Marine Energy: Seizing the supply chain opportunity March 2015
Contents Executive Summary 01 Scotland and the global marine energy supply chain 02 Be part of the marine energy supply chain 03 Product Development Phase 04 Manufacturing & Construction Phase 06 Operations & Maintenance Phase 08 Seizing your business opportunity 10 How to get involved 10 Most importantly: seize first mover advantage 11 Acknowledgements 12 Scottish Enterprise Copyright 2015 Published by Scottish Enterprise and Highlands & Islands Enterprise. This report is available on the Scottish Enterprise website at: www.scottish-enterprise.com Dissemination Statement This publication (excluding the logo) may be re-used free of charge in any format or medium. It may only be re-used accurately and not in a misleading context. The material must be acknowledged as Scottish Enterprise copyright and use of it must give the title of the source publication. Where third party copyright material has been identified, further use of that material requires permission from the copyright holders concerned. Disclaimer The guide is provided for general information purposes only and should not be relied upon. It does not constitute advice, is not exhaustive and does not indicate any specific course of action. Detailed professional advice should be sought before any decision is made as to the matters covered in the guide. In no event will Scottish Enterprise, or the employees or agents of either, be liable to you or anyone else for any decision made or action taken in reliance on the information in this guide or for any consequential, special or similar damages, even if advised of the possibility of such damages. The guide endeavours to reflect best industry practice. While we have made every attempt to ensure that the information contained in the guide has been obtained from reliable sources, neither the authors accept any responsibility for and exclude all liability for damages and loss in connection with the use of the information or expressions of opinion that are contained in this guide, including but not limited to any errors, inaccuracies, omissions and misleading or defamatory statements, whether direct or indirect or consequential. Whilst we believe the contents to be true and accurate as at the date of writing, we can give no assurances or warranty regarding the accuracy, currency or applicability of any of the content in relation to specific situations or particular circumstances.
Executive Summary With a wealth of natural resources, a tradition of technical excellence and a history of embracing entrepreneurial approaches, Scotland sits firmly at the heart of the global marine energy industry opportunity. The industry is fast becoming commercially viable, with developers making rapid progress in the move from the deployment of single device to multi-device arrays in waters. This presents Scottish businesses with the chance to seize first mover advantage, capitalising on the commercial opportunity offered to lead the development of the wave and tidal industries. Scottish businesses can apply their wealth of indigenous skills in research, engineering, manufacturing and operations to capitalise on the fast developing sector. Marine energy is the generation of electricity from the power of the sea. This report focuses on two key subsectors, wave energy and tidal stream energy, where Scotland has a global lead. There are currently more devices being designed, developed and tested in Scotland than in any other country and in both the near and long term, valuable skillsets exist in our industries which can be applied to maximise the value of the global marine energy opportunity. Suppliers from a variety of industries can exploit local advantage and bring their expertise to each phase of the marine energy industry from the project development stages, through to manufacturing and construction and operations and maintenance exploiting first mover advantage in this innovative sector. Scotland s Tidal Stream Energy Industry Scotland has as much as 25% of Europe s tidal stream power potential. Tidal stream energy captures the kinetic energy of the currents flowing in and out of tidal areas. The predictability of the sun s gravitational pull which affects the sea and oceans is a great asset for the industry. Tidal stream resources are generally greatest in areas where current speed is amplified and Scotland s coastal geography of narrow straits and inlets, headlands and channels between islands concentrates their power. Seizing the Opportunity IEA Energy Technology Perspectives estimates up to c.240 GW of marine capacity could be deployed by 2050. The Carbon Trust estimates the UK could capture about 22% of the accessible global marine market. In the period to 2050 this would be worth around 76bn. The tidal energy sector has gathered momentum, witnessing unprecedented levels of private investment over recent years. Large industrial players such as ABB and Alstom have invested into the sector, demonstrating increased confidence in this growing industry. Operators from around the globe have tested their devices at the European Marine Energy Centre s (EMEC) Fall of Warness site in Orkney, including Andritz Hydro Hammerfest, OpenHydro, Scotrenewables, Voith Hydro and Alstom. Scotland s Wave Energy Industry Scotland has an estimated 10% of Europe s wave power potential. Wave energy is generated by offshore winds which create kinetic energy converted to electricity using wave energy devices. Scotland s location favours the industry with its greatest wave energy potential lying off the north and west coasts, particularly off Shetland, Orkney, Lewis and Uist. Various types of wave energy technology exist all of which generate electricity in very different ways. Some devices sit on top of the ocean, riding the waves, while others sit under the surface extracting energy from the surging sea. Scottish companies such as Albatern and Aquamarine Power have been at the vanguard of the development of the wave industry and companies from across the world continue to test and demonstrate a diverse range of devices at EMEC. 01
Marine Energy: Seizing the supply chain opportunity Scotland and the global marine energy supply chain Scotland s tidal energy sector is on the verge of commercialisation. As the marine industry moves from initial device demonstration to the installation of multi-device arrays, the supply chain is faced with a golden opportunity to take the industry forward, driving the market and reaping the economic benefits. Wave & Tidal emphasis Tidal emphasis Wave emphasis Scottish businesses with relevant skills from fishing vessel owners to steel processors to conditioning monitoring experts can all benefit. The majority of global activity in full-scale wave and tidal demonstrator testing is taking place in Scottish waters - already directly supporting over 800 full time jobs in Scotland and hundreds more indirect roles. Scotland finds itself firmly at the forefront of a robust, fast developing industry. Markets are opening elsewhere around the world. Showing evidence of long term global market potential. Domestic experience and expertise gained from current projects in the sector and world-class test and demonstration facilities are already in place. However, unless suppliers reinforce this advantage, continually innovating and developing transferrable skills to deliver a suite of efficient, cost effective marine energy projects, global competitors could capitalise on these opportunities. Promising markets for wave & tidal energy based on resource, current activity and policy regime Fisheries Offshore Wind Oil & Gas Shipbuilding and Repair Ports & Harbours 02 Transfer expertise and facilities Marine Energy Transferable expertise and facilities existing in Scotland s industries Suppliers can capitalise on this across three phases of development and areas of expertise
Be part of the marine energy supply chain Each phase on the pathway to commercialisation provides suppliers with opportunities to tap into the burgeoning marine energy market. Innovative approaches and expertise in developing new solutions and reducing energy costs are of prime importance at each stage in ensuring Scotland remains firmly at the heart of the global marine energy supply chain. Project Management Construction Management Project Development Phase Development studies exploit local expertise Device design, development and manufacture Manufacturing & Construction Phase Innovation and volume production Foundations, moorings, electrical systems design and development Device foundation, mooring installation Electrical system and cabling manufacture and installation Operation & Maintenance Phase Flexible and diverse strategies Project Development Phase exploit local advantage and previous experience This is a phase where local knowledge and presence brings significant advantage in areas of activity associated with planning, surveying, consenting and preparation and where Scotland has already been highly successful. Manufacturing and Construction Phase bring forward innovations and prepare for volume production This phase represents the highest market value for the supply chain. Players will need to be responsive to new trends such as the entry of major industrial companies into the market and the transition from prototypes to volume production. Operations & Maintenance (O&M) Phase be flexible to diverse strategies Due to the limited operational history of wave and tidal devices, this is the phase subject to the greatest uncertainty, yet also the one offering a long-term steady revenue stream. Different marine energy device developers are pursuing different O&M strategies. Suppliers will need to demonstrate flexibility to different strategies. 03
Project Development Phase Offering near-term opportunities suited to existing experience and market presence, this phase addresses all activities up to the point where contracts for devices, balance of plant and installation services are placed including: project feasibility (including environmental and social impact). surveying of site characteristics. application for electrical grid connection. planning consents. project-specific front-end engineering design. Local knowledge and market presence in this phase hold the key to success. Scotland has expertise and facilities in a number of industries which can be transferred to the marine energy supply chain. Scottish business expertise in the offshore wind and oil & gas sectors are expected to be particularly relevant in the development phase. It is believed that Scottish companies could gain 30-50% of the Development Phase value of projects in Scottish waters and capitalise on a growing EU market where previous experience and expertise will be key. Other success factors include: Local knowledge: Understanding of The Crown Estate leasing requirements, Scottish planning regulations, and Scotland s implementation of EU environmental regulation will be critical to success. Substantial previous relevant experience: Many of the required Development Phase activities are very similar to those for all marine or coastal developments, offshore oil & gas, or offshore wind. Vessels, plant and staff: the availability of labour and resources will be key in an environment where the volume of work in competing industries including offshore wind could put a premium on supply. SUCCESS STORY AlbaTERN AlbaTERN, Roslin near Edinburgh: AlbaTERN s primary objective is the development of an economically viable wave energy system. The company s WaveNET is a unique wave energy array system, constructed from multiple SQUID modules; the array can be readily adapted to suit the specifications of the site and the customer s power requirements. The WaveNET device was tested at EMEC throughout 2012. In August 2012 AlbaTERN received an award from the WATERS2 programme of 617,000 to support deployment of their first WaveNET demonstrator arrays consisting of up to six 7.5kW SQUID wave energy converters. 04
Upon completion, a project will have the required permissions to construct and with financial approval to proceed based on a confirmed project design, implementation plan and supply contracts. Timing This phase is the first in the project lifecycle. Presents a near-term opportunity projects to be deployed in five years time are in this phase. Scotland has already forged a successful path in this phase - where local knowledge, presence and experience bring significant advantage with project development activities under way for the first arrays. The opportunity for Scottish businesses is summarised opposite. The opportunity for Scottish businesses is summarised below. Supply chain categories Physical surveys Resource surveying Environmental surveying Planning & consenting Project design Capability required Geophysical and geotechnical survey services Divers, ROVS and specialist vessels Advanced measurement and analysis of wave and tidal stream Modelling benthic detrital dynamics, plankton growth and fish population dynamics Specialist consultancy support Array modeling techniques to optimize device layout and maximize yield Table 1: Development Phase opportunities for Scottish businesses 05
Manufacturing and Construction phase This Phase involves the core activity of marine energy deployment building and installing, driving innovation and preparing the industry for volume production. Supplier requirements will differ according to who they are supplying, with opportunities for both Original Equipment Manufacturers (OEMs) and smaller project developers. This is the phase with the highest market value and where international competition will be most fierce. It will be shaped by ongoing technical and commercial innovation. In many cases the substantial weight and size of marine energy devices will provide opportunities associated with assembly and heavy lifting at coastal locations. However, volume manufacturing of components can happen elsewhere and, taking logistics into account, is more dependent on supplier capability rather than location. Key success factors include: For Original Equipment Manufacturers (OEMs): The requirements of OEMs in the wind sector are likely to apply for wave and tidal energy. The following attributes would also assist: The ability to scale up production: looking to longer-term volume production, and expect their suppliers to have the facilities and resource to deliver this. Strong balance sheet: The financial capacity to upscale production, and to withstand problems. The ability to innovate: need to drive out cost from marine energy projects and need the supply chain to help achieve this. For smaller project developers: In-house design expertise: This provides comfort that technical problems and requests for modifications will be addressed competently and rapidly. A personal relationship: The engineer-to-engineer relationship between customer and supplier is more important than with large OEMs. Low cost: Small project developers are more pricesensitive than OEMs. Scottish businesses are well-placed to be at the heart of innovation in this phase particularly if they engage with world-leading marine energy device developers in Scotland and the centres of marine energy academic research on their doorstep. Local suppliers will also have intrinsic advantages in terms of reduced delivery times and risk. Technical expertise and innovation lies at the heart of this opportunity. Wave and tidal stream energy devices generally consist of a prime-mover element coupled to a power take-off arrangement, a reaction system and a control system. A range of different device technologies are currently under development and several full-scale prototype devices have been tested. The next step will involve demonstrating small arrays of devices, potentially as an initial SUCCESS STORY MeyGen Atlantis Resources Corporation (ARC), Edinburgh: During 2014, ARC secured funding for Phase 1A (6MW) of its MeyGen project at the Inner Sound site within the Pentland Firth. Construction on the world s first tidal energy array began in early 2015, with plans to eventually expand the generating capacity to 398MW. 06
phase of commercial-scale projects (c.100 300 MW). Industry skills required include various steps in designing, manufacturing, assembly and installation of wave/tidal energy convertors and associated balance of plant as detailed opposite. A significant amount of work in design, physical testing and prototyping is required before devices will be ready for serial production and commercial deployment. The focus of research and development is likely to evolve from proving device concepts to demonstrating reliability, understanding the operation of multiple devices within arrays and achieving whole-life cost savings through design for production. The balance of plant for a wave or tidal stream energy project includes all components that are not part of the device but are necessary for its construction and operation. Depending on the device type, balance of plant is likely to include at least foundations or moorings, subsea cabling and substations offshore, onshore or both. The installation and commissioning work starts once the device and balance of plant items are complete and ready for final assembly. It includes onshore assembly, offshore installation activities and on-site commissioning. This Phase typically uses a range of vessels including specialist, modified and standard vessels. Timing Upfront expenditure after Final Investment Decision (FID). Future large arrays may be broken into separate phases, as with offshore wind. While the manufacture and installation of wave and tidal energy converters is the element of the supply chain with the highest market value, it is also where competition from outside Scotland will be most fierce. Players need to be responsive to new trends and work closely with project and device developers. Niche areas are emerging such as community sized project applications. Suppliers will need to be particularly responsive to new trends and dynamics in this phase. Some of these will be inherently commercial in nature such as the transition from prototypes to volume production. Others will be essentially technical, as the need to reduce cost of energy drives innovation in device and component design and production. The opportunity for Scottish businesses is summarised below. Supply chain categories Tidal Device Blades Hydraulics Power take-off Fabrication & Machining Composites Assembly Control systems Generators Offshore substation Cables Connectors Moorings Foundations Installation Capability required Bespoke designs which address tidal-specific issues and improve performance Systems which improve reliability, redundancy and efficiency High efficiency, low weight PTOs for the marine environment Large scale manufacturing - one-offs to volume Alternatives to metal structures + manufacturing ability Large scale assembly, close to deployment sites Bespoke design & development to optimise yields High efficiency generators + bespoke designs for novel devices Design & development of novel subsea and surface piercing hubs Innovative installation, location & protection techniques for fast tidal streams Low cost, reliable wetmate connectors built in volumes Standarised mooring solutions for deeper water sites Use of synthetic mooring leads to reduce weight and cost Pinned structure design Cost effective installations methods and equipment Table 2: Manufacturing and Construction Phase opportunities for Scottish businesses 07
Operations & Maintenance (O&M) Phase O&M will play a key role in the long term deployment of arrays. At this stage there remains uncertainty regarding future O&M strategies to be deployed by the industry. Therefore, it represents an exciting business opportunity for companies with relevant skillsets. The O&M Phase ensures the ongoing generation during a project s anticipated 25 year lifespan. Once installation and commissioning are completed and the project is handed over, this area will present significant opportunities for the supply of goods and services, such as the monitoring of device and balance of plant condition, energy output performance and the impact of the project on the environment. This phase will bring steady 20-25 year revenue streams for suppliers who can adapt to diverse O&M strategies. Success factors in this phase of the project lifecycle include: Access capability: Access will be required in the majority of sea states. Depending on project and device design, special equipment or design of vessels may be needed (e.g. motion-controlled gangways). Existing facilities: ports with existing facilities which are suitable in terms of access, water depth, storage areas and craneage, will have an advantage over ports requiring substantial investment. The O&M phase promises a steady revenue stream over the 20-25 year design life of wave and tidal projects. Depending on the devices adopted, O&M may constitute around a third of the lifetime cost of the wave and tidal sector meaning there is substantial value to be captured here by Scottish players. Another factor to consider is that the strategies currently being deployed for offshore wind will not necessarily transfer to the wave and tidal energy industries. SUCCESS STORY Global Energy, Aberdeen Global Energy completed the lattice section for the Moray Firth Met Mast and carried out logistical support for both the Moray Firth and Inch Cape masts at Invergordon. The company has been awarded the GBS foundations work for the MeyGen tidal project in the Pentland Firth, the world s largest commercial tidal array to date, once constructed in 2015-16. Working with operators and installation contractors around the world, the company has strategically located facilities including large-scale fabrication and assembly capacity. 08
The clear locational advantage leaves Scottish businesses well-placed to seize this commercial opportunity. Leading expert for the energy value chain, DNV GL, believes that for projects in Scottish waters a large fraction of this work (as much as 50%) will be based in Scotland. The opportunity for Scottish businesses is summarised below. Timing This phase provides a revenue stream over the 20-25 year project design life. Supply chain categories Vessels Dockside operations QHSE Performance Monitoring Inspection Capability required Marine co-ordination services, asset management support and personnel tracking systems Civil engineering - infrastructural upgrades Development of marine-specific standards, auditing and certification Navigation/collision avoidance systems Design & development of condition monitoring equipment for marine installations ROVs with enhanced capability Table 3: Operations and Maintenance Phase opportunities for Scottish businesses SUCCESS STORY Aquatera, Orkney Aquatera provides fully integrated renewables support inclusive of strategic planning, public and stakeholder engagement and environmental assessment and surveying. The company provides a modern and innovative suite of environmental services and products. Projects include preparation of strategic environmental assessment (SEA) and environmental impact assessment (EIA) documents for renewable energy projects and strategies; as well as resource assessment studies, risk assessment, design advice, operations support, environmental surveying, developing visualisation tools and producing information and awareness materials. Active in seeking opportunities in the French market, the company recently signed a MOU with French Company Open Ocean to take this objective forward together. 09
Seizing your business opportunity Wave and tidal energy: Scottish innovation on a global stage Geographical location, existing industry skills and resources as well as a favourable policy regime all converge to create significant supply chain opportunities for Scottish businesses in the rapidly developing global marine energy marketplace. Scottish companies need to be responsive, agile and innovative to ensure they tap into the opportunity and prevent being overtaken by international competition in the race to lead the global wave and tidal energy industries. International players in the marketplace will increase competitive pressure on Scottish businesses. However, they also present other commercial opportunities. Higher levels of deployment drive down project costs at a faster rate, while overseas industry interest will attract global investment, enabling Scottish businesses to forge strategic international partnerships, which will drive technical excellence and open up new export markets. It will be the global market that convinces people to enter the supply chain but the presence of a stable domestic market will determine where the industry puts down roots. How to get involved Considering entering or diversifying into the emerging marine energy sector? Follow our top tips: Project Development Phase Leverage experience from involvement in offshore industries: There are a number of similarities (procedural, organisational and technical) which mean that involvement in offshore industries leaves companies well positioned for serving the wave and tidal sector. Manufacturing and Installation Phase Prepare for volume production: Engage in dialogue with technology providers early on to prepare for the transition from prototypes to mass deployment developing plans for delivering multiple turbine units and accommodating repeat orders. Adapt to increased price sensitivity: Suppliers hoping to diversify into wave and tidal energy can benefit from supporting the needs of this sector by bringing expertise in cost reduction and quality control. Operations & Maintenance Phase Be flexible: Suppliers with expert knowledge will be well positioned to shape future O&M strategies and support the sector as it grows. General Work with academia: Scottish universities are at the forefront of marine energy technical innovation academic collaborations could help develop a company s technical leadership. Explore partnering opportunities: There may be partnering opportunities with companies looking to build this exciting new industry. Such partnerships may also open up new export markets to Scottish businesses. Engage with test and demonstration: Around half of the global activity in full scale wave and tidal testing and demonstration is taking place in Scottish waters this presents a near-term opportunity to gain direct experience in the sector, as a route to future volume activity. Examples of test and demonstration facilities include EMEC www.emec.org.uk and Flowave www.flowavett.co.uk 10
Most importantly: seize first mover advantage Early engagement will not just establish track record and technological leadership it will also develop the client understanding and networks needed for potentially rapid future growth Available support Please visit the websites of Scottish Enterprise and Highlands & Islands Enterprise for full details on how we can support companies to take advantage of the growing opportunity from marine energy: Scottish Enterprise www.scottish-enterprise.com Highlands & Islands Enterprise www.hie.co.uk Innovation and R&D grants Scottish Enterprise and Highlands and Islands Enterprise support innovation funding specifically tailored to the needs of the marine energy industry. Please ensure you are aware of funding opportunities by using the websites above. SMART: SCOTLAND If you have an innovation project that represents a significant technological advance within your industry, it may qualify for a SMART: SCOTLAND grant. The grants support technical and commercial feasibility studies and R&D projects. More information available at: www.scottish-enterprise.com/smartscotland R&D Grant Our R&D Grant supports industrial research and experimental development. All enterprises can apply for funding, even if the project is new only to your business and not within a national context. More information available at: www.scottish-enterprise.com/rdgrant Investment support Renewable Energy Investment Fund The Renewable Energy Investment Fund (REIF) helps promote the use of energy from renewable sources and drive further investment into key areas of Scotland s renewables industry. Designed to complement existing public and private sector finance schemes currently available in Scotland, REIF has 103 million available to provide loans, equity investments and guarantees (but not grant funding) for projects that accelerate the growth of the marine renewable energy sector in Scotland. More information available at: www.scottish-enterprise.com/reif Regional Selective Assistance (RSA) RSA encourages businesses to undertake investment that will directly result in the creation or safeguarding of jobs in Scotland. Both indigenous and foreign companies can apply with the resulting impact on employment helping to ensure Scotland s economy remains globally competitive. More information available at: www.scottish-enterprise.com/services/attractinvestment/regional-selective-assistance/ overview Other Support The Marine Energy Expert Support programme is designed to provide businesses with an early insight into supply chain requirements to help them take advantage of emerging industry opportunities now and in the future. The initiative is delivered in partnership with HIE and offers businesses up to two full days of FREE, one-to-one advice and guidance about diversifying into the marine energy sector. Online applications should be made via: www.scottish-enterprise.com/marineexpert 11
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