During the Marine Energy Challenge (MEC), the Carbon Trust, working in partnership with engineering consultants, developed a standard methodology for assessing the cost of energy of marine energy devices.
The purpose of this methodology was to allow a fair, comparative assessment of different device technologies, by providing a means of estimating devices’ costs of energy in a consistent manner.
We recognise that the methodology would be of benefit to other parties working in the marine energy field (including device developers, technology and project investors, and public sector funders), and have therefore produced a summary of the methodology and a supporting spreadsheet. We hope these will bring clarity and consistency to the assessment of marine energy devices. They will also help people replicate the MEC process if they wish.
What the methodology does
The methodology and spreadsheet essentially:
- Define a list of cost and performance parameters that are needed to make a reasonable cost of energy estimate; and
- Combine these parameters in a discounted cash flow calculation, which gives costs of energy at certain pre-determined project rates of return.
It is possible to edit the cost and performance parameters, but our experience is that the parameters listed are appropriate to most marine energy devices. Users may choose the project rates of return, but by default, 8% and 15% rates are included.
Use of the methodology
It should be noted that the methodology and spreadsheet represent a simple approach to cost of energy estimation, which is sufficient to make an initial assessment of device technologies, particularly on a comparative basis. More sophisticated models are possible, and might include, for example, more detailed break-downs of cost items, or financing/valuation structures other than the simple project rates of return. Such sophistications may, for instance, be appropriate when making a commercial assessment of a device technology, to assess the case for investment in a technology or demonstration project.
Feedback
We are interested in your comments on the methodology and spreadsheet, plus suggestions for improvements. Please e-mail any points to marinenews@carbontrust.co.uk.