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Operational expenditure costs for wave energy projects; O/M, insurance and site rent

Date: October 04, 2013 at 19:01 GMT

Introduction: This paper examines the input metrics of operational expenditure (OPEX) assessment for wave energy projects, and reports on case study modelling performed to examine the sensitivity of project profit returns to these inputs.

Assessment and calculation of OPEX has been a very important study area for onshore wind. The determination of its impact and mitigation has been one the reasons for the huge rise in onshore wind installations in Europe and globally.

Research into offshore renewable OPEX has been negligible to date, with only a few reports quoting costs, with little or no analysis (a review of the reports is discussed in the next section). 

The object of the paper is two fold:

  • Define input metrics for OPEX of wave energy projects.
  • Assess impact of OPEX on net present value (NPV) and internal rate of return (IRR) using the case study of a 50MW wave energy project.

A literature review was conducted inspecting the OPEX metrics. The average results determined from that study were used as the inputs for the case study simulations. Review consisted of published reports from onshore wind and offshore wind, as well as wave energy reports.

The location for the case study was off the west coast of Ireland. The model used for the analysis in this paper was NAVITAS, which is a Microsoft Excel tool primarily developed by the author for the Hydraulics and Maritime Research Centre (HMRC) under the Charles Parsons research award. The software calculates the wave energy output of any wave energy device, providing it has a power matrix. 

The wave energy converter (WEC) chosen for analysis in this report was the Pelamis P1, as it is the only WEC to date that has a published power performance matrix. It is also the only device which has provided some preliminary initial cost estimates, which were used in the EPRI study [5] by Previsic in 2004 in California, US. A further report by EPRI was conducted 2 years later (2006) by Bedard [6]. The reliability of the Pelamis power matrix has never been fully verified since it was first published in 2003, and unfortunately, there has been no update of the matrix since. There have also been no revised initial costs estimates for the Pelamis device, nor has the company
volunteered to provide up to date costs. Therefore, the Pelamis device, it’s matrix and costings, are only used in the context of a case study and provide a platform
methodology to examine the paper’s research aims. 

Revenue used for the simulations were based on the proposed Irish wave energy feed-in tariff of €0.22/kWh.  Total initial cost (IC) of a project is defined in this study as the sum of all projects costs which are necessary to deploy device(s) ready for operation.

The costs include: costs of components (WEC, cable, and mooring), cost installation, boats and towing, initial permits, management fees and decommissioning).

Many of the costs of the project are derived as a percentage cost of the WEC, which is abbreviated as ICwec (explained more thoroughly in Methodology and inputs). O/M costs in this study are calculated for each component (WEC, cable and mooring) rather than O/M for the entire project. Calculation for O/M for a component is taken as a percentage of the IC cost of that component, with the inclusion of its installation
cost (explained more thoroughly in Methodology and inputs). An example of the abbreviation for initial costs for cable is as follows:

(IC+instal)cable= initial cost of cable + cost of cable installation. Results extracted from this study must be taken as indicative and relative, keeping in mind that the main
focus of the paper is an analysis of the impacts of OPEX on wave energy project returns.  

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