Statement of Carolyn Elefant, Ocean Renewable Energy Coalition, Potomac, Maryland

Introduction 

Ocean Renewable Energy Coalition is a trade association founded to promote energy technologies from clean, renewable ocean resources. The coalition is working with industry leaders, academic scholars, and other interested NGO's to encourage ocean renewable technologies and raise awareness of their vast potential to help secure an affordable, reliable, environmentally friendly energy future.

We seek a legislative and regulatory regime in the United States that fosters the development of ocean renewable technologies, their commercial development, and potential for export.

The United States is falling behind in the race to capture the rich energy potential of our oceans. While other countries have already deployed viable, operating, power generating projects using the emission-free power of ocean waves, currents, and tidal forces, the U.S. is only beginning to acknowledge the importance these technologies.

Ocean energy can play a significant role in our nation’s renewable energy portfolio. With the right support, the United States ocean energy industry can be competitive internationally.  With the right encouragement, ocean renewable energy technologies can help us reduce our reliance on foreign oil—fossil fuels, in general—and  provide clean energy alternatives to conventional power generating systems.

Why the Ocean Energy Industry Needs the Production Tax Credit

1)  What is ocean energy?

Ocean energy refers to a range of technologies that utilize the oceans to generate electricity.   Many ocean technologies are also adaptable to non-impoundment uses in other water bodies such as lakes or rivers.  These technologies are can be separated into three main categories:

Wave Energy Converters:  These systems extract the power of ocean waves and convert it into electricity.  Typically, these systems use either a water column or some type of surface or just-below-surface buoy to capture the wave power.  In addition to oceans, some lakes may offer sufficient wave activity to support wave energy converter technology.

Tidal/Current:   These systems capture the energy of ocean currents below the wave surface and convert them into electricity.  Typically, these systems rely on underwater turbines, either horizontal or vertical, which rotate in either the ocean curren or changing tide (either one way or bi-directionally), almost like an underwater windmill.  These technologies can be sized or adapted for ocean or for use in lakes or non-impounded river sites. 

Ocean Thermal Energy Technology (OTEC) OTEC generates electricity through the temperature differential in warmer surface water and colder deep water.  Of ocean technologies, OTEC has the most limited applicability in the United States because it requires a 40 degree temperature differential that is typically available in locations like Hawaii and other more tropical climates. 

2)   Is ocean energy commercially viable now?

Yes, but thus far, on a small scale and not in the United States:

            ●          The LIMPET project, a 500 kw shore-based wave plant in Scotland has been feeding power to the grid for 5 years at a cost of 7 cents a kilowatt/hr.  Another 600 kw project similar to LIMPET on Island of Pico in the Azores is operational. 

●          The Pelamis, a Scottish wave energy converter has been feeding power to the grid in Scotland since August 2004 – and recently announced plans to construct a 2.25 MW plant off the coast of Portugal. 

●          An Australian company, Energetech, is in the final stages of anchoring a 500 kw wave energy device in Port Kembla, Australia which will feed power into the Australian grid.

3)         What is the status of US wave, current and tidal projects?

A number of such projects in the United States have been proposed and are on the cusp of  deployment:

            ●  New Jersey based Ocean Power Technologies has operated a test wave energy buoy off the coast of Hawaii for the U.S. Navy and plans to interconnect to the grid by the end of the year.

            ● Washington state based Aqua Energy has proposed a 1 MW pilot project for the Makah Bay off the coast of Washington state.  The project is currently in the midst of what is now verging on a three year permitting process at the Federal Energy Regulatory Commission.  (FERC)

            ●New York based Verdant Power is undergoing licensing at FERC and intends to deploy six units of a tidal/current project located in the East River and supply power to customers on Roosevelt Island imminently, once all regulatory clearances have been obtained.

            ●Australian based Energetech has formed a subsidiary in Rhode Island which has received funding from the Massachusetts Trust Collaborative and has planned a 750 kw project for Port Judith Rhode Island.  Permitting has not yet commenced.

3)  Are these projects discussed above the start of real commercialization?

Yes – or at least that’s what the Electric Power Research Institute (EPRI), perhaps the nation’s most prominent utility research collaborative, concluded.  An EPRI Report released in January 2005 found that “wave energy is an emerging energy source that may add a viable generation option to the strategic portfolio.”  Among the benefits of wave that the report identified are that it is environmentally benign, has a low profile and is generally not visible and is more predictable than solar and wind so it is more dispatchable to the grid.  In light of the success of its wave energy report, EPRI has now embarked on a second stage of exploring the energy potential of tidal and current ocean and coastal resources.

3)      But is ocean energy economically viable?

The EPRI report found that presently, the cost of power from ocean technologies ranges from 7 cents to 16 cents/kw in a low case scenario.   But these costs are expected to decline as the industry matures and as economies of scale make ocean projects less costly.  To compare, back in 1978 wind energy cost 25 cents/kwh to produce – but now costs between 4.5 and 6 cents/kwh.  Wave is already less costly than wind.  Moreover, the EPRI report found that if wave had obtained the same government subsidies as wind, it would be a far more advanced technology than at present.

4)   So how would a PTC help the ocean energy cause when ocean plants are not yet producing power in the United States?

Several reasons.  First, ocean projects are already operating commercially, albeit on a small scale overseas and are on the cusp of doing so in the United States.  Second, in the absence of a PTC, ocean is perceived by investors as a second class renewable, thus making it impossible for ocean developers to attract necessary capital.  Third, the absence of a PTC also makes ocean a less desirable renewable investment than other renewables like wind or solar that do receive the credit.

Because currently, the government offers no funding or programs for ocean energy, the industry, though nascent, has had no choice but to seek out private investment.  But the ocean, wave and tidal/current energy industry cannot attract financing effectively if handicapped by the absence of a PTC for new  technologies with applicability to ocean, lakes and other free flowing non-impounded bodies of water.