WindEconomics: Competition from marine renewables

UK: The UK is well placed to exploit marine renewable energies, and a substantial amount of work is in progress on several options.

Tidal lagoons

An independent review, commissioned by the UK government, of the prospects for tidal lagoon projects, was published in mid-January. The review looked at a number of proposals, in particular one by Tidal Lagoon Power (TLP) for a tidal lagoon in Swansea Bay, Wales.

The author, a former energy minister, said: "My conclusion is that tidal lagoons would help deliver security of supply; they would assist in delivering our decarbonisation commitments; and they would bring real and substantial opportunities for the UK supply chain. I have also concluded that they could play a competitive role as part of the UK's energy mix alongside low-carbon energy from nuclear and offshore wind."

The government is now considering the report and will respond in due course. The project has local support, and the technology - a breakwater and hydro turbines - is not new. The downside is simply the high electricity cost, if measured in conventional terms.

Tidal lagoons work by using a breakwater to impound an area of water in the sea or a tidal estuary and use the difference in the rise and fall of the water to drive turbines in the breakwater.

The Swansea Bay proposal envisages a 10km U-shaped breakwater that includes 16 7-metre diameter turbines with a maximum output of 320MW. Annual electricity production would be 570GWh and the estimated cost of the project is £1.3 billion (€1.5 billion).

Tidal Lagoon Power argues that a conventional cost-of-energy calculation fails to account for the long life of the project — estimated at 90 years.

They have devised an "energy cost to the consumer over lifetime". This is the net present value of the extra costs, above the wholesale price of electricity, over the life of the plant, per megawatt hour of the electricity generated.

They calculate this "cost over lifetime" for the Swansea Bay project as £25.78/MWh (€29.89/MWh) - exactly the same as the cost of the new nuclear power station at Hinkley Point.

The onshore wind contracts for 2019 would be cheaper, at £20/MWh, and other estimates are shown on the chart . The corresponding cost of a bigger tidal project in Cardiff Bay is estimated at £7.8/MWh.

This latter project would benefit from economies of scale and also from the experience gained if the Swansea project were to be built first.

Wave and tidal stream

The UK government is also supporting wave-energy and tidal-stream energy projects.

The country has three test facilities — in north Devon, Pembrokeshire and the Orkney Islands — where prototypes are being tested.

A database maintained by RenewableUK lists 56 tidal projects and 33 wave-energy projects in the UK, operating and proposed.

Wave-energy research is also under way in Portugal, Australia, India and the US, and there is a wide variety of devices that convert the oscillatory motion of the waves into rotary motion that can be used for electricity production.

Tidal-stream technology involves placing tidal turbines in fast-flowing tidal streams and does not require any major civil structures, such as barrages or breakwaters.

The world's first large-scale tidal energy farm launched in Scotland with plans for a final capacity of 398MW from 269 turbines. The initial phase will consist of four 1.5MW turbines, each with blades 16 metres in diameter, to be installed in the waters off the north coast of Scotland between Caithness and Orkney.

Tidal stream projects are also being researched in Australia and New Zealand.

In November 2016, the UK Department for Business Energy and Industrial Strategy (BEIS) announced details of strike prices for "less established" technologies, including offshore wind, wave and tidal-stream technologies.

The aim of this strategy is to give developers cost targets and the proposed levels for offshore wind, wave and tidal stream are shown in the table.

It is clear that the marine technologies are unlikely to undercut offshore wind for some time, and the latter may come down more rapidly than these prices suggest in the light of recent contracts in Denmark and the Netherlands.

Financing is key to electricity prices

Following the news of a nuclear power project in Finland in the December issue, another project, this time in Hungary, has recently been announced, although "state aid" clearance is awaited from the EU. The levelised cost of energy — €55/MWh — is similar to the Finnish project. The gross output of the plant is 2.4GW and the estimated total cost around €12 billion. This makes the capital cost per kilowatt very similar to the cost of the controversial UK Hinkley Point C project.

The low-cost electricity is made possible by the provision of a €10 billion loan from Russia for 21 years, with an interest rate "below 4%" for 11 years, before stepping up to 4.5%, then 4.95%.

For comparison, the index-linked price of electricity from the UK project has now crept up to around €110/MWh.

This illustrates the crucial role played by the financial arrangements surrounding the electricity costs of technologies that are capital intensive, such as wind and nuclear.

The UK nuclear project benefits from a premium price for 35 years, which brings down the cost of energy by more than 10% compared with the price that would need to be charged if the repayment term was 20 years.

At a glance — This month's report conclusions

The role of tidal Lagoons. Final report. Charles Hendry, December 2016 Independent analysis of Tidal Lagoon Power's proposals for projects on the west coast of England and Wales concludes that tidal lagoons could play a competitive role as part of the UK's energy mix alongside nuclear and offshore wind.

The New Power Cost League Table; a clear view of the consumer cost of new build power stations. Tidal Lagoon Power, July 2016 Evaluates electricity-generating technologies on the basis of the additional cost to the consumer. Onshore and offshore wind both cheaper than proposed tidal project in Swansea Bay, but dearer than larger project in Cardiff Bay.