12 January 2017

A tidal wave of nonsense about power generation


That there is going to be a fix in any official report into an environmental boondoggle is obvious – we just have to work out what the elision is. So it is with the Hendry report into the Swansea Lagoon project – the one trailed all over the papers today; the one which says it would cost each household only 30p a year, the price of a cup of coffee. To use the word lie is probably a little strong but someone is very definitely being economical with the actualité.

In case you missed the papers, I’m talking about the £1.3 billion scheme to solve Britain’s looming energy crisis by building a 9km sea wall in Swansea bay to create a socking great lagoon which would harness tidal energy as the waters flow back and forth through 16 giant turbines.

Inevitably, there’s much excitement about job creation. Thousands of jobs will be created by the project, which is touted as being wondrous. But jobs are a cost of doing something, not a benefit. We lose whatever those 2,000 people would have been producing if they were not lobbing rocks into Swansea Bay.

But I digress. What we want to know where the fix is and here it is, courtesy of Mr Hendry:

“I have calculated illustrative annual costs for households for tidal lagoon, offshore wind and nuclear projects commissioning around the mid-2020s on the basis of equivalent amounts of annual electricity generation (assumed to be 550 GWh at pathfinder scale and 5,500 GWh at large scale). 

For a pathfinder tidal lagoon, the Review estimates the average additional cost on a household’s annual electricity bill to be:

  • c. 35-45p in earlier periods (first 15 years)
  • c. 20-30p in later periods (Year 30 to Year 60)”

That’s where the cup of coffee idea comes from. But this is not how you do a cost benefit analysis. For Hendry and confreres haven’t told us the costs of the lagoon. They have told us the extra costs of the lagoon over other mindbogglingly expensive and silly methods of generating electricity. And that isn’t the way you do it.

Instead, you should compare the costs of the lagoon against the most inexpensive methods of generating the power that we all desire. In fact, the government did exactly this back in 2010.

The report compared the costs of various Severn Barrage ideas against those of gas-fired plants. They included future increases in the cost of gas, the right carbon tax for the emissions and so on. And found that the larger the barrage, the more billions it lost us.

As a rough guide, the electricity from the current proposed lagoon will be twice the price of that from a nice gas plant – and more than that against the price of the coal ones we won’t build. Our estimation of the costs should thus be that they are gargantuan – some distance from the sippy cup we’re being told about.

So to compare the costs of this boondoggle with other daft methods of power generation is like a freelance journalist debating the relative merits of a Lambo or an Aston. Not relevant nor really connected to reality.

It is, in short, a fix.

You might say that the costs of CO2-free generation are worth it. But that’s a decision we can only make when we know what those costs are. And if we are going to demand emission-free power, we must run our cost benefit analysis against other such technologies. Onshore wind is cheaper than offshore which would make this lake look very much more expensive. And isn’t it next month, or the month after, that solar is supposed to become cheaper than coal?

The Government should throw this report back at Hendry and tell him to do it again. And for God’s Sake Man, get it right next time. We want to know the costs of the Swansea Lagoon, not how infinitesimally more expensive it is than other moonbeam to cucumber operations.

Tim Worstall is senior fellow at the Adam Smith Institute