Task 7: Cost of Energy assessment for Wave, Tidal, and OTEC at an International Level

Start date: 2014
End date: Permanent

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 investigates the development and fabrication of leading devices or systems, and their integration into commercial arrays and large-scale power plants. The assessment include project development costs (including streamlining of environmental consenting) and operations and maintenance.

Phase II:

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.

In order to monitor the evolution of ocean energy costs and to assess the impact of different drivers on the LCEO, it is proposed under this second phase of the study, initiated in 2018, to undertake a common task on the Cost of Ocean Energy taking into account historical trends, future development and differences among technologies and countries.

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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:

The overall objective of the second phase of the study, that started in June 2018, is to provide information on the cost of ocean energy technologies using a common, collaborative and transparent methodology with the aim to understand past/current trends and anticipate future development.

The following three main aspects will be considered in the evaluation of the cost of energy for ocean energy technology:

  1. Use of transparent assumption and methodologies and of accurate data
  2. Analysis of historical trends and identification of key cost drivers
  3. Employment of models to define future projections.
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Phase I:

The resulf of Phase I of this study is published in the Report "International Levelised Cost of Energy (LCOE) for Ocean Energy Technologies" 



This project has contributed significantly to the state of the art in knowledge of LCOE and cost reduction trajectories for Wave, Tidal Stream, and OTEC on an international level.

Each technology under consideration within this report is at a different stage of development, and presents its own unique challenges. In addition, the likely scale of technology varies between wave, tidal and OTEC, with the latter more likely to be deployed as a large-scale multi-MW power plant (similar to conventional thermal power generation) in comparison to the modular design of wave and tidal stream technologies. Wave and tidal technologies are modular in design, and therefore large power plant capacities will be achieved by the utilisation of multiple modular energy converters.

Engagement with relevant stakeholders in a number of OES Member countries has allowed an international context to be provided for each technology. As a result, mean values across a range of parameters have been obtained as a representative of the average across the industry as a whole.

Some similarities exist among the technologies considered. Current LCOE values are very high for wave, tidal and OTEC technologies in comparison to the incumbent power generation technologies, leading to significant cost-reduction requirements in order to become competitive. Although progress has been demonstrated to date, the level of progress is not on par with expectations. The rate of deployment has been significantly slower than anticipated by some investors and policymakers.

The challenges for each sector are clear. Demonstrable progress in reliable unit operation is required in order to verify and validate the cost projections that have been made within this report. High costs are intrinsic to the early stage development of technology, but clear evidence of progression down the cost curve is needed in order to restore confidence in the ability of each sector to deliver the targets that have been set.

The outputs of this work have resulted in the generation of all input data required for the TIMES regional modelling, carried out by the IEA within their Energy Technologies Perspectives document. By making a clear distinction among wave, tidal and OTEC technologies, the relevant parameters for each technology can allow for a more robust piece of modelling work that more truly reflects the diverse nature of these very different ocean energy technologies.