News / IPPToday #239: UK government refuses to back US$1.7 billion tidal lagoon

IPPToday #239: UK government refuses to back US$1.7 billion tidal lagoon

🕔 June 27, 2018
IPPToday #337: US$320 million financing secured for 330 MW solar project in Australia

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The Business and Energy Secretary, Greg Clark, of the UK government has announced that the proposed Swansea Bay tidal lagoon, which would generate 320 MW of electricity and cost GBP1.3 billion (US$1.71 billion) to develop, does not meet the department's requirements for value for money, and so the government will not grant any public funds to the project.

Tidal Lagoon Power (TLP) cannot proceed with the project without assurance of government subsidies, meaning that this announcement effectively cancels the project. The lagoon was planned to be located in Swansea, on the south coast of Wales.

Clark claims that the same power generated by the lagoon, over 60 years, for GBP1.3 billion, would cost around GBP400 million (US$530 million) if generated by offshore wind at today’s prices, which are expected to decrease in the coming years.

The project has been in development since 2014, securing investment, contractors and planning consent from the government the following year. In January 2017, a government-commissioned independent review approved the project. However, despite pressure from politicians, especially the Welsh government, and the public, the government have refused to announce their final decision until now.

Throughout this long period of deliberation, the cost of the tidal lagoon has often been compared to that of Hinkley Point C, a 3,200 MW nuclear power station currently being constructed in the south-west of England. The government approved the project in 2016, including substantial subsidies, causing much controversy and criticism.

The government's analysis shows that the capital cost per unit of electricity generated each year by the Swansea Bay tidal lagoon would be three times that of Hinkley Point C. However, earlier this month, Wales' First Minister offered GBP200 million (US$268 million) from the Welsh government to the project developers, which he claimed would enable the UK government to enter a contract for difference (CfD) on the same terms offered to Hinkley Point C (GBP92.50 per MWh in 2012 prices) over 35 years following commissioning.

Thus, the UK government's figures are disputed by the many proponents of the project.

TLP has questioned the government's conduct of the review process, stating that no talks have taken place for two years. The unwillingness of the government to negotiate is being perceived by many as an unfair bias to the nuclear industry and against Wales.

Despite the considerable backlash, there are key supporters of the government's decision. Last month, Ecotricity presented the UK government with proposals for two tidal lagoons, which would each have a capacity of 380 MW. These projects have been marketed as alternatives to Swansea Bay, as Ecotricity believes that TLP's costs are excessive. The company claims that it could develop its proposed lagoons, located on the border of England and Scotland, for GBP650 million (US$879.8 million) each, so half the cost of Swansea Bay for more installed capacity.



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