May 28 2010

Economic Outlook

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One of the principal barriers to renewable energies is the high initial capital costs compared to the relatively low running costs (fiscally speaking) for fossil fuel and nuclear technologies.  Yet, despite this proposed reality, OTEC has demonstrated great potential both for market penetration and long-term marketability.  As mentioned in the open-cycle discourse, OTEC has a great energy pay-off potential as well as a possible resource of clean, desalinated ocean water.  This product would be most attractive to developing nations facing imminent water shortages, especially those in tropical areas, thus providing an international incentive to develop this technology further.

The initial capital cost for OTEC ranges from $5 million to $11 million per MW1.  Running costs are projected at 4,000 $/kW, equaling 10 ¢/kWh2.  A study conducted in 1980, proposing only a 10% market penetration in the United States, demonstrated that if 300 OTEC units were installed by 2010, it could generated upwards of $480 billion in capital costs (assuming a rate of $3,000/kW).  More importantly, this capital cost would displace $343 billion worth of oil from the world market3.  With world oil supplies approaching peak supply, this market potential only has the room to grow, providing an impetus for continued studies and research.

A different scenario proposed in 1981 forecasted OTEC’s developmental impact on personal, local, state, and federal finances.  In particular, if 14,000 MW (roughly 1500 OTEC facilities) of OTEC capacity were installed it could help to create over 140,000 jobs, most of these being in shipyards and construction zones.  Federally, these installations would create $450 million in local and state taxes and over $1.5 billion in federal income taxes4.  Although this is a upper estimate projection, if local, state, and federal incentives are attached to OTEC development, the technology could receive an increased interested development.

A legitimate concern for OTEC is the payoff times, or the time it would take the technology to repay the high capital costs associated with installation and initial operation.  If OTEC was scaled to the same net electrical energy output of a fossil fuel plant or comparative pressurized water reactor and light water reactor nuclear technology (with no recycling of spent uranium), OTEC would save between 36 to 53% fossil fuels.  Using this data, an OTEC system would have an energy payoff time of 4. 7 to 6.2 years while also providing 17 to 35 years of dependable, full-time operation3.  More up-to-date studies from 2005 have pointed towards a ratio of lifetime energy generation to that consumed in the construction and operation for OTEC is 10 to 15, achieved by assuming a lifetime of 50-100 years5.

If a hybrid system (i.e. a closed-cycle with a second loop for desalinization) is employed, it could provide fantastic economic benefits for large business and industry.  If the water generated from the desalinization were used for air conditioning systems, it would save over 6000 kWh per month.  If the water was used for actual consumption, a small OTEC plant with 1 to 10 MW energy capacity could generate at least 450,000 gallons of water and at most 9.2 million gallons of fresh water per day, equaling a water supply for populations between 4,500 to 100,000 individuals6.

Overall, despite these encouraging predictions, there still lies a great need for in-depth research into OTEC’s market penetration.  Yet, even these modest projections point to a promising future for increased development of OTEC.


  1. 2010 [cited 2010 May 16].  10MW OTEC Power Plant wins TU Delft Design Challenge.  [Internet].  Netherlands: EcoBoot.  Available from:
  2. Avery William H., Wu Chih.  1994.  Renewable Energy From the Ocean.  New York (NY):  Oxford University Press.  449 p.
  3. Charlier R.H., Justus J.R.  1993.  Current Assessment of Ocean Thermal Energy Potential.  Ocean Energies:  Environmental, Economic, and Technological Aspects of Alternative Power Sources.  Amsterdam (The Netherlands): Elsevier Science Publishers.  p. 187- 270.
  4. Roney, J.R.  Economic and Employment Impacts of OTEC Commercialization.  Report to the Department of Energy, Ocean Systems Branch, March 1981.
  5. Tester, et al.  Ocean Waves, Tide, and Thermal Energy Conversion.  Sustainable Energy:  Choosing Among Options.  Cambridge(MA):  The MIT Press.  p. 599-606.
  6. Vega, Luis A., Economics of Ocean Thermal Energy Conversion (OTEC).  1992.  p. 17-18, 22

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