1,000 foreign firms mull production in India, 300 actively pursue plan as 'Exit China' mantra grows

The Russia-Saudi oil-price war is a fabrication concocted by the media. There’s not a word of truth to any of it. Yes, there was a dust up at an OPEC meeting in early March that led to production increases and plunging prices. That part is true. But Saudi Arabia’s oil-dumping strategy wasn’t aimed at Russia, it was aimed at US shale oil producers. But not for the reasons you’ve read about in the media.

The Saudis aren’t trying to destroy the US shale oil business. That’s another fiction. They just want US producers to play by the rules and pitch in when prices need support. That might seem like a stretch, but it’s true.

You see, US oil producers are not what-you’d-call “team players”. They don’t cooperate with foreign producers, they’re not willing to share the costs of flagging demand, and they never lift a finger to support prices. US oil producers are the next-door-neighbor that parks his beat-up Plymouth on the front lawn and then surrounds it with rusty appliances. They don’t care about anyone but themselves.

What Putin and Saudi Crown Prince Mohammed bin Salman want is for US producers to share the pain of oil production cuts in order to stabilize prices. It’s an entirely reasonable request. Here’s a clip from an article at oilprice.com that helps to explain what’s really going on:

“… there was a sliver of hope that oil prices may rebound after Reuters reported that Saudi Arabia, Russia and allied oil producers will agree to deep cuts to their crude output at talks this week but only if the United States and several others join in with curbs to help prop up prices that have been hammered by the coronavirus crisis. However, in an attempt to have its cake and eat it too, the U.S. DOE said on Tuesday that U.S. output is already falling without government action, in line with the White House’s insistence that it would not intervene in the private markets….

… OPEC+ will require the United States to make cuts in order to come to an agreement: The EIA report today demonstrates that there are already projected cuts of 2 (million bpd), without any intervention from the federal government,” the U.S. Energy Department said.

That is not enough for OPEC+ however, and certainly not Russia, which on Wednesday made clear that market-driven declines in oil production shouldn’t be considered as cuts intended to stabilize the market, Kremlin spokesman Dmitry Peskov tells reporters on conference call.

“These are completely different cuts. You are comparing the overall demand drop with cuts to stabilize global markets. It’s like comparing length and width,” Peskov said…..Moscow’s participation is highly contingent on the US, and is unlikely to agree to output cuts if the US does not join the effort.” (“Historic Oil Deal On The Verge Of Collapse As Russia Balks At U.S. ‘Cuts’”, oilprice.com)

Putin is being reasonable and fair. If everyone else is forced to cut supply, then US oil producers should have to cut supply too. But they don’t want to share the pain, so they’ve settled on a strategy for weaseling out of it. They want their reductions in output (from weak demand during the pandemic) to count as “production cuts”. They even have a name for this swindle, they call it “organic production cuts”, which means no cuts at all. This is the way hucksters do business not responsible adults.

What does Putin want from this deal?

Price stability. Yes, he’d like to see prices settle somewhere north of $45 per barrel but that’s not going to happen for a while. The combination of a weaker demand (due to the coronavirus) and oversupply (from the Saudis flooding the market) have ensured that prices will remain low for the foreseeable future. Even so, Putin understood what the Saudis were doing by flooding the market, and he knew it wasn’t directed at Russia. The Saudis were trying to persuade US oil producers to stop freeloading and cut production like everyone else. That’s the long and short of it. Check out this excerpt from an article by oil expert, Simon Watkins at oilprice.com:

Did the U.S. and the Saudis Conspire to Push Down Oil Prices?

“Saudi Arabia was continually peeved …(because) its efforts to keep oil prices up through various OPEC and OPEC+ agreements were allowing these very shale producers to make a lot more money than the Saudis, relatively speaking. The reason for this was that U.S. shale producers…. were not bound in to the OPEC/OPEC+ production quotas so could fill the output gaps created by OPEC producers.” (“The Sad Truth About The OPEC+ Production Cut”, Simon Watkins, oilprice.com)

This is what the media fails to tell their readers, that US oil producers– who don’t participate in any collective effort to stabilize prices– have been exploiting OPEC production quotas in order to fatten the bottom line at the expense of others. US producers figured out how to game the system and make a bundle in the process. Is it any wonder why the Saudis were pissed?? Here’s more from the same article:

“This allowed the U.S. a rolling 3-4 million bpd advantage over Saudi in the oil exports game, meaning that it quickly became the world’s number one oil producer…. Hence, Saudi Arabia decided initially to unilaterally announce its intention for the last OPEC+ deal to be much bigger than that which it had pre-agreed with Russia, hoping to ambush the Russians into agreeing. Russia, however, turned around and told Saudi Arabia to figuratively go and reproduce with itself. MbS,… then decided to launch an all-out price war.” (oilprice.com)

So you can see that this really had nothing to do with Russian at all. The Crown Prince was simply frustrated at the way US oil producers were gaming the system, which is why he felt like he had to respond by flooding the market. The obvious target was the US shale oil industry that was taking advantage of the quotas, refusing to cooperate with fellow oil producers and generally freeloading off the existing quota system.

And what’s funny, is that as soon as the Saudis started putting the screws to the US fracking gang, they all scampered off to Washington en masse to beg for help from Papa Trump. Which is why Trump decided to make emergency calls to Moscow and Riyadh to see if he could hash out a deal.

It’s worth noting that domestic oil producers have been involved in other dodgy activities in the past. Check out this excerpt from an article in the Guardian in 2014, the last time oil prices crashed:

“After standing at well over $110 a barrel in the summer, the cost of crude has collapsed. Prices are down by a quarter in the past three months….

Think about how the Obama administration sees the state of the world. It wants Tehran to come to heel over its nuclear programme. It wants Vladimir Putin to back off in eastern Ukraine. But after recent experiences in Iraq and Afghanistan, the White House has no desire to put American boots on the ground. Instead, with the help of its Saudi ally, Washington is trying to drive down the oil price by flooding an already weak market with crude. As the Russians and the Iranians are heavily dependent on oil exports, the assumption is that they will become easier to deal with…

The Saudis did something similar in the mid-1980s. Then, the geopolitical motivation for a move that sent the oil price to below $10 a barrel was to destabilize Saddam Hussein’s regime….

Washington’s willingness to play the oil card stems from the belief that domestic supplies of energy from fracking make it possible for the US to become the world’s biggest oil producer. In a speech last year, Tom Donilon, then Barack Obama’s national security adviser, said the US was now less vulnerable to global oil shocks. The cushion provided by shale oil and gas “affords us a stronger hand in pursuing and implementing our national security goals”. (“Stakes are high as US plays the oil card against Iran and Russia”, The Guardian)

This excerpt shows that Washington is more than willing to use the “oil card” if it helps to achieve its geopolitical objectives. Not surprisingly, good buddy, Saudi Arabia, has historically played a key role in helping to promote those goals. The current incident, however, is the exact opposite. The Saudis aren’t helping the US achieve its objectives, quite the contrary, they’re lashing out in frustration. They feel like they’re being squeezed by Washington (and US producers) and they want to prove that they have the means to fight back. Flooding the market was just MBS’s way of “letting off steam”.

Trump understands this, but he also understands who ultimately calls the shots, which is why he took the unusual step of explicitly warning the Saudis that they’d better shape up and step in line or there’d be hell to pay. Here’s a little background that will help to connect the dots:

“..the deal made in 1945 between the U.S. President Franklin D. Roosevelt and the Saudi King at the time, Abdulaziz, that has defined the relationship between the two countries ever since… the deal that was struck between the two men on board the U.S. Navy cruiser Quincy… was that the U.S. would receive all of the oil supplies it needed for as long as Saudi Arabia had oil in place, in return for which the U.S. would guarantee the security of the ruling House of Saud. The deal has altered slightly ever since the rise of the U.S. shale oil industry and Saudi Arabia’s attempt to destroy it from 2014 to 2016, in that the U.S. still guarantees the security of the House of Saud but it also expects Saudi Arabia not only to supply the U.S. with whatever oil it needs for as long as it can but also – and this is key to everything that has followed – it also allows the U.S. shale industry to continue to function and to grow.

As far as the U.S. is concerned, if t his means that the Saudis lose out to U.S. shale producers by keeping oil prices up but losing out on export opportunities to these U.S. firms then tough..

As U.S. President Donald Trump has made clear whenever he has sensed a lack of understanding on the part of Saudi Arabia for the huge benefit that the U.S. is doing the ruling family: “He [Saudi King Salman] would not last in power for two weeks without the backing of the U.S. military.” (“The Sad Truth About The OPEC+ Production Cut”, Simon Watkins, Oil Price)

Trump felt like he had to remind the Saudis how the system actually works: Washington gives the orders and the Saudi’s obey. Simple, right? In fact, the Crown Prince has already slashed oil production dramatically and is fully complying with Trump’s directives, because he knows if he doesn’t, he’s going to wind up like Saddam Hussein or Muammar Gaddafi.

Meanwhile, US shale oil producers won’t be required to make any cuts at all or, as the New York Times puts it: “It was not immediately clear if the Trump administration made a formal commitment to cut production in the United States.”

Got that? So everyone else cuts production, everyone else sees their revenues shrink, and everyone else pitches-in to put a floor under prices. Everyone except the “exceptional” American oil producers from the exceptional United States. They don’t have to do a damn thing.

Nowhere to run to, nowhere to hide. Oil can't go below zero. Oh, yes, it can.

  Nowhere to run to, nowhere to hide. Oil can't go below zero. Oh, yes, it can.

After the CME Group clarified that point, it created an oil crash unlike anything ever seen in the oil futures contract. While we have had particular oil delivery points for oil, the concept of negative oil opens up a whole new world of risk in the global oil market with comprehensive storage facilities filling up. Storage wars have begun. Those with storage can prosper, if not you have to pay to get rid of your oil.

It also is a devastating blow to the oil industry. The short term in this oil market will be all about demand destruction, yet for a long time, we will look at this time in history as the point that oil production destruction began. It also makes the ability of beleaguered shale companies to borrow money because the concept of negative oil price may be too much risk for many banks to bear. While the back end of the oil curve is signaling that things will get better, the plunge in the May contract and the possibility of sharply negative prices are shaking confidence in even the solid back end of the curve. That inability to have confidence will lead to what could become the most significant pullback in investment in history. The longer-term ramifications of this sub-zero price action are yet to be felt.

President Trump suggested that the sell-off was a "financial squeeze”. "The problem is no one is driving a car anywhere in the world, essentially…Factories are closed, businesses are closed," Trump said. "We had a lot of energy to start with, oil in particular, and then all of a sudden they lost 40%, 50% of their market." He said about OPEC and Russia that, "They have to do more by the market, it's the same thing over here. If the market is the way it is, people are going to slow it down, or they're going to stop. That's going to be automatic, and that's happening," he said.

Overnight reports that Russia is demanding the Russian energy producers cut production by 20% while at the same time saying that yesterday's negative oil price was not a concern. Kremlin spokesman, Dmitry Peskov, reportedly said that the negative oil prices are just a "trading issue" and that "this isn't a reason for overly negative assessments of the current reality.”

All eyes today will be on the June Contract that is giving up the ghost. It tried to stay healthy in the world of negative oil but is losing confidence.  One has to remember that this negative pricing is just the delta in the calculations.

If the lockdown is extended to May end then even the june contract will fall to zero. And, the negativity is That there is a storage cost of $7 then there is insurance of another $5 and then comes the insurance of the shipping costs which is to the tune ranging from $15 to $23. If you add all this up you will straight away get $35 negative. but, all this is only in theory.

Courteous- Kushal Thaker- The Specunomist  

Here Is The Full Explanation Behind Unprecedented Negative Oil Price

How did you end up with negative oil prices yesterday?  This happens when a physical futures contract find no buyers close to or at expiry. 

Let me explain what that means:

A physical contract such as the NYMEX WTI has a delivery point at Cushing, OK, & date, in this occurrence May.  So people who hold the contract at the end of the trading window have to take physical delivery of the oil they bought on the futures market.  This is very rare.

It means that in the last few days of the futures trading cycle, (which is today for this one) speculative or paper futures positions start rolling over to the next contract. This is normally a pretty undramatic affair.

What is happening yesterday is trades or speculators who had bought the contract are finding themselves unable to resell it, and have no storage booked to get delivered the crude in Cushing, OK, where the delivery is specified in the contract.

This means that all the storage in Cushing is booked, and there is no price they can pay to store it, or they are totally inexperienced in this game and are caught holding a contract they did not understand the full physical aspect of as the time clock expires.

The contract roll and liquidity crunch that made the extreme sell-off today possible but it DOESN’T necessarily represent futures market conditions: NYMEX June settled today at $21.13.

The June contract is not out of the woods either: today’s action indicate that physical oil markets at Cushing are not in good shape and that storage is getting very full.

A decline of over 15% in the June contract price points to real worries that the physical stress will continue to reverberate, and will force a lot more production shutdowns during May than the ones announced so far.

So today negative prices are the reflection of dire market conditions for producers, with the hope that demand restart before the middle of May and that the June contract does not face the same fate.

Will It Be An Inflationary Or Deflationary Depression?

At some point, the economy is no longer controlled by individual citizens in the marketplace but by government “planners,” who find they have only one of two alternatives: stop “stimulating” and permit a full-scale credit collapse, or continue stimulating until the dollar loses all value and society breaks down.

Depending on which they choose, we will have a depression characterized by deflation or by hyperinflation.

Deflationary Depression

This is the 1929-style depression, where huge amounts of inflationary credit are wiped out through bank failures, bond defaults, and stock and real-estate crashes.

Before 1913 (the inception of both the Federal Reserve and the income tax), having the dollar pegged to gold (at $20 an ounce) inhibited the scale of monetization.

When depressions of this type occurred, depositors acted quickly to collect their money; they had no illusion that the government would bolster their banks; once the banks ran out of gold, their bank accounts were worthless.

Their quick response and the fact that the federal government could not monetize its deficit spending as freely as it now can forced the market to correct distortions rapidly.

Until the 1930s, depressions were sharp but brief.

They were short because unemployed workers and distressed business owners were forced to lower their prices and change their business methods to avoid starvation.

The 1929 Depression was deeper and more widespread than any before it since the Federal Reserve (by becoming the lender of last resort) allowed banks to maintain far smaller reserves than ever before.

By backing the dollar with Reserve Bank IOUs instead of gold, the money supply could be increased enormously, and large distortions could be built into the economy before a depression liquidated them.

It was far longer than those before it, because government attempted to hold wages and prices at levels few could afford to pay, while its make-work and income-redistribution schemes retarded the rebuilding of capital and the productive employment of labor.

Meanwhile, the government discovered the freedom with which it could have its deficit spending monetized and proceeded to spend at an unprecedented rate to finance the New Deal’s spending programs and World War II.

Since the end of the last depression, there have been numerous small recessions. Since at least the ‘70s, anyone of them could have snowballed into another 1929-style deflation.

Government has been able to forestall a deflation each time, since it has far more power than it did during the ‘30s. But the government’s success so far has linked all the cyclical recessions since the end of World War II into a much larger “supercycle.” Just as each of the past recessions had its moment of truth, so will the current one. And it could well be the turning point for the bigger supercycle as well.

Hyperinflationary Depression

This is the Weimar-style depression, like the one Germany experienced in the early ‘20s. Here, rather than let a collapse of inflationary credit wipe out banks, securities, and real-estate values, the government creates yet more currency and credit to prop things up.

It pumps massive amounts of new purchasing power into the economy to create “demand” (even, or rather, especially among corporate and individual welfare recipients, who produce nothing in return).

The government extends past misallocations of capital, when the economy instead needs to readjust to sustainable patterns of production and consumption.

Hyperinflation could result from overstimulation when the authorities try to boost the economy out of a trough. If they expand the money supply too quickly, it might encourage the trillions of US dollars owned by foreigners to flood back here at once, in a bid for real wealth in competition with domestically held dollars. That would reverse, overnight, the muted inflation figures of the last 40 years, and prices could jump at a 20 percent to 30 percent clip.

It is hard to anticipate all the implications of that happening but, presumably, everyone would panic out of dollars and into real goods.

There would be a wave of bank failures. Possible government reactions would be price controls, withdrawal restrictions, foreign-exchange controls, and many other forms of “people controls.”

This country is arguably unique in having a gigantic long-term debt market; bonds and mortgages are worth several times what the stock market is. If the dollars that debt is denominated in were to evaporate, it would be a world-class disaster.

Previous runaway inflations in other countries have been characterized by the printing of literally tons of paper money. But the US economy is based largely on credit.

Would credit cards be accepted if the dollar were to start losing value at a very high rate? Quite possibly not. In other hyperinflations, there was usually some alternate currency to facilitate trade.

Weimar Germans had substantial amounts of gold coins salted away.

In South American inflations, people simply used US dollars.

In the ex-USSR, dollars (and deutsche marks) practically became the new national currency for a few years.

But what would Americans use?

All this would be an academic discussion, or perhaps an interesting topic for a science-fiction treatment, if the US government were a manageable size, and instead of a “legal tender” currency, “dollar” were just a name for a certain quantity of gold.

But that is not the case, and we have to deal with things as they are.

Which Will it Be?

The current administration, Congress, and the Federal Reserve are confronting a far, far more serious problem than ever in past business cycles.

At the bottom of each past cycle, interest rates were high (bond prices were low), inflation was high, and the stock market was very low.

This set up ideal conditions for recovery, as each of these situations went into reverse.

But now, stocks and bonds are already very high, and inflation is already at (what have come to be accepted as normal) very low levels.

At the same time, the government has far less flexibility than in the past, despite being more powerful than ever.

Most of its revenues are already spent before they come in, and it has a gigantic debt load to service.

If some unexpected shock hits, it will be like watching a tightrope walker over the Grand Canyon during a windstorm.

In their efforts to quell inflation, the authorities could make the supply of credit either too small or too costly.

With as much debt as there is today, the wave of bond and mortgage defaults would cascade through the economy. Loan defaults would wipe out banks, and foreclosure sales would depress prices and wipe out the net worth of individuals.

A corporate bankruptcy can take down its suppliers, its workers, its community, and its lenders as well. Perhaps a scramble to pay debt would result in the wholesale liquidation of assets at distress-sale prices, further reducing everyone’s net worth, even while the dollars they owe gain value.

In their efforts to head off a deflation, the authorities would undoubtedly attempt to supply liquidity by creating more currency and credit. But that would just bring back the inflation scenario.

And world credit and currency markets are far larger than they were during the early ‘80s, when things very nearly collapsed.

The financial problems the government has created have taken on a life of their own, and there is a good chance we’ll have a nasty surprise when the next recovery is slated to occur.

Betting on inflation has been the winning strategy since the bottom of the last depression, but a financial accident could change all that overnight.

The inflationists will almost certainly be right in the long run, but they may get wiped out in the short run.

In any event, the moment of truth is approaching, and there likely will be a titanic struggle between the forces of inflation and the forces of deflation. Each will probably win, but in different areas of the economy.

As a result, we’re likely to see all kinds of prices going up and down, like an elevator with a lunatic at the controls. It will not be a mellow experience.

The History Of Hydroxychloroquine In India

As most of us are already aware, Hydroxychloroquine has already taken the world by storm as a treatment against COVID-19. Every newspaper is talking about it, and all countries are requesting India to supply it. Now, a curious person might wonder why and how this chemical composition is so deeply entrenched in India, and is there any history behind it. Well, there is an interesting history behind it which goes all the way to the Indian king Tipu Sultan’s defeat.

In 1799, when Tipu was defeated by the British, the whole of Mysore Kingdom with Srirangapatnam as Tipu’s capital, came under British control. For the next few days, the British soldiers had a great time celebrating their victory, but within weeks, many started feeling sick due to Malaria, because Srirangapatnam was a highly marshy area with severe mosquito trouble.

The local Indian population had over the centuries, developed self immunity, and also all the spicy food habits also helped to an extent. Whereas the British soldiers and officers who were suddenly exposed to harsh Indian conditions, started bearing the brunt.

To quickly overcome the mosquito menace, the British Army quickly shifted their station from Srirangapatnam to Bangalore (by establishing the Bangalore Cantonment region), which was a welcome change, especially due to cool weather, which the Brits were gravely longing for ever since they had left their shores. But the malaria problem still persisted because Bangalore was also no exception to mosquitoes.

Around the same time in 18th century, European scientists had discovered a chemical composition called “Quinine” which could be used to treat malaria, but it was yet to be extensively tested at large scale. This malaria crisis among British Army came at an opportune time, and thus Quinine was imported in bulk by the Army and distributed to all their soldiers, who were instructed to take regular dosages (even to healthy soldiers) so that they could build immunity. This was followed up in all other British stations throughout India, because every region in India had malaria problem to some extent.

But there was a small problem. Although sick soldiers quickly recovered, many more soldiers who were exposed to harsh conditions of tropical India continued to become sick, because it was later found that they were not taking dosages of Quinine. Why? Because it was very bitter!! So, by avoiding the bitter Quinine, British soldiers were lagging behind on their immunity, thereby making themselves vulnerable to Malaria in the tropical regions of India.

That’s when all the top British officers and scientists started experimenting ways to persuade their soldiers to strictly take these dosages, and during their experiments,  they found that the bitter Quinine mixed with Juniper based liquor, actually turned somewhat into a sweet flavor.

That’s because the molecular structure of the final solution was such that it would almost completely curtail the bitterness of Quinine.

That juniper based liquor was Gin. And the Gin mixed with Quinine was called “Gin & Tonic”, which immediately became an instant hit among British soldiers.

The same British soldiers who were ready to even risk their lives but couldn’t stand the bitterness of Quinine,  started swearing by it daily when they mixed it with Gin. In fact, the Army even started issuing few bottles of Gin along with “tonic water” (Quinine) as part of their monthly ration, so that soldiers could themselves prepare Gin & Tonic and consume them everyday to build immunity.

To cater to the growing demand of gin & other forms of liquor among British soldiers, the British East India company built several local breweries in and around Bengaluru, which could then be transported to all other parts of India. And that’s how, due to innumerable breweries and liquor distillation factories, Bengaluru had already become the pub capital of India way back during British times itself.

Eventually, most of these breweries were handed over from British organizations after Indian independence, to none other than Vittal Mallya (the fugitive Vijay Mallya‘s father), who then led the consortium under the group named United Breweries headquartered in Bengaluru.

Coming back to the topic, that’s how Gin & Tonic became a popular cocktail and is still a popular drink even today. The Quinine, which was called Tonic (without gin), was widely prescribed by Doctors as well, for patients who needed cure for fever or any infection. So, that’s how the word “Tonic” became a colloquial word for “Western medicine” in India.

Over the years, Quinine was developed further into many of its variants and derivatives and widely prescribed by Indian doctors.

One such descendant of Quinine, called Hydroxychloroquine, eventually became the defacto cure for malaria, which is now suddenly the most sought after drug in the world today.

The Ocean Could Be The Ultimate Renewable Energy Source

For all their hype as the biggest and final frontier in clean energy production, tidal and wave power have never quite lived up to their potential. The IEA estimates that we harnessed just 1.2TWh of energy from the world’s vast oceans in 2018--a minuscule fraction of the ~170,000TWh in global primary energy consumption.  This sad situation is not for lack of trying, though. 

More than 70 companies have developed various technologies to generate electricity from ocean tides or the kinetic power of waves, leading to global ocean energy production rising tenfold over the last decade. Yet, most never advance past the pilot stages into full commercialization. 

The sad tale of the leader in the space, Ocean Power Technologies Inc (NASDAQ: OPTT), serves as a sobering reality of the enormous challenge of turning an interesting science project into a profitable business venture. Ocean Power--a company mostly kept alive by government largesse--has crashed 99% over the past three years as it threatens to join the trash heap of tech companies that have experienced more false dawns than Groundhog Day.

But some experts now believe that the time for a Blue Energy revolution has come and new developments in the space could flip the script.

The Ocean Energy Systems (OES), an offshoot of the International Energy Agency, has been working round the clock to pool all the research it can in a bid to achieve large-scale ocean power deployment in the near future.

Source: CNN Money

Riding the Tidal Wave

The 24-member OES, including the U.S., China, most E.U. nations, and India, believes ocean power has the potential to become the Holy Grail of renewable energy due to its sheer potential.

The International Renewable Energy Agency (IRENA), an organization that promotes the widespread adoption and sustainable use of all forms of renewable energy, reckons ocean power has the potential to generate more electricity than either solar or wind power. 

According to IRENA, 2% of the world’s 800, 000 kilometers of coastline exceeds a wave power density of 30 kilowatts per meter (kW/m), with an estimated global technical potential of about 500-gigawatt electrical energy (GWe) based on a conversion efficiency of 40%. In other words, by just utilizing 2% of our coastlines, we can generate 4,383TWh of ocean power annually, enough to meet 16.4% of the world’s electricity needs. The U.K. and U.S. have said ocean energy could provide 20 and 15% of their electricity consumption, respectively.

In comparison, all renewable sources combined accounted for ~11% of the United States’ energy consumption in 2018.

Despite the vast potential, only Scotland currently generates any meaningful amounts of ocean power. 

Scotland has enormous potential thanks to its impressive archipelago of islands with heavy tidal currents that can be easily tapped. Located in the Northern territory of the U.K., the nation now boasts the largest tidal array of underwater turbines in the world. Scotland’s tidal turbines have even exceeded expectations, with the MeyGen company now planning to increase the number of installations vastly.

Other leading countries developing ocean power technologies are Canada and the United Kingdom, both endowed with some of the highest tides anywhere in the world. Canada has a number of tidal energy schemes along its Atlantic coast, primarily in Nova Scotia, where scores of competing companies are testing various prototypes. The U.K. has more than 20 of these projects in the pipeline, some still in the research and development stage, but many now being scaled up for deployment.

Meanwhile, China encourages tidal stream energy by offering a generous feed-in tariff 3x the price of fossil fuels. That’s similar to the rate deployed by countries that are trying to launch solar and wind power. The incentive is high enough that one Chinese company is already feeding ocean power into the main grid profitably.

Ocean Energy Benefits

Ocean power comes with some distinct advantages.

First off, it’s clean and compact, featuring higher energy density than either solar and wind projects. For instance, Sihwa Lake Tidal Power Station in South Korea, the world’s largest tidal project with an installed capacity of 254MW, was easily added to a 12.5km-long seawall that was built in 1994 to protect the coast against flooding. Compare that to the 781.5MW Roscoe wind farm in Texas, which takes up 400km2 of farmland, or the 150MW-Fowler Ridge wind project in Indiana that sits on a 202.3km2 parcel of land.

Even solar farms are usually bigger, such as the Bhadla Industrial Solar Park in Rajasthan, India, that is spread across 45km2 of land or the Tengger Desert Solar Park in China that covers 43km2 This means that even smaller countries with long enough stretches of coastline can use tidal power to compete with bigger, land-rich countries such as the U.S., China and India that can afford to dedicate large tracts of land for solar and wind projects.

Second, tidal power is much more predictable than either solar or wind, which can be extremely intermittent.

Finally, the equipment used in ocean power deployments such as tidal barrages are long-lived concrete structures that can have life spans up to 4x longer than typical solar or wind farms. The La Rance in France, for example, has been operational since 1966 and remains in good working order with 240MW generation capacity.

So, what’s stopping the rest of the world from jumping into the Blue Energy bandwagon?

The Cost Barrier

Money always gets in the way. 

The challenges of harnessing tidal and wave power, though, can be daunting.

Tidal power projects hold some of the loftiest up-front price tags in the renewable energy sector. The aforementioned La Rance cost 620 million francs back in 1966, or more than a billion dollars today after adjusting for inflation while Sihwa Lake Tidal Power Station cost $560m. The proposed Swansea Bay Tidal Lagoon project in the U.K. has been priced at £1.3bn ($1.67bn).

In comparison, The Tengger Desert Solar Park costs around $530m--roughly the same cost as Sihwa for 3.3x as much power. Likewise, the Roscoe Wind Farm cost around $1bn for an output of 781MW, about 1.7x better cost efficiency than Sihwa Lake. Although the long-term generation costs of ocean power projects are relatively good compared to other renewable energy systems, the initial construction costs can make them unachievable for poorer nations.

The second big challenge is the lack of sufficient research. One reason why Ocean Power Technologies has been going nowhere is mainly because it dedicates so little money to R&D. The $3.3M (market cap) company has racked up more than $200 million in debt since its founding in 1984 and spends ~$1.3 million a quarter on R&D. Many tidal power technologies are simply not deployable on an industrial scale, thus limiting the expansion of the energy system.

Of course, this is exactly what OES is trying to change through concerted R&D efforts between nations.

Bright Future

The OES has identified several challenges centered around affordability, reliability, operability, installability, standardization, funding availability, and capacity building that will require to be solved before ocean power can become a mainstream renewable energy source.

The organization, in particular, emphasizes the need for significant cost reductions required for ocean energy technologies to compete successfully with other low-carbon technologies. The European target is to get tidal stream energy down to €0.10 per kilowatt-hour and wave power down to €0.15 by 2030, which would also make them competitive with fossil fuels if these traditional sources were obliged to pay for capture and storage of the carbon dioxide they generate.

Unfortunately, the United States has no tidal power plants mainly because it lacks an abundance of sites where the technology can be economically harnessed. The country will have to be content with other low-carbon technologies such as solar, wind, and biofuels where it has better competitive advantage.