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The Pursuit of Economic Ocean Energy A Utility Perspective John Fitzgerald Technology Manager ESBI Ocean Energy. Contents. Introduction to ESBI Ocean Energy Synopsis of 2010 presentation What’s New in 2011? Looking Forward Conclusions. Introduction to ESBI Ocean Energy.

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  1. The Pursuit of Economic Ocean Energy A Utility PerspectiveJohn FitzgeraldTechnology ManagerESBI Ocean Energy

  2. Contents • Introduction to ESBI Ocean Energy • Synopsis of 2010 presentation • What’s New in 2011? • Looking Forward • Conclusions

  3. Introduction to ESBI Ocean Energy

  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

  5. Transparency and Confidence-building TECHNOLOGY PARTNERSHIPS Inform Developer Requirements Hardware spec and procurement, etc. Inform Project Requirements Verified System Specification System Requirements (Targets) Production Technology Development ~ €100m Technology Development Develop Project Site Consenting, Grid Planning, Finance, O&M Plans, Logistics etc.

  6. 2015 2010 ESBI Pre-Commercial Projects ESBI Technology Partnerships Technology Readiness Cumulative Spend Small farm complete. Technology ready for commercial revenue generating projects € 100m ? } Full-scale experimental & commercial demonstration projects € 10.0 - 50.0m Picture Area Part-scale sea-trials experimental projects & subsystem development € 5.0 - 10.0m } Concept verification – tank scale tests & simulation, survivability, costing. € 1.0 - 2.0m } Idea generation, small-scale tank verification, etc. € 10 - 50k

  7. Synopsis of 2010 Presentation

  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

  9. Projecting towards Commerciality (Summary of 2010 presentation) WestWave Project

  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.

  11. What’s New in 2011?

  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

  13. Ireland’s Ocean Energy Strategy SEAI Prototype fund Support Pilot projects, new concepts Belmullet AMETS Test Site Full scale demonstrators Small-scale arrays 10MW/20 devices Commercial Arrays of 100s MW 500MW installed Government Target

  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

  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

  16. Project Partners

  17. WestWave Project Phases Concept Development Construction Operations & maintenance

  18. 2015: WestWave Finance Estimates Estimated initial capital investment breakdown (5-6MW): (Financial Close targeted for 2013)

  19. 2015: WestWave Finance Estimates Total project funding breakdown, (NPV incl. OPEX) : MWh payments at risk to project developer: NER300 Revenue years 2016 to 2020 2009 REFIT 2016 to 2027

  20. Looking Forward

  21. 2020: Achieving Economies of Scale • 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 MWh payments at risk to project developer

  22. 2030: Commercial Farms • 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 Recognise REFIT premium cannot perpetuate at current levels Long term electricity markets? Export infrastructure? Long term cost of carbon? Energy security premium? 2009 ? MWh payments at risk to project developer

  23. Summary

  24. Reducing Tariff Support as costs approach off-shore wind Grant Support & Tariff Support Significant Technology Grant Support Tariff Support Cost of Ocean Energy per MW Installed €m/MW Single Device Demo Pre-Commercial Arrays Small Commercial Arrays Large Commercial Arrays

  25. Technology Innovation Staying Ahead of the Curve

  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.

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