The purpose of this paper is to take an in depth look at the UK economics of two distinct energy categories: tidal power and wave power. “Wave and tidal stream energy is electricity generated from the movement of wave and tidal flows” (GOV UK, 2013). This paper includes comparing the relative potential of these two sources and making an assessment of which one holds the most potential for UK energy needs in the future, as well as ascertaining the estimated costs of these systems.

According to GOV UK: “research has estimated the UK痴 total theoretical tidal range resource at between 25 and 30GWs �enough to supply around 12% of current UK electricity demand” (GOV UK, 2013). At the present time, the UK’s sector for wave and tidal energy is on the cusp of commercialisation. Furthermore, over the next decade, there is a possibility for strong growth as the primary small-scale arrays start to be operational in 2016 and 2017. However, continuous investment is needed if the UK is to take advantage of its early research and development lead (Renewable UK, 2013).

The turbines of tidal power are not only able to capture the energy of currents, they can also seize the energy of dam tailraces, irrigation canals, rivers, and perhaps even the currents of oceans in more or less the same way that air currents are converted from wind turbines. This diverse categorisation offers the potential of converting the churning of the ocean into electrons that are grid-ready. The Carbon Trust, a UK company funded by the government to advance climate change mitigation, has estimated that in the long term, wave and tidal power combined could render 15�0% of the UK’s electricity requirements. Furthermore, the Future Marine Energy 2006 Carbon Trust declared that by 2020, the UK could be utilising tidal and wave power to generate the equivalent of 2 to 5 American nuclear power plants�level of electricity (Environ Health Perspect, 2007).

Economically speaking, tidal stream energy has the possibility of competing on cost with other energy sources that are also low carbon, and to that end, it could play a important role in the future energy system of the UK. There is however, a dilemma, according to reports published by the Energy Technologies Institute (ETI): “the future for a cost competitive wave energy industry is less certain and the industry needs a fresh approach to how it extracts and converts energy from waves if costs are to come down and make it viable” (Focus, 2015). Two Insight Reports, written by ETI痴 offshore renewables strategy manager, Stuart Bradley, examined the challenges and opportunities that the marine energy sector faces. Bradley made the point that tidal stream energy can generate economic benefits, and that the UK is the world leader in the development of tidal devices. He also noted that: 鍍he industry needs a radical rethink to reconsider its approach to extracting and converting wave energy for lower cost solutions in the longer term, [and] as such, we welcome the introduction of parties such as Wave Energy Scotland, who will bring a fresh approach to the market, focusing on learning from collaboration and a rethink on the design of conversion and extraction technology” (Focus, 2015).

In regard to tidal power, the conclusion of the Insight report was that the tidal industry’s aim to lower costs even more, should focus on the furtherance of array-scale arrangements, integrated investiture into supply chain creativity, and their employee training and processes. In addition, the report emphasises that if in the mid term wave power is to be economically competitive, further work needs to be carried out, and that even if there are innovations and aggressive cost reduction is implemented; in the upcoming years, the present-day attenuator wave power technologies are not likely to make a substantial contribution to the energy system in the UK. According to ETI, when compared to tidal power, wave power is not as certain as tidal power. Furthermore, the economics related to its extraction are substantially higher compared to other types of low carbon energy (that comparatively speaking, are coming down cost wise (Focus, 2015).

In regard to relative potential, tidal power is extremely predictable, that is to say that both its timing and level of generation may be arranged in advance. Conversely, wave power, whilst being a type of stored energy from the wind, counter matches wind energy. This counter-correlation induces wave power to peak at contrasting locations to wind energy because compared to an advancing wind front, waves move slower towards the coastline. Furthermore, wave power offers the benefit of acting in a less variable way every hour compared to an equal amount of wind power. And with regard to the expenditure of supplying balancing capacity and transmission upgrades for the energy system, increased variety and certainty in the supply of low carbon electricity will have a substantial positive effect on the cost (Renewable UK, 2013). Economically speaking, tidal stream power appears to have a number of early comparative rewards at the “demonstration stage of development with MRDF support although wave technologies reach lower levelised costs in the long term (Web Archive, 2010).

According to the Renewable UK report: Wave and Tidal Energy in the UK, at present, the capital expenditure required by marine energy projects are expected to decrease substantially as installation and manufacturing processes become industrialised, and instrumentation is developed. “For the immediate future, although the cost per megawatt hour is likely to remain high, the total cost to consumers will be low, as the installed capacity is small” (Renewable UK, 2013). There are three reasons why the costs are anticipated to decrease: industrialisation, technical innovation, and industry learning. The Wave and Tidal Energy in the UK report also states that “there is still a significant variation in the technology approaches…[and that] this suggests that there is still significant opportunity for further cost reduction. In addition, supply chain and financing costs are likely to fall as volumes increase and risks are better understood and mitigated” (Renewable UK, 2013).

The estimated investment in tidal and wave power between 2010 – 2013 is £0.1 Billion, and the “EMR delivery plan estimated investment” for 2014 – 2020 is £0.5 Billion (Department of Energy, 2014). However, the investment situation at the present time for UK wave and tidal power is filed with doubt regarding how much revenue support the industry can rely on in the future. If the economic support is not persuasive enough to attract financiers for initial pre-commercial programs, then there could be a funding respite. Considering the different challenges and constraints facing the industry at this time, “a strike price of £280�00 per MWh for tidal stream energy and £300�20 per MWh for wave energy would be the minimum requirement to provide adequate returns for investors over a 20-year period and to maintain momentum in the sector” (Renewable UK, 2013). In a summing up of levelised costs prepared by Ernest & Young, under the base case (£/MWh), the cost for high wave technology is estimated to be 253 (in 2020), 142 (in 2035), and 105 (in 2050). And the cost of high tidal technology is estimated to be 349 (in 2020), 323 (in 2035), and 286 (in 2050) (Web Archive, 2012).

In summary, whilst both tidal and wave power have the capacity to generate electricity, the research indicates that tidal power holds the most potential for UK’s future energy needs. This is because it is extremely predictable and both its timing and level of generation may be arranged in advance, and offers the advantage of acting in a less variable way every hour compared to an equal amount of wind power. From an economic standpoint, tidal power has shown early comparative rewards with MRDF support at the demonstration stage, however, in the long term, wave technologies attain lower levelised costs.