2. Fossil Fuels
April 10, 2016
Background:
The UnitedStatesshouldseektoincentivize oceanwave technologytocreate a sustainable source of
energy thatcan provide upto 2,640 terawatthoursof electricity peryear.Notingthatone terawattper
hour hasthe abilitytopower 93,850 average U.S. homeswithpowerannually,oceanwave technologyis
an underutilized,butpotentiallyveryuseful formof energy(Bureauof OceanEnergyManagement
2011, nopg.).To incentivizemore efficientandecofriendlytechnologiesthe UnitedStates Federal
Governmentshouldgive energygrantstocoastline statesfromthe Departmentof Energy,the United
StatesSmall BusinessAdministration,the U.S.Treasury,andthe U.S. Departmentof Agriculture. The
Federal Governmentshouldalsoseektoincentivizethroughtax exemptionsandcredits,andshould
encourage State andLocal governmentparticipation.Theseincentives will make the productionprocess
of these technologiescheaper,andpotentiallycreate more of ademandfrominvestorsandconsumers.
OceanWave Energy isa zeroemissionssource of power, andif utilizedefficientlyitcouldreduce the
UnitedStates’heavyreliance onfossilsfuels.
Movingaway fromfossil fuelsisanimportant steptowardssustainable energyandacleaner
environment.Itisa sustainable source of energyasitiscompletelyrenewable,and canbe usedwell
intothe future withoutharmingfuture generations (Walton2014, no pg.).While windandsolarhave
decreasedthe UnitedStates’reliance onfossil fuels,oftentimestheseformsof powerare onlyviable in
rural andsuburbanareas where landisavailable.Observingthatnearlysixtypercentof the world’s
populationliveswithin37milesof a coastline,fundingoceanwave energywouldensure thatcoastal
3. citieswithlesslandhave aviable energyalternative to coal andnatural gas (Carnegie Wave Energy
2016, nopg.).
Dr. Michael Ottavianowhoworksforan international productionanddesigncompanycalledCarnegie
Wave Energy,notesthat newlydesigned CETOwave technology convertsenergyfromthe ocean’sswell
intoelectricity(CarnegieWave Energy2016, nopg.).He notesthat wave energycouldpotentiallysupply
“more than the whole world’scurrentpowerconsumption”(CarnegieWave Energy2016, nopg.)
throughthe use of submergedbuoysandpumps. Pressure iscreatedviathe upanddownmovements
of the waves andissentthrough a pumpbelow the buoy. Thispressurizedwateristhensentashore
througha seriesof pipestodrive a hydroelectricturbine. The energycreated fromthe electrical
generatorcan thenbe usedto eitherpowergridsnearby,oritcan be usedto run a reverse osmosis
desalinationplanttocreate freshdrinkingwater. While otherwave technologiesexist,like tidal energy
and oceanthermal conversion,whichrequire damnsandlarge processingfacilities,CETOtechnologyis
invisible whenviewedfromthe shore andenvironmentallyfriendly. Dr.Ottavianonotesthatthe newly
designedCETOtechnologyattractsmarine life,asthe submersedtechnologyactsas an “artificial reef”
(Carnegie Wave Energy2016, nopg.). While CETO technology currentlyonlyhassubsidiaries in
Australia,Chile, the UnitedKingdom,andIreland,asaninternationalcompanytheyare focusedon
global commercialization.Withmore fundingfromthe UnitedStates Federal Governmentinternational
technologycompanieslikeCarnergieWave Energy,anddomestictechnologycompanieslike Ocean
PowerTechnologies wouldbe able toopennew firmsinthe UnitedStates.
Currently the UnitedStatesdoeshave some OceanEnergypolicyinplace.The U.S.Departmentof
Energy’sWaterPowerProgramnotesthat theirmission isto“research,test,evaluate,developand
demonstrate innovativetechnologiescapable of generatingrenewable,environmentallyresponsibleand
cost-effectiveelectricityfromwaterresources”.The DOEhas currentlyset a national Marine and
HydrokineticTechnologies (MHK) costgoal of 12-15 centsperkilowatthour(kWh) by2030 (Labonte
2014, nopg.). Currently there are several keyissuesregarding legislationbeingreviewedbythe
Department.The firstis The Marine and HydrokineticRenewable EnergyActof 2013 (S.1419), whichif
passedwould promote research,development,anddemonstrationof MHKrenewable energy
technologies.The secondactunderreview isthe The Renewable ElectricityStandardActof 2013
(S.1595), whichif enactedwould create a“renewable electricitystandardthatwouldapply toall
renewable energysources”(Labonte 2014, no pg.).The thirdact that wasconsideredwas the Climate
ProtectionActof 2013 (S. 332), whichif passedwould have allowedthe Environmental Protection
Agencyto establisha‘Sustainable TechnologiesFinance Program’ that “wouldalleviate costburdensfor
ocean,tidal,orhydropowerenergyprojectsthroughloans,creditinstruments,andloanguarantees”
(Labonte 2014, no pg.).Thisbill was sponsoredbySenatorBernie Sanders,andhadbeenconsidered by
the Committee onEnvironmentandPublicWorks (Labonte 2014, no pg.).
4. The UnitedStatesreportfrom the OceanEnergySystemswebsite notesthatcurrentlythere are very
fewmarketincentivesfromthe Federal Government.The FederalTax Creditof 1.1 cents perkWh fora
numerousamountof energytechnologies,includingMHKtechnologies,hasnow expired.AuthorAlison
Labonte notesthatevenwhenthese creditswere inplace,theyonlyservedalimitedamountof MHK
technologycompaniesbecause therewasastipulationthatrequired projectstohave atleast150 kW in
capacityunderconstructionbyDecember31, 2013 (Labonte 2014, no pg.).In additiontothisnow
expiredProductionTax Credit,some Tidal Projectsare eligibleforatax projectequal to10% of
expendituresunderthe InvestmentTax Credit,howeverthisstrictlyappliestoTidal Projectsandnot
MHK technologies. Atthe state level, “MHKtechnologiesare aneligible energyresource under20
states’renewableportfoliostandardsandvoluntaryrenewableenergygoals”(Labonte 2014, no pg.).
GoodIntentions,Bad Implementation – CritiquingCurrentPolicy
The issue withcurrentMHK policyisthat there are manybillsandobjectivesbeingproposed,butno
actionor real progressisbeingmade. The Marine andHydrokineticRenewable EnergyActof 2013 (S.
1419) wasre-proposedin2015 andhas yetto evenbe reportedtothe committee, andthe GovTrack.us
website notesthatthe bill onlyhasatwentyfour percentchance of beingenacted(GovTrack2015, no
pg.). The Renewable ElectricityStandardActof 2013 (S.1595) wasgivena one percentchance of making
it to the committee andonto the House of Representatives,andazeropercentchance of being
enacted.Theynote thatthisprognosiswasgivenbecause PeterWalch,ademocraticRepresentative for
Vermontisa part of a minorityparty. The final bill, Climate ProtectionActof 2013 (S.332) diedin
congressin2013 and has yetto be reintroduced.
5. Withthe waythat congressiscurrentlybalanced,itisblatantthat manyof these billswill be puttothe
wayside until theyare rejected,oruntil congressisresetinNovember.Until then,anotherwayinwhich
companiescanbe incentivizedisthroughpublicfundingprogramsandfundingopportunitiesthrough
differentdepartmentsof the government.The WaterPowerProgramfromthe Departmentof Energy
has a fiscal budgetof 41.3 milliondollarsdedicatedtowards,“FocusArea1:Technology Advancement
and Demonstration”(Labonte 2014,no pg.).A grant of 2 milliondollarsfromthe DOEwas recentlygiven
to Lei Zuo,an associate professorof mechanical engineeringfromVirginiaTech. Zuostatesthatthe DOE
gave himthisgrant to produce a newgenerationprototype of anoceanwave generator.He continues
by explainingthatoceanwave technologywasoriginallyinventedin1799, and “despite this,the field
isn’tmature either.Wave energytechnologyisreallystillinitsinfancyworldwide,andthatopensupan
immense areaof researchthatis reallyexcitingtobe a part of” (Bushey2016, no pg.). AuthorRosaire
Busheynotesthat“as part of the DOE grant, [Lei Zuo] mustachieve minimumgainsof 50percentin
reliabilityand25 percentinpoweroutput,loweringthe costperunitof energy”(Bushey2016, nopg.).
Zuo concludeswith, “If youlookatothercleanenergy options,youcanget about1.5 kilowattsof power
out of a square meterof sunshine.Witha square meterof wind,yougetabout1 kilowattsof power.
Witha meterof oceanwave front,youcan getbetween10and 100 kilowattsof powerandthat’san
excitingpossibilityforusas we continue tomature the technology.” (Bushey2016,no pg.).
While itisobviousthatthe real change needstocome fromFederal Governmentpolicy, President
Obama hasenacted Federal EnergyRegulatoryCommissionlicensing,which enablescommercial-scale
projectsto receive tax creditswhentheymeetFERCstandards(FERC2015, nopg.).It isalso pertinentto
pointoutthat some stateslike Maine andOregonhave become veryactive supporters of MHK
technologyandresearch,andas suchtheyhave signed“Memorandumsof Understanding”between
theirindividual state andFERC (FERC2015, no pg.).
Personal Analysis:
Oceanwave technologyshouldbe supportedthroughFederal Policyregulationthatallowsfortax
credits,loans,andrenewableenergybonds. State andFederal aidshouldalsobe expandedthrough
policy.While the 113th congresshasonlypasseda minute fractionof the billsthathave beenproposed
underObama(GovTrack 2015, nopg.), I am hopeful thatthe 114th
congresswill evokereal change,and
supportthe billsthatwill trulyembrace thisnew formof greenandsustainable energy.
In orderto trulystart makingprogressive changesIwouldstartwithFederal grants.Grantsprovide
resourcestostartup companiesthatcannotindependentlyaffordto“fundthe research,development
and testingactivitiesnecessarytobringa new technologytocommercial operation” (Harmon2011, pg.
7). Authorof a policybrief called“IncentivizingOceanEnergy”,RobertHarmon,notesthatlaterstage
grants are also important,for“the grant fundingreducesnecessaryexternal funding,loweringinvestor
riskand decreasingthe costof debtin the formof interestrates”(Harmon2011, pg. 7). The obvious
advantagesof increasinggrantaidto commercial developerswouldbe thatthe technologyincreases
and ismade cheaperto the producer,and therefore the consumer.However,there are alsosome risks
involved. Harmonnotesthat,“Grant fundingalsocarriesthe riskof dependency.Withoutaproper
incentive structure orthe due diligence necessarytomove technologiesthroughthe commercialization
process,recipientscanremaindependentongrant-basedfundingorsimplyfade awaywithoutreaching
commercial competitiveness”(Harmon2011, pg. 7). To counterthiseffect,the Federal Government
6. shouldonlygive grantstothe mostpromisingrecipients. One policythatwasmentionedin
“IncentivizingOceanEnergy”wascalledGrantMatching,where an organizationmatchesthe grantgiven
by a secondorganization.Forexample,thisoccurredwhenthe OceanWave EnergyTrustmeta grant
giventofour applicantsof 296,000 bythe Departmentof Energy.AnotherpolicysuggestedbyHarmon
was thatthe processof developmentbe brokenintomultiple stages.Inearly developmentproducers
wouldbe eligible forasmallergrant,andif theywere to reachstage two theywere eligible fornearlya
milliondollargrant.Thisreducesthe riskof complete failure,andensuresthatonlythe most
competitivecompaniesare receivingaid.
As fortax incentives,there are currentlyfive thatare beingregularlyusedforrenewable energy
technologies:productiontax credits,investmenttax credits,salestax exemptions,propertytax
exemptions,andaccelerateddepreciationschedules(Harmon2011, pg. 8). Outof the seven total tax
exemptionsavailable,oceanwave technologyonlyqualifiesfortwo.Harmonnotesthat,“One isan
investmenttax credit(ITC) andthe otheris a productiontax credit(PTC). There are obviousbenefitsto
amendingpolicytoencourage more tax creditsandexemptions,Harmonnotes “salestax exemptions
directlyreduce the costof ocean devicesbyexemptingsalestax onequipmentpurchases,while
investmenttax creditsandaccelerateddepreciationincentivessignificantlyreduce capital costsby
decreasinganoceanenergydeveloper’stotal tax burdeninthe nearterm”(Harmon 2011, pg. 11). The
onlyforeseeablenegative toadjustingpolicytax incentive wouldbe thatthe lineswouldbe blurred
whenthere wasa transferof ownershipinthe company.Harmonnotesthat,“tax-exemptentitiesstill
wouldnotbe able to participate.Passthroughenablestax-exemptentitiesto“pass”the tax exemption
ontoa tax-liable partner.Thismeansthe tax-exemptentitymustfind awillingpartnerwithadequate tax
revenues”(Harmon2011, pg. 12).
My recommendationwouldbe toincrease the amountof grant funding,andthentoallow forfunding
duringdifferentapprovedstages,muchlike suggestedabove. Ithinkthisshouldprimarilybeendone
throughthe Federal government,butState’sshouldalsobe involvedandfollowasimilarstructure to
the Federal governmenttoreduce risk.Ithinkthat the primarywaythat thistechnologycanbe funded
and implementedisif congresspassesmore billsthatmandate 1.) Anincrease ingrant funding2.) An
increase intax incentives.If more startupcompaniescouldqualifyforeitherof these options,thenthey
coulddo more R&D, reduce testingcosts,andultimatelyreduce productioncostssothat the energy
providedisaffordableandcompetitive tootherformsof alternativeenergy.
Works Cited
Bushey,R.(2016, March 30). RetrievedApril 22,2016, from:
https://vtnews.vt.edu/articles/2016/03/032316-me-waveharvest.html
This containsan article fromVirginia Tech on whata mechanicalengineer is doing in wavetechnology
with the2 million dollargranthe received fromthe DOE.
Carnegie Wave Energy.(n.d.).RetrievedApril 22,2016, fromhttp://carnegiewave.com/
This is the mostrecent wavetechnology thatis being tested in Australia.Itis zero emissionsand has
shown signsof improving marinelife quality.
7. GovTrack. (n.d.).RetrievedApril 22,2016, from https://www.govtrack.us/
Any information regarding currentorpreviousbill statusor statisticswasfound on thiswebsite.
Harmon,R. (2011, July).IncentivizingOceanEnergy[PDF].OregonWave EnergyTrust.
This is a recent policy brief drafted by theOregon WaveEnergy Trust.It hasinformation regarding
grants,tax incentives,loans,etc.It also providesa thorough analysisof currentpolicy,aswell aspolicy
suggestions.
Labonte,A.(2014). UNITED STATES OF AMERICA - OceanEnergySystemsReport2014. RetrievedApril
22, 2016, fromhttps://report2014.ocean-energy-systems.org/country-reports/united-states-of-
america/
This is a report fromOcean Energy Systemsdisplaying currentpolicy in the United Statesof America
written by a representativefromtheDepartmentof Energy.
OceanWave Energy.(n.d.).RetrievedApril 22,2016, from http://www.boem.gov/Renewable-Energy-
Program/Renewable-Energy-Guide/Ocean-Wave-Energy.aspx
This websitecontainsinformation fromtheBureau of Ocean Energy management.Itprovidesstatistics
forthe amountof energy thatcan be produced fromocean wavesif utilized effectively.
RENEWABLE ENERGY PRODUCTION TAX CREDIT: INSTRUCTIONSFORREQUESTING CERTIFICATION OF
INCREMENTALHYDROPOWER PRODUCTION PURSUANT TO THE ENERGY POLICY ACTOF 2005 [PDF].
(2005). Federal EnergyRegulatoryCommission.
This is information regarding thetax credit thatcan be received when commercial producersfollowFERC
guidelines.
***wave photowasstock & wave technologyphotobelongsto:carnegiewave.com
