Rising tide: How Swansea Bay aims to start an energy revolution

The past two years has seen the Welsh steel industry plunged into crisis.

Port Talbot steelworks, the country’s largest supplier, has become a symbol of this decline.

Thousands of jobs remain under threat amid the ongoing lack of clarity over its future ownership, as question marks continue to hang over the fate of the Welsh steel industry.

Yet there is still hope for the region, in the form of a project that could employ almost 2,000 full-time construction workers and power more than 155,000 homes for more than a century.

The proposed Swansea Bay Tidal Lagoon would sit less than 24 km from Port Talbot steelworks.

It is the first of six planned lagoons in the UK and would make South Wales the birthplace of a new multi-billion-pound industry.

Homegrown attraction

It is this opportunity that attracted the project’s construction director Mike Unsworth to join the team last October.

“The reason I came to this job was I could see the potential to establish a homegrown supply chain to feed this new industry”

Mike Unsworth, Tidal Lagoon Power

He started as Tidal Lagoon Power’s delivery director, before he was appointed as head of construction after former Balfour Beatty CEO Andrew McNaughton unexpectedly stepped down from the role in May. 

Mr Unsworth has spent much of his life working in the energy sector in one capacity or another, but admits that “being at the forefront of something new” was also part of the attraction in joining the project.

Having begun his career in his native Newcastle working for NEI Parsons manufacturing parts for the UK’s nuclear power plants, he has since managed some of the UK’s largest wind projects, such as the £1.6bn RWE Gwynt y Môr Offshore windfarm.

As we take a boat tour around the proposed lagoon, he explains why he became involved in the project: “What I loved about that Parsons job was that we made everything. Everything was manufactured in the UK to build UK power stations.

“The reason I came to this job was I could see the potential to recreate the setting up and establishment of a homegrown supply chain to feed this new industry.”

As with the nuclear sector in the 60s, tidal power offers an opportunity for the UK to be a leading light on a world stage.

Mr Unsworth is keen to stress that Swansea represents a vital first step on this path.

Plans for the world’s first tidal lagoon plant were formulated by Tidal Lagoon Power chief executive Mark Shorrock in the top floor of his Gloucestershire house, and have since developed to become one of the most exciting additions to the UK’s energy mix.

Consisting of 9.5 km of seawall that will surround more than 14 sq km of water, the tidal lagoon will be a vast undertaking.

At the heart of this will be the “powerhouse”: a concrete structure holding the 16 turbines that will take advantage of the bay’s 10.5 m tidal range.

“We have submitted a very competitive strike price and we are confident it is highly competitive to other technologies” 

Mike Unsworth, Tidal Lagoon Power

This will be managed by sluice gates that block water from entering the lagoon. These gates will be opened when water levels reach a sufficient height, pushing water through the turbines, causing the generators to turn and electricity to be created. This is then repeated in the opposite direction.

The process is repeated twice daily, optimising the amount of energy created each day.

After years of planning and design, the project seemed to have overcome a major obstacle when the then-energy secretary Amber Rudd gave the project the green light in June 2015. However, the project has hit some choppy waters since.

Price war

Within months of receiving a development consent order, Tidal Lagoon Power and the government were at loggerheads over a proposed strike price of £160 per MWh – nearly double that of nuclear power station Hinkley Point C.

As a result, the Swansea project was delayed by a year.

Job cuts followed, and even former prime minister David Cameron (who had put the project in the Conservative Party’s re-election manifesto) cooled on the idea.

A review led by former energy minister Charles Hendry was then launched in February looking into the cost-effectiveness of tidal energy in the UK.

Mr Unsworth says the review is a good thing for the project and remains confident a deal can be agreed after it concludes in the autumn.

“We have submitted a very competitive strike price and we are confident that our latest engagement is at a level that is highly competitive to other technologies,” he says.

“It is always about optimising value for money to the consumer and lowering cost wherever possible” 

Mike Unsworth, Tidal Lagoon Power

The new deal put forward by the company is understood to be in the region of £96 per MWh, with the contract extended over a 90-year period.

For future projects, this cost could shrink further, with a recent report commissioned by Swansea Bay finding that the cost of electricity provided at Cardiff Bay could be three times lower than that of Hinkley.

“It is always about optimising value for money to the consumer and lowering cost wherever possible between now and financial close,” Mr Unsworth says.

In preparation of a strike price being agreed, ancillary works will begin in September by Alun Griffiths. The Welsh contractor was chosen for the £25m contract last June.

“The ability for our tier ones to achieve delivery with as much UK supply as possible was crucial to us” 

Mike Unsworth, Tidal Lagoon Power

Laing O’Rourke also bagged work on the scheme, winning the £200m civils work package, while General Electric and Andritz Hydro were picked for the £350m operation and maintenance contract.

“These firms were chosen on criteria that included track record and proven technology,” Mr Unsworth explains. “But the ability for our tier ones to achieve delivery with as much UK supply as possible was crucial to us.”

China Harbour Engineering Company: What happened?

One firm that will no longer be involved is China Harbour Engineering Company.

After just under a year on the project, the Chinese state contractor was let go in a shock move by the developer in May.

The decision came at the same time as construction director and former Balfour Beatty CEO Andrew McNaughton left the company in what seemed, for 24 hours, to be a possible unravelling of the project.

“We went through a fairly intense process last year where we were developing design and construction methodologies not just for marine works but all the construction contracts,” Mr Unsworth explains. “When we came out of that process, we looked at where we were with updated costs, programme interfaces [and] risks, and we took the position at that point [that] CHEC was not value for money.”

Tidal Lagoon Power will now retender the work, which is set to officially launch by October. Mr Unsworth says he has received interest already from many of the firms who bid the first time round.

The majority of these come from the Netherlands or Belgium, with one UK-based dredging firm – Westminster Dredging – also involved. Westminster is a subsidiary of the world’s largest dredging firm, Boskalis, which is based in Holland and has more than 75 years’ experience on large-scale dredging projects across the UK.

“Westminster Dredging is definitely a firm that could carry out these works,” Mr Unsworth says.

Secured finance

While discussions over the strike price to cover Swansea’s operational costs have stalled, the company has secured financing for its construction.

The finance is made up of 80 per cent debt and 20 per cent equity, and the company is planning to go to the banks next year to cover the remainder of the capital expenditure costs.

Both Infrared and Prudential have reportedly invested £100m into the scheme, with millions of pounds more funnelled through local development funding.

”Construction resource needed for Swansea is multi-faceted. Having a variety of skills requirements is important” 

Mike Unsworth, Tidal Lagoon Power

There are also contributions from other less likely donors, including: The Indian Gupta family, which pledged £10m; co-founder of Innocent Smoothie Richard Reed; and Cardiff-based Admiral Insurance owners Heather and David Stevens.

The donation from the latter is emblematic of the local support for the project.

While projects such as High Speed 2 have come up against strong opposition, Swansea Bay has had almost unanimous support from the people of Swansea. In a consultation as part of the development consent order in 2013, 86 per cent of those surveyed came out in support of the project.

Much of this support can be put down to the employment opportunities it will provide for local people and firms, who have been hit hard by the UK steel crisis. At peak construction, Swansea Bay will require an estimated 2,000 workers, not to mention the opportunities in manufacturing.

With 16 100-tonne steel turbines needed at Swansea and hundreds more required for the projects that follow, it could provide a new major source of revenue for steel suppliers and manufacturers in Wales.

“Firms are keen to diversify their skills,” Mr Unsworth says. “GE and Androz Power have spent time developing their supply chain in the local area.”

Capacity issues

But every opportunity has its challenges.

For a ‘world first’ project with no established supply chain, finding the right skills will require political backing. However, Mr Unsworth is confident this will not be a problem for either marine or civils works.

“We are engaging with the supply chain and asking questions about the skills gaps and how we fill them” 

Mike Unsworth, Tidal Lagoon Power

He says the diverse nature of the work means there will be a broad range of skills required. “Construction resource needed for Swansea is multi-faceted. Having a variety of skills requirements is important, as it allows you to target a wide range of [people].”

Nevertheless, he says there could be challenges when it comes to manufacturing for the massive generators. “The area to focus on is the generators and building capacity for those,” Mr Unsworth says.

To address this, Tidal Lagoon Power has already started work with local colleges and universities, as well as its supply chain to ensure a lasting supply of skills. “We are engaging with the supply chain and asking questions about the skills gaps, how we fill them, and whether that requires further investment to set up new manufacturing facilities to increase capacity in the current supply chain.”

Future opportunities

If the government agrees on a strike price for the Swansea scheme, the manufacturing and construction programme will be vast.

Tidal Lagoon Power hopes to have six tidal lagoons in the UK operational in the next two decades. Cardiff is the next on the list, followed by four more in Newport, Colwyn Bay, Bridgwater and West Cumbria.

The £8bn Cardiff project will be six times bigger than Swansea, with between 90 and 120 turbines powering as many as three million homes – equivalent to the whole of Wales.

Cardiff is currently going through the development consent order process, which is hoped to complete by 2019, with construction set to begin in 2022 just as Swansea winds down.

But Tidal Lagoon Power will not stop there and Mr Unsworth is keen to outline its global ambitions. The firm is already in talks with the Gupta family to take tidal technology to India; after that there is scope to expand even further.

Mr Unsworth points to lessons from the wind sector, where the UK was slow off the mark in developing technology when compared with Germany and Denmark. “You then look across the world and say, there are areas like Canada and France that have really good tidal ranges.

“You can then market your larger Cardiff turbine as an export potential to those markets, then with your smaller Swansea turbine you can market that tech to rest of the world; India, Mexico, China.

“Tidal Lagoon Power as an organisation is looking for a supply chain to develop around our projects.”

In a time of increasing uncertainty in South Wales, it might just be the shot in the arm the region needs.