The UK government has decided not to support the proposed 320 MW Swansea tidal lagoon. Energy minister Greg Clark said it was just too expensive compared to alternative options: “The proposal for the Swansea tidal lagoon would cost £1.3 billion to build. If successful to its maximum ambition, it would provide around 0.15% of the electricity we use each year. The same power generated by the lagoon, over 60 years, for £1.3bn, would cost around £400m for offshore wind even at today’s prices, which have fallen rapidly, and we expect to be cheaper still in future. At £1.3bn, the capital cost per unit of electricity generated each year would be three times that of the Hinkley Point C nuclear power station”.
He added, “If a full programme of six lagoons were constructed, the Hendry Review found that the cost would be more than £50bn, and be two and a half times the cost of Hinkley to generate a similar output of electricity. Enough offshore wind to provide the same generation as a programme of lagoons is estimated to cost at least £31.5bn less to build”.
Tidal Lagoon Power (TLP), the developer behind plans to build the lagoon project in Swansea Bay, hit back at the government’s decision, disputing the cost estimates used by the Department for Business, Energy and Industrial Strategy (BEIS). TLP claimed that a number of figures cited by the government were inaccurate and overestimated the cost of the project to taxpayers and bill payers. For example, the BEIS suggested the capital cost for the Swansea Bay project would be three times higher than for new nuclear projects on a per unit of power generated basis. But TLP claims its project would have a capital cost per unit of power generated that was 1.5 times higher than Hinkley and would lead to larger lagoons where the costs would be the same as for new nuclear projects.
And whereas BEIS said the programme of six lagoons across the UK that could be kick-started by Swansea Bay would cost 2.5 times more than the Hinkley Point nuclear project to secure the same amount of power, TLP claims the cost is actually closer to 1.2 times higher, even before considering additional costs associated with nuclear waste and decommissioning. The BEIS decision statement also said it would cost £400m to secure the same power output from offshore wind as sourced from the £1.3bn Swansea Bay Tidal Lagoon, but TLP claims the cost of comparable offshore wind capacity would actually be far higher, at around £1.5bn.
The differences in the projections might be partly explained by an alleged failure to take into full account the longer lifespan of a tidal lagoon project – at one stage TLP proposed a Contract for Difference (CfD) over 90 years. But, even so, the new policy review by the National Infrastructure Commission, or NIC (see my last post) was fairly dismissive of lagoons. It says “an entire fleet of tidal lagoons would only meet up to 10 per cent of current electricity demand in the UK”, and its annex on tidal power by Aurora Energy Research is quite critical of the Hendry study on lagoons and the developer’s claims on costs, concluding that: “tidal lagoon projects are unlikely to ever be economic without government support, unlike other renewables”. It’s hard to disentangle all the competing claims, assertions and assumptions, but one NIC/Aurora chart does seem to show that the lagoons’ strike price-based costs could fall below that fixed for Hinkley by 2045 or so (not too hard), but will never catch up with offshore wind.
The lagoon idea had been backed at one time by the Conservatives. It was even mentioned in their manifesto. But now it’s off the agenda – as too costly. As the Telegraph said: “On a like-for-like basis the Swansea Tidal project would need a contract price of £150/MWh. The sum is well above the eye-watering price of the Hinkley Point C nuclear power project, which will cost bill payers £92.50 for every megawatt produced over 35 years.” It is also almost triple the price of the newest offshore wind power projects, which will be built for £57.50/MWh.
In somewhat similar terms, in a Facebook post on 1 June Ecotricity’s Dale Vince said “The Swansea project is twice as expensive as tidal lagoons need to be, even for the first of a kind. There are alternative approaches and locations that would be far better value for money – if tidal lagoons are going to get government support (and I hope they do) – then it should be done through a proper competitive tender process – to make sure it’s value for money. The Swansea scheme would be an absurd waste of money, given the alternatives that exist. And it would tarnish the whole renewable energy industry. Currently Hinkley is the go to project (to cite) for ridiculous costs – it can and should remain so.”
That was presumably not how the government saw matters, but clearly it was not happy. Though no doubt it was also worried about a potential backlash against a decision not to support the lagoon, given that it had also cut support for on-shore wind and large PV. Certainly, as you would expect, the tidal decision did not go down well in Wales.
Welsh First Minister Carwyn Jones had called for TLP to be offered price support on the “same terms” as the under-construction Hinkley Point C nuclear plant. In a letter to UK energy secretary Greg Clark, Jones said Swansea Bay should be given a CfD worth £92.50 per megawatt-hour in 2012 prices for 35 years. The CfD would represent a “joint offer” to TLP, which would also include a £200m equity and/or loan investment by the Welsh government: “Such an offer would strike an appropriate balance between supporting a pathfinder project in line with the findings of your own Hendry review while providing value for money,” the letter stated. It added “It would need to be a maximum, full and final offer from both governments.”
For good or ill, this was not to be. Instead Wales is now being asked to accept a nuclear plant at Wylfa, to be built by Hitachi, possibly with some direct UK government funding, and though the economic comparisons for that may not be similar, nuclear is not that popular in Wales. All in all, it was maybe not a good time for the government to also announce details of the new £200m nuclear sector deal. But then Wales is to get a £40m nuclear sweetener.
Pity that tidal lagoons didn’t get some cash too…other variants might do better, as Ecotricity has claimed. That company’s own proposal, which it claims would be more economic, is for Solway Firth on the Scottish border. But a very large project has also been proposed for North Wales.
And ever hopeful, it’s also been suggested that water companies might help with funding lagoons. However, for now, it seems to be all over. The attraction of lagoons over tidal barrages is that they do not block off entire estuaries, so their environmental impact is likely to be much lower. But that’s also true for free-standing tidal current turbines, like those being installed step by step in Pentland Firth as part of the eventual 398 MW Meygen project. What’s more, their modular nature means that the installation programme can be incremental and staged, as funding allows. You can’t build half a barrage or lagoon.
I did promise to run an already delayed piece on oil company views next, but that will now be held over, to make way for a report on the closure of the UK feed-in tariff and its impact on solar PV, and also for a post on a new Aurora study for the NIC. Oil can wait a bit longer.