Cheaper than Nuclear - Tidal stream cost reduction potential

The levelised cost of energy (LCOE) of tidal stream technology is forecast to reduce to ￡80 by 2035, with an associated buildout?of ~1.5GW in the UK and France.

By?Ciaran Frost ,?Offshore Renewable Energy Catapult

February 2023

Introduction

In the?previous blog ?of the series,?Simon Stark ?from the?Dutch Marine Energy Centre (DMEC) ?examined buildout scenarios for tidal stream energy (TSE) and wave energy deployments by applying historic offshore wind deployment rates. DMEC’s analysis showed that both wave and tidal stream can drop below €100/MWh (approx. ￡88/MWh) if the aggressive progress of offshore wind can be replicated.

We continue along this cost reduction theme, this time focusing solely on TSE. The technology is courting significant attention, particularly in the UK and France, due to the cost reduction potential and the highly predictable energy output that can reduce costs and supply/demand mismatch in the wider electricity network.

Techno-economic analysis has been conducted as part of the pan UK-French Tidal Stream Industry Energiser Project, known as?TIGER . This €48M project, the largest ever Interreg funded project, has the aim of accelerating cost reduction, increasing knowledge and invigorating supply chains. This is being achieved by an 18-partner consortium, who are focussed on getting turbines in the water and supporting consenting at six tidal sites that are under development. Four of the technologies that have been deployed in real sea conditions by TIGER partners are shown below.

Method

Using real cost and performance data from technology providers we have devised a levelized cost of energy (LCOE) trajectory for TSE.?LCOE? is the most widely used metric for comparing different electricity generating technologies, and is defined as the price that electricity would need to be sold at to break even financially, considering the costs associated with the project and discounting them into the future.

The trajectory considers three different TSE technologies: a fixed bottom horizontal axis, floating horizontal axis and a fixed bottom vertical axis. We considered utility scale devices of ~2MW. To these we applied baseline, optimistic and pessimistic scenarios,?to account for uncertainties in costs, weighted average cost of capital (used as the discount rate) and learning rates.

Costs were combined with global market projections to determine LCOE using a learning rated based approach. This assumes that costs reduce by a fixed proportion as capacity doubles?and has been witnessed in other technologies such as solar and offshore wind .

The results

Our LCOE trajectory is shown below. The blue band represents the standard deviation across the nine scenarios examined. We consider this an indicative uncertainty estimate to account for differences in site properties, flow speeds and specific technologies.

The LCOE is plotted against the deployment trajectories assumed for the UK and French markets (the bars at the bottom). By 2035 we assumed that ~900MW had been installed in the UK, in alignment with the Marine Energy Council’s government?ask , and ~800MW in France which reflects discussions between industry and the French Government.

From our analysis we determined the following LCOE milestones (in ￡2012 prices, consistent with the UK CfD base year):

·???￡190 ± 50 /MWh by 2026

·???￡120 ± 40 /MWh by 2030

·???￡80 ± 30 /MWh by 2035

The 2035 estimate aligns well with DMEC’s estimate as shown in the?previous blog ?(€100/MWh, about ￡88/MWh). This would take TSE below new build nuclear in the UK.

While the present cost of ~￡260/MWh seems high, it should be noted that this is based on currently available technology at small array scale (assumed 4 devices). Such projects cannot access cost savings associated with economies of volume and serial production. This level is also very competitive with the current wholesale electricity prices in the UK, which have been above this level for significant periods during the last year due to the current energy crisis.

Concluding thoughts

TSE represents an exciting opportunity for both the UK and France who both have multi GW potential (11.5GW in the UK ,?4.5GW in France ). Real data from technology providers was used to derive a third party, industry representative LCOE reduction trajectory. It is important that the industry continues to reduce costs to maintain political support and make it a more attractive proposition for private investment.?

While not discussed here,?the predictability of the technology offers a unique way to harness firm, reliable power ?with high local content and in a way that compliments other technologies like wind, solar and nuclear. In the next blog,?Dr Shona Pennock ?from the University of Edinburgh will offer further insights into these energy system benefits.

Marine Energy series: 'Three reasons why marine energy will be a key contributor to European energy security', by?Ocean Energy Europe ,?Offshore Renewable Energy Catapult ,?The University of Edinburgh ?and?DMEC (Dutch Marine Energy Centre)

This blog is based on a recently published study by ORE Catapult entitled Cost Reduction Pathway of Tidal Stream Energy in the UK and France. This was funded through the TIGER project. For the press release and to get a copy of the report?click here .