Economic Analysis

Financial Analysis


Due to the difficulty of accessing detailed capital and maintenance costs for specific tidal devices this case study took into account the expected revenue per kWh produced in the best resource area, the Pentland Firth, with an installed capacity of 25MW. Two scenarios have been assumed for the capital investment recovery, one where potential investors require a payback period for their investment of 5 years and another where they require a payback on their investment within 10 years. Additionally these calculations take into account an assumed rate of inflation of 2.5%.

The income for this tidal energy project will come from selling electricity generated to the grid and also from government incentive schemes that encourage the uptake of renewable generation such the Renewables Obligation Certificates (ROCs) and the Climate Change Levy (CCL). If the project was in operation today (April 2011) the income it could generate would be £165/MWh. The breakdown in costs is shown in the table below.

Bulk Energy Price
Climate Change Levy


The energy produced in Pentland Firth for a 25MW array over a year is about 215,532 MWh, so the expected revenue per year is about £ 35,000,000. For the first scenario, requiring a payback of 5 years, the required intial capital investment would be £187,000,000, while for a payback of 10 years the inital capital investment would be £ 374,000,000.

The Carbon Trust published a study on Future Marine Energy (CTC 601) in 2006 that predicted the initai investment costs for tidal energy projects to be between 9 and 18 £/MWh. So, the investment is still a risk when taking these cost into account and due to this more research and development of tidal devices should be done in order to reduce the costs to make any investment financially viable.