New economic narrative needs the Swansea Tidal Lagoon

Geraint Talfan Davies puts the Swansea Tidal Lagoon into a wider context

So it’s to be an independent review – the familiar recourse of kickers to touch, finders of long grass, ‘timorous beasties’, or those who don’t want to take unpopular decisions before an election. Compare the London third runway decision. Or is it that the UK Government genuinely wants to see beyond the initial Swansea Bay Tidal Lagoon project to the wider potential of tidal lagoons around our shores, and shorelines worldwide?

In recent nail-biting weeks the promoters of a scheme that aims to provide 90 per cent of Swansea Bay’s annual domestic electricity use for 120 years must have oscillated between optimism and pessimism, wondering whether the renowned default parsimony of the UK Treasury will be trumped by political vision and clout, or whether a British tendency to prioritise the short term over the long term will prevail again. Their agonising will last a while yet.

At this moment we do not know whether the Government’s motives in deciding on an independent review are genuinely strategic or disingenuously tactical. The remit is broad but a better clue will probably lie in the make-up of the review team yet to be announced. There are economists aplenty who can be found to kill off any scheme on financial grounds. On the other hand there are those such as Lord Nicholas Stern who might take a longer more rounded view. There are also numerate engineers and environmentalists who could respond to this vision and see the scale of promise that it holds for the future.

We have already had one failure in the Severn with the rejection of the Severn Barrage scheme – scuppered by environmental objections, the resolute opposition of the Port of Bristol and, it has to be said, the lack of credible management. The Swansea lagoon project deserves to fare better: its scale should not tax the official imagination in quite the same way as the barrage did – it should not have frightened as many horses; to have got the project this far speaks of astute management; its financing is achievable; and for a large island like the UK, surrounded by massive tides, you might even judge it to be a necessary experiment.

The Treasury’s focus is, of course, on the ‘strike price’ for the 320MW of electricity that the lagoon’s turbines will produce. Until recently sceptics argued that its strike price would be substantially higher even than for nuclear power, pricing it out of the market. But recently more realistic assumptions about the long timeframe in which the financial considerations ought to be considered, suggest an outcome in which the tidal lagoon would be competitive with the proposed Hinkley Point C nuclear station.

As Wales has already seen – in the example of Glas Cymru’s creation of a new financial structure for Welsh Water – long-dated infrastructure assets can benefit from bespoke financial structuring. There is no reason why financial innovation similar to that which lay behind Glas Cymru should not be applied to the lagoon scheme, and with just as much success. If the strike price were to be on a par with nuclear, comparison of other risks would surely favour the much more modest investment in a tidal lagoon which has none of the costly long-term environmental downsides of nuclear.

But what of other considerations? Whatever one thinks of George Osborne’s economic strategy, no-one doubts that there are few politicians who are more tactically alert. He knows how to create a plausible narrative even around less promising decisions. A positive decision on the Swansea tidal lagoon would surely be grist to his mill.

Osborne has made much of the idea of a ‘northern powerhouse’, whatever caveats one cares to enter on the substance. Surely there is a story to be developed around a ‘western powerhouse’, stretching from Bath to Llanelli – into which storyline one could pull

  • Bristol’s adoption of an elected mayor, and the creation of two city regions in south Wales

  • The prospect of substantial money via ‘city deals’

  • the electrification of the Great Western Railway from London to Bristol and Swansea

  • the development of a Metro rail system in south east Wales

  • a second M4 around Newport, whichever route it takes

  • Osborne’s recent announcement of a £50m investment in a UK national ‘catapult’ scheme to develop compound semi-conductor technologies based on Cardiff University and the IQE company

  • Swansea University’s new £250m science and innovation campus – with the involvement of Rolls Royce, Hewlett Packard, Tata, Bell Labs and BAE

  • University of Wales Trinity St David’s (could someone please invent a shorter name?) proposed new Swansea campus on the SA1 site

  • The redevelopment of Swansea and Newport city centres.

  • The Swansea Bay Tidal Lagoon, with all that it implies in terms of creating new industries that will make use of the engineering expertise in both Swansea and Cardiff universities, and playing into other narratives about ‘rebalancing the economy’.

I commented recently on a new more positive mindset that has developed in Swansea. It is difficult to put a price on this new confidence, but astutely fostered it will undoubtedly deliver a substantial economic dividend beyond the production of energy by the lagoon. In the words of Sir Terry Matthews, Chair of the city region, these developments in the city have a capacity to ‘move the needle’.

But confidence is a fragile thing and there is a danger that undue delay or a negative decision might prick the bubble in an area that is already having to come to terms with the present travails and gloomy prospects for the steel industry in Port Talbot. A positive decision, on the other hand, could lock in that confidence on the basis that Swansea would become the centre for an industry of the future with huge international potential.

I assume in all this that the Secretary of State for Wales, Stephen Crabb, has reminded Mr Osborne that the Swansea City Region actually takes in Mr. Crabb’s own constituency of Preseli. If he has, why hasn’t George listened?

Geraint Talfan Davies is Chair of the Welsh National Opera.

5 thoughts on “New economic narrative needs the Swansea Tidal Lagoon

  1. When I saw the headline “A New Economic Narrative” I thought excellent – new ideas on facing the economic problems in Wales. It turned out to be yet another fantasy based on questionable assumptions and pandering to the out dated idea that large infrastructure projects some how drive the economy. Every scheme referred to in the narrative simply reflects a fixation (particularly by the Welsh Government) with gimmicks and vanity projects.
    The real measure of success with any project is actually quite simple; what are the immediate investment and employment opportunities for the locality and – by far the most important – what is the
    long-term local multiplier effect. .

    The lagoon – the contract has apparently been awarded to a Chinese firm; the technology and skills required are not available locally and the technology I understand will be imported. The on going job creation is miniscule and by definition, there will be no local multiplier. Quite how this “rebalances the economy” escapes me. Oh, and by the way, I’m a Jack and think our bay is quite lovely as it is, thank you.

    The other infrastructure schemes to which reference is made similarly fail this measure of success.
    The city deals combined with the “redevelopment” of Swansea and Newport Centres terrify me. I remember the vibrant, living town (yes, town) that Swansea was before the Quadrant Centre destroyed it; replaced by a cold, unimaginative super coalshed filled with chains, no locals here (can’t afford the rent). Yes, let’s flatten the centre and start again. Multiplier?

    The M4 “relief” road is truly absurd. Aside from the cost, is it not the case that the problem is pinch points that need to be addressed rather than a wholesale new road, and the construction contract awarded outside Wales, no doubt. However, the real concern is the delusion that the road is needed for those seeking to invest in Wales. Really? When are the policy makers (and their advisers) going to realise that the heady days of the mid twentieth century when many businesses were beating a path to Wales NO LONGER EXIST. And the multiplier?

    Rail electrification. Yes, let’s have a high speed, reliable system, but within Wales – do we really want a transport link that makes it easier and quicker to work in London (a vision of the former First Minister) rather than develop local employment opportunities – and the contracts have gone to non UK businesses. Surprise,surprise.

    The metro scheme is a mishmash of trams, trains and buses (I wonder if they’ll be able to meet each other?) and I suspect that if investment funds available becomes an issue, the M4 and rail electrification will take priority.

    What’s really required is a sensible discussion on how we re-build the Welsh economy . ideally from within as many countries have realised. This can’t happen while policy makers are fixated by size, which by the way, is not everything…..

  2. Dr Ball, Has any one ever brought forward any ideas in Wales, to which someone hasn’t said, don’t do this, do something else. Isn’t it time we got bored with our navels.

  3. Originally the lagoon scheme was going to generate electricity costing only a bit more than offshore wind and there was going to be lots of local industry – turbines assembled in Swansea etc. Slowly the local content has dwindled and the price rose to £170 per Megawatt hour. The strike price was reduced by the dodge of committing to guarantees for 90 years. 90 years! We’ll have nuclear fusion before then. Being worried about global warming I was keen on the lagoon but GTD and others just have to face it that the numbers do not add up. There are better ways to produce power and reduce carbon emissions if you are spending three-quarters of a billion smackers.

  4. I think a reply to GTD is appropriate. I would have thought that if GTD wanted to respond then a sound argument is needed, not silly insults.

    I am genuinely surprised by the response. From his long relationship with IWA he should know that the IWA published a monograph written by me “A Strategy for the Welsh Economy” which contained positive ideas on addressing Wales’ economic problems. I’m not an academic or politician bleating on the sidelines – agree with me or not as you are perfectly entitled to do – I have consistently suggested and developed ideas and policies for addressing the economic problems, some of which have appeared here, on IWA’s Click on Wales. GTD should know that,

    I think perhaps though that GTD totally missed the point of my response to the original article which was simply this – grand, expensive one off schemes simply do not provide the re-structuring and re-balancing of ANY economy, and certainly not the Welsh economy.

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