Review: OREC Tidal Stream and Wave Energy Cost Reduction and Industrial Benefit
It is recognised and accepted that cost reduction is required for wave and tidal energy devices, in order to become a competitive part of the energy mix. ORE Catapult have spent a great deal of time assessing the landscape associated with these devices and the pathways to cost reductions. This report took a great deal of time to come to fruition and understandably so; it has the potential to significantly influence government policy and device developer pathways. We will run through the highlights and headlines from the report and discuss the potential future of both wave and tidal stream devices. (OREC Report)
As much as the headline figures of £300/MWh currently, £150/MWh by the time 100MW has been deployed and £90/MWh once 1GW (contributing ~3TWh per year to the grid) has been deployed are encouraging, they mask some of the other essential points hidden within this report. The most relevant of which is that in order to meet carbon budgets, with predicted rises in energy consumption, there is a potential shortfall of 100TWh per year by 2030. Where is this energy going to come from? Renewables (and nuclear) are realistically the only options in conjunction with energy efficiency. Whilst the lifetime cost of offshore wind is reducing significantly, it would be foolish to rely on solely one source of renewable energy. Add in the enhanced predictability of wave energy and especially tidal energy and they have the potential to fulfil a decent proportion of the energy mix.
In combination with this, the opportunity to create a world leading industry, employing thousands of people is a huge incentive. Contribution to the local economy is a key message for the development of marine renewables around the world. This report does note the maturing infrastructure in the UK in clustered locations around test sites, such as Orkney (EMEC), Pembroke (Pembrokeshire Demo Zone), and Cornwall (Wave Hub). This development in coastal towns is a key selling point to local governments and genuinely does boost and develop local economies.
The focus of the report was the tidal stream industry, due to its more established nature than wave energy (i.e. greater global deployed MW and deployment in arrays). In the context of the above paragraph, marine renewables have the potential to provide the energy, but is there a demonstrable pathway to cost reduction?
At a high level the news is promising - there is a pathway to cost reduction. That pathway is what those in the industry have been saying for some time - development with each project - or as the OREC report puts it "Learning by doing". Essentially as the understanding of the materials, performance, marine operations etc. improves, so will key LCOE factors (performance, reliability, availability, CAPEX & OPEX). It is essentially the model that has been observed in the wind industry; as the understanding of offshore foundations improved, the cost of installing them reduced, as devices started acquiring operating hours, design refinements were introduced and reliability improved etc.
There will also be some commercial improvements (also a big factor in offshore wind - blog link) with the deployment of more MW. Investors will gain confidence and the cost of capital (an important factor) will reduce - a factor perhaps underestimated by this OREC report. Similarly, the risk sharing in offshore operations will change enabling more cost effective contract solutions for installation and maintenance activities.
For more on tidal energy see our blog posts here
In this report wave energy has been assumed to lag 10 years behind tidal stream energy - is this a fair assessment? While we think there is no argument against the fact that wave energy is behind tidal in terms of commercial development, ten years may be a little excessive. Given the transferable skills from marine operations, installation of moored devices, consenting, environmental surveys and cable installation the acceleration in development of the wave industry may be greater than that of tidal.
The global potential of wave has been identified as significantly greater than tidal stream energy and the cost reduction pathway is thought to be very similar. As much as comparisons can be drawn with offshore wind, the ability to exploit the size advantage offshore is less applicable to wave (and tidal) devices due to water depth restrictions and device handling. On the other hand the wind industry was more mature by the time it moved offshore and saw 60% cost reduction in 10 years, so with more engineering advancements to come the potential for wave energy cost reduction over the next decade is immense.
For more on wave energy see our blog posts here
This report has portrayed the sector in a positive light; there will be a carbon saving energy shortfall, marine energy has the potential to exploit that with costs reducing all the time and, importantly demonstrating the ability tot create a profitable industry for the UK (£95m net income per year by 2030). Given these high level observations there is hope for government support of initial arrays as the cost of energy begins to reduce.
Even without support, the industry is likely to grow; it is already in a place to compete with diesel generators on remote islands and fish farms, often in regions of the world with good wave and tidal resource (Indonesia, Philippines, remote islands of Canada). Most of the assumptions in this report are conservative and there is potential to reduce the cost of energy further with more advanced learning rates, but these will only occur if both wave and tidal industries are willing to become more collaborative and share knowledge and experiences (something we love doing via projects such as FoDTEC) to help the whole industry mature more quickly.