1 12th Congress of the European Association of Agricultural Economists – EAAE 2008 The Economics of Tidal Stream Power

Abstract — Renewable solar, tidal and wind energy have the potential of reducing dependency on fossil fuels and their environmentally negative impacts. Because of their variability, wind and solar energy in particular impose added costs on electrical grids as system operators attempt to balance operation of existing thermal power plants. In this regard, tidal stream power has an advantage over solar and wind energy as tides are predictable and comparatively regular; yet, tides remain intermittent and thereby still may create inefficiencies to the grid. In this paper, we develop a dynamic optimization framework for analyzing the allocation of power output across generating sources when tidal and wind power are added to the system. In particular, we minimize the cost of satisfying the 2006 British Columbia electricity demand. We use tidal current and wind data from sites around Vancouver Island to estimate the effects of an increase in renewable energy penetration into grids consisting of three typical generating mixes – the British Columbia generation mix that has a significant hydro-power component, the Alberta generating mix with a coal-fired power dominance, and the Ontario generation mix which includes significant nuclear and coal-fired generation. Simulation results over an entire year (hourly time step) indicate that the cost of electricity will increase from its current levels by between 73 % and 150 % at renewable penetration rates of 30 % depending on the assumed generating mix. The cost of reducing CO2 emissions ranges from $97.47 to $1674.79 per tonne of CO2, making this an expensive way of mitigating emissions. The reasons for these high costs are increased inefficiencies from standby spinning reserves and operation of plants at less than optimal levels (so that more fuel is burned per unit of electricity). Further, it is impossible to determine the displacement of emissions by renewable energy without considering the complete operating system