European Seafloor Observatories Implementation Model

WP6. Implementation Model

The technical feasibility of the CELTNET cabled observatory infrastructure has been established thanks to a technical design study by Alcatel Submarine Networks based on field proven solutions. The observatory architecture has been refined by Ifremer to present general aspects of the system and link them to the scientific specifications evolved by the ESONET project. A robust, ring design, repeater driven backbone cable that services primary nodes through branching units and spur cables is proposed to provide a link from shore to the remote deep sea sites. The capacity envisaged is 2 Gigabit Ethernet (GigE) signals per node. This signal can be easily upgraded with existing technologies up to 8 GigE per node. An upgrade could be made on a node by node basis. The nodes will be serviceable by ROV equipped support vessels using procedures established by the submarine cable industry, oil exploration industry and the oceanographic institutes.

The financial value of CELTNET cannot be accurately defined in a standard cost benefit analysis exercise because it involves the application of new technology whose commercial benefit is difficult to quantify. CELTNET will contribute to risk reduction of impacts on society from unusual weather events as a result of climate change. The increased demand for climate change data to support government policy decisions and insurance company risk analysis can be satisfied by cabled ocean observatories. Climate change researchers will use cabled observatory infrastructure because of the superior quality and real time availability of the data. Weather-related catastrophes dominated events in 2005, and accounted for 97% of the approximately 650 natural hazard loss events recorded. Insurance loss amounts reached unprecedented levels, with insured losses of US$ 92bn and overall losses as high as US$ 210bn. Data from cabled ocean observatories will contribute to the reduction of insurance company exposure to losses and to the safety of coastal communities exposed to the risk of storm surge and unusual weather events.

The primary risks associated with the seafloor observatory design, construction and operation have been identified and addressed in the model agreements and contracts provided. The documents include a Pre-Qualification Questionnaire, an Invitation to Participate in Competitive Dialogue and a Draft Contract to plan, manufacture, supply, install, assemble and test the CELTNET infrastructure on a fixed price, turnkey date certain basis. Planning and environmental issues for CELTNET have been examined. A partnership option is proposed whereby Marine Institute1 can benefit from certain statutory rights available solely to the local authority. This option would reduce the risk of cost and time delays associated with objections to planning applications and acquisition of way leave for cable routes on shore.

A business structure was developed based on the forgoing assessment of risks. The ESONET partners could establish a foundation that becomes the framework for the commissioning and ownership of the ESONET ocean observatory sites identified around Europe. The framework would be governed by a heads of agreement or memorandum of understanding. A Special Purpose Vehicle (SPV) would be set up to build and operate each observatory site according to the outline specifications provided by ESONET. This is the entity in which individual project assets are vested and which arranges and assembles project financing. A separate shareholders agreement would apply to each SPV. The shareholders agreement between the relevant ESONET Foundation members would determine such matters as capital contributions, ownership interests, profit participation and project roles and responsibilities. Several business models for managing scientific infrastructure were examined to see if a similar model to the one proposed in Report D7 had already been implemented. ECORD was identified as an appropriate working business model that could be adopted by ESONET to manage the ocean observatory infrastructure.

A financial modelling workbook was developed to allow each ESONET partner to model the financing of construction and operation of each ocean observatory site. The model allows assumptions to be made about capital costs, node deployment costs, operating and maintenance costs, senior debt facility, levels of capital grant, revenue generated, number and timing of scientific payloads deployed etc. The financial model was run for CELTNET based on the new evaluation of costs provided by Ifremer. A model run for the state of the art design with a reduced number of nodes and 70% grant aid will cover its costs (operating and debt service) within 5 years of operation. This assumes that CELTNET makes no contribution to the cost of scientific instruments. The potential revenue of €5m per annum within 5 years of operation is considered realistic given that the estimated average current yearly EU spend on oceanographic data acquisition by research institutes is at least €1.3m. A ten year cash flow forecast is included in the financial model.

The scientific justification and the technical feasibility of CELTNET is established. A business model for implementation has been proposed and a working example identified. The capital and operating cost and potential revenue generation for CELTNET has been investigated and the level of senior debt with grant aid identified.

  • The following recommendations are proposed:
  • The ESONET members should set up the ESONET Foundation (EOOA) to initiate the implementation of observatories using the model Heads of Agreement. The Foundation can become the lobbying body for funding of the first observatory. This process is underway via ESONET NoE and EMSO.
  • Given the expected long lead times Marine Institute should consider initiating EIA and planning applications for the proposed CELTNET observatory.
  • The ESONET members should lobby their relevant government department to commit some grant aid capital funding for construction of a seafloor observatory within their jurisdiction. This process is underway via ESONET NoE and EMSO.
  • The ESONET Foundation should now lobby EIB to ascertain the level of financing that is available from European Technology Platforms.
  • The financial and legal models developed within ESONIM should be provided to the ESONET NoE partners to develop models for a number of European ocean observatory sites including sites that have very different characteristics to the CELTNET site (e.g. Standalone or Emergency Response)

To view the ESONIM final report please click here.