The Government has rejected the proposed Swansea Bay tidal lagoon on the grounds that it does not represent best value for money.

In a statement to Parliament yesterday, Business and Energy Secretary Greg Clark told the House of Commons that following detailed analysis – which has been shared with the Welsh Government –the Government had concluded that the project and proposed programme of lagoons did not meet the requirements for value for money, and so “it would not be appropriate to lead the company to believe that public funds can be justified.”

The government had assessed whether it should commit consumer or taxpayer funds to the programme of 6 tidal lagoons proposed by Tidal Lagoon Power Ltd, he said, the first being the proposed project at Swansea.

Comparing the proposal for the Swansea tidal lagoon which would cost £1.3 billion, Clark told MPs that 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, while the capital cost per unit of electricity generated each year would be 3 times that of the Hinkley Point C nuclear power station.

If a full programme of 6 lagoons were constructed, the Hendry Review had found that the cost would be more than £50 billion, and be 2 and a half times the cost of Hinkley to generate a similar output of electricity.

Taking all the costs together, the Minister said he had been advised by analysts that, by 2050, the proposal – which would generate around 30 TWh per year of electricity - could cost up to £20 billion more to produce compared to generating that same electricity through a mix of offshore wind and nuclear, once financing, operating, and system costs have been taken into account.

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 had concluded that the civil engineering used in Swansea Bay offered limited scope for innovation and capital cost reduction – estimated at 5% - in the construction of subsequent facilities.

The Business Secretary said he had also asked for an assessment of the export potential of embarking on a programme of implementing the technology, but the Hendry Review had concluded that it would take a “leap of faith to believe that the UK would be the main industrial beneficiary” of any such programme.

Greg Clark explained:

“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.”

However, he added that the fact that this proposal had not demonstrated that it could be value for money did not mean that its potential was not recognised.

His department was also in receipt of proposals from other promoters of tidal energy schemes which were said to have lower costs than the Swansea proposal, although these are an earlier stage of development.

Any proposals must however be able credibly to demonstrate value for money for consumers and public funds, he said.

The wider benefits of developing a programme of tidal lagoons such as the long-term jobs and global export opportunities do not fundamentally alter the conclusion that a programme of tidal lagoons is unlikely to be value for money for the UK energy consumer/taxpayer.

“The wider benefits of developing a programme of tidal lagoons such as the long-term jobs and global export opportunities do not fundamentally alter the conclusion that a programme of tidal lagoons is unlikely to be value for money for the UK energy consumer/taxpayer”, the value for money assessment concludes.

Following the UK Government's announcement on the future of the Swansea Bay Tidal Lagoon, Mike Hedges, the Chair of the Welsh Assembly's Climate Change, Environment and Rural Affairs Committee commented:

"Today's announcement from the UK Government is deeply disappointing and extremely concerning for the future of this forward-thinking project.

"18 months ago the UK Government's own Hendry Review concluded the technology would make a strong contribution to the UK energy supply and would bring significant economic opportunities.

"Since then ministers have sat on their hands, seemingly unable or unwilling to engage with the project's backers, Tidal Lagoon Power.

"Last month this Committee invited the Secretary of State for Wales, Alun Cairns MP, to discuss the future of the tidal lagoon with us but received no reply. There are now serious questions the Secretary of State must answer to add clarity and understanding to the UK Government's decision to go against the recommendations of its own review.”

"This is a huge missed opportunity for Swansea and south Wales to be at the forefront of tidal lagoon technology, but also for the UK generally in becoming a truly sustainable energy generating country."

Click here to download the value for money assessment .