Swansea’s tidal lagoon is out; Heathrow expansion is in. With £Bn’s at stake, which projects will make the grade?
The news is in; Swansea’s £1.3bn Swansea Bay tidal lagoon project has been thrown out. Simultaneously, the Government announced Heathrow will get its controversial expansion.
The news illustrates just how divisive today’s billion pound developments are, especially within a UK determined to deliver a low carbon economy.
Environmentalists, predictably, are up in arms. But the reality of granting projects the go ahead is a mind boggling juggling act; jobs, CO2 impacts, costs to taxpayers and the delivery of a greener economy must all be balanced with the concrete demands of today’s profit-driven society.
So, what’s the analytic viewpoint on this latest project news?
Cost vs gain
Business and Energy Secretary Greg Clark told the BBC the £1.3bn Swansea project was not value for money, despite claims by developers Tidal Lagoon Power (TLP) a revised offer made it cheaper.
Government analysis estimated that the lagoon would cost the average British household consumer an additional £700 between 2031 and 2050.
But TLP Chief Executive Mark Shorrock said the figures were wrong, adding that offshore wind projects had received £8 billion in subsidies and the path finder tidal lagoon project needed £25 million a year in order to kick start an industry.
What’s fascinating is the developers asked for a 90 year contract, with an average strike price (the guaranteed price for the electricity generated) of £89.90 per megawatt hour.
Contrastingly, the new nuclear power station at Hinkley Point C in Somerset, a project the Government green lighted, was given a strike price of £92.50/MWh for 35 years. In the short term at least, pricier.
The BBC believes the trouble lies herein; while TLP and the Welsh Government say the price is the same price as nuclear power, the UK government insist it is double, presumably due to the extended contract terms.
And remember, the goalposts have moved. There was huge criticism of the Government over the price for energy at Hinkley Point.
It seems Government ministers simply couldn’t stomach another set of gut wrenching costs. Perhaps understandably; which homeowner would bet on a 90 year fixed mortgage?
It makes sense not to overpay for energy. Then again, redesigning a lower carbon UK was always going to hit taxpayers; already energy suppliers are hiking bills to cover smart meter rollouts, though they may claim it’s for other reasons.
If we’re going to fork out, should nuclear projects, or pathfinders in 100% green energy win out?
Heathrow: emissions vs business
The Guardian writes that an upcoming report by the UK Committee on Climate Change shows a third runway will increase CO2 emissions from 37 to 43 million tonnes per annum.
But since our overall carbon budget will have fallen by 2030 to 344 million tonnes, the contribution from aviation will have jumped from 6.5% to 12.5% of the UK’s carbon emissions.
On price, the Government has pledged the airport will be built at no cost to the taxpayer, will create 100,000 jobs and will benefit the entire country, through guaranteed internal flights to the rest of the UK.
But there’s a problem. The Financial Times says expansion actually costs £14 billion. For that money, Britain may become more open to business after Brexit, by increasing the number of flights each year from 480,000 to 740,000 (with associated carbon impacts).
There are severe doubts, argues the FT, about Heathrow’s ability to raise the money given the fragile state of its balance sheet and the fear for MPs is that passengers and taxpayers might get stuck with a big chunk of the bill.
Heathrow’s financial structuring is very complex, but in a nutshell there is a risk the expansion will end up being bankrolled by levies on passengers and airlines, which ultimately amount to the same thing; taxpayer cost.
Willie Walsh, Chief Exec of IAG, British Airways’ parent company, has gone on record saying there’s zero confidence the project can be built to budget. And, Government ministers haven’t ruled out passing costs to taxpayers, only pledging to keep charges as close as possible to current levels.
What does it all boil down to?
In conclusion, a 100% green energy scheme is being derided for costing the same as Hinkley. Meanwhile, a damaging project from an emissions standpoint, with likely solid business benefits, is having its costs downplayed by the same leadership, which also refuses to pledge you and I won’t ultimately fork the bill if it escalates
Of course, our analysis is incomplete; only a select few really know the genuine costs of either project.
But the true question is this. If taxpayers ultimately fork out, which in either of these cases they are likely to do, shouldn’t they, not a conglomeration of vested interests, business giants and Government, have the say on where their cash goes?
And in so doing, the taxpayer would also implicitly illustrate where hearts lie on low carbon too.
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