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UTILITY Week 10th February 2017

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14 | 10Th - 16Th FEbrUarY 2017 | UTILITY WEEK Policy & Regulation Charles Hendry, former energy minister Q&A Q: How has your review been received so far? Have you received any indication from the government as to what it thinks? A: I've not received any indication so far. I've not badg- ered the government. I felt it was right to give them time to consider it. Q: Are you optimistic at this stage that your recommendations will be followed? A: I hope the government will, but as I haven't had feedback from them optimism would be misplaced. So I'm entirely neutral in terms of my expectation. Q: There have been concerns raised over the com- parison of a 90-year contract for difference (CfD) for tidal lagoon power with CfDs for other technologies which last for far less time. Doesn't making a com- parison on such a basis make tidal lagoons seem cheaper than they are? A: I disagreed with [this point] fairly fundamentally actually. My view is very clearly that if you want to take account of a very long-lived project, then you need to recognise that in the evaluation you make and a straightforward comparison of CfDs doesn't do that. You may be getting that CfD over a short period of years because the project will only last for 25/30 years. Trying to compare that with one which will last for 120 years isn't comparing like with like. I think the most effective way of doing it, therefore, is to look at the level of subsidies spread over the lifetime of the project and ask what it costs the taxpayer on top of what they would otherwise be paying, because bear in mind for the last 60 years of the project this is producing very cheap power indeed. It's going to bring down, at that point, the cost of energy for consumers. Q: The report says large- scale tidal lagoon power could be cheaper than offshore wind over the long term. How sure are you of this, given that offshore wind costs are coming down fast? A: Indeed. I was the minister who set offshore wind the target of being £100/MWh for final investment decisions taken in 2020 and we're already well ahead of that so I think it's all very impressive to see how their costs have come down. What we don't know is how that's going to go forward into the future and whether that keeps on coming down, or at what point it reaches a natural floor level and can't drop significantly below that, especially as you get more challenging technologies – floating turbines, deeper waters, and so on. If you have to rebuild an offshore windfarm three or four times in the lifetime of a tidal lagoon, we can make assessments as to how the cost will come down. But there are very significant reinvestment costs which you simply haven't got in a lagoon. Q: Not all megawatt-hours are equal, and the value of different technologies depends on when the power is produced. How closely would the output of a tidal lagoon match the demand profile of the UK? A: On security of supply, what I said was that it's indig- enous, it is predictable completely but it has limited dispatchability. You can hold back generation for a short period aer the peaks but you can't hold it back indefinitely because you then start to interfere with the next tidal episode. Predictability is a very important part of this equation. For National Grid to be able to know exactly what's coming in at what point means that they can then make other decisions. National Grid was quite comfortable about their ability to manage even from large lagoons with the power output, even if that's com- ing in the middle of the night. Q: There have been calls for tidal streams to be prior- itised over tidal lagoons due to that technology being closer to commercialisation. What is your reaction? A: It wasn't within my brief to look at tidal stream. I think we've seen some quite encouraging elements, but then we've also seen big steps backwards at times. One of the reasons I suggested there should be a tidal power authority was to be able to look at a range of tidal tech- nologies and see how best they can be encouraged. I don't have a technical basis for saying that this technology will come in ahead of that technology. I think I've learned to be quite sceptical of people who told me with absolute certainty what technologies are going to happen when, because those which I was guar- anteed would be salvations when I was a minister have not necessarily worked out like that. Last month Charles Hendry published his eagerly anticipated review into the feasibility of tidal lagoon power. Utility Week spoke with him about the review and its findings. Note: The govern- ment's response to the Hendry Review is expected in Q1 2017

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