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Swansea Bay subsidy plan mystery

Swansea bay tidal lagoon

Energy secretary Amber Rudd has warned the developer behind the Swansea Bay tidal lagoon that its bid for subsidy represents a “significant deviation” from existing negotiations.

A letter from Rudd to Tidal Lagoon Power chief executive Mark Shorrock – dated 10 February and released recently following a Freedom of Information request by campaign group Fish Legal – said the mystery offer would be evaluated by government officials.

Tidal Lagoon Power’s pioneering 240MW Swansea Bay tidal project received planning consent from the Department for Energy and Climate Change last summer.

But negotiations over a subsidy for energy produced by the pilot plant remain ongoing, and Rudd’s letter stated that the strike price suggested by the developer to agree a contract for difference was “not in the best interest of consumers”.

“We understand that you consider your key alternative offer to be [redacted],” added the letter. “As you will appreciate this is a significant deviation from the basis on which we commenced this bilateral negotiation process.

“We recognise there may be potential benefits to your proposed approach, but we also note the risks. In particular we need to fully evaluate the implications of transferring additional risks to the consumer.”

Shorrock said eight weeks ago that it was “imperative” for the developer to conclude commercial negotiations with the government over the Swansea Bay scheme within six weeks.

A spokesman for Tidal Lagoon Power said today: ”We are discussing with government a 90-year financing structure for tidal lagoons, as guided by Treasury officials.

”Tidal lagoons have an extraordinary length of life and this can be made to work to the advantage of the energy consumer. If you finance tidal lagoons using their long asset life to repay bank funding, you can reduce the net present value of any subsidy required by 40% to 50%. Full scale tidal lagoons can deliver the cheapest long term power for the UK.”

Laing O’Rourke was last year named preferred bidder for the contract to build the turbine house and sluice structure block for the £1bn project.

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