The report, published yesterday, said tidal lagoons could be “very competitive” with other low-carbon sources and that the government should move forward with a ‘pathfinder’ project “as swiftly as possible”.
Here, in a Q&A with Utility Week, Hendry goes into more detail about the review and its findings.
Q: What do you think would be a fair strike price for the Swansea Bay tidal lagoon?
A: “I can’t get involved in a commercial negotiation. Those negotiations are ongoing… We’ve seen headline figures in the past of very high CfD strike prices. That doesn’t take account of the digression over time because they are not fully linked to inflation. The Contract for Difference (CfD) will be agreed at the time of the final investment decision. By the time the plant is operating a few years later it will already have come down. So, for the larger lagoons the expectation is that they will be below the cost of new nuclear from the time they start operating, and then it goes on digressing further for years after that.”
Q: How would the strike price for larger-scale lagoons compare to offshore wind?
A: “It depends where you look at them in cycle. As I say the price is going to be coming down for CfDs for tidal lagoons, because they are not fully inflation linked. So, if you look it at the outset they are broadly comparable, but if you look at it over time, particularly over the life time of the project, then they are significantly better than any other technology.”
Q: The cost estimates in the report are based on the current assumptions of Tidal Lagoon Power. How confident are you in the estimates? Do you think they might be overly optimistic?
A: “They clearly have an interest in seeing to their own interests, but at the same time it’s fair to recognise that they have done more work on this any other organisation and the process of negotiation with the government is to bottom out exactly the accuracy of those figures, and exactly where that figure should end up. What I’ve sought not to do is to compromise the government’s ability to carry out those negotiations which I hope will now continue apace, but give in the review where I think the costs are likely to come out over time.”
Q: You said it would be beneficial for Tidal Lagoon Power (TLP) to bring in a partner with a proven track record of delivering major infrastructure projects. Who could you see taking on that role?
A: “I’m not going to list names, but I there are names which we would recognise. If they’re involved; if they’re prepared to come is an equity partner and put their own money into this then it makes it more serious… We’d perhaps be looking for a company which has been doing very significant infrastructure projects before. But then there are other very big international organisations which perhaps haven’t done infrastructure projects in the United Kingdom but have a track record.”
Q: Does Britain have skills based needed to develop a tidal lagoon industry?
A: “What I am absolutely persuaded is that there is a strategy there for the development of skills. For those which aren’t already available, from talking to local businesses, the local colleges, the universities… this will be a core part of their missions going forward. So, some of the skills are there but for those that need to be developed then there is a very clear strategy that has been put in place, supported by some of the work of the Welsh government.”
Q: Does the Swansea Bay project have the support of the chancellor?
A: “I don’t know where Philip Hammond is on this. The government’s official response is that it’s going study the report with care and they need time to do so. There’s approaching forty recommendations in this, some of which will need legislation to set up.”
Q: What are the thoughts of business and energy secretary Greg Clark?
A: “I presented my report to Greg a few weeks ago, just before Christmas. Essentially that was the first time that he had been through it, so his reaction was one where he asked me questions about it but there wasn’t really an opportunity for him to express his view one way or the other. I think he is going to take a very objective balance view.”
Q: What impact do you think Brexit might have on the development of tidal lagoons?
A: “It’s probably too early to tell. The energy elements of our EU membership would not affected by this in any regard. One source of funding would have been the European Investment Bank. That probably isn’t now available. They have historically been investing billions in the United Kingdom. That will drop down to hundreds of millions. The exchange rate changes may make the use of domestic manufacturing more attractive.”