Select Committee on Science and Technology Appendices to the Minutes of Evidence


APPENDIX 35

Supplementary memorandum submitted by Ocean Power Delivery Ltd

PREDICTED GENERATING COSTS FOR THE PELAMIS WEC SYSTEM

  This document detailing the predicted price of energy from the Pelamis WEC system is issued as a supplement to the written evidence submitted by OPD to the above inquiry.

SUMMARY OF PREDICTED ENERGY PRICES

  Initial and onward energy-price for the Pelamis system are predicted to be as follows:

Table 1—Energy Price Summary

System
Anticipated
date
Energy sale
price (p/kWh)
Scheme life
(years)
Discount rate
assumed (%)
1.Scottish Renewables Order system
(2x400kW)
2002
6.9
15
2.First~7.5MW demonstration scheme
(12x650kW)
2003
6.5
15
8%
3.First~25 MW wave-farm installation
(39x650kW)
2004-05
4.7
5.9
15
15
8%
15%
4.Costs for 25MW installation by 2010
2010
2.4-3.4
3.0-4.3
20
20
8%
15%
5.Long-term cost of 25MW installation
2015-20
1.5-2.5
2.0-3.5
20
20
8%
15%


SUMMARY OF METHODOLOGY AND ASSUMPTIONS

  The assumptions used for the five cases given above are summarised below:

1.  SRO3 system

    —  contracted price; and

    —  economics and technology passed tender scrutiny.

2.  First 7.5MW demonstration scheme

    —  devices provisionally costed using data from prototype costing, with sensible economies of scale included. Costing methodology independently assessed by WS Atkins Ltd;

    —  cabling and grid connection cost estimated using data supplied by Econnect Ltd;

    —  installation/commissioning costed using input from OPD's offshore advisers;

    —  annual O&M estimated using input from OPD's offshore advisers;

    —  other costs assumed: planning/approvals, insurance, Crown Estates charges, reactive power charges;

    —  annual power prediction from experimentally validated numerical simulation for representative annual data for ~50kW/m site. Power capture independently assessed by WS Atkins Ltd; and

    —  15 year project at a discount rate of 8 per cent.

3.  First 25MW wave farm

    —  as for 3. above;

    —  15 year project at discount rate of 8 per cent and 15 per cent;

    —  full sensitivity analysis also conducted; and

    —  results independently assessed by WS Atkins Ltd.

4.  Costs for 25MW installation by 2010

  A commonly used "learning-by-doing" economic analysis (using a term known as the "Technology Factor") was used to predict expected cost reductions as installed capacity rises according to the following expression:


  Cm =Cl x m(lnTf/ln2)
  
  
Where:
Cm=Cost of mth unit
  Cl =Cost of first unit
  Tf =Technology Factor


  Typically, Tf for industrially processed systems is 0.85-0.95. A low technology factor (~0.85) represents fast learning with a resulting rapid fall in costs, a high Tf (~0.95) represents a slower rate of cost reduction. Experience has shown that over 20 years the wind energy industry has achieved a Tf of 0.9-0.95. Wind is currently predicted to maintain a Tf of ~0.95 with ~18GW of installed capacity to date (the cost of energy has been falling steadily at 8-9 per cent per annum over the last 10 years, and is predicted to continue to fall at ~4-8 per cent per annum over the next decade).

  For this analysis we have assumed the cost of the first unit (Cl) is the first 25MW installation as described in Section 3. We have assumed a total world-wide capacity of 2.5GW (~15 per cent of current installed wind capacity) by 2010 installed to the profile shown in Figure 1 (below) with major installation commencing from 2007-08 once the technology gains credibility. Upper and lower values for Tf of 0.90 and 0.95 and discount rates of 8 per cent and 15 per cent were assumed. The results are shown in Figure 2 (below) for installation to 2010.

  A Tf of 0.90 to 0.95 is seen as conservative but realistic. Wave energy has the potential for larger gains in power capture efficiency through improvements in control strategies than all other energy technologies. This is because of the fundamental physics of waves and the harmonic nature of the input allowing the dynamic response to be optimised. Conservatively, OPD have estimated that this may lead to an increase in annual energy capture of ~50 per cent in the long term.


6.  Long-term cost of a 25MW installation

  The analysis presented above was extended to a world-wide installed capacity of 20GW (ie similar to current installed wind capacity) by 2015 and 40GW (predicted installed wind by 2010) by 2020, assuming a similar range of Tf and discount rates, the results are as shown in Table 1 (above).

  As a cross check a study was carried out to identify likely long-term cost reductions and performance improvements on the first 25MW wave-farm installation.

  Cost reductions assumed were as follows:

    —  structure: 33 per cent reduction mainly due to anticipated move to concrete;

    —  power systems: 25 per cent reduction due to design optimisation and economies of scale;

    —  finishing/corrosion protection: 50 per cent reduction due to move to concrete for structure;

    —  cabling costs: 33 per cent reduction due to design optimisation, use of DC systems and specialist installation equipment;

    —  grid connection costs: no reduction assumed as early systems will occupy best sites;

    —  installation costs: 33 per cent reduction due to specialist equipment and techniques;

    —  insurance: significant reductions (50-75 per cent) as confidence in the technology rises;

    —  O&M: 50 per cent reduction due to improving reliability design optimisation and specialist equipment;

    —  reactive power: effectively eliminate due to probable use of DC transmission systems; and

    —  Crown Estates charges: likely to be reduced if large capacity installed, will be negligible if more than 12 miles offshore.

  Improvements in performance:

    —  improved power system efficiency: from ~80 per cent to ~90 per cent through design optimisation; and

    —  improved control algorithms: ~50 per cent increase in annual energy capture.

  The results of this are shown in the table below with and without 50 per cent increase in annual energy due to improved control-algorithms, as this is the most contentious assumption.

Case
Including
improved control
Excluding
improved control
8% discount rate
1.5 p/kWh
2.2p/kWh
15% discount rate
2.0 p/kWh
3.0p/kWh


  These results generally agree well with the technology-factor based analysis presented in Figure 3 (below) which shows costs out to 40GW installed capacity.






 
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