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ISLAND ENERGY TRANSITIONS: PATHWAYS FOR ACCELERATED UPTAKE OF RENEWABLES Martinique, June 22-24,...

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WAVE ENERGY TECHNOLOGIES: CRITERIA FOR SUCCESS ISLAND ENERGY TRANSITIONS: PATHWAYS FOR ACCELERATED UPTAKE OF RENEWABLES Martinique, June 22-24, 2015 Max Carcas, Managing Director, Caelulum Ltd
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WAVE ENERGY TECHNOLOGIES:

CRITERIA FOR SUCCESS

ISLAND ENERGY TRANSITIONS:PATHWAYS FOR ACCELERATED UPTAKE OF

RENEWABLESMartinique, June 22-24, 2015

Max Carcas, Managing Director, Caelulum Ltd

Caelulum Independent company providing management

and consultancy services in offshore renewables Strategy advice to government in renewables

adoption Experienced in bringing new products to market

and market enablement >£70m funding raised in investment, sales,

grants in marine renewables Sales and joint ventures established with leading

utilities and energy companies

Wave Energy• Waves formed by

interaction of the wind with the sea

• Swell waves travel for thousands of miles without losing energy

• Very concentrated form of renewable energy

Þ Wave energy – stored, concentrated, wind energy

• Benefits from consistent trade winds

• Immunity to local climatic effects

• Small hourly & diurnal variation

• Numerous calibrated WIND-WAVE models

• Existing offshore forecasting services

Predictability

How much power can we get from ocean waves?

P = L . W. E

Length of coastline in m (eg 0 –

2000km)

Wave Power generation in

kW

Efficiency of wave energy capture (0-

100%)

W = ρ g² H² T 32π x

1000

ρ - sea water density = 1024kg/m³g – gravitational acceleration = 9.8 m/s²

T

Time period between

wave crests (seconds)

H – peak to trough wave

height (metres)

Wave Power kW per metre of wave front

How much is there?

60km x 15kW/m (est)= 900MW average; = 7.8TWh/year

….€2.7bn/year (!) @ 35c/kWh [Martinique demand =1.1 TWh/year, ie average of 125MW]

What about the technology?Key requirements:

Installability Survivability Reliability Maintainability Operability Cost effectivenessÞ Vital to have a fully

engineered solution to the all the requirements above to deliver commercial farm operation

Pelamis Wave Power

Aquamarine Power

The offshore/marine sector’s contribution:

“No major technical barriers to the development of wave energy prototypes have been identified. All issues raised under design, construction, deployment and operation can be addressed by transfer of technology from other industries, especially the offshore industry”

DTI Report - Wave Energy: Technology Transfer & R&D RecommendationsOve Arup, October 2000

Building on offshore technology

3. Sustainable business model- Virtuous circle of cost

reduction- profitable projects- profitable technology

suppliers

4. The vision- Significant economic, environmental and energy system benefits

2. First investible power projects- Key performance

indicators validated- Risks reduced that

could impact projected returns

1. Full scale prototypes- Generating electricity- Technology validation &

iteration

£305/MWh + capital grant

£150-200/MWh with 1GW deployed

£305/MWh; projects <30MW

Wave technology path to success

Where are we now? 1904 2006

Commercial criteria Energy yield (eg 25-35% capacity factor)

Validated power curve over tidal cycle Availability (eg 80-95%)

Validated reliability and maintainability, ideally over period of 2-3 years Capital costs (eg £3-7m/MW)

Correlation between prototype and production Ratio of fixed costs in project to variable costs

Operating costs (eg 4-6% Capex/annum) Grid costs Correlation between prototype and production Ratio of fixed costs to variable costs

Lifetime (eg 15-20 years) Design & validation

Other risks eliminated/reduced Wake effects, electrical interconnection, environmental

Technology take-off

PROJECTBUILD

PROJECTDEVELOPMENT

What to finance?

Ele

ctr

icit

y

consu

merProject Developer

Development (1-3 yrs)

Wave Energy Converter Technical feasibility studies

Environmental & Technical consultants, Stakeholders, Government, etc

Project OwnerBuild (9-24 months)

Wave Energy Converter assembly & installation

Component suppliers, subcontractors, fabricators, vessel operators

Balance of plant supply, substation, submarine cable, network upgrades

Project Owner Operation (>20 years)

Wave Energy Converter operation & maintenance

Component suppliers, vessel operators

Balance of plant maintenance, Insurers, site owner/lessor

PROJECTOPERATION

Who to finance?

Utilities Energy companies Independent power producers Pure project developers Pure financiers Industrials Suppliers/ Contractors Public sector

Decision factors for a project financier

Does return

on equity

balance risk?

RISKS:Machine:- Survivability- Reliability- Availability- Maintainability- OperabilityPolitical:- Tariff variationContractual:- Warranties

Financial Model

COSTS OF:- Machine- Installation- O&M- Insurance- Grid connection- Permitting & EIA- Seabed lease

Approach to financing

Likely projectreturn defined

Likely returnon equitydefined

INCOME:- Grants- Tariff- Energy Forecast

FINANCE/DEBT:- On balance sheetor limited recourse?- Contracts/Terms- Coverage ratios- Warranties

Resource datafor site

MachinePower curve

Data

from

Test

centre

pro

toty

pe

Data

from

Te

st centre

pro

toty

pe

Data

fro

m T

est

ce

ntr

e

pro

toty

pe

Allconditionsprecedent

met?

Execute contracts,

release finance

OrderMachines

CONTRACTPREPARATION:- PPA- EPC- I, O & M- Grid connection- Grant Assistance- Insurance

CONSENTS &PERMITS:- Environmental- Seabed lease- Fishing/Navigation- Onshore equip.GRANTS- secured

YES YES

OTHER BENEFITS Eg: PR, FirstMover, Exclusivity, Tech rights

Hurdle rate=> Need to get above the line….

TEST & VALIDATION

CO

ST R

ED

UC

TIO

NIN

CR

EEA

SD

Y

IELD

Affect of cost of finance

Diesel vs Wave comparison- same cost of energy….!

Need for scale - CapexCapex cost versus scale of project

£0.00

£1.00

£2.00

£3.00

£4.00

£5.00

£6.00

£7.00

£8.00

0 5 10 15 20 25 30 35 40 45 50

Mill

ion

s

Project size (MW)

Ca

pex

co

st

(£m

/MW

)

£0

£20

£40

£60

£80

£100

£120

£140

£160

Mill

ion

s

Capex £/MW Capex cost (absolute)

Variable (per machine costs)

Fixed costs (Project development costs, Grid connection)

Need for scale – O&MO&M cost versus scale of project

0

2

4

6

8

10

12

14

16

18

0 5 10 15 20 25 30 35 40 45 50

Project size (MW)

Ele

ctr

icit

y c

os

t a

ttri

bu

tib

le t

o O

&M

(p

/kW

h)

£0.0

£0.2

£0.4

£0.6

£0.8

£1.0

£1.2

£1.4

£1.6

£1.8

Mill

ion

s

O&M cost (p/kWh)O&M cost (absolute)

Variable (per machine costs)

Fixed costs (O&M team, O&M base, vessel)

Project phasing

Reduces risk Easier to scale Potential for grant

funding for initial phase

Back to the future?Wind 1980: ~10MW installed? Typical turbine 75kW Capacity Factor 12%

(1985, California) Annual average: 9kWWind 2012: >100GW Europe alone Typical turbine 3MW Capacity factor 30%

(2012, California) Annual average:

900kW

Back to the Future?

Opportunities for Martinique and other islands Use only indigenous energy resources Develop marine energy solutions

appropriate to local conditions Create conditions for inward

investment Create business and jobs – not just in

technologies but also support services, tourism relating to innovative projects

Protect the environment But first – understand what you have

and where you want to get to!


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