Abstract
Tidal stream energy (TSE) is an exciting, emerging form of renewable energy. The completely predictable nature of the tidal resource makes TSE unique among renewables. This could give it a key place in our energy system as a highly predictable form of higher quality energy, improving energy security.
TSE is a disruptive technology with a successful and growing track record of device deployments and demonstrations in the last ten years. In 2020 the European industry hit a milestone of 60GWh of production [1]. Despite this, political support for the sector has been inconsistent. This has slowed down investment and technology development, compared to alternatives like solar and offshore wind that have benefited from significant public development funding and energy generation subsidy. Consequently, there has not been the chance to unlock cost reduction through deploying commercial scale arrays, and there are only a handful of projects across the UK and France to date as markets merge across the globe.
Despite the historically challenging headwinds, the industry has still shown significant cost reduction ability. In 2018 ORE Catapult estimated TSE levelized cost of energy (LCOE) at £300/MWh. In the UK in 2022, four projects (40.8MW) were awarded CfDs at £178/MWh, to commence operation between 2025-27. This indicates an LCOE reduction exceeding 40% with little to no revenue support since 2016.
While the high predictability of TSE warrants a pricing premium, due to the lower costs incurred in the wider energy system, it is crucial that TSE continues to drive down costs to become competitive with other forms of energy. In this report we analyse the cost reduction pathway of TSE considering the UK and French markets. The main aim of this work is to:
Assess and quantify the cost reduction trends being seen in the tidal industry using recent knowledge captured from the Tidal Stream Industry Energiser (TIGER) Project and other sources.
Using data from TSE technology providers and the ORE Catapult Analysis and Insights Team, we have created an industry representative LCOE trajectory. This is shown below. It considered three leading utility scale device concepts and nine cost scenarios in total, which were analysed to devise an appropriate LCOE trajectory. The key LCOE estimations are as follows:
- Currently we estimate TSE LCOE to be £259±30/MWh
- By 2026 TSE LCOE will fall to £193±48/MWh
- By 2030 TSE LCOE will fall to £116±38/MWh
- By 2035 TSE LCOE will fall to £78±25/MWh
These estimates assume cumulative TSE deployment of 877 MW in the UK and 783 MW in France by 2035. The UK estimate echoes the sentiment by the UK Marine Energy Council (MEC), who are calling on the UK Government to set a target of 1GW of marine energy by 2035. The French estimate mirrors the current ask of French suppliers to the government.
As well as the LCOE trajectory, this report also promotes additional TSE benefits to advance the economic narrative. These have been sourced from both TIGER and third party projects, and are summarised by the following key messages:
- Cost reduction mechanisms: In the report we describe the key cost reduction drivers for the TSE sector. These will help the industry reach its £78±25/MWh by 2035 potential. Key areas identified include larger rotor and rated power devices (38% LCOE reduction), economies of volume from larger farms (28-50% LCOE reduction) and reduction in WACC (20% WACC reduction leads to 10% LCOE reduction). Within a separate TIGER study, described in this report, we identified eight cost reduction drivers that could reduce LCOE by a combined 67.5%. Assuming a present day LCOE of £259/MWh, these together would take LCOE down to £84/MWh and are achievable by 2035. Longer term we predict that TSE could reach £60/MWh by 2042 and £50/MWh by 2047.
- Socioeconomic benefits: TSE offers significant socio-economic benefits. TSE farms are more energy dense than offshore wind, meaning that farms can be more compact which reduces issues with other sea users. Socioeconomic benefits include high local content on projects (80%+), high job creation per MW (more FTEs per MW than offshore wind) and £5-19Bn in GVA by 2050. The UK also has the ability to capture 25% of international market value through exports.
- Energy system benefits: The completely predictable nature of TSE is perfect for a role in the energy system, reducing costs associated with curtailment, and the need for reserve gas capacity as a result of supply/demand mismatch. TSE has the ability to displace both fossil fuels and other forms of renewable energy.
A study funded through TIGER has estimated that TSE could provide £100-600M in cost savings in the energy system per annum by 2050. It could also reduce CCGT gas capacity by 40% in the net zero energy system.
The EVOLVE project is examining similar issues. Initial results indicate that 1GW of wave and tidal could save £114M per annum in the energy system as the diversity in the energy mix means that supply better matches demand.
From this study we recommend the following to policymakers in the UK and France:
- Commit to industry deployment targets. We endorse the MEC’s ask of UK Government to commit to a target of 1GW of marine energy by 2035. TSE could make up 850-950MW of this. We also endorse the deployment targets (equating to 750MW by 2035) being discussed with the French Government.
- Ensure TSE has secure route to market. In the UK we support maintaining the current TSE ringfence in upcoming CfD rounds. In France we support the ongoing discussions between project developers and regulators.
- Streamline consenting processes. Reducing approval times to one year, as is being pursued for offshore wind in the UK, will strengthen the project pipeline and ensure that the next generation of projects are built. The indication is a 6-year timeframe in France between next generation projects being awarded and commissioned, which we also think could be shortened over time.
All three of these actions will improve private sector confidence, open up new funding streams for TSE and greatly accelerate the cost reduction process