Utility Week

18 | 31ST AUGUST - 6TH SEPTEMBER 2018 | UTILITY WEEK Operations & Assets Analysis T he scrapping of the Swansea Bay Tidal Lagoon project in June was brutal. According to a written statement handed down by energy secretary Greg Clark: "However novel and appealing the proposal is… the costs that would be incurred would be so much higher than alternative sources of local carbon power, that it would be irresponsible to enter into a contract." He may have been talking about the pioneering £1.3 billion scheme in South Wales, but the message to the wider renewable energy industry is clear: a technology may be innovative, but if the government judges it too expensive it will not be supported. The decision has le the marine technologies sector feeling let down and looking to its future. "I don't see any real appetite for innovation in construction with this government at the moment. It's not so much the death of innovation – it hasn't started," says Tidal Lagoon's executive chairman, Keith Clarke. The company is now having to regroup, and he says it would be premature to discuss the future until it had digested the full ramifications of the decision. A spokesman for the company adds that tidal lagoons are fundamentally different to other energy assets and require new ways of thinking: "We saw no appetite from government to think differently, which suggests there's a systemic obstacle to innovation." New technology needs a system capable of appraising new ideas on their own merits and not merely in reference to the status quo, he says. Since then, the government has also dis- missed calls from the marine renewables industry to provide separate support for sea- borne technologies through the contracts for difference (CfD) support mechanism. An announcement about the next auction round in May 2019 revealed that wave and tidal technologies would have to once again com- pete head-to-head with offshore wind. This was the case in the 2017 auction, in which no marine or tidal scheme was awarded a contract. Developer Atlantis had bid for a contract for the next phase of its MeyGen tidal stream project in Scotland's Pentland Firth, but despite cost reductions of two-thirds compared with an earlier phase, it failed to beat offshore wind on price. Richard Graham, MP for Gloucester and chair of the All-Party Parliamentary Group on Marine Energy and Tidal Lagoons, says that despite the setback of Swansea, it was not the end of the story for either tidal lagoons or the wider marine energy sector. But the government needed to be clearer about how it would compare the costs of different energy sources, he says. Cutting costs Graham asks: "How do you compare a price for marine energy relative to sources around for almost 60 years (nuclear) or much shorter periods (wind): but which have reached their current price aer c£18 billion of subsidy? "If everything is priced from the latest offshore wind bids of CfD of £55/kWh, the chances of much marine energy being added to the mix are very modest." The sector is adamant it can bring costs down. A report published in April by the Offshore Renewable Energy Catapult estimated that tidal stream technology could potentially cut its levelised cost of energy from £300/MWh now to £150/MWh once 100MW had been installed, falling to £80/ MWh aer installation of 2GW. Cameron Smith, director of public affairs and business development at marine devel- oper Atlantis, says the industry does not need a huge amount of help in order to com- mercialise cutting-edge innovation. "The technology is at the stage of becoming poten- tially huge. We just want some support for the first 200MW or so of projects," he says. Trade body Renewable UK has sug- gested one potential solution. It is pushing for an Innovation Power Purchase Agree- ment (IPPA), which would use tax incentives rather than consumer-funded subsidies. Under an IPPA, a corporate would agree to pay above the market price – at a level set by government – for the energy generated by a wave and tidal stream project. The corporate could then reclaim the additional costs as a tax rebate through the normal tax return process. It proposes that built-in thresholds would reduce the level of support available as technology matures, ensuring that the government's overall expo- sure was limited. There is an appetite from corporates and energy-intensive industries to source renewables to increase energy security, and to help meet carbon reduction targets, says Luke Clark, head of external affairs at Renewable UK. "The IPPA would take the cost of innovation off consumer bills and make it more of a taxation measure," he says. Graham believes the idea has merit. "I look forward to seeing the government's response to the IPPA. I'm optimistic that both ministers and officials will engage more with marine energy, which is aer all what Greg Clark promised." Ring-fenced support Unless the government comes up with support, the sector is talking about moving its innovation overseas. France and Canada are supportive of marine energy, with other countries in Asia, including China, also showing an interest. Atlantis switched its focus overseas in 2016 when the government removed the ring-fenced support for marine Marine renewables all at sea Subsidies have been cut and the government has rejected plans for a tidal lagoon in Swansea Bay as too costly. So where does wave and tidal technology go now? Catherine Early reports. Swansea lagoon was scrapped in June

• Cover