Tidal Lagoons and UK Energy Strategy

Jesse Norman Excerpts

Tuesday 6th December 2016 Westminster Hall

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Jesse Norman)]

Thank you very much, Mr Paisley. Members have already widely noted the honour it is to serve under your chairmanship, and I add my support to that sentiment. I congratulate my right hon. Friend the Member for Preseli Pembrokeshire (Stephen Crabb) on securing this important debate. It is testimony to him and the importance of the issue that he has generated such cross-party support and so many interesting speeches. The sentiment in the room has been so evident.

My right hon. Friend has long been a proponent of the economic benefits that tidal lagoons could bring to his constituency and to south Wales as a whole. Naturally, he and other Members here today are keen to understand better how the development of a tidal lagoon at Swansea specifically and a fleet of tidal lagoons around the UK coastline—were they to go ahead—would benefit their local economies. However, as he acknowledged, this is a difficult and complex question. The technology is new and untried, and the development warrants due care and consideration before decisions are taken. That is why in May the Government commissioned Charles Hendry to undertake an independent review of the strategic value of tidal lagoons in the UK. Among other things, the review was intended to consider whether and in what circumstances tidal lagoons could play a cost-effective role as part of the UK energy mix, to examine the potential scale of the opportunity, including in the supply chain, and to consider different sizes of projects as the first of a kind.

Contrary to what some Members have said, building a tidal lagoon in Swansea is not a manifesto commitment of the Conservative party, but it is mentioned in the manifesto. There is a commitment to explore the lagoon as a source of affordable energy, and that is exactly what Charles Hendry is being asked to do in his review. We are expecting him to deliver his report to Government very shortly. Colleagues may know better than me how shortly, but whenever that is, this debate is a timely opportunity to discuss the issues. Apparently, drafts have been sent to or discussed with officials—certainly in one case—but it is important to note that the review is not about Swansea as such. Rather, it is a general review of the costs and benefits of tidal energy. As it has not reported, it is irrelevant that the autumn statement has occurred, contrary to what some colleagues have tried to insist. It would be wrong for Government to announce anything while a review we had commissioned was under way. We look forward to receiving it and reading it with great interest.

The question has been raised as to whether, as my right hon. Friend said, there will be a timely and purposeful decision. Members asked when the Hendry review would be published and whether there would be a decision before the end of the year. Colleagues will understand that any decision before the end of the year would be unrealistic at this late stage, and my right hon. Friend acknowledged that. We will give this matter thorough and careful consideration. There will be no dragging of heels.

[Geraint Davies]

Is the Minister willing to set a target deadline that he will not go past? Will he say, “By June next year, we will try to do better,” or will he set no deadline at all?

[Jesse Norman]

The fairest thing to do is to see what the report says before we come to a view about an appropriate timetable. It would be quite wrong to prejudge the report and its conclusions.

For all the enthusiasm of my right hon. Friend the Member for Preseli Pembrokeshire for tidal lagoons, I note that he has taken a measured approach, respecting the complex issues that are being raised, for which I thank him. As he said to the House when he was Secretary of State for Wales,

“The Swansea tidal lagoon proposition is very exciting and commands wide support across the business community in Wales, but we also need to recognise that the project is asking for a very significant level of public subsidy and intervention. It is absolutely right that”

the Government

“should conduct very robust due diligence in making sure that such projects will deliver value for the taxpayer.”—[Official Report, 13 January 2016; Vol. 604, c. 842.]

That is precisely what we will do. We will take the time necessary to look at the review’s findings in relation to tidal lagoons, particularly in the context of a wider assessment of the nature of the UK’s future energy mix and our plans to reduce carbon emissions.

Last month, the Secretary of State set out his vision for how the energy sector should develop, in the context of our new UK industrial strategy. He recognises that the Government’s role must be to create the right framework for growth, harnessing both existing and new technologies, to deliver more secure, cleaner energy at a lower cost. That is our goal: a reliable, clean and inexpensive energy system.

Of course, new technologies such as tidal lagoons may have a role to play, but not at any cost. My hon. Friend the Member for Eddisbury (Antoinette Sandbach) rightly raised several issues, and we look to the energy review and other discussions to resolve them. She raised not merely the issue of cost, but her concerns about the lack of intellectual property, planning uncertainty and delays. The Government should properly consider those issues as part of a wider decision-making process.

As colleagues know, the contract for difference allocation round, which we announced last month, is under way. Overall, our energy policies and priorities have not changed. It is worth saying, in relation to the remarks of the hon. Member for Aberdeen South (Callum McCaig), that it is not true that CfDs do not include tidal stream technologies, although it is true that there is no ring-fenced allocation for them within the auction. That is because our responsibility is to bill payers. Tidal stream, which is not a technology that we are specifically discussing in the context of tidal lagoons—it is a different technology—has a strike price about three times higher than that of offshore wind. Until those prices fall, it may be difficult for it to compete. When they do, it will come within the policy horizon.

[Callum McCaig]

In fairness to myself, I do not believe that I said it was excluded; I said it is effectively excluded, which the Minister may have touched upon himself. Ignoring the potential first mover advantage for tidal stream technology, how does he expect its price to come down if it does not have the support to deploy and develop a downward price trajectory?

[Jesse Norman]

That is a perfectly reasonable question. Historically, the expectation has always been that technologies have to demonstrate that they are capable of benefiting from support. Given that the distance in the range of cost is so high, a judgment has been made that that technology has not done so at the moment, but other technologies have succeeded in doing so.

Other colleagues raised issues such as the rate at which costs might fall with other lagoons, the degree to which different projects could inspire different learning, and the first mover advantages, all of which should be resolved and discussed in the context of the Hendry review.

[Jim Shannon]

In my contribution, I mentioned the SeaGen project in Strangford lough in Northern Ireland—a pilot scheme sponsored by the Government to get results in relation to the environment. Perhaps the Minister is going to tell us what the results of that pilot scheme are so that we have some idea of what we are doing now.

[Jesse Norman]

I am sorry to have given up time for that intervention, because I was coming to that point. SeaGen, as the hon. Gentleman recognises, was a research test bed, and it is being decommissioned now. It received a £10 million grant from the Department, and those conclusions are being carefully assessed. It is a project in which there has already been public investment. [Official Report, 14 December 2016, Vol. 618, c. 6MC.]

It is clear that we cannot allocate subsidies to every technology that asks for them. We have said that our focus will be on key technologies that have the potential to scale and deliver long-term cost savings, in which the UK has a comparative advantage and whose costs to consumers are acceptable.

[Geraint Davies]

Will the Minister give way?

[Jesse Norman]

I am very short of time. I am so sorry. I have taken an awful lot of interventions, and I want to make progress.

I note the enthusiasm of my right hon. Friend the Member for Preseli Pembrokeshire for the proposed Swansea bay project, but it is the Government’s job to consider the advantages and disadvantages and to scrutinise the evidence to ensure that decisions are taken in the longer-term interests of the UK and consumers. It is worth focusing on the significant uncertainties associated with the project—in particular, the use of a new and untried technology in a marine environment, the length of time over which the commitment would be made, and the planning issues, which have already been mentioned.

Since the debate on the economic impact of tidal lagoons in March, the Department has continued to have discussions with the developer of the Swansea bay lagoon. I cannot comment on those discussions, given their commercial nature, but the most recent proposal put forward by the developer would be a very significant deviation from current Government policy. It would not be impossible, but it would require careful consideration. We have always been clear that we will consider the findings of the independent review of tidal lagoons and all other relevant factors in deciding whether to proceed with negotiating a CfD on this project. The developer is aware of that.

The issue of value for money quite properly remains at the forefront. I mentioned the concerns about consents and leases, decommissioning and the supply chain. I note that the China Harbour Engineering Company is no longer working with the developer. There is also an issue of state aid approval. The point is that, even under ideal circumstances, it will take some time to resolve those issues, and the Government will need to take our time to consider the review and make a judgment in a proper and effective way.

As this important debate draws to a close, let me say that I expect a copy of the review’s report to be on my desk and those of colleagues very soon, and we will give it careful consideration. I assure hon. Members that the Government will strike the right balance between responding in a swift and timely way and taking the time required to consider this complex issue in the detail it deserves.

[Ian Paisley (in the Chair)]

Mr Crabb, given that the Minister has been generous in giving up a bit of time, you have the opportunity to accept a bouquet and take a bow, but not much more, before I put the Question.