Is tidal power dead in the water?

The collapse late last month of the French-owned, Irish-based company that has installed tidal turbines three times in the Bay of Fundy continues to reverberate. It is felt most acutely by suppliers and sub-contractors in Nova Scotia, the Orkney Islands, and wherever in the world OpenHydro did business.

An unanswered question is whether the collapse of a player with deep pockets means developing Fundy tidal power is dead in the water or just indefinitely stalled, because for the past decade, OpenHydro has been the only developer to launch and test turbines at the demonstration site established in the Minas Passage near Parrsboro.

While there is consensus among researchers and provincial officials that the collapse of OpenHydro is a major setback, nobody seems to want to have a frank discussion about the prospect that the dream could be over. Possibly that’s because taxpayers have committed a lot of money — millions of dollars for research and development, and tens of millions for the infrastructure needed by tidal developers to test their turbines and relay power through an underwater cable to an onshore substation.

The non-profit organization set up to oversee the test site and monitor effects on marine environment is FORCE (the Fundy Ocean Research Centre for Energy). In response to a request for an estimate of how much public money FORCE has spent to date, its spokesperson Melissa Oldreive wrote, “The total amount of public investment for activities at FORCE has been approximately $36.2 million. These investments have leveraged significant investment from FORCE berth holders over the years, and each berth holder is anticipated to spend up to $20 million to build and install each tidal turbine, make a contribution towards FORCE’s common costs, and support ongoing operations and monitoring.”

FORCE operates on an annual budget of $1 million, which includes the seasonal operation of an interpretative site near Parrsboro. Oldreive could not provide a target date for when any of the three other companies who have been renting berths at the Cape Sharp demonstration site might deploy a turbine. The other berth-holders include Minas Tidal (a Nova Scotia company), privately-owned DP Energy of the United Kingdom, and Black Rock Tidal Power, owned by Schottel Hydro, a multinational based in Germany.

Ever since he chose to wind up the small ocean resources firm he co-founded with other local investors to investigate the potential of tidal power, Ron Scott has been watching the saga from the sidelines. When Maritime Tidal Energy Corp began in 2006, the future looked bright, thanks to a study by California’s Electric Power Research Institute that pegged the Bay of Fundy as one of the world’s best sites to develop clean green energy. MTE formed a joint venture with a firm in the United Kingdom (Marine Current Technologies) that already had a SeaGen turbine operating there.

That project was one of several, including Minas Energy, which grew out of the renewable energy division of the former Minas Basin Pulp and Paper company in Hantsport. Those projects began prior to the development of Muskrat Falls (a project also plagued with setbacks and cost overruns) and before the flood of cheap shale gas from the United States.

Although Scott is retired and no longer participating in tidal energy development, he’s watched OpenHydro’s progress with particular interest. “When one of the leading players in tidal development in the world can’t make it go, it is significant,” says Scott. “It’s difficult to know if it’s a knockout blow. What I do know is that it is extremely difficult to bring this technology to market at a price that will compete with wind and solar, despite its predictability. The dramatic cost decreases in wind and solar power in recent years have added to the difficulty. How do you compete with huge production runs of solar panels and wind turbines when you are building tidal turbines one a time?”

That observation was foreshadowed in an article written for the Energy Regulation Quarterly in the fall of 2015, “Regulation and Development of a New Energy Industry: Tidal Energy in Nova Scotia.” Its author, Bill Lahey, was an associate professor at Dal’s Schulich School of Law, who has since been appointed president of the University of Kings College. Lahey has also been tasked by the McNeil government with examining forest management practices and delivering (yet another) report on the perennially controversial sector.

Lahey’s article noted that the development of tidal power within the province was once viewed as the most promising way to “green” the electricity grid and move away from burning coal (the fuel which supplied 85 per cent of our electricity and generated most of our carbon emissions). Until then, Nova Scotia was an “energy island.” But Lahey argued that description changed when Nova Scotia Power built the Maritime Link — a subsea cable — to import mega amounts of hydroelectricity from Labrador. That electricity is expected to start flowing within the next few years and continue for at least three decades.

“The Maritime Link project has altered this context,” wrote Lahey in the Energy Regulation Quarterly. “The context for the development of tidal power has changed in a broader sense: the assumptions about relentless and sharp increases in the price of fossil fuels that informed analysis of tidal energy’s economic potential in the period between 2005 and 2010 have proven off the mark, at least in the short-term, due to the combined effect of the shale-gas revolution, the recession, and the production decisions made by leading oil-producing countries. The result is that changes in the price of fossil fuels have not narrowed the gap between the cost of producing electricity with fossil fuels and the cost of producing it with tidal energy to the extent some anticipated.”

Lahey pointedly suggested that, “These circumstances call for realism and caution in the development of the Bay of Fundy’s tidal energy potential — as recognized in virtually every official document on tidal power produced over the past 10 years.”

To encourage potential tidal developers, the province had set a price of $420 per megawatt hour for small producers of “instream” tidal power,  and $530 per MWH for large producers. That range is about four times higher than what large wind farms receive. In 2015, the Nova Scotia’s stated goal was to produce 300 MW of commercial electricity from tidal energy by 2020. But that’s been drastically downgraded to 20 MW.

Since the implosion of OpenHydro, Energy Minister Derek Mombourquette has said only that the province is “monitoring” the situation and believes the potential is still great for tidal energy. In fact, two modest and experimental projects — one near Digby and another on the opposite side of Minas Passage near Cape Split — are still in the works for this year.

Before going further, here’s a brief synopsis of what’s been reported about how OpenHydro ran out of money, based on documents filed with the High Court in Ireland and reported by the Irish Times and The Chronicle Herald. They show OpenHydro and its sister company OpenHydro Technologies owe more than $400 million. Their parent company, Naval Energies of France, is owed close to half that amount to repay loans it made to OpenHydro. The French company filed to liquidate the Irish company just a few days after the July 22 hook-up of the latest version of its massive, doughnut-shaped, five-storey turbine in the Bay of Fundy.

The petition to the Court to liquidate OpenHydro was provoked by a letter from a handful of its senior managers to OpenHydro’s Board of Directors dated July 24. They essentially accused the company of breaking Irish law by continuing to operate “business as usual” when the company was insolvent. In a word, broke.

Much to the dismay of Nova Scotian subcontractors, vessel operators, motel owners, and at least two lobster fishermen who lost dozens of traps when the turbine was placed on the bottom of the bay two weeks ago, the ownership and operation of the turbine has been thrown into confusion by the impending bankruptcy. This means they are unlikely to get paid or compensated. At least one vessel owner in Eastern Passage is owed half a million dollars.

The court appointed Grant Thornton in Ireland as the receiver. OpenHydro’s French parent company, Naval Energies, appears to be the largest creditor having loaned or invested a total of $391 million since 2010. Emera Inc. had paid $15 million to buy a 2.2 per cent stake in OpenHydro.

More importantly, through its joint venture with the now bankrupt OpenHydro, Emera also owns 20 per cent of the turbine at the bottom of the Bay of Fundy. The joint venture is called Cape Sharp Tidal, named for the demonstration site near Parrsboro. Emera spokesperson Stacey Pineau says Emera was unaware its Irish partner was insolvent. She claims Christian Richard, Emera’s representative on the OpenHydro Board of Directors, resigned in March so Emera could focus exclusively on Cape Sharp. More questions might get asked when Emera reports its second quarter financial results at the end of this week.

Pineau won’t say whether the turbine is insured or for what amount. Emera has so far refused to answer questions about whether it might consider buying and operating the turbine when the receiver puts that asset up for sale. All last week, Pineau stuck to the same script Emera issued in its initial response to the collapse of its Irish partner.

“Emera learned of the OpenHydro liquidation process on July 26 and had no prior knowledge of any filing with the Irish High Court,” wrote Pineau in an email. “Emera is still working to understand the liquidation process and is focused on ensuring that the receiver/liquidator has a plan for the continued environmental monitoring and safe operation of the Cape Sharp Tidal turbine that is currently deployed in the Bay of Fundy until they determine a final plan for it.”

Meanwhile, until Grant Thornton reveals such a plan (the Irish receiver has said very little in response to our inquiries) the tidal turbine in the Bay has been switched off. It’s not producing electricity, nor are any of its systems working to monitor any interaction between marine life and the turbine. Until the court decides who is responsible for it, it’s likely to stay there, since the cost of retrieving a 1,000-tonne turbine involves several vessels and more than half a million dollars. It’s possible that a remotely operated platform equipped with sonar and environmental sensors which FORCE had built as a back-up in case the turbine’s monitoring gear failed could be deployed as soon as next week to comply with Department of Fisheries and Oceans regulations.

The Halifax Examiner has learned of a complicating factor, however: on Friday, the vessel leasing firm BBC Chartering filed for a sheriff’s warrant in Halifax for the seizure of an OpenHydro asset, presumably a specialized barge built in Pictou to raise and lower the turbine. The warrant is still sealed, but will become public record after it is executed. BBC Chartering has not responded to a request for comment.

The petition to the Irish court by parent company Naval Energies says OpenHydro experienced financial losses of $246 million in 2017. Some were related to the cancellation of a project in France, but others related to technical difficulties (such as the three months it took to raise the turbine from the bottom of Minas Passage), followed by upgrades to the turbine’s control centre (or “brain”) while in drydock in Saint John, New Brunswick.

Although OpenHydro succeeded in being the first company to successfully deploy a tidal turbine and connect it to the Nova Scotia grid (a milestone accomplishment, considering the first $10 million turbine deployed in 2009 had its blades quickly shorn off by the strength of the waves), the second turbine lowered in November 2016 failed to generate much electricity. During the first three months of 2017, that turbine produced only enough electricity to energize the subsea cable and provide electricity for about four homes before it was pulled out of the water for technical upgrades. The third and final turbine put in the water by OpenHydro two weeks ago is a sister to the one deployed in 2016. Both were fabricated by Aecon Industries in Pictou.

Was it Mother Nature, technical challenges, market forces, or all three that sank OpenHydro?

“The hostility of the marine environment and the troubles they have had with initial installations have added to the problems,” says Ron Scott. “Governments and commercial investors are very reluctant to chance that someday tidal power can be delivered at cost that is competitive. Perhaps the early adopters will be in locations where the cost of energy is very high and other options are not available.”