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UK government review backs £1.3bn tidal lagoon

The project, in which Infracapital and InfraRed are equity investors, has been given the green light by former Energy Minister Charles Hendry after a seven-month assessment.

A proposed £1.3 billion ($1.6 billion; €1.5 billion) tidal lagoon project in the UK has inched one step closer to being finalised after it was backed by a government-commissioned review.

Charles Hendry, the UK’s Minister of State for Energy from May 2010 to September 2012, said “the evidence is clear that tidal lagoons can play a cost-effective role in the UK’s energy mix” after completing the assessment he began in May last year.

The government commissioned the review in February after former prime minister David Cameron told MPs his enthusiasm for the Swansea tidal lagoon project, to be developed by Tidal Lagoon Power, had waned after negotiations about a subsidy had stalled.

The 320MW project was granted planning consent in 2015. It had earlier received equity backing from Infracapital and InfraRed Capital Partners totalling £200 million. Macquarie Capital had been enlisted to lead the debt-raising process.

However, the proposed lagoon has come under fire for the high cost of energy slated for the project. A strike price is yet to be confirmed but it is mooted to be similar to that of the controversial Hinkley C nuclear plant. In his report, Hendry admitted he began the review somewhat sceptical but has been persuaded otherwise and believes “tidal lagoons at scale could deliver low-carbon power in a way that is very competitive with other low-carbon sources”.

He added that the cost on consumer energy bills for the project would be about 30p for the first 30 years and urged the government to move to “timely” final negotiations on a subsidy and strike price.

“The government will now require a period of time to assess the recommendations set out in the review, and to consider the issues which would arise from a broader lagoon programme,” it said. “A government response will be published in due course.”