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Levelised Cost of Energy Assessment for Wave, Tidal, and OTEC at an International Level

Start: 2014 | End: 2019

A number of full scale prototypes are now in operation and generating to the electricity grid; plans for the first arrays are well advanced. It is important for policy makers and those who might invest in ocean energy generation to have a picture of the current costs for ocean energy generation and how  these are likely to reduce over time. 

The assessment of the Levelised Cost of Energy (LCOE) for ocean energy devices represents a critical  element of understanding in the development of ocean energy array projects. While the cost of existing prototype devices is high, there is scope for significant reductions of the cost of energy. In  order to unlock some of these cost savings, the deployment levels of ocean energy converters will  need to ramp up and projects must progress into the construction and operation phases. 

LCOE estimates are a cornerstone of the deployment strategy for all device and project developers. Furthermore, a thorough understanding of the technological limitations is fundamental to developing an accurate and representative LCOE that the sector is capable of achieving. The final goal for all wave, tidal, and OTEC technology developers is to generate power at a cost that is competitive with alternative forms of generation.

Phase I:

The aim of the first phase of this project was to provide an authoritative view on what cost reductions are feasible at a global  level, taking into account the experience from other technologies. By undertaking a bottom-up assessment of the cost components of leading wave, tidal, and OTEC systems, this work investigated the development and fabrication of leading devices or systems, and their integration into commercial arrays and large-scale power plants. The assessment included project development costs (including streamlining of environmental consenting) and operations and maintenance.

The first phase of this study, which applied the LCOE methodology developed by the IEA, identified the need for homogenization of cost and performance (Capex, Opex, capacity factor, availability) data among different developers and countries. 

The study showed that whilst progress has been made, the rate at which cost-reduction and technology deployment have taken place have been below par with expectations in the sector. Further progress is needed in order to build confidence in the ocean energy sector, and in each specific technology market.

Technology development and deployments are the main drivers for bringing the cost of energy of ocean energy technologies down; however external factors such as cost reduction of other RES technologies (e.g wind) provide further stimulus for ocean energy costs to be reduced quickly.

Phase II:

The objective of phase II is to provide information on the cost of ocean energy based on the methodology and results of phase I, identifying different technologies, baseline projects in different countries and when possible, comparing regions and technologies throughout a transparent methodology. Based on information received from technology developers and project promoters, cost targets will be addressed for different ocean energy technologies. Moreover, targets per cost component (CAPEX, OPEX and Capacity factor) will be proposed out using a reverse LCOE approach.


Phase I:

The goal of the first phase of this study was to engage a large number of international stakeholders to deliver an internationally reliable and credible Levelised Cost of Energy  (LCOE) assessment for wave, tidal, and OTEC technologies, together with identification of the routes to maximise cost reduction through international collaboration.  

As a result, a standard cost model was built for the purpose of this work, which was aligned with the TIMES regional model (the Integrated MARKAL-EFOM System) utilised by the International Energy Agency (IEA) in their Energy Technology Perspectives (ETP) analysis.

This initial study identified the need for homogenization of cost and performance (Capex, Opex, capacity factor, availability) data among different developers and countries.  

Phase II:

To achieve the final objective, three technical Work Packages (WP) have been defined. WP1 focus on data collection and definition of baseline projects. WP2 will analyse cost drivers throughout cost optimization and sensitivity analysis. WP3 will suggest future work to be undertaken when cost and performance data from a relevant number of ocean energy projects are available. A fourth WP for project management and reporting is also included. 

Phase I:

The results of Phase I are published in the Report: 

"International Levelised Cost of Energy (LCOE) for Ocean Energy Technologies". 

Phase II:

A second study of the ocean energy costs was developed. The study has shown that both wave and tidal energy, based on the collected baseline cases and with further successful development, will be able to reach the cost targets defined in the European Strategic Energy Technology Plan, where €150-100/MWh is projected by 2025-2030 for tidal and €150-100/MWh for wave by 2030-2035.

To achieve continued and successful development of ocean energy projects, investments in continued basic R&D, as well as continued development of test and pilot projects internationally, are required. The exchange of information and international co-operation under OES will be able to facilitate the dissemination of results, which will gradually help identify the best and most cost-effective solutions for the different ocean energy market segments.

Collection of information from technology developers and project promoters by public bodies that support ocean energy R&D will be critical to ensure a successful deployment of the sector.

The access to actual data from projects should be used to make progress on 5 aspects: learning curves, better understanding of ocean energy markets, jurisdictional programmes, synergies with other industries and integration with existing infrastructure.

The OES is organised under the auspices of the International Energy Agency (IEA) but is functionally and legally autonomous. Views, findings and
publications of the OES do not necessarily represent the views or policies of the IEA Secretariat or its individual member countries.