Utility Week

UTILITY Week 20th January 2017

Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government

Issue link: https://fhpublishing.uberflip.com/i/774579

Contents of this Issue

Navigation

Page 11 of 31

12 | 20TH - 26TH JANUARY 2017 | UTILITY WEEK Policy & Regulation Analysis T idal lagoons are the renewables flavour of the month. The promise of relatively low-cost, predictable generation that would boost the UK economy has won plenty of fans. But is it too good to be true? An independent review conducted by former energy minister Charles Hendry was published last week and it is overwhelmingly positive. It said tidal projects could represent "considerable value" when compared with other low-carbon technologies and the UK should "seize the opportunity". Others have also spoken in glowing terms both of the technology and the review, say- ing tidal technology – in particular the six projects planned by Tidal Lagoon Power (see box) – can play a "major role" in Britain's low-carbon future energy mix. Proponents claim there is a "strong case" for the devel- opments to be pursued. The government's role in backing the £1.3 billion Swansea Bay project – which was granted a development consent order in July 2015 – will be essential for the industry. It is a critical "pathfinder" project. Business and energy secretary Greg Clark kept his cards close to his chest when responding to the review, saying only that he was "grateful to Hendry and his team". He did say that "the issues are particularly complex as they relate to untried technol- ogy in the marine environment" and that the Department for Business, Environment and Industrial Strategy (BEIS) would consider the recommendations and determine what deci- sion should be made. A significant element of this decision will revolve around the industrial strategy element. The potential project pipeline – £15 billion of investment in six lagoons – would see more than 2,000 jobs created and 100,000 tonnes of mostly British steel used in the construction. It would be a lifeline for an ailing steel sector and something that would save jobs in the long term, according to UK Steel director Gareth Stace. The good news continues when the car- bon reduction is factored in. Tidal lagoon Power claims the Swansea Bay project would save 236,000 tonnes of carbon during each year of operation. This, and the sub- sequent projects, would take a significant step towards helping the UK hit its climate change obligations. However, the £90/MWh that Tidal Lagoon Power estimates the Swansea Bay project would require from a strike price is close to that agreed for the new nuclear power stations at Hinkley Point C and Sizewell Is the tide turning? Tidal lagoons have received a boost with the positive endorsement of Hendry's review. Mathew Beech and Tom Grimwood report. Q&A: Charles Hendry Review author and former energy minister Q: What do you think would be a fair strike price for Swansea Bay? A: "I can't get involved in a commercial negotiation. Those negotiations are ongo- ing… We've seen headline figures in the past of very high CfD strike prices. That doesn't take account of the digression over time because they are not fully linked to inflation. The CfD will be agreed at the time of the final investment decision. By the time the plant is operating a few years later it will already have come down. So, for the larger lagoons the expectation is that they will be below the cost of new nuclear from the time they start operating, and then it goes on digressing further for years aer that." Q: How would the strike price for large lagoons compare to offshore wind? A: "It depends where you look at them in the cycle. The price is going to be coming down for CfDs for tidal lagoons. So, if you look at it from the outset they are broadly comparable, but if you look at it over time, particularly over the lifetime of the project, then they are significantly better than any other technology." Q: The cost estimates in the report are based on the current assumptions of Tidal Lagoon Power. How confident are you in the estimates? Do you think they might be overly optimistic? A: "They clearly have an interest in seeing to their own interests, but they have also done more work on this than any other organisation and the process of negotia- tion with the government is to bottom out exactly the accuracy of those figures. What I've sought not to do is to compro- mise the government's ability to carry out those negotiations, which I hope will now continue apace, but say in the review where I think the costs are likely to come down over time." Q: You said it would be beneficial for Tidal Lagoon Power to have a partner. Who can you see taking on that role? A: "I'm not going to list names, but there are names which we would recognise. If they're involved, if they're prepared to come in as an equity partner and put their own money into this, then it makes it more serious… We'd perhaps be looking for a company that has been doing very significant infrastructure projects before. Then there are other very big international organisations which perhaps haven't done infrastructure projects in the UK but have a track record." •   Project scoping and feasibility  studies. •   Design development, plus  early consultation. •   Options consultation –  informal consultation  with public and private  stakeholders, looking at  various scheme options. •   Environmental Impact  Assessment. •   'Preferred option  consultation'  – statutory  consultation. •   Consents sought. •   Prudential named  cornerstone investor. Timeline Swansea Bay 2011  2012  2013  2014 The proposed lagoon in Swansea Bay

Articles in this issue

Archives of this issue

view archives of Utility Week - UTILITY Week 20th January 2017