Appendix: Government Response
The Government welcomes the Committee's report on
"A Severn barrage?" (HC 194), published on 10th June
2013.
The Government has clearly set out its position with
respect to a Severn barrage. Following its extensive feasibility
study of Severn Tidal Power (STP) the Government concluded in
2010 that it did not see the strategic case for public investment
in a Severn barrage. It has not, however, ruled out a privately
funded scheme coming forward.
The Severn estuary has great potential. However,
the Government recognises that a traditional tidal barrage is
not the only way of exploiting the outstanding resource of the
Severn estuary.
The Government remains keen to hear about well-developed
proposals for harnessing the power of the Severn estuary - be
it through a barrage or other means.
However any such scheme would need to credibly demonstrate
strong evidence of value for money, economic benefits, energy
saving and environmental impact mitigation before the Government
could take a view on its potential.
It is clear from the report that the Energy and Climate
Change Committee shares the Government's view on the level of
development of the Hafren Power proposal. In its current form,
the Hafren Power proposal for a Severn barrage does not demonstrate
that it could deliver the benefits it claims it would achieve.
The Government's response sets out a number of the ways in which
Hafren Power would need to improve its proposal for it to merit
further serious consideration.
In its report, the Committee raised a number of detailed
comments and recommendations. These are considered separately
below.
Transparency and public consultation
1. Robust and credible evidence is fundamental
to building trust and reassuring key stakeholders, particularly
for an unprecedented and huge project such as the proposed Hafren
Power barrage. We support the calls for further evidence and technical
detail of the proposal in order to arrive at an informed decision.
We recommend that such evidence is placed in the public
domain as soon as possible if stakeholder confidence is to be
established and in order to promote maximum transparency. (Paragraph
16)
The Government agrees with this statement. Given
the significance of a project such as a Severn barrage and the
broad interest it will generate across wide stakeholder memberships,
it is vital that transparency and good communication should underpin
the development of any such proposal.
The Government has been pleased to see that Hafren
Power have shared their full Business Case with the Committee
and have published a redacted version of it on their website.
The Government encourages the consortium to continue ensuring
transparency and good communication with their stakeholders and
the public.
2. We further recommend that Government
makes clear to Hafren Power that no further consideration will
be given to their proposal until and unless the additional information
requested has been provided. (Paragraph 17)
The Government has made it clear to the Hafren Power
consortium that it would need to see much more detailed, credible
evidence of their proposal before it would consider it further.
The type of information the Government would expect to see in
support of such a proposal includes:
- In-depth study of environmental
impacts. This would require both baseline studies and estimation
of likely effects.
- Detailed environmental compensation and mitigation
plans.
- Further information on turbines including: modelling
of impacts, plans to move from concept stage to commercialisation,
including in-situ testing.
- Gaining commitment to the project from low head
turbine manufacturers.
- Evidence to substantiate claims of how much of
the proposed benefits can be delivered.
- Extensive stakeholder consultation including
a clear, understandable breakdown of the level of public support
the developer thinks they would need and a thorough, robust evidence
base to support this.
- Analysis of impacts on upstream ports and navigation
and mitigation plans.
- Detailed evidence supporting job creation figures.
- Detailed evidence of the flood impact figures.
The Government is prepared to further consider the
Hafren Power proposal once this information is provided.
3. We consider Hafren Power's expected timetable
for the passage of a Hybrid Bill completely unrealistic. We note
that the Hybrid Bill route does not offer an open and fully accountable
process for stakeholders and affected parties. An application
via the Planning Act 2008 may provide a more suitable legislative
vehicle for a barrage project. Clearer guidelines on due process,
expected timescale and the information required by Government
under different legislative routes, and particularly under a Hybrid
Bill, would be helpful for both stakeholders and developers. (Paragraph
22)
The detailed process and requirements for an application
under the Planning Act 2008 are set out in secondary legislation,
and explained in DCLG guidance notes and advice notes issued by
the National Infrastructure Division of the Planning Inspectorate.
Detailed information is available from the Planning Inspectorate
website.[1]
The Government would expect an application for an
installation of this type to be accompanied by an Environmental
Statement (ES) to comply with the Environmental Impact Assessment
(EIA) Directive. A Report on Consultation, demonstrating how the
proposal has taken account of the outcome of consultation, and
a Habitats Regulations Assessment of the effect of the proposal
on protected sites would also be required.
The expected timescale for a proposal to be consented
under the Planning Act regime would be approximately 2 years for
the pre-application consultation process, 9 months for application
and examination, 3 months for the PINS recommendation and 3 months
for the Secretary of State to determine the application. This
means that the earliest a formal application under the Planning
Act 2008 would be is in Summer 2015 (and, since the EIA will require
detailed studies of migrating and breeding birds and fish to establish
a proper baseline, which are unlikely to be able to begin until
Autumn 2013, then cover the breeding season of Spring/Summer 2014,
this may be optimistic). If an application was submitted by Summer
2015, we would expect it to be determined by mid-Autumn 2016.
As the Minister noted in his oral and written evidence,
the process for a Hybrid Bill is not specified by legislation.
Before considering the introduction of a Bill, the Government
would need to be persuaded, on evidence presented by Hafren Power,
that the proposals would be viable. In order to reach such a conclusion,
the Government would require much of the same information to that
required to support an application for development consent, including
evidence of the environmental impact of the proposal and of wide
public engagement. It would further require satisfactory resolution
of the level of Government support through Contracts for Difference
(CfDs).
The Government would not expect to lay a Bill before
the ES was received. Preparation of an ES is likely to take the
same time as for an application under the Planning Act 2008, i.e.
around 2 years, with the earliest possible completion date therefore
being Summer 2015.
A slot in the legislative programme would need to
be identified with Parliamentary Business Managers. It is likely
that, even if time is found, this would not be before Autumn/Winter
2015, at the earliest. Depending on the complexity of the Bill
(which is likely to need to cover, as a minimum, the same issues
as a Development Consent Order under the Planning Act 2008, including
all the relevant deemed planning permissions and other licences)
it could take longer.
As noted in the report, there have been very few
similar Bills to act as indicators of how long it might take for
the Bill to complete the Parliamentary process. This would likely
be at least a year, but it could extend to three or four years.
This would indicate a time frame for Royal Assent, if such a
Bill was introduced and enacted, between early 2017 and 2020.
Costs and value for money
4. We recommend that Government ensure that
levelised cost of energy analysis reflects a fair appraisal of
long-term cost and power generation, which takes into account
the full lifecycle of marine energy projects. (Paragraph
28)
The Department of Energy and Climate Change employs
a flexible approach in calculating generation costs for Tidal
Range projects, reflecting the uncertainty in this emerging technology.
DECC's Electricity Generation Cost publication[2]
draws on the Ernst & Young/Black & Veatch approach[3].
This assumes a 40 year financial life in levelised cost of energy
calculations, despite project lifetimes potentially exceeding
this. Ernst & Young / Black & Veatch cite uncertainty
in policy frameworks supporting generation over longer lifetimes,
discounted cashflows making minimal impact past 40 years, and
unknown timing and costs of project refits that may be required
sometime after 40 years. This methodology is used to provide an
illustrative estimate of levelised cost of energy for the tidal
range (barrage) industry.
DECC's latest estimates of levelised cost of energy
for the Severn Barrage[4]
were calculated on a project lifetime basis, reflecting the availability
of information on a project basis to enable this approach.
This flexibility in methodology when looking at both
illustrative and project specific cost estimates for tidal range
projects will continue to be reflected in DECC's approach.
5. We believe that the strike price for the barrage
would have to be considerably higher than the £100/MWh which
Hafren Power have "in mind". Furthermore, the company
say they would require this price to be guaranteed for 30 years,
twice as long as an offshore wind project. It is unsatisfactory
that such wide-ranging figures have been cited regarding the level
of Government support required for a barrage. As a minimum, the
strike price for barrage-generated electricity should not be higher
than that for offshore wind, which is expected to be around £100/MWh
by 2020. While the use of novel turbines and updated design may
indeed provide savings in barrage construction, it is very unlikely
that the Hafren project will be financially viable with a strike
price at this level. If a higher strike price was offered, it
would risk swamping the Levy Control Framework to the detriment
of other low-carbon technologies. Claims by Hafren Power of long-term
affordability are too distant and uncertain a prospect to overcome
more immediate economic, environmental and local concerns. (Paragraph
34)
It is not for Government to comment on what level
of revenue support would make a privately funded project economically
viable. Without further detailed evidence on the design of the
project it is difficult to assess whether Hafren Power claims
of the strike price they may require can be substantiated.
As part of its June announcement, the Government
stated that is was not intending to set a strike price for tidal
range projects for the first Electricity Market Reform delivery
plan period running to March 2019. This is due to the lack of
cost data available for tidal range projects, including a potential
Severn barrage. Instead, Government will consider how best to
price CfDs and the appropriate length of contracts for tidal range
projects, on a case-by-case basis.
In any case, the relative value for money of a Severn
Barrage would need to be assessed alongside other low carbon generation
competing for funding in the Levy Control Framework (LCF).
6. We do not believe that potential collateral
benefits should be factored into any strike price negotiations.
In the case of the Hafren scheme, significant uncertainty remains
regarding whether such savings would in fact be made, and there
is a lack of consensus regarding the impact of a barrage on flooding.
The support available via Contracts for Difference comes directly
from consumers via their energy bills. Any flood defence savings
made as a result of projects supported will not accrue to bill
payers but to the Exchequer. We recommend that the savings
from any potential reductions in Government spending are disregarded
when negotiating strike price. (Paragraph 37)
The strike price is set on the basis of the cost
of building and operating specific technologies or generation
assets in order to meet Government electricity objectives.
It does not include secondary or collateral costs/benefits which
might arise from a project such as potential flood savings. On
that basis, we would not take into account flood savings or any
other collateral costs/benefits in setting a strike price for
the barrage.
7. While we do not share these concerns regarding
foreign investment, and indeed welcome investment in renewable
projects from private sources, all efforts should be made to ensure
maximum UK content if the project is taken forward. (Paragraph
38)
The Government agrees with this statement. We welcome
foreign investment in UK energy and infrastructure projects. However
it is clearly desirable that these investments come with a high
UK content and creation of UK growth and jobs.
Given the current level of detail of the proposal
it is difficult to assess the validity of Hafren Power's claim
that 80% of the investment in their project would remain in the
UK.
8. The Committee notes that the current mechanisms
to support large renewable projects are limited in scope, and
that support under CfDs will be limited by the Levy Control Framework.
While private finance offers a welcome boost to infrastructure
investment, particularly during the economic downturn, projects
will inevitably need to provide an attractive return to investors
and the future cost of such finance remains uncertain. We are
not convinced that Hafren will be able to raise the funds needed
for their project as easily and cheaply as they claim. (Paragraph
41)
To date, Hafren power have not presented the Government
with compelling evidence of their likelihood of raising the necessary
levels of finance for such a project.
9. Hafren Power's proposals will require massive
support under the Contract for Difference (CfD) mechanism and
for a much longer period than alternative low-carbon technologies.
Currently it is unclear whether the company's proposal would be
eligible for such support since it has yet to prove value for
money compared with other low-carbon sources. Until the company
is able to provide stronger evidence of interest from investors
and of the basis for its claimed costings, the economic viability
of the project will be in doubt. (Paragraph 42)
The Government agrees that without further evidence
it is not possible to assess the economic viability of the project
nor the level at which it should be supported. We refer the Committee
to our answer to paragraph 34 above.
Environmental impacts and mitigation
10. We conclude that the environmental impacts
of the Hafren Power barrage, as currently presented to us, are
very considerable and that there is a high risk of unintended
and possibly damaging consequences. We also conclude that Hafren
Power has not presented sufficient credible evidence relating
to estuary morphology, impacts to habitats and upstream fluvial
flood risk. Further data, research and modelling will be required
before impacts in these areas can be assessed with any degree
of certainty. (Paragraph 50)
11. We therefore conclude that the usefulness
of international comparator sites is limited as a result of differences
in estuary characteristics and scheme designs. (Paragraph 53)
12. We note that the Environment Agency claims
that it is "not aware of any turbine
designs which would allow the safe, repeated passage
of fish through a barrage at the
scale proposed." While claims that a barrage
would lead to very extensive fish
mortality may be exaggerated, existing figures
of low level fish mortality tend to
derive from a single species and do not encompass
the diversity of species found in
estuaries. Studies have largely focused on only
direct mortality. However initial
studies on indirect mortality suggest it may constitute
a significant source of overall
mortality. Field testing a prototype in an estuary
on a range of fish species and sizes
will need to be carried out before the claimed
"fish-friendliness" of Hafren Power's
proposed turbine can be determined. (Paragraph
57)
The Government agrees with the above comments. It
is for the developers to do the necessary work to prove that their
design is 'fish-friendly' and will not jeopardise the UK's obligations
under the Water Framework Directive and Habitats Directive. Such
studies will need to take account of the wide variation in vulnerability
of different fish species arising from to their different morphology,
physiology and behaviour.
13. Before giving further consideration to the
project, the Government should establish greater clarity in the
terms and application of the Habitats Directive to major renewable
infrastructure projects, in particular regarding the derogation
process and principle of 'Imperative Reasons of Overriding Public
Interest' (IROPI). (Paragraph 67)
Compliance with the Habitats Directive must be judged
on a case-by-case basis as the impacts of a project can vary considerably
between similar projects depending on factors such as their scale,
location and the exact technology used. It is therefore hard to
provide detailed clarity on how the Directive would apply to what
is still a hypothetical, very high level proposal. We would expect
the European Commission to ask for much more detailed proposals
before discussing the detailed application of the Directive in
respect of issues such as 'like for like' compensation.
The Government is however committed to making its
general guidance on the Directive clearer and the IROPI principle
is the subject of published DEFRA guidance[5],
including advice on how and when the IROPI test should be applied.
This sets out that 'plans and projects which enact or are consistent
with national strategic plans or policies (e.g. covered by or
consistent with a National Policy Statement or identified within
the National Infrastructure Plan) are more likely to show a high
level of public interest.' Renewable energy projects are therefore
likely to show a high level of public interest given EU level
targets and the duties set out in the Climate Change Act. However
this does not mean all renewable projects can automatically go
ahead. The developer also needs to be able to show there are no
alternative solutions and that they have secured compensation
that will maintain the integrity of the Natura 2000 network.
14. Serious questions remain about the effectiveness
and feasibility of providing compensatory habitat on the scale
required for the proposed Hafren Power barrage scheme. While optimisation
of barrage design and operation offer possibilities for mitigation,
the requirements of the EU Habitats Directive are a significant
challenge. We note that smaller scale projects may face fewer
obstacles in achieving compliance with European legislation. (Paragraph
73)
The Government agrees - but given the sensitive and
highly protected environment of the Severn Estuary, any project
may face insurmountable obstacles unless IROPI can be clearly
demonstrated.
15. We appreciate the financial outlay implied
in, for example, developing a full Environmental Impact Assessment
of the proposed project. But it is clear that such a large-scale,
high risk and high cost project cannot go ahead in a designated
area without supporting evidence and assessments in place. Without
such evidence the project will not achieve political and public
acceptability. (Paragraph 74)
The Government agrees.
Socio-economic impacts
16. The Hafren Power barrage scheme could offer
significant benefits for the UK in terms of jobs and growth, with
the potential to reinvigorate the local economy. A tidal barrage
on this scale would highlight the UK's engineering capabilities
in the construction of large-scale renewable projects. (Paragraph
79)
The Government's STP feasibility study concluded
that a barrage could benefit the regional economy with net value
added to the economy and jobs created. However, these would have
to be balanced with potential negative impacts on the current
ports, fishing and aggregate extraction industries in the estuary.
The net regional benefits represented in the STP
study varied greatly (with construction jobs ranging from +5,300
to -2,200 (with a central estimate of +440 jobs) and GVA from
£5.9bn to -£1.5bn (with a central estimate of £2.1bn)).
Benefits and impacts from the current proposal would
differ depending on the specific features of the proposal including
adequate provision for sea-locks as well as location and scale
of manufacturing, supply chain etc. It is difficult to assess
what the job and economic impact of the Hafren Power proposal
will be in practice, not having seen detailed evidence behind
their headline figures.
Whilst a project of this scale could highlight UK
engineering capability, it is worth noting that the actual export
potential for such a project are likely to be limited, given the
maturity of the technology and the small number of sites around
the world with the combination of features to make a tidal barrage
viable.
17. Hafren Power has failed to reassure the ports
industry that its business would continue to be viable with a
barrage in place. Serious questions remain in regard to the barrage's
impact on water levels, shipping times, freight costs and siltation.
These will need to be fully addressed before impacts to the ports
can be accurately evaluated. (Paragraph 86)
The Government agrees with this observation.
Each of the issues identified, even taken alone, could have very
serious implications for the ports on either side of the Channel
and estuary upstream from the proposed Barrage. The ports
also identified the prospect of ship congestion at the lock system
as a potentially serious deterrent to the choice of these ports
by ship operators.
18. We therefore recommend that any claims
about job creation and economic benefit should be independently
verified, particularly with reference to the costs being borne
by energy users, with adverse impacts to existing industries factored
in to calculations in order to provide a robust assessment of
net regional economic impact. The employment benefit
of a barrage scheme is likely to centre around temporary jobs
during construction. The number of high-quality, permanent jobs
created by the proposals will be ultimately more significant.
(Paragraph 90)
The Government agrees that detailed evidence needs
to be provided to back up the Hafren Power proposal's headline
figures on jobs and economic benefits and that these should be
independently verified. These figures are unlikely to be refined
until greater clarity is provided on the actual design of the
scheme including, for example, on:
· choice
of turbine manufacturer;
· details
on turbine operations;
· details
on manufacturing and supply chain;
· adequate
provision of locks and other measures to mitigate impacts on ports.
Decarbonisation and energy security benefits
19. We accept that a tidal barrage scheme in the
Severn estuary could provide a reliable and predictable low-carbon
electricity supply, which could bring benefits for energy security.
Technological innovations such as smart grids, interconnection
and electricity storage could help to overcome the challenges
associated with tidal energy. (Paragraph 95)
20. We note the disparities in these carbon savings
assessments and the need to take into account a carbon payback
period. Carbon reduction offered by a barrage would nonetheless
be considerable. (Paragraph 96)
21. We conclude that the Hafren Power project
in its current form has not demonstrated sufficient value as a
low-carbon energy source to override regional and environmental
concerns. We agree with the Minister that, at present, the barrage
is not vital to meeting our 2050 carbon targets, for which alternative
pathways exist. On the basis of the evidence available, we further
conclude that the same or similar policy objectives could be delivered
through less environmentally damaging means and possibly at lower
cost. (Paragraph 99)
Government recognises the strong energy and climate
change benefits that a Severn Barrage could bring. It has summarised
these in our written evidence to the Committee. However these
cannot come at any cost. The Government agrees with the Committee
that the Hafren Power proposal in its current form does not credibly
demonstrate sufficient mitigation of the environmental and regional
economic impacts. Nor does it demonstrate sufficiently good value
for money for the consumers.
There are many ways in which the UK could meet its
decarbonisation targets. The focus is on technologies which can
allow us to meet these targets whilst balancing environmental
impact mitigation, economic benefits and value for money for the
consumer.
Barrage technology and alternatives
22. Although Hafren Power has assured the Committee
that it has included time for turbine testing and development
in the project timescale, we doubt that the two years proposed
will allow sufficient time for production of a novel turbine as
well as the necessary independent verification and trials. (Paragraph
103)
The Government agrees with this statement. It is
our understanding from discussion with technology developers that
such a novel turbine would take about 5-10 years to be developed,
verified and tested.
23. We conclude that a more incremental approach
using alternative technologies (such as tidal lagoons) may have
the potential to provide a lower-risk, lower-impact option than
the Hafren Power barrage scheme. Whether these alternatives offer
better value for money is far from clear at this stage. Any alternative
proposals to the Hafren Power scheme would need to demonstrate
the same robust evidence about the costs, environmental and socio-economic
impacts which we require for the Hafren Power scheme. We
recommend consideration is given to first developing a smaller
scale tidal project, in order to build a stronger evidence base
for assessing impacts, risks and costs before proceeding with
any larger scale scheme. The Government should take this into
consideration before approving the development of projects in
the Severn estuary. (Paragraph 114)
The Government agrees with this approach in principle.
A smaller-scale tidal range scheme could in particular provide
important information on the operation of the innovative turbines,
which Hafren Power proposes to use. It is worth noting, however,
that, given the considerable scale of a Cardiff-Weston type barrage
and the unique environment of the Severn Estuary, a smaller-scale
tidal range project would not necessarily provide wider evidence
readily comparable to the type of impacts from a larger scheme.
Smaller schemes, including tidal lagoons, are still
likely to be challenging and to have high capital costs. As set
out by the Committee, smaller schemes would also need to demonstrate
strong evidence of value for money, economic benefits, carbon
saving and environmental impact mitigation.
24. We conclude that the Government should continue
to examine the energy generating potential of the Severn region
in the event of Hafren Power's proposed barrage scheme not going
ahead. We therefore recommend that the Government consider
how a more proactive approach to Severn resource management could
stimulate growth in the marine renewables industry and drive forward
tidal projects in the region. (Paragraph 116)
There is a huge amount of potential energy in the
Bristol Channel and it is only right that the Government should
be seeking the best ways of extracting it. The Government's STP
study took an in-depth look at a number of tidal range options
for the Severn estuary.
The Government welcomed the RegenSW report on a balanced
technology approach in the Bristol Channel. The RegenSW report
goes some way in looking at the possible combinations of renewable
energy projects in the Bristol Channel to make best use of its
resource whilst considering environmental impacts and regional
industry concerns. Until concrete proposals are put forward by
developers, the Government doesn't see a strategic case for funding
further studies to examine the potential of the region at the
expense of the tax payers.
The Government sees the RegenSW report as a useful
framework against which developers can best consider the appropriate
use of resources in the Bristol Channel.
However, as many of these technologies are still
emerging or not cost competitive, it is not appropriate for Government
to take a directive approach. The Government sees this role as
most effectively achieved by the market. It is not for Government
to be directive over which technology solutions should be adopted
by developers at the outset.
The Government has set out the broad agenda for the
renewable energy mix it wants to see to the 2020s and beyond.
We are putting in place a framework for efficient support mechanism
through the Electricity Market Reform.
The Government is also fully committed to the development
of a UK wave and tidal stream industry. To date, it has provided
sustained and targeted support for the development of the sector
enabling it to move from initial concept onto prototypes and now
looking to support the first arrays. The support package is comprehensive
and larger than anywhere else in the world. In this spending period
alone £80m of public money will have been invested in the
sector. This has allowed the UK to maintain its standing as "the
destination" for marine energy.
The Government strongly believes that these energy
policies taken together will create an environment allowing winners
to emerge naturally.
However, it is vital that any proposal or set of
proposals demonstrate compellingly that they are viable, good
value for money for the consumer and environmentally responsible.
1 http://infrastructure.planningportal.gov.uk/application-process/the-process/
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2
https://www.gov.uk/government/organisations/department-of-energy-climate-change/series/energy-generation-cost-projections
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3 http://webarchive.nationalarchives.gov.uk/20121205174605/http:/decc.gov.uk/assets/decc/what%20we%20do/uk%20energy%20supply/energy%20mix/renewable%20energy/explained/wave_tidal/798-cost-of-and-finacial-support-for-wave-tidal-strea.pdf Back
4 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/50263/6_Impact_Assessment.pdf Back
5
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/82647/habitats-directive-iropi-draft-guidance-20120807.pdf Back
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