What’s happening with Swansea Bay tidal lagoon?

Am I the only person who’s bemused about what’s happening to the Swansea Bay tidal lagoon? It looks like precisely nothing, though it would be just my luck for a deal to be announced five minutes after I post this article. If that happens, then don’t bother reading the rest!

As far back as July the FT reported that the project’s investors were warning that the delay in making a decision was putting the project at risk. According to Wales Online, a bunch of Swansea councillors met with Secretary of State for Business, Energy and Industrial Strategy Greg Clark on 30 October to urge him to speed things up, but two weeks later there have still been no announcements about what is happening. I wondered whether an announcement might have been made at the recent International Tidal Energy Summit earlier this week, but there’s still no news.

I don’t understand why the government couldn’t have given it a definitive unambiguous yes or no several years ago. But I have a theory, and here it is.

Before going into that, however, it might be worth a quick recap of the story so far.

The idea of a building a tidal lagoon in Swansea Bay was first put forward in the early 2000s by a company called Tidal Electric but they seem to have gone away and nobody remembers them any more. Their scheme is discussed in the 2nd edition of the textbook “Renewable Energy: Power for a Sustainable Future” by Godfrey Boyle et al, OUP, 2004.

In 2011 a wind farm developer called Mark Shorrock also had the idea of building a tidal lagoon in Swansea Bay. According to the Guardian, he has spent £7M of his own money getting the scheme off the ground and has since raised and spent several tens of millions more on it. To be viable it would need a feed-in tariff somewhere in the region of £90 to £200 per MWh, depending on the number of years the tariff is awarded for and the level of return the project’s investors are prepared to accept.

Tidal Lagoon Power’s initial proposal was for a feed in tariff of £168/MWh for 35 years, though since then various other combinations of tariff level and duration have been mentioned in various media reports. I’m not sure what their current proposal is.

For comparison, the first few offshore wind farms received feed in tariffs of roughly £150/MWh for 15 years, though recent offshore wind farm proposals have been awarded much lower tariffs, and Hinkley C nuclear power station has been awarded a feed in tariff of £92.50/MWh for 35 years.

The high level of subsidy that the lagoon would require has attracted much criticism. This has come not just from the usual anti-renewables ranters such as Christopher Booker and James Delingpole, but also from from a number of more credible commentators, such as Citizen’s Advice, Policy Exchange and the Adam Smith Institute, who are less easily ignored (well, the first two anyway).

There are also many high profile supporters of the scheme. Almost every politician in Wales, for example.

This means that the government is going to get a barrage (no pun intended) of criticism if they award it the feed in tariff it needs to go ahead, and a barrage of criticism if they don’t. More importantly, the decision involves the expenditure of a large amount of public money (a feed-in tariff comes from bill payers rather than tax payers but is still public money). This means that the decision will be scrutinised by the National Audit Office and the Public Accounts Committee. Furthermore, the money goes to a private, theoretically for-profit, company. This will give the scheme’s opponents the opportunity to allege if not corruption then at least crony capitalism. This is a civil servant’s worst nightmare and understandably they just want it to go away.

In an attempt to get out of this bind, in 2016 DECC commissioned former energy minister Charles Hendry to carry out an independent review of the scheme in the hope that it would provide an unambiguous answer that everyone would support. His report, published in January 2017, did give an unambiguous answer, which was that it should be supported. Part of his rationale was that the scheme would cost each household in the country only 30p per year—an argument that is often used to justify public funding of the royal family. Unsurprisingly this attracted a certain amount of derision and provoked headlines like: ‘Tidal power swamped by dubious mathematics ’.

Interestingly, on page 85 of his report Charles Hendry says:

The Energy Technologies Institute (ETI) has undertaken analysis for the Review using its Energy System Modelling Environment (ESME) to identify the capex levels at which tidal lagoons would need to be built for them to be part of a least-cost pathway to deliver the UK’s statutory target to reduce greenhouse gas emissions in 2050 by 80% from 1990 levels

… ETI’s targets for tidal lagoon capex levels range from £1,200 per KW in a “baseline” case to £1,800 per KW in a ‘low nuclear and no CCS case’. These targets are significantly lower than capex estimates for large scale tidal lagoons based on ITP’s [the review’s technical consultants] analysis. For example, capex estimates for Cardiff, Newport and Bridgwater, net of a 10% reduction to reflect the role of a pathfinder project, are in a range of £2,700 – £2,800 per KW

That should have been the end of the story. Tidal lagoons are not on the least cost pathway to meet our 2050 targets. That’s all there is to it. However, he then says:

I do not consider that the shortfall between estimated capex levels for large scale tidal lagoons and ETI’s targets illustrate that tidal lagoons cannot be cost effective.

Hmm.

This has left the government with a problem. They still don’t have an option that won’t call down a huge amount of criticism on their heads. Fortunately, there is a saviour on the horizon. Brexit. It’s all hands to the pump and we can’t do anything non-brexit related until 2019 at the earliest. Phew, that’s a relief!

© Copyright 2017 Howard J. Rudd all rights reserved.