Carbon Trust launches tidal fund

3 min read

A £22m Carbon Trust fund aimed at demonstrating wave and tidal technologies could prove decisive in attracting investors into a high-risk market sector.

A £22m fund aimed at demonstrating wave and tidal technologies has been launched by the Carbon Trust as part of the government’s Renewable Energy Strategy.

The Marine Renewables Proving Fund (MRPF), initially announced in July, has been designed to accelerate commercialisation of UK marine energy, following demand from industry to provide additional support for the development and testing of prototype devices.

Lord Hunt, the energy and climate change minister, said: ‘The scope for wave and tidal energy around the UK’s shores is massive and we’re working closely with developers in the UK to bring on the necessary technologies. The Proving Fund will help marine projects get off the drawing board and into the water, taking them a vital step closer to full-scale commercial viability.’

The existing funding structure means that developers only gain support from a Marine Renewables Deployment Fund (MRDF) once they have completed their research and development, and are ready to move their prototypes into a commercial environment.

Over the past few years, companies have had difficulty reaching this standard, prompting concerns that the MRDF alone is not enough to promote the development of marine energy in the UK.

According to the Carbon Trust, the Proving Fund will act as a ‘feeder’ scheme for the MRDF to help fulfil the necessary requirement of having a full-scale device operating in the sea. The government hopes this will go some way to addressing the difficulties of gaining early-stage funding from private investors.

Benj Sykes, The Carbon Trust’s spokesperson, said: ‘There has been some criticism of the MRDF and [the fact] that it has actually not been able to put any money in the industry. I think the industry has moved a long way. When the MRDF was originally put in place, the industry was a much less mature one.

‘It has become clearer over time that there is this funding challenge particular to the marine industry, because you get to the point where you have a relatively high-risk programme in terms of putting a device in the sea for the first time at full scale, so there are a lot of unknowns.’

Projects will be assessed based on their technical track record and development road map. The Carbon Trust said it expects the devices to be tested at around a quarter of full scale in a tank or in the sea before they receive funding.

Once this has been achieved, up to £6m will be made available for applicants to meet the capital costs of building and deploying their prototypes. This will provide 25-45 per cent of the project’s costs with the remaining funding matched by private investors.

James Mitchell, head of business development at tidal-energy group, Atlantis Resources, believes the fund-matching nature of the scheme will allow the government to pick the right technologies while giving private investors greater confidence in supporting radical new designs and concepts.

‘My personal view is that it is not really appropriate to do 100 per cent government funding. If you can’t get the private sector to finance it then it is probably not worth funding,’ he said.

‘We need technologies that are commercially viable and industry has to play a part in choosing these. However, the MRDF has had a problem providing the funding that immediately proceeds it, so I think the government has done the right thing by filling the gap.’

Sykes added that private investment would be crucial to the success of the funding scheme. He said: ‘I think there’s an element of investors not understanding the process and backing out of scheme.

'Even for the ones that do understand it, a device would need £7-10m to get into the water, with no guarantee that there will be a commercial proposition at the end of it.'

He added: 'There’s no way around it. It’s expensive to prove technology in this area but doing it is crucial and will be vital to our future economy.’

According to research by the Carbon Trust, 25 per cent of the world’s wave technologies are currently being developed in the UK. If the rate of development continues, the group believes that Britain could become the global leader in the wave-power market, bringing in revenues of £2bn per year by 2050 and creating up to 16,000 direct jobs.

The Carbon Trust’s work is being supported by the Technology Strategy Board (TSB) which has announced a programme of activities that will sit alongside the MRPF. The TSB’s activities will focus on delivering targeted support for longer-term projects through a competition due to be launched in spring 2010.

Ellie Zolfagharifard