Swansea Tidal Lagoon

Andrea Leadsom Excerpts

Tuesday 8th March 2016 Westminster Hall

[The Minister of State, Department of Energy and Climate Change (Andrea Leadsom)]

Mr Hollobone, it is a great pleasure to serve under your chairmanship. I congratulate all hon. Members on this interesting debate—I mean that sincerely—in which some good points have been made. I welcome the hon. Member for Salford and Eccles (Rebecca Long Bailey) to her place on the Front Bench. It is a pleasure to speak with her for the first time in this debate. Interestingly, we both have landlocked constituencies, yet we share a keen interest in this project.

I congratulate my hon. Friend the Member for Carmarthen West and South Pembrokeshire (Simon Hart) on securing this debate. His chosen topic is of great interest to the Government, and I sincerely welcome this opportunity for an exchange of views. He, like others from the south Wales region and beyond, is keen to understand better how the proposed Swansea bay tidal lagoon project, if it goes ahead, would benefit the local economy.

I want to clarify one important thing: my hon. Friend is absolutely right to mention that the Swansea bay project was in our manifesto. The Government absolutely recognise its potential to deliver low-carbon, secure energy for the future. However, as I am sure he will accept, it was not a commitment to deliver a contract for difference. This Government are absolutely determined to prioritise keeping costs down, to be on the consumer’s side and to decarbonise at the lowest price while keeping the lights on. Although the project is of huge interest to us, I am sure that he will appreciate that we must keep a close eye on the cost.

[Neil Parish (Tiverton and Honiton) (Con)]

The Bristol channel has the second highest tidal rise and fall in the world. We must harness it. We look to the Minister to find a way to fund that over a long period, because I think it has a timescale of more than 120 years. Once the lagoon is built, if the banks and turbines can be repaired, it will have an infinite life. If we can get the funding right, the power will be right, because the tide will be there, hopefully. As long as the moon is there and the earth revolves around the sun, we will have a tide.

[Andrea Leadsom]

My hon. Friend makes a good point. I agree completely. As I said, we are keen on the project, but not at any price.

Since the Government entered bilateral negotiation with Tidal Lagoon Power Ltd on a possible contract for difference for the project, my officials have been undertaking due diligence to establish a better understanding of the project, including detailed scrutiny of its costs, timescales and potential benefits. I assure my hon. Friend the Member for Eddisbury (Antoinette Sandbach) that the bilateral negotiation process is set out in a stakeholder engagement document that my Department published in January 2015, so it is not an opaque process. I urge hon. Members to read it.

Let me be clear that this Government continue to recognise the potential for the deployment of tidal lagoons in the UK. The scalability of the technology is of genuine interest to us. We are attracted to the proposed Swansea bay tidal lagoon because of its potential to unlock larger, more cost-effective developments elsewhere in the UK.

[Jonathan Edwards]

Will the Minister give way?

[Andrea Leadsom]

I will answer the hon. Gentleman’s point, which I know he has made twice already. I will come to it in a moment.

There is speculation, following recent announcements, that this Government have kicked the project into the long grass. The simple truth is that the developer’s current proposal for a 35-year contract is too expensive for consumers to support, and the deliverability of the wider lagoon programme is too uncertain at this point. The developer is seeking a very significant amount of financial support for the project from consumers, and its most recent proposals for a longer contract would be a significant deviation from where Government policy is just now.

For that reason, it is only right that we take more time to consider the proposals. As I have said, the Government cannot support the technology at whatever cost to the consumer. It must represent good value for money and be affordable. We have told the developer that Department of Energy and Climate Change and Treasury officials stand ready to continue discussions. In parallel, there will be an independent review to assess the strategic case for tidal lagoons and whether they could represent good value for consumers.

The independent strategic review was mentioned by my hon. Friends the Members for Gower (Byron Davies), for Eddisbury and for Montgomeryshire (Glyn Davies), as well as the hon. Member for Ceredigion (Mr Williams). It will consider a number of issues, including the potential scale of the opportunity in the UK and internationally, including, importantly, supply chain opportunities.

Shortly, we will set out more details about the review, including the name of the person who will lead it. I hope that it will be possible to complete the review by the autumn. It will help us to consider further what role tidal lagoons could have as part of our plans to secure clean and affordable energy for families and businesses across the country.

[Carolyn Harris]

Can the Minister confirm that there will be somebody from Wales on that committee?

[Andrea Leadsom]

As I say, the make-up of the committee is being discussed right now, and I will certainly take that point away. I am quite sure that there will be someone from Wales on it, but I cannot say for certain because we have not got the names of individual members yet. I am grateful to the hon. Lady for making that point. As I was saying, we will not be able to make a decision about whether to award a CfD to Swansea bay until the review has been completed.

My hon. Friend the Member for Carmarthen West and South Pembrokeshire suggested an intergenerational CfD for up to 90 years, as did the hon. Member for Aberavon (Stephen Kinnock). We will consider this and other means of financing this type of project as part of the review. However, hon. Members will appreciate that a 90-year CfD, or a CfD for even longer, is a very, very long-term intergenerational funding commitment that is not something that the Government have looked at so far. It requires further review; it is not something that we can simply pick up.

One of the very important reasons for the widespread interest in the proposed Swansea bay tidal lagoon and of course the wider lagoon programme is the potential for significant economic growth and job creation. We are taking this opportunity very seriously. If a decision is taken to award a CfD to this project, the Government will look to maximise the potential economic benefits as far as humanly possible. I can tell hon. Members that consideration of the supply chain is always a key part of a CfD negotiation, and the Government have already requested a supply chain plan and map from the developer. We are very pleased that the UK content of the project is likely to be up to 65% and that the Welsh content is likely to be about 50%.

That is good news, but hon. Members—in particular, my hon. Friend the Member for Carmarthen West and South Pembrokeshire, and the hon. Members for Aberavon, for Salford and Eccles and for Swansea East (Carolyn Harris), and my hon. Friend the Member for Gower—asked, “What do we get from this, especially for the steel industry and so on?” I can tell all hon. Members that in the context of offshore wind, where there is a very clear commitment to further growth, I am pushing extremely hard to maximise the opportunity for the UK supply chain, and if this tidal project goes ahead I will be like a Rottweiler and absolutely fighting for as much UK content as possible. That is a very important point to make to all hon. Members.

[Mr David Jones]

My hon. Friend has mentioned offshore wind. Is it not the case that the strike price proposed for the Swansea lagoon is comparable to that for offshore wind? Does not the lagoon have the substantive advantage of not being intermittent, unlike offshore wind?

[Andrea Leadsom]

My right hon. Friend is exactly right that the advantage of this project is that it is despatchable and not intermittent, which is the problem with offshore wind. However, I am afraid that he is not right that the cost of this project is comparable to the cost of offshore wind, because the timescale for this project is vastly different. If we compare like with like, we find that this project is much more expensive.

Once again, I congratulate hon. Members; this has been a very constructive debate and I have taken away a number of points from it. I also pay tribute to the hon. Member for Newport West (Paul Flynn), who has expressed his very long-term vision, which is far beyond the pedigree of most of us here, if not all of us here. He has been promoting the possibilities for tidal and he is absolutely right to do so. However, I can assure him that Hinkley Point is not comparable. We are very confident that the Hinkley Point project will get built and I will make the specific point that, as he will know, the decommissioning costs are taken into the CfD price, and so there is not a further cost of decommissioning, as some Members suggested.

[Paul Flynn]

I am grateful to the hon. Lady for her remarks. If the Hinkley Point European pressurised reactor suffers the same fate as all other reactors—delays of six or seven years—what is the Government’s plan B to fill the energy gap?

[Andrea Leadsom]

As the hon. Gentleman will know, the Government are not dependent on any one technology. The important thing is a mixture of technologies and we are confident in our strategy for ensuring reliable and affordable supplies of energy.

It is entirely understandable that people are getting behind this proposed tidal project. It has the potential to be a very exciting development for Swansea, south Wales and the UK. If the project goes ahead, it should have a positive impact on the local economy, and if a positive decision is taken, we will look to maximise the opportunity and the effect as far as possible. However, we have a duty to ensure that the decisions we take are in the best interest of consumers across the UK, both today and in the future. So while we will continue to discuss the project with the developer and carefully scrutinise its most recent proposals, we will await the outcome of the independent review before taking any decisions on the Swansea bay proposal.

[Mr Philip Hollobone (in the Chair)]

I call Simon Hart for his second innings.