A £1.0 billion (€1.3 billion; $1.6 billion) plan to build the world's first power-generating tidal lagoon in Swansea Bay, Southern Wales, has received further support as the government said it had initiated discussions with potential developers.
With a planned capacity of 320 megawatts (MW), the plant is expected to become the world’s largest tidal energy provider if and when it becomes operational in 2018. It is also billed as a potential first step in the development of a network of coastal lagoons which could eventually generate up to 8 percent of the UK's electricity needs.
The plant has already received support from the private sector, with UK insurer Prudential last October named a cornerstone investor in the project. While the company did not disclose any financial details on the transaction, a source close to the matter told Infrastructure Investor that the firm had agreed to invest up to £100 million.
The government felt it necessary to display stronger support for the project, however, after the future of two major tidal energy players became uncertain over the last few weeks.
“Tidal energy is a huge opportunity for Britain,” UK Energy Secretary Ed Davey said ahead of the Chancellor's Autumn Statement this week. “That's why we're showing investors and developers that we're serious about tidal lagoon potential and have started in-depth discussions for what could become the world's first tidal lagoon.”
The project featured in both Wales and the UK’s latest national infrastructure plans, with the latter saying the UK government “will start closer discussions with Tidal Lagoon Power to establish whether a potential tidal lagoon project at Swansea Bay is affordable and value for money for consumers”.
Negotiations are likely to focus around a guaranteed electricity price for the energy produced by the project as well as potential construction guarantees, according to Infrastructure Investor’s sister publication Low Carbon Energy Investor.
“We are on target to run the first auction for Contracts for Difference (CfD). While there are no bids from the tidal industry in the current allocation round, I’m keen to see future bids. That’s why I ring-fenced a protected allocation of contracts worth 100MW up to 2019, for the industry. This is guaranteed if people come forward. And it’s not a limit or cap,” Davey said at a recent tidal energy conference.
The Welsh infrastructure plan said it would help by setting up enterprise zones for the marine industry as well as providing supply chain support. The projects could be given the green light before the UK’s general election in May 2015, according to Davey.