Earth, Wind & Power. The lowdown on offshore energy
With £160m pledged to wind energy, the UK is paving the way for a future of clean, offshore energy. A lot is riding on its success.
Love is in the air (and sea)
Marine Power Systems is by no means the sexiest name; marine energy extraction hardware ain’t as alluring as a Tesla Cybertruck; and Swansea is certainly no San Francisco. But, MPS’s mission to provide clean, affordable, renewable electricity to power our daily lives is sure to make you swoon.
What’s more, following Boris Johnson’s pledge to power every UK home with offshore wind by 2030, MPS may soon be the most courted bachelor in town.
A long time in the making
It takes a lot of work to appear effortlessly attractive; 12 years of research, development and sheer graft in MPS’s case.
Those 12 years have paid off, and MPS is now poised to make waves (sorry, couldn’t resist) in the energy sector.
With their three patented floating devices – WaveSub, WindSub and DualSub – MPS have significant competitive advantages including:
dual energy sources of wind and waves (provides more consistent power than other renewables which may be reliant on weather conditions, think solar panels on a cloudy London morning)
lower-cost power (more on this in a min)
using data on wind and ocean conditions to optimise position for efficient energy capture (compare with onshore wind turbines that are fixed)
less of an eyesore than solar panels or wind turbines
MPS will be looking to convert these advantages into commercial success after being awarded a £17m government grant to test their technology at a full scale. And if testing is successful, expect an IPO to raise additional investment.
Green for our planet, and our pockets
In the past, renewable energy has been more expensive than carbon-intensive sources of power, such as coal and gas. This is not right. There should not be a financial penalty for sustainability.
Now, however, the tide has turned (last one, I swear). Rising capacity coupled with a falling installation price (big up economies of scale) means that consumers stand to benefit from wind power. In the UK, the price of offshore wind has fallen over 70% from £150/MWh to less than £40/MWh in just 6 years, which compares favourably to gas at around £50/MWh.
A small fish in a big pond
Global electricity consumption is a £2 trillion (~$2.6t) market. And it’s growing rapidly. According to forecasts from the International Energy Agency, global demand for energy will increase 30% by 2040. If the UK government’s ambitious target for 2030 is met, offshore wind will provide 50% of the country’s energy needs; there will be plenty of business for manufacturers like MPS over the coming years.
MPS plan to get in on the action through device sales to developers. Hundreds of thousands of floating platforms will be needed over the coming decades to exploit the enormous offshore potential, not to mention ongoing maintenance and upgrading. Just getting a small slice of the pie will be lucrative.
MPS’s proprietary technology should mean it is well-placed to win contracts…that is if wind farm developers are willing to take a chance on a relatively small and unestablished manufacturer. Competitors, such as Vestas (£11bn revenue in 2019) and Siemens (£13bn), have already built numerous operational offshore wind farms in the UK (12 and 21 respectively). They are dependable options, whereas MPS may not have enough credibility yet. No one ever got fired for buying IBM.
A blueprint for the rest of the world?
Whilst its approach to green energy is encouraging, compared to the rest of the world the UK is just a drop in the ocean (OK, I lied – pls don’t sue me). For a significant reduction in CO2, renewables must become the worldwide standard.
The commercial viability of offshore energy will be key. Governments will be reluctant to prop up the wind farms with subsidies in the long run, especially as this will likely be accompanied by a reduction in tax income (average of 50% tax rate on oil across G7 countries, although US has notably lower rates at 20%). Clean energy companies must be profit-making entities in their own right.
Approaching policy deadlines for the commissioning of new projects in the two biggest markets support this argument. In China, the end of 2020 is the cut-off point for wind projects to qualify for tariff subsidies. In the US, wind projects must be operational by the end of 2020 to get production tax credits. Free money may not be around much longer.
It’s time for British offshore to deliver. MPS will play its role. If they can be profitable then the rest of the world may start paying attention. The future of our planet could be at stake. No pressure then.
Almost vommed at the IBM line. Otherwise great article, thanks for broadening my horizons.