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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. The certainty of financial return
offered by proposed Irish Feed-in Tariff (FiT) policy is analysed. The influence of
technological ‘learning’ is also discussed. The model presented identifies those rates
of learning required to achieve cost-effective deployment under various cost certainty
requirements. The corresponding cost reduction targets for developers are identified.
Uncertainty is found to have a greater impact on the investment decision when
learning progresses at a slower rate. This paper emphasises the requirement for a
premium to account for cost uncertainty when setting FiT rates. By quantifying
uncertainty, the presented methodology allows for the required premium to be
identified.