U.K. Weighs Tidal Power Contract Aping Hinkley Nuclear Deal
(Bloomberg) -- U.K. officials are in intensive talks with their Welsh counterparts to kick-start a tidal power plan by copying the controversial contract awarded to Electricite de France SA for its Hinkley Point nuclear power project.
Tidal Lagoon Power Ltd.’s Swansea Bay project would tap the ebb and flow of the tides to generate electricity. It’s been in limbo for 15 months since a government-commissioned review recommended giving it the go-ahead. The delay reflects a reluctance by ministers to accept costs for consumers that were once estimated at double the power price EDF will get.
Amid pressure from more than 100 backbench lawmakers who want the tidal plant to move ahead, ministers are grappling with how to make it palatable. The developer had proposed an initial power price a third higher than Hinkley’s. But an offer of assistance from the Welsh government has changed the game. Officials are now debating a deal on the same terms as Hinkley, according to Richard Graham, a lawmaker with the ruling Conservatives who chairs Parliament’s All-Party Parliamentary Group on Marine Energy.
“The government basically said we cannot possibly justify something that’s more expensive than Hinkley,” said Graham, in whose Gloucester constituency TLP is based. “So TLP have effectively worked out a structure that means they won’t be more expensive than Hinkley. It’s a clone of that contract.”
Ministers “have a responsibility to minimize the impact on consumers’ bills,” Business Secretary Greg Clark told lawmakers earlier this month when asked about the Swansea project. Even so, “I do not want to close the door on something if it is possible to find a way to justify it.”
The Welsh government said talks with Clark’s officials have been “very positive,” though its assistance is contingent on the U.K. awarding TLP a contractual power price guarantee.
“We’re prepared to consider a loan and/or equity investment,” said Ken Skates, the cabinet secretary for economy in Wales. “This offer is real and we now need the U.K. government to declare whether it will support the development.”
TLP declined to discuss contract details. Chief Executive Officer Mark Shorrock said discussions between the British and Welsh governments are “at full tilt.”
“There is no doubt in my mind that they will finalize an approach that works for all parties,” Shorrock said.
Tidal Lagoon Power argues the project will only need 1/66th of Hinkley’s subsidy. At a maximum output of 320 megawatts, it’s a tenth of the size of EDF’s nuclear plant. And because of the intermittent -- though predictable -- nature of tides, the TLP plant would generate at most for 14 hours a day. It’ll also have a 120-year lifespan, providing predictable power into the 22nd century.
The smaller scale and daily output of the tidal plant mean the subsidies it would reap will be lower than at Hinkley Point, which the National Audit Office has estimated will cost consumers 30 billion pounds ($43 billion) over 35 years.
If the Swansea plant is successful, TLP plans another five bigger and cheaper lagoons nationwide. Those could create 71,000 jobs at peak construction and generate more than 40 billion pounds of private investment.
“We’ve got to be ambitious and bite the bullet on the first one,” said Labour lawmaker Albert Owen. “There will be costs, but it’s investment for the future,” he said, noting the potential business for Tata Steel Ltd.’s plant in Port Talbot.
Potential supply-chain work for companies including Andritz AG, General Electric Co. and Cemex SAB de CV has sparked the interest of lawmakers across the country of all political stripes. Graham last year secured the signature of more than 100 members of Parliament calling for Clark to proceed with the Swansea plan.
Simon Clarke, a Conservative lawmaker elected to Parliament last year, said Tees Components Ltd., a manufacturer in his constituency, stands to benefit from the nascent industry and there’s “frustration” at how long the government is taking to make a decision. Sharing that view is another Conservative lawmaker, Mark Pawsey.
“It’ll be jobs for my constituents and fits very neatly with our clean energy strategy,” said Pawsey, noting that Cemex and GE plants in his Rugby district may benefit from supply-chain contracts. “I’d like to see it happen, and along with many others, I’m disappointed that government seem to be taking quite a long time to form a view.”
One member of Parliament who signed Graham’s letter was Claire Perry, then a backbencher who since has been promoted to energy minister in Clark’s department, with a brief covering renewables. She said government officials are working “very closely” with their Welsh counterparts.
“We hope to make a decision shortly,” Perry said in an interview. “It’s a big decision that has to be made and it’s important to get it right."
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