filename.ppt 1

The Pursuit of Economic Ocean Energy A Utility Perspective

John FitzgeraldTechnology ManagerESBI Ocean Energy

filename.ppt 2

Contents

• Introduction to ESBI Ocean Energy

• Synopsis of 2010 presentation

• What’s New in 2011?

• Looking Forward

• Conclusions

filename.ppt 3

Introduction to ESBI Ocean Energy

filename.ppt 4

ESBI Ocean Energy Strategy

• Target by 2020 of 150 MW of Ocean Energy in Ireland

• ESBI aim to Consent, Own and Operate Power Stations

• Experience over 28 years in Ocean Energy developments

• Strong relationships with leading technology developers

• Identifying, exploring and seeking to consent sites in Ireland

filename.ppt 5

Inform Developer Requirements

Transparency and Confidence-building

TECHNOLOGY PARTNERSHIPS

Inform Project Requirements

Develop ProjectSite Consenting, Grid Planning, Finance, O&M Plans, Logistics etc.

Hardware spec and procurement, etc.

System Requirements

(Targets)

Technology Development

Verified System

SpecificationProduction

~ €100m

Technology Development

filename.ppt 6

Picture Area

€ 10 - 50k

€ 1.0 - 2.0m

€ 5.0 - 10.0m

€ 10.0 - 50.0m

}

}

}€ 100m ?

Small farm complete. Technology ready for commercial revenue generating projects

Full-scale experimental & commercial demonstration projects

Part-scale sea-trials experimental projects & subsystem development

Concept verification – tank scale tests & simulation, survivability, costing.

Idea generation, small-scale tank verification, etc.

Cumulative Spend

Technology Readiness

2010

ESBI Technology Partnerships

2015

ESBI Pre-Commercial Projects

filename.ppt 7

Synopsis of 2010 Presentation

filename.ppt 8

Target Cost of Energy

For Capacity Factors of 30% - 40%, to compete with Offshore Wind TARGET:

• CAPEX €1.6 - 2.2m /MW

• OPEX €80k -160k /MW /year

5% 10% 15% 20%OPEX €M 0.05 €M 0.08 €M 0.10 €M 0.11CAPEX €M 1.08 €M 0.83 €M 0.67 €M 0.56OPEX €M 0.08 €M 0.12 €M 0.15 €M 0.17CAPEX €M 1.62 €M 1.24 €M 1.00 €M 0.84OPEX €M 0.11 €M 0.17 €M 0.20 €M 0.22CAPEX €M 2.17 €M 1.65 €M 1.34 €M 1.12OPEX €M 0.14 €M 0.21 €M 0.25 €M 0.28CAPEX €M 2.71 €M 2.07 €M 1.67 €M 1.40OPEX €M 0.16 €M 0.25 €M 0.30 €M 0.34CAPEX €M 3.25 €M 2.48 €M 2.01 €M 1.69OPEX €M 0.19 €M 0.29 €M 0.35 €M 0.39CAPEX €M 3.79 €M 2.89 €M 2.34 €M 1.97

40%

50%

60%

Affordable CAPEX-OPEX combinations for Power Producing Projects

(Hurdle=10% Tariff = €100 per MWhr, 20 year project life)

€(2010) / MW installed Annual OPEX as % of CAPEX

Cap

acit

y F

acto

r20%

30%

70%

5% 10% 15% 20%OPEX €M 0.05 €M 0.08 €M 0.10 €M 0.11CAPEX €M 1.08 €M 0.83 €M 0.67 €M 0.56OPEX €M 0.08 €M 0.12 €M 0.15 €M 0.17CAPEX €M 1.62 €M 1.24 €M 1.00 €M 0.84OPEX €M 0.11 €M 0.17 €M 0.20 €M 0.22CAPEX €M 2.17 €M 1.65 €M 1.34 €M 1.12OPEX €M 0.14 €M 0.21 €M 0.25 €M 0.28CAPEX €M 2.71 €M 2.07 €M 1.67 €M 1.40OPEX €M 0.16 €M 0.25 €M 0.30 €M 0.34CAPEX €M 3.25 €M 2.48 €M 2.01 €M 1.69OPEX €M 0.19 €M 0.29 €M 0.35 €M 0.39CAPEX €M 3.79 €M 2.89 €M 2.34 €M 1.97

€(2010) / MW installed Annual OPEX as % of CAPEX

Affordable CAPEX-OPEX combinations for Power Producing Projects

(Hurdle=10% Tariff = €100 per MWhr, 20 year project life)

Cap

acit

y F

acto

r20%

30%

40%

50%

60%

70%

filename.ppt 9

Projecting towards Commerciality

Pre

-Com

mer

cial

Dem

onst

rato

r

Pre

-Com

mer

cial

Pro

ject

5M

W

Ear

ly C

omm

erci

al

Pro

ject

(50

MW

)

Com

mer

cial

P

roje

cts

Project Commisioning Year: 2010 2015 2020 >2020Project Size: ~1MW 5MW 50MW 50-100MW

CAPEX range (€/MW) € 8-14m € 6-8m € 2.6 - 3.6m € 1.7 - 2.3OPEX range (€/MW/yr) € 0.5m € 0.3m € 0.25m € 0.1m

Initial Investment:Private Equity (%) 50% 55-70% 100% 100%Public Grant / Infrastructure (%) 50% 30-45% 0% 0%

Tariff required (€/MWh) N/A €300/MWh €220/MWh €100/MWh

(Summary of 2010 presentation)

WestWave Project

filename.ppt 10

2010 presentation conclusions:

• Technology developers need to be aware of cost targets and chase them as part of their technology requirements (e.g. €1m / MW quayside)

• 2010: Capital grant scheme required to support technology developers & investors through the current phase of experiment & demonstration.

– Maximise benefit to Ireland by supporting location of activity here.

• 2015: Increase initial tariff to €300 / MWh to compete with 5 rocs.– Leverage support from investors and utilities to locate early projects

with energy production in Ireland and to promote Irish supply chain.

• 2020: Use existing tariff of €220 / MWh to support the building of an economy of scale in Ireland.

• Beyond 2020: Expect long term cost of energy to become competitive with Offshore Wind, approaching €100/MWh as industry scales up.

filename.ppt 11

What’s New in 2011?

filename.ppt 12

WestWave Project

• To develop first wave energy farm in Ireland by 2015

• ≥5 MW array of Wave Energy Converters

• Situated on West Coast of Ireland for 12 years operation

• Utility led pre-commercial project

• Develop the supply-chain to support the ocean energy sector

filename.ppt 13

Support Pilot projects, new concepts

Full scale demonstrators

Small-scale arrays 10MW/20 devices

Commercial Arrays of 100s MW

500MW installedGovernment Target

SEAI Prototype fund

Belmullet AMETS Test Site

Ireland’s Ocean Energy Strategy

filename.ppt 14

Benefits to Ireland

• Deliver Phase 3 of Ocean Energy Strategy

• Leverage significant EU funding to match domestic funding

• Develop supply-chain enterprise in the sector

• Pave the way for commercial scale development

• Address key issues in developing wave energy projects in Ireland

• Give much needed confidence to all stakeholders in the sector

filename.ppt 15

European Funding – NER 300

• Application Timeline– ESBI Applied to DCENR on 9th February

– DCENR decision to submit to EC given on 9th May

– EC/EIB Due Diligence for 9 Months before decision

• Project must be operational by end 2015

• Latest: – 153 applications submitted across all categories.

– 10 applications submitted for Ocean (Wave, Tidal, OTEC).

– 8 have been forwarded to the EIB of which 3 are in Wave category.

– Fund valued at €4.9 Billion

filename.ppt 16

Project Partners

filename.ppt 17

WestWave Project Phases

Concept

Development

Construction

Operations & maintenance

2011 2012 2013 2014 2015 2016

filename.ppt 18

2015: WestWave Finance Estimates

Estimated initial capital investment breakdown (5-6MW):

(Financial Close targeted for 2013)

filename.ppt 19

MWh payments at risk to project developer:

2015: WestWave Finance Estimates

NER300 Revenue years 2016 to 2020

REFIT 2016 to 2027

Total project funding breakdown, (NPV incl. OPEX) :

2009

filename.ppt 20

Looking Forward

filename.ppt 21

2020: Achieving Economies of Scale

MWh payments at risk to project developer

• First circa 50MW large farm (possibly expansions of earlier consented sites)

• Using TRL 9 verified technology (type certified) – significant in-service data:– Credible reliability & availability projections for future project assumptions– Extended economic life and improved energy production assumptions.

• Amortisation of vessel hire and marine infrastructure costs over larger project.

• Some technology innovation around cost reduction.

2009

filename.ppt 22

2030: Commercial Farms

MWh payments at risk to project developer

Long term electricity markets? Export infrastructure? Long term cost of carbon? Energy security premium?

• 50-100 MW large arrays

• Using TRL 9 verified technology already applied in large arrays – Proven technology.

• Dedicated infrastructure developed for target sites – Ports, Vessels, Grid,etc.

• Dedicated and competitive component and technical services supply chain.

• Significant Technology Innovation

?2009

Recognise REFIT premium cannot perpetuate at current levels

filename.ppt 23

Summary

filename.ppt 24

0

2

4

6

8

10

12

14

16

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

€m/M

W

Cost of Ocean Energy per MW Installed

Pre-Commercial

Arrays

Single Device Demo

Small Commercial

Arrays

Large Commercial

Arrays

Tariff SupportGrant Support

& Tariff Support

Significant Technology

Grant Support

Reducing Tariff Support as

costs approach off-shore wind

€m/MW

filename.ppt 25

£-

£100.00

£200.00

£300.00

£400.00

£500.00

£600.00

£700.00

£800.00

£900.00

£1,000.00

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Reve

nue

of W

ave

Pow

er (£

/MW

h)

Calendar Year

Scottish Wave Power Revenue

Ireland Wave Power Revenue

Portugal Wave Power Revenue

Low Energy sites

Med Energy sites

High energy sites (Ireland)

Staying Ahead of the Curve

Technology Innovation

filename.ppt 26

Summary:• The WestWave project has showed that previous targets for 2015 pre-commercial

projects in Ireland are still on track.

• WestWave is a vital step in commercialising technology, developing an Irish supply chain and opening the Irish wave energy market for further investment.

• Grant support, REFIT and NER300 are essential components of delivering the pre-commercial WestWave project as it is currently envisaged.

• Up to 60% of the initial WestWave investment will be private finance based on MWh attracting REFIT and NER300 tariffs.

• REFIT payments will be spread over the period 2016 to 2027 and conditional on MWh produced.

• If energy production targets are met, total Irish state contributions to the project could approach 60% of total project costs.

• Technology developers continue to innovate and target commercial costs.