*2.2. Assumptions and Economic Computations*

In order to perform an economic assessment at the early stages of the concept development (TRLs 1–4), some assumptions are made. Through reverse calculations, the initial estimates on the CAPEX and OPEX of the project can be obtained. The goal is to get an indication of the values that would allow achieving a given target LCoE. To perform the reverse calculation, some values need to be assumed for the following parameters:


Based on the project interest rate and the project lifetime, it is possible to extend the discount rate on an annual basis by calculating the annualisation factor (*Af*(*n*,*r*)):

$$A\_f(n,r) = \frac{r}{1 - (1+r)^{n+1}}.\tag{1}$$

The Normalised Annual Energy Production (NAEP), in MWh per installed kW per year, can be calculated using the following relation:

$$\text{NAEP} = 8765 \cdot \mathbb{C}\_f \cdot a\_{\%} \tag{2}$$

where 8765 corresponds to the number of hours in a year.

The LCoE (in EUR/MWh) relates the parameters, CAPEX, OPEX, NAEP, and the annualisation factor through the following simplified equation:

$$\text{LCoE} = \frac{A\_f \cdot \text{CAPEX} + \text{OPEX}}{\text{NAEP}}.\tag{3}$$

By assuming a given LCoE, NAEP and annualisation factor, a relation between the CAPEX (in EUR per kW of installed power) and the OPEX (in EUR per kW of installed power per year) can be obtained. Because the OPEX is typically expressed as a percentage of the CAPEX (this relation is further described in Section 2.3.2) by choosing a given percentage, the CAPEX can be estimated; and from that, the OPEX can also be derived.

#### *2.3. Breakdown of Costs*

The costs related to a wave energy project are usually divided into CAPEX and OPEX. These two categories are further divided into cost centres. This categorisation is performed

in order to quantify the influence of the different cost centres on the overall cost of a project. For wave energy projects, this exercise was performed in [4,21–25], but in all cases, either a single technology was considered or a limited number of technologies were considered.

A literature review was performed by Têtu and Fernandez Chozas in [26] to build a cost database for wave energy projects [27]. This database is the baseline for the technology agnostic breakdown of costs presented in this section, which can be used to assign ranges of cost for the different cost centres when target values for the CAPEX and OPEX are known.

#### 2.3.1. CAPEX

CAPEX for a wave energy project can be summarised as all the expenditures associated with the project development, its deployment and commissioning until the operation of the WEC farm starts. It also includes decommissioning at the end of the project life. A thorough literature review of costs related to the CAPEX can be found in [26]. Costs found in this category include costs related to the multifaceted process of developing a WEC farm from inception through to the handing over of the farm to the customer. A cost breakdown for the CAPEX is presented in Figure 1 based on the work compiled in [26]. The different costs centres are explained further in the following subsections.

**Figure 1.** CAPEX breakdown of costs for the different cost centres.
