Clean energy may offer respite to South Wales steel workers, who face losing their jobs because of a round of layoffs at Tata Steel Ltd.’s plant in Port Talbot.
Fairwood Fabrications Ltd., a contractor for Tata, may have to cut half its 200 employees because of the layoffs at the Indian steelmaker, Chairman Gherold Davies wrote Jan. 18 in a letter to U.K. Chancellor of the Exchequer George Osborne. He urged the government to push forward plans by Tidal Lagoon Power Ltd. to develop a new power plant in Swansea Bay near Port Talbot.
“If we get the first tidal lagoon away at Swansea, there are another five waiting, so there’s a whole new industry being created,” Chief Executive Officer Mark Coia said on Jan. 22 in a phone interview. “It’s thousands of high-skilled, quality jobs. We need a form of reinvention to keep that traditional heavy industrial base running, and tidal lagoon’s perfect for that.”
The company is pressuring Prime Minister David Cameron’s government to support tidal lagoons to create jobs and diversify the U.K.’s energy mix. The Swansea project would boost a local economy reeling from the Tata cuts and support jobs in a region where unemployment exceeds the U.K. average.
Tidal Lagoon Power is in talks with ministers to secure a long-term contract to guarantee the price it receives for electricity from the plant. The 1 billion-pound ($1.4 billion) facility would generate 320 MW of electricity by tapping the natural rise and fall of the sea.
A spokesman for the Treasury didn’t immediately comment when contacted by phone on Jan. 22.
The project could add 316 million pounds to the Welsh annual economy during construction, supporting 1,900 jobs, Tidal Lagoon Power estimates. Once operational, it would employ 181 people. That would soften the blow of the 750 Tata job losses, and follow-up projects would create thousands more posts.
The unemployment rate in Wales is 5.5 percent, compared to the U.K. average of 5.1 percent, according to a report on Jan. 21 from the Office for National Statistics. Rates near Swansea and Port Talbot are even higher.
Coia said he doesn’t know yet how the Tata reductions will affect his company, which helps maintain the steelmaker’s pipework, buildings and machinery.
“It leaves us in a land of limbo,” Coia said. “We’ll have to put some of our workers on reduced hours from sometime next week.”
Davies said that Fairwood has been “working closely” with Tidal Lagoon Power and its contractors. His letter was also sent to Cameron, Business Secretary Sajid Javid, and Energy Secretary Amber Rudd, Coia said.
“We’ve got a very real opportunity to form an important part of a new long-term global supply chain here in Wales,” Davies wrote. “That means work for those facing redundancy as a result of the Tata news.”
At first glance, the support required for tidal lagoons is expensive – greater than nuclear. Poyry Oyj analysts estimate the Swansea project will need to sell power for 168 pounds a MWh. That compares with the 92.50 pounds a MWh that Electricite de France SA brokered for the Hinkley Point nuclear station.
Those calculations, however, don’t factor in the long life of tidal power units, which will reduce their cost dramatically. The Poyry figures are based on a 35-year contract like EDF’s, but tidal lagoons have double the 60-year lifespan of reactors.
Tidal Lagoon Power has also said that the next plant in Cardiff Bay, with a capacity of 1,800 MW to 2,800 MW, would benefit from economies of scale and would need about 90 pounds to 95 pounds a MWh. The company’s six planned plants would create 35,000 jobs during construction, and 6,400 for operation, it says.
“Tidal lagoons will provide long-term security of supply,” the company said in a statement. “There is a price at which this prospect becomes viable. We are very confident that we can hit that.”
With assistance from Svenja O’Donnell.
©2016 Bloomberg News
Lead image credit: Tidal Lagoon Power Project Film for Tidal Lagoon Swansea Bay.