Tidal Lagoons and UK Energy Strategy

Callum McCaig Excerpts

Tuesday 6th December 2016 Westminster Hall

[Callum McCaig (Aberdeen South) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Paisley. It has been a good debate and I congratulate the right hon. Member for Preseli Pembrokeshire (Stephen Crabb) on securing it and on the manner in which he made his case. It is notable that with the honourable exception of the hon. Member for Eddisbury (Antoinette Sandbach) everyone who has spoken so far in the debate has been in favour of the project; there were speakers from all the nations and several regions of the UK, and all bar one were in support. Debates such as this bring me out in a bit of a cold sweat, because I may have to brutalise some constituency names that I do not know how to pronounce. I thank all those who mentioned the constituency of the right hon. Gentleman and saved me from pronouncing it as if it might normally follow the word “Elvis”—that is how I would have read it. Such debates are an educational process for many of us, and this one has certainly been educational for me with respect to learning to pronounce the names of parts of the beautiful country of Wales.

The speech of the right hon. Member for Preseli Pembrokeshire touched many key points, and these were replicated by many Members who spoke. The project is potentially a key part of the Government’s industrial strategy, and the cross-party support that it enjoys is balanced by its cross-cutting benefits. It is not just an energy project; we have heard that it will boost tourism and support the steel industry. It also ticks a number of the boxes on which the Government are trying to deliver with their nascent industrial strategy. It links business with energy; it provides a low-carbon technology; it has the potential to spread the economic benefit and boost economic growth outwith London and the south-east of England; and it has the potential to develop a sizeable and exportable technology. Those are all things that, I think, we would like.

There may be issues as to the cost, as the hon. Member for Eddisbury said. However, as I often do when we discuss technology of this kind, I remind the House that we must ask not only the cost of doing something, but the cost of not doing it. It may be difficult to account for that, and it will be interesting to see whether the Hendry review touches on it. However, the right hon. Member for Preseli Pembrokeshire said that we should aim to emulate the Danes in their development of onshore wind. They have developed an industry and have world-leading technology and exports coming from that. I sought to intervene on the right hon. Gentleman, but my attempt was somewhat lost in the debate. As well as emulating the Danes, we need to make sure we do not emulate ourselves as to what we did in relation to onshore wind technology. The original leaders in that technology were here, and the lead was ceded to the Danes who picked it up and ran with it, and are now in an enviable position. Let us not repeat our mistake over onshore wind with tidal technologies.

Tidal lagoons and technologies are an important aspect of the matter, but not the only one. The hon. Member for Strangford (Jim Shannon), who is no longer in his place, mentioned the potential of the tidal scheme—SeaGen—in Strangford lough; and in the Pentland firth between Scotland and the Isles of Orkney there have been world firsts in the deployment of tidal turbines in an area renowned for its tides. That has potential, and I would like to question the Minister about the contracts for difference that were announced last month. We know that they have excluded technologies that are cheaper than offshore wind—onshore wind and solar will not be allowed to bid in—but technologies that are more expensive have also, effectively, been excluded. Essentially, we will have a competitive option process that only one technology will be able to win. That does not seem like fair competition to me—it would mean a broken promise to the tidal industry—and I hope that the Minister can address the matter. That promise of a de minimis amount of electricity through the contract for difference process has seen the development of several stages of proposals that would look to bid in—in particular, MeyGen in the Pentland firth. That could be part of a compelling story of a UK tidal industry, with the tidal lagoons and turbines as compatible—sister—technologies in which we could be a world leader. I wholeheartedly support the deployment of offshore wind, but not its being the only show in town. Because of the Government’s decision—their fixation, it would seem, on that technology—we risk losing one aspect of that story. I really hope that the Government will reconsider their decision and engage with those looking to pursue the schemes to see what can be done to develop them.

I will not take up my full amount of time, but I want to return to tidal lagoons. The scheme ticks many boxes and its development has support across the Chamber and, I think, Parliament as a whole. The lagoon will be a pathfinder in Swansea, the first of its kind. We have a history of developing energy technologies in which numerous firsts of a kind have turned into ones of a kind. I hope that Swansea goes ahead but, if it does, it must be a pathfinder. It must be a scheme that leads to the development of a technology. There is no point in our paying a large amount of money to do this once, then not learning from it, not reaping benefits for future development and, most importantly, not having the technology to export. I fully support the scheme, as does my party.

--- Later in debate ---

[Jesse Norman]

The fairest thing to do is to see what the report says before we come to a view about an appropriate timetable. It would be quite wrong to prejudge the report and its conclusions.

For all the enthusiasm of my right hon. Friend the Member for Preseli Pembrokeshire for tidal lagoons, I note that he has taken a measured approach, respecting the complex issues that are being raised, for which I thank him. As he said to the House when he was Secretary of State for Wales,

“The Swansea tidal lagoon proposition is very exciting and commands wide support across the business community in Wales, but we also need to recognise that the project is asking for a very significant level of public subsidy and intervention. It is absolutely right that”

the Government

“should conduct very robust due diligence in making sure that such projects will deliver value for the taxpayer.”—[Official Report, 13 January 2016; Vol. 604, c. 842.]

That is precisely what we will do. We will take the time necessary to look at the review’s findings in relation to tidal lagoons, particularly in the context of a wider assessment of the nature of the UK’s future energy mix and our plans to reduce carbon emissions.

Last month, the Secretary of State set out his vision for how the energy sector should develop, in the context of our new UK industrial strategy. He recognises that the Government’s role must be to create the right framework for growth, harnessing both existing and new technologies, to deliver more secure, cleaner energy at a lower cost. That is our goal: a reliable, clean and inexpensive energy system.

Of course, new technologies such as tidal lagoons may have a role to play, but not at any cost. My hon. Friend the Member for Eddisbury (Antoinette Sandbach) rightly raised several issues, and we look to the energy review and other discussions to resolve them. She raised not merely the issue of cost, but her concerns about the lack of intellectual property, planning uncertainty and delays. The Government should properly consider those issues as part of a wider decision-making process.

As colleagues know, the contract for difference allocation round, which we announced last month, is under way. Overall, our energy policies and priorities have not changed. It is worth saying, in relation to the remarks of the hon. Member for Aberdeen South (Callum McCaig), that it is not true that CfDs do not include tidal stream technologies, although it is true that there is no ring-fenced allocation for them within the auction. That is because our responsibility is to bill payers. Tidal stream, which is not a technology that we are specifically discussing in the context of tidal lagoons—it is a different technology—has a strike price about three times higher than that of offshore wind. Until those prices fall, it may be difficult for it to compete. When they do, it will come within the policy horizon.

[Callum McCaig]

In fairness to myself, I do not believe that I said it was excluded; I said it is effectively excluded, which the Minister may have touched upon himself. Ignoring the potential first mover advantage for tidal stream technology, how does he expect its price to come down if it does not have the support to deploy and develop a downward price trajectory?

[Jesse Norman]

That is a perfectly reasonable question. Historically, the expectation has always been that technologies have to demonstrate that they are capable of benefiting from support. Given that the distance in the range of cost is so high, a judgment has been made that that technology has not done so at the moment, but other technologies have succeeded in doing so.

Other colleagues raised issues such as the rate at which costs might fall with other lagoons, the degree to which different projects could inspire different learning, and the first mover advantages, all of which should be resolved and discussed in the context of the Hendry review.