HITTING THE ROCKS

We generated the first real meaningful quantities of electricity from the waves anywhere in the world, and brought genuine new investment, not displacement of other investment - money that only came here because we were here. Any initiative in the renewable field will attract its detractors, but of the £95 million invested over the past 17 years the vast majority, over £70m, has been private money primarily from European investors and utilities. With only a proportion of public funding coming from the Scottish Government, the net contribution of Pelamis to the Scottish economy to date is between £65m-£70m positive. It's a genuine contribution to the Scottish economy.

What do the difficulties experienced by Pelamis signify for the sector?

It's a challenging time in the whole industry. We are in a very big period of uncertainty because of electricity market reform [the constantly-changing price and incentivisation regime surrounding the decarbonisation of the electricity market]; there's no getting away from the impact this has on investment confidence for renewable in general. Those like us at the riskier end of the renewable portfolio are hit hardest, while the most mature technologies at the lowest costs will still proceed. That background pervades the whole industry, not just in the UK.

Why is wave power so uniquely difficult?

Obviously, everyone is now very aware of our costs, because they're all published. All previous technologies have generally been developed within a centralised energy market where early-stage development costs are just lost across the portfolio … In contrast, we are coming straight out of the research lab into the sea and are expected to make a return in a deregulated market.

Do you feel you have been adequately supported by Scottish officialdom?

We have had a very strong and enduring cross-party political commitment to developing wave power technology. The vast majority of politicians see marine energy as a big opportunity for Scotland. After what happened to the wind sector in the 1980s, when Scotland was seen as having given away an early advantage in turbine technology, there is a strong desire not to repeat that in marine energies. Due to the unfamiliar challenges, wave power technology has to be much more innovative. While this is, of course, a challenge for us it also means the resulting intellectual property created is much richer and better protected. And for Scotland's economy it's a massive export opportunity as a uniquely disruptive and well-protected technology, with strong synergies with Scotland and comparative advantages in terms of resource, technology and supply chain. That message has been well understood in Scotland for some time, but I think less so in Westminster where they have had a more hands-off, leave-it-to-the-market attitude.

Is there other support out there?

There is now a real and growing appetite and commitment to marine power in the European Commission. Previously, it wasn't in their Strategic Energy Technology (SET) plan, which identifies promising energy technologies that need support and development. Now it is on the SET plan and it has focus from having its own technology platform to define priorities, design programmes and put out calls for funding. There's now plenty of opportunity in Europe to raise funds for this kind of work.

How has the mood towards marine energy changed?

There's no denying we've got a very difficult situation now; private-sector investors are finding it pretty hard at the moment to make a major contribution. Set against this we have a public sector which is very supportive because of the aggregation benefits it offers in a portfolio of other renewables, its offshore out-of-sight location and because of the huge industrial opportunity it offers with the potential for tens of thousands of jobs and billions in exports. It's quite an interesting inversion of 10 years ago where there was quite a lot of private money, but very little public support

What are your hopes for Wave Energy Scotland (the technology development body being set up by the Scottish Government to encourage innovation in the industry, which may take on some of Pelamis' staff)?

It's early days, and currently no-one knows much about it. We are trying to get in and help shape it. Pelamis has - or regrettably did have - more than 350 "man years" of experience in the firm; that's a prodigious and unique body of real experience of observing problems in the marine environment and designing against them. We are desperately keen that that experience doesn't go to waste. Yes, we have short-term funding issues that have created this current situation, but we are determined that all of the critical lessons we have learned and hurdles we have crossed don't have to be relearned by a new generation of engineers in Wave Energy Scotland. I am keen that it is properly captured and brought to bear, securing the current state of the art and acting as a springboard for creating future value for the Scottish economy. People should have this at the front of their minds when they are wondering what the budget should be for Wave Energy Scotland. Here we are sitting on a thousand-billion-pound global opportunity; so far, even just trying for 15 years, has created £65m-£70m net positive impact for the economy - just imagine what it would be like when we were actually manufacturing.

WES is pushing collaboration hard. The type of funding we have had to date has made this hard and we agree there has been wasted effort and lessons relearned as a result. However, while we agree we need to work together more effectively than we have … we need to retain a bit of competition in technology and the supply chain as well. It's a question of getting the balance right.

Does Scotland need a new development quango? Who should lead it?

Someone with relevant experience. We are trying to develop a new technology in a very difficult era. We at Pelamis are ready to embrace any initiative that is pushed forward and very keen to be at the heart of the organisaiton, and seek any way of advancing the technology we are trying to commercialise.

I guess the thing we need to avoid is that it gets wrapped up in red tape as a Government initiative. It needs to be industry-led and backed by the Scottish Government, not a mini-Scottish Enterprise; an industry-led initiative providing funding for solutions to problems that are genuinely impeding private investment from entering the sector. It's got to be very clearly focused on that. The opportunity is big enough and the potential returns are enormous because the technology is very innovative and you can hold a market advantage when you are ready, so it's a question of looking at the risks that are stopping the investment coming in, and Wave Energy Scotland has to hit them on the head and resolve them, to make the sector "conventional" and "investable" as soon as possible.

Leadership of it will be key and it has to include - must include - experience from the electricity sector in general, experience from the manufacturing sector in general and real, harsh experience of the marine energy sector.