For a new technology, the ultimate market size is fundamentally dependent on the ability of the technology to produce power at a commercially attractive rate. Once any official “green” premium is added to the local fossil-fuel generating price, a technology that can produce power for less than this combined rate will command a large market – generating costs higher than this combined rate will result in no sustainable market at all.
In essence, a wave technology which can produce an internal rate of return above that of fossil-fuel projects will have an almost unlimited market. A wave technology producing IRRs lower than the long bond rate will enjoy no market attention.
While wave climate and capital cost are very important inputs to the IRR of any project, it is the PPA (Power Purchase Agreement) which has the greatest ability to differentiate the market size. Project IRR is critically dependent on the price received for energy. Therefore, jurisdictions with high potential PPA rates will clearly be the ones with the biggest market.
Incentives for wave energy exist in some places, such as Portugal, with the UK and Spain hopefully legislating similarly at some stage. This will drive the early market for wave energy, but the volume that these incentives apply to is quite limited. For example, in Portugal, the incentive applies only to the first 20 MW of installed capacity of wave energy. For this reason, such incentives will not drive large markets.
However, where electricity prices are high for any and all forms of power, the market for wave energy will, ceteris paribus, be larger. Perhaps the largest market, on a percentage of existing demand basis, will be remote island communities which currently rely on diesel generators for electrical power. This category includes the Hawaiian Islands. The longer term wave energy market for this category is at least 10,000 MW. Other remote island communities, in locations with a good wave climate, include Indonesia, where a potential wave energy market of 25,000 MW exists.
In grid-connected locations, besides the incentive based market, the best places will be those with high natural electricity costs. These include Japan and some parts of Europe and North America. The market in these locations for wave energy projects which can deliver guaranteed IRRs of 10% and above is almost unlimited – the higher the potential IRR, the larger the market. It is rather pointless to even predict the possible market size in such jurisdictions as, given attractive economics, it will only be limited by practical reasons such as space limitations. Suffice to say, the upper long term bound for these markets is well above 100,000 MW in each location.
While development of new technology and producing a return for our investors are the immediate business goals of our company, we also have a top-down vision for sustainability within our organisation, driven by our founders, Tom Denniss and John Brown. This vision extends to our philanthropic proposals for the introduction of our wave energy technology into developing countries as well as industrialised nations. For more information, see the Community page.