The Scottish Renewables 3rd Marine Energy conference last week in Inverness – sponsored by Highlands and Islands – was one of the most vibrant and exiciting wave and tidal events I’ve been at in the past few years. I was delighted to be asked to give an opening keynote. Here it is in full.

“Good afternoon and welcome, welcome to the 3^rd Scottish Marine Energy conference, welcome to Inverness and welcome to Eden Court. Like a number of us here in the room Eden Court is a product of the 70’s, as is I guess the modern Renewables industry, born as a child of the oil crisis of that decade.

 So in Inverness in the 70’s,  in 1976 in fact, a couple of things were happening that would – in retrospect – prove to be pivotal in the creation of a city, and an industry. On the 15^th April Eden Court theatre was opened by the actor Alasdair Cruickshank MBE, better known to those of us in the room of a certain age as Dr Cameron in “Dr Finlay’s Casebook”.  Over the next 35 years Eden Court in its role as a cultural centre for the city and the wider Highlands and Islands, has played a crucial part in turning Inverness from a small county town in to a modern northern European city, at the heart of a vibrant regional economy.

 At the same time as Dr Cameron was cutting the ribbon, a group of University researchers were installing the first sea trial of Dr Stephen Salter Nodding Ducks, just eight miles from here, in Dores bay on Loch Ness. A small beginning, and at the time perhaps seen as a false start, but those nodding ducks were the first step in the creation of a Scottish Marine Energy industry, now thirty five years on, just on the cusp of moving from Research and Development to full scale commercial deployment, with a dramatic target for deployment of the equivalent of a full size thermal power station in the waters around the Highlands and Islands by 2020, and Government support at the highest level.

Quite a different place to that of the 70’s, 80’s and 90’s.

So let’s just take a moment to look at where the industry is in 2011.

Device development

Scottish technology companies are at the forefront of device design and development, with both first and second generation devices covering deep water and near shore wave, seabed and floating tidal, as well as on-shore wave capture. Full scale devices are now being deployed.

Device testing

The Orkney based European Marine Energy Centre (EMEC) is the global leader for the testing of wave and tidal devices, and still the worlds only grid connected test centre for both the wave and tidal industry. Starting in 2000 a HIE led public sector investment of £35m has delivered a test centre that is now scheduled to be fully occupied by 2012, is self supporting in revenue terms, and is seen, by both industry and government as the natural home for research, testing and deployment of prototype marine energy devices.

Indeed this year has seen the largest concentration of wave and tidal devices anywhere in the world getting very wet in the waters around Orkney.

I think its important to remember that whilst there can be a lot of talk in this industry, the one place where there is a lot of action is here in the Highlands and Islands of Scotland.

 Industry Incentives

The current ROC regime in Scotland offers developers the highest levels of support in the world, while the Saltire Prize is Scotland’s unique £10 million challenge to accelerate the commercial development of marine energy.  And remember that the Scottish Government’s 2020 electricity target will require the deployment of many hundred’s of MW of wave and tidal devices.

Device Deployment

The Pentland Firth and Orkney Waters leasing area remains the world’s first and only commercial wave and tidal leasing round, with TCE approving 1.6GW of development rights for large scale wave and tidal arrays during 2010,  for installing by 2020. A number of other smaller sites, all in the Highlands andIslands have since been awarded leases by the Crown Estate for array deployment,  for both further testing and in pursuit of the Saltire Prize.

Of course its also important to remember that this is a global industry, with global opportunities, and a major milestone was reached when Inverness based Wavegen on-shore wave plant went live earlier this year in the Basque country.

Supply Chain

A supply chain continues to grow, encouraged and supported by the public sector, based around an amalgam of environmental services firms, technology and R&D start ups, oil and gas fabrication companies, marine service and installation interests and specialist electrical businesses, and which is developing a particular expertise in the research, design, manufacturing, deployment and testing of wave and tidal devices.

But of course significant challenges face the industry

Technology developers are small, significantly undercapitalised and the sector fragmented.

Major device testing and array deployment challenges have yet to be overcome, and this will require new investment and sources of funds.

Whilst large corporates and utilities are increasingly showing interest in marine energy, their primary focus (and resources) will be largely on the development of off-shore wind. Having said that the French giant Alstom’s investment in Inverness wave company AWS was an important stage both in the development if that company, and the industry.

As new UK and international test and deployment centres come on-line, and the Crown Estate initiates new wave and tidal leasing rounds elsewhere in the UK, Scotland’s first mover advantage risks being eroded.

The recently announced EMR proposals also raise questions about the future delivery and scale of market support for these technologies.

There is a risk that the wave and tidal sector could be marginalised by the policy, investment and consenting requirements of the off-shore wind sector.

But remember the marine energy sector offers Scotland an almost unique opportunity to create a long term world leading energy industry. In order to capture the maximum opportunities offered by marine energy for the Scottish economy strong leadership, co-ordination, direction and investment will be required from Scottish Government, Enterprise Agencies, key stakeholders and of course Industry.

So what are we doing about it? Well lots of activity across government and industry with a clear focus

Appropriate market incentives are critical – both through the RO and its possible replacement.

Grid – we need to securing a positive outcome on grid regulation and charging issues. More on that in a moment

Capital support – how best to ensure and deliver funds at sufficient scale is a strong focus for Government and HIE and SE, and is being explored in depth at next weeks Low Carbon Investment Conference inEdinburgh.

Innovation support - R&D support needs to remain available, focused and effective.

Planning and Regulation – There will be a continued focus on simplifying and streamlining environmental, planning and licensing procedures. I know the Minster Fergus Ewing  – who is opening tomorrows session – is particularly keen on overcoming these barriers.

Supply Chain – connecting the scale of the potential capacity and opportunity with potential Scottish businesses and suppliers will be a key activity over the next few months and years.

Infrastructure – meeting the fabrication, deployment and build-out needs for the sector. Indeed we are now just about to kick off Phase three of the National Renewables Infrastructure Plan – NRIP 3 – looking specifically at the fabrication and deployment needs of the Marine Energy Industry.

Skills – ensuring that the developing sector has access to an appropriately skilled workforce is of course critical.

Finally, Grid and Charging issues still remain a major barrier to the development of our industry. As you will have heard on the radio this morning the huge financial disparity between the North of Scotland and the SW of England is real and continuing – indeed Neil was on Radio Scotland at 6:45 this morning talking about the costs of delivering power from the Pentland Firth and Orkney waters at many tens of millions of pounds.

However I’m pleased to say that there is some movement in other parts of the grid policy jigsaw that we all face.

Almost a year ago to the day, Ofgem announced its fundamental review of transmission charging, Project TransmiT. In our response to the proposed scope of TransmiT we (HIE) urged the Regulator to include underwriting liability and to treat it with the same gravitas as transmission charging as one of the ‘dual barriers to renewable energy deployment’ in the Highlands and Islands. We supplied evidence of independent, consented projects that had either failed to proceed or had to dilute ownership because of extreme costs of securing a grid connection.

Ofgem listened to our concerns and instructed National Grid to establish an industry Working Group to examine the relationship between user commitment and the securities developers must post in order for the grid works required to connect the to be undertaken.

I am delighted to share with you that the Working Group recognised the significant barrier underwriting commitment poses to projects in areas remote from to the main interconnected transmission system – which by definition means projects in the North of Scotland and the Islands, including marine. There is industry consensus for a much higher socialisation of costs, reducing user commitment from the current 50% to 25% pre-consent, dropping to 10% post consent.

This has the potential to unlock significant finance at the development stage which would otherwise be tied up in posting securities. It also carries an important message in that it recognises that if marine renewables are going to contribute to diversity and security of supply and binding UK carbon reduction targets; further socialisation of the cost of connecting to the grid is required.

Ofgem is yet to consider the findings of the working group but we hope that the industry consensus will be accepted, implemented and guide the Regulator’s activity on their deliberations on the second of the dual regulatory barriers to the deployment of marine renewables: transmission charging.”

When I mention to friends, family and neighbors that the Highlands and Islands is leading the world in the development of a whole new energy industry, they tend to look at best quizzical, and at worst disbelieving. I like to remind them that in 1976 Dores bay in Loch Ness was the test bed for Scotland’s first wave device, Stephen Salter’s Nodding Duck. The fate of that technology was contentious, shelved some say as a result of closed door meetings in Whitehall and secret memos from rival technologies.  

Yet fast forward thirty five years, and we now see those early dreams for wave power, and tidal stream energy becoming a solid commercial and political reality. Indeed it has been quite some year for the marine energy industry in Scotland and more specifically the Highlands and Islands. The sector received a major boost when the Scottish Government announced its target for 100% of Scotland’s electricity demand to be met by renewable energy – 1GW of which is to come from wave and tidal energy resources. That’s not just a few marine energy devices, that’s a full size underwater power station. 

While this is clearly a huge challenge for Scotland’s emerging marine energy sector, it also provides us with huge opportunities. Despite there only being just over three megawatts of marine energy currently installed in the UK, (the equivalent of one modern on-shore wind turbine), all of it is here in the Highlands and Islands. In the islands in fact, on Islay and at the European Marine Energy Centre (EMEC) in Orkney. Yet despite the modest current foot print of the industry, 2011 has also seen a flurry of activity that make that 1GW target more than just a pipe dream, with commercial scale devices generating electricity, major international companies investing in the region and Highland wave power expertise delivering new projects in Spain.  

Firstly, and over the past few months, all of EMEC’s wave and tidal test sites became contracted to developers and has EMEC started to reap the benefits of significant developer activity, high berth occupancy and associated income. All of this has enabled it to become operationally self-sustaining. This is a significant measure of the health of the emerging marine renewables sector.  

Next, one of our local companies AWS Ocean Energy received a huge vote of confidence with an overseas investment from Alstom, the French-headquartered global power generation, transmission and rail transportation company. In June, Alstom acquired a 40 per cent stake in Inverness-based AWS, developer of the AWS-III wave power device. 

Then, in July, technology developed here in the Highlands at Inverness-based Voith Hydro Wavegen was used for Spain’s first commercial wave power plant. The project on the Basque seaport of Mutriku, located between Bilbao and San  Sebastian, will provide an output of 300kW – sufficient electricity for around 250 homes. This may seem modest, but its about the same size as the first commercial wind turbines that appeared across the Highlands in the late 1990’s. Today the standard wind turbine has 10 times the output.  

But if you are in any doubt about the reality of the marine energy sector, and the progress on capturing energy from our waves and tides, a quick visit to Orkney would likely impress you. In the waters around Orkney, a hive of deployment, commissioning, testing and decommissioning activity is keeping a surprising proportion of the Orkney workforce very busy. EMEC, one of our region’s greatest energy success stories, is the world’s first grid-connected, accredited test centre for wave and tidal energy device testing. This summer, the test centre became fully contracted, with 10 full-scale wave and tidal prototype devices due to be on site by the end of this year. Tidal devices currently at the Centre include those deployed by Open Hydro, Tidal Generation Ltd, Atlantis Resources Corporation, Voith Hydro Ocean Current Technologies. Currently at the wave site are: Eon/Pelamis, Wello Oy and Aquamarine Power.

At EMEC companies from Scotland, England, the USA, Singapore, Finland, Ireland, are all testing, monitoring, researching, and planning how they can make the next step to full commercial generation, and all helped by a growing local supply chain. From resource monitoring and environmental impact experts to divers and ROV operators; and from specially commissioned vessels to high voltage design and installation engineers, the region is home to the world’s foremost support services network for marine energy device deployment. 

While Orkney has benefited from being the location of the first major step in the development of full-scale prototype marine energy device testing, Caithness and Sutherland will play a pivotal role in the next stage. Its proximity to the Pentland Firth and Orkney Waters where The Crown Estate has approved 1.6GW of development rights for large-scale wave and tidal arrays during 2010, and its enviable legacy of engineering skills and facilities will make it an attractive location as developers scale-up to pre-commercial and commercial device deployment.

The £10m Saltire Prize was launched in Scotland in March 2010, creating one of the biggest international innovation prizes in history. With our word-class facilities and extensive wave and tidal resources, the Highlands and Islands offer an ideal place for the winner to put their technology to the test.

The region also has world-class fabrication and port infrastructure, developed during the oil and gas boom of the 70s and 80s, and now ready to be put to use building the next generation of renewable energy capacity. Recent examples include Aquamarine’s first Oyster device, the OpenHydro foundation, the structures for Ocean Power Technologies’ (OPT) PowerBuoy 150 and the Atlantis AK1000 being fabricated at the Nigg Yard by Isleburn and the structures for Pelamis and the Hammerfest Strom’s HS1000 at the Arnish Yard on the Western Isles.

In addition, HIE has recently made million-pound investments in other key infrastructure sites that will be required for this emerging sector, both in Caithness at Scrabster Harbour Trust and Orkney for property at Hatston Pier, which complements funding totalling £11m from Orkney Islands Council and the European Regional Development Fund for Hatston Pier and Lyness Harbour.  

With all this exciting marine energy activity underway in the Highlands and Islands, we really can claim to be the world’s leading region in marine energy development. And so we are delighted that Inverness will be hosting this year’s Scottish Renewables Marine Energy Conference and Exhibition in next week. This will be the third year of hosting the event, which will take place at Eden Court on Monday 19th and Tuesday 20th September 2011, with a conference dinner on the Monday evening at the Bishop’s Palace, Eden Court. The event is expected to attract more than 220 delegates and 30 exhibitors from industry, local and national government,  regulators and academia.

I look forward to seeing you in Eden Court next week.