Is tidal stream technology finally ready to emerge from pre-commercialization hell? It might be, thanks to the prospect of new government support in the U.K. and growing interest in China.

This spring the U.K. launched a review of its contracts for difference program supporting renewables, potentially putting immature technologies like floating offshore wind and tidal energy into a separate category from traditional offshore wind and thereby giving them a realistic chance to compete for contracts.

Such a move could allow for an expansion of the world's first and only tidal stream array, according to Tim Cornelius, chief executive of developer Simec Atlantis Energy.

Since November 2016, Atlantis' four-turbine, 6-megawatt MeyGen array has been sending electricity to the grid from the seabed off the northeast of Scotland. MeyGen was celebrated as tidal stream’s first proof of commercialization, and it was originally devised to be the first phase in a much larger project. At the time, the U.K. was by far the most promising market in the world for tidal stream, with a host of developers lining up behind Atlantis with proposed projects. 

Nearly four years later, however, MeyGen has not grown any larger, and no other commercial-scale projects have been built.

Moving out of offshore wind's shadow

MeyGen's first phase was built under a previous U.K. support system, which was replaced in 2015 by the contracts for difference scheme. In the first three CFD allocation rounds, the government pitched tidal against offshore wind, effectively guaranteeing a stalled market for the former technology.

Atlantis has cut its costs and can today build a project with a levelized cost of around £100 ($123) per megawatt-hour, Cornelius told GTM. But that's not enough to compete head-to-head with offshore wind in Europe.

It was a huge relief, then, when the U.K. government in March launched a review of its CFD system. Cornelius said he sees the consultation as “providing the best opportunity that MeyGen will ever have in securing a CFD for the build-out of its next 30 megawatts.”

Tidal energy: A string of failed companies and devices

Tidal stream generation uses devices that act like underwater wind turbines to extract energy from the predictable ebb and flow of tides. The resource is particularly strong in places where tides have to flow through a bottleneck, such as in the Pentland Firth off Caithness in Scotland and the Bay of Fundy in Nova Scotia, Canada.

The potential for tidal energy is big, but tapping into the resource has proven to be difficult. The forces at play are so great that they have ripped tidal stream turbines apart on at least a couple of occasions. Maintaining and repairing the massive machines underwater is challenging and, so far, expensive.  

As a result, tidal stream has long ranked alongside emerging generation technologies such as airborne wind energy, small modular nuclear and wave power as a segment that is big on promise but never seems quite capable of breaking into the mainstream. Siemens exited the market, Alstom stopped focusing on it, and last year Tocardo Tidal Power went bankrupt.

But Atlantis believes the tide is finally turning for the sector. The company may have found a route to market even without the CFD program: In September it revealed plans to install 36 new turbines off the coast of Scotland to power a data center.

Meanwhile, MeyGen's growing track record is helping to sell the concept of tidal stream energy overseas. The Scottish array has delivered almost 30 gigawatt-hours of clean energy to the grid, said Cornelius, and it is attracting international attention.

Last September, Atlantis announced a contract to supply electricity to the Channel Island of Alderney from a proposed project off the coast of France. The following month the developer secured a deal to supply tidal turbines and offshore construction services to Kyuden Mirai Energy of Japan, for a 500-kilowatt demonstration project off Naru Island.

This April, Atlantis defied the coronavirus lockdown in Wuhan to install a 500-kilowatt machine for state-owned power company China Three Gorges between the islands of Putuoshan and Huludao in China’s Zhoushan Archipelago.

Growing signs of interest in China are bringing newfound optimism to the sector. At least four device suppliers are now active in the Chinese market, according to Ocean Energy Europe, a trade group.

The same old questions of cost and scale

Tidal energy's challenge is the same as it ever was: reducing costs. But today, it also faces an increasingly mature offshore wind industry in many markets.

The growth of offshore wind actually helps the tidal sector in some ways, resulting in greater availability of vessels and knowledgeable workers, Cornelius said.

By connecting all of its subsea turbines to a single hub rather than using separate export cables, Atlantis believes it can bring its levelized costs down to around £90 per megawatt-hour, Cornelius said. The developer is working on such a hub for MeyGen, backed by almost £1.6 million in grant money from the Scottish government. 

Even that's not enough, however. Ultimately, tidal stream projects need to get their costs down to around £60 ($75) per megawatt-hour to compete effectively with offshore wind, Cornelius said. Achieving that will require scale, he said — a cumulative 500 megawatts of projects or more.

That's a tall order for a technology that has so far failed to reach commercialization even when backed by industrial heavyweights such as Naval Energies and Siemens.  

“In the last few years, the drop in the [levelized cost] of offshore wind has moved the bar even higher,” said Claudio Bittencourt Ferreira, business development director for wave and tidal at DNV GL, the classification society.

“From an investor and market point of view, wind and solar can be deployed immediately on a large scale worldwide, making them very attractive," Ferreira said. "Tidal is still working on developing technology that needs to be proven regarding reliability and [levelized costs].”