Naval Energies pulls plug on tidal business citing lack of commercial prospects, leaving uncertain future for flagship French pilot project
The shock exit of renewables firm Naval Energies from the tidal energy market last week has plunged into uncertainty a "novel" French government-backed pilot project off the cost of Normandy the company was developing on behalf of EDF.
The French government last week secured clearance from the EU Commission to provide state support to the 14MW Normandie Hydro tidal demonstration project in the English Channel. The plans would have seen Dublin-based OpenHydro install seven of its turbines on the sea floor, with EDF Energies Nouvelles then taking over operation of the facility.
EU Commissioner in charge of competition policy, Margrethe Vestager confirmed on Thursday the project did not contravene State Aid rules and would help "showcase tidal energy technology", which she said could "contribute to the transition towards a climate friendly energy supply in Europe".
But in a shock announcement just a day later, Naval Energies said it was pulling the plug on its tidal energy business, and liquidators were called in at its Dublin-based subsidiary OpenHydro, throwing the English Channel tidal demonstration project into disarray.
It came just days after the firm officially opened its first dedicated tidal turbine assembly plant in Cherbourg on the northern peninsula of France, an event which was attended by local politicians and Karmenu Vella, EU Commissioner for the environment. The future of the new plant, which was built to supply up to 25 OpenHydro tidal turbines each year for commercial clients in France, Canada and Japan, is now also uncertain.
With OpenHydro now undergoing liquidation proceedings with debts approaching a reported €280m, Naval Energies said provisional liquidators from Grant Thornton had been appointed who would "now act on behalf of OpenHydro and will make the decisions regarding all OpenHydro subjects".
It means that, despite the Normandie Hydro pilot now having received all relevant authorisations from both the French government and the EU, there is now huge uncertainty over whether it can continue, or what will happen next to the Cherbourg plant, which is owned by Naval Energies and of which OpenHydro is the tenant.
In a statement on Friday, demonstration project partner EDF Energies Nouvelles said: "We have learnt Naval Energies' news and we need to take the time to analyse the situation."
Naval Energies publicly announced its decision to exit the tidal market early on Friday after a decision was made at a board of directors meeting on 25 July, citing a "lack of commercial prospects" for the business.
A company spokesperson said it informed EDF and the EU Commission of the news "right away", and stressed that EDF had not yet placed any order with OpenHydro.
The spokesperson also said the firm was looking into "the possibility of carrying out a reconversion" of the Cherbourg plant's infrastructure, adding there were "several interesting options on the table in terms of making use of this industrial facility" but that it is "way too early to give details at this stage".
OpenHydro also has operations in Canada and Japan, the future of which also remain unclear.
Naval Energies explained in its statement last week that it had faced challenges in finding a route to market for its tidal turbine technology and would there be focusing its efforts on its floating wind turbines and marine thermal energy conversion businesses.
It claimed "the fact remains that the market for tidal-turbine energy is closing", pointing to limited deployment opportunities of just 100MW to 150MW in France until 2028, the lack of any route to market through price support contracts in the UK, and "great sensitivity" over the cost of the technology in Canada.
"It is with regret, but also responsibility, that we are taking the decision to stop developing tidal-turbine energy," said the firm's CEO Laurent Schneider-Maunoury. "The deterioration of the market, in France and around the world throughout the recent months, has been reflected in a lack of commercial prospects over the long term."
Rémi Gruet, CEO of trade network Ocean Energy Europe, said the Naval Energies decision was "disappointing" but that the tidal costs were coming down fast and the technology presented a "significant industrial opportunity" for European governments.
"The liquidation of OpenHydro is disappointing news, yet closures are part of pioneering and innovating in a brand new industrial sector, on the road to commercialisation," he said.
However, following the revelations UK-based marine energy developer SIMEC Atlantis Energy immediately signalled its interest in potentially filling OpenHydro's shoes in the French demonstrator project, and also utilising potential spare capacity in the Cherbourg turbine assembly plant.
The developer said in a statement on Friday it was "saddened" to hear of Naval Energies decision and that "our thoughts are with the employees" of OpenHydro - thought to number around 100 - whose jobs are now under threat.
But it sought to refute suggestions of wider difficulties in the tidal energy market, claiming SIMEC Atlantis Energy's tidal stream business had "never been more active" globally, citing contract wins in Asia and Europe, expansion plans, and several upcoming investment decisions on the next series of UK arrays.
Atlantis is the developer behind the flagship MeyGen tidal array off the coast of Scotland which began generating electricity last year. Its technology - which resembles underwater wind turbines - differs slightly to the cylindrical subsea turbines developed by OpenHydro.
But Tim Cornelius, CEO of SIMEC Atlantis Energy, said the firm would be "delighted" to invest alongside shareholders and supply equipment to the Normandie Hydro project, and also to enter in discussions over the future of the Cherbourg plant.
"If we are able to make progress with the French Government on the development of large scale arrays in Normandy and Brittany, we would be delighted to discuss the future of the Cherbourg plant as we are currently running out of capacity at our facility at Nigg Energy Park in Scotland," he said in a statement. "Furthermore, given the EC approval overnight for the Normandie Hydro plant, we would be delighted to invest alongside existing shareholders and supply equipment to this project, if required."
Cornelius claimed the company was capable of delivering pilot tidal farms in Normandie "within existing support mechanisms" that could be in operation as soon as 2019/20, in addition to developing commercial scale arrays for less than €70/MWh by 2025 "making tidal power very competitive in French territorial waters using traditional three bladed horizontal axis turbines".
Last week's development underscore the scale of the challenges involved in building a commercially viable business in the still fledgling marine energy market. But despite inevitable setbacks for the sector, marine energy advocates remain confident the industry can deliver on its considerable potential.
After more than 10 days of action, protest group says it will voluntarily bring an end to current London blockades tomorrow
National Infrastructure Commission chief executive Phil Graham's speech at the Clean Energy Infrastructure Summit
Brewing giant has made SDG6 central to its water strategy, and is reaping the benefits as a result
Joint statement with institutional investors strengthens oil major's low carbon plans, but critics insist wider targets are needed