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Will Swansea Bay Sneak In Through The Back Door?

March 8, 2016

By Paul Homewood 

h/t Patsy Lacey  

 

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http://www.telegraph.co.uk/business/2016/03/06/meet-the-man-who-wants-to-be-britains-first-tycoon-of-tides/

 

 

Dear little Emily reports in the Telegraph on the latest attempts to smuggle the Swansea Bay tidal lagoon in through the back door:

 

After filling out most of the page with no more than a puff piece, she gets to the nitty gritty:

 

So far, so good – and ministers too appeared to have been won over, granting Swansea Bay tidal lagoon planning consent last year and even mentioning it in the Conservative manifesto. But there’s one major hurdle standing in the way of making it a reality: and that’s convincing the Government to give it the financial support it needs. Shorrock began by seeking a conventional “contract for difference” subsidy contract, of the kind the Government is using to support offshore wind farms and new nuclear plants such as Hinkley Point. The idea is simple: a guaranteed, inflation-linked “strike” price for the electricity generated, with the difference between that and the market price topped up by – or paid back to – consumers.

But the price Swansea needed was simply too high to be palatable. At about £168 per megawatt hour (MWh) for 35 years, it was more than four times the market price of power, and almost double the £92.50 per MWh for Hinkley Point. 

Citizens Advice called it “appalling value for money” and in January, the Prime Minister, David Cameron said his enthusiasm for the project was reduced because he had not seen any plans with a strike price that was “attractive”.

So now Shorrock is attempting to convince the Government to take on not only a novel technology, but also a novel funding model. He proposes an unprecedented 90-year contract with a price of £133 per MWh – but with the crucial distinction that it would not be indexed to inflation.

“In real terms, it goes down every year,” he says. That, Shorrock says, makes it “intellectually corrupt” to compare the £133 with the inflation-linked £92.50 for Hinkley Point. The correct comparison is the net present value of the contract, he says, which would be equivalent to a conventional strike price of £95.60.

What he doesn’t mention, but the company later confirms, is this offer is contingent on a short-term £150m loan from the Government to help to cut financing costs. Without that, the strike price equivalent soars back to £118.50.

Shorrock claims subsequent, larger projects will require significantly lower subsidies; the Cardiff lagoon would have a net present value equivalent to a conventional strike price of £68 per MWh. “Large-scale lagoons deliver the cheapest cost of power per megawatt-hour, we think, in this country, bar none.”

 

The 90-year proposal is so radical that the Government last month announced it was commissioning a wide-ranging review of the case for tidal technology, shelving any decision on Swansea subsidies until its conclusion. Shorrock protested, claiming the project would be lost without a decision in six weeks, but he has about-turned and is now chipper about the delay.

“We got a letter from the Secretary of State saying: ‘We are prepared to work on a 90-year structure with you’,” he says, “That’s everything that we needed.”

If a deal can be agreed in time to start building next spring, Shorrock says first power from Swansea – once pencilled in for 2018 – could be generated in 2021. He hopes to submit planning applications for the Cardiff and Newport lagoons in 2018, with first power by 2026. The much-delayed Hinkley Point nuclear plant is currently slated for 2025. “Our internal bet in the company is we will power on 2,700 megawatts at Cardiff before Hinkley Point,” he says.

It’s a bold plan – and one that’s entirely dependent on winning the Government’s support. What will Shorrock do if ministers say no?

“They won’t,” he says, and he breaks into a smile.

http://www.telegraph.co.uk/business/2016/03/06/meet-the-man-who-wants-to-be-britains-first-tycoon-of-tides/

 

So it appears we have a choice of being scalded or burnt! Even with the £150 million loan, the NPV is still higher than Hinkley, which is as we know widely regarded as a monstrously expensive white elephant. Furthermore, we would be stuck with it for 90 years.

Based on the £118.50 figure, and assuming 2% pa inflation, it would take 45 years before it could break even with a current market wholesale price of £50/MWh.

And once again we need to remind ourselves just what a pitiful amount of power Swansea Bay would be able to supply.

According to the project specification, the capacity of 320 MW will only actually supply 495 GWh annually, meaning utilisation is only 17.6%. Just along the coast, the recently opened 2000 MW gas power station at Pembroke is capable of supplying 15000 GWh a a year, on demand and at a fraction of the cost.

 

Shorrock assures that, if only we pay him a huge subsidy for Swansea Bay, he will be able to use the experience to build bigger and cheaper lagoons at Cardiff and Newport. I have a better idea – let him use some other country as a guinea pig.

The UK is set to achieve its Paris target of a 40% cut in GHG within the next couple of years. There is therefore no need at all to be wasting further money subsidising expensive projects like this one until 2030 at the least.

However, it seems that Shorrock has inside information that the government will saddle future generations with this white elephant, just so that they can burnish their green credentials.

19 Comments leave one →
  1. March 8, 2016 3:23 pm

    It also has to be remembered that trougher Mark Shorrock is married to trougher Juliet Davenport of “Good Energy” infamy, who now claims she can build wind farms without any Government subsidy. Is there a collective name for a pair of troughers?

    • It doesn't add up... permalink
      March 8, 2016 3:30 pm

      Does that make her a trophy wife?

    • March 8, 2016 5:23 pm

      She has an option to buy 10% of Swansea Bay’s output – but I bet she will not pay £133/MWh!

    • Graeme No.3 permalink
      March 8, 2016 5:31 pm

      Oinkers?

  2. It doesn't add up... permalink
    March 8, 2016 3:45 pm

    The trick here is to get the government committed so that when the cost overruns come in they have to have real nerves to cancel the project. It is the same thing with Hinkley Point. The only solution is to halt both projects now and to return to proven conventional sources of power.

  3. A C Osborn permalink
    March 8, 2016 4:20 pm

    Snake Oil Salesman.

  4. Graham permalink
    March 8, 2016 6:00 pm

    What experience do you gain from basically, throwing rocks in the sea, which wil make the next lagoon much cheaper? Then generators already exist.
    And did I read somewhere that the rocks would come from a quarry in Cornwalll, that the golden two already own.?

  5. Graham permalink
    March 8, 2016 6:57 pm

    Thanks Paul.
    Check out Shire Oak Quarries, and Shire Oak Energy. The quarry was Dean Quarry, but it was reported that Shorrock was MD of Tidal Energy and the other two as well.
    Great if you own the material that your other company has to buy, using our money!

  6. March 8, 2016 7:25 pm

    So who in the Govt. is getting a backhander?

    • Graham permalink
      March 8, 2016 8:48 pm

      Avro
      607
      Just look at Sir Edward Davey to see what can be achieved.

  7. Green Sand permalink
    March 8, 2016 11:04 pm

    “……Sneak In Through The Back Door?”

    Silt always does, tis the dredge master’s wet dream!

  8. John F. Hultquist permalink
    March 8, 2016 11:24 pm

    Not a “White Elephant” because such are gifts. The idea being you can’t refuse it but do have to care for it.
    I think the phrase “buying a pig in a poke” fits.

    • Jack Broughton permalink
      March 9, 2016 11:39 am

      When you buy a pig in a poke and have to make some use of it because it has cost so much, does it then become a white elephant? This web-site explores the full depth of human life!

      • March 9, 2016 3:59 pm

        The pig in the poke might in fact be a cat. Hence the traditional caution when buying one.

        Hence also one must not ‘let the cat out of the bag’…

  9. CheshireRed permalink
    March 9, 2016 12:50 pm

    When you look at those cost and output figures when compared to gas then this project is revealed to be as daft a vanity project as you could ever wish to see. Amber Rudd would do her credibility and long-term career prospects a HUGE favour by having the courage to kill off this monstrosity. (Likewise at HPC too)

  10. manicbeancounter permalink
    March 9, 2016 8:53 pm

    Shorrock is quoted as saying

    Large-scale lagoons deliver the cheapest cost of power per megawatt-hour, we think, in this country, bar none.

    That is “equivalent to a conventional strike price of £68 per MWh“.
    And how much does the new gas-fired power station down the coast at Pembroke receive? £40-£50 per MWh.
    Was this Shorrock chappie a double-glazing salesman before selling tidal schemes?

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