Comment: Lord Smith not convinced by toe in the water

IT WAS perhaps just a bit of bad luck that Lord Smith of Kelvin, the chairman of the much-anticipated Green Investment Bank (GIB), kicked investment in wave and tidal power into the long grass on the same day the sector highlighted it was desperate for cash.

The Marine Energy Action Plan, unveiled by the Scottish Government and its industry-led Marine Energy Group, reported on the significant progress made by Scotland’s wave and tidal energy sector.

It counted the 11 wave and tidal devices deployed or being deployed at the European Marine Energy Centre on Orkney, adding that there will be three more being tested by 2014.

Near Islay, there is also the world’s largest consented tidal stream project that will deploy the HS1000 tidal device in a project being undertaken by ScottishPower Renewables and the Austrian/Norwegian group, Andritz Hydro Hammerfest.

Then there is the Crown Estate’s leasing agreements for projects with a potential to produce up to 1,600 MW in the Pentland Firth and Orkney waters.

But, as Niall Stuart, the chief executive of industry body Scottish Renewables points out, getting the finance to scale up these projects to commercially viable arrays is a “major challenge”, not to mention the “massive costs to connect these projects to the grid”.

So where is the money going to come from? There are some technology developers that have got at least some support and investment from big private firms such as Alstom, Rolls Royce and Siemens.

The sector will have to rely on a range of funds being made available through the Department of Energy and Climate Change (£20 million), the Scottish Government’s Marine Renewables Commercialisation Fund (£18m) and the Technology Strategy Board (£10.5m).

It also has high hopes for the Renewable Energy Infrastructure Fund, made up from the £100m disbursement from the Fossil Fuel Levy that the Scottish Government wrangled from the Treasury last year. The other half of the levy was used to fund the foundation of the GIB.

The GIB, on the other hand, has £3 billion burning a hole in its pocket that has to be spent by April 2015.

Lord Smith says there is huge interest in the innovative developments taking place in wave and tidal energy, but despite his enthusiasm the entire sector still has its sceptics.

The GIB is taxpayer funded and while some will want it to take risks it has first to prove to the markets that it can deliver a return on its investment.

Royal waves bringing in a few sovereigns

the Queen has contributed handsomely to ensure the development of Scotland’s offshore renewables sector. According to the Crown Estate – otherwise known as Her Majesty’s property holdings – it spent £2.7m on wave, tidal and offshore wind projects in Scottish territorial waters last year.

As a result, the profits she took from Scotland fell slightly, although she also spent a lot cleaning up some storm damage, the estate said.

But nor should we feel too sorry for the Queen in this, her 60th year on the throne. Letting out access to her offshore waters can also be a tidy earner. Capital receipts from Scotland were £5.9m, which included option payments from developers for offshore renewables projects.

The Crown Estate comprises Britain’s coastline, more than half of which is in Scotland. So it plays an essential role in the Scottish Government’s offshore renewable ambitions. It requires that the estate lead licensing rounds on areas such as the promising Pentland Firth. One of its biggest deals there so far, signed in 2010, was with a consortium known as MeyGen, and is already proving fruitful, having secured grid capacity in February with SSE and the National Grid to deliver 253MW of tidal energy in phases from 2014 through to 2019.

Previously, all profits from the Crown Estate went to the Treasury and the taxpayer – an arrangement dating back to 1760. But this time, in exchange for giving up the Civil List last year, the Queen and her family get a cut of the Crown Estate’s profits.

Figures for the estate reveal its portfolio UK-wide enjoyed the best performance in its history, with profits rising to £240m in the year to 31 March from £231m the year before. Clearly her property assets – Regent Street, Windsor Great Park, Royal Ascot – are holding up better than your more common commercial property.