HOW IT WORKS
Tidal energy is produced by the rise and fall of the oceans tides. The three ways to harness tidal energy are through the usage of tidal turbines, barrages, or tidal lagoons.
Tidal turbines are similar to underwater windmills. The movement of the currents spin the turbine which in turn activates a generator that produces electricity. Tidal turbines work best on coastlines with strong tidal zones. Turbines are most effective in shallow water which helps avoid any potential conflict with ships.
Tidal barrages would harness energy through the potential and kinetic energy created by the oceans tides. Barrages are long dams (30-50 km) built from the coastline without enclosing an area. The barrage has gates that are open as the tide rises. At high tide the gates close, creating a tidal lagoon and the water is then released through the barrage’s turbines creating energy. It is important to note however that barrages can be harmful to marine plants and animals and require constant supervision.
A tidal lagoon is a body of ocean water that is partly enclosed by a natural or manmade barrier. A tidal lagoon would generate energy in a similar fashion to tidal barrage however unlike barrages, tidal lagoons can be constructed on the coastline. While tidal lagoons have minimal environmental impact, their energy outputs also tend to be low.
WHAT THE MARKET LOOKS LIKE
The European Commission has identified “blue energy” as one of the five focus areas that could deliver sustainable long-term growth and jobs in the “blue economy.” The potential benefits of wave and tidal energy development to the UK are well understood – the marine energy industry has been forecast to be worth £6.1 billion to the UK economy by 2035, creating nearly 20,000 jobs. The World Energy Council has conservatively estimated the market potential for wave energy alone to be in excess of 2,000TWh/year, representing a capital expenditure of more than £500 billion, assuming 2007 costs.
With a burgeoning export market, the rewards could be greater still. The UK continues to be a global leader in marine energy, with more wave and tidal stream devices installed than the rest of the world combined, according to RenewableUK. The last 12 months have seen continued technical progress: several companies are deploying full-scale single units in UK waters and embarking on test programs with a view to deploying multiple device arrays from 2015 to 2017.
In addition, the UK has benefited from a h3 industrial base in shipping and offshore engineering; there is a relatively well-developed supply chain and a favourable regulatory and licensing environment, from the “5 ROCs” market-support mechanism to the approach of The Crown Estate.
POTENTIAL CHALLENGES
The same consultation also highlighted the constraints that need to be addressed to allow further development, such as the length and complexity of authorization, certification and licensing procedures in individual Member States. A large majority of respondents also think that there should be a specific policy supporting ocean energy development at the EU level, as well as long-term visibility. Regarding technical barriers to grid connection, the lack of agreed standards and technical specifications and of construction and installation vessels were the barriers most frequently cited by stakeholders to the development of ocean energy. Investment continues to be difficult to obtain from private sources in the UK. A large-scale deployment of ocean energy will thus depend on the sector’s ability to address these technological and economic challenges.
GOVERNMENTAL SUPPORT
The UK Department of Energy and Climate Change (DECC) supports these developments through feed-in tariffs: the UK and Scottish Governments confirmed in July 2012 the incentives for wave and tidal energy at 5 ROCs per MWh for projects up to 30 MW capacity that are installed and operational prior to 1 April 2017.
Between 2010 and 2012 The Crown Estate has licensed almost 40 wave and tidal sites throughout the UK. While the vast majority are in Scottish waters, sites are also being developed as far and wide as Falmouth in the south west of England and Torr Head in Northern Ireland. These sites mean that there is now a substantial pipeline of potential capacity, with likely deployment of 100 to 200MW of devices expected by the end of 2020.
There are several financial advantages to investing in Tidal companies. The main benefit for investors is the tax relief they receive if they purchase qualified EIS shares. In doing so, shareholders have the potential to receive significant breaks on the invested money. For example, you get an income tax relief of 30%. This means that 30 percent of invested money can be taken off of the amount of income tax you pay for the following year. This is capped at investments of £1,000,000. Another example of relief is EIS shares are usually exempt from inheritance tax after 2 years.
Furthermore, there is no capital gains tax on any earnings from EIS qualified shares. You can even use a loss from an investment to offset income tax in the year the shares are disposed of, or from the year before. To do this, you take your loss, less any income tax relief you receive, and the remainder is what can be offset. Finally, investors can defer tax paid in capital gains, as long as those gains are immediately used to purchase qualified EIS shares.