JONATHAN HODGES
About delivering innovation: Stage gate metrics for ocean energy
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1. Many in the sector refer to stage gate metrics: what is their potential for an emerging sector such as ocean energy?
We are really learning from other industries here, both developing and mature, where stage gates are used to manage new product development and standardise the activities carried out at each stage. During stage gates, industries commonly apply metrics, or evaluation criteria, to compare technologies, helping developers, funders and investors to make the right decisions – after all, technology that can satisfy the evaluation criteria will have a higher chance of commercial success.
Stage gate metrics bring crucial structure and consistency to the emerging ocean energy sector, ensuring that the most promising and high-performing technologies receive public funding and that developers can provide coherent evidence of their potential.
'Stage gate metrics bring crucial structure and consistency to the emerging ocean energy sector, ensuring that the most promising and high-performing technologies receive public funding '
This comes at an important time for wave energy, which is progressing well but without consolidation of technology types. We are unlikely to see the kind of consolidation that exists for offshore wind on three-bladed turbines, but this underlines the importance of consistent assessments that help investors to see past the differences and gain confidence in promising investment opportunities. This all supports us towards commercialisation, which will allow us to exploit the economic growth and low-carbon energy contribution that the ocean energy sector offers.
2. Based on WES experience, what's the impact of stage gate metrics on technology development?
We can see clear impacts in the WES programme and the wider sector. WES runs a research, development and innovation programme, using pre-commercial procurement to create competition between technologies. By applying stage gate metrics, we have driven an ever-improving standard of well-conceived, appropriately scoped projects, and allocated over EUR 45 million to 86 projects since 2014. Only projects which demonstrate clear potential against the metrics move to the next stage, and the process has allowed us to select the most promising technologies, which are starting to attract investment interest.
'The European Commission is leading a task to build global consensus on stage gate metrics (or evaluation criteria) for ocean energy'
The European Commission is leading a task to build global consensus on stage gate metrics (or evaluation criteria) for ocean energy, on behalf of the International Energy Agency’s Ocean Energy Systems (IEA-OES) committee. The chosen metrics mirror the key challenges, pushing technology developers to align their activities and outputs with investors’ expectations. This drives up the overall quality of proposals, meaning more successful projects and accelerated sector progress.
3. What's the opinion of technology developers on the process?
Developers of credible technologies see real benefits. The majority are seeking future investment and all of them need to demonstrate positive results and trajectories. This becomes easier if the targets are widely accepted, framing the conversation around metrics which test the fundamental characteristics of a technology. These range from technical details to higher-level evaluations which are meaningful to investors, such as Levelised Cost of Energy, and Return on Investment.
Investors can also find wave technology difficult to understand - lots of yellow things bobbing up and down in the ocean! As an outsider, it all looks quite similar, but if you focus, the differences are huge. Imposing a standardised structure onto the process supports the conversation between developers and investors; it’s an essential step to attracting investment. Developers understand that stage gate metrics can help them to distinguish themselves from the competition.
4. When do you expect to see commercial results for ocean energy technology?
The timelines differ for various sectors, but progress is becoming ever more convincing. The tidal stream sector is demonstrating consistent electricity generation over increasingly long-term deployments and is building innovative financial packages to support the scale-up of projects. Wave technologies are a few years behind but are making good progress. Participants in the WES programme will deploy scale devices in Scotland in 2020, bringing an opportunity to integrate proven subsystems and other supporting technologies with novel wave energy converters. We are showcasing a coherent development path and enjoying exciting results. This pedigree breeds confidence and subsequently investment, putting both sectors in a strong position to achieve utility-scale cost-competitiveness and a maturing commercial product by 2030. Aquaculture, island communities and underwater autonomous vehicle charging also offer valuable markets and potential scale-up routes.
'The previous failures contributed valuable knowledge to the development of metrics and we must use them to avoid repetition and to take sensible scale-up steps'
5. Would you say the ocean energy sector would have experienced fewer failures if we had had stage gate metrics 15 years ago?
Ocean energy technologies are still maturing, so research, development and demonstration activity are inevitably risky. If we didn’t experience failure, we wouldn’t be trying hard enough, but the nature of the failures would have been different with a structured stage gate metrics process.
This consistent assessment process focuses funding more rapidly into technologies with the required characteristics, so issues are identified sooner, at a smaller scale, and can be fixed or avoided before financial cost and impact on the sector grows too large. The previous failures contributed valuable knowledge to the development of metrics and we must use them to avoid repetition and to take sensible scale-up steps.
To be effective, stage gate metrics require an effective enforcement mechanism and an adequate funding stream. Programmes like WES and the European Commission’s upcoming pre-commercial procurement scheme provide both, and are increasingly supported by shared assessment tools and methods, such as those being developed by the Horizon2020-funded DTOceanPlus project. By bringing this all together, we are setting the ocean energy sector on track for the technology consolidation and maturation process that investors seek.