The £15bn Severn Barrage project must be publicly funded and publicly owned, according to a government-commissioned report released this week.
The Sustainable Development Commission’s (SDC) report on tidal power in the UK backs the construction of a 16km barrage across the Severn estuary, but claims the project can only be cost-effective and environmentally friendly if it is publicly owned.
“This must be a public sector project. Private sector interest rates of 10% [on the capital investment] would make the Severn barrage’s production of power uncompetitive,” said SDC economic commissioner Tim Jackson, speaking at the launch of the report.
“The private sector also likes to maximise returns, and this could give rise to cost cutting in construction and unsustainable developments in areas surrounding the barrage.”
However, the recommendation cuts directly across current government policy to rely on the marketplace to provide all energy infrastructure – a policy which has prevailed since the barrage’s privatisation in 1990.
The SDC report followed the announcement last week by secretary of state for business John Hutton that the government would commission a feasibility study into tidal power in the Severn estuary.
This study will have particular focus on the proposal by the Severn Tidal Power Group (STPG), a consortium of Sir Robert McAlpine, Taylor Woodrow, Balfour Beatty and Alstom.
The STPG proposal would see a barrage constructed between Cardiff and Weston-super-mare to supply 8.64GW of power – equivalent to two nuclear power stations, or 5% of total UK electricity demand. The 16km-long structure would harness the Severn’s 14m tidal range and could also carry a road and rail line.
However, construction of the barrage would wipe out 145 hectares of protected wildlife habitats in the estuary, which under European law would have to be re-established elsewhere in the UK.
Jackson said the only way to ensure that this environmental mitigation happened was to keep the scheme in public hands.
“It’s absolutely critical [on a scheme this large] to have clear leadership,” he added. “Ill-defined public-private ownership will only cause problems. In terms of risk to the public purse, I think public-private partnerships are just as risky [as fully publicly funded schemes] and they confuse the lines of responsibility.”
He cited the Channel Tunnel as an example of a major scheme where private leadership led to financial ruin, and said taxpayers look set to pick up the tab for the failure of Metronet on London’s Underground.
The SDC report suggests that as well as taxation, public funds could be raised through a levy added to electricity bills over a 10-year period, the issuing of Government bonds, or the creation of a publicly owned company that would mostly be funded by taxation or a bond issue, with a minority of shares sold to the private sector.
STPG spokesman, and Sir Robert McAlpine corporate development manager, Roger Hull said: “Clearly a low interest rate is important to the economics of the project, and if the public sector is able to fund the project it would be very helpful.”
“The Severn Tidal barrage will be our next world class engineering project and would leave an enduring legacy,” said ICE manager for Wales Denys Morgan.
“It has the potential to make a massive green contribution to the UK’s energy needs Đ generating around 5% of our total demand. The environmental issues associated with the project can be engineered successfully and sympathetically.
“The project could create opportunities over a long period for the Welsh construction industry and will benefit the Welsh economy and tourism. Ultimately, Wales, surrounded on three sides by water, has massive tidal generation potential.”