Generation Review: Tidal power

Will the government support the Swansea Bay lagoon, ushering in a era of renewable energy that plays to the UK’s strengths?

The proposal to build a £1.3 billion tidal lagoon plant in Swansea Bay is a unique proposition. Construction is slated to begin in 2018, and its completion would mark a world first in the development of tidal power. It is seen as the first in a series of steps that would see the ebb and flow of the UK’s coastal tides make a major contribution to ensuring a sustainable supply of renewable electricity.#

For Charles Hendry, the former energy minister who authored the recent report into feasibility of both Swansea Bay and tidal energy as a whole, it is also a “no-regrets” policy: “I don’t believe there would be any debate in decades to come about whether this was the right thing to do. I would expect it is much more likely to be seen the decision which started a new industry – and all done at the cost of a small number of pence to consumers each year.”

If his assessment is correct, the implications for the country’s energy supply – and its decarbonisation targets – could be significant.

With Canada the only country in the world with more abundant tidal resources on which to draw and the UK’s coastlines representing more than half of Europe’s tidal potential, the country is uniquely placed to capitalise on this developing energy technology. Around the UK coastline, the total tidal power potential is estimated to be 25-30GW, or enough to satisfy 12 per cent of overall electricity demand.

Furthermore, unlike onshore wind, generating power from tidal flows is popular with the public. Seventy-six per cent of those polled support its development, placing it behind only solar power in popularity.

The technology, like other renewables, suffers from intermittency, but it is both entirely predictable – in terms of when the power will be generated – and consistent year-round.

So the reasons for Hendry’s emphatic endorsement of tidal generation seem clear. And yet, more than four months since his review of its feasibility was published, the wait for the government response on Swansea Bay, and the sector as a whole, continues.

The main reason for the substantial period of reflection and assessment is undoubtedly cost. With a previous plan to develop tidal power in the Severn Estuary scrapped because of concerns about the need for public subsidies, the appetite for government backing of such developments has diminished significantly. With the Swansea Bay project, such backing would not be required, however, because it is expected that the government will have to agree a strike price near to that of the highly criticised £92.50/MWh agreed for Hinkley Point C to secure the project’s delivery.

But beyond that single barrier, there is an appetite to provide long-term support to bring tidal power to full fruition. The successes in cutting the costs of solar and wind, both on and offshore, suggest the same could be achieved for tidal energy, but delivering on such a promise will depend on sustained support and security.

If such support is forthcoming and Swansea Bay is greenlit, then it and tidal farms such as the recently launched MeyGen project in Scotland may usher in a new era of renewable energy production that plays to this island nation’s strengths. However, if it is not, then tidal power’s potential may flow out before it has even flowed in.

 

CfDs: Tidal lagoon strike price

The exact level of subsidy that Tidal Lagoon Power (TLP) is currently seeking for the Swansea Bay project is unclear. At the launch of his review into tidal lagoons earlier this year, former energy minister Charles Hendry refused to be drawn on a figure, saying he couldn’t comment because of ongoing negotiations.

TLP initially called for a strike price of £180/MWh over a 30-year contract for difference (CfD) but a report commissioned by the firm later suggested £168/MWh over a 35-year agreement.

As detailed in the Hendry review, TLP is now seeking a lower strike price but over a much longer 90-year contract. In February last year, the Financial Times reported a figure of £96.50/MWh as part of this proposal. This compares with the 35-year strike price of £92.50/MWh offered to EDF for Hinkley Point C.

However, unlike existing CfDs this would not be fully linked to inflation, meaning the real value of the strike price would fall over time.
TLP has revealed estimates for the larger lagoons, which could follow on from Swansea Bay if the pathfinder project proves successful.

The company said its proposed Cardiff project would need a starting strike price of £113/MWh, if it could achieve a capital cost reduction of eight to ten per cent between first and second projects. The real value would fall to £96.10/MWh by the first year of operation in 2027.

TLP said the contract would be the equivalent of a fully indexed agreement with a starting strike price of just £70.4/MWh.
Note: All figures quoted in 2012 prices.

 

Government support: A pathfinder project

Swansea Bay will, say its proponents, be in the vanguard of a series of bigger, more cost-effective projects.

The potential of tidal power in the UK has been explored before. In 2007, the Labour government launched a feasibility study into the economics, environmental impact and benefits of building a tidal barrage across the Severn Estuary.

The 16km dam would have extended from Weston-super-Mare to Cardiff, with the 12.8m tidal range on which it would draw expected to generate up to 5 per cent of the country’s energy needs.

For a country seeking to invest in new renewable energy technology, the Severn Estuary proposal had significant potential.But with an estimated cost of £30 billion and the realisation that it could be developed and built only with significant government funds or subsidies, it was determined to be too expensive. Announcing that it would not be progressed in October 2010, energy secretary Chris Huhne said there was no “strategic case” for the scheme and suggested tidal’s future lay in the hands of the private sector.

Now, nearly seven years after those plans were shelved, the private sector has come to the fore. Tidal Lagoon Power has secured £1.3 billion in private investment to construct an 11.5km2 tidal lagoon in Swansea Bay, with its 16 turbines operating 14 hours a day with a maximum output of 320MW.

Capable of powering 155,000 Welsh homes, the Swansea Bay Tidal Lagoon is a substantial enterprise in itself; but with the location drawing on a tidal reach second only to that of a site in Nova Scotia, Canada, it is as much about demonstrating the overall potential of tidal power in the UK.

 

No-regrets in pushing ahead

The project’s role as a pathfinder has been endorsed in the recent government-commissioned review of tidal power, conducted by former energy minister Charles Hendry. He called it “a no-regrets policy”. “After years of debating, the evidence is, I believe, clear that tidal lagoons can play a cost-effective part of the UK’s energy mix,” he said.

According to the review, the cost to the public, paid through a price for electricity from Swansea Bay agreed up front to secure its development, would be 30p per household for its first 30 years to get the project up and running, which with its expectation of an operational life of 120 years, would, in Hendry’s view, be a price worth paying even if no further plants were built.

But that is not his preference. Both Hendry and Tidal Lagoon Power see Swansea Bay as a frontrunner followed by a series of bigger projects soon after its feasibility has been demonstrated. For Tidal Lagoon Power, this vision takes the form of five large developments in Swansea’s wake. There is already a proposal for Cardiff with an installed capacity of 3GW and an investment potential of about £8 billion.

If Swansea Bay prompts further developments, the costs of each as a proportion of output are expected come down as the benefits of industrial growth and the domestic supply chain increase.

A report by the Infrastructure Inspectorate set out these arguments, and estimated that although the cost for the first project would likely be £168/MWh, it would fall to £92/MWh by the time the third came online, with ample scope for increased competitiveness with other power sources as technology and the industry develops.

 

Potential large and small

And the potential of tidal energy is not only in major infrastructure projects such as Swansea Bay. Off the North Coast of Scotland in the Pentland Firth, the MeyGen tidal stream project recently reported that its first installed turbine was operating.

The project, run by Tidal Power Scotland and Scottish Enterprise with a lease from the Crown Estate, is a three-stage development that starts with the installation of four 1.5MW turbines and is expected to end up with 269 turbines with an overall capacity of 398MW.

Like Tidal Lagoon Power, the project partners behind MeyGen – which includes tidal energy specialist Atlantis Resources – expect the costs, and therefore the funding from the public purse, to drop significantly as the project progresses and industrial activity increases.

Breeding growth

But despite the potential, it is still uncertain whether tidal power will go on to become a major player in the UK’s energy market.

Although the Hendry review concludes with strong and broad support for both the Swansea Bay tidal lagoon and the industry as a whole, it has been more than four months since it was published and there has still been little indication of the government’s thoughts on the issue.

Shadow secretary for business, energy and industrial strategy, Rebecca Long Bailey visited the site in Swansea and called for quick action to be taken: “We have a really big sector we can build. This project needs to see a sign-off soon.”

But prime minister Theresa May appeared to avoid the issue on a recent visit to Wales. When pressed on the matter she could offer only that the report was still being reviewed.

May now has a further stalling tactic in the shape of the snap general election which will certainly push a government response on the future role of tidal power in the UK back into the autumn.

The delay does not bode well for Swansea Bay’s proposed timeline, which targets 2018 for the start of construction.

Competing technologies

More broadly, the issue that must be addressed is whether or not the successes of bringing down costs in other renewable technologies that have been tried, tested and developed at scale work in favour of tidal power or against it.

Those who support tidal power argue that the cost reductions achieved in little over a decade of offshore wind show that capitalising on the UK’s tidal resources can quickly bring it in line with other renewables and therefore make it worth the investment.

On the other hand, those who oppose it argue that with offshore wind and others already competing with older methods of generation, there is little need to attempt to do the same again with a new technology when funds could be pooled into technologies that are already competing.

All that is known though, is that if it is to be progressed, support for tidal generation must be as stable and reliable in the long term as the tides on which it will be built.

 

Case study: MeyGen tidal energy project

The 3.5km2 site just off the north coast of Scotland was identified by Atlantis – which owns 86 per cent of MeyGen – as a suitable location for a tidal stream array because of the channel created by the uninhabited island of Stroma just north of the site providing strong currents.

In 2010, as part of the Pentland Firth and Orkney Waters leasing round, The Crown Estate awarded an agreement for lease to MeyGen, granting the option to develop a tidal stream project with a capacity of up to 398MW.

In September 2014, a power purchase agreement potentially worth £50 million over ten years was signed with Smartest Energy for the first phase of the project.

 Construction began in January 2015, with the first turbine being installed and exporting power to the grid in February this year.

A further four phases of work are planned. Currently under way and set to add 6MW of capacity to the existing 6MW is phase 1B – also known as Demotide or Project Stroma. The second round of work also benefitted from a £17.6 million grant from the European Commission to help prove the technical and commercial viability of tidal array technology. The £420 million phase 1C is expected to start in 2019.

Phase 2 will bring the installed capacity up to 252MW and up to the current grid connection limit. The final phase, which will add 146MW, will follow afterwards once this has been upgraded.

Atlantis chief executive Tim Cornelius has been driving the project forward and is insistent that tidal technology – which has an estimated strike price of around £168/MWh – can become competitive on price with other renewables.

“This project will help the tidal stream industry demonstrate reductions in the price per unit of electricity by increasing the energy yield per pound of investment. Demotide will set tidal on a path to cost parity with offshore wind by 2020.”

 

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