The government is snubbing a £25bn renewable energy project which promised to import enough solar and wind power from Morocco to meet nearly a tenth of the UK’s electricity demand.
Sky News has learnt that Ed Miliband, the energy security and net zero secretary, has decided not to proceed to formal negotiations with Xlinks, a privately owned company, about a 25-year price guarantee agreement.
A ministerial statement is expected to be made confirming the decision later on Thursday.
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The government’s move to snub Xlinks after protracted talks with the company will come as a surprise to energy industry executives given the company’s pledge to deliver large quantities of power at a price roughly half of that to be generated by new nuclear power stations.
Xlinks, which is chaired by the former Tesco chief executive Sir Dave Lewis, had been seeking to agree a 25-year contract for difference with the Department for Energy Security and Net Zero (DESNZ), which would have guaranteed a price for the power generated by the project.
One Whitehall insider said its decision was partly motivated by a desire to focus on “homegrown” energy supplies – an assertion queried by industry sources.
Sir Dave told The Sunday Telegraph earlier this year that Xlinks would switch its focus to another country if the UK government did not agree to support the project.
The company is now expected to explore other commercial opportunities.
Xlinks had not been seeking taxpayer funding for it, and claimed it could help solve the “intermittency problem” of variable supply to UK households and businesses.
Reducing manufacturers’ energy costs was the centrepiece of the government’s industrial strategy launched earlier this week.
Sources said that market-testing of the financing for Xlinks’ construction of a 4,000-kilometre cable between Morocco and the Devon coast had been significantly oversubscribed.
Xlinks’ investors include Total, the French energy giant, with the company having raised about £100m in development funding so far.
The company has said it would be able to deliver energy at £70-£80-per-megawatt hour, significantly lower than that of new nuclear power stations such as the one at Sizewell C in Suffolk to which the government allocated more than £14bn of taxpayers’ money earlier this month.
It was unclear whether the growing risk of undersea cable sabotage was one of the factors behind the government’s decision not to engage further with Xlinks.
In an interview with Sky News in 2022, Sir Dave said Xlinks enjoyed low geopolitical risk because of Britain’s centuries-old trading relationship with Morocco and the north African country’s ambitions of growing the energy sector as a share of its exports.
“The Moroccan government has recognised that exporting green [energy] is a very important part of their economic plan going forward, so they have an export strategy,” he said at the time.
“The Sahara desert is probably one of the best places in the world to generate renewable energy from… so you have a very long period of generation.
“And if you’re capturing that energy and adding some battery storage, you can generate energy to cover a little bit more than 20 hours a day, which makes it a fantastic partner for the UK.”
The former Tesco chief added the quality of modern high-voltage cables meant energy could now be transported “over very long distances with very, very few losses”.
Sir Dave said the technology risks associated with the project were relatively small, citing examples of much longer cable links being planned elsewhere in the world.
“The benefit here is that it’s proven technology with a very committed reliable partner with a cost profile… that we will never [be able to] match in the UK,” he said.
A spokesperson for DESNZ said it did not comment on speculation, while Xlinks declined to comment on Thursday.
