We thought that the price for non-carbon electricity had peaked when the U.K. government agreed to require UK electricity customers pay £92.50 ($130.43) per MWH for the output from the under-construction Hinkley Point nuclear power station. We were wrong.

Sponsors of the Tidal Lagoon Power project in Swansea, Wales asked for £123.00 ($170.34) per MWH) with a 90 year contract. They subsequently squeezed a promised subsidy out of the government of Wales (which, according to some sources, may end up owning the project). This has reduced the pro-ject's cost so as to bring it roughly in line with Hinkley Point.

The project proposes to erect a dam in the harbor (“barrage” in the native tongue), that will trap the water from the rising tide on one side of the dam and take advantage of the difference in water level between one side of the barrage and the other to turn bidirectional turbines. The 320 MW project would cost £1.3 billion ($1.8 billion). The company raised about 3 percent of the needed funds as seed money, got pledges for more, and indications of interest from the usual collection of financial firms, none of whom seem ready to put in real cash until the government signs on.

In January 2017, a government study recommended the project, but that decision started to look shaky after bidders offered offshore wind to the government at £57.50 in September. Why pay twice as much for the same green energy? The business secretary described the project as “an untried technology with… significant uncertainties.” But the sponsors and their backers have not given up.

Previously, in a rush to implement green electricity producing technologies, the government approved a number of carbon free electricity generation projects. These now appear to be rather expensive methods for producing electricity in light of the rapidly falling costs of newer wind technology. Related: Tanzania’s $344M Natural Gas Plant Is A Game Changer

The government has signaled its support for Hinkley Point with extremely generous power purchase agreements and low cost loans. This despite considerable evidence that there were cheaper ways to pro-duce no-carbon power.

The Swansea project could generate clean electricity at relatively high fixed costs for perhaps 120 years. But, given the pace of technological advance, who knows what comparable projects will cost even a few years in the future. Possibly a lot less. Project advocates view Swansea as merely the first of many such tidal power projects in the U.K.

Is the government right to impose rather high electricity costs on consumers as it in effect subsidizes new clean technologies to produce electricity? Would this technology, if so attractive, get traction without a push from the government? But even if the tidal barrage concept has merit, long term, in efforts to reduce greenhouse gas emissions, might that money be better spent first on cheaper ways to reduce carbon emissions —- such as off shore wind? Swansea's tides won’t go away if not harnessed immediately.

By Leonard Hyman and William Tilles for Oilprice.com

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