Tidal Lagoons and UK Energy Strategy

Debate between Stephen Crabb and Geraint Davies

Tuesday 6th December 2016 Westminster Hall

[Stephen Crabb (Preseli Pembrokeshire) (Con)]

I beg to move,

That this House has considered tidal lagoons and UK energy strategy.

It is a pleasure to serve under your chairmanship, Mr Paisley. This is a timely moment for the House to return to the subject of tidal lagoons as a future energy source, and specifically the projects of Tidal Lagoon Power Ltd, starting in Swansea bay, for which it has already received a development consent order.

My hon. Friend the Member for Carmarthen West and South Pembrokeshire (Simon Hart), my constituency neighbour, led the previous Westminster Hall debate on Swansea tidal lagoon on 8 March 2016, which underlines the keen interest in this project from people in west Wales. It is encouraging to see colleagues here from across the United Kingdom, which demonstrates that what we are discussing is of strategic importance to the whole UK’s energy policy, economic policy and industrial policy.

The previous debate was essentially held under a different Government, when energy and climate change belonged in a stand-alone Department under a different team of Ministers led overall by a different Prime Minister. I welcome the new ministerial team at the Department for Business, Energy and Industrial Strategy. The team is experienced and well equipped to take on the challenges before us. I also welcome what the new Business Secretary said to the Institute of Directors on 27 September in his speech on industrial strategy:

“Many of the policies and decisions that form our industrial strategy will not be about particular industries or sectors, but will be cross-cutting.”

I welcome the departmental integration of industry with energy to make that happen, and tidal lagoons are a good example of the kind of opportunity that such integration is intended to foster.

The last general election feels like ancient history, but it is worth reminding ourselves that Conservative colleagues stood on a manifesto that:

“All parts of the UK will soon be helping to deliver secure, affordable and low-carbon energy, from the Hinkley Point nuclear power station, to offshore wind turbine manufacturing at the new Green Port in Hull, the next generation of pipelines West of Shetland and the Swansea tidal lagoon.”

I am proud of that manifesto commitment, and I would like to see it delivered.

Ten months ago the Government announced an independent review of the feasibility and practicality of tidal lagoon energy in the UK, recognising that tidal lagoons have the potential to provide the country with clean and secure energy but saying that more work needs to be done to determine whether it provides value for money. The Government therefore commissioned a review of the technology to improve our understanding of how tidal lagoons could contribute to the UK’s future energy mix in the most cost-effective way. The purpose of the review, led by the widely respected former Energy Minister Charles Hendry, was to help to establish an evidence base to ensure that all decisions on tidal lagoon energy are in the UK’s best interest, to better understand whether tidal lagoons can be cost-effective and to consider the impact on consumer bills both today and in the longer term.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Does the right hon. Gentleman agree—perhaps the Minister will reflect on this too—that, given that 75% of identified fossil fuels cannot be exploited if we are to fulfil our Paris and COP 22 climate change obligations, the spot price of oil, which is often deflated by Saudi excess production to attack frackers, should not be the point at which we identify value for money? We should get sustainable green power at the lowest cost possible, even if the cost of oil is down.

[Stephen Crabb]

The hon. Gentleman makes his point well. The purpose of the Hendry review is to help to provide clarity so that the Government can determine the role that tidal lagoons could have as part of a long-term strategy to provide secure, clean and affordable energy for families and businesses across the country. The review is now complete and will be presented to the Government this afternoon. I, and I suspect the Minister, have no idea what the review says and what it concludes, but given the strength of support for a tidal lagoon industry across such a wide spread of business and political opinion, I imagine that Mr Hendry has heard some powerful and compelling arguments that cannot be dismissed lightly.

It would be absurd to ask the Minister to address his remarks this afternoon to the contents of the review—he will rightly need time to digest and assess it—but my one request is that he commits today that a decision will be made, along with a full response to the review, in as short a timeframe as possible. Even as I say “as short a timeframe as possible,” I sense the scope that that allows for foot dragging, so I seek assurance that the Government will respond in a timely and purposeful way, with no foot dragging. This cannot become another third runway decision, where industry makes repeated calls for a Government decision only for it to be kicked further down the road. There is too much at stake.

--- Later in debate ---

[Stephen Crabb]

Perhaps we need another occasion to talk more fully about the role that apprenticeships play in rebalancing the economy, but the hon. Lady makes a vital point. If we are to have a new tidal lagoon industry, there is a lot of training to be done. A lot of new skills need to be brought into the workforce, so one can readily see that apprenticeships will play a key role.

I will draw my remarks to a close by drawing attention to the elephant in the room, which a number of hon. Members have already mentioned: money and affordability. I was discussing the Swansea tidal lagoon project with one Minister recently who described it to me as “eye-wateringly expensive”. When I pressed him on that, it became embarrassingly clear that he did not understand the project at all and was merely repeating what he had heard someone else say about it. A myth of unaffordability has grown up around the vision of tidal lagoons as it has developed over the last five years.

Let us be clear: the projected investment costs should not deter us. We know that investors are ready to support the Swansea bay project, whose overall project cost is about £1 billion to achieve construction and connection to the national grid. Tidal Lagoon Power has already spent around £50 million on the development work, and another tranche of money is ready to be used to bring the project to financial close, as long as the Government give the green light. Of the total capital investment of around £1.3 billion, we know that around 84p of every £1 will be spent here in the UK, and at least 50% of that will be spent in Wales. For the Welsh economy, a project of that scale would certainly help to move the dial in terms of gross value added.

We have still have not addressed the crucial point on which this whole thing hangs: value for money. I am interested to see what the Hendry review says about it, but after seeing the figures that crossed my desk when I was a Minister, and again more recently, I have been greatly encouraged that the project does represent value for money. By taking a long-term view of the asset—for that is what it is: a long-term source of power generation—and using established modelling that will be familiar to Treasury officials, the current net value of subsidy for Swansea could amount to a contract for difference equivalent of £89.90 per megawatt-hour. We would be talking about a 90-year contract with a diminishing subsidy each year for 35 years—because it is de-linked from inflation—which then starts to pay money back to the Government for the rest of the life of the contract. That compares favourably with Hinkley C, which locks in an escalating strike price with a contract for difference of £92.50 per megawatt-hour.

The point is that it is affordable: Swansea bay tidal lagoon would put an additional 18p on to household bills, and would require only 0.41% of the 2020-21 levy control framework budget in its first year. By its 35th year, Swansea bay would require just 0.15%—effectively a rounding error—of the levy control framework budget. To put that into context, Hinkley C will add around £12 to household bills.

[Geraint Davies]

Does the right hon. Gentleman accept that because the value of the pound plummeted by something like 20% after the news of Brexit—I think it is now down by around 14%—the lagoon will be much greater value for money, because it obviously costs more to import oil and energy if sterling has a low value?

[Stephen Crabb]

I genuinely do not know about that. We are discussing the long-term view. I do not know what oil and gas prices, or the value of sterling, will be in six months, let alone in 35 years.

The Swansea bay project does have strong credentials as a stand-alone project, but think about a Cardiff tidal lagoon as the first full-scale project. That would see the cost of electricity drop markedly, with a potential contract that could, I am told, take around £5 off the average household electricity bill. That is why it is so important to talk about a tidal lagoon industry, not just about doing Swansea as a one-off. It is the fleet of full-scale lagoons that will unlock the full energy opportunity for the UK. If we get it right, the country will win with low-cost, reliable and clean power and the emergence of a new globally significant industry here in the UK. Tidal power is reliable, as well as clean, and it is not subject to the vagaries of the weather. It is predictable—we know exactly when every high tide will be for years ahead—and tidal lagoon systems will be built to last for at least 120 years, making them all the more worthy of investment.

We have a unique and historic industrial opportunity before us, and we absolutely should seize it. We have the natural resource on our coastline, and we need new sources of low-carbon power. We have a rich industrial heritage that has bequeathed us the skills, the capabilities and the ambition to take on the challenge. After five years and expenditure of more than £50 million, the pathfinder project at Swansea bay is almost ready to start construction. The project has planning consent, strong funders, strong industrial partners, political and public support, and a delivery team and supply chain ready to kick into action. It has also proved to the international marketplace that the successful commercial development of tidal lagoon infrastructure can be achieved.

I urge the Minister not to delay in his consideration of the Hendry review. I urge him to seize the moment, to give the go-ahead to Swansea bay, and to launch this affordable, sustainable, first new post-Brexit British industry, which will serve our energy needs into the 22nd century.

Draft Wales Bill (Morning sitting)

Debate between Stephen Crabb and Geraint Davies

Wednesday 3rd February 2016 General Committees

[Geraint Davies (Swansea West) (Lab/Co-op)]

I hear what the Secretary of State is saying, but does he agree that the Welsh people’s consent was given by the most recent referendum in which they argued that more, not less, devolution should occur? He is now arguing that we should move backwards, behind that battle line, and in fact many laws that have been passed in Wales would not have been passed under the legislation he is now proposing.

[Stephen Crabb]

The hon. Gentleman’s charge is untrue on so many levels. The Conservative-led coalition Government held the referendum and we recognise that that was a game changer in terms of devolution for Wales. A large majority of people who participated in that referendum voted for full law-making powers in the areas that were devolved. They were never asked to agree that the devolution boundaries should be redrawn. It is the role of elected Governments to make decisions about where the devolution boundary lies.

Oral Answers to Questions

Debate between Stephen Crabb and Geraint Davies

Wednesday 18th November 2015 Commons Chamber

[Stephen Crabb]

My hon. Friend makes an important point, not least about the importance of investing in technology. If we are to drive up prosperity in Wales, we need more growth in higher technology. This afternoon, I am proud to be helping to launch a new compound semiconductor centre for IQE and Cardiff University. That is emblematic of the changes in the Welsh economy.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Twenty-five thousand jobs in Swansea bay city region rely on being in the single market. Swansea is, of course, in the convergence funding area. Will the Secretary of State support Swansea bay city region MPs’ bid to get the new tax centre for Wales in Swansea bay city region, given that it is an area of relative deprivation, and not Cardiff?

[Stephen Crabb]

Exciting things are happening in Swansea and the Swansea bay city region. I am delighted that Swansea MPs are working together. If they have a proposal about future changes to the delivery of Government services, with opportunities for Swansea, I ask them please to send them through and we will consider them.

Steel Industry

Debate between Stephen Crabb and Geraint Davies

Wednesday 28th October 2015 Commons Chamber

[Stephen Crabb]

I am not going to take any more interventions for the time being.

The steel industry across Europe and around the world is in the midst of a crisis, the magnitude of which has not been seen in at least a generation. Chronic global overcapacity has squeezed prices to the extent that the price of certain products has halved in recent times and is expected to fall further still. European demand is still about 30% below pre-crisis levels. The Chinese economy, which has until recently been the driver behind global steel demand, is slowing down. The world is awash with cheap steel looking for markets. For some products, cheap Chinese imports have gone from accounting for 0% of the market to representing 37% of the UK market share within 18 months—that is an extraordinary growth in a very short period. Chinese steel exports roughly doubled between 2011 and 2014. That is the extremely challenging backdrop to the current crisis facing our steelworkers. It has been described as a “perfect storm” in terms of the configuration of different events and phenomena that are affecting the global steel industry, but that is why the Government remain absolutely committed to doing everything in our power to support steelworkers across Britain in the weeks, months and years ahead.

[Geraint Davies]

Does the right hon. Gentleman accept that giving the contract on HS2 to the Chinese will increase the probability that they will use Chinese steel? Moreover, if we had given that contract to a British consortium, those companies would have paid British corporation tax, British national insurance and British income tax, and they would have supported British supply chains and built British capacity for the future. Is not his laissez-faire approach, which has neglected British steel and British industry, at the root of this problem—or a large part of it at least?

[Stephen Crabb]

Forgive me for saying so, but the hon. Gentleman makes a slightly confused point. The investment going into the rail industry is creating opportunities, now and in the future—huge opportunities for the UK steel industry. The Government are determined to help the UK steel industry take advantage of those investment opportunities.

Oral Answers to Questions

Debate between Stephen Crabb and Geraint Davies

Wednesday 16th September 2015 Commons Chamber

[Stephen Crabb]

What matters above all else is our commitment, from the Prime Minister downwards, to completing the project. Opposition Members have expressed a lot of concern about the progress of the project. If they do not believe it is happening, I would encourage the hon. Lady and her colleagues to walk the length of the route, because they will see work happening right now to deliver this really important project.

[Geraint Davies (Swansea West) (Lab/Co-op)]

14. Will the Secretary of State give a cast-iron guarantee, here and now, that in his review Sir Peter Hendy, the newly appointed chief executive of Network Rail, will not look again at stopping the electrification of the line to Cardiff and having dual fuel from Cardiff to Swansea?

[Stephen Crabb]

I am not sure the hon. Gentleman quite knows about these issues. We are totally committed—I cannot be clearer than that—to electrifying the Great Western line all the way through to Swansea, as part of a programme of infrastructure investment bigger than anything this country has seen since the days of Isambard Kingdom Brunel.