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4 Feb 2003 : Column 63WH—continued

Severn Barrage

4 pm

Huw Irranca-Davies (Ogmore): I am grateful for this opportunity to initiate a debate on the vital topic of renewable energy in the United Kingdom, in particular on the potential of the Severn barrage. I want to thank the World Wildlife Fund and the Severn tidal energy group for submitting their thoughts, which have informed my views from different perspectives.

The Severn barrage is a mythical creature, seemingly lost in the mists of time—or lost in the mists of the Severn estuary on a dank winter day. It is now a legendary apparition, somewhat akin to the Loch Ness monster, occasionally sighted rearing its curious form along the banks of the Gwent levels. Does it really exist? Is it just a fable from children's tales or—if one takes a different view—a nightmarish vision designed to send children quivering in fright to bed along the shores of Severnside? On the contrary, it is real—or, at least, it could be. In fact, it is like something in a fairy tale—a Peter Pan. If enough people believe in it—in particular, those strange people known as Members of Parliament and Cabinet Ministers—the Severn barrage could live again. It could return from folklore and become a part of a living, breathing, modern Wales and United Kingdom.

The first proposals for a Severn barrage were made in the 1840s, so it could be argued that if it has not happened by now, it never will. However, the first proposal for the channel tunnel was in 1802—so you never know.

My background has given me a special interest in this subject. More than 10 years ago, I was a student at that excellent seat of learning that is Swansea Institute of Higher Education, a leading light in vocational and applied education in south Wales. That is sufficient praise to satisfy my lecturers and former colleagues. As part of my MSc in European leisure resource management, I assisted peripherally in research in a European project known as the Esturiales study with my former professor and close friend, Graham King. The study involved a detailed analysis of several major estuaries in Europe, including the Severn, in an attempt to put forward proposals for estuary zone management.

The study was complementary to my MSc, rather than an integral part of it, and although I was extremely grateful for the opportunity to work closely on such an important project and to travel to some interesting places in Europe, I still remember saying to Graham—who was also my dissertation tutor—nine months into the 12 months of my course, "Don't you think that it is now time to start on my dissertation?" His response was non-committal, and we turned our minds back to more important matters, such as the European project that we were engaged upon.

One of the prime aspects of EZM is conflict resolution in marine and coastal environments that recognises the special contribution that estuaries make to biodiversity. Although the Severn is not identical to the Tagus, for example, it is a splendid exemplar of the many conflicts that exist in such environments. There are shipping movements, leisure craft, special marine habitats, wetlands, sand dredging and commercial fishing, historic sites along the tidal reaches, and, not least, it is

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an attractive leisure venue for walkers and tourists. In short, like all great European estuaries, it is a marvel of nature.

However, it is also a marvel of the influence of mankind and womankind. It is a living, working, thriving animal that has co-existed with, and been modified by, humankind since historical records began. Ports and jetties have altered the shape of the coast. Extraction—currently a controversial issue—has fed the economic development along its shores. Farmers have helped to shape the coastline. Roads have skimmed its surface on bridges that link the Celtic homeland with the land of its former inheritance across the water, and rail tunnels burrow beneath it.

The English and Welsh communities that inhabit the coast of the Severn are separated by a vast pool, but in many ways they have shared a common past, living with and off the bounty and beauty of this powerful stretch of water. Like many intimate relationships, it has always been about power to some degree. We have ever been the submissive partner, recognising that the Severn is a mistress of immense power. It is the second largest tidal reach in the world after the Bay of Fundy—where, by the way, tidal power is operational. We are, in effect, a houseguest, and we take what we are given and are grateful. The issue now is whether the long-term houseguest reasserts its rights and takes a greater share of what is on offer. If so, can the two live happily ever after? That is the great conundrum of sustainable development. The puzzle is never more illuminating than in discussions on the Severn barrage, which while offering huge potential benefits, has a direct impact on three sites of special scientific interest, a special protection area under the European birds directive, a Ramsar site and a proposed special area of conservation. Therefore, proposals for the barrage should not be taken lightly.

In 1989, the Severn barrage project general report derived from the tripartite studies examined the feasibility and impact of an ebb-tide electricity generating barrage stretching from Brean down near Weston-super-Mare to Lavernock point near Cardiff. It rapidly ran into confrontation, especially over costs and environmental concerns.

Paul Flynn (Newport, West): My hon. Friend's speech deserves support for its literary merit alone. Powerful environmental groups that could generally be described as friends of the mud spoke out against the ambitious Severn barrage. They made a strong case and stopped it. Does my hon. Friend consider that the best practical way forward would be the more modest proposals of islands that would use both the power of the tide and that of the wind to generate electricity, but in a way that would not be environmentally disruptive?

Huw Irranca-Davies : My hon. Friend makes an intelligent point. I do not believe that either proposal should preclude the other at this stage. My sole purpose in having the debate is to ensure that all options are discussed. I agree that technology and the principle that small is beautiful have moved on substantially, but that should not make us too cautious about large-scale projects. Environmental concerns, as he rightly pointed out, are more significant in such estuaries than in other

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areas. If we fail to discuss adequately a major proposal such as the Severn barrage, with all its pros and cons, we are probably doing a disservice.

After a brief sighting of the mythical barrage creature in 1989, it disappeared under the waves. It is a shy creature, so why is it back? Why has it been sighted once more off the shores of Barry and Weston-super-Mare? I shall explain. The conditions have changed markedly to make the barrage at least worth discussing. I shall highlight the significant factors that make it necessary to discuss this issue, and I shall explain why it must feature in the forthcoming energy White Paper and why it must receive a considered and balanced hearing. The changes are outlined in the recent report that was commissioned by the Department of Trade and Industry, so it must believe that they are worth examining, and will be carried out by the Severn tidal power group.

The three main factors of the report are the reductions in the cost of capital through such mechanisms as project finance, the expanding post-Kyoto market in renewables and greenhouse gas emission savings, and the possible role of the barrage in alleviating the forecast challenges of habitat erosion through global warming. I shall first deal with financial viability. A project of such scale can either cause sleepless nights or break ministerial careers. If 2001 prices were applied to the 1989 energy report, the staggering cost would be £10.3 billion to £14 billion. However, the reduced cost of capital of up to 40 per cent., the restructuring of capital funding for major projects, including public private partnerships, project finance, bond issues and reductions in construction and design costs since 1989 all combine to make the project more financially manageable in terms of capital costs.

Billions of pounds can be psychologically damaging to Ministers and Back Benchers who can feel like rabbits caught in the headlights of an oncoming juggernaut. Surely the money could be spent better elsewhere. However, there is potential under a PPP and project finance approach to give the financial risk to the private sector, with a probable 25-year project cost payback against the backdrop of the Government's assurances on premiums for the energy created during that period. Depending on the financial restructuring, the barrage could be returned to Government at the end of 25-year payback to produce an estimated further 95 years of renewable energy with the minimum of maintenance.

We should consider the forecast costs of the 2012 Olympic games, which official estimates put at more than £2 billion and others at more than £4 billion. No matter how fast the Olympic athletes run or how high they jump, they will not produce 6 per cent. of the electricity needs of England and Wales. The final cost of the channel tunnel was estimated at between £12 billion and £13 billion, but the chunnel does not offer electricity or protection against the effects of global warming, such as flooding and sea-level rises. We should also bear in mind the fact that the lifespan of the electrical dynamo is 120 years of low-maintenance, free energy, so balancing the admittedly huge initial capital cost against a 120-year cycle makes the project not quite so daunting.

Tidal power by barrage has been used with success for 35 years at the 240 MW La Rance range at St. Malo. The Severn barrage could produce an estimated 8.6 GW of

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electricity, which is 36 times that of St. Malo or, in simple terms, 6 per cent. of the total electricity needs of England and Wales. It is not difficult to see what the 6 per cent. would do for the Government's ambitious targets on renewables, and it would move us away from reliance on carbon-based fuels. Whereas the original EP57 study suggested a capacity of 1.1 GW, the new, more ambitious figure reflects a more efficient use of the tidal energy and augments the overall viability of the project.

The financial considerations are further supported by the fact that the project could be part of new Government thinking on project funding. However, such a project, with an estimated payback of 25 years, would attract private sector backing only if Government offered some surety of the premium for the electricity. Understandably, the private sector wants to reduce the risk in exchange for investing so massively. The cost of such a project is so vast as to be frightening, but the rewards—financial and otherwise—are so constant over the long term and the financial risks in proven technology so easily dealt with that the Government should not be scared. The project is not necessarily a monster; it could be, to coin the name of one of my children's favourite characters, a big, friendly giant.

I emphasise the conditional—the "could". The WWF has kindly noted:

Like those who live along the Severn, it has genuine concerns that prevent support for the Severn barrage at present. Those concerns include restrictions on fish movements, the impact on designated wetlands and mudflats, and the impact on coastal birds, sand movements and beaches. There are also questions about the barrage's impact on shipping, especially any future demands by Bristol for larger shipping and dredging.

Mr. Jon Owen Jones (Cardiff, Central): Does my hon. Friend share the perception that whenever schemes that have an ecological impact are proposed, people focus on the negative ecological impact and rarely examine the potential positives? I examined the project at university and noted that it would increase the amount of biodiversity in the land beyond the estuary, so it would have a net benefit on biological creatures living in that area.

Huw Irranca-Davies : My hon. Friend is correct. Although I do not intend to go far down that line of argument, the full cost-benefit analysis and environmental impact assessment of such a large project should take into account not only the possible negatives, but the possible positive externalities on the environment. Creating a stable water platform behind the barrage, with the increase in biodiversity that has been suggested, is a benefit and needs to be taken into account.

These and other concerns must be investigated further. However, they will not be explored unless the barrage features in the energy White Paper. This is a case in which a few printed words can open a debate or stifle it before it has begun.

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The other potential benefits include the significance of areas of change in the post-Kyoto targets on renewables, which now create a viable market for renewables and for savings through reductions in greenhouse gas emissions. The barrage could reduce emissions by up to 18 million tonnes a year or 3 per cent. of the United Kingdom's carbon-based emissions. The Government's own forecast suggests that the UK could be a net importer of gas by 2006, and could source up to 90 per cent. of our gas demand beyond our shores by 2020. In strategic terms, it is clearly in the UK's interests to explore methods of reducing exposure to non-UK sources and, as we all intend, of reducing our reliance on nuclear energy.

DEFRA reports that the annual cost of flood damage in the Severnside region is £120 million a year. That is estimated to rise to an incredible £4 billion by 2075. If a barrage can mitigate those costs by managing the extremes of tide and flood, that should be included in the debate. In the absence of a barrage, the existing shoreline plan anticipates that the rate of coastal erosion through climate change will increase and lead to the loss of the habitat that we discussed earlier, but—it is a big but—much of the prevailing thinking on the marine energy contribution to sustainable development focuses on the smaller scale, such as tidal pools, small-scale barrages and wave energy.

There is something of the Schumaker "small is beautiful" argument here. However, as my hon. Friend the Member for Newport, West (Paul Flynn) mentioned, there is a corresponding danger of piecemeal development and an incremental creep towards targets that are never reached and that recede into the distance. If we are firm in our intentions on renewable energy, all options, large and small, should figure in the discussion. That is not so much blue-sky thinking as blue-water thinking. Let us not rule out any options.

Why should I be interested in the subject as a representative of Ogmore? That is not Ogmore-by-Sea, by the way—that delightful coastal village—but Ogmore, the thoroughly land-locked constituency. The potential benefits that I outlined could be good not only for the people along the Severn, but for the people of Wales, the rest of the UK and all the nations whose signatures embellish the Kyoto treaty, as well as those that regrettably do not.

These arguments make further examination worthwhile. If the barrage is viable, we should be courageous in our support. If it is not, we should rule it out and focus our energies elsewhere. It is time to see whether the mythic Severn barrage, like the channel tunnel, can be made real, or whether it should be consigned to folklore for evermore.

4.17 pm

Alan Howarth (Newport, East): I shall be brief, as we want to hear the Minister's response.

My hon. Friend the Member for Ogmore (Huw Irranca-Davies) made an important, elegant and eloquent speech. As he said, the subject has been discussed for a very long time—longer, even, than the discussion on the reform of the House of Lords. We know that we need security of energy supply and a

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reduction in our CO2 emissions. Unless a new generation of nuclear power stations is to be built, which we do not want, we also know that we must find environmentally sustainable sources of new energy.

Nuclear power will make a smaller contribution to our overall energy supply. It will, as my hon. Friend noted, be risky to depend increasingly on imported gas, and we should not look the tidal gift horse in the mouth. There is an enormous potential source of energy for the harnessing. Of course the wider environmental impact must be considered very carefully. As my hon. Friends noted, there are pluses as well as minuses to the environmental impact. The matter is complex, but we must consider it.

There will clearly be problems in financing such a vast project. However, we famously have the lowest long-term interest rates in a very long time and have gained the experience of public-private partnerships, so we can finance projects such as this if we decide that it is the right thing to do and if we have the will to do it. I join my hon. Friend the Member for Ogmore in hoping that the energy White Paper will include a commitment thoroughly to study the feasibility of the Severn barrage and the arguments for and against it. My hon. Friend the Member for Newport, West will agree that those living on the shores of the Severn are not frightened of open-minded and intelligent analysis of the project. Responsibility will straddle the UK Government and the Welsh Assembly, just as the barrage will straddle the Bristol channel. That provides an additional challenge, but there is no reason why the work should not be undertaken.

4.19 pm

The Parliamentary Under-Secretary of State for Wales (Mr. Don Touhig) : I congratulate my hon. Friend the Member for Ogmore (Huw Irranca-Davies) on securing the debate. He has long taken a keen interest in renewable energy and, in particular, the proposals for the Severn tidal barrage. I had planned to say more about renewable energy, but time prevents me from doing much on that front. Members will be aware that the Minister for Energy and Construction cannot be here, so, as Wales Office Minister with responsibility for green issues, I am responding on the Government's behalf.

The UK has spent considerable sums—£20 million in all, of which the Government provided £12 million—in evaluating the potential of generating electricity from tidal barrages. The scheme, part of the new and renewable energy programme, ran from 1978 to 1994. Tidal barrages use well-established technology. Several locations around the world have been studied, but relatively few projects have been constructed. The first and largest, with a capacity of 240 MW, is on an estuary near St. Malo. When I paid a visit, I was greatly impressed by what I saw.

The UK programme included a detailed study of the Severn and the Mersey barrages, as well as less detailed studies of the Wyre, the Duddon, the Conwy and the Loughor. As assessment of the overall UK potential was also undertaken, together with an underpinning programme of generic studies, largely addressing environmental issues.

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In July 1993, the Conservative Government announced the programme's closure. Energy Paper 62, a Government evaluation of the prospects for renewable energy published in 1994, estimated the total accessible resource at about 50 TWh per year—about 12 per cent. of our current electricity supply. Ninety per cent. came from eight larger sites and the rest was distributed across about 30 smaller sites around the country. Of the total, less than 40 per cent.—19 TWh a year—was available at less than 10p per kWh at 1992 prices, using an 8 per cent. discount. At the time, it was not seen as attractive as other options. Potential non-energy benefits were seen as relatively small, as was the potential for reducing costs.

The Severn was the largest potential project studied and the total cost of the Severn evaluation programme was £8 million, of which the Government provided £4.8 million. With a capacity of nearly 9,000 MW and an output of 17 TWh per year—more than 4 per cent. of total current UK supply—the Severn barrage would be one of the largest civil engineering projects in the world and by far the largest renewable energy generation scheme in the UK. It would mean building a 10-mile barrage between the Severn estuary and the Bristol channel, just downstream of a line between Cardiff and Weston-super-Mare, enclosing about 140 miles of coastline.

At 1994 prices, the cost of generation was estimated at 7.5p per kWh at an 8 per cent. discount rate, rising to 17p per kWh at a 15 per cent. discount rate, excluding grid reinforcement costs. As with all such capital-intensive schemes, generation costs are highly sensitive to the discount rate.

In July 2001, the Government commissioned the Severn tidal power group, an industry grouping that co-sponsored the earlier programme, to undertake a short study of the project to establish whether developments since 1994 justified a more substantial review of the project and to define what issues such a review would need to cover. The report was published last month, making it clear that significant changes have occurred that would affect the scheme, though not all point in the same direction.

Since 1989, the cost of power generation has gone down and the completion of the second Severn crossing has reduced the potential benefits of a road crossing over the barrage, while existing and planned increases in the size of shipping using the Bristol channel and the Severn estuary could have a significant impact on the scheme, throwing into doubt the size of the shipping locks in the earlier design. Any restrictions on the port of Bristol would have severe commercial consequences. We have also, of course, become much more aware of environmental issues, as other Members mentioned earlier.

There is no doubt that, with the loss of approximately 65 per cent. of the inter-tidal area, a barrage would have a major effect on the ecosystems of the Severn estuary. Constructing the barrage would result in the loss of the unique tidal nature of the estuary and cause major problems for migratory fish such as salmon. The Environment Agency believes that substantial environmental loss to conservation and biodiversity would be likely.

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However, the study group pointed to the likelihood of increasing flood damage in the Severn estuary due to global warming, and therefore pointed out the possible additional benefits of the barrage in protecting the Severn valley. I should note, however, that although the barrage would afford protection against tidal surges, the Environment Agency believes that that would be a very expensive way to provide flood protection.

The study estimates that the cost of the scheme would be between £10 billion and £14 billion at 2001 prices. Pre-construction activities, including a £30 million environmental assessment, might cost £300 million over five years, and construction would take a further five to seven years until barrage closure, with full power generation about two years after that. Those are significant sums by any stretch of the imagination. However, peak employment during construction might reach 30,000 to 40,000 people, about half of whom would come from the Severn side.

The report suggests that the project might be financed by the private sector through the bond market over 40 years or more at a cost equivalent of about 6p per kWh. That would, however, be about twice the amount of UK sterling project bonds issued to date, and it would require a high degree of security in terms of the future income stream from the project. The study group suggested that that could be achieved by a public-private partnership contract let by the Government or by underpinning obligations for the purchase of the output. In effect, the private sector would underwrite the construction risk, but the Government would underwrite the future income stream needed to secure the project's financing.

Huw Irranca-Davies : I am sorry to intervene in such a time-limited debate. Will the Minister acknowledge also that the nature of the project is such—it involves proven technology—that there is less long-term risk? It would not be like other PPPs or large schemes such as the channel tunnel, because it does not have that element of risk.

Mr. Touhig : That would depend on when the project started, were it to go ahead, and on design costs and the market. If there were to be a public-private partnership, we would have to make a commercial judgment on that matter. It is clear, therefore, that the project would not proceed on a fully commercial basis in the private sector.

On the basis of the study, the group concludes that a more substantial reappraisal of the project would be needed. The Government have not yet reached such a conclusion, but plan to set out their policy towards large-scale tidal barrage developments in the forthcoming White Paper, which will be music to the ears of my hon. Friend.

The further studies recommended by the report would cost about £3 million, although, as has been made clear, much larger sums would be needed for a complete environmental appraisal. We are considering whether that would represent good value for money. Clearly, I cannot pre-empt the publication of the White Paper, but in reaching our conclusion we will take full account of the report and of the views expressed in the debate.

I conclude by emphasising the Government's commitment to renewable energy. We have set ambitious targets, and believe that this is an exciting

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time for renewables. The Government are determined to push forward on that agenda. Our task in meeting the demanding targets that we have set requires the vision to carry forward our objectives and to turn that potential into reality. There are many barriers in our path, but the rewards are immense—reliable sources of clean energy, a reduction in carbon emissions and a developing renewables industry will be crucial to our country's future. We all need to work together to achieve that.

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I commend my hon. Friend for securing the debate, and I am grateful to him and to other Members for their contribution. I am sorry that there was not sufficient time to give a fuller reply. We must await the White Paper's publication to see whether it sheds any light on my hon. Friend's ambitions for the Severn barrage.

Question put and agreed to.

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