Select Committee on Science and Technology Appendices to the Minutes of Evidence


Supplementary memorandum submitted by Mr Peter Fraenkel, Marine Current Turbines Ltd, following the Evidence Session of 21 March



  It is impossible to give a simple short answer to this question, since costs are effected by numerous parameters, not least being the site conditions, the scale of the project and the financial assumptions. However we have developed a techno-economic model that can calculate the economics on the basis of calculations that require several dozen parameters to be defined. The model can synthesise a typical tidal stream resource on the basis of several key factors, notably the "mean Spring peak current velocity" and it can also synthesise a tidal turbine system sized correctly to resist the loads and with all the components having cost-functions that allow the overall cost of the systems to be determined in relation to their performance. To make life simpler we have a "baseline model" that utilises what were judged as "typical" parameters, this model was recently scrutinised by independent consultants, Binnie, Black and Veatch under contract to the DTI, and their report broadly endorsed our analysis and could presumably be obtained from the DTI for any members of the Committee that wish to look into this more deeply (although the report is still in final draft form at the time of writing and the DTI may wish to delay releasing it until it is in its final form).

Projected cost variation with time for tidal stream electricity

  Our detailed costing model results are plotted against time in the graph below.

  The capital costs will be reduced through the R&D programme up to 2004 and the first commercial projects thereafter. This is achieved partly through economies of scale; eg installing a batch of 20 to 30 turbines typically reduces unit costs by up to 50 per cent as a result of spreading the project planning, design and installation cost overheads over more machines. Hence the single rotor turbine in R&D Phase 1 will cost over £4,000/kW but the twin rotor Phase 2 machine will be significantly more cost-effective at £2,500/kW. A single Phase 3 machine would be marginally more cost-effective than the Phase 2 one, but, by installing a batch of five machines, economies of scale bring unit costs down to £1,500/kW at the end of the R&D programme—a level of cost-effectiveness which was only surpassed by wind turbines since 1990.

  After the R&D programme is completed, the initial projects would involve batches of 20 to 30 systems and these will have unit costs in the range £600 to £1,000/kW which makes them immediately competitive with both offshore wind and onshore biomass generation at the present time. These are of course costings for early projects and they are conservative since they are based on the initial design concept and make no assumptions on possible further cost savings that may be achieved as the technology is further developed. Most new technologies can improve in cost-effectiveness quite rapidly; wind generated electricity today is 25 per cent of the cost, in real terms, that it was in the early 1980s when commercial wind farms were first installed.

  The above chart also gives the electricity production unit-costs to be expected and compares these with examples of costs of other generation technologies. It can be seen how the capital costs translate so that the three phase R&D programme yields electricity at 22, 12.5 and 8p/kWh for Phases 1, 2 and 3 respectively. It is expected that the first commercial projects that follow will deliver electricity at between 4 and 6p/kWh and that electricity costs will continue to fall to around 2 to 3p/kWh for large scale projects, ulitmately making the technology cost-competitive with conventional fossil fuelled power generation, but with the added commercial advantage of all the credits that can be gained for clean power generation. Costs of less than 2p/kWh could be achieved in favourable situations given the kinds of improvements experienced with other technologies.

  The question obviously arises as to why we can expect this technology to be so much better than other renewables such as wind. The answer is primarily because this uses a high intensity energy resource (typically capturing 6 to 10MWh/m2 per annum compared with less than 1.5MWh/m2 per annum for wind for each square meter of rotor in the flow); this results in a relatively small size for a turbine of a given power rating combined with what is potentially a low cost technology fabricated from steel. A single 1MW tidal turbine rotor will typically be less than 20m in diameter compared with a 1MW wind turbine which needs a rotor of about 60m diameter. Apart from being small, tidal turbines are built like ships, while wind turbines, where weight is critical, need much more exotic and costly components. Low capital cost leads to low electricity costs.

  A key cost assumption for the longer-term commercial product is that we can do better than £2,700/tonne in manufacturing costs and that tidal current turbines need be no heavier than 150 tonne/MW (ie a production cost for the systems of £405,000/MW) and that installation can be kept at an average level of £100,000 per turbine. These are reasonably modest targets since the "going rate" for large ships manufactured in SE Asia at the present time is in the order of £1,500/tonne including everything (engines, electrical systems, radar, soft-furnishings for the Captain's cabin, the lot) and a tidal turbine production run involves a mix of steel fabrication and electrical components not dissimilar from that in a ship (but lacking any soft furnishings!).

  Given success with developing the technology beyond the targets that can be envisaged at this early stage, then even better cost-effectiveness than this may be envisaged, to yield what may well be one of the least cost methods of electricity generation so far invented—ie something comparable with large scale hydro power. This is not entirely surprising since marine current turbines are in fact a form of large scale hydro power, but one where the environmental impact can be minimal.

Conclusions and comments

  To answer the questions more specifically, it can be seen that:

  1.  The initial unit costs of electricity from single prototype systems will be in the order of 12 to 22p/kWh (which is incidentally immediately competitive with electricity costs from small diesel generators as used on small islands lacking a grid connection).

  2.  In five years when the first commercial projects are developed, probably around 20MW, we expect costs to fall to around 4 to 6p/kWh (depending on scale of installation, distance to the grid and strength of the resource at the chosen location).

  3.  In less than 10 years we expect 100MW scale projects with costs in the 3 to 4p/kWh range (or less, if significant as yet unknown improvements in the technology occur).

  4.  In the longer term it seems reasonable to expect unit electricity costs to "bottom out" at around 2p/kWh for "Gigawatt-sized" projects.

  It should be noted that all these cost assumptions are based on:

    —  locations with mean Spring peak current velocities in the 2.5 to 3m/s range (5 to 6 knots);

    —  a 3km primary "umbilical" connection to the onshore grid;

    —  key financial parameters are 8 per cent discount rate, 20 years amortisation;

    —  all costs are included to make the results realistic, including profits for the developers, manufacturers and contractors, plus insurance, seabed rental to the Crown Estates (based on 2 per cent of margin from sale of electricity), EIA costs, etc;

    —  O&M costs nominally set at 3 per cent of installed capital cost per annum.

  To summarise all the cost assumptions would make this explanation excessively long but we would be happy to enter into more detailed explanations for anyone wishing to have more detail on this.

  It should also be noted that most of the cost, as with all non-fuel burning renewables, is the repayment of capital. The DCF analysis used assumed a 20 year life, but this technology is analogous to hydro plants and once effectively developed the technical life should be in the order of 40 years or more (although certain components will of course need more frequent replacement). If this seems surprising it should be noted that offshore defence structures built during the 2nd World War still survive off the UK's east coast and many offshore oil and gas industry structures date back to the 1960s and 70s. The mechanical and electrical component is technically similar to a low head hydro plant where operational lives of 30 years or more are not uncommon. Hence the electricity costs after the capital cost has been written off will be very much lower, less than 1p/kWh, since the only costs outstanding at that stage are O&M and decommissioning.

  An important additional point is that a major part of the cost of smaller projects relates to the overheads involved in starting the project (surveys, permissions, engineering and design, etc as well as the connection to the grid which can be costly); it follows from this that the marginal cost of extending an already existing project is also very much lower, since a large part of the overhead costs will already have been invested.

20 March 2001

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