Quantifying the uncertainty of wave energy conversion device cost for policy appraisal: An Irish case study

Niall Farrell, Donoghue, Cathal O’ and Karyn Morrissey

Energy Policy, 2015, vol. 78, issue C, 62-77

Abstract: Wave Energy Conversion (WEC) devices are at a pre-commercial stage of development with feasibility studies sensitive to uncertainties surrounding assumed input costs. This may affect decision making. This paper analyses the impact these uncertainties may have on investor, developer and policymaker decisions using an Irish case study. Calibrated to data present in the literature, a probabilistic methodology is shown to be an effective means to carry this out. Value at Risk (VaR) and Conditional Value at Risk (CVaR) metrics are used to quantify the certainty of achieving a given cost or return on investment. We analyse the certainty of financial return provided by the proposed Irish Feed-in Tariff (FiT) policy. The influence of cost reduction through bulk discount is also discussed, with cost reduction targets for developers identified. Uncertainty is found to have a greater impact on the profitability of smaller installations and those subject to lower rates of cost reduction. This paper emphasises that a premium is required to account for cost uncertainty when setting FiT rates. By quantifying uncertainty, a means to specify an efficient premium is presented.

Keywords: Wave energy; Feasibility analysis; Uncertainty; Renewable energy policy appraisal; Statistical simulation (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0301421514006375
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Quantifying the uncertainty of wave energy conversion device cost for policy appraisal: an Irish case study (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:78:y:2015:i:c:p:62-77

DOI: 10.1016/j.enpol.2014.11.029

Access Statistics for this article

Energy Policy is currently edited by N. France

More articles in Energy Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().