the companies pursuing these technologies are still relative small there is a need for coordinated governments support for research to be able to advance at a reasonable pace. Thus far the federal effort in this area has been lacking. Last year the Department of Energy stopped funding its hydroelectric research program. Although there have been some efforts at the state level, notably in Oregon and New York, there is still a need for coordinated research efforts to answer fundamental environmental and operational questions .

Regulatory Process

Both the Federal Energy Regulatory Commission (FERC) and the Mineral Management Service (MMS) are currently working through the issues of how these new technologies will fit into their existing regulatory requirement (in the case of FERC) and proposed new guidelines (in the case of MMS). FERC currently has over 40 preliminary permit applications pending, some for competing sites. MMS is not accepting new applications as it looks at formulating its regulatory structure for the Outer Continental Shelf (OCS). In both these situations developer and their potential backers are left in a uncertain situation as to what will be the ultimate regulatory requirement for proposed projects, who will have final jurisdiction and how will competing agency requirements be resolved. Financial backers are faced with an ill-defined situation to make decisions regarding investment in these promising new technologies.

Incentives

The history of the wind industry has shown that if a new energy technology is going to achieve its potential it needs encouragement. Over the past 30 years wind has progressed from a promising concept to its current capacity of approximately 10,000 MW with the help of direct government research and incentive programs such as the Production Tax Credit (PTC). The PTC serves the laudable purpose of improving the financial picture for fledgling technologies and allowing them to compete with more established technologies and their long established infrastructure.

Under the Energy Policy Act of 2005, PTC was extended to 2008 and the definition was expanded to include efficiency and capacity improvements at traditional hydroelectric facilities. Although ocean, tidal and ocean thermal technologies were identified in the Energy Policy Act in other provisions, they were not included in the PTC. The definition of power sources that can take advantage of the PTC and corresponding Clean Renewable Energy Bond (CREB) programs should be expanded to include tidal, ocean current, wave, ocean thermal and kinetic flow in rivers, stream and manmade channels. The effective dates for the program should be extended from its current 2008 expiration to at least 2016. This will provide a degree of certainty on which developers and funders can make decisions regarding which projects to pursue.

The Reedsport project is part of a promising beginning. If programs are enacted to encourage development of these emerging technologies, the U.S. could see wave technologies providing new generation that greatly exceeds current wind generation with fewer reliability and aesthetic issues.