Financing ocean energy farms
Many ocean energy technologies have reached a critical moment in their development: the demonstration phase, where pilot farms/plants are put in the water. This phase requires higher levels of investment than RD&I prototypes, alongside the usual challenges associated with innovative technologies. Access to finance is crucial to de-risk ocean energy technologies and increase their competitiveness, but the cost of finance is high – often up to 50% of the cost of the project.
To bridge the “Valley of Death” of financing, and avoid funding bank loans rather than the actual technologies, public intervention is required. A few instruments already exist that mitigate risk and make finance more affordable, and several others are being designed or adapted for this purpose.
OEE makes sure that European and national institutions are familiar with the sector’s particular requirements, so that these instruments cater to the specificities of ocean energy technologies and are built to be fit-for-purpose.
InnovFin Energy Demo Projects (EDP) is a European Investment Bank (EIB) programme. It provides loans or loan guarantees of between €7.5m and €75m to first-of-a-kind commercial-scale renewable energy, hydrogen and fuel cell demonstration projects. It helps to bridge the gap between demonstration to commercialisation.
OEE has been promoting the scheme to the industry since its inception. As a result, more ocean energy applications were received than for any other renewable technology. The first ever project financed by InnovFin EDP is AW Energy’s ‘Waveroller’ deployment in Portugal.
The Innovation Fund draws its funding from the EU Emissions Trading Scheme and targets commercial technology demonstrations. Its total budget will be shared between innovative renewables, Carbon Capture and Storage (CCS), storage and heavy industries.
The first call for both large- and small-scale projects was launched in 2020 and 27 projects were selected for a grant in December 2021. A second call was launched in October 2021 and will be awarded in December 2022.
From the beginning, OEE has engaged with EU institutions to make sure that the fund is designed to support ocean energy technologies. OEE successfully advocated to separate different renewable energy sectors into specific categories. This will increase the number of renewable energy projects – and specifically ocean energy projects – selected in each call.
Investment platforms are privately-managed investment funds, combining European Commission and EIB funds, together with private capital. These platforms aim to fund infrastructure projects – including renewable energy projects that are at the pilot farm demonstration phase.
The BlueInvest Platform is the European Commission’s new program to fund blue economy activities. It encompasses a BlueInvest Fund, grants and training services. The BlueInvest Fund issued its first call in January 2021 and will invest directly in blue economy innovative companies.
OEE is pushing for regular grant calls to support the ocean energy sector.
Innovative technologies always involve a greater risk than established ones – but the reward is also much higher. The Ocean Energy Strategic Roadmap identified a system that will help project developers and device manufacturers cover this risk: an Insurance and Guarantee Fund.
This Fund can cover and mutualise a large part of the technological risk of pilot farms and pre-commercial projects, and at minimal cost. This will bring down the cost of capital and allow renewable technology developers to secure finance for their projects. By reducing risk, the Fund will help put machines in the water, which will in turn further reduce costs and the amount spent by public authorities.
The design of a brand new European Insurance and Guarantee Fund for the ocean energy sector is now underway. OEE has appointed risk and insurance consultancy, Renewable Risk Advisers (Renewable Risk), to design the Fund as part of the EU-funded OceanSET project.