Tidal tussle

After decades of dithering and hoping for the market to provide new capacity, the government has finally taken a more active role in the development of the UK’s energy infrastructure.

Confirmation last week of the shortlist of tidal power schemes for the Severn Estuary now under consideration by ministers coincided with the publication of criteria being used by government to assess sites for new nuclear power stations.

These two events indicate that the government has finally come to terms with the fact that it must demonstrate its support for major privately financed energy projects if it is to encourage the private sector to invest in them. They also indicate the government’s commitment to minimising carbon emissions from electricity generation by using a mixture of renewable energy and nuclear power. Key to the renewables element of our low carbon energy mix could be the development of capacity in the Severn Estuary.

Publication of the shortlist of five projects which will harness power of the River Severn’s (News last week) tidal range was very important. The eventual announcement of which, if any, of the projects is favoured by ministers will give us a stronger indication of where government policy on renewables is heading.

Of the five, the Cardiff to Weston-super-Mare barrage goes the furthest towards producing the renewables capacity ministers say the country needs. Choosing the others would mean a greater reliance on other projects elsewhere.

The Cardiff-Weston Barrage would have a generating capacity of 8.64GW, which is between six and seven times greater than any of the other schemes the government is considering. With an estimated capital construction cost of £18.6bn, it is also the most expensive option on the shortlist.

Indeed, it is so much more costly than the others that the PricewaterhouseCoopers (PWC) investigation of the financing options concluded that it was the only project on the shortlist that would need the government to underwrite some of the risks. “It is difficult to envision a party other than government who could take the risk associated with the integration of the various construction packages [required for a scheme of this scale],” said the PWC report Severn Estuary Tidal Power - Financing and Ownership.

Independent research by consultant Halcrow reveals that, unless electricity prices were to treble, the government would have to provide a subsidy for the project of between 60% and 70% of its total cost. If the Cardiff-Weston’s final outturn cost were to reach £23bn- as expected (the government predicts it will cost £20.9bn, including compensatory habitat measures), this would mean a public subsidy of £15bn.

Given the government¹s multi-million pound bank bail-out and its plans to fast-track existing infrastructure projects in an attempt to kick start the economy, it would be tempting for ministers to favour one of the smaller schemes. These can be entirely privately funded, and would therefore avoid adding to the government’s already burgeoning overdraft.

However, a decision in favour of these smaller schemes could be called into question, as they seem less economically viable than cheaper, higher capacity modern nuclear power plants.

Shoots Barrage, the Bridgewater Bay and Welsh Grounds tidal lagoon options, costing between £3bn and £4bn each to build, will have generating capacities of between 1.05GW and 1.36GW and annual electricity outputs of between 2.31TerraWatt hours (TWh) and 2.77TWh.

The first European Pressurised Reactor (EPR) plant now under construction at Olkiluoto, Finland may be three years late and 50% over its £2.8bn budget at £4.2bn, but it will still have a generating capacity of 1.6GW that can produce 13TWh of electricity per year.

Similarly the £3.5bn Flamanville 3 EPR under construction in France will have a generating capacity of 1.65GW with a similar annual output to Olkiluoto. If new nuclear plants in the UK cost £4bn each and generate 13TWh per year, there would be questions about why electricity firms would invest money in less cost effective projects.

The cheapest Severn Estuary option is the Beachley Barrage scheme, and this could be one that generators might consider. But investment in renewables on this scale might be better placed in windfarms.

A government underwritten Cardiff-Weston scheme could be more viable and would produce 3.8TWh more electricity than the modern nuclear alternative. But the fact that it could cost five times the amount of an EPR and is the only option requiring some form of financial support from the government could be its undoing.

From a political point of view, the Cardiff-Weston Barrage is the only scheme that -by generating 5% of annual UK electricity demand can have a major impact on raising the proportion of UK electricity that comes from renewables – a key goal for all major political parties. But it remains an expensive and risky option for the taxpayer, and ministers might feel more comfortable with a smaller scheme complemented by a wider range of other renewable energy capacity.

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