Public Willingness to Pay and Policy Preferences for Tidal Energy Research and Development: A Study of Households in Washington State
Introduction
Over the past 30 years, concerns about the impacts of greenhouse gas emissions have grown in the global political arena. At the same time, expenditures on energy R&D in the United States by both the private and public sector have been flat or declining since the late 1980s (Nemet and Kammen, 2007). Declines in spending are largely a result of the deregulation of the U.S. electricity sector, diminishing private sector interest in nuclear energy R&D, and inconsistent renewable energy R&D subsidy policies (Nemet and Kammen, 2007). This has resulted in levels of funding that are inadequate to meet the rising challenges of developing new renewable energy technologies. This funding situation may change in the near future, as renewable energy R&D has come to the forefront of climate change policy discussions and unprecedented levels of new private and public investment in renewable energy R&D were pledged alongside the Paris Agreement (Davenport and Wingfield, 2015). This elevates the importance of understanding how to provide funding support for early stage energy technologies in ways that align with public preferences.
Tidal energy resources consist of differentials between high and low tides created by the gravitational interaction between the sun, moon, and earth's oceans (Tsantes, 1974). Elevation differences between high and low tides can be exploited directly for electrical power generation, and there are two prominent types of technologies that are being developed to capture this energy. A “tidal barrage” produces electricity through the placement of dams in a basin or estuary situated to capture the energy in the difference between high and low tides (analogous to conventional hydroelectric dams). The other main technology, tidal current energy turbines, can harness the energy generated when elevation differences between high and low tides produce strong currents (analogous to wind energy). This study is specifically focused on tidal current energy, which is referred to as in-stream tidal energy in the survey instrument. Tidal energy is a clean, renewable energy resource and because of its gravitational origin, predictable over the lifetime of a generation project (Denny, 2009). Turbines used to harness tidal current energy are an example of an emergent energy technology that is in the early stages of development and requires substantial levels of initial funding to move forward. To bring a tidal energy project from conceptual inception to readiness is generally estimated to require investment in excess of $100M.
Tidal energy technology is currently being developed globally; however the devices that are presently in operation are prototypes. The first commercial project in the world is MeyGen, located in the United Kingdom. The first phase of the project, consisting of four megawatt-scale turbines is likely to be fully commissioned by the end of 2016. Pending the outcome of environmental studies, the project may be authorized to expand to an array of several hundred turbines (Meygen, 2016). In the U.S., there are currently no fully commercial-scale arrays permanently deployed. As a result, there have been few opportunities for the public to gain exposure to this type of technology and a lack public knowledge about tidal energy is recognized as a source of possible bias in this study. Several explanations have been advanced for why this technology has yet to progress to the fully commercial level. These explanations include public opposition to the siting of individual projects, lack of a precedent for governance structures and regulatory processes, uncertainty about environmental effects, competition with multiple other uses of the marine environment, technical development issues, and high upfront economic costs of development (Kerr et al., 2014).
Puget Sound in Washington state is an area where tidal energy holds the potential to supply a significant percentage of local energy needs (Polagye et al., 2009). However, no tidal energy projects have advanced beyond the planning phase in Puget Sound. A recent project proposed for Admiralty Inlet in Puget Sound was cancelled in 2014 before deployment due to high development costs relative to the level of available public financing (Vaughn, 2014). Securing adequate funding to cover project costs is frequently a limiting factor for marine renewable energy1 projects around the world.
Currently, about 75% of the electricity produced in the state of Washington (WA) comes from hydroelectric sources (U.S. Energy Information Administration Service, 2015). In 2006, WA state residents voted for an initiative that mandates a Renewable Portfolio Standard (RPS), which requires large utilities in the state to generate at least 15% of their power from renewable sources by 2020 (Washington State Legislature, 2007). New hydroelectric capacity is not eligible to meet RPS obligations, motivated by interest in developing the state's non-hydroelectric renewable sources.2 Because, the abundance of cheap and secure hydroelectric power produced in WA results in low electricity costs (WA residents pay an average of 24% less on their electricity bills than the national average (U.S. Energy Information Administration Service, 2015)), the RPS obligations primarily incent the most cost-effective renewable resources such as solar and wind (Washington State Legislature, 2007). This situation complicates market entry for emerging non-hydroelectric renewable resources, such as tidal energy (Goldsmith, 2015). To reduce this barrier, in 2013, the WA state legislature voted to create a clean energy biennial fund worth $76M, to support clean energy projects in the “development, demonstration, and deployment” phases (WA Department of Commerce, 2015a). While providing a helpful incentive, this level of funding is small compared to the total costs of developing new renewable resources. Overall, this demonstrates the importance of understanding if residents would be willing to pay a higher cost for diverse renewable energy technologies to meet RPS standards when they are accustomed to paying low electric bills. Such diversity of sources increases security of supply, particularly as regional climates shift.
We examine tidal energy R&D in WA from an economic and policy perspective. However, because the challenges associated with developing tidal energy are multi-faceted, the research design was informed by input from researchers in other disciplines in order to ensure that a full and diverse set of social, environmental, technical, and economic issues were addressed in our study. This research is nested within a larger project being performed by team of investigators that addresses the challenges of tidal energy development from an interdisciplinary problem-driven perspective. Engineers, fisheries ecologists, oceanographers, physicists, and social scientists are collaborating to understand the most sustainable way to develop tidal energy using multidisciplinary criteria.
The metrics that are typically used to value Marine Renewable Energy (MRE) projects such as the Levelized Cost of Energy (LCOE) do not take into account the total economic value and non-market costs and benefits of investing in the development of this technology (Goldsmith, 2015). A recent summit of ocean energy industry stakeholders identified a lack of quantification of the total economic value of MRE R&D as one of the major challenges to industry development (Goldsmith, 2015).
The objectives of this study are two-fold, first to assess public preferences for potential policy incentives and funding sources to support tidal energy R&D and also to understand the non-market values associated with tidal energy R&D in WA through investigating public Willingness to Pay (WTP). Contingent Valuation Methodology (CVM) is used to investigate how constructs from environmental psychology affect WA state households' WTP for tidal energy R&D. This work presents the first stated preference study for MRE conducted in the United States and provides insight for estimating WTP for other new energy technologies.
Section snippets
Innovation Theory
The key economic challenge inherent in science and technology innovation theory and currently hindering the development of MRE projects occurs when projects commonly become trapped and fail in the phase of development known as the ‘valley of death’ (Corsatea, 2014). The public sector generally provides the funding for basic research in the early stages of MRE development and the increasing market pull allows the private sector to supply most of the financing of these resources once the
Survey Design and Data
We surveyed a random sample of WA state households by mail. We used a stratified sample survey technique in which surveys were sent to an equal number of Puget Sound coastal and non-coastal WA state households. Coastal residents were defined as living within 15 miles of Puget Sound coast, where tidal energy resources are concentrated. MRE technologies, like tidal energy, are likely to impact coastal residents and non-coastal residents in different ways and we wanted to understand if this leads
Willingness to Pay Model Design
Researchers have used a variety of methods to elicit WTP. A single-bounded dichotomous choice question involves asking respondents to make a discrete choice between two or more alternatives with different costs (Haneman, 1984). The vector of costs is pre-selected by the researcher and each individual in the sample is randomly assigned one of the costs from the vector. The amount of information obtained through a WTP question can be increased by asking follow-up questions with double-bounded
Response Rates and Distribution
A total of 6617 complete surveys and 21 partial surveys were returned, resulting in a 22.7%8
Conclusions
Recently, private investors and governments pledged unprecedented financial and political support for renewable energy R&D in conjunction with the Paris Agreement. This is likely to create push for both the development of new energy technologies and also demand for an acceleration of bringing these technologies to market on a global level. Studies such as the analysis presented here help ensure that funding is directed in a way that aligns with societal preferences along with market
Acknowledgements
Funding for this research was provided through a grant by the U.S. National Science Foundation, under Sustainable Energy Pathways Award #1230426. We would like to thank Brian Polagye (University of Washington, UW), Terrie Klinger (UW), David Layton (UW), Shannon Davis (The Research Group), Robert Berrens (University of New Mexico), Julie Mueller (University of Northern Arizona), Abby Towne (ATowne Design), The Sustainability of Tidal Energy Research Team at UW, Anita Rocha (UW Center for
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