Energy Policy

– in the House of Commons at 4:55 pm on 25th June 2018.

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Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy 4:55 pm, 25th June 2018

Mr Speaker, I wish to make a statement about the proposed Swansea Bay tidal lagoon.

Britain’s energy policy on electricity generation is based on meeting three needs: ensuring that we can count on secure and dependable supplies of electricity at all times; minimising the cost of supplies to consumers and taxpayers; and meeting our greenhouse gas emission reduction obligations. To those three requirements we have added, through our industrial strategy, a further ambition, which is to secure long-term economic benefits, in terms of jobs and prosperity, from the decisions that we take.

Our policy has been successful. Britain has one of the most secure and reliable electricity supply sectors in the world. Last winter, one of the coldest in recent years, the margin of capacity in our electricity generating system was more than 10%—around twice what it was in 2016-17. We have the strongest record in the G7 for reducing our greenhouse gas emissions. Between 1990 and 2016, the UK reduced its emissions by more than 40%. We have massively increased our deployment of renewable generation: renewable electricity now makes up almost 30% of our generation; our renewable capacity has quadrupled since 2010; and in two years the auction price of offshore wind has fallen from £114 per MWh to £57.50 per MWh. Coal, the most polluting fuel, contributed less to generation in Britain last year than in any year since the industrial revolution. All that has been achieved while the UK has maintained a position in respect of electricity’s overall cost to households that is well below the average for major European countries.

Nevertheless, the cost of electricity is significant for households and for businesses, and the policy-related costs have been growing. We have made a clear commitment to bear down on those costs. It is in that context that the Government have assessed whether they should commit consumer or taxpayer funds to the programme of six tidal lagoons proposed by Tidal Lagoon Power Ltd, with the first being the proposed project at Swansea. We believe in renewable energy and we believe in the benefits of innovation. The conclusion of our analysis, which has been shared with the Welsh Government, is that the project and the proposed programme of lagoons do not meet the requirements for value for money, so it would not be appropriate to lead the company to believe that public funds could be justified.

The proposal for the Swansea tidal lagoon would cost £1.3 billion to build. If successful to its maximum ambition, it would provide around 0.15% of the electricity we use each year. The same power generated by the lagoon over 60 years for £1.3 billion would cost around £400 million for offshore wind, even at today’s prices, which have fallen rapidly and which we expect to be cheaper still in future. At £1.3 billion, the capital cost per unit of electricity generated each year would be three times that of the Hinkley Point C nuclear power station. The Hendry review found that if a full programme of six lagoons were constructed, the cost would be more than £50 billion, and it would be two and a half times what it would cost Hinkley to generate a similar electricity output. It is estimated that enough offshore wind to provide the same generation as a programme of lagoons would cost at least £31.5 billion less to build.

Taking all the costs together, I have been advised by analysts that by 2050 the proposal that was made, which would generate around 30 TWh of electricity per year, could cost up to £20 billion more to produce, compared with generating that same electricity through a mix of offshore wind and nuclear, once financing, operating and system costs have been taken into account. That could cost the average British household consumer up to an additional £700 between 2031 and 2050, or the equivalent of £15,000 for every household in Wales. However, in recognition of the potential local economic benefits that might result from a lagoon in Swansea, I asked officials to go back to consider what additional benefit could be ascribed to a number of other factors, including a beneficial impact on the local economy. For £1.3 billion, a Swansea lagoon would support, according to the Hendry review, only 28 jobs directly associated with operating and maintaining the lagoon in the long term.

Officials were also asked to make an assessment of the potential for valuable innovation and cost reductions for later lagoons that might come from embarking on a programme of construction. Independent advice concluded that the civil engineering used in Swansea bay offers limited scope for innovation and capital cost reduction—estimated at 5%—in the construction of subsequent facilities.

I asked for an assessment of the export potential of embarking on a programme of implementing the technology, but the Hendry review concluded that it would take

“a leap of faith to believe that the UK would be the main industrial beneficiary” of any such programme. On energy reliability, the generation of electricity would be variable rather than constant, with a load factor of 19% compared with around 50% for offshore wind and 90% for nuclear.

The inescapable conclusion of an extensive analysis is that, however novel and appealing the proposal that has been made is, even with these factors taken into account, the costs that would be incurred by consumers and taxpayers would be so much higher than alternative sources of low carbon power that it would be irresponsible to enter into a contract with the provider. Securing our energy needs into the future has to be done seriously and when much cheaper alternatives exist no individual project and no particular technology can proceed at any price. That is true for all technologies. The fact that this proposal has not demonstrated that it could be value for money does not mean that its potential is not recognised. My Department is also in receipt of proposals from other promoters of tidal energy schemes that are said to have lower costs than the Swansea proposal, although these are at an earlier stage of development. Any proposals must be able credibly to demonstrate value for money for consumers and public funds.

I am sure that many people in the House and beyond would wish that we were in a position today to say yes to the Swansea proposals. I have appreciated the contribution of Charles Hendry, whose constructive report led to this further analysis being made, and the engagement of the Secretary of State for Wales and Members of the Welsh Assembly, including the First Minister and the Leader of the Welsh Conservatives, Andrew R. T. Davies. All of us have a requirement to be responsible stewards of taxpayers’ and consumers’ money and to act at all times in their interests. It is in discharging that responsibility rigorously that I make this statement today, and I commend it to the House.

Photo of Bill Esterson Bill Esterson Shadow Minister (Business, Energy and Industrial Strategy), Shadow Minister (International Trade) 5:02 pm, 25th June 2018

I thank the Secretary of State for the somewhat late advanced sight of his statement—I think we understand why—and give the apologies of my hon. Friend Dr Whitehead who would normally respond to this statement, but who is a victim of the Transport Secretary’s failure to run the trains on time; a failed policy if ever there was one. I am afraid that this statement is evidence of yet another failed Government policy; it is a missed opportunity for the domestic economy and for our export potential.

The Government really should be ashamed about what we have heard from the Secretary of State today. When he announced the cancellation of the project, my hon. Friends said, “Shame”. They were right to do so as this is indeed shameful. It is another broken promise by the Conservative party—we have seen lots of those recently, too. I remind the House that, in 2015, the Conservative manifesto committed to building the Swansea Bay tidal lagoon. The Government appointed Charles Hendry to produce a report to do just that. It has been one year, five months and 14 days since he published his final report. The report stated:

“The aim now is that we should move to secure the pathfinder project as swiftly as possible.”

During this time, the Minister has received letters signed by more than 100 MPs from all parts of the House in support of the project, along with interventions and questions indicating the strength of feeling in this place. There has been unanimous support from across industry, but the handling of the project by this Government has been atrocious. Not only have the Government taken an inordinate amount of time to come to the House; hon. Members, Tidal Lagoon Power, the Welsh Government, the trade unions and other stakeholders have been left to find out about development through leaks in the press

It emerged in a joint hearing of the Business, Energy and Industrial Strategy Committee and Welsh Affairs Committee last month that a BEIS Minister had not spoken to Tidal Lagoon Power for 16 months. Will the Secretary of State set out how we can trust his word that he wants to talk to other marine developers and bring forward the other projects to which he referred in passing, when his Department has not even spoken to Tidal Lagoon Power for more than a year? This is no way for the Government to conduct themselves over an issue that is so important for Wales, our environment and the whole wider UK economy.

Approving the lagoon would have been a positive step, taken by a Government with a clear vision for the future, willing to lead the way in new, innovative technology and strongly supporting British industry. It would have been a step taken by a Government able to provide businesses with certainty in uncertain times, rather than the insulting, undermining and questioning rhetoric that we have heard from the Secretary of State’s Cabinet colleagues. We have heard a lot from him and his colleagues about the industrial strategy and supporting new technologies, revitalising our manufacturing sector, encouraging UK-based supply chains and creating jobs outside London. Well, so much for that industrial strategy. Swansea Bay tidal lagoon could have helped to deliver on each of these objectives, so will the Secretary of State outline which assessment criteria were used to decide against the project, over and above a simple cost calculation?

The project would have required 100,000 tonnes of steel, with a significant proportion expected to be produced nearby at Port Talbot. It would have used first-of-a-kind, precision-engineered, bi-directional turbines, with the vast majority of components built in the UK, establishing new UK-based supply chains. It would have created more than 2,300 jobs in Swansea and paved the way for the creation of a new domestic industry with substantial export potential. The Hendry review was commissioned by the Government. Given that the Secretary of State is ignoring his own review, what alternative analysis did he carry out to support his decision to cancel the project? That this Government, especially in the excessive time that they have taken to make a decision, do not value the wider benefits of the project is disappointing to say the least.

One very good way of offsetting the impact on climate change of expanding airport capacity would be to expand renewable energy production. Is not it remarkably ironic that this statement has been made on the same day as the Heathrow vote? There is a fine judgment to be made on Heathrow tonight. Giving the go-ahead to the Swansea Bay tidal lagoon would have made supporting Heathrow just that little bit easier.

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

On the hon. Gentleman’s last point, my understanding is that the Welsh Government support the option of a third runway at Heathrow; I am not sure whether that is a co-ordinated position.

The hon. Gentleman asked a number of questions. I understand his disappointment that we have not been able to approve the proposal, but he will know that we all—be it the UK Government or the Welsh Government —have to be responsible stewards of taxpayers’ and consumers’ money. He asked about the analysis that has been made and the time that has been put into this decision. It was the request of the Welsh Government and the recommendation of Charles Hendry that we consider alternative suggestions as to the economic impact of the proposal. That is what we have done, and I have been willing to extend the analysis and leave no stone unturned to see whether this project can be approved.

The hon. Gentleman knows that our record on renewables is one of the strongest in the world, particularly for offshore wind, in which Wales—as well as every other part of the United Kingdom—is a huge beneficiary. We have quadrupled our deployment of renewables since 2010. We are the world’s leader in offshore wind, creating jobs and exports around the world. If we were to use the funds at less value for money—that is, take them from that very successful supply chain and deploy them instead to the programme of a tidal lagoon—the consequence would be job losses in Wales and other parts of the United Kingdom. It is the commitment to continue what has been a successful strategy of achieving jobs all around the country in offshore wind that provides the reason why we need to be rigorous about this.

Listening to the hon. Gentleman, one would think that what ordinary working people and businesses have to pay for their energy is a matter of complete indifference to him. Is there any limit at all to what he would he would make consumers pay? The Swansea lagoon would cost three times as much—I repeat, three times as much—as having the same electricity generated by offshore wind here in the UK. The whole tidal programme would cost £50 billion when we could have the same amount from wind for nearer to £20 billion. Is it Labour’s policy to charge £700 per household more than is needed in the first place? As for economic development in Wales, it would be cheaper to write a cheque for £15,000 to every single household in Wales than to subsidise this particular proposal. I am afraid that his response sums up the approach of spending whatever it takes, no matter how wasteful of consumers’ and taxpayers’ money that is.

The hon. Gentleman talks about industrial strategy, but the clue is in the word “strategy”. A strategy does not spray consumers’ or taxpayers’ money on any proposal—it requires a rigorous assessment. We are a leader in offshore wind because we took a decision to focus on a technology for which costs could come down and there was a massive global market in which we could create jobs. What he proposes would reverse that by doling out subsidy to whoever asks loudest, rather than what has been rigorously assessed. That is not strategic.

In summary, Labour would pay £700 per household for less reliable electricity, fewer exports from offshore wind and fewer jobs, including in East Anglia, on Teesside and in Scotland—and, yes, in Wales and Northern Ireland, too. It would saddle taxpayers with a decommissioning cost of over £1 billion. We will always put the interests of taxpayers, and working people who pay bills, first. I would hope that a responsible Opposition would acknowledge the seriousness of the analysis that has been made and recognise that its conclusion is rigorous.

Photo of Stephen Crabb Stephen Crabb Conservative, Preseli Pembrokeshire

Even Conservative Members who have been the strongest supporters of the lagoon project have always known that there was a serious value-for-money question to be answered. Will my right hon. Friend confirm that every single avenue was explored to try to find a financial solution to make this happen, and that today’s announcement does not close the door on future investment in tidal and wave power that would give us reliable, clean energy into the 21st century and beyond?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

I can confirm that. Anyone who has concentrated on this proposal and seen the assessment that has been made would conclude that my hon. Friends and I have left no stone unturned in looking at all possibilities that might improve the economic case. However, when the conclusion is that something is so much more expensive than other low-carbon technologies, we have to follow that evidence and protect consumers and taxpayers from paying so much more than they need to pay. My right hon. Friend is absolutely right that we continue to believe in innovation. We have spent £100 million on new energy research and development. We will continue to do that. We have had other proposals that suggest they would be cheaper. I am very happy to continue work with other promoters of schemes to see whether what would be an attractive proposal can be implemented in a way that would be value for money.

Photo of Drew Hendry Drew Hendry Shadow SNP Spokesperson (Business, Energy and Industrial Strategy)

I thank the Secretary of State for advance sight of his statement.

Eighteen months ago, an independent review commissioned by the UK Government said that moving ahead with the Swansea Bay tidal lagoon would be a “no regrets policy”. Well, plenty of people are regretting this decision today. The Welsh Government were willing to put £200 million into the scheme if it went ahead. It was described as a world-leading opportunity to establish Wales as a centre for expertise and manufacturing, and a long-term source of low-carbon energy. This statement is, yet again, pulling the plug on a Tory promise.

In Scotland, we know how Wales feels. We witnessed the promised £1 billion for carbon capture and storage in Peterhead being pulled for no good reason, stunning both the public and the companies that had bought into the promise, surrendering the technological lead, and costing the taxpayer £100 million. Now it is back—it is flavour of the month—but, of course, grossly underfunded. Here we go again.

The Secretary of State hides behind the scale when making the comparison. He says that he cares about consumers, but this Government are happy to see bill payers paying through the nose for the calamitously bad deal that is Hinkley C. The Government’s disastrous deal with EDF on the strike price will see them pay at least £30 billion over 35 years. At a time when offshore wind strike prices are dropping dramatically, they seem to waste more and more on failing nuclear.

Will the Secretary of State confirm that this and other renewable support is being withdrawn in order to subsidise the likes of Hitachi’s Wylfa nuclear plant? That company has requested loans and guarantees of £12 billion, as per the secret negotiations. Will he admit that this is yet another mistake, and will he have the backbone to categorically rule out any other public bail-outs for failing, costly and desperate nuclear providers?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

The hon. Gentleman represents a country that has prospered from the development of the offshore wind industry. The truth is that if a decision had been taken to subsidise this proposal, that money would have come out of the budget for offshore wind, which would have led to job losses in Scotland and elsewhere around the United Kingdom. He mentions a proposed subsidy. The truth is that if a project that is not viable is subsidised by the taxpayer, it is simply a taxpayer-subsidised unviable project. That is no basis on which a project can be approved.

The hon. Gentleman refers to the nuclear power programme. If he regards the price agreed for the power from Hinkley Point C as too high, that is all the more reason for him to oppose this proposal, because it is so much costlier. He must accept that there is a responsibility for the use of consumers’ and taxpayers’ money that comes with being in office. When a proposal is so out of kilter with what can offer value for money, the necessary decision must be made, and he should respect that.

Photo of John Redwood John Redwood Conservative, Wokingham

I accept that, on the Secretary of State’s figures, this would be a very bad investment, but can he tell us about the amortisation period of the investment? Surely a barrage will last a lot longer than, say, a wind farm. Will he explain why his advisers think that the project would generate so little power on a not very reliable basis, given the reliability of the tides?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

My right hon. Friend is correct to point to the amortisation. As someone who has spent a career in finance, he is aware that in discounting the value of earnings in future generations, the great majority of the value is in the earlier years, and that has been the standard basis of the assessment made. What has not been taken into account is the prospective decommissioning cost of the proposed lagoon, which has been estimated at £1 billion. That has not been included in the analysis, but it would be a further liability for the taxpayer.

Photo of Rachel Reeves Rachel Reeves Chair, Business, Energy and Industrial Strategy Committee, Chair, Business, Energy and Industrial Strategy Committee, Chair, Business, Energy and Industrial Strategy Committee

I have to say that I am slightly surprised by the Secretary of State’s tone. In answer to Drew Hendry, he said that this project was “so out of kilter” with other ways of producing energy and that the costs are much higher. In that case, can I gently ask why on earth it has taken five years to come to this decision? What lessons has the Secretary of State learned from the decision-making process around the tidal lagoon project? Frankly, a lot of effort has been put into this project by business, the Welsh Government and others, and I think that many people have lost confidence in the Government’s programme for renewables because of this.

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

The hon. Lady will know, as Chair of the Business, Energy and Industrial Strategy Committee, that the Government’s programme of renewables has resulted in the biggest reduction in the cost of the deployment of renewables that we have seen in this country, and that deployment has increased threefold. The success of that strategy is evident. I was asked by many Members, the Welsh Government and many businesses to make sure that every aspect that could contribute to a value-for-money case had been considered —the impact locally, the prospects for exports and the prospects for innovation—and it was right to do so and to leave no stone unturned. I think that that was the right approach, and when the Select Committee scrutinises the decision, I think it will regard the process as having been exhaustive and rigorous.

Photo of David Davies David Davies Chair, Welsh Affairs Committee, Chair, Welsh Affairs Committee

Does my right hon. Friend agree that the relentless criticism by environmental groups and Opposition Members of the £92.50 per megawatt-hour strike price for Hinkley—not least in this House a few weeks ago—has made it virtually impossible for any Government ever to agree to pay a higher strike price than £92.50, and that this project was coming in at a significantly higher price, according to the person responsible for it?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

I saw the evidence given to the Committee inquiry chaired by my hon. Friend and Rachel Reeves. He is right that we made a commitment, in approving Hinkley Point C, that future projects had to come in at a lower price. I think it is the case that evidence to the inquiry cited a strike price on a comparable basis of not £92.50, but £150, which demonstrates the force of my hon. Friend’s point.

Photo of Edward Davey Edward Davey Liberal Democrat Spokesperson (Home Affairs)

I was Secretary of State for Energy when the tidal lagoon story began, so may I tell the current Secretary of State with responsibility for energy that his statement is wrong, wrong, wrong? The evidence that the price of future tidal lagoons would fall dramatically after the first lagoon at Swansea is overwhelming. That was exactly what happened with other renewable technologies, including offshore wind, as he has admitted. Will he promise the House today that he will publish every scrap of evidence and analysis that he has used to take this decision, and hold a debate in Government time on that analysis and evidence?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

The right hon. Gentleman will see from the analysis, and indeed from the conclusions that Charles Hendry and others have pointed to, that the technology inherent in the construction of the lagoon programme—whether building sea walls or the turbines—is not subject to the same degree of cost reduction as other energy technologies. We will be very open about this and publish whatever is not covered by a non-disclosure agreement with the companies concerned. He is, of course, welcome to scrutinise that.

Several hon. Members:


Photo of Eleanor Laing Eleanor Laing Deputy Speaker (First Deputy Chairman of Ways and Means)

Order. The Secretary of State has been very thorough in answering questions but, as the House can see, a great many people wish to ask questions. We have about 20 minutes left for the statement, which will allow everyone to get in if we can have just short questions and short answers.

Photo of Richard Graham Richard Graham Conservative, Gloucester

I have to say that this is a sad day for Swansea, for Gloucester—the home of Tidal Lagoon Power plc—and, indeed, for other innovative sources of marine energy more widely. Since the project was entirely financed by entrepreneurs and institutional investors, not by the Government, the only real point of argument was the price at which the Government were prepared to buy the energy through the grid. Will the Secretary of State tell us at what price he would have approved the Swansea project? Will he also confirm that his Department will lay out a programme of how it will develop a real strategy for taking forward tidal and other forms of marine energy?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

I know that my hon. Friend has been a great champion for this technology and that he will be disappointed with the conclusion that has had to be reached. At the point of considering any proposal, we are required to examine the cost of alternatives, and the costs of low-carbon alternatives, including offshore wind and nuclear, were more competitive than those for this programme. It is not possible to specify a particular price, because such an assessment has to be made at the point of a decision. However, I have said very clearly that far from being against tidal technology, I am in favour of it, but a value-for-money case has to be presented. We will continue to be open to proposals that can demonstrate such a case.

Photo of Albert Owen Albert Owen Labour, Ynys Môn

I am disappointed by today’s announcement. It sounds as if the Government have given up on innovation, marine energy and their own industrial strategy. The Secretary of State discussed wind energy. It would not be at the price it is today if we had not had a decade of subsidies through renewable obligations, which many Government Members opposed. Will he assure me that other marine energy projects such as those in my constituency and across the country will not be jeopardised and crowded out by the price of wind today, and that there is a level playing field for innovation in marine energy?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

The hon. Gentleman would accept that the commitment that I have given to pursue alternative energy sources, including projects in his constituency, has been clearly demonstrated. Of course we are open to innovation—we fund innovation. The assessment by independent experts is that the prospective cost reduction for this technology is not the same as that enjoyed by offshore wind. When it comes to future proposals, of course I will consider them rigorously, and if they can demonstrate value for money they can be contenders.

Photo of Glyn Davies Glyn Davies Conservative, Montgomeryshire

Like many others on both sides of the House, I am disappointed that the Swansea tidal lagoon and associated lagoons are not economically viable. The Government have a responsibility to protect the interests of consumers who pay electricity bills. What we all want to hear from the Secretary of State is that he is committed to looking at other schemes that might offer the potential to use tidal energy around our coasts and the power of the production of our marine environment in which our islands live.

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

I will. I welcome my hon. Friend’s remarks. We have a substantial programme of investment in innovation. Indeed, when it comes to the costs, to pay £30 billion more than is required to generate the same amount of electricity crowds out the ability to fund genuine projects that can reduce the price of energy.

Photo of Carolyn Harris Carolyn Harris Shadow Minister (Equalities Office) (Women and Equalities)

Swansea Bay tidal lagoon is in my constituency. The Secretary of State will never understand the frustration and anger that felt in my city today. It prompts the question of just who is speaking for Wales in the Cabinet, because it is certainly not the Secretary of State for Wales. We have not had electrification; we have not had the tidal lagoon. If he does not do the job properly, it is time to move on, I fear.

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

My right hon. Friend the Secretary of State for Wales has been vigorously engaged in making sure that every aspect of the analysis of this project has been conducted, including the impact on the local economy. The hon. Lady is familiar with the figures and the economics of the project, and because she is aware of the proposal she knows of its distance from being value for money, which causes higher bills for her constituents, including intensive energy users such as the steelworks in south Wales, which is something that any responsible Government have to take into account. I think she knows that this has been done in a rigorous way.

Photo of Jeremy Lefroy Jeremy Lefroy Conservative, Stafford

The question is not simply about cost, although that is important, but about energy security. Tidal lagoons are one of the best and most secure ways, under British control, of ensuring that we generate power for the future. Will the Secretary of State please have a look at this again?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

Of course we look at energy security, and having a diverse energy supply is important. In so doing we have to look at the contribution that is being made, and it is much more cost-effective to diversify our energy by commissioning sources that, in many cases, are a third cheaper than what is proposed. We can do more of it if we adhere to value for money.

Photo of Jonathan Edwards Jonathan Edwards Shadow PC Spokesperson (Treasury), Shadow PC Spokesperson (Transport), Shadow PC Spokesperson (Foreign Intervention), Shadow PC Spokesperson (Business, Energy and Industrial Strategy)

This announcement will be met with widespread anger in the communities that I represent, and it is the second broken promise from the 2015 Tory manifesto on top of the cancellation of electrification. Will the Secretary of State outline how detailed the discussions were with the Welsh Government regarding joint equity in the project? If the Welsh Government determined that they wanted to increase their equity share and go it alone, would the British Government stand in their way?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

The commitment given was to enter into discussions to see whether the project could be financed. We have done that rigorously, including with the Welsh Government. I think there have been more than 10 meetings with the Welsh Government this year alone to consider whether this was possible and to make sure we were looking at every possibility. The conclusion we have drawn is that it cannot be justified in terms of value for money. It was right to work with the Welsh Government to look at all the possibilities, but we have to abide by the conclusions of a serious analysis.

Photo of Mark Pawsey Mark Pawsey Conservative, Rugby

The Secretary of State’s statement will have been listened to with great concern at GE Power Conversion in Rugby, which would have manufactured the turbines for the tidal lagoon. A great deal of development has been done there within a mostly British supply chain. UK manufacturing missed out on the manufacturing of wind turbines because of a lack of a commitment to the sector in its early years. Does the Secretary of State agree that it is important that we do not miss out on the manufacturing opportunities that can arise from harnessing tidal power?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

My hon. Friend is right that it is important to take a long-term and strategic approach. That is exactly what we did with offshore wind, identifying a technology in which the supply chain could be located in the UK and creating jobs right across the country. That has been a great success. The opposite of that, however, would be to spread very thinly very expensive projects that do not, as the analysis demonstrates, have the potential for exports that offshore wind and others enjoy. That would reduce the economic prospects for firms across the country.

Photo of Chris Elmore Chris Elmore Opposition Whip (Commons)

Part of the role of government is that a Secretary of State will have a vision for delivering and a vision for ideas. The Secretary of State has shown today that he does not have any vision for delivering services and improvements to the economy for the people of south Wales. We have had the scrapping of electrification and we are clearly no further forward with various projects the British Government can fund. Can we have a guarantee from the Secretary of State about when the British Government are going to start investing, so that the people of Wales can have some faith? All he is proving right now is that, with the Welsh Secretary and the British Government, the Tories really are failing Wales.

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

The Swansea city deal, to name one case in point, will be welcomed by the hon. Gentleman. In terms of planning for the future, making commitments that put on bill payers or taxpayers costs that are three times higher than are justified is no strategy for the long term. To saddle businesses and industries with such costs is a strategy for uncompetitiveness.

Photo of Antoinette Sandbach Antoinette Sandbach Conservative, Eddisbury

I thank the Secretary of State for his very sensible decision. Will he confirm that it would have put an additional 31p on every household’s bill in my constituency every year for up to 65 years, leading to £370,000 a year flowing out of my constituency on energy bills to pay for this uneconomic project?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

My hon. Friend is right that £700 per household across the UK cannot be justified, either for consumers in Wales or in any of our constituencies.

Photo of Stephen Kinnock Stephen Kinnock Labour, Aberavon

The Swansea Bay tidal lagoon would also have been in my constituency. I can tell the Secretary of State that today the people of Aberavon see this as yet another betrayal of the interests of the people of Wales. They also understand that the project would have had tremendous benefits for the steel industry. Will the Secretary of State today please promise to publish the cost-benefit analysis for the steel industry and the massive opportunity cost of not going ahead both for the steel industry and the steel supply chain? Will he publish that information?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

The hon. Gentleman and I engage closely with the steel industry. In fact, the steel content of the proposed lagoon would have been about a third of a month’s output of the Port Talbot plant. He knows perfectly well that one of the challenges facing the steel industry in this country is energy prices. I would have thought that he would want to take steps to reduce the burden of energy costs on businesses such as the steel industry.

Photo of Bim Afolami Bim Afolami Conservative, Hitchin and Harpenden

As a member of the Public Accounts Committee, I can say that value for money is very important to the House and should always be, and I accept the Secretary of State’s assessment in this regard. However, will he confirm to and reassure the House that the Government are not giving up on marine energy or renewable energy, and set out further plans in due course?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

I will indeed. We have an energy innovation fund that can bring forward new technologies, but when it comes to the point of mass deployment, they have to be value for money and show that consumers and taxpayers will not see increased bills as a result.

Photo of Thangam Debbonaire Thangam Debbonaire Opposition Whip (Commons)

I am disappointed that the Secretary of State does not seem to understand that the Government are not just responsible for stewardship of taxpayers’ money. Their stewardship of the Earth is what counts here, as does their stewardship of investment in our economy and shepherding an industry from its nascent stages to something commercially viable. This country has so much potential marine energy. Will the Secretary of State please reiterate his commitment, which he should have, to investing in that marine energy today?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

This proposal is not commercially viable and the prospects are that it will not become commercially viable. If technologies are proposed through the test beds and our innovation programme, no one would be more pleased than I to deploy them as part of our energy mix, but we have to take into account the impact on bill payers and taxpayers.

Photo of Chris Davies Chris Davies Conservative, Brecon and Radnorshire

I thank my right hon. Friend for his statement. I confirm that there is also great disappointment from Conservative Members that this scheme is not going ahead, but with disappointment there is also realism. The figures that he quoted make it clear that if the scheme went ahead, the burden on our children and grandchildren would be enormous. He has already confirmed that he is still looking into tidal energy. Will he also confirm that if and when it is suitable to proceed with tidal energy, Swansea and the south Wales coast will be looked at first and foremost for future investment?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

Of course. The test is that the deployment of a technology can be done at good value for the taxpayer. That is the challenge for any new technology, and if it can be demonstrated that it meets that challenge I will be very pleased to welcome it.

Photo of Nick Thomas-Symonds Nick Thomas-Symonds Shadow Solicitor General, Shadow Minister (Home Office) (Security)

The Secretary of State was very specific in the figure that he gave for the number of jobs he expected to be created in operation and maintenance of the lagoon—it was 28. Can he be equally specific about the number of jobs that he has been advised would have been created in the UK-wide supply chain during the construction phase?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

The figures are taken from the Hendry report—these are not Government figures; they were laid out there. The number of jobs created during the construction period would have been 2,260, but they would have been for the very limited period of construction. In terms of value for money, of course, the permanent jobs are what needs to be assessed.

Photo of Kevin Foster Kevin Foster Conservative, Torbay

Will the Secretary of State reassure me that he will continue to make these types of decisions based on clear analysis, rather than political convenience?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

It has to be the case that when we take decisions that have consequences for consumers and businesses that already face, in energy-intensive industries, high energy costs, we have to act responsibly both for households and the future competitiveness of those companies.

Photo of Chris Ruane Chris Ruane Shadow Minister (Wales)

The proposed lagoon off the north Wales coast would have stretched from Llandudno to Prestatyn in my constituency, protecting a very vulnerable coast. In assessing the viability of a tidal lagoon, what recognition does his Department give to the impact of lagoons in combating coastal flooding?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

Part of the energy assessment that has been made is what would be the best way to secure our energy supplies of the future competitively and so that costs for taxpayers and bill payers are minimised. As I made clear in my statement, I added to that assessment considerations of the local impact and the prospects. I could not have gone further in embracing all the different aspects, and I hope that the hon. Gentleman will reflect that that was the right thing to do.

Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

It is clear from what the Business Secretary said that this was not even a marginal decision that could have gone either way, and that by a country mile the Government have decided that this scheme is simply not financially viable. What I do not understand is why there is such a big gap in the Business Secretary’s analysis and that of Tidal Lagoon Power Ltd. What is his assessment of why that gap is so wide?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

With any proposal, it is important to do due diligence and check the basis of the calculations, and in this case, in so doing, as my hon. Friend stated, we found the gap to be so wide that the proposal could not be responsibly backed. As I have said to hon. Members, however, any proposal that is competitive will be welcomed.

Photo of Owen Smith Owen Smith Labour, Pontypridd

This is another blatantly broken promise to the people of Wales, but I will leave that aside. The Secretary of State has given umpteen speeches talking about the need for this country to invest in new technologies and innovation and lamenting that we have failed to capitalise on great British ideas in the past. Does he not see the huge gap now between that laudable rhetoric and his short-term accountancy decision today?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

Part of the assessment, and part of that which Charles Hendry made in this analysis, was of the technology’s export potential, and a great proportion of the global potential is within this country, so it does not have the potential the hon. Gentleman describes. In fact, Charles Hendry concluded that any benefits from the technology would be limited to design and consultancy, rather than substantial industrial benefits.

Photo of Anna McMorrin Anna McMorrin Labour, Cardiff North

This Government consistently let Wales down, and on this the Secretary of State is completely and utterly wrong. It is his duty to provide leadership here. The National Audit Office states that the lagoon either matches or outperforms Hinkley across its three value-for-money tests. If he supports the tidal industry, how can he not be prepared to support the project that makes it possible?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

In terms of support for Wales, for every £100 of public funds spent in England, £120 is spent in Wales, and the NAO, which scrutinises all such decisions and proposals, will find that this one was taken in complete conformity with the standards of probity required.

Photo of Eleanor Laing Eleanor Laing Deputy Speaker (First Deputy Chairman of Ways and Means)

And finally, the prize for patience and perseverance goes to Tonia Antoniazzi.

Photo of Tonia Antoniazzi Tonia Antoniazzi Labour, Gower

I have been a teacher in Wales for 20 years, and I am devastated by today’s news. Pupils throughout Wales have been studying an exciting new future promised to Wales by this Government, and now it is not going to happen. The fig leaf of a city deal will not hide the Government’s shortcomings in Swansea. This is a clear dereliction of duty. If they have no aspiration for Wales, what aspiration does the Secretary of State expect for our future generations?

Photo of Greg Clark Greg Clark The Secretary of State for Business, Energy and Industrial Strategy

I am surprised that the hon. Lady would turn her nose up at a £1.3 billion city deal. I would have thought she would welcome it on behalf of her constituents. It does her constituents, young and old, no service to saddle them with energy bills much higher than if we have regard to the price that ordinary people would pay in their bills and which businesses would incur when trading. That is responsible government.