Abstract
CSIRO was commissioned by Wave Swell Energy Ltd (WSE) to independently analyse the potential for capital cost and levelised cost of electricity (LCOE) reductions of its proprietary unidirectional oscillating water column (OWC) wave energy converter (WEC) technology. The analysis is based on the widely accepted concept of “learning-by-doing”.
As to be expected, individual firm learning rate data was not available for WSE’s WEC as it is a novel technology that has had limited deployment thus far. An estimated learning rate based on industry wide learning rates was used as the next best approach. It is not known how different an individual firm’s learning rate might be compared to the industry wide learning rate, which is a source of some uncertainty in the methodology. In any case, a single firm cannot deliver all learning in a technology class such as wave energy and all technologies will benefit from collective learning. The wave energy sector’s overall learning rate will, therefore, be the result of a concerted industry wide effort with support, for example, from government and the research sector.
Early stage or emerging technology classes have been found to have, on average, an industry wide learning rate (LR) of approximately 20%. However, using a bottom-up engineering approach, a more conservative LR of 18.23% was calculated for wave energy technology. Based on this LR, the capital cost was projected as a function of cumulative capacity out to 10,000 MW, and the LCOE was calculated alongside the capital cost. At present, the WSE technology already has an LCOE that is competitive with diesel generation in remote locations. The modelling approach projected that the WSE technology can be cost competitive with offshore wind within 25 MW to 45 MW of installed capacity.
Applying an industry wide learning rate, it is projected that the WSE technology can achieve an LCOE of 0.05 $/kWh, which is equal to the current lowest cost generation of onshore wind and solar (Graham et al., 2020) if it can reach a deployment of 2,500 MW of installed capacity. This is approximately 0.35% of the installed capacity that onshore wind and solar PV have required to reach this same LCOE. As a comparison, the total global installed capacity for electricity generation was 7,484,000 MW at the end of 2019 (IEA, 2020), with wind and solar energy having reached 733,000 MW and 714,000 MW of this capacity respectively by the end of 2020 (International Renewable Energy Agency, 2021).
Using the CSIRO’s global and local learning model (GALLM-E), which compares 27 electricity generation technologies under a scenario where the world heads towards net zero emissions by 2050, it is projected that wave energy, including the WSE technology, can achieve a 1.3% share of the global electricity market in 2050 if it can sustain an 18.23% learning rate. This equates to 170,000 MW of installed capacity and is greater than the total projected contribution of biomass and geothermal generation combined. Even if the learning rate halves over time, as has been the case for wind and gas turbines, for example, it can still achieve the same market share by 2050, however, early and large scale uptake would then be delayed by approximately 10 years.
The analysis in this report is based solely on reductions in capital cost. It does not take into account potential improvements in the conversion efficiency of the technology and, thus, any increases in the capacity factor. Technology improvements and increases in capacity factor are inevitable and have been observed to lead to greater proportional reductions in LCOE than for capital cost, implying the potential for an even lower LCOE for the WSE technology than projected in this report.