برنامه نصب و راه اندازی 10 ساله برای انرژی امواج در ایرلند: تجزیه و تحلیل مورد حساسیت مطالعه بر بازده مالی

This paper is a case study which examines the finances of a proposed installation schedule of 500 MW of a wave energy device type in Ireland. The novel aspects of the analysis were the modelling of the combined influence of learning curves, supply and demand rates as well as future cost of cash on the phased deployment over the 10 years. There are many studies which have examined the economics of renewable energy project installations, including wave energy. However, there is lack of research in the impact and implications of phased installations over time, especially when using a feed-in tariff (FIT) revenue mechanism. The goal of the study was twofold. The first goal was to assess the viability of the current Irish feed-in tariff within the context of a phased installation program for the wave energy device chosen for the study, and measures required to produce a positive rate of return. The second aim was to assess the impact of learning curve, supply/demand curves and future cost of cash on phased project installations. The wave energy device chosen for the study was the Pelamis P1 and the economic model used was NAVITAS, created by HMRC. The assessment was based on net present value and internal rate of return. The wave energy data for the study was 2007 from M4 of the west coast of Ireland, obtained from Marine Institute, Ireland. Results from the case study indicated that the high initial costs for the case study wave energy device had a significant impact on financial returns. Results of the case study indicate that higher tariffs may be required than the current Irish, static, nonindex linked, FIT to foster positive returns for future wave energy projects, especially if phased installations are considered, which are susceptible to future cash and supply/demand factors. The large range of sensitivity factors assessed in the case study demonstrates the vulnerable nature of these large scale projects when estimating financial returns. Further studies will be required to assess multiple device types, update initial costs for wave energy devices, provide reliable power matrices, as well as appropriate learning curve and supply demand rates.

This paper examines the phased installation of a total of 500 MW of a wave energy device (Pelamis P1) over a period of 10 years in Irish waters. The goal of the study was twofold: • To assess the viability of the current Irish feed-in tariff, and measures required to produce a positive rate of return using the case study device. • To assess the impact of learning curve, supply/demand curves and future cost of cash on phased project installations. The 500 MW Irish installation target is quoted as an ‘ambition’ by DCENR [1], or that ‘at least’ 500 MW would be the desired installation minimum. The 500 MW target is an increase from that originally set in the 2005 strategy paper [2] of 84 MW installed by 2020 and 485 MW for 2025. The white paper also sets a short range target of 75 MW for 2012. This target was cancelled in Sept 2009 by the Ocean Energy Development Unit1 (OEDU) in consultation with the Marine Renewable Industry Association (MRIA),2 as it was deemed unattainable considering current progress in device development at the time. 500 MW is the target set in the 2010 released Renewable Energy Action Plan (NREAP) [3] and is considered a stepping stone to large scale deployment by 2050. The 500 MW capacity chosen for this paper is thus a case study example of a possible deployment schedule for 2020. It assumes that all the relevant technical problems, including supply chain logistics, have been solved for each deployment year examined. The model used for the analysis in this paper was NAVITAS, which is a Microsoft Excel [4] tool developed at the Hydraulics and Maritime Research Centre. The outputs of the study were the profit (net present value (NPV)) in present value terms derived from the 10 year project for a developer and internal rate of return (IRR minimum 10%). The cost of electricity (COE) was not assessed in this paper, as COE does not account for revenue creation from tariffs, and it was concluded in a study by Dalton et al. [5] that it is not the best metric to consider when profits generated from tariffs are the main focus of the study. The wave energy device chosen for analysis in this report was the Pelamis P1, as it is the only WEC to date that has a published power performance matrix. It is also the only device which has provided some preliminary initial cost estimates, which were used in the 2004 EPRI study [6]. A further study by EPRI was reported in 2006 by Bedard [7]. The reliability of the Pelamis P1 power matrix has never been fully verified since it was first published in 2003, and unfortunately, there has been no update of the matrix since. There have also been no revised initial costs estimates for the Pelamis P1 device, nor has the company volunteered to provide up-to-date costs. Therefore, the Pelamis P1 device, its matrix and costings, are only used in the context of a case study and provide a platform methodology to examine this paper’s research aims. The 500 MW assessed in the paper is modelled as if located in one location. This is not representative of reality where multiple farms will be located along the west coast. Current research work carried out by the author (yet to be published) will investigate whether the wave energy climate along the west coast of Ireland substantially varies or is similar. Thus the total energy resultant from the one location chosen for this present study can be taken as indicative of the sum of energy from a range of other possible locations. The modelling for this case study paper uses only one year of data from 2007. Further research work carried out by the author (yet to be published) will compare energy output over a range of years. Other relevant research work carried out by the author (yet to be published) will include financial returns of multiple device types in one location. Results extracted from this study must be taken as indicative, keeping in mind that the main focus of the paper is an analysis of the impacts of learning curve and future cost of cash on phased installations.

The purpose of this case study paper was to examine the finances of a proposed phased installation schedule for a total of 500 MW wave energy capacity in Ireland over a 10 year period, using a sample wave energy device in one location. The novel aspects of the analysis were the modelling of the combined influence of learning curves, supply and demand rates as well as future cost of cash. The case study simulation results for the proposed phased 10 year installation plan of 500 MW indicate that the present tariff of €0.22/kWh will not be sufficient to produce a positive NPV and IRR for the case study device chosen for the majority of the scenarios simulated. This result varied from a similar case study presented by Dalton et al. [5] for large Pelamis farm at the same location where all the devices were deployed in one year. It is apparent that the present case study modelling a phased installation over 10 years was heavily penalised by the considerations of future cost of cash and supply demand. An increase in tariff in the present study to €0.37/kWh was necessary to achieve an overall average IRR of 10% over the 10 years of phased installation. Index linking the tariff from the beginning would provide increased returns, although incurring a higher cost to the exchequer. Interestingly, a 10 year project scenario incurring all the cable costs in the first year produced same returns as that scenario which was used for the remainder of the paper; i.e. cable costs and installation split into separate projects, due in each year. Although, costs did not differ, considerable logistics and time would be saved if one cable installation was used for the entire project in the first year. The financial results were very sensitive to operation/maintenance and insurance rates. If O/M and insurance rates were to increase from 3% to 5% of Capex, then the tariff needed to increase to €0.43/kWh for the case study device to produce a 10% IRR. The most effective way to increase profits in the case study scenarios, while maintaining the current tariff of €0.22/kWh, was to reduce the cost of the device directly, which in the case of the device used in the case study, was a 50% reduction of 2010 prices. This method was most effective as all other costs such as O/M and insurance were simultaneously reduced in the modelling as they were linked to the device initial cost. This may not reflect reality, and will need further research when real figures for these costs are available. As a result of this linked system of costs, direct grants appeared less effective as they were not linked to how O/M and insurance costs were generated. Also investigated were carbon credits and RECs, each requiring substantial grants before 10% IRR return was reached. The sensitivity analysis conducted on variables impacting NPV and IRR for a phased installation project demonstrated that both the future cost of cash and supply/demand curves can have significant impact. Their effect outweighed learning curve benefits accrued. The reason why the future cost of cash is so important lies in the nature of the FIT. The main benefit of FIT is that the contract guarantees a fixed revenue stream for the duration of the project. Projects implemented in future years will have higher expenses reflected in future cost of cash, but will still have to avail of the same tariff rate as projects started earlier. Thus, annual project revenue decreases linearly in proportion to the delay in the year that project is started. Revenue decrease was compensated in the latter years of the case study project schedule when larger farms were deployed, due to bulk discount rates for multiple device purchases and lower discount rates. Supply and demand rates, which normally decrease in time, may actually increase as in the case of offshore wind. This possible increase in cost will have a significant impact on wave energy project viability. In conclusion, the high initial costs for wave energy device modelled in the case study (Pelamis P1) had a significant impact on financial returns, using current Irish FIT. The results indicate that higher tariffs may be required than the current Irish, static, non-index linked, FIT to foster positive returns for future projects, if phased installations are considered which are susceptible to future cash and supply demand factors. The results for the Pelamis P1 device may not be indicative for other wave energy devices, and future studies will be required to compare multiple devices together in one location, as well as one device type in multiple locations using this phased installation concept. The large range of sensitivity factors assessed in the case study demonstrates the vulnerable nature of large scale projects when estimating financial returns especially in the long term. More conclusive studies will be required to update initial costs for devices, provide reliable power matrices, as well as supply appropriate learning curve and supply demand rates, all of which are still not readily available despite the progress in the industry research.