Energy Regulators Adjust to a Tidal Gold Rush

14 August 2007—The promise of unlimited free energy from the ocean’s tides has companies tripping over themselves to get the rights to the best bits of U.S. coastline. But the number of real opportunities for tidal energy—where incoming and outgoing tides drive underwater turbines—is small. And developers are finding it hard not to stumble over each other or over the U.S. Federal Energy Regulatory Commission’s antediluvian hydropower regulations, which were established back when hydropower meant the Hoover Dam. Now FERC is trying to clear the path and bring tidal energy into the 21st century.

Last month, FERC proposed the second change in a year to its tidal technology licensing system. The new six-month pilot license for tidal projects would largely replace a process that can take up to seven years. But some critics suggest that the commission is facilitating a misguided gold rush.

In 2006, an Electric Power Research Institute study identified five prime North American tidal-energy sites. What makes a prime site? ”You need an hourglass-shaped structure,” says Roger Bedard, author of the study and an ocean energy expert at Palo Alto, Calif.–based EPRI. A bay funneling into an ocean through a narrow passage—like the one under San Francisco’s Golden Gate Bridge—puts maximum force into the tides.

Photo: Verdant Power, Inc.

Six turbines like this one provide Roosevelt Island with 1000 kilowatt-hours per day of clean electricity, enough to power a supermarket and a parking garage.

In fact, San Francisco Bay is one of the prime EPRI sites, though the tidal potential of sites in the lower 48 U.S. states are eclipsed by those in Canada and Alaska. However, identifying the site is only the first step in a difficult process. Tidal technology is easy to develop from a technical standpoint, says Bedard, but not from a regulatory perspective.

The best way to commercialize tidal technology is to put turbine systems into the water and test and develop them by trial and error, says William ”Trey” Taylor III, president of Verdant Power, New York City. Verdant did just that, underestimating the strength of the current in New York City’s East River: the blades on its turbine broke just a few months after they started operation. Without demonstrations, says Taylor, no one will know whether tidal energy really works or how it affects the environment. But until someone can demonstrate that it works, people are loath to invest in the technology.

The problem is magnified by a licensing process that can cost millions. By clearing the red tape for small, low-power projects, FERC’s new tidal pilot license reduces that cost significantly. With the new regulations in place, tidal energy developers don’t get ”eaten alive” by the process, says John C. Topping Jr., director of Oceana Energy Co., Washington, D.C., whose subsidiary secured the coveted San Francisco permit.

The lengthy, costly permit and licensing processes the new rules replace were established long ago to regulate more sedate and established technologies like dams. Getting a preliminary permit was easy, because the permit does not allow any construction—it merely reserves the site for three years. During that time, a company gathered the information needed for its FERC license application. Then FERC did its own environmental assessments at the company’s (considerable) expense before allowing construction.

FERC began to revise its permitting process amid suspicions that the three-year ”reservation periods” were being abused. In 2006, Verdant filed a grievance against Oceana, accusing the company of behaving like the Internet domain-name squatters of the 1990s. ”As soon as the EPRI report came out, Oceana snapped up all these permits under the names of different companies,” thus tying up the sites for three years, says Taylor. Based on the company’s permit applications, some critics speculated that Oceana had no available technology but would try instead to leverage the permits to win investors. FERC vowed to apply greater scrutiny to its new permit applications to discourage site banking. ”We wanted to make sure that those who held the permits were seriously pursuing them,” says FERC spokeswoman Celeste Miller. EPRI’s Bedard says the change was long overdue.

Oceana vehemently denies intentionally blocking development for any of its 11 preliminary permits. Topping, who has held posts at the Climate Institute—a renowned environmental group in Washington, D.C.—and the U.S. Environmental Protection Agency says his credentials should speak for themselves. ”I’ve got my reputation on the line,” he says. Topping says Oceana is partnering with the U.S. Navy to create cutting-edge turbine technology, and the designs are now being finalized. He disagrees with the EPRI’s estimate that San Francisco can generate 35 megawatts of power at most—he thinks the number is closer to 300, which could provide over a third of San Francisco’s energy. Topping says Oceana applied for several permits not to impede other developments but to be able to choose the best sites for the company’s technology.

In any case, tidal energy may fill fewer pockets than you’d expect. ”It’s not a gold rush,” says Bedard. ”It’s peanuts.” At most, he estimates that the citizenry will allow 15 percent of the coastlines to be populated with turbines, which might provide 6.5 percent of total American energy usage. But that does not mean he thinks it shouldn’t be pursued. ”It should be part of a portfolio approach to renewables,” he says. ”But if you’re in it to get rich, you’re going to be sorely disappointed.”