The future of the world’s largest tidal power scheme in Scotland is now uncertain following on from last week’s 2017 allocation round for contracts for difference (CfDs) for renewable energy projects which saw its Phase 1C proposed £200 million expansion lose out to established technologies such as offshore wind.

Global leader in the marine power generation sector Atlantis said that as expected, its majority owned subsidiary, MeyGen Ltd, was not awarded a CfD in the latest allocation round in respect of Phase 1C.

The company had forecast a two-thirds reduction in the level of revenue support required for Phase 1C versus that enjoyed by the first phase of the project and submitted what it described as “a very competitive bid” into the auction process.

Atlantis said the significant cost reduction achieved for Phase 1C would be accomplished through improvements in the technology, larger turbines, higher volumes, economies of scale and reduced financing costs. 

However, this was not sufficient to allow the project to secure a contract for difference in the auction. The MeyGen project was competing directly with more established renewable technologies such as offshore wind, rather than within a sub-category of earlier stage marine renewables as previously pledged by the UK government.

The first phase of the project, Phase 1A, is approaching 2GWh of generation, and was made possible by the outgoing Renewables Obligation scheme, which provides a means of revenue support in addition to wholesale power prices.

The large-scale deployment of more mature technologies has driven down the costs of generation so that they are now approaching levels which mean projects require minimal subsidy support to be viable. 

Commenting on last week’s announcement by the Department for Business, Energy & Industrial Strategy (BEIS), Atlantis said that like the path followed by solar and onshore wind, the cost trajectory supports the rationale for early stage subsidy support for marine technologies.

“Given the significant subsidy reduction already forecast by MeyGen and the opportunity to preserve an important domestic and export tidal stream industry, Atlantis expects BEIS to recognise the benefits of either a bi-lateral CfD discussion or the reintroduction of a marine energy sub-category in the next allocation round, either of which would be welcomed by Atlantis.”

 Atlantis has now entered into discussions with BEIS officials. Phase 1B of the project (6MW) did not participate in the auction because it had been awarded funding support from European Commission mechanisms such as NER300 and Horizon 2020.

Priority projects for Atlantis – France, Asia & the Wyre Estuary

Since November 2016, when BEIS announced the removal of the previously pledged ring-fenced allocation, the company has focused on developing marine power projects in other jurisdictions.

In the near term, Atlantis will focus on delivering projects in France, Canada and South East Asia where tidal stream is well supported.

Atlantis is in discussions with French authorities about establishing a multi-turbine array in French territorial waters which could commence construction in 2018, it has a 50% stake in a 4.5MW berth in Canada at the FORCE facility in Nova Scotia and will soon be in a position to release updates to the markets on contracts and project development rights in Indonesia, China and South Korea.

The company has also started an intensive three-year programme for the delivery of a 160MW tidal range and flood protection project in the Wyre Estuary - Atlantis has been awarded preferred developer status by the Duchy of Lancaster for the scheme.

"Travesty" if UK loses out on first-mover advantage in another emerging industry

Tim Cornelius, Chief Executive Officer of Atlantis, said:

“We’ve made great strides in reducing our cost of generation so that we can slash our requirement for revenue support, and I am incredibly proud of the work the Atlantis team has done in this respect. However, I must acknowledge the difficulties of competing on a level playing field with established technologies like offshore wind, which has been operating at commercial scale in the UK for over a decade.

“It would be a travesty if the UK were to lose out on another emerging industry where it has established a first-mover advantage and where the cost of energy is on a steep downward trajectory. 

“We expect our ensuing discussions with BEIS to focus on how the future jobs and growth benefits of the sector can be secured for the UK.  Our UK portfolio contains some of the best tidal stream sites in the world, and we support the ambition to ensure that the development of these sites is achieved through a UK focused supply chain rather than relying on imported skills and goods. We hope that the UK can continue to play a leading role in an industry it helped create over the past decade.”