U.K. Rejects $40 Billion Severn Barrage Tidal-Power Project

The U.K. rejected proposals for a 25 billion-pound ($40 billion) tidal-energy barrage designed to generate as much as 5 percent of the nation’s power needs.

The plan by Hafren Power Ltd. for a dam-like barrage won’t offer value for money and may endanger the environment, the government said in a report, affirming findings by parliament’s Energy and Climate Change Committee in June. Hafren needs to improve its proposal before receiving “serious consideration.”

Tidal barrages harness energy from water traveling in and out of rivers or bays. They allow unrestricted flows during high tide before using turbines to capture the energy as the water recedes. Funding such projects, including the one rejected today on the Severn River, has been limited by tighter credit markets.

“Financing such a large asset isn’t currently possible in the private market, not least due to the size of the financing required but also the significant construction risk involved,” said Andrew Cox, KPMG LLP’s global head of energy and natural resources for transactions and restructuring. “Government support would be the only means to finance such a scheme.”

The 18-kilometer (11-mile) project would need state support for about 30 years through guaranteed payments for its power, twice as long as an offshore wind farm, the government said in the report published today on its website. Electricity prices would also probably be “considerably” higher than Hafren anticipates, it said.

Potential Impacts

The company needs to provide more details on the potential effect on the environment, economy, jobs and local industry from the development, as well as its design, according to the report.

Earlier proposals for a barrage were axed in 2010 because of the cost. The government said in May 2011 that the Severn was open to private projects as the U.K. seeks to get 15 percent of its power from renewables by 2020. That compares with about 9.4 percent now.

“The scheme would need a significant subsidy compared to current market prices and there seems to be little evidence that the technology can be sufficiently competitive,” KPMG’s Cox said in an e-mail.

While tidal barrages are used in other countries, none yet operate commercially in Britain.

It would make sense to learn the lessons from a smaller barrage project first, said Stephanie Merry, head of marine renewables at the U.K.’s Renewable Energy Association. That way environmental impacts can be assessed before attempting a venture on the scale of the Severn Barrage, she said.

Alternative Option

Alternatively the Severn could be a good site for tidal lagoon projects, she said. These can generate large amounts of power without the environmental effects of a barrage and represent a “big opportunity” for the U.K., she said.

Tidal lagoons are areas of water that are separated from the rest of the sea. Water is trapped and released from the lagoon through turbines. Developer Tidal Lagoon Plc said in April it was looking for investment to build a lagoon across Swansea Bay in Wales.

Copyright 2013 Bloomberg

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