ARTICLE IN PRESS

Energy Policy 37 (2009) 1914–1924

Contents lists available at ScienceDirect

Energy Policy

0301-42

doi:10.1

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journal homepage: www.elsevier.com/locate/enpol

The economics of tidal energy

Eleanor Denny �,1

Department of Economics, Trinity College Dublin, Dublin 2, Ireland

a r t i c l e i n f o

Article history:

Received 19 August 2008

Accepted 12 January 2009Available online 6 March 2009

Keywords:

Tidal energy

Renewable generation

Climate policy

15/$ - see front matter & 2009 Elsevier Ltd. A

016/j.enpol.2009.01.009

+353 18961522; fax: +35316772503.

ail addresses: dennye@tcd.ie, edenny@gmail.c

is work was conducted in part while the au

h Centre (ERC) at University College Dublin

ity Supply Board (ESB) Networks, ESB Power G

Energy Regulation, Bord na Mona, Airtricit

s and Cylon Controls.

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 benefits 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, manypolicy makers worldwide have accepted the importance ofreducing greenhouse gas emissions, in particular from theelectricity industry. As a result, there has been an internationalmovement in the promotion of policy mechanisms for thereduction of greenhouse gas emissions and in the promotion ofclean renewable technologies for electricity generation.

Many types of renewable generation, such as solar, wind, tidaland wave generation, exhibit ‘variable’ output, in other words, theoutput of these units depend upon weather conditions that cannotbe controlled by the operator of the generator. For example, theamount of electricity generated by a wind turbine fluctuates aswind speed changes and that of a photovoltaic array with theintensity of sunlight. Thus, the control of these generators islimited as operators can only reduce their potential output.As well as being variable, many forms of renewable generationalso face a challenge of being relatively unpredictable. Since theunderlying resource cannot be directly controlled, the renewablegeneration is high when conditions are favourable and low when

ll rights reserved.

om (E. Denny).

thor was with the Electricity

. The ERC is supported by

eneration, EirGrid, Commis-

y, Viridian, Bord Gais, SWS,

unfavourable. Thus, forecasts of weather conditions are crucialwhen examining renewable generation sources. When significantpenetrations of renewable generation are connected to anelectricity network, it can result in a requirement to alter theoperation of the system to accommodate the variability of thesegenerators (ILEX and Strbac, 2002; Holttinen, 2004; DCENR,2006).

Tidal generation has a significant advantage over many otherforms of renewable generation as it is almost perfectly fore-castable over long time horizons. Thus, incorporating tidalgeneration into an electricity system should be less challengingthan other forms of renewable generation which are relativelyunpredictable.

Investment in tidal generation adds to the generation capacityon the system and can thus defer investment in other forms ofgeneration. This is a benefit of tidal generation and is measured bythe capacity credit. The capacity credit of a generator can beconsidered as a measure of the amount of conventional generationthat could be displaced by the renewable production withoutmaking the system any less reliable (Castro and Ferreira, 2001).Another benefit of tidal generation is a reduction in harmfulemissions as tidal generation is likely to displace the output ofsome thermal units. In addition, a reduction in the operation ofthermal units can also lead to a fuel cost saving as tidalgeneration, with a zero fuel cost, replaces units with significantfuel costs.

However, despite its predictability, tidal generation output isstill variable and non-dispatchable in nature and as such poses achallenge for system operators. An increase in variable generation

ARTICLE IN PRESS

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

E. Denny / Energy Policy 37 (2009) 1914–1924 1915

on an electricity system may result in an increase in the cyclicaloperation of conventional units as system operators attempt tocoordinate the following of the fluctuating demand throughoutthe day and the variable output of the tidal generation (DCENR,2006; Bryans et al., 2005b). An increase in the cycling ofconventional units can result in increased wear and tear on themachines and result in a shortening of the life span of the units(Lefton et al., 1997; Denny and O’Malley, 2008). In addition it maybe the case that a significant increase in the penetration of tidalgeneration may result in a need for greater reinforcement of thenetwork system, and this is a potential cost imposed by the tidalgeneration (DCENR, 2006).

In this paper, I identify the main potential costs and benefits ofincorporating tidal generation onto an electricity system and usethese costs and benefits to quantify a break-even capital cost fortidal generation in a case study on a real electricity system. Themethodology used here is based on a preliminary evaluation oftidal generation by Denny and O’Malley (2007a) and on previouswork by Denny and O’Malley (2007b) on the costs and benefits ofwind generation. The approach adopted attempts to maximisesocial welfare and thus includes both direct and indirect costs andbenefits. As this is a social welfare maximising study, it isconsidered that any costs incurred are societal costs and anybenefits are societal benefits, rather than accruing to anyparticular participant.

However, in order to constrain the scope of the study a numberof assumptions were required. This study represents a nearperfectly competitive gross pool electricity market. Thus, thegenerators are assumed to be profit maximisers and price takersand gaming of the electricity market by individual generators isnot taken into account. While in reality a certain degree ofstrategic bidding behaviour may occur, this is not the focus of thispaper. Indeed, since this is a social welfare maximising study, andperfect competition ensures the optimal solution for society ingeneral, the results shown here could be deemed to represent thesocial optimum. Electricity system dynamics, although an im-portant technical issue for renewable energy integration, arehighly system specific and require a large scale system modelbeyond the scope of this paper and as such have been omitted inthis analysis. In addition, in an attempt to limit the number ofassumptions required, it was necessary to omit ‘softer’ factorssuch as the visual and local environmental impacts of tidalgeneration, the creation of jobs, improvements in local infra-structure, etc.

Section 2 discusses the characteristics of tidal generation, andSection 3 outlines the case study electricity system analysed inthis work. Section 4 describes the electricity market modelemployed and the results, discussion and conclusions arepresented in Sections 5–7, respectively.

2. Tidal generation

Traditionally tidal energy has been harnessed using a barragesystem to establish a head of water, which can in turn power aturbine, much as in a hydroelectric dam. An example of such ascheme can be seen at the La Rance tidal barrage, Brittany, France.Recent developments in tidal energy devices (TEDs) have focusedon harnessing the tidal stream rather than the potential rise in sealevel. Tidal streams are fast moving currents, the speed of whichcan be magnified by local topographical features such as head-lands, inlets and between islands (BWEA, 2007; Bryans et al.,2005b). The progress of TED development has been slow, withonly 15 projects in development around the world. One tidaldevice is almost market ready, it is developed by Marine CurrentTurbines (MCT) and is illustrated in Fig. 1 (MCT, 2007). Two other

TEDs still in the development stage are the Engineering Business’s‘Stingray’ project and the Hammerfest Strøm project.

As can be seen from Fig. 1, the MCT turbine uses technologysomewhat similar to that of a wind turbine. Two turbines aresupported by a beam driven into the seabed, as the water flowspast, the turbines turn and produce power. The rotors measurebetween 15 and 20 m in diameter, and can pitch at 1801 toaccommodate bi-directional flows, i.e. on the ebb and flood tide.For ease of servicing, the wing holding the turbines can be jackedup the beam, raised out of the water, removed and serviced onland (MCT, 2007).

The MCT device has been designed to take advantage of thebest tidal resources and is considered viable in areas of 20–40 m ofwater, where the peak spring tidal current velocity is greater than2.25 m/s (Bryans et al., 2005a; Whittaker et al., 2003). MCTinstalled a prototype with a single 750 kW turbine off Lynmouthin the Bristol Channel during 2003 and a 1.2 MW device iscurrently being tested in Strangford Lough in Northern Ireland.

The majority of the energy contained within the tides isgenerated from the gravitational forces of the sun and moon onthe deep oceans. The rotation of the earth relative to both the sunand the moon produces a 12.4 h cycle resulting in two high watersand two low waters per day. The size of the high water isdependent on the position of the moon relative to the sun. Whenthey are in line the forces are constructive and there is a springtide. When they are at 901 the forces are destructive and there is asmaller neap tide (Denny and O’Malley, 2007a; Bryans et al.,2005b). The power output from a 1 MW MCT device is shown for aspring tide and a neap tide in Fig. 2 (Bryans et al., 2005a). Thisspring–neap cycle has a period of 14.7 days (two cycles per lunarmonth) as shown in Fig. 3 (Bryans et al., 2005a).

It is clear from Fig. 2 that the tidal output peaks and troughsfour times a day as the tide comes in and out twice daily. In

ARTICLE IN PRESS

00:00 06:00 12:00 18:00 00:00

0.2.

0.4

0.6

0.8

1.0

Time of Day

Tida

l Out

put (

MW

)

SpringNeap

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

151050

0.33

0.66

1.00

Days

% m

ax o

utpu

t

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

Gas51%

Coal14%

PumpedStorage3%

Oil15%

Peat4%

Renewables13%

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

E. Denny / Energy Policy 37 (2009) 1914–19241916

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

3. Case study

In order to quantify the costs and benefits of tidal generation areal electricity system was taken as a case study. Ireland is thecase study chosen for this analysis since it is an island electricitysystem with a potentially rich tidal energy resource. In addition,Ireland has very limited interconnection to other systemsallowing for a controlled study of tidal generation. However, theissues that are raised here are not unique to the case system andare likely to be relevant in other systems considering tidalgeneration.

The Irish system historically consisted of two separatelyoperated but interconnected systems, one in the Republic ofIreland and one in Northern Ireland. However, in 2004 anagreement was reached between the electricity regulators in theRepublic and in the North to establish a single ‘all-island’ marketfor electricity. This new ‘all-island’ Single Electricity Market (SEM)was launched in November 2007 (SEMO, 2007). The SEM is amandatory gross pool market with centralised commitment ofunits. The marginal generator sets the system marginal price forall generators in the gross pool market. In addition, to the grosspool market there is a separate capacity payment mechanism.Thus generators’ bids should consist of their marginal and startcosts only. This paper examines this ‘all-island’ electricity system,covering the Republic of Ireland and Northern Ireland (referred tojointly 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 fired generation plant with a small number of peat plants andold thermal gas generators. Since 1990 however, the share of highcarbon content fuels such as coal has fallen in Ireland due to alarge increase in the use of natural gas combined cycle plants(CCGTs). Gas fired generation now accounts for over 50% of thegeneration in Ireland (Deloitte, 2005). Ireland has one pumpedstorage station and a small number of hydropower plants. Inaddition, Ireland has one 500 MW interconnector to Scotland. Theinstalled plant mix for the Irish electricity system as of March2008 is illustrated in Fig. 4.

Bryans et al. (2005b) determined the resource for tidal energyaround Ireland using a 2 dimensional tidal model to simulate thetidal flows for the waters surrounding the entire island with a405 m by 405 m grid. They found that the resource currentlyaccessible to the MCT tidal device (as shown in Fig. 1) is 374 MWaround Ireland. However, it is predicted that into the future, TEDdevelopment will lead to larger turbines which will be financiallyviable at greater depths and lower spring current velocities. Basedon the predictions by Bryans et al. (2004), a tidal resource of up to560 MW is investigated here, representing 6% of installedgeneration capacity.

4. Methodology

During the design process of the Single Electricity Market inIreland software from Energy Exemplar, known as PLEXOS forPower Systems, was used by the market design team to model thelikely operation and prices in the new market (PLEXOS, 2006).The purpose of this modelling work was to assist industryparticipants in developing a greater understanding of the newelectricity market arrangements and to provide quantitativesupport in assessing the potential impacts of the arrangementson both the industry and the final customer (AIP, 2008).

The PLEXOS tool is a sophisticated modelling technique whichuses mixed integer optimisation to determine the unit commit-ment decisions and accounts for generator constraints such asminimum and maximum operation, ramp rates, start times andcosts, maintenance schedules and transmission constraints. Theoptimisation also co-optimises for reserve provision and includesenergy limited cascade constraints for the operation of hydrosta-tions and genuine optimisation of the pumped hydro stations(PLEXOS, 2006).

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E. Denny / Energy Policy 37 (2009) 1914–1924 1917

This PLEXOS model was populated with specific informationfor the Irish system (hereafter referred to as PLEXOS-SEM) andwas validated initially against the Trading and Settlement code byKEMA consulting and secondly against the first four months ofactual market operation by NERA consulting (AIP, 2008). ThePLEXOS-SEM model is utilised by the Commission for EnergyRegulation (CER) in Ireland as part of their duties to monitorgaming in the market. Fig. 5 below illustrates the accuracy of thePLEXOS-SEM model by comparing the predicted average ofthe system marginal prices in the first four months of the SEMto the actual average of the system marginal prices (NERAEconomic Consulting, 2008).

The Commission for Energy Regulation has made available allof the inputs for the PLEXOS-SEM model (AIP, 2005) and thismodel is utilised in this paper to model the impact of increasinglevels of tidal generation on the operation of the Irish electricitysystem and the resulting costs and benefits.

4.1. Tidal generation in PLEXOS-SEM model

Tidal generation is perfectly predictable and under EUDirective 2001/77/EC (2001) tidal output must be accepted whenavailable. Thus, in order to include the tidal generation output in

69.7479.19

123.05

68.36

79.07

120.42

0

20

40

60

80

100

120

140

Base price

Euro

/MW

h

PredictedActual

Mid price Peak price

Fig. 5. Predicted system marginal price vs. actual system marginal price.

0

1000

2000

3000

4000

5000

6000

7000

1

MW

Load N

1

2 3 4 5 6 7 8

Fig. 6. The impact of tidal g

the PLEXOS-SEM model, the tidal profile was simply subtractedfrom the demand profile. Installed tidal penetrations wereincreased from 0 to 560 MW in 80 MW intervals and thecorresponding generator output profiles were analysed. Fig. 6below indicates the impact of 560 MW of tidal generation on theload for the first 15 days in January 2007.

As illustrated by the markers 1–4 in Fig. 6 the tidal output hasvarying effects on the load profile depending on time of themonth. At marker 1, the impact of the tidal generation is to cause asignificant decrease in the net demand in the middle of theafternoon. At marker 2, there is a neap tide and the tidal output isseen to have a minimal impact on the demand. Marker 3 indicatesthat the tidal output can significantly reduce the minimumdemand during the night and marker 4 illustrates a decrease inpeak demand. Each of the effects at markers 1, 3 and 4 is likely tohave a significant impact on the operation of the conventionalunits on the system. The impact of this on the costs and benefits ofthe tidal generation is investigated further in Section 5.

As shown previously, the power output from a tidal turbine orgroup of turbines will only reach its maximum output during aspring tide, which occurs for a short time twice a month.Therefore, it is not envisaged that developers would consider iteconomically viable to install electrical equipment rated toharness all of the energy available at a spring tide. Instead, it ispredicted that the maximum power from the turbine would bedown-rated by altering the pitch of the blades. This is known asElectrical Down Rating (EDR).

A scenario is investigated in this paper which assumes that inIreland, the installed tidal devices will undergo 40% down ratingof the maximum rated capacity of the turbines (Bryans et al.,2005b). Thus, the assumed maximum power output realised is336 MW although the resource is 560 MW, as shown in Fig. 7.In this scenario it is envisaged that developers would balance thesavings in the cost of the turbine and the grid connection againstthe revenues lost from spilling energy at higher tidal flow rates.

5. Results

In order to investigate the costs and benefits of tidalgeneration, the model described in Section 4 was run for eachhour for an entire year with increasing penetrations of installedtidal generation. The resulting operating schedules of the

Day

etLoad Tidal

2 4

3

9 10 11 12 13 14 15

eneration on demand.

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00:00 06:00 12:00 18:00 00:000

100

200

300

400

500

600

336

Time of Day

MW

Original SpringEDR SpringNeap

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

E. Denny / Energy Policy 37 (2009) 1914–19241918

generators were then analysed to determine the CO2, SO2 and NOx

emissions benefits, the fuel saving benefits and the cycling costs.Also discussed in this section are the capacity benefits ofincreased penetrations of tidal generation.

2 It should be noted that the assumed CO2 price of 30/t CO2 is the opportunity

cost of CO2 rather than the social benefit and is efficient only if the EU target is

efficient 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

benefit and less than 3% of the total benefit of tidal generation. Thus, the results are

relatively insensitive to changes in assumptions regarding the price of SO2 and

NOx.

5.1. Emissions benefits of tidal generation

Harmful emissions are created in combustion plants throughthe burning of fuels at elevated temperatures. As the installedcapacity of tidal generation increases it displaces conventionalgeneration which has an impact on the emissions from theconventional units. Emissions of carbon dioxide (CO2) and sulphurdioxide (SO2) depend on the quantity of carbon and sulphur in thefuel, respectively, and the quantity of fuel burnt (Denny andO’Malley, 2006). Thus, a reduction in the operation of a thermalunit will result in a reduction in CO2 and SO2 emissions. Nitrogenoxides (NOx) formation is more complex and does not dependsolely on the nitrogen content of the fuel but is also affected bythe flame temperature, the oxygen concentration and theresidence time (Kesgin, 2003). Previous work on the impact ofvariable generation on emissions is shown in Denny and O’Malley(2006).

Once the operating levels of the conventional units had beenattained using the model described in Section 4, the resulting CO2,SO2 and NOx emissions from the conventional units werecalculated for each hour by using specific emissions informationfor each individual generator (EirGrid, 2006; AIP, 2005). Fig. 8illustrates the emissions benefits from increasing levels of tidalgeneration for CO2, SO2 and NOx. The magnitude of CO2 emissionsis much larger than for the other two emissions, however, for easeof illustration all three emissions have been plotted on the sameaxis in Fig. 8.

It can be seen that as tidal generation increases, the systememissions of CO2, SO2 and NOx are reduced. However, thesereductions are relatively modest. With 560 MW of installed tidalgeneration, CO2 emissions are reduced by approximately 501 kt(metric), representing approximately 2% of total system emis-sions. 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 tothe fact that tidal generation has a low average output (loadfactor) when compared to other forms of generation. The loadfactor for tidal is approximately 22% compared to over 40% for lowlevels of installed wind generation. This low load factor results in

a smaller reduction in conventional generation output than asimilarly size unit with a higher load factor.

For the purposes of this analysis it is necessary to express theseemissions savings in monetary terms. Under the EU ETS (2003),there is currently an EU wide CO2 emissions market wheregenerators buy and sell allowances for CO2. Thus, the CO2

emissions are valued at a representative market price of h30/t ofCO2.2 There is not currently an emissions market for SO2 and NOx

in Europe, however, there is a market for these emissions in theUnited States. Thus, the assumed value of these emissions arebased on the prices in these emissions markets in the UnitedStates (US EPA, 2006a, b). The assumed SO2 price is h150/t and theNOx price is h3000/t. The value of the saved emissions isillustrated in Fig. 9 (shown as the line ‘EDR 0%’).3

As discussed in Section 4.1, a scenario was analysed where thetidal turbines undergo 40% Electrical Down Rating. This saves thedeveloper the cost of investing in a turbine which will onlyoperate at is full rated to capacity during a spring tide. Ratherelectrical equipment rated to produce 60% of the maximumoutput of the feasible resource is produced. With EDR of 40% thetotal energy output of the tidal device over the year is reduced.This results in a slight reduction in the emissions savings.The emission saving benefits with EDR of 40% is also illustratedin Fig. 9.

5.2. Fuel savings with tidal generation

As tidal generation displaces electricity produced from thermalunits the quantity of fuel burnt by the thermal units change. Themodel described in Section 4 determined the operating scheduleswith increasing penetrations of tidal generation. Once thesedispatches had been determined, the consumption of fuel wascalculated by analysing the gigajoules (GJ) of energy consumedper MWh for each generator (AIP, 2005). The annual fuel savingswith increases in tidal generation are shown in Fig. 10.

Because the relative size of the installed tidal is small inrespect to the size of the system (6%), the fuel savings are modest.The largest reductions are seen in gas generation with 560 MW oftidal 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 thefuel prices used are shown in Table 1. These are also the pricesused in the dispatch of the generators. For the different gas pricesshown, the fuel savings on a particular date are valued at the gasprice on that date. Also illustrated are the fuel savings if ElectricalDown Rating of the tidal turbines is employed.

5.3. The capacity benefit of tidal generation

One of the key benefits associated with increased tidalgeneration is the additional capacity it adds to the system. Theextent to which tidal generation can substitute for conventionalgeneration without reducing the reliability of the system is givenby the capacity credit of tidal (Castro and Ferreira, 2001).

ARTICLE IN PRESS

0 80 160 240 320 400 480 56019

20

21

22

20000

25000

30000

Installed Tidal Generation MW

Emis

sion

s in

Kilo

tons

CO2

NOx

SO2

Fig. 8. Tidal generation emissions savings.

0 80 160 240 320 400 480 5600

2

4

6

8

10

12

14

16

18

Installed Tidal Generation MW

Valu

e of

Sav

ed E

mis

sion

s in

Mill

ions

of E

uro

EDR 0%EDR 40%

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

0 80 160 240 320 400 480 5600

20

40

60

80

100

120

140

160

180

Installed Tidal Generation MW

Ann

ual F

uel C

onsu

mpt

ion

in P

etaj

oule

s

GasCoalPeatOil

Fig. 10. Annual fuel savings with tidal generation.

0 80 160 240 320 400 480 5600

5

10

15

20

25

30

35

40

45

Installed Tidal Generation MW

Valu

e of

Fue

l Sav

ings

in M

illio

ns o

f Eur

o

EDR 0%EDR 40%

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

E. Denny / Energy Policy 37 (2009) 1914–1924 1919

Variable sources of generation, such as tidal, make a differentcontribution to the capacity on the system than dispatchablegeneration. Although tidal generation can serve a large proportionof the load, it may not necessarily be the case that the times ofhigh tidal generation coincide with times of high demand. Bryanset al. (2005b) found that the capacity credit of tidal ranges fromapproximately 25% at low installed capacities to under 15% at560 MW. With Electrical Down Rating, the capacity creditis increased slightly. The capacity credit of tidal is illustrated inFig. 12.

The capacity benefit of tidal generation can be thought of asthe saved cost of building and maintaining a conventionalgenerator with a capacity equal to the capacity credit of theinstalled tidal generation.4 Based on CER (2006) and Doherty et al.

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 benefit’’ is used to represent the monetary value of this displaced

conventional generation, calculated as the saved capital and O&M cost.

ARTICLE IN PRESS

Table 1Fuel costs in h2008/GJ.

Fuel type Fuel price (h/GJ) ROI Fuel price (h/GJ) NI

Coal 3.79 4.14

Gas (01/10/2007–31/12/2007) 6.25 6.62

Gas (01/01/2008–31/03/2008) 7.65 8.02

Gas (01/04/2008–30/09/2008) 4.97 5.34

Oil 6.66 6.26

Peat 3.23 –

0.00

5.00

10.00

15.00

20.00

25.00

30.00

0Installed Tidal Generation MW

Cap

acity

Cre

dit%

Capacity CreditCapacity Credit (40% EDR)

80 160 240 320 400 480 560

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

0

2

4

6

8

10

0Installed Tidal Generation

Valu

e of

Sav

ed In

vest

men

t in

Mill

ions

of E

uro

EDR0%EDR40%

80 160 240 320 400 480 560

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

1000

1500

2000

2500

3000

Tota

l num

ber o

f Sta

rts 0MWTidal

560MWTidal

E. Denny / Energy Policy 37 (2009) 1914–19241920

(2006) it is assumed that new conventional generation built inIreland will be gas fired, with a capital cost of h6,50,000 per MWinstalled, availability of 85% and operation and maintenance costsof h45,000 per MW per year. The capital cost is converted to anannuity with a term of 15 years and a discount rate of 7.83% inorder to be expressed as an annual cost (CER, 2006). Fig. 13 showsthe value of the saved investment in conventional generation withincreases in tidal generation.

Gas Units0

500

Peat Units Coal Units Oil Units Total

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

5.4. Cycling costs with tidal generation

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

demand. This cycling includes ramping up and down and turningon and off. When a unit is cycled, the boiler, steam lines, turbineand auxiliary components undergo large thermal and pressurestresses which result in damage. This damage accumulates overtime and eventually leads to accelerated component failures andforced outages (Lefton et al., 1997).

The costs associated with cycling include additional operationand maintenance spending associated with increased overhauls,higher heat rates due to low load and variable operation, auxiliarypower, fuel during start up, unit life shortening, increasedoperator error due to greater hands-on operation, etc. It isestimated that these costs can range from h200 to h5,00,000(including fuel cost) per single on–off cycle depending on the typeof unit (Lefton and Besuner, 2001; Denny and O’Malley, 2007b,2008). The actual cost of cycling is very difficult to estimate andmust be conducted on a plant by plant basis. Grimsrud and Lefton(1995) found that a base loaded coal unit with a total installedcapacity of 500 MW and a fuel cost of $3000 per cycle, had a truecost of $40,000 per cycle when the costs mentioned above weretaken into account. On average, it was estimated that for a largesample of units, the fuel costs represent about 7–12% of the totalcost associated with cycling for a large supercritical unit, 10–15%for an intermediate fossil fuel unit and 20–30% for a gas firedturbine (Grimsrud and Lefton, 1995).

As illustrated in Fig. 2, the tidal generation has four peaks andtroughs per day representing the tidal current coming in and outtwice a day. This fluctuation is particularly apparent during aspring tide when the variations are at their maximum. As seen inFig. 6, the tidal generation can have a dramatic effect on demand.A reduction in the minimum demand at night will cause certainunits which had previously been baseloaded to switch off atminimum load and then to switch back on once demand has risenagain. In other words, the conventional generation on the systemwill be required to ramp up and down and switch on and off inlinewith the variations in the tidal generation. Thus, although thetidal generation is predictable its variability causes a challenge forsystem operators. Fig. 14 shows how the number of starts of thedifferent units on the system changes with the introduction oftidal generation.

It was found that in general, as tidal penetration increases, thenumber of starts on the system increases. This is due to themagnitude of the variations in tidal output increasing asthe installed tidal generation increases. The exception to thisis for the oil units. As the tidal penetration increases the oil unitsare utilised less and less and are gradually removed from the plantmix. The cost of this additional cycling activity as a result of the

ARTICLE IN PRESS

0

5

10

15

20

25

0Installed Tidal Generation MW

Cyc

ling

Cos

t in

Mill

ions

of E

uro

EDR0%EDR40%

80 160 240 320 400 480 560

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

0

10

20

30

40

50

60

70

80

0Installed Tidal Generation MW

Mill

ions

of E

uro

Total BenefitsCycling Costs

80 160 240 320 400 480 560

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

Table 2Break-even annual costs.

Installed tidal generation Annual cost (hm)

0 0

80 9.1

160 17.9

240 23.7

320 30.1

400 35.7

480 40.0

560 46.1

E. Denny / Energy Policy 37 (2009) 1914–1924 1921

increased tidal generation was calculated for each of the units onthe 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 associatedwith increases in tidal generation and the emissions benefits, fuelsavings and capacity benefits. Since tidal generation is still in itsinfancy clearly defined capital costs have not yet been establishedand forecasting the likely capital costs could be erroneous.In addition, there have been no comprehensive network reinfor-cement studies completed for Ireland with respect to tidalgeneration. Thus, rather than attempting to quantify the totalnet benefits of tidal generation I will attempt to determine themaximum amount that these other costs can be to ensure positivenet benefits for tidal generation. Fig. 16 illustrates the annual totalbenefits of tidal (the emissions benefit plus fuel saving benefitplus capacity benefit) and the annual cycling cost.

From Fig. 16 the total benefits of tidal generation are seen toexceed the cycling costs at all penetrations of tidal generation,however, the capital, operation and network costs of the installedtidal generation have still to be included. Table 2 illustrates themaximum that these other costs could be each year to ensure thatthe benefits of tidal generation are greater than the total costs.

The amounts in Table 2 represent the maximum that thecombined capital, O&M and network costs can be each year toensure positive net benefits for tidal generation. In other words, ifthe annual capital, O&M and network reinforcement costsexceeded the amounts shown in Table 2 then the costs of tidalgeneration will exceed the benefits and the resource should not bedeveloped.

Putting these figures into perspective, if it is assumed that theoperation and maintenance costs of tidal generation were equal toh55,000/MW installed per annum, annual O&M cost for 560 MWof tidal generation would be h30.8m. While this figure mayinitially appear to be high, O&M cost of h55,000/MW per annumare in fact less than those of an offshore wind turbine (Dohertyet al., 2006). Given that the moving parts of the tidal turbinesoperate below the water line, they are likely to incur greaterdamage to parts compared to a wind turbine with moving partsabove 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 O’Malley (2008) and Denny et al. (2007).

tend to be high given accessibility issues and greater infrastruc-ture costs than onshore developments.

If it were assumed that no network reinforcement wasrequired with 560 MW of tidal, then the capital costs would haveto be less than h15.3m per annum to ensure positive net benefits(h46.1–h30.8m). If this is the annual cost of capital, then the totalcapital 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 approximatelyh2,37,000 per MW installed of tidal generation. In other words, toensure 560 MW of tidal generation breaks-even the capital costwould have to be less than h2,37,000 per MW installed. The break-even capital and network costs to ensure positive net benefitsfor 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 Table3) for tidal generation to produce positive net benefits isunrealistically low given that the cheapest plant currentlyavailable on the Irish system is a Combined Cycle Gas Turbinewith a capital cost of h6,50,000/MW installed. Thus, the benefitsof tidal generation are such that the capital costs would have to bedramatically lower than the cheapest conventional unit in order tobe economically viable from a societal perspective. Thus, it is notunreasonable to conclude that, given the current conventionalplant mix, tidal generation will produce negative net benefits atall penetrations.

A similar analysis was conducted for the scenario where EDR of40% is employed. In this scenario, although the resource is560 MW, the turbine installed is only rated to 336 MW, thus thecapital cost per MW installed is based on these lower ratedturbines. Table 4 illustrates the maximum capital cost per MWinstalled if EDR of 40% is utilised.

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Table 3Break-even capital plus network costs to ensure positive net benefits.

Installed tidal

generation

Break-even capital

cost (hm)

Break-even capital cost per MW

installed (hm)

0 0 0

80 40.8 0.51

160 78.9 0.49

240 90.4 0.38

320 108.6 0.34

400 118.6 0.30

480 118.0 0.25

560 132.7 0.24

Table 4Break-even capital plus network costs to ensure positive net benefits with EDR of

40%.

Turbine size

(resource size)

Break-even capital

cost (hm)

Break-even capital cost per MW

installed (hm)

0 0 0

48 MW (80 MW) 32.2 0.67

96 MW (160 MW) 68.7 0.72

144 MW (240 MW) 80.8 0.56

192 MW (320 MW) 93.0 0.48

240 MW (400 MW) 93.7 0.39

288 MW (480 MW) 100.5 0.35

336 MW (560 MW) 103.0 0.30

E. Denny / Energy Policy 37 (2009) 1914–19241922

It is seen that with EDR of 40% the break-even capital cost ofthe turbine can be higher per MW installed for the tidalgeneration to produce positive net benefits than if no EDR isemployed. However, even utilising EDR the required capital costsare still low compared to conventional generation and otherrenewable resources.

6. Discussion

The case study presented in the previous sections highlightedthe potential costs and benefits of tidal generation. It was seenthat due to its relatively low load factor of just 22%, and its lowpenetration level (6%) the potential emissions and fuel savings oftidal generation are modest. In addition, the potential of tidalgeneration to defer investment in conventional generation islimited due to its low-capacity credit. While there are a number offactors which may increase the value of the benefits (such asincreased carbon or fuel prices) the shortfall between the costsand benefits is such that these factors alone would not besufficient to dramatically alter the economics of tidal generation.In fact, it has been shown in Denny and O’Malley (2008) that anincrease in the carbon price can actually reduce the overall netbenefits of variable generation by increasing the cycling costsmore than the saved emissions. The increased carbon price shiftshigh carbon emitting units such as coal to marginal operation.Marginal units are required to cycle more frequently thanbaseloaded units in order to balance supply and demand. Coalunits which were historically operated as baseload units and thenhave to switch to variable operation typically have among thehighest cycling costs of all units. Thus, the carbon price increasesthe cycling costs and these costs are then further exacerbated bythe addition of variable generation on the system.

This paper examined the impact of tidal generation on a realelectricity system with a static plant mix. Thus, the underlyingplant mix was assumed to be unchanged with increasingpenetrations of tidal generation. In addition, this paper assumed

a carbon price of h30/t CO2 and a fixed set of fuel prices. However,in the long run the price of CO2 will impact on the prevailing fuelprices and is likely to have an impact on both conventional andtidal generation investment. Thus, looking into the future, if it isenvisaged that tidal generation will play a major role in the plantportfolio, then the conventional plant mix should be optimised toaccommodate this tidal generation. If this were to be conductedthe break-even costs for tidal generation are likely to be affected.A study conducted by Doherty et al. (2006) examines the optimalfuture conventional plant portfolios with high levels of installedvariable generation. Their analysis shows that with increasingpenetrations of variable generation, there is a reduction in thenecessity for baseloaded generation and an increase in peakingcapacity. In particular, the results point towards a reduction incoal-fired generation and an increase in OCGTs with increasingvariable generation penetrations.

Although it is predictable, the variability of the tidal generationproduces a significant cost to the system. One approach to reducethe impact of tidal generation on conventional generator cyclingwould be to curtail the tidal generation output at times ofminimum demand. This would reduce the number of starts on thesystem and thereby reduce the impact on the conventional units.However, the curtailment of energy from the tidal devices wouldhave a knock-on effect on the potential emissions and fuel savingbenefits.

Alternatively, electricity storage could be utilised to store theelectricity generated by the tidal generation during the night andto release it at peak times. This would increase the potentialrevenues of the tidal generator and would help to reduce thevariability of the tidal output. In addition, it is likely that therewould be increased emissions and fuel savings by a reduction inthe net demand at peak times. However, construction of adedicated storage unit to balance the variations in the tidaloutput comes at a high capital cost per MW installed. In addition,the combined low load factor of the tidal generation and theround-trip efficiency of storage devices would dramaticallyreduce the benefits of a combined tidal and storage system(Feely et al., 2008).

This paper investigates the break-even costs for tidal genera-tion from a societal perspective but it does not consider who bearsthe costs and who reaps the benefits associated with the tidalgeneration. It remains an open question how much of these costsand benefits would be passed on to the consumer in the marketprice and one which the author hopes to address in future work.

It is interesting to note the break-even costs for tidal in relationto the costs and benefits of wind generation. While windgeneration has the disadvantage over tidal generation of beingrelatively unpredictable, it has a higher load factor resulting inincreased energy output and therefore increased emissions, fueland capacity benefits. In addition, decades of experience com-bined with a small number of moving parts has resulted in thecapital costs of wind turbines falling to a relatively low level.The operating environment for wind turbines is also much moreforgiving on the mechanical parts than the marine environment.Denny and O’Malley (2007b) conducted a cost-benefit analysis ofwind generation on the Irish system and found that windgeneration produced positive net benefits for the system in excessof 22% of electricity generated from wind in 2010. In fact based onthe results in Denny and O’Malley (2007b) the break-even capitalcost for wind generation at a penetration level of 22% of electricitygenerated from wind is in excess of h1.5m/MW installed.

This paper omitted some of the ‘softer’ benefits of tidalgeneration development such as the creation of local jobs,improvements in local infrastructure leading to improvementsin the standard of living in rural areas. These benefits are verydifficult to estimate and will vary depending on the location of the

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E. Denny / Energy Policy 37 (2009) 1914–1924 1923

tidal generators. Research by Murphy and Walsh (2002) andby Forfas et al. (2003) suggest that very little benefit should beattributed to creating additional jobs in countries like Irelandbecause there is effectively full employment. In fact they suggestthat at most a value of between just 10–20% of a job should beincluded. However, in light of more recent economic conditions,the value of job creation is likely to be significantly greater.

In addition, tidal generation also reduces the reliance onimported fuels and as such can act as a hedge against interna-tional fuel price and supply variations. This benefit was notincluded in this paper.

The Irish Government currently supports the operation of peatfired generation in Ireland by a levy on all electricity bills, knownas the public service obligation (CER, 2004). The reasoning behindthe support of peat is for fuel diversity purposes for security ofsupply and for rural employment benefits (ESB, 2001). For theyears 2004, 2005 and 2006, the average income from the PSO levyfor the 350 MW of installed peat generation was h57.88m perannum (CER, 2004; EirGrid, 2005). Thus, the Irish public pay onaverage h57.88m per year for the security of supply benefits andthe local economy benefits of the peat fired generation. If tidalgeneration was assumed to create these same benefits, and giventhe capacity factor of tidal generation at 350 MW installed, thesebenefits of tidal generation could be assumed to equal 16% ofh57.88m (h9.26m). This equates to a benefit of h26,459 per MWinstalled. If this benefit were included in the analysis above thetotal benefits would increase slightly, however the overallconclusions of the paper would remain unchanged.

While the results presented in this paper are specific for theIrish system, the methodology presented is applicable for allsystems. As this paper has shown, the benefits of tidal generationare such that the capital costs would have to be dramaticallylower than the cheapest conventional unit in order to beeconomically viable from a societal perspective. While financialsupport is often provided from Governments and Public agenciesfor capital costs for renewable projects—its low break-even costbring into question whether this is a prudent policy for tidalgeneration.

7. Conclusions

This paper presented a methodology for calculating the break-even costs of tidal generation and discussed the potential for tidalgeneration for a case study system. It was found that tidalgeneration resulted in increased cycling costs on the case system.The nature of the tidal generation, with four daily peaks andtroughs in output, results in a low load factor for tidal generation.This leads to relatively low emissions and fuel saving benefits fortidal generation. To calculate the net benefits of tidal generation itwas assumed that there were no deep network reinforcementsnecessary with increased tidal generation and the operation andmaintenance costs were assumed to be slightly less than those foran offshore wind turbine. However, even with these assumptions,in order to produce positive net benefits, the capital costs of tidalgeneration 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 afeasible option for the case study.

Acknowledgements

The authors gratefully acknowledge the contributions of MarkO’Malley at the Electricity Research Centre in University College

Dublin and John Fitz Gerald of the Economic and Social ResearchInstitute for their helpful comments and observations.

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