A portfolio of three tidal lagoon power plants would deliver large-scale low carbon power at a significantly cheaper price than offshore wind by 2021, according to a new economic study.
The study into the cost profile of power from tidal lagoons was conducted by energy economists at Poyry, the management consultancy on behalf of Tidal Lagoon Power Ltd (TLP), which is planning to build a 240MW tidal lagoon in Swansea Bay and develop a pipeline of tidal lagoon power projects in the UK.
Pöyry Management Consulting analysed the support cost requirements of three tidal lagoon projects currently under development by TLP, drawing on technical cost data supplied by TLP.
This was then translated into an assessment of lifetime generation costs and required contract-for-difference (CfD )strike prices compared the cost of tidal lagoon with other technologies competing for UK Government Support under the new support mechanism for low carbon generation.
The study concluded that the energy cost of tidal lagoon projects can be competitive with other low-carbon technologies and a pipeline of projects could be supported through strike prices comparable with those expected to be required for other technologies.
Lagoons would be cheaper than a gas-fired power station
As with all forms of low carbon generation, tidal lagoons will require Government support via a pre-defined ‘strike price’. The Government’s volume-weighted levelised cost of energy for the three lagoons as around £100 MWh. The central LCOE assumption for a Round 3 offshore wind farm in 2021 is £131 MWh. The cheapest of the projects assessed, Lagoon 3, has a levelised cost of around £90 MWh, broadly similar to onshore wind, large-scale solar PV, nuclear and gas-fired generation.
The first “proof-of-concept” project, which is the Swansea Bay development, requires a £168/MWh strike price -based on Tidal Lagoon Power’s capital and operating cost estimates for tidal lagoons, and DECC’s levelised costs for other technologies.
Poyry’s central assessment of the required CfD strike price for the first three lagoons studied on a volume-weighted average basis is £111 MWh. At present, other forms of marine energy are offered a strike price of £305 MWh and offshore wind projects are offered £155 MWh.
The reduction in required strike prices in moving from Lagoon 1 to Lagoon 3 is driven primarily by moving to bigger sites with greater tidal range rather than on an assumption of technology learning.
When compared at a social discount rate of 3.5%, a rate commonly used by Government to evaluate the future costs and benefits to consumers of policy decisions, even Lagoon 1 is cost comparable with offshore wind, and on this basis, Lagoons 2 and 3 would be cheaper than a gas-fired power station.
Long asset life would deliver cheap electricity for decades
The initial lagoon project will require support of around £50m per year, which is small compared to the Government’s budget for total low-carbon electricity support of around £7.6bn per year by 2020. The Crown Estate estimates that supporting tidal lagoon power could contribute up to 25TWh of renewable electricity per year.
Tidal lagoons have an assumed operating life of 120 years. This very long asset life means a tidal lagoon will be generating low cost renewable electricity long after CfD expiry - meaning consumers would continue to benefit from this cheap electricity for many years.
The study notes that the very long asset life of a tidal lagoon makes it equivalent to five generations of offshore wind investment and two generations of investment in nuclear power production and clean-up.
Mark Shorrock, CEO of Tidal Lagoon Power, said that electricity generation from tidal lagoons will continue to get cheaper, commenting:
“This study clearly demonstrates that tidal lagoons can rapidly become one of the cheapest sources of electricity in the UK. The more water we impound, the more power we produce, the less support we require. It really is that simple. And with an operating life of over one hundred and twenty years, tidal lagoons offer future generations even lower cost electricity following their thirty-five year period of strike price support.”
Click here to download the study
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