An economic analysis of tidal energy to support sustainable development

Abstract

Decarbonization of the energy sector, requires a strong expansion of renewable energy, which combined with effective and efficient use of resources, enables the development of models based on the green economy. Tidal energy, which is currently underutilized, can contribute to this change by providing affordable and clean energy, thus contributing to sustainable development. This work evaluates the economic dimension of sustainability and provides a profitability analysis related to a 1 MW plant located in central Italy. The methodology consists of a technical framework, geared toward quantifying the energy potential from that plant, and economic models based on indicators such as Net Present Value (NPV), Levelized Cost of Energy (LCOE) and Discounted Payback Time (DPBT).The results show that the plant turns out to be profitable in the base case (NPV = 573 k€ and DPBT = 21 years) and policy interventions, which see the use of capital grants and subsidies, change the results to NPV ranging between 338 and 1287 k€ and DPBT between 11 and 15 years. However, alternative scenarios indicate that the variables that most impact economic outcomes are changes related to energy selling price and capacity factor. The LCOE in the different scenarios varies between 49.4–89.8 €/MWh. The implications of this work define that tidal energy supports the energy transition to sustainable development and that the mix of technical, market, and political factors must be considered in policy decision making.