One month after the UK government rejected the Swansea Bay tidal lagoon proposal, it has emerged that the scheme could be delivered without the UK government funding – according to a new independent report.
According to the report, prepared by financial experts Holistic Capital, the Swansea Bay tidal lagoon is a fundamentally strong proposition and an ‘exceptional’ project that could provide clean power for generations to come.
The recommendations made in the report could help pave the way for a wholly independent Welsh-based solution to delivering the 320MW clean energy project as a dedicated task force is being set up to consider alternative delivery and financing models.
The task force is said to be working closely with public sector stakeholders as well as private sector institutions.
Recommendations for ‘fully Welsh’ tidal lagoon
The report advises taking a new approach to procuring the lagoon by bringing on board well-established construction partners to provide the confidence that a project of this magnitude can be delivered.
Funding the project without the need for UK government financial support through a Contract for Difference (CfD) scheme is possible, according to the report.
This would be done by Welsh Government Bond issue plus introducing an opportunity for the lagoon to sell energy produced directly to customers through a ‘direct supply’ arrangement, in order to ‘significantly improve’ revenue streams.
A new operating model which includes creating an energy company to distribute the electricity direct to consumers so that the lagoon becomes both an energy generator and supplier has also been proposed by the report authors.
A number of key aspects of the proposal can be changed, Swansea Council Leader says
The Holistic Capital report comes a month after the UK government ‘turned its back on the lagoon project‘ with Business, Energy and Industrial Strategy Minister Greg Clark describing it as not being value for money.
The government’s rejection came despite its own independent Hendry Report concluding that the lagoon was a ‘no regrets’ option.
Paul Marsh, CEO of Holistic Capital , said: “We believe the project can be funded independently of UK government, and potentially delivered as a purely Welsh initiative. We believe, based on our in-depth review, that the original £1.3bn cost of the lagoon can be reduced. Together with new funding models, that makes the project significantly more viable than originally proposed.”
The report has been welcomed by Rob Stewart, Leader of Swansea Council, who said it breathed new life into the lagoon.
“The government announced in June that it doesn’t consider the previous CfD model viable, but we are determined to find another way of delivering this ground-breaking project.
“There are a number of key aspects of the proposal that can be changed to deliver the project without any UK Government support. This includes new approaches to funding, procurement, construction, and operation.
“One of the major differences in approach would be creating an energy company so that the lagoon generates and distributes electricity direct to homes and businesses. This would have a dramatic effect on the affordability of the project,” said Stewart.
Further details of the new task force will be announced shortly but it is expected to include industry leaders, UK and Welsh government officials, financial experts and local government officials.
The report was commissioned by Swansea University on behalf of the Swansea Bay City Region.
It was delivered by Holistic Capital which has a track record advising the UK government on large-scale investments, having reviewed over 250 projects of similar scale, and delivering worth more than £8 billion of investment into the UK.