Swansea Tidal Lagoon

Jonathan Edwards Excerpts

Tuesday 8th March 2016 Westminster Hall

[Simon Hart]

The hon. Gentleman makes a good point. The only reason I did not mention the SNP is that I forgot. I hope he does not take that to heart.

The Swansea bay tidal lagoon project ticks a lot of boxes—to use that rather awful expression. If I make only one point this afternoon, it is this: it must not be seen as a one-off project or a stand-alone proposal. It is part of a four-part proposal for the Severn estuary. It will lead to other projects around the UK coast, and after that—who knows?—perhaps across the rest of the globe. We have a chance to be a global leader in this technology; to start it down with us in the Swansea bay. It is equally important that the Government look at it not as a stand-alone project, but in the context of the proposals for Cardiff and Newport. This is not about just Swansea, Wales or the UK; nor is it about just renewable energy, which has been debated so often here.

I have four issues that I will deal with as quickly as I can, given your steer, Mr Brady: the current situation; employment opportunities; the questions about costs, which have been reported in the press; and other benefits, which sadly do not seem to have been reported at all. On the current situation, this is about a long-term plan for the UK and beyond. Over the next 10 years, the UK will lose 11 of its coal-fired power stations, followed by our ageing nuclear capability. In technical terms, that is the same as a 25 GW reduction out of a total capacity of 85 GW across the UK. As yet, nobody has made it entirely clear how we will fill that void. Hinkley Point is 10 years off, and today further questions were raised about the speed and certainty of that project. No new gas-fired power stations are under construction in the UK.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

I congratulate my constituency neighbour on securing this debate and on his opening remarks, many of which I agree with. The big issue with Hinkley C is the strike price. The problem with the tidal lagoon is that the financing model that is envisaged for it is the contract for difference. Does he agree that we should perhaps look at other models, such as direct public investment? If we go for a CfD, the cost ends up with the consumer. If we go for direct investment, it ends up with the public, but it is far cheaper than a CfD.

[Simon Hart]

The hon. Gentleman makes a very good point. I will come to that issue later in my speech. That is an important message to the Government. I entirely agree that using a model for this form of energy infrastructure simply because it is used for other forms, such as offshore or onshore wind, is potentially a mistake. There is an opportunity, especially with the Government review, to look at other models to see whether we can make it work over a longer period using different technology.

--- Later in debate ---

[Antoinette Sandbach]

The hon. Lady will know that the strike price that has been agreed includes the decommissioning costs, and that Wylfa is a project that is very much welcomed in north Wales. Voters on the Isle of Anglesey are extremely supportive of the Horizon project going forward.

Citizens Advice said there was a danger that the project would repeat the mistakes that were made at Hinkley. It highlights an

“opaque negotiating process, lack of scrutiny of cost effectiveness and excessive politicisation of the decision”.

I am aware, as is every Member in the Chamber, that Assembly elections will take place in May. No doubt the project is being used to sell the dream. On behalf of my constituents, and particularly those who have difficulty in paying their bills, I welcome the review and urge an element of caution before we commit ourselves to a hugely expensive project. If it can deliver, and at the right price, it clearly needs to go ahead, because of the many advantages that have been and no doubt will be outlined in the debate. However, I want to say to the Minister that it should not be at any cost—only at a cost that is reasonable for the taxpayer. The clear, substantive advantages can be argued for, but I have concerns about the project.

[Jonathan Edwards]

The hon. Lady is making her point clear. Is she ideologically opposed to direct public investment, if she is opposed to the contracts for difference model?

[Antoinette Sandbach]

My understanding is that the rate of return to the investors in the project is 12% to 15%, which is very high. It is a very high cost to taxpayers and I query where else in the market anyone could get that kind of return. When we are talking about payments over 90 years, I urge caution. I do not say “Don’t go ahead”: I say that the review is appropriate. There could be clear advantages, and the boost that would be given to the steel industry and, no doubt, the domestic supply chain would be welcome. There are positives to be expressed, but there are also concerns, and it is right that if we are debating the project in the House we need to know some of the risks as well as potential rewards.

--- Later in debate ---

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. It is also a pleasure to debate opposite the Minister for the first time. It is fitting that two ladies are representing the Government and the Opposition on International Women’s Day. I congratulate the hon. Member for Carmarthen West and South Pembrokeshire (Simon Hart) on securing this debate. In his opening remarks he eloquently explained why the Swansea bay tidal lagoon is a particularly exciting subject.

The construction of a tidal low-carbon power plant represents a real opportunity for the UK to be at the forefront of renewable technology innovation. That fundamental point has been echoed by other hon. Members today. I do not intend to go over those remarks, as the hon. Member for Coatbridge, Chryston and Bellshill (Philip Boswell) has already done so rather articulately.

This debate has been a fantastic opportunity to highlight the potentially huge economic benefits of encouraging tidal lagoon power. Of course, we have also heard the hopes of hon. Members on both sides of the House that the Government will come to an agreement on the level of state support required to get this project off the ground. Indeed, the Conservative party’s manifesto contained a commitment to the Swansea tidal lagoon as a source of

“secure, affordable and low-carbon energy”.

However, there is a fear in many quarters that, since then, the Government appear to have kicked the project into the long grass. I hope that this debate will help to remind the Government of their commitment and that we will see some movement towards meeting it.

As we have heard, the proposed Swansea bay tidal lagoon has clear environmental benefits, as it harnesses a sustainable source of energy to generate a significant amount of carbon-free electricity over a long lifespan. Tidal Lagoon Power, the company that will construct, own and operate the plant, has suggested that it will generate enough electricity to power 90% of homes in Swansea bay over a 120-year lifespan. Indeed, as the generation of power relies only on the tide, it is an entirely predictable source of renewable energy.

Given the Government’s cuts to other renewables, we hope that tidal lagoon technology will not be the next to suffer, particularly because the economic case, as we have heard today, is as strong as the environmental case. For instance, a key benefit of developing the Swansea bay tidal lagoon is the number of jobs that it will create and support during its construction and lifetime. Tidal Lagoon Power estimates that the project will support 1,900 jobs during construction and 181 jobs during each year of operation. That is supported by research by the Welsh economy research unit at Cardiff University, which estimates that 1,850 full-time equivalent jobs will be supported across the region for the three-year construction period.

Such employment opportunities will be incredibly beneficial to the Swansea bay area of Wales, which has a somewhat high rate of economic inactivity and has recently been dealt a blow with the loss of jobs in the steel industry—another sector that, frankly, the Government should be doing much more to support. In fact, today we heard that an estimated 370,000 tonnes of steel are required for this project alone.

The Swansea bay tidal lagoon presents a real opportunity to rejuvenate the area, offering employment in a new, growing industry. As the Cardiff University research unit explains,

“integrating construction demand with local manufacturing inputs and new industry will be an important means of strengthening prospects in these important parts of the regional economy.”

Similarly, trade unions have added their voice to business leaders and academic experts. Unite Wales, for example, hailed the project as

“both superb and significant in terms of the vision, energy and employment potential it could bring to Wales.”

Furthermore, the local community will benefit greatly from the plans for the lagoon area itself. We have heard today that Tidal Lagoon Power has outlined its ambition

“for the lagoon to become a major attraction and recreational amenity…showcasing tidal range technology and providing a unique venue for opportunities in the arts, culture”.

[Jonathan Edwards]

I am grateful to the hon. Lady for giving way and for confirming from the Front Bench that the Labour party is fully behind the project. The key question for her as someone who aspires to be in the Minister’s seat is this: how would a future Labour Government pay for the project if they were in charge of it? Would they use a strike price model via a contract for difference, or does she agree that we should consider direct public investment as a far cheaper way for the public to finance the scheme?

[Rebecca Long Bailey]

The hon. Gentleman raises some interesting and pertinent points. I hope that the Minister has considered them, and that the Government will address many of those issues in the review currently being undertaken. We as a party will comment on them when the facts and information become available in due course.

--- Later in debate ---

[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.