Tata reaches Port Talbot deal with ESO despite union opposition

ESO will begin supplying the energy at Port Talbot from 2027. Photograph: Ben Birchall/PA

Tata Steel has reached a deal with the UK’s electricity grid to start supplying the energy for new furnaces in south Wales from 2027, as the company moves ahead with its plan despite union opposition.

The agreement with the National Grid’s electricity supply operator (ESO), the company which controls how energy is moved around Great Britain, will provide hundreds of millions of megawatts of power to a new electric arc furnace at the steelworks in Port Talbot.

Tata Steel is planning to shift rapidly from two polluting blast furnaces – which can produce 5m tonnes of steel, but also nearly 2% of UK carbon emissions – to electric technology that can produce up to 3.2m tonnes of recycled steel a year.

The plan will cut emissions dramatically, but it will also mean as many as 2,800 steelworkers will lose their jobs, in a devastating blow to a community built around the works.

The first blast furnace is due to close at the end of June, followed by the second blast furnace and the “heavy end”, which makes steel from iron, in September. Tata Steel is expected to open a voluntary redundancy scheme as early as next week, after initially planning to do so this week.

Tata Steel has been in talks with ESO since 2020, as it considered options to decarbonise. Upgrades to grid connections, and particularly linking the “generation-rich” north to the “demand-rich” south of the UK, are increasingly important, said Marc Hedin, the head of research for UK and Ireland, at Aurora Energy Research. Hedin said he did not believe that any other projects would have been pushed back to make way for the Tata Steel connection, and existing infrastructure would limit the cost to the grid.

Nevertheless, the agreement signals that Tata is pushing forward on an ambitious timescale for the switch. It hopes to make an order for the furnace equipment by September, and to start construction by August 2025.

Unions have argued that Tata could avoid making thousands of redundancies by keeping one blast furnace open until 2032 while also building the electric arc furnace. However, Tata has rejected that plan, arguing that it was financially unsustainable, and is starting consultations with workers about redundancies.

Charlotte Brumpton-Childs, a national officer at GMB union, said: “Tata Steel seems to be quite happy moving on and agreeing deals with the National Grid. But the thousands of steelworkers whose lives they’ve ruined would like them to put a bit more time into agreeing their redundancy terms – or even an approach to decarbonisation that doesn’t result in compulsory redundancies.”

Port Talbot steelworkers represented by the Community union last week voted overwhelmingly in favour of industrial action, as have Unite members. GMB has been forced to rerun its ballot to meet legal requirements.

Tata Steel has claimed that workers will receive worse redundancy terms if they proceed with industrial action.

The government indicated that it worked to speed up the connection, after backing Tata’s plan with a pledge of £500m in financial support. In a statement provided by Tata Steel, the investment security minister Alan Mak, said: “Accelerating grid connection timescales is a top priority for government and we are working closely with Ofgem and the network companies to transform the electricity network at a scale and pace not seen for decades.”

Rajesh Nair, the chief executive of Tata Steel UK, said the grid connection was a “critical milestone in transforming our steelmaking operations in Port Talbot”.

“Having access to higher-power electricity is a foundation stone for greener steelmaking, regardless of the technology choice,” he said. “This agreement means we will have sufficient power for our new electric arc furnace and the capability in the longer-term to further strengthen our business.”