§ Mr. MorganTo ask the President of the Board of Trade (1) what representations he has received concerning the use of the non-fossil fuel levy and the Mersey barrage project and funding proposals for it;
(2) if he will make a statement on the funding of the Mersey barrage project; what representations he has received concerning funding instruments for the project; what proposals he has for a government contribution towards the cost of final design studios; and what consultations he has had with the private sector shareholders in the Mersey Barrage Company, shipping navigation and nature conservation interests concerning outstanding objections.
§ Mr. EggarResults of the work undertaken to date on the Mersey barrage, indicate that the construction of a tidal energy barrage across the river Mersey could generate electricity at 8.2 p/kWh (8 per cent. discount rate, 1991 prices). It now seems very unlikely that these costs could be substantially reduced by further work.
The financing plan developed by the Mersey Barrage Company (MBC) is detailed in its phase III report. This envisages a 25-year contract with a purchase price of 6.75p/kWh as part of the a future round under the non-fossil fuel obligation. The plan assumes that the equivalent of 2p/kWh of this, to be discounted at zero per cent. in real terms, would be paid as advance payments during construction. This advance payment equates to a £700 million contribution towards the barrage's estimated construction costs of around £1 billion. The remaining 4.75p/kWh would be paid over the first 25 years of the barrage's operation.
232WMy right hon. Friend the President of the Board of Trade and I met representatives of the MBC, including shareholders, to discuss possible ways forward for further studies into the proposed Mersey barrage, last July. We discussed suggestions by the MBC for a fourth stage of studies. It is estimated that these would cost £12 million, and would take the barrage up to the stage of requiring parliamentary approval for construction, subject to the availability of an appropriate funding mechanism.
As well as electricity generation, a Mersey barrage has a number of non energy costs and benefits, such as improved leisure facilities and an effect on local wildlife and shipping, that need to be considered. The most recent studies of the barrage were aimed at reducing the uncertainty associated with these issues, and I was aware of the findings of the work. In coming to a decision on further funding for the barrage there was a need to weigh the cost to the electricity consumer of financing the barrage, with consideration of the other costs and benefits of the barrage. On balance my right hon. Friend the President of the Board of Trade and I told the MBC that we could not justify the expenditure of public money for the studies they suggested.
We await the final report of the most recent studies into the proposed barrage, and will, of course, consider any further proposals from the MBC.