Is wave power worth £15 billion?

The Independent on Sunday reports that David Cameron is to propose greater use of wave power:

"Mr Cameron will say: "Britain's coastline is over 1,000 miles long and has some of the highest tidal ranges in the world. Tapping into this free, continually renewed energy source could, according to some research, provide us with up to 20 per cent of our electricity supplies."

While we aren't charged for waves tapping their power has very significant costs. It is possible to perform a back of the envelope calculation to work out just how much it would cost to shift 20 per cent of our electricity generation from coal, gas and nuclear to wave.

Energy consultancy PB Power estimate (PPT, pg. 20) that wave power costs around 19p per KWh more than conventional sources. Multiplying that by 20% of our 405,884 GWh of electricity generation each year (PDF, pg. 126) suggests that in 2006, the latest year for which data is available, such a switch would have cost £15.4 billion. That's around 1.2% of GDP, a bit under half the defence budget or a crossrail every year. An absolute fortune.

Now, that cost is necessarily a rough estimate - here are some of the factors that might push the cost higher or lower:

• If we're building that much capacity the technology would likely develop and become more efficient, we would get better practiced at deploying it. This might mean costs would be lower than expected.



• Public projects tend to wind up more expensive than the government expect, the official term for this is 'optimism bias'. We studied the problem in our report Beyond the Dome: Government projects £23 billion over budget (PDF) and found projects, on average, net over budget by one third. This might mean costs would be higher than expected.



• A major UK investment in wave power, a relatively small industry at present, would constitute a huge upward demand shock and, as supply would take time to respond, push up prices for the equipment needed to tap wave power. Again, this might mean costs would be higher than expected.



• Generating a substantial portion of the UK's total electricity needs from wave power would probably not be possible without moving to suboptimal sites. Parts of the coast where it is difficult to install the equipment or wave power is weak would have to be used once the best locations were taken up. This is another factor which might make wave power even more expensive if it were implemented on a large scale.

If present policies for subsidising renewable power are maintained then it won't just be the cost itself but who is paying it that we will need to worry about. The Renewables Obligation, the main source of subsidy for renewables, increases the price of energy which means that the people who suffer most are the poor elderly who spend a large portion of their income keeping their homes warm.

While many sources of power can, theoretically, provide a large portion of the UK's power needs no renewable has yet proven an ability to supply a large portion of our demand for electricity at an affordable price.

Cross-posted from the TaxPayers' Alliance blog.