Green Economy in a Blue World-Full Report

the form of either a fixed price to be paid for renewable energy production or an additional premium on top of the electricity market price paid to RES-E producers. FITs allow technology specific promotion, as well as an acknowledgement of future cost reductions by applying dynamic decreasing tariffs. As they are usually guaranteed for a number of years, they are popular and effective with project developers as they provide long-term certainty and reduce market risk (UNEP, 2010). It should be noted that these incentive mechanisms are most effective as and when technologies are in a position to be scaled up and more widely deployed, as seen with other forms of renewable energy. Aside from offshore wind-energy, these incentives are not as effective for marine-based renewable energy technologies which are still in the conceptual or demonstration phase. In this regard, direct funding for research is critical (see below). 3.2 Technology and research Research and development is often highlighted as being important for a transition to renewable entry sources, but support is often inadequate (UNEP, 2011). Technical advances improve the cost-effectiveness of marine-based renewable energy technology through enhanced efficiency and capacity factors, facilitating widespread deployment. Uncertainty regarding such advances is consequently a significant obstacle to take-up in this sector. Governments or public agencies can provide financial and legislative support for R&D of specific marine-energy technologies, and also to assist small and medium scale enterprises to set up pilot plants, for which it is hard to raise capital. For example, the European Commission’s Sixth Framework Programme for research and technological development provided funding for Spain’s first grid-connected wave power project, Mutriku (Bloomberg, 2011). Other examples include the Marine Renewable Proving Fund in the UK, which supports the demonstration of two wave and four tidal devices (Carbon Trust, 2011). Other non-financial options can be used to support cooperation in this field. This is particularly important in the early phase of development where small projects are disproportionately affected by higher planning and transaction costs. International cooperation for example can also be facilitated, such as through the recently established International

Renewable Energy Agency (IRENA). This can build on other initiatives, such as the IEA’s Ocean Energy Systems Implementing Agreement which is taskedwith facilitatingandcoordinating ocean energy research, development and demonstration through international co- operation and information exchange. The European Marine Energy Centre in Scotland and other testing centres allow device developers to share the costs of testing their devices, through the use of shared infrastructure and permits (IPCC, 2011). Given the high R&D costs involved, developing countries are not key players in the marine- based renewable energy field. However, with more than 50 per cent of potential renewable energy expected to be available in developing countries, North-South collaborations could help to speed up the transition. Producing knowledge products that can be adapted to local circumstances is another concrete action (Wilhelmsson, et al., 2010). 3.3 Financing As illustrated above, there are financial and project specific risks associated with marine- based renewable energy, including high initial investment costs, novelty of technology and high operating and maintenance costs. Moreover, in general newer technologies have higher financial risks than conventional established ones, due to gaps in knowledge and uncertainty about results. Hence, financial support is required. The IEA found that in its 28 member countries, financial support for renewable energy had stagnated over the last 30 years. However, there was a 50 per cent rise in 2009 despite the economic turndown, indicating resurgence in interest in this sector (UNEP, 2011). However, these are not necessarily directed to marine- based renewable energy. In 2009 new global investment inmarine energy (excluding offshore wind) represented 0.001 per cent of total global investment in renewable energy (Bloomberg, 2010), reflecting the nascent stage of this sector. Finance needs to be tailored to R&D for a range of relevant option technologies. In the early stages of development, public financial support is needed, both for R&D and then later to encourage deployment (see sections above for examples). Later, private finance can be mobilized for near-competitive technologies and demonstration projects. Public finance mechanisms can encourage the private sector to complement rather than to

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