Fresh offer of ‘substantial investment’ from Welsh first minister raises hope for clean energy plan getting a green light from Westminster

This article is more than 2 years old

This article is more than 2 years old

Plans for a £1.3bn tidal power lagoon in Swansea could still be backed by ministers despite government indecision on whether to support it, according to the author of an independent review on the project.

Charles Hendry, a Conservative politician and former energy minister, enthusiastically supported the scheme a year ago as a source of clean power and UK jobs.

Since then, the government has not indicated whether it wants to move ahead with the project, and ministers were recently reported to have gone cold on it.

But Hendry told the Guardian he was still hopeful that Swansea would receive backing, because the plan would have been ruled out before now if it was not being given serious consideration.

“I remain optimistic that government will decide to move ahead, especially in light of [this week’s] announcement from the Welsh government,” he told the Guardian.

On Wednesday it was revealed that Carwyn Jones, first minister of Wales, had written to prime minister Theresa May offering “substantial” investment in the form of a loan or equity stake to help the lagoon move forward.

“This investment could help to reduce the cost of capital for the project and reduce the subsidy requirement over the lifetime of any contract for difference,” he said.

The last offer tabled by the Tidal Lagoon Power company was £89.90 per megawatt hour over 90 years, though Hendry prefers a 60-year timescale.

The Welsh offer should bring the number down, but it could still appear expensive compared to rival low-carbon sources of power.

New offshore windfarms to be built in 2022-23 have won contract for difference subsidies of £57.50 per MWh over 15 years. EDF Energy was awarded £92.50 per MWh over 35 years for Hinkley Point C, the nuclear power station due online by 2025.

Business secretary Greg Clark has refused to be drawn on whether he will back the lagoon, which could be the first of several. Government sources insist a decision has not been taken either way yet.

Hendry said that the delays were understandable and should not be mistaken for officials turning lukewarm on the scheme.

“I was always clear that government would require some time to consider my recommendations. With an election and ministerial changes that process was inevitably going to take longer,” he said.

No subsidies for green power projects before 2025, says UK Treasury Read more

Swansea city council has sent birthday cards to May, Clark and the Welsh secretary to remind them it is one year since Hendry recommended supporting the lagoon.

Rob Stewart, the council leader, said: “Post-Brexit, this is exactly the kind of innovative project the UK government should be wholeheartedly backing because it will lead to a new global industry in the UK that will benefit British workers and British businesses.”

There have also been warnings that a thousand jobs could be lost in the Midlands if the lagoon does not go ahead at GE plants in Stafford and Rugby, which had been earmarked to make the lagoon’s underwater turbines.

The government said a response to the Hendry review would be published in due course.

A spokesperson said: “We want to ensure that the UK has a diverse, secure and affordable energy mix but it must provide value for consumers.”