Pwyllgor Newid Hinsawdd, yr Amgylchedd a Seilwaith
Climate Change, Environment, and Infrastructure Committee26/04/2023
Aelodau'r Pwyllgor a oedd yn bresennol
Committee Members in Attendance
|Huw Irranca-Davies AS|
|Janet Finch-Saunders AS|
|Jenny Rathbone AS|
|Llyr Gruffydd AS||Cadeirydd y Pwyllgor|
Y rhai eraill a oedd yn bresennol
Others in Attendance
|Huw Morgan||Tata Steel|
|Luke Fletcher AS||Aelod o Bwyllgor yr Economi, Masnach a Materion Gwledig|
|Member of the Economy, Trade and Rural Affairs Committee|
|Martin Brunnock||Tata Steel|
|Shavanah Taj||TUC Cymru|
Swyddogion y Senedd a oedd yn bresennol
Senedd Officials in Attendance
|Andrea Storer||Dirprwy Glerc|
|Elizabeth Wilkinson||Ail Glerc|
|Marc Wyn Jones||Clerc|
Cofnodir y trafodion yn yr iaith y llefarwyd hwy ynddi yn y pwyllgor. Yn ogystal, cynhwysir trawsgrifiad o’r cyfieithu ar y pryd. Lle mae cyfranwyr wedi darparu cywiriadau i’w tystiolaeth, nodir y rheini yn y trawsgrifiad.
The proceedings are reported in the language in which they were spoken in the committee. In addition, a transcription of the simultaneous interpretation is included. Where contributors have supplied corrections to their evidence, these are noted in the transcript.
Cyfarfu’r pwyllgor yn y Senedd a thrwy gynhadledd fideo.
Dechreuodd y cyfarfod am 09:32.
The committee met in the Senedd and by video-conference.
The meeting began at 09:32.
Bore da i chi i gyd. Croeso i Bwyllgor Newid Hinsawdd, yr Amgylchedd a Seilwaith Senedd Cymru. Croeso i Aelodau i'r cyfarfod. Rŷn ni hefyd wedi gwahodd aelodau'r Pwyllgor Economi, Masnach a Materion Gwledig i ymuno â ni, a dwi'n croesawu Luke Fletcher yn y capasiti yna. Rŷn ni wedi derbyn ymddiheuriadau gan Delyth Jewell a Joyce Watson, sy'n methu bod gyda ni'r bore yma. Mae hwn yn gyfarfod sy'n cael ei gynnal ar fformat hybrid, ac, ar wahân i addasiadau sy'n ymwneud â chynnal y trafodion ar ffurf hybrid, mae holl ofynion eraill y Rheolau Sefydlog yn parhau. Gaf i egluro hefyd fod eitemau cyhoeddus y cyfarfod yn cael eu darlledu'n fyw ar Senedd.tv, ac mi fydd Cofnod y Trafodion yn cael ei gyhoeddi, fel sy'n arferol? Mae'r cyfarfod yn un dwyieithog, felly mae yna ddarpariaeth cyfieithu ar y pryd o'r Gymraeg i'r Saesneg ar gael hefyd. Felly, cyn bwrw iddi, gaf i ofyn a oes gan unrhyw Aelodau unrhyw fuddiannau i'w datgan?
Good morning to you all, and welcome to the Climate Change, Environment, and Infrastructure Committee at the Senedd. I welcome Members to the meeting. We've also invited members of the Economy, Trade, and Rural Affairs Committee to join us, and we welcome Luke Fletcher in that capacity. We have received apologies from Delyth Jewell and Joyce Watson, who can't be with us this morning. This is a meeting that's being held in a hybrid format, and, aside from the adaptations relating to conducting proceedings in hybrid format, all other Standing Order requirements remain in place. May I also explain that the public items of this meeting are being broadcast live on Senedd.tv, and a Record of Proceedings will be published, as usual? The meeting is bilingual, and simultaneous translation is available from Welsh to English also. So, before we start, may I ask if Members have any declarations of interest?
Chair, if I could just note my membership of the cross-party group on steel, and also my membership of unions who are in front of us later on today, which is on my register of interests.
Dyna ni. Diolch. Jenny.
There we are. Thank you. Jenny.
I'm a member of Unite the Union.
Dyna ni. Ocê. Iawn. Luke.
There we are. Okay. Luke.
There we are. Okay.
Iawn. Diolch yn fawr iawn. Diolch i bawb.
Okay. Thank you very much. Thank you, all.
Ymlaen â ni felly at brif ffocws y cyfarfod. Rydyn ni wrth gwrs yn gwneud darn o waith y bore yma yn edrych ar ddatgarboneiddio’r diwydiant dur yng Nghymru, ac mae yna bryderon wedi bod yn y cyd-destun yna, am sawl rheswm, a bydd yna gyfle i ni i graffu'r gwaith yna, sydd angen digwydd. Mae yna ddau banel o'n blaenau ni heddiw, a'r panel cyntaf yn gynrychiolwyr o Tata Steel. Felly, mi wnaf i estyn croeso i Martin Brunnock, sy'n gyfarwyddwr cyfathrebu a materion cyhoeddus gyda Tata Steel, a Huw Morgan, sy'n gyfarwyddwr datgarboneiddio gyda Tata Steel. Croeso i'r ddau ohonoch chi. Mi wnawn ni fynd yn syth i mewn i gwestiynau, i ni gael gwneud y defnydd gorau o'r amser sydd gennym ni. Felly, mi wnaf i gychwyn, drwy ofyn i chi beth fyddai eich dull dewisol chi o ddatgarboneiddio ym Mhort Talbot, a sut ydych chi'n meddwl y byddai modd delifro hynny'n ymarferol.
So, on we go to the main focus of the meeting. We are of course doing a piece of work this morning, looking at decarbonisation of the steel industry in Wales, and concerns have been raised in that context, for many reasons, and there will be an opportunity for us to scrutinise that work, which needs to happen. We have two panels before us today, and the first panel are representatives from Tata Steel. So, I'll welcome Martin Brunnock, who is director of communications and public affairs with Tata Steel, and Huw Morgan, who is director of decarbonisation with Tata Steel. So, welcome to you both. We'll go straight into questions, to make the best use of time available to us. So, I'll start by asking you what would be your preferred approach to decarbonising in Port Talbot, and how do you see it being delivered in practice.
Diolch yn fawr am y gwahoddiad i siarad â chi heddiw.
Thank you very much for the invitation to speak to you this morning.
I think if we look at the business of Tata Steel UK, we are looking at the biggest challenge that is going to face the steel industry for a generation, in terms of needing to decarbonise. We see a business that is a 3.5 million tonne business producing steel in Port Talbot that then goes across the UK and supports many customers and supports many different industries. We're really one of the foundations on which UK plc is built. We employ some 8,000 or so employees across the UK, 6,000 of which are in Wales, and we have a number of different applications for which our steel is used. In order to produce that steel, we take coal and we take iron ore from around the world, and we use our blast furnaces in Port Talbot to make hot metal, which is then converted into steel. In order to produce that material, or that steel, we emit around 6.5 million tonnes per annum of carbon dioxide. So, there's a significant challenge ahead of us.
In terms of quantifying that, that represents around 2 per cent of the UK's anthropogenic carbon dioxide emissions—so, man-made carbon dioxide emissions—and between 15 and 20 per cent of Welsh carbon dioxide emissions. And given the challenges ahead of us with global warming, there's a clear need to tackle those carbon dioxide emissions in order to reduce those emissions themselves. And to build on that, what that also requires, in order to produce 1 tonne of steel, you need around 1.4 tonnes of iron ore, you need about 0.8 tonnes of coal and about 0.3 tonnes of limestone, so we’re consuming a lot of earth-bound raw materials in order to do so. So we have a carbon dioxide challenge and also a challenge around what materials we're consuming from the ground as well.
I think that, if we reflect on the challenge that we face, we're effectively in a position where, as Tata Steel UK, we've committed to reducing our carbon dioxide emissions by at least 30 per cent by 2030, and to be a net-zero emitter by 2045. So, that's our public commitment. That's what we’re currently working towards, and in my role as the decarbonisation director for Tata Steel, we're currently building the different road maps and different options in order to progress along those pathways. It's important to note that no decision has yet been made and that discussions are still ongoing in terms of what is the preferred option, and that's the basis on which discussions with UK Government are proceeding. So, those discussions are ongoing, are commercially sensitive, and are currently being led by Tata Steel Ltd, who are the parent for Tata Steel UK. So, they have the mandate and the responsibility to carry on those discussions, and that's where the discussions sit—above the Tata Steel UK level at which we sit at the moment.
So, the road map is pretty fluid, dependent on those discussions, then.
The road map is a number of different options, and we consider a number of different options in the context of receiving the level of support that we've asked for, and other scenarios in which, if we don’t receive that level of support, what then would the outcome be for the business?
Okay, thank you. Huw.
Thank you, Chair. Thank you very much—it’s good to have you in front of us today. I think this is a crucial issue, because I think many of us here would say, on the importance of moving through that massive, seismic change within the industry towards green steel so that we can decarbonise and have a model in this country for actually what we do with steel production, and not offshore dirty steel production, if you like, elsewhere, we’ve got to do this. But the technological solutions are all very expensive.
This will never come cheap, and every other European Government, and worldwide, is seeing it doesn’t come cheap. So, can I ask, at the moment, in those discussions with UK Government, what are you asking for? What are they offering? What’s the gap? And when does it need to be sorted?
I think if we look at what's the ask of Tata Steel to the UK Government, it's effectively to say, 'We want a level playing field.' So, if you look at what's happening in Europe, the likes of Salzgitter have received €1 billion of support towards their decarbonisation efforts. That's half of the capital investment that we believe that they require to make the transition they've declared. The same for ArcelorMittal in Spain—they've received €0.5 billion of support to support the transformation. So really, as Tata Steel, what we’re asking for is a level playing field, and that’s a level playing field in terms of investment, in terms of competitive energy prices, and a competitive policy landscape that allows us to compete fairly with our European neighbours. That's really where we start, and that's the basis on which the discussions take place.
If it helps, Chair, I can share this list we have of all the European competitors of ours who are working with their Governments and the joint level of investment. I can share that after with the committee, if that would be helpful.
That would be really useful, yes, thank you.
That would be really useful. Other colleagues will turn to issues of where this leaves us right at this moment, and how urgent the investment is, as well as how urgent the need for decarbonisation is, but one of the things you didn't touch on is where the gap is currently at the moment. These discussions are still ongoing. I understand the UK Government has put something like £300,000 on the table. Tata has, perhaps you'll correct me, asked for something like £1.5 billion. Is that correct? Is that the up-to-date situation? Have you heard any more?
Well, I think what has been reported in the press is £300 million, not £300,000—
Sorry, yes, £300 million.
—but that's a press report. I think those discussions are ongoing. As we've said, what we're looking for is a level playing field. Dependent on the technological option that's chosen ultimately at the end, that is our critical pathway, because we want a level playing field on investment, a level playing field on energy costs and a level playing field on policy to ensure that we can best compete to have a sustainable steel industry in Wales and the UK, to underpin the green steel revolution that we're on the cusp of entering and, effectively, to ensure that we maintain great jobs in Wales and the UK for the next generation of steelworkers.
Okay, thank you. Janet.
Good morning. Could you give me the details of any support Tata want from the Welsh Government in addition to the UK Government investment?
We've been talking to the Welsh Government on a regular basis, with officials and Ministers, around support for skills and support for research and development, and we meet with them on a regular basis to discuss those things. We've recruited 130 apprentices this year, for example—over 100 graduates and, also, a doctoral programme. But, in terms of apprenticeships and the Welsh Government, we've got a very close relationship.
Okay, so you're content with the level of support you're getting.
Very, very good support, yes, thank you.
Is the Welsh Government involved in any way with the discussions with the UK Government as well, in terms of what they could bring to the table or to add value in other ways?
Certainly, when I, the chair of Tata Steel UK and the managing director and chief executive officer of Tata Steel Limited met with the First Minister and economy Minister a few months back, the managing director and chair articulated the need and want, and the First Minister and the Minister for Economy wrote to their counterparts in London to express their full support for anything that is required.
But you see the discussions with the UK Government and the discussions with the Welsh Government as very discrete, separate processes.
I think so, yes. The Welsh Government is absolutely supportive, and we have a good relationship with the UK Government. We welcomed the Secretary of State to Port Talbot last Friday, and we had good discussions with her and her team. As Huw mentioned, our job as well is to get the right policy in place, whether it be energy, whether it be UK emissions trading or whether it be the carbon border adjustment mechanism. That's quite an important thing to discus, actually, because the European Union have instigated their carbon border adjustment mechanism. We're in discussions with the UK Government, and in consultation, and we have to do the same, because the danger that we see, and other steel companies see, is that the European Union will go ahead of us faster on that legislation, which leaves the UK open, then, to imports from those nations that haven't signed up to those carbon tariffs. So, that's quite an important discussion as we progress.
Okay, we'll come back to some of those points in a minute. Luke.
Diolch, Gadeirydd. I think Members of this committee will fast realise that I'm a very cynical person, but, you know, worst-case scenario here now, say that there is no agreement reached with the UK Government on investment around steel here in Wales, what are the implications for the Port Talbot site and other sites in Wales?
That's part of the ongoing analysis that we're undertaking at the moment. I think it's too early to prejudge; there's certainly no decision been made. We'll wait for the conversations and the negotiations between the parent, Tata Limited, and the UK Government to conclude, and then, in terms of any agreement that can be reached, we'll then, of course, discuss that with our trade unions and consult on any of those sorts of impacts.
So, it's solely reliant on the level of investment the UK Government is willing to put in.
I think it's an incredibly important factor. As we've said, that's linked to—you'll hear it a lot from us—a level playing field on investment and on policy that we can establish with our European competitors.
I think it's also worth adding to Huw's points that Huw talked about reducing our carbon dioxide emissions by 30 per cent by 2030. We've invested millions in the plant over the last 12, 24 and 36 months in decarbonising our current assets as well. So, we're not just waiting for that; we're actually proactively looking to make the investments in our existing assets to help the carbon dioxide footprint. We have two blast furnaces. They have seven stoves between them. Stoves basically heat the air up that goes into the blast furnaces, and we've replaced two of those, which was 12 months' work, commissioned in February. We're looking at schemes to increase the amount of scrap we use in the steel plant. So, today, we use about 17 per cent scrap that comes from tin can bales or cars in our processes. If we can increase that by 1 per cent, we can reduce our carbon emissions by 100,000 tonnes per 1 per cent increase. So, it's really significant. And those are the schemes we're looking at today, because we've got to look at today as well as tomorrow.
So, on the cost of replacing those two blast furnaces, roughly what was the cost?
It was the stoves, it was. So, it would have been about £2 million in total for those.
I think that the key is that, whilst the discussions are taking place, what we want to ensure is that, within our current footprint, what we can do to invest to reduce our carbon dioxide emissions. So, as Martin said, we're investing in the current blast furnaces to ensure that we reduce the amount of coal that we burn and therefore reduce our carbon dioxide emissions, or alternatively invest in other areas like our power plant, which sees us being able to better utilise our gases onsite, or the steam onsite, to generate more electricity and reduce the amount of electricity that we then pull from the grid, so that we can become more self-sufficient. So, we're not standing still; we continue to invest, but, clearly, in terms of that broader transformation, that transition to green steel making, that's a larger quantum, it's a larger investment requirement, and that's why that level playing field is so important to us.
And that power plant was a £37 million investment to generate 30 MW of electricity. So, it's a pretty significant investment.
Okay. Thank you, Luke. Janet.
Thank you, Chair. If you don't come, or cannot come, to an agreement with the UK Government by July, do you have any intention of closing one of the furnaces?
So, as I've said, those discussions are ongoing and, at the moment, we're undertaking a number of different analyses around scenarios and what the future of the business will look like with and without Government support. But, it's too early to judge what the outcome of those discussions will be and what the analysis will be.
So, could we have some assurances that you don't intend to close any furnaces?
Well, as I've said, the discussions are ongoing and we need to conclude on the discussions and the scenario analysis, and then at the appropriate moment we will be able to communicate the outcome of those analyses and those discussions.
And what timescale do you have for that decision, then?
Well, I think it will be subject to those discussions with Government, and how they proceed.
But, discussions can go on and on for months. What are we talking here?
Well, I think you've said July, haven't you? You've said July.
Well, it says July, but—
Well, I think July was a date reported in the Financial Times. Now, in terms of the outcome of the discussions, I'm not clear in terms of the point at which they'll conclude, because, as you say, they are discussions and they will continue at their own pace. But, what's clear for us is we want to ensure that we provide a foundation for UK plc. This is going to be the biggest transformation that this country will see in terms of steel making for a number of generations, and it's important that we find a way through, with that level playing field, to bring forward or to continue to supply the automotive industry, the construction industry with green steel that is sovereign to the UK, so that we can ensure that we continue to support the 2,000 customers that we have.
And we're part of a broad supply chain, of course. We've got customers that we supply, but also we're spending around £2 billion per year with our supplier network across the UK. So, there is a big multiplier effect that we bring to the table, and that's really where our focus is: how do we make this a success?
Thank you for that. Huw.
I've got to say, you are being the consummate diplomat in your answers, and it's a credit to you, bearing in mind where the negotiations are at the moment with the UK Government. So, it's not a criticism, just an observation. But, could I ask you, putting aside those negotiations, if there were investment coming forward that allowed you to do a just transition towards zero carbon and so on, is it in Tata's mind to maintain, if that funding was there, a blast furnace alongside moving towards new technology, arcs and so on, which will definitively take you towards that zero carbon? Because the argument goes, of course, as you will know from many who lived for generations of steel in Port Talbot, that if you get rid of the blast furnace side of it, and you are only doing the recycled metals and so on, it's a significant downgrading of the facilities there. So, if you have a successful outcome to the negotiations, do we have an understanding of where Tata is on maintaining blast furnace in Port Talbot?
So I think, if we look at trends in Europe, to start off with, then we'll see how they apply to Port Talbot, or how to decarbonise steel in general. You effectively have an option where you maintain blast furnaces and you incorporate carbon capture, utilisation and storage. So, you capture the carbon dioxide that those furnaces emit. You can increase the amount of recycled content that you produce via transition to electric arc, or alternatively, you can use an electric arc furnace but supplement that with what you'll see as hydrogen-based DRI, or direct reduced iron. I think there was a research paper published yesterday that starts to quantify some of those different technologies and their impacts.
Now, what I think we need to be mindful of is that, if you take an example of carbon capture utilisation and storage, there is currently only one facility globally in which CCS, or carbon capture and storage, is in place to capture the emissions of the steelworks. That's in Emirates Steel, and it captures about 800,000 tonnes per annum. That's against a quantum of 6.5 million tonnes of our current emissions. So, in order to see that as a solution, and it's an option on the table, because there are no decisions that have been made yet, but in terms of developing that solution, that needs to travel along a pathway in terms of being scalable to a level that can capture the emissions of Port Talbot. So, that's one potential option.
The other, in terms of electric arc furnace, is an option that is available to us. I think that I agree historically that the electric arc furnace has been seen as something that can't make the same quality of steel as the blast furnaces. That's a historic perception, so I think—. If you look at Europe, Europe is about 70 per cent blast furnace technology and 30 per cent electric arc furnace technology. In the United States, post 2008, that changed; they're predominantly electric arc furnace-based steel making, rather than blast furnace-based steel making. What we've seen is that there is a development in the US that has allowed them to produce more complex grades via those assets and via that technology. So, that's another option that allows them to produce steel for automotive, effectively, which historically, the common conception would be that the electric arc furnace couldn't do that. So, we're seeing that, in America, they can do it on an industrial scale, so that's an important point of reference. And then, hydrogen-based DRI is something that, at the moment, most companies have declared a natural gas-based DRI transition first, moving to hydrogen later on. So, all of those are different options on the table, and we have to understand what is the best option for Tata Steel UK.
But reflecting on, perhaps, some of the raw materials that are available in the UK, if you look at the UK in general, the UK generates around 10 million tonnes of scrap per annum. Eight million tonnes of that is currently being exported from the island to different geographies, and then, in some cases, it's being brought back into the UK, as tube, as coil, and effectively competes with us and undercuts our price. So, steel from the UK is being sent to, say, Turkey, being melted and then being sent back to the UK. Now, the reason that's important is that it provides an option to say, 'Well, from the electric arc furnace perspective, there's a natural raw material here'—that's the first part. But that's a future consideration in the context of blast furnaces or hydrogen-based DRI as well. But also, to Martin's point, it's an important factor as we look to effectively travel along this road map and this pathway at the moment to get to that transition, and increase the amount of scrap that we consume, because for every tonne of scrap that we consume, that's going to reduce our emissions by 1.5 tonnes. So, an additional 1 tonne of scrap reduces our carbon dioxide emissions by 1.5 tonnes. So, scrap is an important raw material, no matter what the future is. There are a number of factors, but there are also three principal solutions ultimately, as well, as to how we can take technology forward.
Sorry, that's quite a long answer—apologies—but it's important to note that there are three—
It is, and it gives an important context to all of this.
There are three options and different contexts.
Absolutely. Okay, thank you very much. Jenny.
Thanks very much. I just wanted to go a little bit more into the detail about what you're doing at the moment, and some of the things you're doing with partners. You've already told us that you're reusing redundant steel, 17 per cent, and you're also generating more than 70 per cent of your own energy requirements, so you're not having to pay the horrendous prices that the grid charges. How is—. You're a very significant member of the south Wales industrial cluster, and there are lots of other big players there. How is that partnership enabling you to pinpoint the things that you could be doing now to achieve your initial target of a 30 per cent reduction in carbon emissions by 2030?
The south Wales industrial cluster, we were a founding part of that, setting it up. One of my team actually led that piece of work. The important thing for south Wales is that the south Wales corridor has to decarbonise, right. That's really important, and I think what the south Wales industrial cluster has done is enable those companies to come together and say, 'What are the policies we need from Government to help us decarbonise quickly?' And an example would be hydrogen. Where's the hydrogen infrastructure going to come from to make hydrogen viable as a fuel within Wales? So, that would be one example. There was a south Wales industrial cluster kick-off meeting about three weeks ago—
Yes, I was at it.
Yes, and I thought that was very good. And there were, I think, something like 30 policy asks. I can't remember what the 30 are, but I can certainly share those with the group. But in terms of—
We need to focus on how this is enabling you to develop the important relationships with energy generators—clean energy generators.
For example, if we relate that to RWE Renewables, who are partnered within the south Wales industrial cluster, we've just signed a memorandum of understanding with RWE Renewables to look at floating offshore wind within the Port Talbot region as part of the free port that was successful a few weeks back. That's important, because if we can use the steel made in Port Talbot to make floating offshore wind turbines, and, then, they're in the Celtic sea producing green energy, we'll bring that green energy back into the plant to make green steel.
We have a memorandum of understanding, because, at the moment, floating offshore wind, or wind turbines are made of plate steel. So, there's not enough plate steel in the world to make what we need to make, so we're going to redesign those structures with our capability, our research and development facility, to use strip steel, which is what we make in the UK. Our experience of doing that in the automotive industry is second to none. We work with automotive companies to redesign steels, whether it be thickness, stiffness, strength, and we're going to do the same now with our partners within that cluster. That's an example of how we work together within the clusters.
Okay. But, clearly, all these integrated parts—we won't reap the benefits from the offshore wind industry if we don't generate the steel that they need within south Wales, and we won't reduce the carbon emissions by bringing them from the other side of the world. One of the organisations I met at the launch was LanzaTech—obviously very big international players. Now, they were saying that if they don't get some money off the UK Government, they're likely to walk. Could you just describe to me what is the technology they're endeavouring to use to support your energy needs?
So, LanzaTech—and I met with them a few weeks ago to talk about their proposal—are actually considering putting a facility on land owned by Associated British Ports, ABP, which own a lot of the land in Port Talbot. Their model is to convert carbon dioxide into aviation fuel—sustainable aviation fuel—and they have a pilot planned, I think, in Ghent, in ArcelorMittal in Belgium, where they're taking waste gases from the steelworks and converting it to sustainable aviation fuel. That's their model. If they didn't take carbon dioxide from the steelworks, they could import carbon dioxide in a liquefied form and convert that into sustainable aviation fuel, but that would be a project for LanzaTech to do, either with or without the steelworks. We've not said—
Okay, so they're not directly going to be assisting you on decarbonising your operations. Okay. To what extent is the uncertainty around the new technologies that need to be used to decarbonise the steel industry impacting on the progress that you're endeavouring to make with the UK Government? Because it seems to me that we're in a chicken and egg situation, where there are a lot of promising prospects, but it's not going to happen tomorrow.
I think what's interesting is that a lot of the technology, in terms of carbon capture and storage, it's an established—it needs to be scalable. But there's a method in which we can capture carbon dioxide, in terms of electric arc furnaces; it's an established industrialised technology. There are many reference plants across the world that can demonstrate a way of making steel and the steel that we need.
I think the challenge, really, is around hydrogen, perhaps, in terms of hydrogen-based direct reduced iron. If we look at the UK Government's commitment around hydrogen availability—possibly 1 GW by 2025, 10 GW by 2030—in terms of some study by the Materials Processing Institute that suggests that if the UK was to switch its blast furnaces to direct reduced iron, it would need 1.4 GW of demand, so, it's going to be a massive consumer of hydrogen going forward.
I think that the hydrogen network and infrastructure is an important point. But, ultimately, what that leads us to is the core of that problem—not problem, sorry—the core of how to generate hydrogen is going to be: is there enough electricity—part 1; is there enough renewable electricity therefore, and do those timings align—part 2; and then, number 3, it's around how do you get to a position where you've got sufficient grid connections to allow you to then, through electrolysis or through using electric to generate hydrogen, have sufficient connections to the grid to allow you to undertake those processes. And there are a number of problems in there. So, to Martin's point earlier around support going forward, one of the key support areas is going to be the availability of sufficient grid connections to allow Port Talbot to operate those different technology options. So, that's a National Grid discussion, to ensure that, in the timescales that are required for each of the scenarios, power can be made available. And that's part of a broader question as well, then, for south Wales, in terms of: we are one, perhaps, anchor point in terms of consumption from the National Grid, but there'll be others as part of the south Wales industrial cluster—be it LanzaTech or others—that will also want to consume power from the grid. And I think the Welsh Government are pulling together a good view as to what those different pulls on the National Grid will be, going forward, and will help deliver those connections as required by industry.
Okay. So, this is something that the First Minister is pursuing vigorously with the UK Government. Presumably, this is something you're also raising in your negotiations with the UK Government, because this is—. It's no use developing this offshore wind if we don't have the grid connections happening at the same time, because, otherwise, we're delaying things, and we haven't got time, have we—not just because of the climate emergency, but because your business model requires us to have instant, very swift solutions.
So, where are we at in your negotiations with the UK Government? Is this around the grid, or is it the direct investment that you require to make more of a shift towards electric arc production?
So, the negotiations are about a level playing field, part of which will need to be also supporting policy around how to deliver the grid connection to Port Talbot, to allow us to make the transition in the timescales that we believe are the right timescales. So, in order to do that, be it carbon capture and storage, or be it electric arc furnace, or hydrogen-based direct reduced iron, that will require a grid connection, so it's an important part of all future considerations for the Port Talbot site.
So, how much is—
Sorry, Jenny. Huw, did you want to come in on this specific point?
Sorry, Jenny. It's only to come back just for clarity. From everything you're saying, in terms of the proven technologies and those that still need to be tested and commercial, let me ask you one straightforward question: electric arc is something you want to get on with at Port Talbot, yes?
As I've said, it's one of the options, as is—
Yes, but from everything you've said—. CCS, you've said, is not proven at commercial scale; where it is done, it has been done very expensively, it needs massive Government support. Electric arc is well proven; you've told us about the European examples, the American examples, and so on. Everything I'm reading from you says that you want to move to electric arc as part of the solution, and it will be the first, probably the one that you can run at fast in Port Talbot.
So, what I've said is that we've got—. So, in terms of the example I gave, Emirates Steel currently have carbon capture and storage linked to steel making, and that's 800,000 tonnes per annum. There's a question around how to scale that, but that is an option, to say: if you maintain a blast furnace configuration, how do you scale? But then also, what I've mentioned in terms of the European landscape is that most European players are moving towards electric arc furnace and hydrogen-based DRI—that's one point of reference, as is the equivalent blast furnace carbon capture and storage technology. But the point here is that there aren't decisions made, there are still options that continue to be discussed, and, as those discussions progress, of course, bringing us back to a point we made earlier, those discussions also will take place with the trade unions, who I know you're meeting later as well.
Okay. Fine. I'm trying to get a sense of your priorities and the scale of those priorities—what would come first, and so on. But could I ask you then one other thing—a quite simple question? Hydrogen, green and other colours, are now increasingly being piloted, trialled in parts of south and west Wales. Are you in discussion with any of those hydrogen producers about the potential of them engaging with you, in the fairly short to medium term, to produce the sort of thing you could actually do with blast furnace? Are you in discussions with any of those companies? Are you allowed to say that?
I think if we were, it would be within the south Wales industrial cluster. The point that I think Huw's making is that we're in confidential discussions with the UK Government around technology choice and level playing field, and that's all we can say on that topic. I know you want to push us, but that is all we can say.
Okay. I did my best.
Yes, I know, fair play. Back to you, Jenny.
If everything goes according to plan, can Wales produce enough hydrogen to meet your needs as well as some of the other applications for green hydrogen, in looking at all these players in south Wales?
I think it's a step away from us. Huw talked about technology choices. In terms of creating green hydrogen from electricity in south Wales, we're years and years and years and years away from that technology. And if you talk to the guys in the south Wales industrial cluster, they'll confirm that, because there's just not enough green electricity to enable water to be split into hydrogen and oxygen, and that would be green hydrogen. So, I know there are lots of different colours, but, ultimately, if you want to make green steel or green anything, you need green hydrogen, so it's a long way off.
Okay. I don't detect that there is the urgency here, given (a) the climate emergency and (b) your business case for changing now.
Okay. Well, that's your view. We need to move on. Before I come to Janet to take us on to talk about energy prices, which I know is a key issue that we need to discuss, can I just ask in what way, if any, would your different preferred options affect your ability to produce the products that you're currently making at Port Talbot? Would they need to evolve in relation to the technology that you use, or is your focus on continuing to produce what you currently produce, albeit through a different way of generating it?
So, we want to ensure that the steel we produce—no matter which of the solutions—continues to act as the foundation for industry in the UK. I think that if there are compromises around what the technology can and can't do, then we need to put mitigation steps in place. And mitigation steps are alternative sources of supply, working with customers and the supply chain to try and see, if you can't produce a certain type of material, can you migrate those customers to a different type of material that they, whatever the preferred option or whatever the ultimate option will be, can then consume? Because ultimately, one of the challenges that we'll all face is that, whilst this is a technology change in terms of the steel that can be produced, there's also a supply chain discussion as, a society and as an economy, we move towards a green economy. How does then the supply chain adapt to also consume that green steel? And that will be one of the key considerations, but that's part of a broader engagement with our stakeholder groups, be it suppliers or customers, over the coming years.
Sure, okay. Thank you. Janet.
Thanks, Chair. UK Steel has said that the UK steel sector continues to face electricity prices higher than competitors in France and Germany. How is this going to affect decarbonisation of the sector, given that low-carbon steel technologies are extremely electricity intensive?
That's a good question and we're obviously one of the largest members of UK Steel and work with them on policy with Government. One of the things that we've been working on with the team down in UK Government is energy support and energy policy. There was the 'supercharger' announcement two or three weeks ago, and what that has allowed us to do is to evaluate now that—. There were three real things, weren't there? There was the renewable levies exemption scheme from 85 per cent to 100 per cent, which we see as positive, there was the exemption from the capacity market supplier charge, and then there was the 90 per cent network charges for the steel companies. So, what we're doing now, with our experts on energy, is trying to look at our energy uses, what that would mean to us, and then that may take us to a position where we have a level playing field with Europe. So, we're doing that analysis at the moment. I'm happy to share it with you once we've finished it, but it's quite complicated. But we see that intervention by Government as very positive. We would like it faster. So, there's got to be some primary legislation passed, I think, this summer, and then we can push on with trying to get that adopted by April 2024. That's our plan. So, we see it as a positive, but we haven't fully evaluated yet, but it's pretty complicated.
Okay, thank you.
Okay. Did you want to come in?
You seem quite positive about that, which is quite a contrast to recent years of discussion. Has it changed significantly, then, with the recent announcements? And could I ask you also to touch on the recent runaway energy prices that we've seen? How has the support package been during that period, because that will have affected your bottom line? And how did it compare to other countries that we're competing with?
So, energy prices did rocket, didn't they? They've come down slightly, but are probably three times higher than they were for normal. We've worked very closely with Government, actually, to make sure that we would modify our take off the grid if we needed to, for consumers, I guess. But what they also did is they put the emergency energy relief package in, which was really a positive thing to do, and for us the good news is that they extended it to March 2024. So, those two interventions we see as positive. I know European governments did similar. What we're seeing now as we look out to Europe is that some of those governments are actually taking that support away ahead of the UK Government. So, it's a good thing.
Okay, thank you. Janet.
So, given the need for electricity to power lower carbon steel making, do you plan to increase the percentage of your energy requirements that is self-generated as part of your work to decarbonise?
If we take it in two parts, we talked earlier about needing to increase the amount of self-sufficiency we have. Today, it's 70 per cent at present, after the investment that Martin mentioned, with a 30 MW turbine. That's something that will continue. In terms of going forward, one thing Tata Steel has as a historical legacy of being part of the old British Steel Corporation is it has an awful lot of land. Now, one of the potential road maps that we need to evaluate is how to best utilise that land for renewable electricity, be it in the form of solar or wind. So, that's something that's ongoing, to understand, 'Well, how can we effectively feed into the grid?' or find some sort of power purchase agreement, or sleeving, I think they call it. Wherever that energy's generated, how do we take that to Port Talbot? We're not able to generate sufficient electricity in order to meet our needs. I think that would be questionable, just based on the sheer volume of electricity required, so there'll still be a pull on the grid, and therefore what we'd look to continue to do is to consume, ultimately, in the fullness of time, electricity that is renewable, that is, effectively, as Martin has described, pulled from the Celtic sea and consumed in south Wales to produce green steel. That would be our ambition.
And just as a small point, whilst the measures put in place by the UK Government are there today, which Martin quite rightly pointed out, and they are helpful today, it's important to ensure that we continue to maintain a competitive policy landscape on energy costs over the coming years, because, across all solutions, the amount of electricity we require will only increase and, therefore, we need to keep that competitiveness on electricity prices, going forward. We can't revert to where we have been historically, which is being at a disadvantage against French and German steel makers.
Okay. Jenny very briefly, and then we'll move on to Luke.
You say your analysis is ongoing for using this legacy land to generate energy. Could you just explain to us why you haven't accelerated this process, because you clearly are always going to need a very large amount of energy?
It's something that's under way. We're engaged with some third parties to help us understand, based on our land masses that we have available across the UK, what type of technology we can place on that land, be it solar or be it wind, and then also work through the process of, based on the land mass, the type of technology, how much energy could be generated. What then would be required in terms of connecting that parcel of land to the grid, and then what would be required in terms of ensuring that we have that sleeved to Port Talbot? That's a piece of work that is ongoing and is active, and we continue to progress it, to effectively become more self-sufficient.
Okay. What I'm struggling to understand is why this hasn't happened already, because it's self-evident that you need this energy. Is it the grid that's the main obstruction?
I wouldn't say at the moment the grid is an obstruction. I think it's just something that we're analysing at the moment in terms of how we can best utilise the land and assets that we have available to us.
But why weren't you analysing this 10 or 15 years ago?
I'm not sure, but I think the important thing is we're doing it now and we're analysing now to understand how we can best utilise the land that we have available to us.
Okay. So, when is it likely to lead to any electricity being generated on this legacy land?
Well, I think that will depend on a parcel-by-parcel basis, and we haven't yet concluded the studies that will soon start on how to best utilise that land.
Could I just ask—? We've focused, obviously, quite a bit on energy policy in our discussions and in relation to your discussions with the UK Government. Are there any other policy areas aside from energy, obviously, that are being focused upon?
We mentioned the carbon border adjustment mechanism.
I think that's really important. I mentioned that the European Union are ahead of the UK on that discussion and are getting calls for evidence of why we need it. So, we are working with UK Government on that. And we'd ask that the timescales align with the European timescales and the same mechanism, really, because it protects UK interests, and if Europe go before us, then that leaves us at a disadvantage.
Sure, sure. Okay. There we are. Okay. Thank you. Luke.
Diolch, Gadeirydd. Just thinking about the workforce at the moment, many of us not just in this room, but in the Senedd, have talked about the need for a just transition and the importance of ensuring the workers aren't left behind as we look to decarbonise. Thinking about some of the routes that you've identified around the potential for decarbonisation of your Welsh sites, what would the implications be for the workforce, because, for example, we've seen reports, one notably from Sky News, implying that the workforce of Port Talbot will be reduced from 4,000 to 1,000 workers? How would you respond to that?
Well, I think, as we've said, the analysis is under way in terms of what the different technology options will be and what the impacts are. The one thing that we will be clear on is that the outcome of any of the scenarios will be discussed, of course, with the trade unions. There will be a full consultation process, as necessary, associated with any of those impacts. But I think that, from our perspective, where we are is we recognise the importance of Tata Steel to communities, both in south Wales, north Wales and more broadly across the UK in terms of its impact. It's a cornerstone part of a number of different regional areas, and we offer salaries that are 36 per cent higher than the national average and greater than the average for those areas themselves.
What we foresee, though, is that what we want to become as Tata Steel UK, or Tata Steel in Port Talbot in particular if we link to the free port, and what we believe is that we can be the anchor point for the green industrial revolution actually taking place in south Wales itself, and we could be one of the factors that acts as a multiplier that sees a number of green jobs develop and grow around the Port Talbot site, to ensure that we can continue to be part of a broad network and broad ecosystem of green steel to start off with, green communities and the future green industry in south Wales.
So, in terms of that report on Sky News, you wouldn't have any idea where that would have come from? The report on Sky News, for example, said that it was 'internal estimates'—the job losses from 4,000 to 1,000. So, you wouldn't have an idea of where that would have come from?
I'm not sure where the media speculation has come from, no.
Okay. You mentioned in terms of being the anchor point for the green industrial revolution here in south Wales. We're seeing skills gaps emerge across several different sectors now when it comes to the green agenda. Have you identified skills gaps within your own sector at the moment? And to what extent are those gaps going to cause a problem for you down the line?
I think I said earlier that we're recruiting about 130 apprentices this year—80 undergraduates and doctoral students. So, we're always recruiting for skills. We have our own academy on site, where we train electrical engineers, mechanical engineers, and we train technicians, chemists et cetera to bolster the skills that we need on site. There is a skill shortage in south Wales or the UK generally. So, we have to think about what skills we need internally and address those needs ourselves, and then, what we can do with our partners, as we move to a green economy is say, 'Do we need more designers? Do we need more welders?' On the importance of the work we do with RWE Renewables on how we redesign floating offshore wind, when we do that work, we'll consider what skill base we need as well. And then, when we know the skill base we need, we can say to the likes of Welsh Government or ourselves or our training partners, like the colleges, 'These are the syllabuses we need now, these are the training materials we need to make sure that we have the skills in south Wales to deliver the green economy.' I think it's quite dynamic, but we're very, very used to it in Tata.
And to what extent is a programme of reskilling the current workforce involved in that, because, again, coming back to that just transition element, there will be a number of people who potentially need to reskill who are in the current workforce?
That's very true. We recognise that, and that will be part of the considerations on how to move forward once we have concluded the discussions with Government. I think that what's important to note is that, at present, we're an anchor point also for apprentices and graduates in the south Wales region. So, I myself, I'm a product of Tata Steel's higher apprentice programme. Last year, or this year, I think we've recruited maybe 100 to 130 apprentices. In our apprentice pipeline, we've got around 430, I think is the number, of which 380 are based in Wales. So, we're a massive skills creator. Tata Steel UK has offered me, at least—I can talk from personal experience—a tremendous amount of opportunity and support to develop my career and my process. I think that's something else in terms of that multiplier effect and being that anchor point—to be an anchor point for skills and the economy is as important as also the generator of green steel.
And in terms of that you've mentioned a lot of the internal work around the reskilling and skilling agenda within the sector, would you be expecting further support from Welsh Government as we move to further decarbonisation around reskilling?
I think so. I think we're working together with Welsh Government to make sure that we have alignment. It won't just be us; it'll be the other partner companies as well. But it's have we got the right courses in the schools, to start with, and then moving through to GCSEs or A-levels or diplomas with the colleges, and then university. So, it's that whole—. You need the whole range of skills from apprentices all the way through. But it's working together with the Welsh Government to make sure we get it right.
And do you feel that the Welsh Government is clear on its direction around the skilling agenda within your sector?
We have really positive discussions around our sector in terms of skills. We have good support from Welsh Government. The Welsh Government team were down with our training manager only two or three weeks ago to talk about our current training programmes, did we have any gaps, what those gaps were and how the Welsh Government can help.FootnoteLink So, those dialogues exist, the networks exist; it works pretty well, I think.
As was just said, the Welsh Government have had a track record of supporting us through skills and talent development as well over the course of the last five years, or five to 10 years.
There we are. Diolch yn fawr iawn. Thank you. Janet.
Thank you. Celtic free port. So, how important is the Celtic free port to Tata's future plans for decarbonisation at Port Talbot, and how exactly will you be involved in the free port?
I think it's a good question. We supported the free port application. ABP's part of it, because they're based in Port Talbot. We think it's a good thing for south Wales; we think it's a good thing for Port Talbot. What I said earlier was that we've got this memorandum of understanding with RWE Renewables, and that's specifically around redesigning floating offshore wind structures to use strip steel rather than plate steel, because that's good for the UK economy; it's good for everybody.
So, we're actively involved in that today, and what we see, the vision that we have—[Interruption.]
That's okay. The vision that we have is that you make green steel in Port Talbot, and then the infrastructure's set up in the right place in Port Talbot where you're making these floating offshore wind structures. I think the requirement for that over the period is like 5 million tonnes of steel. It's huge. Those floating offshore wind turbines then are put in the Celtic sea, generate electricity to bring back into the steel plant to make green energy, and we see that—. That's where we see the importance of that activity. So, we'll continue to actively support the free-port activity.
And whether wider investments such as this do affect the level of funding that Tata require to support decarbonisation from the UK Government.
Sorry, can you repeat that? I didn't quite understand, sorry.
Yes. Whether wider investments such as this—I mean, I would think that they would—affect the level of funding that Tata requires to support decarbonisation from the UK Government.
I think they're two different things. I think our discussions, as we said earlier, are ongoing, and private and confidential with UK Government. I think the free-port discussions will be, again, a separate activity.
Okay. Huw wanted to come in.
Can I ask, on the—? It's great that we've got this potential, and our understanding is that the bid that was put forward from Milford Haven and Port Talbot came across extremely strongly to those who assessed the bids, which is fantastic, because, clearly, the partnership working is good. But, in terms of moving to actually building platforms at Port Talbot, can I just ask: do you think the bid process is currently designed in a satisfactory way to enable that to do, and could you also comment on, particularly, the issue of the Crown Estate awarding tenders for production? Because we can go round different countries currently to get these platforms and to get the other technology. It would be a tragedy if this was not actually built at Port Talbot—to the nth degree. So, I'm talking about barriers, impediments, within the bid process et cetera. What are your worries at the moment, if any?
We weren't involved in the bid process; we were purely supportive of the bid process—
—so, we wouldn't have any visibility of that. So, I can't answer that question, I'm sorry.
But, if the opportunity was there, you'd be able, in the timescale described in the Celtic sea project, which will come in phases, we understand that, but you'd be, subject to the successful outcome of discussions with the UK Government so that you can pursue options of different types of steelmaking and so on—you'd be then ready to engage at the earliest stage with the development of offshore wind in the Celtic sea? You'd be ready? As opposed to it going to Spain, Portugal, elsewhere—you'd be ready?
Right, that's good.
Yes, okay, thank you. I just wanted to ask a few questions generally about research and development. You've touched on the different technologies that are already being used to certain degrees and have proven others in their infancy maybe. I'm just wondering what work Tata is doing directly with partners to develop your own R&D in this decarbonisation space.
Do you want to go?
Yes, so, we spend about £11 million a year on R&D in the UK—the biggest spend by any steelmaker. We have a relationship with Swansea University very strongly and a relationship with Warwick University very strongly, but also other universities: the University of South Wales, Imperial College London, for example. We have various research programmes ongoing. I'll give you an example of one that we're doing with the University of South Wales, which I actually started with them when I was the research and development director for Tata Steel UK seven years ago, where we started off with one PhD student looking at the capability of taking some of our gases—the blast furnace gas at the time—and, with a bioreactor, converting that to a valuable product.
I'm pleased to say that we, along with the university, had £2.5 million funding from Government to put a pilot plant in Port Talbot, and if you come to Port Talbot—and I openly offer to you all to come to Port Talbot for a visit, or to any of our sites, but, if you do come to Port Talbot, what you see is a pilot plant. We're actually taking gases from the blast furnace, bubbling them through a bioreactor, and that bioreactor is made of waste product from the water industry, which would otherwise go to landfill. And that bioreactor converts the carbon dioxide, essentially, from the blast furnaces, to carboxylic acid, which is, essentially, the building block of life. And if you did another process, you could convert it to valeric acid, which is perfume, believe it or not. So, that's an example of the research programmes we're doing. We also do research jointly with Warwick and Swansea on all different product developments, for example, and process enhancements. So, it's quite a robust programme we have. And we also have the power of the group: so, we also have the power of India, if we need help from India, or indeed the Netherlands or somewhere.
Okay, that's very interesting. Of course, a number of the R&D projects that you've been involved with have benefited from EU structural funds, so, where are we in terms of replacement funding and the sufficiency or otherwise of any replacement funds that might be available? How does it compare?
It was a topic of conversation with the universities to say, 'Well, where does that funding come from?', and I think those conversations are still live. I'm not in them anymore because of my new role, but I'm aware they're taking place. I can try and get some detail back to you if that would be helpful.
Just some sort of indication of how does it compare would be useful, or what the prospect is, I think, because, obviously, it's such a key part of this work, we'd want every stone to be turned and every opportunity to be taken advantage of, clearly.
That's right, and the project I talked about came from Welsh Government—you've been funding it—so, it's very good.
But I will provide that detail.
Thank you. Thank you. Okay, we've concluded the areas that we were hoping to cover. Is there anything else that Members wish to mention?
Just a couple of things I want to come back to. July, then, is not a deadline for these negotiations with the UK Government.
No, like we said, the discussions are ongoing and the outcome will be the outcome when it happens. I mentioned earlier that we're investing in the blast furnaces still. We've invested in some new technology only recently called Topscan, which goes at the top of the blast furnace and helps model where the coke and the iron ore go to get more stability and less carbon dioxide—a reduction of about 50,000 tonnes. So, we continue today to run the business as we've run the business, investing in the assets that we have for the right reasons. So, that's all I can say on that.
So, my follow-up question would then be—. I'm not going to ask you for then where is the deadline, because you've said you have positive discussions going on with the UK Government and so on, but let's assume we have a positive outcome and all the technological options that we've described are all on the table—no ranking, no preference—you'll need to engage with the unions, you'll need to engage with Welsh Government on training and so on, there. What's the timescale if you have a successful outcome in July, August, September, whatever? What's the timescale for laying those options out, engaging with the unions, engaging with Welsh Government, both on the package of support and also the issues that Luke referred to of just transition? So, what's the timescale for when you could do that, because it's not just to do with the Celtic free port, it's the long-term future of the steel industry in Port Talbot and in Wales?
So I think, in terms of timescale, the engagement would need to start once the decision—well, I think an ongoing engagement is taking place. I'd start with that, and then, clearly, in terms of the impacts, then the impacts are subject to reaching the conclusion of the negotiation. In terms of the lead time, then, associated with either building a carbon capture utilisation and storage plant or building an electric arc furnace or building a direct reduced iron-based facility, those are a number of years. So, there's a period between the start of that journey and the end that will be a number of years, but the most important thing is that intensive engagement upfront to ensure that the appropriate consultations take place and then the appropriate planning is in place to support what has been discussed around the table as a just transition, to ensure that any impacts are mitigated, part 1, and then part 2, of course, to make sure that we're developing the right skills and framework that can sit around Tata Steel UK and around the south Wales industrial cluster so that we can realign, as Martin described, colleges to ensure that we've got the right pipeline of STEM subject qualifiers or STEM subject participants coming through to feed not just Tata Steel UK, but also the south Wales industrial cluster and the free port, because, hopefully—I think we all hope around the table that—what we see over the course of the next 10, 15 years is a green industrial revolution sitting in south Wales, and, as a catalyst, via the south Wales industrial cluster.
Okay. Last word to Janet, then.
Given all the challenges and pressures that it's obvious are facing Tata Steel here, how assured and enthusiastic are you about its future prospects, to include manoeuvring your way through the decarbonisation programme?
I think we're positive. I think we're proud as well, and I think we all should be proud, that the steel industry in south Wales serves a number of important customers in the UK. So, we make steel in Port Talbot, we transfer that to Trostre in Llanelli, they convert that to tin plate for Heinz. So, all Heinz baked beans will be made from south Wales steel—[Interruption.]—and things like that. So, it's really positive—. Sorry.
No, no, I'm good; it's all good stuff—
She was cheering.
—and positive, because you're such a valued asset to us.
It's such a value, it is. And we make steel for Llanwern, Llanwern galvanise that, send it to the north-east of England and make Nissan Leafs, Nissan Qashqais, which we probably all know and see and love. The Mini is made from steel from south Wales, the Principality Stadium, the impressive IKEA store in Cardiff, which my wife always goes to and comes back with loads of stuff, is made from steel from Port Talbot and painted in Shotton. So, we're very proud and positive. We've been in business since 1902, and we want to stay there for a very long time.
As a committee, would you welcome us coming to see you one day for a visit?
Yes, you have indicated. Okay, Jenny wants to come in now, so—.
I just—. If we continue along the current trajectory, we are going to see carbon emissions being exported and massive job losses. So, what are the top three priorities for you to get us to where we need to be, in terms of decarbonising our industry and having that virtuous circle of the steel that we need for the green energy revolution being created locally here in Wales?
So I think, in terms of what are our key asks, it's clear that it's a level playing field with competitors in Europe.
Right, we've got that.
That's around investment. And if you look at, as we've said, Salzgitter in Germany and ArcelorMittal in Spain, they've received about 50 per cent of the capital investment requirements. We want to ensure that we've got an appropriate policy landscape that provides a competitive energy price and competitive planning processes, grid connections et cetera, et cetera. Those are the key enablers to the future green industrial revolution: having support in both an investment perspective—and that's not a subsidy, that's a level playing field discussion to ensure that we can compete and continue to compete within Europe, because we never want to get into a position where we're unable to deploy a green steel offering in south Wales because we've been outfought and outcompeted by European competitiors.
Okay, but this matter just simply hasn't had the attention it deserves. You're the largest emitter of carbon emissions in the UK bar none, and we simply haven't seen the pace of change needed. I'm appreciating that you're not the only player in this, but unless there's a change of policy and pace, how on earth are we going to achieve what we all in this room want to achieve, which is a green revolution with maintaining our industrial base in south Wales?
Sorry, is that a statement or a question?
Well, I'm just seeking some indication of what it is that actually needs to change. We've talked a lot about the obstacles to change, but is it entirely based on the UK Government having a change of policy?
I think in terms of our position, as we've hopefully articulated, we are looking to invest our current assets, where possible, to reduce our carbon dioxide emissions, by better utilising waste gases or reducing the amount of coal or coke that we consume in our processes. So, there are steps that we can take.
The green industrial revolution is going to be the biggest challenge that the industry faces, both for hard-to-abate sectors like steel and also other sectors that will face similar challenges. What all steel industry participants will see is that the scale of capital investment required is typically going to be outside the realms of what's affordable for those industries or for those companies, and that really is where we request the support, and we see that starting to take place in Europe. I don't think it's necessarily a UK-based problem. I think, across Europe, there are only a small number of confirmed amounts of support offered by European competitors. What we want to make sure of is that, on the basis that those announcements have started to be made, we in the UK move with the same momentum as our European competitors, so we're not the last to the table and we can be one of the first. That's what we'd like to be.
Thank you. The very last word to Huw now.
Thank you, Chair. I'm sorry to go back, but it is helpful to get clarity. You've made it really clear that two of the key factors that you need now resolved are, first, the investment support for the transition to net zero, which will require significant support from UK Government in one way or another—you're in the midst of negotiations—and secondly, the energy price support, which you've described, Martin, as being really positive about the way we've got through the recent energy hikes and so on. But you need to see that in place, allied with mechanisms that move you, as you want to, towards zero carbon. If one of those pillars comes away, the one that you've banged on about for years and years, and the unions have as well, which is the energy price support, how much of an impact does that have on your overall strategy as you've described today towards net zero? Because that support has been good, as you've described, but it's been temporary. We have no indications that that's going to continue for ever and ever at the moment, so would that take away a substantive leg of the stool that allows you to get to net zero?
I think if we look at the future of steel making in whatever capacity, absolutely key to everything is a competitive electricity price. I think that won't just be for steel; I think that's more generally for UK plc and the industry more generally. If you want a competitive hydrogen price, you need a competitive electricity price. That's not a steel-specific problem. I think that's an industry problem across the UK. Because I think, in future, if the future is a hydrogen-based economy, it's therefore a competitive electricity price economy first and foremost in order to then generate competitively priced hydrogen. So, I think that's key more generally across industry, not just specific to steel.
Thank you so much, both of you, for appearing before us this morning. We very much appreciate the evidence that you shared with us, and clearly it will form a key part of our consideration around this subject area. You will be sent a draft copy of the transcript just to check for accuracy, hoping that everything's been captured, but clearly I'm sure you can let us know if it hasn't, and also we would appreciate those different elements that you've agreed to forward to us. Maybe we can remind you of what those are in correspondence. Diolch yn fawr iawn. Thank you both. The committee will now break for 10 minutes and we'll reconvene at 10:50 to hear from the trade unions as well. Diolch yn fawr.
Gohiriwyd y cyfarfod rhwng 10:40 a 10:53.
The meeting adjourned between 10:40 and 10:53.
Croeso nôl i gyfarfod y Pwyllgor Newid Hinsawdd, Amgylchedd a Seilwaith yn Senedd Cymru. Rŷn ni'n parhau â'r gwaith o ystyried datgarboneiddio y diwydiant dur, ac rŷn ni'n symud at ein panel nesaf ni, sydd yn gasgliad o gynrychiolwyr o'r undebau llafur. Dwi eisiau estyn croeso i Alasdair McDiarmid, sy'n ysgrifennydd cyffredinol cynorthwyol gydag undeb Community, Charlotte Brumpton-Childs, sy'n swyddog cenedlaethol GMB—mae hi'n ymuno â ni ar-lein, croeso—Shavanah Taj, sydd yn ysgrifennydd cyffredinol TUC Cymru, a Tony Brady, swyddog cydlynu rhanbarthol Unite Cymru, gyda chyfrifoldeb dros Tata yn genedlaethol. Croeso i'r pedwar ohonoch chi. Mae gennym ni dipyn o bethau rŷn ni eisiau eu trafod a'u codi gyda chi, felly awn ni'n syth i gwestiynau, a mi wnaf wahodd Janet i gychwyn.
Welcome back to this meeting of the Climate Change, Environment and Infrastructure Committee at the Senedd. We are continuing with our work of considering decarbonisation of the steel industry, and we move to our next panel of witnesses, who are representatives of the trade unions. I want to extend a welcome to Alasdair McDiarmid, assistant general secretary, Community union, Charlotte Brumpton-Childs, GMB national officer—she is joining us online; a warm welcome to her—Shavanah Taj, the general secretary of Trades Union Congress Cymru, and Tony Brady, Unite Wales regional co-ordinating officer, with responsibility for Tata nationally. A warm welcome to all four of you. We have a number of issues that we want to raise with you, so we'll move immediately to questions, and I'll invite Janet to kick off.
Diolch, Chairman. Good morning, bore da. Could you provide us with the latest position in negotiations between Tata and the UK Government on investment for decarbonisation at Port Talbot?
As is widely known, we remain in ongoing discussions with Tata. We are doing our own lobbying of the Westminster Government et cetera, but I think it's widely known that the £600 million that was given between Tata and Jingye is not enough to transition the industry or the sector. I think that that's well known. It's not attached to any genuine plan, there's no job guarantees. Investment is needed urgently, but a real plan is as important as investment. We need a plan for manufacturing that includes steel, that includes jobs during transition, that includes training, and includes good—
So where are the barriers to those negotiations in terms of a plan?
There's no commitment from the Westminster Government. There's been no commitment about a manufacturing strategy. It's all been kind words, but what we need is, 'Yes, we want a steel industry', or, 'No, we don't want a steel industry', and we can get on with dealing with that situation. But we feel ourselves now—we had a discussion before—that this summer could be the crisis point. We need to have something in place by this summer, or I feel that Tata will make their own decisions and put spades in the ground on their own plans.
There's no requirement for you all to answer every question, by the way. Just indicate if you want to come in. Alasdair.
Thank you very much. Clearly, this is an incredibly important question, so I thought I'd supplement what Tony said. I completely agree with him—it's been incredibly frustrating, this process. Obviously, we know Tata and the Government have been in discussions for a number of years. There's been quite a lot of blaming the other for the lack of progress; Government says they need a plan from Tata to commit to support, and Tata say they need to know what Government's going to offer before they can commit to a plan. So, it's been very much a chicken-and-egg situation, and, really, the people who lose out are our members, the workforce. It's been incredible uncertainty they've had to live under, for many, many years, but particularly since the Indian parent, Tata, put the business up for sale, with the threat of potentially shutting it in 2016, if a buyer couldn't be found. Ever since that time, it's been an extremely difficult position to have to deal with, and the progress has been incredibly slow. We now know that a £300 million offer has been put on the table—that's progress, we welcome that, it's good to see that, but I don't think there's any doubt that that's going to be way below the sorts of figures that are going to be required for a successful outcome.
We don't know the details of the discussions between India and Tata; in fact, I think probably your previous panel doesn't know the detail of those discussions either. And that's part of the difficulty—that these discussions are taking place at a level between the Indian parent, No. 10, No. 11, and we don't really know what's going on. And that leads to a lot of concern, a lot of worry, lots of people leaving the business, lots of uncertainty. As Tony says, really, it's got to a position now where decisions have to be made. Yes, Government has to step up to the plate, but, yes, Tata has to do that as well. We don't blame one or the other; I don't think it's helpful for us to say, 'It's all in the gift of Government, Government has to pay', and if they don't, then that gives Tata carte blanche to say, 'Well, we've tried, Government's not supporting us, and so we're going to do what we have to do'. It very much has to be a partnership between Government and Tata, and the onus is, as we see it, on both sides to come to an agreement. And they have to do that very quickly, because, as Tony says, time is running out, investment decisions have to be made, the assets are nearing the end of their lives, and, potentially, to continue without a decision one way or another is becoming unsafe. So, we have to have decisions very, very soon. We don't know the detail of the negotiations, but they have to conclude, certainly this year, if not in the next few months.
On behalf of your members, then, how are you, as the unions, actually engaging with UK Government and influencing the discussions?
Charlotte wants to come in.
Thank you for that, Janet. We meet with the steel Minister, which at the minute is Minister Ghani, on a regular basis. In fact, we've got a meeting scheduled for either next week or the week after. That is a meeting of Ministers, people from BEIS, the industry, and employers, as well as the trade unions. And we challenge them on some of the questions that you're asking us today in that space. Like Alasdair said, and Tony before him, there's not a huge amount of transparency towards the trade unions in terms of how those negotiations are going on, both with Tata and with Jingye. I know we're talking about Welsh steel today, but it's not something that is a Tata-unique issue. But from our members' perspective, whenever we meet them, there's vehement agreement between the trade unions, when we're pressing the Government, that we need action on investment for decarbonisation as well as improving the market conditions for the UK steel industry. We've been talking to steel makers recently about what happens in the next couple of months, and we've had some concerning comments made about, even if the capital expenditure is right or the investment is there, the procurement position of the UK steel industry, as well as the high energy costs and the high costs of carbon, still make it quite an unattractive proposition moving forward, and all of those can be and should be influenced by Government. And I know we've seen some announcements on carbon emissions as well as energy prices, but they're all looking towards 12 to 18 months in the future, and it's not—. We're getting increasingly concerned that the decisions are being taken too lightly and the influence of those decisions is not going to come in in enough time to help the UK industry when it needs it.
[Inaudible.] So, when did you last meet with them? If you're meeting with them—. Now, how often do you engage and meet in this arena?
I think Alasdair will correct me, but it happens between every four to six weeks at the minute.
Thank you. Sorry, Alasdair, did you want to come in? No need to operate the mike.
Okay. Yes. So, every month we have a conversation with the Minister or with their senior officials. We're in regular dialogue with Government officials. I would say probably the communication isn't as good as it was in the past. The previous business Secretary or the previous three business Secretaries ago, I think, Kwasi Kwarteng, he re-established the steel council at the start of 2021, with a remit to essentially develop a net-zero proposal, make agreements with the companies, make agreements with the unions in return for Government support. All through 2021, we had very, very regular dialogue with the Government, with the civil servants, and, as a sector, very much a shared endeavour, trying to get to a position where we could make agreements on net zero. We made a lot of progress. I think, actually, all the stakeholders were lined up, except for the Treasury at that point, and we hoped to be able to go into COP26 with an agreement on steel decarbonisation, but unfortunately, the rug was pulled from under us. And since that time, the business Secretaries that have come since Kwasi Kwarteng—Grant Shapps, Jacob Rees-Mogg and now the current business Secretary—have been less inclined to have that formal structure with the sector. But nevertheless, there is still this regular engagement via monthly calls with the Minister or her senior officials when she's not able to make those meetings.
Okay. So, if Tata and the UK Government fail to come to an agreement around the level of investment required, just give us an idea of what the implications would be for the workforce, not just at Port Talbot, but obviously other sites in Wales as well. Shavanah.
So, what I can say is, in Wales alone, we're looking at about 7,000 people losing their jobs. We know that steel is really important in Wales. We know that wages are in the range of about 59 per cent higher than the regional average, so it would be a massive loss, most definitely. And it would also be a real shame, because we are now in the process, of course, of securing the two ports and, potentially, you're going to lose a massive group of workers who are highly skilled, who we could use then. We could transfer those skills over so that those jobs are protected, but also other people then, within that area and the surrounding area in Wales, could also benefit too. So, there's a real issue here.
But in terms of how it's impacting workers already, mental health is shot. Workers are in a really bad state at the moment and, in fact, so bad that the Wales Union Learning Fund has predominantly focused on mental health training for workers and for reps, and the employer has also equally felt the need that it was important for them to also invest in further training for their staff, as far as mental health and well-being is concerned.
If we don't actually get to a stage where we are focusing in on this area, but also understand that steel is going to be important—. We're not going to do without steel, but we also know that there is a real issue when it comes to investing in green energy. We've got all the plans there, we've done all the research, we know what is needed, but so far the money that's on the table is just not enough to get us over the line. You've had the employer side in here prior to us. Tata alone have asked for £1.5 billion. You've heard so far already that that figure is nowhere near what is going to be needed going forward. So, this will be a massive loss for Wales. But also we're trying to move forward as far as one plan is concerned, looking to improve our economy going forward for the future, post COVID, post Brexit, but if we can't secure any further funding for this, this will be a huge loss, not only for Wales, but for the whole of the United Kingdom.
And, going forward, we're effectively missing the green revolution boat.
Absolutely. There are some real opportunities here, and it also impacts on the circular economy as well. We're talking about 7,000 jobs here, but there are lots of other people who will be impacted and lots of businesses that will have to shut overnight.
Thank you. Jenny, did you want to come in?
I just wanted to pick up on what Alasdair was saying about how things were going well in terms of having a decarbonisation plan with Kwasi Kwarteng as the industry Minister. I appreciate that the monthly discussions are no longer happening; what happened to the plan? Has that just been put in the bin?
Well, you can read the plan, I believe. It's available publicly through the Make UK website, and the plan still exists, the willingness still exists. I think the sector is quite unusual in the way that we work together. We've a long history of very constructive industrial relations. Obviously we have very, very good membership density across the unions in all the steel sites across the UK. We have excellent political relations and we have very good relations with the business department as well. There's a very high degree of consensus on what needs to happen; as we said before, what is needed is the political will to make it happen.
So, the plan still exists. I can talk a bit in detail—and I'm sure we'll come onto that—about the plan and our views on the plan for Tata Steel in particular. But at the absolute crux of the plan are two elements, and I'm sure we'll go on to talk about that, and they are the direct support for decarbonisation investment and energy prices, which are the two issues that are really the linchpin. Everything else we can talk about is kind of tinkering around the edges. Unless Government—and it's the Government in Westminster rather than the Government here who have the levers to do something about it—unless the Westminster Government is prepared to take on those two big issues, and do it in a way that gives us comparable support to that which is enjoyed by our competitors in Europe, then it's going to be very, very difficult. So, as we always say, it's not about handouts. We've never asked for handouts, the companies never ask for handouts. It's about that level playing field and that fair go, because we have an excellent industry, a hugely skilled workforce, very, very good research and development, a really valuable market, but we are competing with one hand tied behind our back because we're paying so much more for energy, and our European competitors are getting so much more for decarbonisation support than what has been put on the table by the Westminster Government to date.
Well, you've taken me on to the question I was going to ask next, so maybe, Tony, you can pick up on this. How does the support, or the situation that we find ourselves in with the UK Government in relation to Tata, compare to how other European Governments are working with the industry in their respective countries, and whether there's any good practice or anything that we can learn from there in terms of moving forward here in the UK?
Definitely, yes. As Alasdair said before, there's no company on this planet that can make this change on their own. They need the help and investment from their respective Governments, and they're getting that help from their Governments. The problem we have—and Alasdair's right—we have good relationships with the BEIS Ministers, but every time we start to tell the good story about steel, they're moved on. It's a different Minister we're dealing with now, so we have to start all over again. Very, very frustrating. Now, there are certain different reasons for that, but looking at the help from the Government, we need—. It's all about commitment again, it's all about: do we want a steel industry? It's as simple as. Now, the last time I met with a BEIS Minister they were talking about, 'These are very big companies, these are rich companies, they've got rich parents', but the energy costs—they need help with energy costs. Alasdair said himself, we're not asking for handouts; we're asking for a level playing field. The difference in energy prices from here to Germany is eye-watering. It's just impossible to compete.
Okay. So, can we point to any particular examples of European countries, Alasdair?
Certainly. So, there are two parts to it: there's energy prices and there's decarbonisation support, as we said. We're seeing other European Governments acting, and they have been doing for quite some period of time. But just in the last few months, we've seen the German Government agree to a more than €1 billion package to support Salzgitter. That's German Government funding. That's done. I think it was October that that got over the line. And, just a few weeks ago, we had the Spanish Government agreeing to a deal with ArcelorMittal to support their operations in the north of Spain, via a green steel hydrogen project—funding for that—and I think that was €450 million. And the French Government have agreed a similar package of something in the region of €1 billion of support for ArcelorMittal to decarbonise in France. So, other countries are getting on with it; they're doing it. And those funding packages are of the sort of 50 per cent match funding level, which is exactly what Tata are asking for. And, yes, £1 billion, it seems like a huge amount of money, but what they're asking for is what other countries are providing. So, it's not anything different; it's the level playing field again. We just want the same support as other countries are providing.
And on energy prices, it's been an issue for us for a long, long time. We've always had uncompetitive energy prices, but the situation has been really exacerbated by the situation in Ukraine, and we know what's happened with energy prices around that. Other countries were quick to act, even though they weren't as badly hit as us, capping energy prices for industrial consumers in some way. And it's not just Europe either, it's important to note, because, yes, our Government would like to portray energy prices as a global issue, but it's not really; it's a European issue. So, the Chinese, the Americans, the Japanese, other major steel producing countries, they don't face the same costs as us. So, it's put significantly more pressure on us than any other country. So, it's been very, very difficult.
And, of course, the Government has come forward with some limited support and they've got this supercharger scheme, which is due to give us relief from renewables obligations, the capacity market, and potentially some exemptions from network and transmission charges. All of that's very welcome. Most of it's not coming in until 2024, or later—some of it not until 2025—but it still will not give us parity with German and French producers. So, yes, it's great, but unless we have a level playing field with other countries then it's going to be very, very difficult to persuade companies to invest, and invest at the level that is required to secure the future of the industry and the jobs of our members for the next 10 and 20 years, which is what we need to see.
Okay. Charlotte, and, then—. Yes, okay, Charlotte.
Thank you. Just before we move on, as a little illustration of where we are compared to our European counterparts, currently, there are 38 green steel projects going on in Europe. The UK have got one, up in Scunthorpe, which is part of the Zero Carbon Humber initiative. In 2021, just to give you an idea of the pace that our European competitors are moving at, the UK had no planned projects and the EU had 23 planned projects. So, in just over 18 months, they've gone from 23 to 38, and we've gone from zero to one, and this is the pace that we're trying to keep up with. There's already a number of plants across Europe that are able to produce green steel, and we can get into a debate on how green that steel actually is, but they're able to put a label on some of the products that they create. I think there are around 11 plants that are able to certify some of their steel as green, and the UK are just not anywhere near to being able to match that at the minute.
Okay. Yes, that's pretty stark. Thank you for that. That's really useful. So, finally from me, and then we'll come to Huw with a few specifics around decarbonising at Port Talbot, we've spoken about the UK Government, now, obviously, I'm just interested to understand what kind of support or investment you'd be looking for from the Welsh Government, albeit it at a very different scale, I appreciate that. But what kind of role do you see the Welsh Government being able to play in this context?
I think procurement would be a good start. I think that there are significant opportunities for increasing the proper procurement of Welsh steel in Welsh infrastructure projects. I think Welsh Government could lobby Westminster to bring that across the UK. There are similar operations, publicly funded projects—. An example of that are the three fleet solid support ships. The contract went to a Spanish company, albeit some of the work will go to Harland and Wolff, but most of the work is in Cadiz. So no-one's been held accountable for procurement. They have little things in there to say that, as practicable, they'll try and use UK or Welsh steel, but no-one's held accountable for not using Welsh steel or UK steel. So, I think the Welsh Government procurement would be a massive impact.
Okay. Shavanah, yes?
I suppose one of the things that the Welsh Government can do; I mean, they're already focusing on skills and preparing the workforce for what the future looks like, but genuinely, it does go back to investment, and it also does go back to the levers that the Welsh Government currently doesn't have, unfortunately. So, the will is there, the political will is there, and the plans are very much in place, but unfortunately, until we can secure that funding, it is going to be really difficult going forward.
Yes, okay, thank you. Huw.
Shavanah, the obvious question is: what levers, please? What sort of levers are you talking about?
There's no need to operate the microphone, by the way, it's automatic—one less thing to worry about.
Well, I think, as far as levers are concerned, if the Welsh Government had, of course, more money in the pot, as far as the budget is concerned—there's already a big black hole there—that would be helpful. But equally, when it comes to investment, we don't have direct responsibility over the investment, as far as the levelling-up fund, for example, was concerned, now, with the agreements that we finally have around ports, it'll be interesting to see how the Welsh Government and UK Government can continue to work together. There have been some tensions between both of those positions.
But there are things that the UK Government—and I'm sure the Welsh Government would agree—that we can all be doing together, as well. So, we know, for example, there's an organisation called Make UK, and they've identified a series of options for how the UK Government, in particular, could help support steel. Firstly, by creating a net-zero steel market, and they've said that this is a similar approach to what's happened as far as the automotive market is concerned, and the Government there intervened to ban the sale of new internal combustion vehicles from 2030, and they also made a series of policy recommendations, including carbon border adjustment mechanisms and product standards, and also green public procurement. And then, additionally, having direct support for net-zero steel production as well, and again, that would very much mirror what's already happening as far as the power sector is concerned, where renewable energy generators are being provided with a price guarantee. There's a levy there on energy for consumers as well. So, there are examples already of co-investment. So, it's not like it's not happening in other sectors and in other areas. So, it's kind of like emulating that good practice that already exists.
Yes, okay. Thank you. Can I turn to some of the options for decarbonising? We've heard from Tata this morning, and they were highly diplomatic in laying out that there are numerous options that are on the table; there's no pecking order. But reading between the lines, I would suggest that we could see a sort of pecking order. So, we had CCS supply to the existing technology that's there, the traditional steel making, which was described to us as possibly more expensive, untested at a commercial scale, et cetera, et cetera, not many examples around the world. We had hydrogen, which is coming along slowly, but again, it's—[Inaudible.]. And then, of course, we had electric arc. What I want to ask you is what would your preferred options be for decarbonising steel, moving to green steel, getting to net zero, either as a mix of those options, or do you want to rule some out there, because of the impacts on the workforce, and so on? Yes, Charlotte on the screen.
Thank you. So, I'll sort of preface my answer with: Tony, Alasdair and I have been in quite in-depth conversations with Tata about all of those options, and we're all subject to non-disclosure agreements, because a lot of it is commercially sensitive. So, we may also have to skirt around it a little bit.
Oh, no. [Laughter.]
In terms of preferred options, from a GMB perspective, I think success will lend itself to utilising a mix of all three of those that you've described. I think carbon capture, whilst it does have some of those challenges that you've outlined there, Port Talbot is quite uniquely placed to be able to utilise some of that technology. I think there is a professor from Swansea who recently contacted Tata to sort of explain those benefits to the organisation. But I think that with the length of time that it will take to not only build and commission the electric arc furnace, which I think is the final place that we want to get to, the issues around having the right connectivity to be able to properly electrify that process mean that we're going to have to have a transition through technologies until we arrive at the one that we think will be able to sustain the business long term, moving forward.
So, a bit of a diplomatic answer, but for the steel industry, we need investment and decisions made now to be able to secure the future and that might look like using transition technology to get there. But if we don't, as Alasdair said, the lifespan of the assets is quickly approaching the end and your investment now to be able to extend those to be able to survive long enough to get to an electric arc furnace is where we need to be. It's a bit of a bugbear of mine when people talk about—when the press talks about the steel industry and talk about it as a dying industry, I like to point out that our GMB convener at Port Talbot is 26-years-old; he needs that plant to continue for the next 40 years to be able to get to his retirement age, and I'm sure that he hopes that his children will be able to see a career in the steel industry as well. So, that's what we're here trying to secure—making sure that the investment in whatever technology we end up arriving at is there at the right time to make sure that we don't lose opportunities by taking too long to make a decision.
Alasdair, are you going to be equally diplomatic?
I'll try and be as undiplomatic as I can. Of course, it's the biggest question, and it is a big question—it's a big question for the industry; it's a big question for producers right across Europe, and everyone's been grappling with it. A few years ago, carbon capture seemed to be the technology of choice, now that's waned a bit and electric arc furnace and hydrogen production seem to be more of a common choice for companies to go for at this particular moment, and that might change again.
So, we've obviously been in discussions with Tata for years around this. You might remember in the summer of 2020, a story appeared in The Times suggesting that Tata had a plan—they had an agreement with Government to do away with the blast furnaces and move to an electric arc furnace model at the earliest possible opportunity, within a few years. We reacted at that time. We said that was completely unacceptable; we couldn't support that. The costs—the societal costs and the impact on jobs would be too much and we weren't convinced on the technology choices. And ever since that time in 2020, we've been engaged in what has been, to be fair, an extremely constructive process with Tata. Essentially, they've worked with us, worked with our experts, a management consultancy called Syndex; they've given us access to all of their modelling and we've had a fully open discussion about the different technology options that could be possible and the benefits and pros and cons of each cost and so on.
Now, carbon capture is very attractive to us in some ways, because, of course, it has the least impact on employment, but it's very difficult for Port Talbot because there's nowhere to put the stuff—there's nowhere to store the carbon. In all likelihood, it would have to be put on ships and buried under the Irish sea or somewhere else, so, it's very, very difficult to see that technology working. We have to go on what our experts tell us. Clearly, it's an extremely complicated area. Unless you're a scientist or an engineer, it's very difficult to have a full and deep understanding of it, and even so, there are a lot of uncertainties around it. But the view of our experts is essentially laid out in a paper that Syndex produced with MPI—the Materials Processing Institute—which are the company's experts, essentially. So, this was a joint paper by the union's experts and the company's experts, published in 2021 around laying out a strategy for the decarbonisation of the UK steel industry. And what it essentially advocated is a gradual technology shift, as Charlotte says, based on a number of different phases: making the most of what we have, running the assets as far as they can but transitioning in stages towards a model, which is essentially based on electric arc furnace production, but supplemented with DRI, fed by, probably natural gas in the first instance, then blue hydrogen, then green hydrogen, as the technology develops and the supply and affordability of hydrogen becomes more affordable.
So, essentially, what our experts tell us would be the best option for Port Talbot would be a gradual shift, keeping blast furnace production going in the short term. Of course, we have the legally binding targets. We have 2050 net zero and we have 2035 when the Climate Change Committee has recommended that emissions from ore-based steel making should be near zero. But, in our view, we don't need to rush headlong into electric arc furnaces this decade, even. It would make sense from our perspective to keep at least one blast furnace going into the 2030s. That would allow time for the technology to settle in, but importantly, it would enable the UK—or Wales, south Wales, I should say—to keep its ability to produce virgin iron. And that's very important, because at this moment in time, you cannot make all of the grades of steel from recycled steel made in electric arc furnaces.
Can I just pick you up on—? You say 'at this moment'—
Tata's evidence earlier on today was that that's improving all the time—
It is improving.
—and we're going to get to the point where it is replicable.
Absolutely. It's improving all the time, and I fully expect that, in 10 years, there will be solutions, but there aren't at the moment, and we certainly can't say to our members, 'Don't worry about it. Your plant might shut, but fingers crossed, we hope that technology saves you in a few years' time.' That's not practical for us to do that. So, there are particular sites at risk as well. One is Trostre. It might have come up in an earlier session, but Trostre employs about 700 people in Llanelli, it makes packaging steels; it's the only UK plant that does that, and you cannot make the substrate for packaging steels via electric arc furnaces at this moment in time. Yes, the technology is improving, lots of people are in a similar position and are trying different things to get to a position where you can make it work, but at the moment, it does not work and you cannot make some of the high-end automotive grades as well, which is a major issue, because clearly, automotive is the key market for Tata.
So, we need some time for technology solutions to emerge, but in our view as well, Port Talbot Tata needs to be able to stand on its own two feet. Electric arc furnaces are still going to need some virgin iron to come in from somewhere—probably about a million tonnes of it—and where does that come from? We don't know. Russia used to be a source of DRI sold on the open market; I don't think we're going to be buying stuff from Russia anymore, or probably ever again. So, it's very important—it's more important than it's ever been, we believe, for Wales, for the UK, to be able to stand on its own two feet in terms of steel production and not be reliant on other countries and unreliable international supply chains.
And not offshore the steel production, whether it's in traditional blast furnaces, to somewhere else, and say, 'Well, that's their problem'.
Because at some point, we'll be held to reckoning for that as well. Can I just extend this one point, because I know Janet wants to come in as well, Chair. Just to ask, Unite wrote recently to the UK Government putting the point that, if there was investment in hydrogen or electricity—and I'm assuming you're all singing from broadly the same hymn sheet, as we've heard from Charlotte and Alasdair, but if there were that investment in hydrogen or electricity or electric arc, et cetera, that it should come with strict job guarantees. What does that mean?
Well, I think it has been covered by both Charlotte and Alasdair. We must have guarantees that there will be the least impact on jobs, the least impact on skills. We need to have like-for-like upskilling and other jobs or other industries, et cetera. I know that that's difficult. Now, Tata's decision must be with full consultation with the unions. We have to be part of the decision they make, for the reason that has been explained by previous speakers. But, it's about the least impact. Now, the trouble we've got on that is that Tata have to make a decision, as I said before. Now, Tata may well have made the decision, we don't know that, but whatever decision they make is going to impact heavily. So, our preference—electric arc furnace, hydrogen, as Alasdair says, technology is changing all the time, but we don't have the luxury to wait until the company or the Government are in the position to say, 'This is the preferred option. It's the least impact for us'.
Charlotte and then Alasdair, and then, maybe we'll come to Janet. Charlotte.
Just in terms of hydrogen generally, the GMB have made the point that we're born out of gas fitters and engineers, so we've got a particular interest in hydrogen wholly anyway, and GMB believes that investment in hydrogen is essential if we're to decarbonise industries from steel to chemical manufacturing. We are losing the skills in terms of being able to do that, and I know that when there was a move back in the 1960s and 1970s to move to gas central heating in homes, there were a number of colleges set up to be able to support training the workforce to be able to work on the new technology. I think the point that Unite made is a point that all the trade unions are making in terms of decarbonising steel. We cannot sell our jobs in the interests of decarbonising an industry, because the social and economic impacts of that will go far beyond what could be imagined. When we're talking about moving to new technologies, we call it a 'just transition' quite a lot, and that doesn't mean making sure that an electrician that works in the steel industry can now go work offshore on windfarms. It means consultation with the workforce, making decisions for the workforce, and ensuring that the trade unions are at the centre of some of these decisions that are being made, so we that can protect our members' jobs and livelihoods and terms and conditions in the process.
Okay, thank you. Alasdair.
Yes. I just want to finish my point from a previous answer around the technology road map and doing things in stages. I think this is important, because it's about the timeline. If we know what the timeline is and if we have sufficient time that changes everything. If Tata's plan was to replace the blast furnaces with electric arc furnaces in a four or five-year period, we can't deal with that. We can't manage that. The impacts on people would be severe. There would be compulsory redundancies. It would be impossible for us to support that. But if you're looking at a transition time frame that is between now and, say, 2032, and perhaps one blast furnace is replaced by an electric arc furnace when it expires later in the decade, and the other blast furnace keeps going to 2032, 2033, and we have 10 years, that's a timeline we could work with, potentially. We've done this many, many times. We've dealt with huge restructuring since the turn of the century. We're used to managing change. If we have the time and if you look at the demographics of the workforce as well, then potentially there is scope for a just transition where everyone who wants a job can retain a job in the business. So, the time frame is very, very important. It's about phasing in the technologies at the right time, to give them time to bed in, to make sure that we're sustainable, to make sure that when the blast furnaces do go off they're replaced by DRI and, ultimately, hydrogen capacity, and it's about giving time for us to, as Charlotte says, manage a just transition for the workforce.
Luke and others will come in on issues around just transition and dig a little deeper, but I just want to get some clarity, because my reading would be: in order to get to secure jobs in the future, we've got to go through this transition. I get your point on phasing, but we've also got to deliver net zero. We have binding commitments to do it. Can you do that phasing, Alasdair, at the same time as delivering our net-zero targets, knowing that one of the biggest contributors—? And I will defend jobs in steel in this country until my dying day, but, if we've got to get to net zero as well, can we do it in the phased way that you're talking about, and actually hit those net-zero targets, recognising that steel is a big contributor to our carbon emissions?
It is a big contributor, obviously. Port Talbot is perhaps the biggest contributor of them all. And yes, absolutely, I think we can; 2035, as I say—we recognise that that is a target and we accept that this has to be done. We're not sticking our heads in the sand. We know that change has to come, and it's going to be transformational, and it's going to have huge impacts on people—there's no doubt about it. I fully recognise that there are going to be fewer jobs at the end of this process than there are at the start, but—. Sorry.
To short-circuit this, you're happy that this can be done in a way that also hits the net-zero targets, that you're not arguing for a delay, an extension of those net-zero transition—
No, no, no.
Right, good. Good. Good. Thank you.
I'm not arguing for that. We want to be part of the solution. We recognise that the industry has to decarbonise. Our members do. We've been on a journey. Our members have been on a journey. Because this is very, very difficult for us, clearly, for reasons that probably don't need explaining, but, yes, we absolutely recognise that it has to happen. The question is how to do it in a way that's fair and gives us the most sustainable and secure steel industry for the future.
The fact is that global emissions would go down as well, if we weren't actually importing as much steel. So, at the moment, we're importing, what, around 60 per cent. We could be producing this locally, so it could be very, very different. And in terms of some of the new technologies, we're talking about, potentially, 2035, so there is a time period in between, but we also, then, need to think about the longer-term social, economic harms to those communities and to those individuals within those jobs.
My father worked in the steel industry. To go to Port Talbot recently and to visit the site where we're going to have—hopefully, fingers crossed—the next port is a big thing, and, talking to workers in Tata, they're saying, 'Well, hopefully, this site could really secure our skills, but also mean that we can pass on to future generations to come.' There's a lot of new, younger people, more diverse workers, entering into manufacturing and steel and what have you, and we could really lose lots of people—people who we are currently investing in. And we don't want to have to have—. We can't be in a position where we see what happened when mining disappeared and we didn't have a plan. We can't have that again for steel. It's not a runner for us at all.
Okay, thank you. Janet.
Thank you. Oh, I had my question in my hand then. There we are. Oh, I do beg your pardon. There we go.
Sky News recently reported that internal estimates imply the number of workers at Port Talbot could be reduced from 4,000 to as few as 1,000 workers. Do you recognise those figures? How would you respond to them? And if what we've heard here this morning is—. You know, this is technically all down to Tata, the UK Government, and with your influence, if figures are at a level that are acceptable, and there's a consensus agreed. Do you recognise the size of job losses that are being hinted at?
Yes, totally, we do. And you're right, we accept there will be a devastating impact—up to 4,000 workers directly at Port Talbot, but that would echo up the supply chain; the supply chain would be devastated. If you go back to 2019, when Honda closed, 18 component producers in Wales lost their contracts because that closed, and that was 3,500 workers in Wales who lost their jobs, and that was a company in England. So, it's the supply chain as well. So, yes, we do agree with and recognise the numbers; they're devastating.
And I suppose my final question is: will you do everything you can to engage with the UK Government? I think, as a committee, maybe we could write to the UK Government ourselves. Tata Steel is too valuable a commodity—and all the workers, and the implications for us. But, also, in terms of the decarbonisatoin, it is just such a false economy, in terms of finance, and in terms of carbon emissions, to be importing the amounts, the alternative. Now, we've got this chance to grasp by the nettle, however painful it is.
Indeed. Charlotte, you wanted to come in as well.
I wanted to agree with the comments that were just made. It's a complete false economy. I think that the estimates on the cost of decommissioning the plant, as well as the ongoing social and economic costs that would go with the huge amount of job losses, makes it completely uneconomic to allow the steel industry to fail. I think, from a GMB point of view, the frustration from our members is that—and I would probably hazard a guess that this is a similar frustration that the Welsh Government face—a lot of the issues that the steel industry face are based on political decisions that are being made/not being made within the UK Government. And I think that for a lay steelworker looking at how procurement works within the UK—and we have major infrastructure projects that aren't utilising the world-beating standard steel that we have in the UK, because we've got energy prices that we just cannot compete with European and international competitors on—it's hugely frustrating.
I don't know if any of you have had the pleasure of visiting Redcar since the huge closure they had up there, but it's a high street full of betting shops, charity shops and pound shops, and that is something that we don't want for any of our—. I told the Chair at the start of the meeting—I live in Scunthorpe, which is really comparable to Port Talbot in terms of employment numbers and the impact that it has on the local area. We will not take lying down without a fight. We want to save these jobs. We think that everyone that would like to have a future within the steel industry should have the opportunity to have a future in the steel industry, and there's enough work and exciting innovation that can be going on to maintain the steel industry for the next 100 years. If we have mass job losses within the UK steel industry, then that will be solely down to political choices being made away from the workforce, sort of leant on by companies not being able to afford to make those decisions without having Government intervention, and it would be a tragedy.
Sure. Thank you, Charlotte. Briefly, Alasdair, and then we'll move on.
Very briefly. There are different possible futures. Yes, we know there are going to be fewer jobs at the end of this process than there are now. I don't necessarily recognise those figures; certainly, our experts would say that there can be a lot more jobs than Port Talbot—you know, under a decarbonisation strategy. A lot depends on the level of ambition, because, the way we see it, steel is not a sunset industry—there are huge opportunities. We're going to need more and more steel over the years ahead. As Shavanah says, currently, we import 60 per cent of our steel, and, if we're serious about net zero, we don't want to be transporting the stuff from the other side of the world. So, we need to take this opportunity to grow the steel industry, rather than to shrink it, invest in downstream, invest in new capacities, new galvs line, electrical steels—those are some of the areas where our experts say there is opportunity. So, with the right level of ambition and investment, we believe we can offset some of the reductions that are probably inevitable in the upstream steelmaking operations, and reskill, repurpose people to work in downstream steel activities. Because, ultimately, we need to make more steel in this country.
Yes, indeed. Indeed. Thank you. And just picking up on some of the political choices that Charlotte mentioned earlier, one of those of course is around energy prices, and I'm aware that Community and Unite have called on the UK Government to bring energy prices in the UK, or at least for the UK steel sector, into line with those in other European countries. So, could you just say a little bit about what action is required to do that, or how that would look like in terms of Government interventions?
[Inaudible.] The Government has to call an end to this profiteering. The energy prices are about—. The four big companies, energy providers, have a combined profit of £9.5 billion—that's up 84 per cent since 2019. It's clear that there are massive profits being made, at the detriment of industry as a whole, especially the steel industry. The distribution companies, they've got a combined profit of £6.3 billion in 2021. That's up £5.6 billion in 2019. The profit margins are getting bigger than any other UK economy sector. The Government needs to look beyond short-term, knee-jerk reactions and bring an end to that. Until they do that, manufacturing is always going to struggle. We ask for a level playing field. How can we have a level playing field if energy companies are making such vast profits?
So, are we talking about windfall taxes reinvested into industry, or how would that—? What would that look like, really? Alasdair? Sorry, Tony.
It's an option, again, but we're dealing with a Government whose belief is in the free market—if you don't sell your product, you sink. But when you're looking at an infrastructure for a country who's now out of Europe, we need to be making our own steel—we've all agreed on that. But with that attitude about the free market, it's never going to be a place—. We need this commitment. They have to make a decision. Do we want to make steel in this country, or import it?
I think what we want to see is Government action that recognises the urgency of the situation. So, we had the energy crisis, which is still going on, really, kicked off by the crisis in Ukraine. And the Government's response, through the energy security strategy, was, essentially, 'Right, let's invest in renewables, let's invest in nuclear, and, in a decade's time, we're going to have all this cheap energy and it's going to be fantastic'. And more recently, we've had the announcement of this supercharger initiative, which is going to make a difference, but it's not going to make a difference until 2024, or 2025 in some instances. That's not good enough; we need something now, probably in the form of a short-term cap. So, the extension for the energy bill relief scheme, essentially gives companies a reduction on their steel prices, but it still does not reduce bills by enough—it's something like £20 per megawatt hour. It's not enough to bring our prices into line with those paid in France and Germany. So, unless we have a level playing field, that's not good enough.
And just to give one very quick example of the urgency of this, in January, you might have seen that Liberty Steel announced hundreds of redundancies—I think 450 redundancies—across a number of sites, two of them in Wales. But 186 of those redundancies were at their Rotherham site, which is where they make steel. Those redundancies were based on the need, as they saw it, to essentially stop making billets at their Rotherham plant, because they couldn't make them economically, because energy prices were so high. The proposal is to import those instead from the other side of the world from steel made in a less environmentally friendly way. It makes no sense for the environment, it makes no sense for the workforce, and it makes no sense for the UK. What we agreed, as part of the consultation with Liberty, is that if energy prices come down from where they were, which was about £100 per MWh, to £50 per MWh, either via normalisation of the energy market or by Government introducing a cap so that they pay £50 per MWh, then they would reverse that proposal, stop importing billet, ramp up production again in Rotherham and employ more people. That's an example to show that things are happening now, jobs are being lost now, because of our uncompetitive energy prices. Solutions that give us some comfort that things will be better in 10 years' time aren't good enough if we want to have a steel industry at that time.
Sure. And the other risk as well, of course, is that in decarbonising, obviously moving to low-carbon steel technologies, they tend to be extremely electricity intensive as well, so we're not going to get away from this question. It's not one that we can answer now and forget about for the future.
You're absolutely right, and it's probably the most important thing. All of the available low-carbon steel-making technologies will require significantly more electricity. Arguably, it's more important than investment support, because if we have a competitive energy price and the conditions make sense, then companies are more likely to invest.
I'm conscious that time is ebbing away, and we're just about halfway through the areas that we wish to cover, so I think we need to just keep that in mind, if we may. Jenny, over to you.
Thank you. We need to have buy-in from the Treasury. It seems you've got a plan, but the Treasury's not bought into it yet. And we've also got to have a plan for decarbonising oil and gas, both because of the prices and because of the climate emergency. Community, I understand you've had a report produced by David Coats, which highlights the potential for new jobs in decarbonisation, as well as the potential losses by changing the processes for making steel. I wonder if you can just tell us what he has pinpointed are these opportunities for your workforce.
This is a report that Community union and Prospect union commissioned in 2021, looking at how to deliver a just transition in the steel and the oil and gas sectors. The key conclusions of his report were that social dialogue and partnership were the most important mechanisms to enable a just transition. He looked, in his report, at the experience of other countries where they've had successful transitions that have been managed in a socially responsible way, including Voestalpine in Austria—the steel maker—and SSAB, a Swedish steel maker as well. Essentially, in terms of the opportunities for steel, his findings were consistent with what I've already said—that with the right time frame and the right technology plan, then we could facilitate a just transition whereby there would be no need for any compulsory redundancies, because of natural attrition, because of churn, because of the age demographic, and there would be potentially new opportunities not only in steel and investing in some of the new capacities I've talked about already—so electrical steels, a new galvanising plant—but also in things like hydrogen production, scrap enrichment. Scrap enrichment is obviously going to be a massive challenge for the industry. Probably the industry's all going to be fighting over scrap. We've got an abundance of it at the moment; we're not going to have it for very long. Currently, we export a lot of the stuff to Turkey, and then it comes back to us in finished products. But there's going to be a lot of new industries and capacities around the sector, depending on the decarbonised route that we follow. That's an important part of it.
In terms of the transition of steelworkers to other industries, it's something we've always been extremely sceptical of, if I'm honest. Our priority is to keep people within the industry if they want to be in the industry. Yes, certainly, there's going to be lots of good new green jobs—well, we hope there are—in south Wales through the work of the south Wales industrial cluster, the free port—lots of opportunities there, potentially. But as far as we can see, there is no evidence that those jobs are going to be of the same standard, the same quality, as Tata Steel jobs in terms of job security and terms and conditions in particular. And because of that, it's been a discussion that is almost sort of secondary to us, because our priority is to keep people in the good highly paid Tata Steel jobs, which are so important to anchor places like Port Talbot and keep local economies running as they do. I'll perhaps leave it there.
But what about the diversification that Tata could be doing on its own land? Why are we not seeing huge arrays of renewable energy popping up next door to where the steel production operations are happening? Because that's a way of them generating their own electricity, and that, it seems to me, is one of the ways in which you will diversify skills and the jobs that are available to people. But also, it secures the steel industry. I don't understand why—. Tata Steel told us, 'Well, we're looking at it.' This debate has been going on for a long time. Why haven't we seen action?
Indeed, yes. They're looking at it. It's a question for them, really, I suppose.
It is, but you are obviously involved.
They're a lot further ahead in terms of that conversation in the Netherlands than they are here, and I think a lot of that is to do with the fact that, clearly, the UK business has been through an extremely difficult time over the last few years. It's not making money. I don't think that's any secret. And if you're not making money, then you don't have money to invest, and it's quite difficult to look at doing things that are adding significant cost in the short term. So, there are a lot of aspirations. There are a lot of aspirations in the decarbonisation road map as well, but at the end of the day, you need money to fund those investments.
So, you think all the blockages on this modernisation is just the absence of the Treasury opening up its purse.
No, I don't, actually. I think that is a major part of it, but Tata have a big role to play as well. As I say, we don't go round blaming the Government for everything. At the end of the day, Tata are the employer and we will hold them to account. They own the business; they bought the business. In all honesty, I think they've been good employers over the years. You can't fault them, really. They've stuck around since 2007, they've put in however many billions they have for very little return, but at the end of the day, they are the employers, and we hold them to account. The future is a strategic partnership between Tata and the Government. I don't think there's any doubt about that. The onus is on both parties to come to an agreement, but yes, it is about money at the end of the day.
Just thinking about a just transition now, what would a just transition look like for the Tata Steel workforce? I understand it's quite a broad question, but I suppose what I'm trying to get out of you today is what are the sort of key components or key requirements of a plan, in your view. We heard this morning about reskilling, for example.
In terms of a just transition—I think Charlotte's referenced this, as have other colleagues—for us, a just transition is really where no worker is left behind, where if jobs are lost, that you have a like-for-like situation. But as has just been explained, that isn't necessarily going to be the case. This is about social partnership working; this is about co-investment and looking at the bigger future as well. I think that the areas that we would mostly be concerned about would be a loss of pay, a loss of skills, pensions, equality, health and safety, of course, union recognition—a massive issue for us as well. But I think that there are now some opportunities as far as Tata is concerned, particularly in relation to the free port that we may get as far as the Celtic free ports are concerned, in terms of decarbonising Port Talbot. In the free-port plans, in particular, there is that focus on low-carbon technologies, such as floating offshore wind, hydrogen, carbon capture, et cetera, and the bidders have also talked about enabling offshore wind, creating that cradle to nurture new green tech companies.
As far as the Wales TUC is concerned and as far as the Wales Union Learning Fund is concerned, as I mentioned earlier, we've already seen employers taking full advantage of that. The fact that we still have the Wales Union Learning Fund in Wales is a really important thing, and employers can see the benefits of that as well. The issue, really, is that we've been talking a lot about planning, but we don't know what the details of the plan look like. Which direction are we going to focus on? Because you can upskill workers and you can retrain workers, but you can only do that effectively if you know what that pathway is going to be. At the moment, there are lots of different options on the table, we just don't know which one we're going to run with. I think that is why it is important that we have to open up that very clear dialogue with the Treasury to say, 'How much money are we talking about?', because then you can plan effectively going forward.
There are a couple of points there in terms of free ports and the net-zero skills action plan I know that other colleagues will want to come back on. But we mentioned the example of Redcar earlier and I think I'll come to Charlotte, if that's okay, just as you mentioned Redcar. Do you see that there are things that we can learn from the closure of the plant there in terms of a just transition—things that we might want to emulate here in Wales or even avoid?
Thank you. The strategy to decarbonise the sector needs to ensure that workers and communities are directly benefiting from the opportunities of the transition. First and foremost, this should result in jobs being protected for steelworkers alongside the creation of high-productivity, high-wage jobs, all of which should be rooted in comprehensive just transition policies to deliver necessary support to workers. This was outlined by the TUC in 2022, and it includes ensuring that new jobs are just as good in terms of pay, skills and pensions, ensuring trade union recognition is not lost, that a programme of investment in training and in skills to ensure that workers have access to training-related funding is part of the transition, effectively harnessing transition-related knowledge from workers in the adaptation process.
When we talk about a just transition, the most important thing on that is to do things with the workforce, not to the workforce. And with that, you'd be able to ensure that you gather the knowledge and skills required to make that successful. I think that the free-port opportunities that are being discussed in Wales on the face of it are good things and should create opportunities for companies to invest in things like greener technology and provide opportunities for Port Talbot. I think we need to be keeping an eye on the fact that with free ports comes an opportunity to undercut wages in employers that don't operate within the free-port area. We need to make sure that our workers and our members are not victims of that race to the bottom in terms of pay and terms and conditions, because that's something that Unite have actually done a lot of work on—on the pitfalls that can come with free ports. We need to make sure that our Welsh members are not victims of that.
The good thing on that is that the Welsh Government did include specifically fair work criteria in the initial prospectus as far as the two free ports are concerned, so, that's a good thing. And there are discussions about a sort of council worker-style model to help mitigate some of those risks with free ports. But we also most definitely need to now make sure that we have got those fair work standards, including access to workers, making sure that these are unionised jobs, that people have a say in what their future looks like as well and that we don't end up in a situation for the free ports where all of a sudden we are having to bring people into the area rather than take advantage of those people who are already on site, but also in the surrounding areas as well. We don't want to be in a situation where the only jobs that local people in particular could benefit from, for example, would be in low-paid, maybe retail, hospitality, quite often insecure, exploitative labour. We would want them to take full advantage of what's potentially on offer, but good-quality unionised jobs with fair work right at the heart of it.
You talked specifically about Redcar. Redcar closed in 2015 and 2,500 jobs were lost. That was an example of an unjust transition. In October 2022, the blast furnace was finally demolished as part of the free-port redevelopment. It was grim irony that the first import shipment received by that free port was 100 tonnes of construction-grade steel. We need to be careful that we don't repeat that. Charlotte touched on the fact that Unite has done work on free ports. We have done a lot of work on free ports, but, from our experience of the free ports in England, priority is given to land, and all we're seeing so far are major infrastructure warehouses being built to store stuff. Now, that'd be a travesty if that happened in Port Talbot, Anglesey or places like that, where we're just storing stuff so that employers can get tax breaks on tariffs.
I think this is exactly what we're trying to pull out here with the Redcar example. I will hand back to you, Chair, because I know there are some other questions before we go into detail on that.
Yes. Janet wants to come in briefly, then we'll come to Jenny, and then we'll come to Luke to conclude.
Just on that point, Shavanah, I'm sure you didn't mean to say that the retail and hospitality sector is exploitative. You know, you've got to bear in mind we all here represent many business owners in the retail and the hospitality sector, so I would like to clear the record that you didn't really mean to say 'exploitative'.
What I mean is that, more often than not, we do have more insecure work in retail and hospitality—that's a fact. We do see more zero-hour contracts, we do see more non-unionised jobs within those sectors, and so that can become quite difficult. But, nonetheless, of course, in Wales, we now do have a retail forum and we have got some good discussions going on as far as the hospitality and retail sector is concerned. We have now got the social partnership and procurement legislation in place, which, whilst it primarily focuses on the public sector, nonetheless there's space for us to get in to as far as making sure that that sector is also well unionised and well protected and can take full advantage of things like the Wales Union Learning Fund and skilling jobs as well for the future.
But you'd be happy to withdraw the suggestion that it's exploitative. It's not the best—. It's about—. We try and do everything here and be very courteous.
Okay. Janet, I think the point has been made.
Yes, I understand. Yes.
Okay, thank you. Jenny, and then we'll come to Luke to conclude.
You talked about the options being unclear, Shavanah, in terms of what should we be upskilling our workforce for in the future. What's your assessment of the coherence of the clean growth plan of the south Wales industrial cluster, because they talk about a just transition and they talk about a highly skilled, innovative workforce? Does this add up as far as you're concerned or are these just warm words?
At the moment, I think it's quite unclear. We are focusing in on the skills where we believe there might be some gaps, but, genuinely, until we know what the future road map looks like and where we're going to focus our attention, I'm not convinced that we have enough detail as of yet on that.
Yes, I broadly agree with that. I think the net-zero skills plan is very encouraging, actually, and, obviously, the references to just transition, the focus on digital skills and the commitment to engagement and consultation with all stakeholders and particularly the unions. Now, it is difficult when we don't know what the road map is, but that doesn't mean we shouldn't be doing anything about it. And one of the difficulties we had when we were working as a sector writing the net-zero strategy was the skills part of it, which, ultimately, we wrote, and the unions co-wrote that section of it, but it was quite sparse. And actually, that's why Community last year did a research project with Cardiff University around the green skills requirements for a decarbonised steel industry and based on surveys of hundreds of our members in steel. Some really interesting results, essentially concluding that our members absolutely are committed to this agenda—92 per cent believe that we have to transition, even though the vast majority also think it's going to make their job less secure. But more than 50 per cent of them do not believe—50 per cent of our members do not believe—they have the right skills to essentially facilitate and do their job in a decarbonised steel industry. And what the report concluded—and it's available on our website, if you'd like to look at it—is, essentially, we need to concentrate much more on transversal, transferable skills. It's the digital skills, it's analytical, problem solving, leadership, communications, and that's very much a skill set that has not been addressed, certainly by the companies. We've also recently done another research project, this time with Leeds university, based on surveys of our members, looking at hopes, aspirations and fears for the future, and, again, it reinforces that our members are committed to the green agenda, in many ways, but they do not believe they have been properly consulted or supported by their employers.
Fine. Last question, Jenny.
Where does the net-zero skills plan sit in all this, then, because that's the Welsh Government's proposal of how we're going to meet the massive skills gaps that are popping up all over the place? Is this a coherent plan as far as you're concerned?
I don't think it is a coherent plan as yet. As far as I know, the detail is still to be resolved. It's a very aspirational document, as far as I understand it. It's something that needs to be properly consulted on. It needs all stakeholders working together. As I say, I don't think there are any answers at the moment. There are some areas we need to look at, but I think the commitment to doing it, and doing it in partnership, is the right one, but we also need to get on with it, because—