You might expect that an island nation offering substantial grants through a wave and tidal energy grant scheme would have applicants queueing up. But a £50 million fund has succeeded in attracting precisely two applications - and both were rejected.

The Marine Renewables Deployment Fund was condemned by business groups yesterday as a failure. Instead of tempting companies to defray part of their costs with taxpayers’ money, ministers made the qualifying conditions too tough, analysts concluded. It was now likely that companies would shift operations to more supportive countries.

This failure to offer sufficient incentives was identified in a report on low-carbon technologies by EEF, a manufacturers’ organisation, and the business consultancy Deloitte.

Officials started the fund with £50 million in 2005 as part of the Government’s drive to increase the proportion of energy supplies from low-carbon and renewable resources. Reducing the reliance on fossil-fuel energy sources was seen as imperative because of the need to lower the greenhouse gas emissions blamed for man-made climate change.

Most of the wave and tidal technology fund – £42 million – was for grants to technologies that had gone beyond the initial research and development stage. To be eligible companies needed to have had full-scale devices operating in the sea.

Jane Lodge, the head of UK manufacturing at Deloitte, said: “This is not joined-up thinking by the Government. It is setting targets to reduce emissions but not helping progress on technology to deliver those targets. In other countries it is much easier to get grants. It is ridiculous if we are lagging behind in wave technology as an island nation.”

Despite the potential richness of resources in green energy, including wind, tidal and wave energy supplies, in 2005 Britain contributed only 0.01 per cent of its gross national product to research and development in energy. This was less than any other G7 nation. Last month, however, ministers announced a feasibility study into creating a barrage across the River Severn, where the strong tides could generate almost 5 per cent of the electricity in Britain.

The authors found that Britain possesses the best marine energy resources in Europe and that there could be revenues of between £300 million and £900 million by 2020. Britain also has more businesses engaged in developing marine energy devices than any other country. They forecast that Britain’s total environment industry will provide a million jobs by 2050, a 150 per cent rise from the 400,000 today, and estimated that by 2050 the climate-change industry could be worth £1.5 trillion globally.

As an example of attractive incentives the report cited the Portuguese offer to marine energy producers of a fixed premium price for their electricity for 12 years.

Roger Salomone, energy adviser at the EEF, said that the lack of grants issued by the fund brought into question whether the money was being used wisely.

A spokesman for the Department for Business, which administers the marine renewables fund, said: “The department is hopeful that there will be further applications in the coming year which will meet the eligibility criteria.”

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