TIP0033

North West Energy Squared Limited / Northern Tidal Power Gateway Limited

Robert Barker,
Finance & Strategy Director
North West Energy Squared Limited

Environmental Audit Committee examines tidal energy in the UK’s path to net-zero

Introduction

1. This submission relates to North West Energy Squared Limited (NWE2) and Northern Tidal Power Gateway Limited (NTPG) and their project to build a barrage across Morecambe Bay and the Duddon Estuary. 
2. The two barrages will have incorporated 132 hydro-turbine generators to generate electricity from the significant tidal range in the area (average approx. 8m).  They are expected to have a lifespan of at least 120 years generating approximately 7.8TWh/y of predictable (tides), renewable (gravitational pull of moon and sun) energy.
3. A dual carriageway on top of the barrage would create a road link from Barrow and the west coast of Cumbria to Lancaster & Morecambe and via the M6 to the north west of England and beyond.  This would be expected to enhance socio-economic transformation for an area which is suffering from lack of investment and an ageing and falling population.  It will require 7,300 jobs GVA £329pa) during construction and 7,400 jobs on-going jobs (GVA £351m pa).
4. The barrages can be used to mitigate and manage the affect of climate change (rising sea-levels (perhaps 1m by the end of the century) and flooding (inland and coastal areas - particularly due to more extreme weather events)).
5. A large proportion of information provided in this representation to the EAC has been collected analysed and presented in two reports prepared by Mott MacDonald in 2017 and 2019 for NWE2. 
6. Other information (including stakeholder information) has been collected by the leadership team of experts over the period 2014 to date.
   

Answers to questions raised

1. What contribution can forms of tidal power play towards the UK’s energy mix?
1. The quantity of energy produced by tidal range electricity is not insignificant.  Morecambe Bay and the Duddon estuary output is estimated to be 7.8TWh/y.  A UK west coast fleet of barrages could produce more than 64TWh/y.

2. This form of electricity generation can especially fit with other renewable and nuclear energy because it:

1. Renewable/green: it is estimated that the CO2 costs of the build of the barrage will be repaid in a year, the electricity generated is then free from CO2 emissions
2. Predictable: unlike wind and solar power; the electricity is generated on the tidal ebb and flow.
3. Significant: Mott MacDonald estimate barrages across Morecambe Bay and the Duddon Estuary would create 7.8m TWh/y.
4. Continuous: as a fleet on the west coast (see figure above), virtually continuous given the different times of tide ranges up and down the coast. 

3. There are also wider benefits of this barrage across Morecambe Bay and the Duddon Estuary:

1. environmental protection: mitigate flood and provide coastal and marine protection against climate change and rising sea-levels:

2. economic and social transformation: significantly reducing travel times and costs; 7,300 jobs to construct and 7,400 on-going jobs. 
   

2. Why, despite the considerable marine resources available, have relatively few developers established tidal projects?

1. The government has supported overtly with funds and rhetoric - wind, solar and biomass (and others - all to a greater or lesser extent).  More recently nuclear power is gaining traction within government reports (Energy White Paper).  Clearly developers are most likely to follow funding where it is available to them. 

2. If the up-front feasibility and development funding is not available for the innovation of new technologies, then the likelihood of discovering and developing such technologies will be very limited.

This continues to be the case.  The two most recent and influential documents affecting sustainability (published December 2020) are:

• the Climate Change Committee report ‘The Sixth Carbon Budget, The UK’s path to net zero, and

• the Energy White paper, Powering our Net Zero Future. 

In total, these two documents (over 600 pages) mention the words ‘tide(s)’ or ‘tidal’ four times, one as part of a definition of sustainability and one which is in the context of Wales, Scotland, and Northern Ireland (nothing relating to England).

The other two mentions give no real encouragement or any sign of direct short-term help to tidal range projects: 

• Sixth Carbon Budget - Climate Change Committee (CCC) states: “Larger-scale funding (which is currently levied on bills, and therefore covered in our analysis above) is likely to be needed to support nuclear power (e.g., via a regulated asset base – RAB – model), novel renewables (such as wave, floating wind, and tidal) and funding for hydrogen and CCS power projects.” (page 301).
• Energy White Paper states: “We will consider the role of wave and tidal energy, following further evaluation of the commercial and technical evidence” (page 46),

There is no explanation of the type of tidal energy nor a commitment to any possible timescale, nor who may be working on this, although this particular call for evidence may be that.

3. The main beneficiaries and drive from the government now seem to be wind and nuclear.
4. We believe that there is a view that this kind of project is too big, too difficult, too risky, too expensive.  Perhaps if our forbears in the 18th and 19th centuries or those that had the idea of building the Mulberry harbours and getting them to the Normandy coast – in secret - had taken this view we would not be in the good place that we are now, despite COVID-19.
5. We believe earlier ‘failures’ have not helped this technology, for example:

• the Severn River barrage failing partly due to risks of impact on birds and fish; and
• the Swansea Bay lagoon - we understand absorbed £30m to £40m from government and private investors prior to its rejection.

6. However, we now need to build in the need for zero emissions by 2050 because of the effect that emissions are having on climate change and rising sea levels.

2.     Are there certain locations where one type of tidal technology is best suited?
1. Simplistically, the best areas to construct tidal range barrages are where the tides are highest, particularly where the shape and depth of the areas to capture the water displaces significant quantities of water, and the water depth does not require extraordinary engineering to construct a barrage.  The relationship between the cost of the barrage required to the amount of water that can be held back or captured is important.  These areas tend to be in estuaries and bays (firths) as can be seen from the map below for the UK

2. Barrage tidal range generation (as opposed to other tidal range generation, e.g., lagoons) can add additional significant benefits if they are also sited to:

• Providing improved connectivity to areas which have longstanding connectivity issues,
  i.e., opening the economy; creating more travel to work areas, opening up investment opportunities (including tourism) and job opportunities, including helping the recruitment of suitable talent to the area (teachers, NHS); helping to reduce population migration declines; relieving road. congestion (A523?? and adding alternatives to the eastern approaches to the Lake District)

• Reduce travel time with the savings of time and fuel

• Provide conduits for cabling and services across the barrages.  In particular if there is new generation capacity based in NW Cumbria a cable link south to connect with the Heysham 1 and 2 infrastructure networks would be significantly cheaper than tunnelling a cable under Morecambe Bay and the Duddon.

• Manage and mitigate the impact of climate change.  Particularly, rising sea levels and flood management

3. A further benefit would be sought through the export of expertise in tidal range projects and their construction to other areas of the world.  The global map shows areas which are considered suitable for the use of tidal range electricity generation.

3.     How could financial support be structured to assist technological and project development in this area?
1. The tidal range barrage concept is proven (see below) but needs funds to test feasibility and help development in its early stages in the UK and site-specific work that must be completed (e.g., marine bathymetry and environmental impacts).  Those funds will not be forthcoming without significant help from the government in England.

2. There are many reasons why the funding is not forthcoming, please refer to the response for question 2 above.

3. The technology is not the issue as this is proven with two operating tidal power schemes in the world: on La Rance river, France and Sihwa Lake, South Korea. 

4. The difficulty is generating the funding to ascertain the feasibility of specific UK sites and to demonstrate level playing field competitiveness with other sustainable electricity generation in the UK (as previously mentioned the White Paper on Energy and the CCC only mentions Tidal energy four times). 

5. To make progress, tidal range projects need:

• Recognition by government of the technology;
• Recognition of the added value of economic, social, and environmental benefits of the schemes that are on offer which will be different for each scheme;
• Government recognition to demonstrate to potential funders that wind and nuclear are not the only options for renewable energy, and this must be backed up with;
• Grant support – to help prove the benefits of the proposed projects put forward (and not necessarily for ‘innovation’ as the definition of innovation suggests a completely new way of doing or achieving something - in the modern era La Rance tidal power scheme in France has been working since 1966.

6. Past failures have meant that funding seems only to be available from local funding – Welsh government, Liverpool mayoral funds etc.  The benefits have not been taken up by the UK central government for England. 

7. Investors will want to see government support.  We are pleased that there may be the creation and mission of a new Green Investment Bank (2.0), but its impact on tidal range projects will depend on its mission and scope from the government.

8. If these fundamentals are in place and the tidal range projects(s) are, with some financial help from the English government, shown to be commercial worthy then raising finance could be considerably easier. 

9. As we move towards Financial Investment Decision (FID) prior to construction, with concept and feasibility well supported and significant progress made on DCO we would expect to secure funds from a wider range and source of investment funds.  We are planning that government sources of finance and/or guarantees may support up to half the construction cost.  Other sources of finance at this stage we would expect from other equity investors and long-term return investors (for example pension funds).

4.     How might tidal schemes reduce costs to become commercially competitive with other low carbon or renewable options?
1. We totally understand the need to drive costs out of the projects proposed.  However, we are also equally aware that the enhancement of benefits must also be focused on with the same vigour.  The costs are an investment and the benefits accruing and the payback over the extended lifetime of the project may be as significant as cost reductions.

2. All benefits should therefore be brought into account along with strict cost reduction and technological improvement.  We are concerned that the Treasury’s Green Book investment analysis does not take into account many benefits of the project in this new era of targeting zero emissions.

3. We believe there are significant benefits of meeting the aims of the Grand Challenge of ‘Clean Growth’ although we have not yet been able to financially quantify this benefit.  The CO2 cost of building the barrage has been estimated to be offset after just one year of full operation.  There does not seem to be a method of valuing the saving in CO2 in governments investment analysis (Treasurers Green Book).

4. Although the start-up investment is large, the annual O&M costs are relatively low, and the life of the project is expected to be at least 120 years.  This life may then be extended because it may not be advantageous to decommission - the caissons and turbines can be replaced; the road may still be needed for local travel, and the barrage still required to support the ecology of the area.  The key is to appreciate that the actual investment payback will need to be spread over a much longer number of years than is usual in other electricity generating projects.  There does not seem to be a method of valuing the length of this project in governments investment analysis (Treasurers Green Book).

5. In addition to the generation of significant renewable energy, there are also significant additional advantages which have been set out in the answer to Question 1 above which would not be available to many other schemes.

6. Initial estimates in reports commissioned independently by the company suggest that a CfD of £57 is possible, prior to cost reduction measures and prior to any modification of Treasury Green Book advice.  We believe that this would compare favourably against offshore, deep sea wind turbine generation and nuclear power generation.

7. Importantly, when comparing this technology with wind and solar, tidal range power is completely dependable and predictable, moreover, when the development of an extended west coast series of barrages is implemented there will be virtually continuous and predictable output from tidal range power (in all but very short periods of neap tides).  Additionally, the time of generation on each barrage may be flexed to start a half hour earlier or later to meet grid demand requirements.  The value of this to the National Grid is high as it allows better planning and the capability to replace gas and coal and to moderate the intermittency of solar and wind generated electricity. 
8. New industry in the UK is expected to be created for the build of the barrage as well as from the connectivity created by the causeway.  The undertaking should also create important opportunities for worldwide export of know-how and expertise.

9. NTPG would use every opportunity possible to manufacture the components of the barrage from UK sources.

10. A key assumption in determining the required CfD is the cost of financing the project; this is due to the significant upfront capital required, and the length of the proposed CfD contract.  Our base case scenario has assumed a weighted average cost of capital (WACC) (nominal post-tax) of 8%. Typically, the WACC for a low carbon CfD backed project in the UK will range between 5% (ground mounted solar) and 10% (reported for Hinkley Point C). The risk profile of this project is assessed to be in the middle of this range.  The WACC is important because on large schemes with construction timescales over several years the cost of finance can be a significant portion of the total cost of the scheme.  The provision of some grant funding or government loan guarantees could reduce the WACC to 6% which would reduce the CfD strike price required significantly. 

11. Evaluating the scheme using the RAB model over 120 years and also bringing in other benefits, such as road connectivity and environmental cost avoidance and valuing some protection of environmental classification would also reduce the WACC

12. Following completion, the majority of technical risks will have been mitigated potentially enabling refinancing at lower rates.

13. NTPG could expect to use the expertise of the Advanced Manufacturing Resource Centre (AMRC) which is setting up a new base in Salmesbury near Preston, and the Offshore Renewables Joint Industry Programme, Lancaster.  We have seen how technology in the aircraft industry has made significant savings due to AMRC skilled intervention both in materials, speed of manufacture and weight of materials.  We would expect similar benefits to accrue to the turbine manufacturing industry as the quantity of turbines required would be 130+ for NTPG and perhaps a further 1,000 in the UK and several thousand worldwide.

14. Manufacture of concrete caissons to hold the generation equipment would be sited in the northwest (Barrow or Workington) where there is port slipway space available.  The technology for developing concrete caissons is tried and tested.  We would expect the northwest ports to facilitate rapid progress in cost reduction through improved materials, rates of production and consequent reduction in construction times.

15. Development of Design for Manufacture and Assembly (DfMA) and modular civils will be important parts of construction and construction cost consideration.  A modular approach to each part of the development and construction of the project will lead to shorter timescales to construct which would save considerable financing costs.  As the project approaches completion, it is possible that a WACC of 8% could cost in the region of £800m pa – a one-year reduction in the construction time leads to a saving of £800m.

16. NTPG sees Morecambe and the Duddon as a pathfinder project where the benefits of the manufacture and construction throughout the project would then be used throughout the UK western seaboard and into a worldwide industry with the expertise and know-how based with developers, manufacturers, constructors, and universities based in the north west.

17. Where costs savings or technical benefits are recognised but cannot be achieved on the pathfinder project, they will be saved on projects which follow on.

5.     What are the environmental impacts of tidal schemes and how can these be minimised?
    
1. Coastal margin habitats of the UK have high biodiversity and support a wide range species. The importance of Morecambe Bay and the Duddon estuary is reflected in the magnitude of international level environmental designations.  They are RAMSAR wetland sites, Special Areas of Conservation (SAC) and Special Protection Areas (SPA).  At the national level they are Sites of Special Scientific Interest (SSSIs), and part of the Duddon Estuary is a National Nature Reserve.  More widely, they are surrounded by the Lake District National Park to the north, and by Areas of Outstanding Natural Beauty to the east.  Views to the Bay from these areas are important.  The current ecology of the area provides a wide range of benefits, including food and jobs directly (e.g., fishing, tourism) and indirectly (e.g., shipping).  Any new development will need to maintain and/or preferably enhance these benefits. 
2. A tidal energy barrage is effectively a permeable dam across the estuary, allowing opportunities for management (e.g., maintaining the current tidal extent and location) on either side.  The barrage management and the use of turbines to pump water would keep the current high and low tides at an equivalent level and equivalent times.  This could be used to manage and mitigate any impacts on bird feeding areas and the impact on other intertidal habitats and species. The barrage could also act as an environmental management scheme used to alleviate some of the current and future expected pressures from rising sea-levels (e.g., coastal erosion, loss of habitat, coastal flooding) and climate change (e.g., riverine flooding). 
3. The ecology of Morecambe Bay and the Duddon Estuary is constantly changing.  Some of these changes (e.g., location of planned development) can be considered during project planning.  Others (e.g., changes in the location and extent of salt marsh) are currently unknown and may require adaptive management measures to be put in place.
4. The impact of changing tidal levels/cycles on groundwater and hydrology (whether through climate change or the introduction of a barrage) are site specific and require further investigation
5. We understand that a new barrage scheme would require environmental impact assessment (EIA) under the European EIA Directive (2014/52/EU) and the UK Infrastructure Planning (EIA) Regulations 2017.  Any new road scheme an environmental impact assessment under the EIA Directive and either the EIA (Harbours, Highways and Transport) Regulations 2017 or the Infrastructure Planning (EIA) Regulations 2017.

Both would require Habitats Regulations Assessment (HRA) under the European Habitats Directive (92/43/EEC) and the UK Conservation of Habitats and Species Regulations 2017.

6. Additionally, we favour that the proposed scheme is subject to strategic environmental assessment (SEA) under the European SEA Directive (2001/42/EC) and the Environmental Assessment of Plans and Programmes Regulations 2004. In this way, we can ensure that the scheme is subject to a full and appropriate assessment and consultation with statutory consultees and the public, impacts and mitigation measures through the feasibility and scheme design phase prior to submission to the decision-making authority.
7. Carbon footprint

It is expected to take less than 12 months from the start of generation for carbon embedded and emitted during the construction of a tidal power plant to be offset.  After this, the plant will be carbon neutral.

8. Decommissioning
• Tidal energy is a natural resource which will be available indefinitely.  The design life of tidal energy power plants is around 120 years, and this is expected to increase as the associated technology develops. 
• At the time of decommissioning in 120 years, rising sea levels would have occurred, the basin ecology may have imported an important ecology of its own, and the coast would have adapted to the protection provided by the barrage.  Decommissioning of the barrage may not be considered appropriate at that stage and is possible that caissons could be replaced allowing a new generation of turbine which would continue to generate sustainable electricity.  Replacement or repair of caissons would allow the continuation of road connectivity and consequent socio-economic benefit.  This could extend the life of the barrage and its component benefits indefinitely.
• If decommissioning is required, it might consist of removal of the turbines and possibly some gates, leaving the caissons in place.  The ability to open /close the wall openings may still be needed to maintain coastal flood protection and against tidal surges.
8.     What are the wider economic benefits and what potential disadvantages could tidal schemes bring to regional areas?
1. We have earlier in our submission (please see answer to Question 1 above) mentioned several additional benefits from the Morecambe Bay/ Duddon Estuary Scheme. 

2. The importance of the environmental impact on the coast are supported by government papers:
• Flood and coastal erosion risk management strategy

Defra/EA Policy Statement July 2020

• Future of the Sea: Current and Future Impacts of Sea Level Rise on the UK.  Foresight – Future of the Sea Evidence Review Foresight, Government Office for Science

December 2020