Policy strategies for advancing the marine and hydrokinetic energy industry

Marine and hydrokinetic (MHK) electricity generation systems are one of the newest technologies to emerge in the renewable energy industry. In order for the MHK industry in the United States to develop and become competitive with fossil fuels and more mature renewable energy technologies, it needs to have a supportive policy environment. Much of the past success of renewable energy technologies (like wind and solar) can be attributed to government revenue support policies (e.g. tax credits and grants). Many of these policies have not yet been offered to the MHK industry or are not designed to adequately accommodate the unique characteristics of MHK projects. This analysis focuses on identifying opportunities for enhancing or restructuring the production tax credit (PTC), investment tax credit (ITC), and cash grants to optimize the potential benefits to the MHK industry. An extensive literature review was conducted to compare the policy experiences of other, more mature, renewable energy technologies. Similarities were drawn between MHK and those technologies to develop a set of recommended strategies for accelerating the development of the MHK industry in the United States. The results of the analysis revealed that the treasury cash grant is the ideal incentive policy for ensuring optimal growth opportunities for the MHK industry. The next best policy option is a 5-10 year transitional program from a 30% ITC to a 2.2 ¢/kWh PTC, based on a "switch-over" installed cost target of approximately $1.65 million/MW (assuming a 7.5% discount rate). Additionally, the policies will be most beneficial if they are implemented through a stable, long-term framework that includes regular adjustments to account for changing economic conditions and fuel prices. These policy options will provide the best opportunity for increasing MHK's competitiveness with other renewable energy technologies and fossil fuels.