1. tim.stallard@manchester.ac.ukEconomic Assessment of Large-Scale Marine Energy Deployment 1/17 Economic Assessment of Large- Scale Wave Energy Deployment HMRC Marine Energy Economics Forum Monday 13 th June 2011 Dr Tim Stallard School of Mechanical, Aerospace and Civil Engineering University of Manchester.

2. Content Background Economic Assessments of Wave Energy Projects The EQUIMAR protocols Attaining a levelised cost of €50/MWh –Implications for expenditure Site & device considerations –Expenditure per device –Idealised devices –Site accessibility Summary tim.stallard@manchester.ac.ukEconomic Assessment of Large-Scale Marine Energy Deployment 2/17

3. Marine Energy Cost Estimates tim.stallard@manchester.ac.ukEconomic Assessment of Large-Scale Marine Energy Deployment 3/17 CAPEX & Cost of Electricity (COE) estimates from 14 publications 2001 – 2011. - Includes ‘Wave’, ‘Tidal-Stream’ & ‘Marine’ - Pre 2010 data adjusted by 3% per annum. - All years, exchange rate 1.65US$ = 1GBP. COE reduction typically inferred by Learning Curve approach.

4. Economic Assessments Facilitate fair comparison of alternative marine technologies for large-scale deployment. (e.g. 100 MW farms) To provide a summary measure of economic viability of an energy generating option to allow comparison to alternative options. Economic Assessment of a Project - Standard procedure for determining economic indicators - Identify the underlying processes that influence cost and revenue - Account for uncertainty consistent with the level of development To provide comparison between electricity generating options (e.g. between individual wave or tidal technologies). Economic Assessment of a Technology - Quantify limits to performance and to cost reductions - Quantify range of possible cost variations A B tim.stallard@manchester.ac.ukEconomic Assessment of Large-Scale Marine Energy Deployment 4/17

5. Marine Energy Project Assessment tim.stallard@manchester.ac.ukEconomic Assessment of Large-Scale Marine Energy Deployment 5/17 Net Present Value indicates viability. Also assess project specific risks: Identify: Factors, or events, that could: - alter the quantity or unit cost of an expenditure item or - alter the magnitude or value of energy production. Quantify: The impact of these factors on the measures of economic viability. Mitigate: Explain measures taken to limit each risk.

6. EquiMar Protocol IIIA 1. Capital Expenditures 4. Risk Assessment 2. Operating Expenditures 3. Revenue 5. Project Assessment Objective / Process / Method for each stage Identifies: - major items of capital expenditure (excluding device component costs) - factors that affect periodic expenditures - factors that affect revenue Describes: - framework for assessing project risks Economic assessment produces: - a summary measure of viability (NPV) - a description of risks that would alter the outcome of the assessment. tim.stallard@manchester.ac.ukEconomic Assessment of Large-Scale Marine Energy Deployment 6/17

7. Expenditure: to attain €50/MWh tim.stallard@manchester.ac.ukEconomic Assessment of Large-Scale Marine Energy Deployment 7/17 Project generates average output of 100 MW. Require NPV of Revenue > NPV of all Expenditures

8. Expenditure: Site Specific tim.stallard@manchester.ac.ukEconomic Assessment of Large-Scale Marine Energy Deployment 8/17 36 kW/m 35 kW/m 5 kW/m 15 kW/m 27 kW/m 15 kW/m 10 kW/m 49 kW/m Sea-state scatter plots for 8 sites (HSE, 2001)

9. Expenditure: per Device tim.stallard@manchester.ac.ukEconomic Assessment of Large-Scale Marine Energy Deployment 9/17 Number of devices in farm: dictated by power output per device Type I: Tuned to all frequencies Type II: Tuned to site peak frequency Z P Point Absorber Limit

10. Expenditure: per Device tim.stallard@manchester.ac.ukEconomic Assessment of Large-Scale Marine Energy Deployment 10/17 Device: Optimal output at peak period Resource: HSE (2001), 8 sites All projects COE = 50 €/MWh Cable: site to shore transmission estimates based on distance & rated power (Boehme et al., 2006) OPEX: 3% CAPEX (assumed) OPEX: 8% CAPEX (assumed) Number of devices in farm: dictated by power output per device Type I: Tuned to all frequencies Type II: Tuned to site peak frequency OPEX: Sensitive to site-accessibility? Point Absorber Limit CAPEX per device < ~ €0.70 – 1.5 M

11. OPEX: site & device dependent tim.stallard@manchester.ac.ukEconomic Assessment of Large-Scale Marine Energy Deployment 11/17 Vessel cost for installation and maintenance: large, uncertain expenditure -Site dependent: distance to site, duration of operational conditions -WEC dependent: frequency of failure, duration of work -Vessel dependent: speed, rental cost, operational conditions -If all devices similar reliability e.g. 1 maintenance visit per device per annum VesselCost ~ (T Transit + T Activity + T Waiting ) Rate VesselCost = (T Available ) Rate

12. Monthly (in)accessibility tim.stallard@manchester.ac.ukEconomic Assessment of Large-Scale Marine Energy Deployment 12/17 If vessel requires: Hs < 2.0 m: 1 to 2 days for each day of operational conditions Wave Site Average power ~ 23 kW/m From statistical analysis of monthly scatter plots. Weibull method, BMT (2003) Tidal Site, U MAX ~ 2.5 m/s From time-series analysis of 1-decade of wind, wave and current speed data. Hs < 1.5 m: 1 to 3.5 days for each day of operational conditions

13. Access Constraints: Tidal Site tim.stallard@manchester.ac.ukEconomic Assessment of Large-Scale Marine Energy Deployment 13/17 Installation whilst U c < 1.33 m/s 28 devices (~ 14 MW) in six months 100 MW capacity if install 7 devices per 24 hr window Installation whilst U c < 1.13 m/s 15 devices (~7.5 MW) in six months 100 MW capacity if install 14 devices per 24 hr window Number of installations per Month

14. Access Constraints: Wave sites tim.stallard@manchester.ac.ukEconomic Assessment of Large-Scale Marine Energy Deployment 14/17 Average waiting required for 1-day and 2-day weather windows ( H s < 2 m) 1020304050 Wave power density (very approx.) kW/m For site Hs > 2 m, 3+ days extra vessel time required for each day of operation

15. Vessel Expenditure tim.stallard@manchester.ac.ukEconomic Assessment of Large-Scale Marine Energy Deployment 15/11 €10k/day: 1.0% to 2.5% CAPEX €20k/day: 1.5% to 3.5% CAPEX Device: Optimal output at peak period Resource: HSE (2001), 8 sites All projects COE = 50 €/MWh Cable: site to shore transmission estimates based on distance & rated power (Boehme et al., 2006) OPEX: Vessel Cost only… 1 day maintenance per device Site-to-shore transit time Site specific waiting time €50 / MWh IF CAPEX per device < ~ €2.25 M (sites with 35-50 kW/m) CAPEX per device < ~ €1 M (sites with 15-20 kW/m)

16. Summary Project assessment: –Summary measure for project comparison: Net Present Value (NPV) –Must also identify risks and mitigate Expenditure that allows COE < 50 €/MWh –CAPEX less than £1.2M / MW approx. –Vessel expenditure includes 2 – 6 days waiting per day of use. –CAPEX per site-tuned device less than: site WECVessels only8% opex 15-20 kW/msite-tuned, €1 M€0.6 M 35-50 kW/msite-tuned, €2.25 M€1 M Single point absorber devices considered. tim.stallard@manchester.ac.ukEconomic Assessment of Large-Scale Marine Energy Deployment 16/17

17. Further Information www.equimar.org D7.3.1: WEC support structure design & cost study (ODE) Stallard, Harrison, Ricci and Villate. Economic Assessment of Large- Scale Marine Energy. 8 th EWTEC, 2009. D7.3.3: Review of cost reduction processes D7.4.1-2: Analysis of site access constraints Economic Assessment of Marine Energy Projects. Chapter IIIA, The EQUIMAR Protocols, Ed. Smith et al. 2011. –Including risk assessment to identify factors that would change outcome of Project Assessment Also see:www.tiny.cc/StallardTimwww.tiny.cc/StallardTim www.manchester-uk.academia.edu/TimStallard tim.stallard@manchester.ac.ukEconomic Assessment of Large-Scale Marine Energy Deployment 17/17

18. Notes tim.stallard@manchester.ac.ukEconomic Assessment of Large-Scale Marine Energy Deployment 18/11

19. Risk & Mitigation tim.stallard@manchester.ac.ukEconomic Assessment of Large-Scale Marine Energy Deployment 19/11 Factor / EventMitigation Energy production below predictions - Resource different to predictionsResource Accuracy (I.A) - Performance below prediction in known conditions. Testing II.A – II.C (developer), Warranty to specification (investor). Availability below prediction - Severity of resource extremesResource Accuracy (I.A) - Lower reliability than predictedTesting II.A – II.C (developer), Warranty to specification (investor). Value of generated electricity lower than predicted Inaccurate prediction of outputTesting II.A – II.C (developer), Warranty to specification (investor). Market value (€/kWh) changesRisk for all projects over same period Incentives (e.g. political) e.g. Revenue risks

20. Cost Changes: Infrastructure tim.stallard@manchester.ac.ukEconomic Assessment of Large-Scale Marine Energy Deployment 20/11 Scale of project (projects at the same time) –Supply of station keeping structures –Vessel use Elapsed time (projects at different times) –Procurement and process costs Experience of technology (projects at different scale of sector development) –Standardisation, process efficiency

21. CAPEX and expected reductions with increased project scale Capital Cost tim.stallard@manchester.ac.ukEconomic Assessment of Large-Scale Marine Energy Deployment 21/11 TOTAL Reduction: A: -20.6% B: -9.7% C: -18.0% D: -10.5% Source: Equimar workshop & Survey, 2008/9 -50% -30% +5%