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 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
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 fore-
castable 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
ARTICLE IN PRESS
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Energy Policy
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doi:10.1016/j.enpol.2009.01.009

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E-mail addresses: dennye@tcd.ie, edenny@gmail.com (E. Denny).
1
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, Commis-
sion for Energy Regulation, Bord na Mona, Airtricity, Viridian, Bord Gais, SWS,
Siemens and Cylon Controls.
Energy Policy 37 (2009) 19141924
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 im-
portant 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 infra-
structure, 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.
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 head-
lands, 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 20m 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 2040m of
water, where the peak spring tidal current velocity is greater than
2.25m/s (Bryans et al., 2005a; Whittaker et al., 2003). MCT
installed a prototype with a single 750kW turbine off Lynmouth
in the Bristol Channel during 2003 and a 1.2MW 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 12.4h 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 1MW 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
ARTICLE IN PRESS
Fig. 1. The marine current turbines (MCT) design (MCT, 2007).
E. Denny / Energy Policy 37 (2009) 19141924 1915
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 9GWof 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 500MW 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
405m by 405m grid. They found that the resource currently
accessible to the MCT tidal device (as shown in Fig. 1) is 374MW
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
560MW 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 commit-
ment 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 hydrosta-
tions and genuine optimisation of the pumped hydro stations
(PLEXOS, 2006).
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
T
i
d
a
l

O
u
t
p
u
t

(
M
W
)
Spring
Neap
Fig. 2. The power output during a spring and neap tide.
15 10 5 0
0.33
0.66
1.00
Days
%

m
a
x

o
u
t
p
u
t
Fig. 3. The power output from a tidal device over a 15 day period.
Gas
51%
Coal
14%
PumpedStorage
3%
Oil
15%
Peat
4%
Renewables
13%
Fig. 4. The installed plant mix for the Irish system in 2008.
E. Denny / Energy Policy 37 (2009) 19141924 1916
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
the PLEXOS-SEM model, the tidal prole was simply subtracted
from the demand prole. Installed tidal penetrations were
increased from 0 to 560MW in 80 MW intervals and the
corresponding generator output proles were analysed. Fig. 6
below indicates the impact of 560MW 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
336MW although the resource is 560MW, 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
ARTICLE IN PRESS
69.74
79.19
123.05
68.36
79.07
120.42
0
20
40
60
80
100
120
140
Base price
E
u
r
o
/
M
W
h
Predicted
Actual
Mid price Peak price
Fig. 5. Predicted system marginal price vs. actual system marginal price.
0
1000
2000
3000
4000
5000
6000
7000
1
Day
M
W
Load NetLoad Tidal
1
2
4
3
2 3 4 5 6 7 8 9 10 11 12 13 14 15
Fig. 6. The impact of tidal generation on demand.
E. Denny / Energy Policy 37 (2009) 19141924 1917
generators were then analysed to determine the CO
2
, SO
2
and NO
x
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.
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 (CO
2
) and sulphur
dioxide (SO
2
) 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 CO
2
and SO
2
emissions. Nitrogen
oxides (NO
x
) 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 CO
2
,
SO
2
and NO
x
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 CO
2
, SO
2
and NO
x
. The magnitude of CO
2
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 CO
2
, SO
2
and NO
x
are reduced. However, these
reductions are relatively modest. With 560MW of installed tidal
generation, CO
2
emissions are reduced by approximately 501kt
(metric), representing approximately 2% of total system emis-
sions. This represents a saving of approximately 470g/kWh.
Reductions in SO
2
and NO
x
at 560MW 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
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 CO
2
emissions market where
generators buy and sell allowances for CO
2
. Thus, the CO
2
emissions are valued at a representative market price of h30/t of
CO
2
.
2
There is not currently an emissions market for SO
2
and NO
x
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 SO
2
price is h150/t and the
NO
x
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
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 560MW of
tidal resulting in 5,000,000GJ reduction in gas consumption
(approx 3%) and 2,000,000GJ 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).
ARTICLE IN PRESS
00:00 06:00 12:00 18:00 00:00
0
100
200
300
400
500
600
336
Time of Day
M
W
Original Spring
EDR Spring
Neap
Fig. 7. Electrical down-rating of tidal output.
2
It should be noted that the assumed CO
2
price of 30/t CO
2
is the opportunity
cost of CO
2
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 SO
2
and NO
x
compared to that assumed for CO
2
, the
value of the SO
2
and NO
x
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 SO
2
and
NO
x
.
E. Denny / Energy Policy 37 (2009) 19141924 1918
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
560MW. 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.
ARTICLE IN PRESS
0 80 160 240 320 400 480 560
19
20
21
22
20000
25000
30000
Installed Tidal Generation MW
E
m
i
s
s
i
o
n
s

i
n

K
i
l
o
t
o
n
s
CO2
NOx
SO2
Fig. 8. Tidal generation emissions savings.
0 80 160 240 320 400 480 560
0
2
4
6
8
10
12
14
16
18
Installed Tidal Generation MW
V
a
l
u
e

o
f

S
a
v
e
d

E
m
i
s
s
i
o
n
s

i
n

M
i
l
l
i
o
n
s
o
f

E
u
r
o
EDR 0%
EDR 40%
Fig. 9. Monetary value of emissions savings from tidal generation.
0 80 160 240 320 400 480 560
0
20
40
60
80
100
120
140
160
180
Installed Tidal Generation MW
A
n
n
u
a
l

F
u
e
l

C
o
n
s
u
m
p
t
i
o
n

i
n

P
e
t
a
j
o
u
l
e
s
Gas
Coal
Peat
Oil
Fig. 10. Annual fuel savings with tidal generation.
0 80 160 240 320 400 480 560
0
5
10
15
20
25
30
35
40
45
Installed Tidal Generation MW
V
a
l
u
e

o
f

F
u
e
l

S
a
v
i
n
g
s

i
n

M
i
l
l
i
o
n
s

o
f

E
u
r
o
EDR 0%
EDR 40%
Fig. 11. Monetary value of 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.
E. Denny / Energy Policy 37 (2009) 19141924 1919
(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.
5.4. Cycling costs with tidal generation
In the day to day operation of electricity systems, conventional
generation units are required to cycle in order to meet the
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 500MW 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
ARTICLE IN PRESS
Table 1
Fuel costs in h2008/GJ.
Fuel type Fuel price (h/GJ) ROI Fuel price (h/GJ) NI
Coal 3.79 4.14
Gas (01/10/200731/12/2007) 6.25 6.62
Gas (01/01/200831/03/2008) 7.65 8.02
Gas (01/04/200830/09/2008) 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
0
Installed Tidal Generation MW
C
a
p
a
c
i
t
y

C
r
e
d
i
t
%
Capacity Credit
Capacity 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
0
Installed Tidal Generation
V
a
l
u
e

o
f

S
a
v
e
d

I
n
v
e
s
t
m
e
n
t

i
n

M
i
l
l
i
o
n
s
o
f

E
u
r
o
EDR0%
EDR40%
80 160 240 320 400 480 560
Fig. 13. Monetary value of the saved investment in conventional generation.
Gas Units
0
500
1000
1500
2000
2500
3000
T
o
t
a
l

n
u
m
b
e
r

o
f

S
t
a
r
t
s
0MWTidal
560MWTidal
Peat Units Coal Units Oil Units Total
Fig. 14. Impact of tidal generation on the number of starts on the system.
E. Denny / Energy Policy 37 (2009) 19141924 1920
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 reinfor-
cement 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 560MW
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
tend to be high given accessibility issues and greater infrastruc-
ture costs than onshore developments.
If it were assumed that no network reinforcement was
required with 560MW 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 560MW 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 560MW of tidal generation breaks-even the capital cost
would have to be less than h2,37,000 per MW installed. The break-
even 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
560MW, the turbine installed is only rated to 336MW, 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.
ARTICLE IN PRESS
0
5
10
15
20
25
0
Installed Tidal Generation MW
C
y
c
l
i
n
g

C
o
s
t

i
n

M
i
l
l
i
o
n
s

o
f

E
u
r
o
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
0
Installed Tidal Generation MW
M
i
l
l
i
o
n
s

o
f

E
u
r
o
Total Benefits
Cycling Costs
80 160 240 320 400 480 560
Fig. 16. The total benets and cycling costs of tidal generation.
Table 2
Break-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
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).
E. Denny / Energy Policy 37 (2009) 19141924 1921
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 CO
2
and a xed set of fuel prices. However,
in the long run the price of CO
2
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 genera-
tion 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 com-
bined 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
ARTICLE IN PRESS
Table 3
Break-even capital plus network costs to ensure positive net benets.
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 4
Break-even capital plus network costs to ensure positive net benets 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 (80MW) 32.2 0.67
96MW (160MW) 68.7 0.72
144MW (240MW) 80.8 0.56
192MW (320MW) 93.0 0.48
240MW (400MW) 93.7 0.39
288MW (480 MW) 100.5 0.35
336MW (560MW) 103.0 0.30
E. Denny / Energy Policy 37 (2009) 19141924 1922
tidal generators. Research by Murphy and Walsh (2002) and
by Forfa s et al. (2003) suggest that very little benet should be
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 interna-
tional 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 350MW 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 350MW 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.
7. Conclusions
This paper presented a methodology for calculating the break-
even 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
Dublin and John Fitz Gerald of the Economic and Social Research
Institute for their helpful comments and observations.
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