ARTICLE IN PRESS

Energy Policy 37 (2009) 19141924

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Energy Policy
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The economics of tidal energy

Eleanor Denny ,1
Department of Economics, Trinity College Dublin, Dublin 2, Ireland

a r t i c l e in f o
Article history: Received 19 August 2008 Accepted 12 January 2009 Available online 6 March 2009 Keywords: Tidal energy Renewable generation Climate policy

a b s t r a c t
Concern over global climate change has led policy makers to accept the importance of reducing greenhouse gas emissions. This in turn has led to a large growth in clean renewable generation for electricity production. Much emphasis has been on wind generation as it is among the most advanced forms of renewable generation, however, its variable and relatively unpredictable nature result in increased challenges for electricity system operators. Tidal generation on the other hand is almost perfectly forecastable and as such may be a viable alternative to wind generation. This paper calculates the break-even capital cost for tidal generation on a real electricity system. An electricity market model is used to determine the impact of tidal generation on the operating schedules of the conventional units on the system and on the resulting cycling costs, emissions and fuel savings. It is found that for tidal generation to produce positive net benets for the case study, the capital costs would have to be less than h510,000 per MW installed which is currently an unrealistically low capital cost. Thus, it is concluded that tidal generation is not a viable option for the case system at the present time. & 2009 Elsevier Ltd. All rights reserved.

1. Introduction Due to increasing concern over global climate change, many policy makers worldwide have accepted the importance of reducing greenhouse gas emissions, in particular from the electricity industry. As a result, there has been an international movement in the promotion of policy mechanisms for the reduction of greenhouse gas emissions and in the promotion of clean renewable technologies for electricity generation. Many types of renewable generation, such as solar, wind, tidal and wave generation, exhibit variable output, in other words, the output of these units depend upon weather conditions that cannot be controlled by the operator of the generator. For example, the amount of electricity generated by a wind turbine uctuates as wind speed changes and that of a photovoltaic array with the intensity of sunlight. Thus, the control of these generators is limited as operators can only reduce their potential output. As well as being variable, many forms of renewable generation also face a challenge of being relatively unpredictable. Since the underlying resource cannot be directly controlled, the renewable generation is high when conditions are favourable and low when

Tel.: +353 18961522; fax: +353 1 6772503.

E-mail addresses: dennye@tcd.ie, edenny@gmail.com (E. Denny). This work was conducted in part while the author was with the Electricity Research Centre (ERC) at University College Dublin. The ERC is supported by Electricity Supply Board (ESB) Networks, ESB Power Generation, EirGrid, Commission for Energy Regulation, Bord na Mona, Airtricity, Viridian, Bord Gais, SWS, Siemens and Cylon Controls.
1

unfavourable. Thus, forecasts of weather conditions are crucial when examining renewable generation sources. When signicant penetrations of renewable generation are connected to an electricity network, it can result in a requirement to alter the operation of the system to accommodate the variability of these generators (ILEX and Strbac, 2002; Holttinen, 2004; DCENR, 2006). Tidal generation has a signicant advantage over many other forms of renewable generation as it is almost perfectly forecastable over long time horizons. Thus, incorporating tidal generation into an electricity system should be less challenging than other forms of renewable generation which are relatively unpredictable. Investment in tidal generation adds to the generation capacity on the system and can thus defer investment in other forms of generation. This is a benet of tidal generation and is measured by the capacity credit. The capacity credit of a generator can be considered as a measure of the amount of conventional generation that could be displaced by the renewable production without making the system any less reliable (Castro and Ferreira, 2001). Another benet of tidal generation is a reduction in harmful emissions as tidal generation is likely to displace the output of some thermal units. In addition, a reduction in the operation of thermal units can also lead to a fuel cost saving as tidal generation, with a zero fuel cost, replaces units with signicant fuel costs. However, despite its predictability, tidal generation output is still variable and non-dispatchable in nature and as such poses a challenge for system operators. An increase in variable generation

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on an electricity system may result in an increase in the cyclical operation of conventional units as system operators attempt to coordinate the following of the uctuating demand throughout the day and the variable output of the tidal generation (DCENR, 2006; Bryans et al., 2005b). An increase in the cycling of conventional units can result in increased wear and tear on the machines and result in a shortening of the life span of the units (Lefton et al., 1997; Denny and OMalley, 2008). In addition it may be the case that a signicant increase in the penetration of tidal generation may result in a need for greater reinforcement of the network system, and this is a potential cost imposed by the tidal generation (DCENR, 2006). In this paper, I identify the main potential costs and benets of incorporating tidal generation onto an electricity system and use these costs and benets to quantify a break-even capital cost for tidal generation in a case study on a real electricity system. The methodology used here is based on a preliminary evaluation of tidal generation by Denny and OMalley (2007a) and on previous work by Denny and OMalley (2007b) on the costs and benets of wind generation. The approach adopted attempts to maximise social welfare and thus includes both direct and indirect costs and benets. As this is a social welfare maximising study, it is considered that any costs incurred are societal costs and any benets are societal benets, rather than accruing to any particular participant. However, in order to constrain the scope of the study a number of assumptions were required. This study represents a near perfectly competitive gross pool electricity market. Thus, the generators are assumed to be prot maximisers and price takers and gaming of the electricity market by individual generators is not taken into account. While in reality a certain degree of strategic bidding behaviour may occur, this is not the focus of this paper. Indeed, since this is a social welfare maximising study, and perfect competition ensures the optimal solution for society in general, the results shown here could be deemed to represent the social optimum. Electricity system dynamics, although an important technical issue for renewable energy integration, are highly system specic and require a large scale system model beyond the scope of this paper and as such have been omitted in this analysis. In addition, in an attempt to limit the number of assumptions required, it was necessary to omit softer factors such as the visual and local environmental impacts of tidal generation, the creation of jobs, improvements in local infrastructure, etc. Section 2 discusses the characteristics of tidal generation, and Section 3 outlines the case study electricity system analysed in this work. Section 4 describes the electricity market model employed and the results, discussion and conclusions are presented in Sections 57, respectively.

Fig. 1. The marine current turbines (MCT) design (MCT, 2007).

2. Tidal generation Traditionally tidal energy has been harnessed using a barrage system to establish a head of water, which can in turn power a turbine, much as in a hydroelectric dam. An example of such a scheme can be seen at the La Rance tidal barrage, Brittany, France. Recent developments in tidal energy devices (TEDs) have focused on harnessing the tidal stream rather than the potential rise in sea level. Tidal streams are fast moving currents, the speed of which can be magnied by local topographical features such as headlands, inlets and between islands (BWEA, 2007; Bryans et al., 2005b). The progress of TED development has been slow, with only 15 projects in development around the world. One tidal device is almost market ready, it is developed by Marine Current Turbines (MCT) and is illustrated in Fig. 1 (MCT, 2007). Two other

TEDs still in the development stage are the Engineering Businesss Stingray project and the Hammerfest Strm project. As can be seen from Fig. 1, the MCT turbine uses technology somewhat similar to that of a wind turbine. Two turbines are supported by a beam driven into the seabed, as the water ows past, the turbines turn and produce power. The rotors measure between 15 and 20 m in diameter, and can pitch at 1801 to accommodate bi-directional ows, i.e. on the ebb and ood tide. For ease of servicing, the wing holding the turbines can be jacked up the beam, raised out of the water, removed and serviced on land (MCT, 2007). The MCT device has been designed to take advantage of the best tidal resources and is considered viable in areas of 2040 m of water, where the peak spring tidal current velocity is greater than 2.25 m/s (Bryans et al., 2005a; Whittaker et al., 2003). MCT installed a prototype with a single 750 kW turbine off Lynmouth in the Bristol Channel during 2003 and a 1.2 MW device is currently being tested in Strangford Lough in Northern Ireland. The majority of the energy contained within the tides is generated from the gravitational forces of the sun and moon on the deep oceans. The rotation of the earth relative to both the sun and the moon produces a 12.4 h cycle resulting in two high waters and two low waters per day. The size of the high water is dependent on the position of the moon relative to the sun. When they are in line the forces are constructive and there is a spring tide. When they are at 901 the forces are destructive and there is a smaller neap tide (Denny and OMalley, 2007a; Bryans et al., 2005b). The power output from a 1 MW MCT device is shown for a spring tide and a neap tide in Fig. 2 (Bryans et al., 2005a). This springneap cycle has a period of 14.7 days (two cycles per lunar month) as shown in Fig. 3 (Bryans et al., 2005a). It is clear from Fig. 2 that the tidal output peaks and troughs four times a day as the tide comes in and out twice daily. In

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1.0
Spring Neap

Renewables 13% Peat 4%

0.8
Tidal Output (MW)

0.6

0.4

Oil 15%

Gas 51%

0.2.

PumpedStorage 3%
00:00 06:00 12:00 Time of Day 18:00 00:00

Coal 14%
Fig. 4. The installed plant mix for the Irish system in 2008.

Fig. 2. The power output during a spring and neap tide.

% max output

1.00 0.66 0.33

5 Days

10

15

Fig. 3. The power output from a tidal device over a 15 day period.

addition, as shown in Fig. 3, the maximum tidal output varies throughout the month with the spring neap cycle.

3. Case study In order to quantify the costs and benets of tidal generation a real electricity system was taken as a case study. Ireland is the case study chosen for this analysis since it is an island electricity system with a potentially rich tidal energy resource. In addition, Ireland has very limited interconnection to other systems allowing for a controlled study of tidal generation. However, the issues that are raised here are not unique to the case system and are likely to be relevant in other systems considering tidal generation. The Irish system historically consisted of two separately operated but interconnected systems, one in the Republic of Ireland and one in Northern Ireland. However, in 2004 an agreement was reached between the electricity regulators in the Republic and in the North to establish a single all-island market for electricity. This new all-island Single Electricity Market (SEM) was launched in November 2007 (SEMO, 2007). The SEM is a mandatory gross pool market with centralised commitment of units. The marginal generator sets the system marginal price for all generators in the gross pool market. In addition, to the gross pool market there is a separate capacity payment mechanism. Thus generators bids should consist of their marginal and start costs only. This paper examines this all-island electricity system, covering the Republic of Ireland and Northern Ireland (referred to jointly in this paper as Ireland). Ireland currently has approximately 9 GW of installed capacity. The generation plant mix was traditionally based on large coal and

oil red generation plant with a small number of peat plants and old thermal gas generators. Since 1990 however, the share of high carbon content fuels such as coal has fallen in Ireland due to a large increase in the use of natural gas combined cycle plants (CCGTs). Gas red generation now accounts for over 50% of the generation in Ireland (Deloitte, 2005). Ireland has one pumped storage station and a small number of hydropower plants. In addition, Ireland has one 500 MW interconnector to Scotland. The installed plant mix for the Irish electricity system as of March 2008 is illustrated in Fig. 4. Bryans et al. (2005b) determined the resource for tidal energy around Ireland using a 2 dimensional tidal model to simulate the tidal ows for the waters surrounding the entire island with a 405 m by 405 m grid. They found that the resource currently accessible to the MCT tidal device (as shown in Fig. 1) is 374 MW around Ireland. However, it is predicted that into the future, TED development will lead to larger turbines which will be nancially viable at greater depths and lower spring current velocities. Based on the predictions by Bryans et al. (2004), a tidal resource of up to 560 MW is investigated here, representing 6% of installed generation capacity.

4. Methodology During the design process of the Single Electricity Market in Ireland software from Energy Exemplar, known as PLEXOS for Power Systems, was used by the market design team to model the likely operation and prices in the new market (PLEXOS, 2006). The purpose of this modelling work was to assist industry participants in developing a greater understanding of the new electricity market arrangements and to provide quantitative support in assessing the potential impacts of the arrangements on both the industry and the nal customer (AIP, 2008). The PLEXOS tool is a sophisticated modelling technique which uses mixed integer optimisation to determine the unit commitment decisions and accounts for generator constraints such as minimum and maximum operation, ramp rates, start times and costs, maintenance schedules and transmission constraints. The optimisation also co-optimises for reserve provision and includes energy limited cascade constraints for the operation of hydrostations and genuine optimisation of the pumped hydro stations (PLEXOS, 2006).

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This PLEXOS model was populated with specic information for the Irish system (hereafter referred to as PLEXOS-SEM) and was validated initially against the Trading and Settlement code by KEMA consulting and secondly against the rst four months of actual market operation by NERA consulting (AIP, 2008). The PLEXOS-SEM model is utilised by the Commission for Energy Regulation (CER) in Ireland as part of their duties to monitor gaming in the market. Fig. 5 below illustrates the accuracy of the PLEXOS-SEM model by comparing the predicted average of the system marginal prices in the rst four months of the SEM to the actual average of the system marginal prices (NERA Economic Consulting, 2008). The Commission for Energy Regulation has made available all of the inputs for the PLEXOS-SEM model (AIP, 2005) and this model is utilised in this paper to model the impact of increasing levels of tidal generation on the operation of the Irish electricity system and the resulting costs and benets.

4.1. Tidal generation in PLEXOS-SEM model Tidal generation is perfectly predictable and under EU Directive 2001/77/EC (2001) tidal output must be accepted when available. Thus, in order to include the tidal generation output in

140 120 100 Euro/MWh 80 60 40 20 0 Base price Mid price Peak price
Fig. 5. Predicted system marginal price vs. actual system marginal price.
79.19 79.07 69.74 68.36 Predicted Actual 123.05 120.42

the PLEXOS-SEM model, the tidal prole was simply subtracted from the demand prole. Installed tidal penetrations were increased from 0 to 560 MW in 80 MW intervals and the corresponding generator output proles were analysed. Fig. 6 below indicates the impact of 560 MW of tidal generation on the load for the rst 15 days in January 2007. As illustrated by the markers 14 in Fig. 6 the tidal output has varying effects on the load prole depending on time of the month. At marker 1, the impact of the tidal generation is to cause a signicant decrease in the net demand in the middle of the afternoon. At marker 2, there is a neap tide and the tidal output is seen to have a minimal impact on the demand. Marker 3 indicates that the tidal output can signicantly reduce the minimum demand during the night and marker 4 illustrates a decrease in peak demand. Each of the effects at markers 1, 3 and 4 is likely to have a signicant impact on the operation of the conventional units on the system. The impact of this on the costs and benets of the tidal generation is investigated further in Section 5. As shown previously, the power output from a tidal turbine or group of turbines will only reach its maximum output during a spring tide, which occurs for a short time twice a month. Therefore, it is not envisaged that developers would consider it economically viable to install electrical equipment rated to harness all of the energy available at a spring tide. Instead, it is predicted that the maximum power from the turbine would be down-rated by altering the pitch of the blades. This is known as Electrical Down Rating (EDR). A scenario is investigated in this paper which assumes that in Ireland, the installed tidal devices will undergo 40% down rating of the maximum rated capacity of the turbines (Bryans et al., 2005b). Thus, the assumed maximum power output realised is 336 MW although the resource is 560 MW, as shown in Fig. 7. In this scenario it is envisaged that developers would balance the savings in the cost of the turbine and the grid connection against the revenues lost from spilling energy at higher tidal ow rates.

5. Results In order to investigate the costs and benets of tidal generation, the model described in Section 4 was run for each hour for an entire year with increasing penetrations of installed tidal generation. The resulting operating schedules of the

7000 2 6000 5000 4000 MW 3 3000

Load NetLoad Tidal

2000 1000 0 1 2 3 4 5 6 7 8 9 Day 10 11 12 13 14 15

Fig. 6. The impact of tidal generation on demand.

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600 500 400 MW 336 300 200 100 0 00:00

Original Spring EDR Spring Neap

06:00

12:00 Time of Day

18:00

00:00

Fig. 7. Electrical down-rating of tidal output.

generators were then analysed to determine the CO2, SO2 and NOx emissions benets, the fuel saving benets and the cycling costs. Also discussed in this section are the capacity benets of increased penetrations of tidal generation.

a smaller reduction in conventional generation output than a similarly size unit with a higher load factor. For the purposes of this analysis it is necessary to express these emissions savings in monetary terms. Under the EU ETS (2003), there is currently an EU wide CO2 emissions market where generators buy and sell allowances for CO2. Thus, the CO2 emissions are valued at a representative market price of h30/t of CO2.2 There is not currently an emissions market for SO2 and NOx in Europe, however, there is a market for these emissions in the United States. Thus, the assumed value of these emissions are based on the prices in these emissions markets in the United States (US EPA, 2006a, b). The assumed SO2 price is h150/t and the NOx price is h3000/t. The value of the saved emissions is illustrated in Fig. 9 (shown as the line EDR 0%).3 As discussed in Section 4.1, a scenario was analysed where the tidal turbines undergo 40% Electrical Down Rating. This saves the developer the cost of investing in a turbine which will only operate at is full rated to capacity during a spring tide. Rather electrical equipment rated to produce 60% of the maximum output of the feasible resource is produced. With EDR of 40% the total energy output of the tidal device over the year is reduced. This results in a slight reduction in the emissions savings. The emission saving benets with EDR of 40% is also illustrated in Fig. 9.

5.2. Fuel savings with tidal generation 5.1. Emissions benets of tidal generation Harmful emissions are created in combustion plants through the burning of fuels at elevated temperatures. As the installed capacity of tidal generation increases it displaces conventional generation which has an impact on the emissions from the conventional units. Emissions of carbon dioxide (CO2) and sulphur dioxide (SO2) depend on the quantity of carbon and sulphur in the fuel, respectively, and the quantity of fuel burnt (Denny and OMalley, 2006). Thus, a reduction in the operation of a thermal unit will result in a reduction in CO2 and SO2 emissions. Nitrogen oxides (NOx) formation is more complex and does not depend solely on the nitrogen content of the fuel but is also affected by the ame temperature, the oxygen concentration and the residence time (Kesgin, 2003). Previous work on the impact of variable generation on emissions is shown in Denny and OMalley (2006). Once the operating levels of the conventional units had been attained using the model described in Section 4, the resulting CO2, SO2 and NOx emissions from the conventional units were calculated for each hour by using specic emissions information for each individual generator (EirGrid, 2006; AIP, 2005). Fig. 8 illustrates the emissions benets from increasing levels of tidal generation for CO2, SO2 and NOx. The magnitude of CO2 emissions is much larger than for the other two emissions, however, for ease of illustration all three emissions have been plotted on the same axis in Fig. 8. It can be seen that as tidal generation increases, the system emissions of CO2, SO2 and NOx are reduced. However, these reductions are relatively modest. With 560 MW of installed tidal generation, CO2 emissions are reduced by approximately 501 kt (metric), representing approximately 2% of total system emissions. This represents a saving of approximately 470 g/kWh. Reductions in SO2 and NOx at 560 MW installed are 4% and 3%, respectively. These relatively low emissions reductions are due to the fact that tidal generation has a low average output (load factor) when compared to other forms of generation. The load factor for tidal is approximately 22% compared to over 40% for low levels of installed wind generation. This low load factor results in As tidal generation displaces electricity produced from thermal units the quantity of fuel burnt by the thermal units change. The model described in Section 4 determined the operating schedules with increasing penetrations of tidal generation. Once these dispatches had been determined, the consumption of fuel was calculated by analysing the gigajoules (GJ) of energy consumed per MWh for each generator (AIP, 2005). The annual fuel savings with increases in tidal generation are shown in Fig. 10. Because the relative size of the installed tidal is small in respect to the size of the system (6%), the fuel savings are modest. The largest reductions are seen in gas generation with 560 MW of tidal resulting in 5,000,000 GJ reduction in gas consumption (approx 3%) and 2,000,000 GJ reduction in oil (approx 19%). Reductions in coal and peat are more modest with less than 0.5% reductions. The value of the saved fuel is shown in Fig. 11 and the fuel prices used are shown in Table 1. These are also the prices used in the dispatch of the generators. For the different gas prices shown, the fuel savings on a particular date are valued at the gas price on that date. Also illustrated are the fuel savings if Electrical Down Rating of the tidal turbines is employed.

5.3. The capacity benet of tidal generation One of the key benets associated with increased tidal generation is the additional capacity it adds to the system. The extent to which tidal generation can substitute for conventional generation without reducing the reliability of the system is given by the capacity credit of tidal (Castro and Ferreira, 2001).
2 It should be noted that the assumed CO2 price of 30/t CO2 is the opportunity cost of CO2 rather than the social benet and is efcient only if the EU target is efcient and if EU policy is cost-effective. This is unlikely to be the case, however this issue is considered to be beyond the scope of this paper. 3 Despite the high price of SO2 and NOx compared to that assumed for CO2, the value of the SO2 and NOx savings combined is less than 10% of the total emissions benet and less than 3% of the total benet of tidal generation. Thus, the results are relatively insensitive to changes in assumptions regarding the price of SO2 and NOx.

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30000 25000 20000

CO2 NOx SO2

Emissions in Kilotons

22 21 20 19 0 80 160 240 320 400 Installed Tidal Generation MW

Fig. 8. Tidal generation emissions savings.

480

560

Value of Fuel Savings in Millions of Euro

Value of Saved Emissions in Millions of Euro

18 16 14 12 10 8 6 4 2 0 0 80 160 240 320 400 480 Installed Tidal Generation MW 560

EDR 0% EDR 40%

45 40 35 30 25 20 15 10 5 0 0 80 160 240 320 400 Installed Tidal Generation MW 480 560

EDR 0% EDR 40%

Fig. 9. Monetary value of emissions savings from tidal generation.

Fig. 11. Monetary value of annual fuel savings with tidal generation.

Annual Fuel Consumption in Petajoules

180 160 140 120 100 80 60 40 20 0 0 80 160 240 320 400 480 Installed Tidal Generation MW 560
Gas Coal Peat Oil

Variable sources of generation, such as tidal, make a different contribution to the capacity on the system than dispatchable generation. Although tidal generation can serve a large proportion of the load, it may not necessarily be the case that the times of high tidal generation coincide with times of high demand. Bryans et al. (2005b) found that the capacity credit of tidal ranges from approximately 25% at low installed capacities to under 15% at 560 MW. With Electrical Down Rating, the capacity credit is increased slightly. The capacity credit of tidal is illustrated in Fig. 12. The capacity benet of tidal generation can be thought of as the saved cost of building and maintaining a conventional generator with a capacity equal to the capacity credit of the installed tidal generation.4 Based on CER (2006) and Doherty et al.

Fig. 10. Annual fuel savings with tidal generation.

4 In this paper, the term capacity credit is used to represent the percentage of conventional generation that can be displaced by tidal generation. The term capacity benet is used to represent the monetary value of this displaced conventional generation, calculated as the saved capital and O&M cost.

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Table 1 Fuel costs in h2008/GJ. Fuel type Coal Gas (01/10/200731/12/2007) Gas (01/01/200831/03/2008) Gas (01/04/200830/09/2008) Oil Peat Fuel price (h/GJ) ROI 3.79 6.25 7.65 4.97 6.66 3.23 Fuel price (h/GJ) NI 4.14 6.62 8.02 5.34 6.26

30.00 25.00 Capacity Credit% 20.00 15.00 10.00 5.00 0.00 0 80 160 240 320 400 480 Installed Tidal Generation MW 560
Capacity Credit Capacity Credit (40% EDR)

Fig. 12. Capacity credit of tidal generation (Bryans et al., 2005b).

Value of Saved Investment in Millions of Euro

10
EDR0% EDR40%

8 6 4 2 0 0 80 160 240 320 400 Installed Tidal Generation 480 560

demand. This cycling includes ramping up and down and turning on and off. When a unit is cycled, the boiler, steam lines, turbine and auxiliary components undergo large thermal and pressure stresses which result in damage. This damage accumulates over time and eventually leads to accelerated component failures and forced outages (Lefton et al., 1997). The costs associated with cycling include additional operation and maintenance spending associated with increased overhauls, higher heat rates due to low load and variable operation, auxiliary power, fuel during start up, unit life shortening, increased operator error due to greater hands-on operation, etc. It is estimated that these costs can range from h200 to h5,00,000 (including fuel cost) per single onoff cycle depending on the type of unit (Lefton and Besuner, 2001; Denny and OMalley, 2007b, 2008). The actual cost of cycling is very difcult to estimate and must be conducted on a plant by plant basis. Grimsrud and Lefton (1995) found that a base loaded coal unit with a total installed capacity of 500 MW and a fuel cost of $3000 per cycle, had a true cost of $40,000 per cycle when the costs mentioned above were taken into account. On average, it was estimated that for a large sample of units, the fuel costs represent about 712% of the total cost associated with cycling for a large supercritical unit, 1015% for an intermediate fossil fuel unit and 2030% for a gas red turbine (Grimsrud and Lefton, 1995). As illustrated in Fig. 2, the tidal generation has four peaks and troughs per day representing the tidal current coming in and out twice a day. This uctuation is particularly apparent during a spring tide when the variations are at their maximum. As seen in Fig. 6, the tidal generation can have a dramatic effect on demand. A reduction in the minimum demand at night will cause certain units which had previously been baseloaded to switch off at minimum load and then to switch back on once demand has risen again. In other words, the conventional generation on the system will be required to ramp up and down and switch on and off inline with the variations in the tidal generation. Thus, although the tidal generation is predictable its variability causes a challenge for system operators. Fig. 14 shows how the number of starts of the different units on the system changes with the introduction of tidal generation. It was found that in general, as tidal penetration increases, the number of starts on the system increases. This is due to the magnitude of the variations in tidal output increasing as the installed tidal generation increases. The exception to this is for the oil units. As the tidal penetration increases the oil units are utilised less and less and are gradually removed from the plant mix. The cost of this additional cycling activity as a result of the

Fig. 13. Monetary value of the saved investment in conventional generation.

3000

2500

(2006) it is assumed that new conventional generation built in Ireland will be gas red, with a capital cost of h6,50,000 per MW installed, availability of 85% and operation and maintenance costs of h45,000 per MW per year. The capital cost is converted to an annuity with a term of 15 years and a discount rate of 7.83% in order to be expressed as an annual cost (CER, 2006). Fig. 13 shows the value of the saved investment in conventional generation with increases in tidal generation.

Total number of Starts

0MWTidal 560MWTidal

2000

1500

1000

500

5.4. Cycling costs with tidal generation

0

In the day to day operation of electricity systems, conventional generation units are required to cycle in order to meet the

Gas Units

Peat Units

Coal Units

Oil Units

Total

Fig. 14. Impact of tidal generation on the number of starts on the system.

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25 Cycling Cost in Millions of Euro 20

80 70 60 Millions of Euro
Total Benefits Cycling Costs

15 10 5 0 0 80

EDR0% EDR40%

50 40 30 20 10

160 240 320 400 Installed Tidal Generation MW

480

560

0 0 80 160 240 320 400 Installed Tidal Generation MW 480 560

Fig. 15. Increase in system cycling costs with increases in tidal generation.

Fig. 16. The total benets and cycling costs of tidal generation.

increased tidal generation was calculated for each of the units on the system.5 The additional cycling costs are illustrated in Fig. 15. 5.5. Break-even analysis of tidal generation The previous sections discussed the cycling costs associated with increases in tidal generation and the emissions benets, fuel savings and capacity benets. Since tidal generation is still in its infancy clearly dened capital costs have not yet been established and forecasting the likely capital costs could be erroneous. In addition, there have been no comprehensive network reinforcement studies completed for Ireland with respect to tidal generation. Thus, rather than attempting to quantify the total net benets of tidal generation I will attempt to determine the maximum amount that these other costs can be to ensure positive net benets for tidal generation. Fig. 16 illustrates the annual total benets of tidal (the emissions benet plus fuel saving benet plus capacity benet) and the annual cycling cost. From Fig. 16 the total benets of tidal generation are seen to exceed the cycling costs at all penetrations of tidal generation, however, the capital, operation and network costs of the installed tidal generation have still to be included. Table 2 illustrates the maximum that these other costs could be each year to ensure that the benets of tidal generation are greater than the total costs. The amounts in Table 2 represent the maximum that the combined capital, O&M and network costs can be each year to ensure positive net benets for tidal generation. In other words, if the annual capital, O&M and network reinforcement costs exceeded the amounts shown in Table 2 then the costs of tidal generation will exceed the benets and the resource should not be developed. Putting these gures into perspective, if it is assumed that the operation and maintenance costs of tidal generation were equal to h55,000/MW installed per annum, annual O&M cost for 560 MW of tidal generation would be h30.8m. While this gure may initially appear to be high, O&M cost of h55,000/MW per annum are in fact less than those of an offshore wind turbine (Doherty et al., 2006). Given that the moving parts of the tidal turbines operate below the water line, they are likely to incur greater damage to parts compared to a wind turbine with moving parts above the water line. In general O&M costs for offshore energy
5 A comprehensive description of how the cycling costs for the Irish system are calculated is given in Denny and OMalley (2008) and Denny et al. (2007).

Table 2 Break-even annual costs. Installed tidal generation 0 80 160 240 320 400 480 560 Annual cost (hm) 0 9.1 17.9 23.7 30.1 35.7 40.0 46.1

tend to be high given accessibility issues and greater infrastructure costs than onshore developments. If it were assumed that no network reinforcement was required with 560 MW of tidal, then the capital costs would have to be less than h15.3m per annum to ensure positive net benets (h46.1h30.8m). If this is the annual cost of capital, then the total capital cost of 560 MW of tidal would be approximately h133m (assuming an interest rate of 7.83% and a term of 15 years (CER, 2006)). This represents a capital cost of approximately h2,37,000 per MW installed of tidal generation. In other words, to ensure 560 MW of tidal generation breaks-even the capital cost would have to be less than h2,37,000 per MW installed. The breakeven capital and network costs to ensure positive net benets for each penetration of tidal generation are shown in Table 3. Also shown is this break-even cost expressed per MW installed (i.e. column 2 divided by column 1). The break-even capital cost per MW installed (shown in Table 3) for tidal generation to produce positive net benets is unrealistically low given that the cheapest plant currently available on the Irish system is a Combined Cycle Gas Turbine with a capital cost of h6,50,000/MW installed. Thus, the benets of tidal generation are such that the capital costs would have to be dramatically lower than the cheapest conventional unit in order to be economically viable from a societal perspective. Thus, it is not unreasonable to conclude that, given the current conventional plant mix, tidal generation will produce negative net benets at all penetrations. A similar analysis was conducted for the scenario where EDR of 40% is employed. In this scenario, although the resource is 560 MW, the turbine installed is only rated to 336 MW, thus the capital cost per MW installed is based on these lower rated turbines. Table 4 illustrates the maximum capital cost per MW installed if EDR of 40% is utilised.

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Table 3 Break-even capital plus network costs to ensure positive net benets. Installed tidal generation 0 80 160 240 320 400 480 560 Break-even capital cost (hm) 0 40.8 78.9 90.4 108.6 118.6 118.0 132.7 Break-even capital cost per MW installed (hm) 0 0.51 0.49 0.38 0.34 0.30 0.25 0.24

Table 4 Break-even capital plus network costs to ensure positive net benets with EDR of 40%. Turbine size (resource size) 0 48 MW (80 MW) 96 MW (160 MW) 144 MW (240 MW) 192 MW (320 MW) 240 MW (400 MW) 288 MW (480 MW) 336 MW (560 MW) Break-even capital cost (hm) 0 32.2 68.7 80.8 93.0 93.7 100.5 103.0 Break-even capital cost per MW installed (hm) 0 0.67 0.72 0.56 0.48 0.39 0.35 0.30

It is seen that with EDR of 40% the break-even capital cost of the turbine can be higher per MW installed for the tidal generation to produce positive net benets than if no EDR is employed. However, even utilising EDR the required capital costs are still low compared to conventional generation and other renewable resources.

6. Discussion The case study presented in the previous sections highlighted the potential costs and benets of tidal generation. It was seen that due to its relatively low load factor of just 22%, and its low penetration level (6%) the potential emissions and fuel savings of tidal generation are modest. In addition, the potential of tidal generation to defer investment in conventional generation is limited due to its low-capacity credit. While there are a number of factors which may increase the value of the benets (such as increased carbon or fuel prices) the shortfall between the costs and benets is such that these factors alone would not be sufcient to dramatically alter the economics of tidal generation. In fact, it has been shown in Denny and OMalley (2008) that an increase in the carbon price can actually reduce the overall net benets of variable generation by increasing the cycling costs more than the saved emissions. The increased carbon price shifts high carbon emitting units such as coal to marginal operation. Marginal units are required to cycle more frequently than baseloaded units in order to balance supply and demand. Coal units which were historically operated as baseload units and then have to switch to variable operation typically have among the highest cycling costs of all units. Thus, the carbon price increases the cycling costs and these costs are then further exacerbated by the addition of variable generation on the system. This paper examined the impact of tidal generation on a real electricity system with a static plant mix. Thus, the underlying plant mix was assumed to be unchanged with increasing penetrations of tidal generation. In addition, this paper assumed

a carbon price of h30/t CO2 and a xed set of fuel prices. However, in the long run the price of CO2 will impact on the prevailing fuel prices and is likely to have an impact on both conventional and tidal generation investment. Thus, looking into the future, if it is envisaged that tidal generation will play a major role in the plant portfolio, then the conventional plant mix should be optimised to accommodate this tidal generation. If this were to be conducted the break-even costs for tidal generation are likely to be affected. A study conducted by Doherty et al. (2006) examines the optimal future conventional plant portfolios with high levels of installed variable generation. Their analysis shows that with increasing penetrations of variable generation, there is a reduction in the necessity for baseloaded generation and an increase in peaking capacity. In particular, the results point towards a reduction in coal-red generation and an increase in OCGTs with increasing variable generation penetrations. Although it is predictable, the variability of the tidal generation produces a signicant cost to the system. One approach to reduce the impact of tidal generation on conventional generator cycling would be to curtail the tidal generation output at times of minimum demand. This would reduce the number of starts on the system and thereby reduce the impact on the conventional units. However, the curtailment of energy from the tidal devices would have a knock-on effect on the potential emissions and fuel saving benets. Alternatively, electricity storage could be utilised to store the electricity generated by the tidal generation during the night and to release it at peak times. This would increase the potential revenues of the tidal generator and would help to reduce the variability of the tidal output. In addition, it is likely that there would be increased emissions and fuel savings by a reduction in the net demand at peak times. However, construction of a dedicated storage unit to balance the variations in the tidal output comes at a high capital cost per MW installed. In addition, the combined low load factor of the tidal generation and the round-trip efciency of storage devices would dramatically reduce the benets of a combined tidal and storage system (Feely et al., 2008). This paper investigates the break-even costs for tidal generation from a societal perspective but it does not consider who bears the costs and who reaps the benets associated with the tidal generation. It remains an open question how much of these costs and benets would be passed on to the consumer in the market price and one which the author hopes to address in future work. It is interesting to note the break-even costs for tidal in relation to the costs and benets of wind generation. While wind generation has the disadvantage over tidal generation of being relatively unpredictable, it has a higher load factor resulting in increased energy output and therefore increased emissions, fuel and capacity benets. In addition, decades of experience combined with a small number of moving parts has resulted in the capital costs of wind turbines falling to a relatively low level. The operating environment for wind turbines is also much more forgiving on the mechanical parts than the marine environment. Denny and OMalley (2007b) conducted a cost-benet analysis of wind generation on the Irish system and found that wind generation produced positive net benets for the system in excess of 22% of electricity generated from wind in 2010. In fact based on the results in Denny and OMalley (2007b) the break-even capital cost for wind generation at a penetration level of 22% of electricity generated from wind is in excess of h1.5m/MW installed. This paper omitted some of the softer benets of tidal generation development such as the creation of local jobs, improvements in local infrastructure leading to improvements in the standard of living in rural areas. These benets are very difcult to estimate and will vary depending on the location of the

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tidal generators. Research by Murphy and Walsh (2002) and s et al. (2003) suggest that very little benet should be by Forfa attributed to creating additional jobs in countries like Ireland because there is effectively full employment. In fact they suggest that at most a value of between just 1020% of a job should be included. However, in light of more recent economic conditions, the value of job creation is likely to be signicantly greater. In addition, tidal generation also reduces the reliance on imported fuels and as such can act as a hedge against international fuel price and supply variations. This benet was not included in this paper. The Irish Government currently supports the operation of peat red generation in Ireland by a levy on all electricity bills, known as the public service obligation (CER, 2004). The reasoning behind the support of peat is for fuel diversity purposes for security of supply and for rural employment benets (ESB, 2001). For the years 2004, 2005 and 2006, the average income from the PSO levy for the 350 MW of installed peat generation was h57.88m per annum (CER, 2004; EirGrid, 2005). Thus, the Irish public pay on average h57.88m per year for the security of supply benets and the local economy benets of the peat red generation. If tidal generation was assumed to create these same benets, and given the capacity factor of tidal generation at 350 MW installed, these benets of tidal generation could be assumed to equal 16% of h57.88m (h9.26m). This equates to a benet of h26,459 per MW installed. If this benet were included in the analysis above the total benets would increase slightly, however the overall conclusions of the paper would remain unchanged. While the results presented in this paper are specic for the Irish system, the methodology presented is applicable for all systems. As this paper has shown, the benets of tidal generation are such that the capital costs would have to be dramatically lower than the cheapest conventional unit in order to be economically viable from a societal perspective. While nancial support is often provided from Governments and Public agencies for capital costs for renewable projectsits low break-even cost bring into question whether this is a prudent policy for tidal generation.

Dublin and John Fitz Gerald of the Economic and Social Research Institute for their helpful comments and observations. References
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7. Conclusions This paper presented a methodology for calculating the breakeven costs of tidal generation and discussed the potential for tidal generation for a case study system. It was found that tidal generation resulted in increased cycling costs on the case system. The nature of the tidal generation, with four daily peaks and troughs in output, results in a low load factor for tidal generation. This leads to relatively low emissions and fuel saving benets for tidal generation. To calculate the net benets of tidal generation it was assumed that there were no deep network reinforcements necessary with increased tidal generation and the operation and maintenance costs were assumed to be slightly less than those for an offshore wind turbine. However, even with these assumptions, in order to produce positive net benets, the capital costs of tidal generation would have to be less than h5,10,000 per MW installed. This is considered to be an unrealistic low level of capital cost, thus, it is concluded that tidal generation is currently not a feasible option for the case study.

Acknowledgements The authors gratefully acknowledge the contributions of Mark OMalley at the Electricity Research Centre in University College

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