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Clues to the levelised cost of tidal stream

Andrew Montford, Global Warming policy Forum

Another white elephant

Yesterday, I set out the levelised cost of floating offshore wind turbines. In this article, I will look at what we know about the levelised cost of tidal stream energy, and show that it is probably even higher. This was prompted by a report in yesterday’s Times, puffing up the 2-MW Orbital Marine Power tidal stream plant, which is now supplying the grid from a site off the coast of Orkney.

Fortunately, the plant has been set up in its own company, so we can see the most recent financial accounts. These show that by the end of last year, Orbital had spent £7.8 million on construction. This is not the final bill – there is another six months of spending to come, but we can treat this figure as the bottom of the plausible range. £7.8 million is £3.9 million per megawatt, which makes it somewhat more expensive in those terms than offshore wind. However, it appears that a megawatt of tidal stream capacity delivers even less electricity than the same amount of offshore wind. According to Orbital’s submission to a Parliamentary inquiry, they are expecting to generate around 30% of the theoretical maximum. The equivalent “load factor” for a new offshore windfarm is in the high 40s.

It’s not clear if 30% is an average for the plant’s 15-year lifetime, but if we assume optimistically that it is, then Orbital will need to earn over £180/MWh, just to cover its capital costs. That compares very badly to gas turbines, which would generally need only around £40 to cover all costs.

We’ll have to wait to see what Orbital’s actual operating costs are, but it’s hard to be optimistic when you have high-tech machinery installed in corrosive salt water. I would be surprised if it was less than £70/MWh. And that supposition is confirmed by that Parliamentary submission, in which Orbital say they are seeking a guaranteed income of £250/MWh.

It’s obvious from these figures that tidal stream is wildly uneconomic and that the Orbital plant is, like the Hywind floating windfarm, a white elephant – the source of unearned rents for its investors and management.

LCOE assumptions
My assumptions are all optimistic – grossly so.
WACC: 4.2%
Output deterioration: 0%
Lifespan: 15 years