Tidal lagoon costs could beat all low-carbon alternatives

The cost of tidal lagoon power could fall "well below all other low-carbon technologies", a feasibility study has found.

A large-scale lagoon would require a lower strike price than either nuclear or offshore wind and would be even more competitive on cost over the full lifetime of the project, according to a government-commissioned review led by former energy minister Charles Hendry.

Over a 120 year life-span, Hendry said “the second half of the life of a tidal lagoon – that second 60 years – would generate very low prices indeed.

“The capital costs would have been paid off, there would be no further interest payments to be made and the subsidy period would have ended.”

On this basis, the cost of subsidising large-scale tidal lagoons would “fall well below all other low-carbon technologies”.

Describing his report’s findings at a launch event in London, Hendry said that, providing a successful pathfinder lagoon can be deployed in the UK,  subsequent large lagoons should be able to expect a Contracts for Difference (CfD) strike price averaging around “£70/MWh over the subsidy period.”

He claimed that the cost of future large scale tidal lagoons will have costs eight to ten per cent lower than for the pathfinder. This will be due to lessons learned and lower financing costs as well as the ability of large scale lagoons to “use higher tidal ranges and impound greater volumes of water”.

The UK’s tidal lagoon pathfinder project would be the 320MW Swansea Bay scheme, which is projected to cost £1.3 million to build. Hendry described the sceme as a “no regrets” option for the UK and urged govenrment to move forward “as swiftly as possible” with the provision of a subsidy agreement.

Swansea Bay’s developer, Tidal Lagoon Power, has proposed 90-year CfD, but this would be only partially indexed against inflation, unlike existing contracts, so the real value of the strike price would fall over time. Hendry suggested a 60-year contract this would be a more appropriate given the pitfalls of trying to forecast almost a century ahead.

“We’ve seen headline figures in the past of very high CfD strike prices”, he added. “That doesn’t take account of the digression over time because they are not fully linked to inflation.”

Strike price requirements for large-scale tidal lagoons over 90-year contract

Average strike price requirements for large-scale tidal lagoons over 90-year contract

Source: Hendry review, Tidal Lagoon Power figures

Average Contract for Difference cost per megawatt over projects full lifetime’s

Source: Hendry review