How the end of coal in the UK and closure of Port Talbot steelworks are related
It’s a momentous day in UK industrial history, in two respects. But what have the closures of the last blast furnace at Port Talbot and the final British coal-fired power station at Ratcliffe-on-Soar got to do with one other?
In one respect the common factor is coal. The blast furnace at Port Talbot is one of the last remaining descendants of the key technology invented in Britain during the early Industrial Revolution.
Abraham Darby pioneered the process of using coal (a baked form of coal called coking coal, to be precise) to refined iron ore – turning it into what is known as pig iron.
That, along with the basic oxygen process devised by Henry Bessemer, was among the foundational inventions which happened in Britain, and helped to kick-start the fossil fuel age that followed.
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Blast Furnace No 4 at Port Talbot is not the last remaining such facility in the country – there are also two blast furnaces still operating at British Steel in Scunthorpe – but all of these furnaces will soon be gone, replaced with electric arc furnaces, which produce steel in a far less carbon-intensive way.
All of which sounds like good news – but there’s a catch we’ll come back to in a moment. In the meantime, let’s take a second to ponder another landmark moment: the end of coal power.
Port Talbot in Wales. Pic: PA
Britain was also the first country in the world to have an operational coal-fired power station – the 1882 plant in Holborn. And today it has closed its last remaining coal-fired power station.
In one sense this is only a formalisation of something that has been creeping up on the UK for some time: the gradual switch from coal-fired power to a combination of gas power and renewables.
Ratcliffe-on-Soar Power Station. Pic: PA
Gas-fired power stations are better than coal plants in at least three respects: they are more efficient at turning fuel into power, they are quicker to switch on and off and they emit about half the amount of carbon.
But this switch is not without its consequences. Coal, like it or not, is still a cheaper form of power than gas – at least before you take into account carbon costs. And unlike gas, coal supplies are not as dependent on Russia.
Also, Britain’s switch from cheap-ish coal towards more expensive gas and renewables (themselves dependent on a rainbow of government subsidies) is part of the explanation for why the country currently has some of the most expensive power costs in the developed world.
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Indeed, industrial power prices, which are most directly affected since they absorb most of the subsidies for renewables, are higher than in any other developed country.
And since electric arc furnaces are powered by electricity (as the name suggests), our ability to make steel at a reasonable price will be determined in future by those industrial power costs.
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In other words, green steel in the UK is likely to be considerably more expensive, in part because of how quickly the UK is pushing towards green power.
It’s worth saying, that the push towards renewables is not the only reason for high UK power prices. There is also the fact that the grid in this country is short of investment – not to mention the dysfunctionalities of the way wholesale power markets are structured.
But eye-wateringly high power prices are part of the explanation for why industry is shifting away from Britain to cheaper locations. It is part of the explanation for why this country is de-industrialising faster than nearly every other developed nation.
That, in turn, is helping to reduce the amount of carbon emitted in this country. But it’s also helping to diminish the number of people employed in manufacturing and the amount of economic output generated by the sector.
The US central bank has cut interest rates for the first time this year, in a move president Donald Trump will likely declare is long overdue.
Mr Trump has demanded cuts to borrowing costs from the Federal Reserve ever since worries emerged in the world’s largest economy that his trade war would stoke US inflation.
The president – currently in the UK on a state visit – has, on several occasions, threatened to fire the Fed chair Jay Powell and moved to place his own supporters on the bank’s voting panel.
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He was yet to comment on the rate decision.
The fallout from the row has resonated globally, sparking worries about central bank independence. Financial markets have also reflected those concerns.
The bank, which has a dual mandate to keep inflation steady and maintain maximum employment, made its move on Wednesday after a major slowdown in the employment market that has seen hiring ease sharply.
The latest economic indicators have shown caution over spending among both companies and consumers alike.
The Fed said the economy had moderated.
Inflation, while somewhat elevated due to the effects of higher import costs from the trade war, has not taken off as badly as some economists, and the Fed, had initially feared.
Mr Trump has sought to fire Fed rate-setter Lisa Cook. File pic: AP
Its 12-member panel backed a quarter point reduction in the Fed funds rate to a new range of between 4% to 4.25%.
The effective interest rate is in the middle of that range.
Crucially for Mr Trump, who is trying to inspire growth in the economy, the Fed signalled more reductions ahead despite continued concern over inflation.
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Financial markets saw a further two quarter point rate cuts before the year’s end.
The dollar, which has weakened in recent days on the back of expectations of further rate cuts, fell in the wake of the decision and the Fed’s statement.
It was trading down against both the euro and pound. Sterling was almost half a cent up at $1.17.
This Fed meeting was the first with new Trump appointee Stephen Miran on the voting panel.
He was chairman of the president’s Council of Economic Advisers before being handed the role this week.
His was a sole voice in the voting for a half percentage point cut. It is clear, though the identity of participants’ forecasts are not revealed, he was the lone voice in calling for a further five quarter point reductions this year.
Mr Trump has sought to fire a member of the Fed’s board, Lisa Cook, to bolster his position further but that decision is currently subject to a legal challenge.
Some of the biggest US technology companies have pledged billions of pounds of investment to turbocharge Britain’s artificial intelligence (AI) industry, as the two countries announce a landmark technology deal.
Nvidia, Microsoft, Open AI and Google made a flurry of announcements to coincide with President Trump‘s state visit to the UK.
They include plans to build data centres and invest in AI research and engineering.
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Sir Keir Starmer described the agreement, which both leaders will sign over the coming days, as “a generational step change” in Britain’s relationship with the US.
The deal will see both countries cooperate on AI, quantum computing and nuclear energy, with investment in modular reactors revealed earlier this week.
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The prime minister said it was “shaping the futures of millions of people on both sides of the Atlantic, and delivering growth, security and opportunity up and down the country”.
The government said the deal would deliver thousands of jobs, with a new AI Growth Zone in the North East of England earmarked for 5,000 jobs.
The region will host a new data centre developed in partnership with ChatGPT developer OpenAI, the US chip giant Nvidia and the British data centre company Nscale. The UK government will supply energy for the project, which will be based in Blyth.
Jensen Huang, chief executive of Nvidia, who has previously drawn attention to Britain’s inadequate levels of digital infrastructure, said: “Today marks a historic chapter in US-United Kingdom technology collaboration.
“We are at the Big Bang of the AI era – and the United Kingdom stands in a Goldilocks position, where world-class talent, research and industry converge.”
Nvidia chief executive Jensen Huang. Pic: Reuters
The Blyth data centre is part of Stargate, Open AI’s infrastructure project to build large data centres across the US.
The company has also developed sites in Norway and the UAE. Nvidia, which provides the graphic processing chips (GPUs), expects to generate $20bn (£14.6bn) by the end of this year from “sovereign” deals with national governments over the coming years.
Sam Altman, OpenAI’s chief executive, said: “The UK has been a longstanding pioneer of AI, and is now home to world-class researchers, millions of ChatGPT users and a government that quickly recognised the potential of this technology.
“Stargate UK builds on this foundation to help accelerate scientific breakthroughs, improve productivity, and drive economic growth.”
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Microsoft also pledged £22bn, its largest ever investment in the UK, to expand data centres and construct the country’s largest AI supercomputer.
Meanwhile, Google owner Alphabet pledged £5bn to expand its data centres in Hertfordshire and fund its London-based subsidiary DeepMind, which uses AI to power cutting edge scientific research. The company was founded in Britain and acquired by Google in 2014.
Other investments include £1.5bn from AI cloud computing company CoreWeave and £1.4bn from Salesforce.
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