Shares of tidal energy company Simec Atlantis Energy Ltd. jumped 81% after auction win

Shares of SIMEC Atlantis Energy Ltd (AIM:SAE, OTC:SMAYF) rose 81% today after winning a contract to supply tidal power at what it says will be the largest site in this guy in the world.

The UK Department for Business, Energy and Industrial Strategy today announced the winners of the fourth ‘Contracts for Difference’ auction.

Four tidal energy projects have won contracts that guarantee producers a floor price and assure them a stable price for their production for more than a decade.

Managing Director Graham Reid said the contract for Simec’s MeyGen tidal project gives the company a pathway to develop the comprehensive tidal stream network, which has been planned for more than a decade.

“The significance of today’s announcement cannot be understated,” he said.

“We will deliver the world’s first commercial-scale tidal array and we now have a clear runaway, with future CfD cycles, to deliver the full c400MW of tidal power generation to MeyGen.”

Simec secured a floor price, known as a ‘strike’ price, for part of the output from the MeyGen tidal power project off the coast of Scotland at a price of £178.54 per megawatt hour.

This price is guaranteed for a period of 15 years from 2027, which means that if the wholesale cost of electricity falls below this price during this period, the government will pay the producer an amount to supplement his income at this amount.

On the other hand, MeyGen will be required to refund money if wholesale prices increase.

The company said it will now work “to achieve financial close of this next phase of the project by 2024, with operation commencing in 2027.”

Tidal power is one of the most stable forms of renewable energy because it is generated by predictable changes in the tide, but the technology is still very nascent.

At full capacity, the MeyGen project would have an installed capacity of 398 MW, making it the largest commercial power plant of its type.

Simec has secured enough grid capacity to serve almost a third of this potential, by installing an undersea hub that will transmit electricity via a single export cable.

According to its website, the company has leased enough land between Scotland’s northernmost coast and the island of Stroma to install a tidal stream project of this size, which will be delivered in three phases.

The first phase of the project is already operational and the second phase is expected to reach 80 MW, according to its website.