Methodology for a Decision Support Tool for a Tidal Stream Device

Economic Policy

Besides all the technical and environmental issues, it is also important to understand the legislation driving the development and deployment of marine renewable energy systems.

Renewable Obligation Certificates

It is important to understand the legislation driving the development and deployment of marine renewable energy systems. Current legislation within the renewable energy market is in the form of the Renewables Obligation where electricity suppliers are effectively required to source a percentage of their output from renewable sources [12].

Suppliers meet their Obligation by submitting Renewable Obligation Certificates to Ofgem obtained per MWh of RE electricity generated. If a company has a surplus or shortfall of ROCs they can enter a marketplace for the trading of ROCs. The value of a ROC is variable however on average is ≈£50/ROC. Importantly the level of ROC’s received can be modified for specific technologies to suit strategic and political goals. Therefore for wave/tidal in the coming years the level of ROC received will be as follows [13]:

Renewable Obligation Certificates per Technology

*5 ROCs up to a 30MW project cap, 2 ROCs thereafter.

Although this legislation is being superseded by the following Contracts for Difference it is still important to consider because there will be a period of overlap between the legislation where installations can decide to ‘opt-in’ to either financial support systems.

Electricity Market Reform

This legislation introduced with the Energy Act is due to come into force of April 2014. This legislation aims to reduce the risk to investors in renewable projects by reducing the volatility of the income received from renewable generators.

Generators involved in this scheme will supply electricity into the market as usual, and remain active participants in the wholesale electricity market. However the CFD pays the difference between an estimate of the market price and a ‘strike price’. The strike price is estimated as the amount of revenue which would attract investors to the technology [14]. Essentially:

         •   If market price is low for power supplied the CFD pays a top-up to the generator.
         •   If market price is higher than expected for power, the generator pays the difference back to the CFD

The CfD is a contract between the generator and a new Government-owned counterpart, and will provide the generator with clear contractual rights and aims for increased investor certainty. Currently for wave and tidal technologies the level of support has been outlined as follows [15]:

Contracts for Difference: Support Strike Price

Therefore these values can be used in the economic evaluation and compared to expected revenue through RO. Contracts are fixed for 15 years.

The delivery of the new CfD will be possibly subject to slight changes in Scotland to legislation as in the SRO. Importantly, environmental policy in general is a devolved power to the Scottish Government therefore guidelines for Environmental assessments will be different for proposed installations [16].

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References:
        ➙   [12] OFGEM Renewables Obligation (RO) Webpage. May 2014.
        ➙   [13] UK Government: Banding levels for the banding review period (2013-17) in England and Wales. May 2014.
        ➙   [14] UK Government: Electricity Market Reform: Policy Overview. 2012.
        ➙   [15] UK Government: Investing in renewable technologies – CfD contract terms and strike prices. 2013
        ➙   [16] Overy, A. UK Energy Market Reform: The Energy Bill Overview. 2012.