Leading employers in the steel industry have written to the chancellor George Osborne urging him to back Swansea Bay’s Tidal Lagoon project.
Steel businesses in both Wales and Yorkshire have told the chancellor that the project would help replace jobs lost during the ongoing steel crisis, while also boosting the pipeline of work for surviving producers.
The calls come as negotiations between Tidal Lagoon Power and the government over the strike price at Swansea Bay are thought to be at a crucial stage, with prime minister David Cameron indicating the government had cooled on the project last month.
Steel firms urge chancellor to back Swansea Bay
In a letter to the chancellor, Andrew Gatenby, managing director at Yorkshire fabricator Allerton Steel, said Swansea Bay was “a crucial industrial opportunity… not just for Wales, but also for the Northern Powerhouse”.
He added: “The requirement for a positive decision is even more important given the current situation within the steel industry and also the offshore oil and gas market.
“A tidal lagoon-based industry would go a long way to addressing some of the problems that are arising from this crisis such as extra employment and long-term job security.”
Gherold Davies, chairman of steel manufacturer Fairwood Fabricators, said Swansea Bay could help replace the jobs lost after Tata Steel axed 750 jobs at its nearby Port Talbot plant.
Fairwood employs around 200 people in Port Talbot, but Mr Davies warned that the downsizing of the Tata plant could see its workforce halved. However, he said that the skills lost to the steel industry could be redeployed at Swansea Bay.
“I accept that the government may not be in a position to protect the Port Talbot steelworks from decline,” he wrote, “which makes it all the more crucial that when rare opportunities to redeploy these skills are presented, they are seized with both hands before they are lost to the region altogether”.
Last week, reports emerged that Tidal Lagoon Power was set to propose a reduced strike price – effectively the level of public subsidy for the project – in exchange for more than doubling the lifetime of the subsidy.
Sir Terry Matthews, chairman of the Swansea Bay City Region local enterprise group, told Construction News that extending the life of the deal from an initial 35 years to as much as 100 years could almost halve the strike price.
Discussions between the Department of Energy and Climate Change and Tidal Lagoon Power, which have been ongoing since last March, have focused on a price of around £160/MWh. But the new deal could see this come down below £100, bringing it closer to the £92.50 price agreed by EDF for its Hinkley Point C nuclear plant.
Sir Terry said: “Whether it is the government in Cardiff or London, nobody is against the project; it is a competitive strike price that they want.
“The news is that the strike price being put forward is now competitive.”
He added that putting a 35-year limit on the strike price, as has been standard practice for traditional power plants, was “crazy” and that the extended period was a more sensible approach.
He said: “You don’t build a facility like a lagoon and force it to be written off after 35 years, which is standard for a power station.
“Nobody is against the project because it has so many positives; the difficulty was the standard time for writing it down of 35 years. That is being addressed with this plan.”
He suggested that the longer-term nature of the deal could attract interest from institutional investors, such as pension funds.
Sir Terry also urged Tidal Lagoon Power to investigate other ways to raise money for construction, including thickening the lagoon walls to create “lucrative ocean frontage land” for development.
He said the thicker walls would create “two honking big chunks” of land, which could raise significant extra capital to be put towards construction costs.
“This would dramatically bring down the cost of building the lagoon,” Sir Terry said.
“You would suddenly have ocean frontage land on the lagoon side belonging to a city with an extremely high value for development and all the money raised could be deducted from the cost of building the lagoon.”