Ocean Power: Europe's Next Green Thing

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Wavegen is now working with the Basque Energy Board to construct a larger test plant on the northern coast of Spain, and a full commercial facility in Scotland should be up and running by 2010.

Today's Wave Power Is Eco-Friendly

Of course, experiments with marine power have been under way for decades. One of the first plants in the world to harness tidal power, located in La Rance, Brittany, has been in operation since 1966. Built across the mouth of an estuary with powerful tides, the 240-megawatt plant produces electricity when tidal waters surge through turbines built into the barrier.

Today's experimental technologies tend to be more environmentally sensitive than those of yesteryear. Scotland's Pelamis Wave Power—formerly called Ocean Power Delivery—has created an eco-friendly "wave farm" off the coast of Portugal (BusinessWeek.com, 5/3/06) in partnership with Latin American utility Enersis (ENI) that already produces 2.25 megawatts of electricity.

Now Pelamis and Enersis, a unit of Spanish utility Endesa (ENDE.BE), aim to expand the site to 20 megawatts. Max Carcas, the company's business development director, also has targeted North America for growth and expects wave power to be a $10 billion-per-year industry by 2012.

The Tide Is Turning

To be sure, there are plenty of risks for marine energy firms. High startup costs, competition from other renewable sources, and investor fears over how well the technologies actually work could derail ocean power's move into the mainstream. What's more, generous and consistent government support will be essential to getting the industry off the ground. Marine energy currently costs at least 10 times as much as electricity produced by traditional sources. Countries like Britain and Spain offer subsidies for marine energy, but concerns that the support could be reduced has further confused investors looking to finance projects.

Despite this uncertainty, venture capitalists and power companies haven't stopped flooding the sector with cash in search of breakout technologies. Indeed, StrategyEye's Boeckmann predicts that thanks to growing investment, marine energy could constitute 20% of Europe's total renewable resources by 2020, compared with 40% from wind power.

That's good news for companies across the Continent hoping their projects could be the next big thing. Though wind and solar have snagged most of the investment to date in renewables, the tide is turning in favor of marine energy.

For more on marine energy, see BusinessWeek's slide show.

Scott is a reporter in BusinessWeek's London bureau .