Michelin Factory closes due to high energy costs

News today from RTE, as predicted on this blog, more job closures due to high energy prices :

Michelin has announced plans to close its tyre factory in Ballymena, Co Antrim, with the loss of 860 jobs.

The company said it will "run down" the manufacturing plant by mid-2018 as part of a restructuring plan that will see investment in its facilities in Dundee and Stoke on Trent.The announcement comes a year after another major employer in Ballymena - the JTI Gallaher tobacco factory - announced plans to close its operation in the town by 2017, with the loss of around 870 jobs.

The factory in Ballymena opened in 1969.

Managers have been warning for a number of years that high-energy costs were making production increasingly unsustainable.

"Despite great efforts and progress being made in previous years, other European plants are still more competitive than Ballymena.

Back in 2013, the company installed a 4.6MW wind farm on site to try to cut energy costs :

Dale Vince, Ecotricity founder, said: “Building wind power on-site and supplying it directly to a factory not only cuts carbon emissions, but because you don’t need to transport the electricity via the grid – it cuts energy costs too.

“This is a way to make businesses more competitive and more environmentally sustainable at the same time.”

Onsite Wind Energy – pioneered by Ecotricity and known as ‘Merchant Wind’ – ensures that electricity is channelled direct to the end user, while any excess energy not used on site goes into the local Grid.

Wilton Crawford, Factory Manager at Michelin Ballymena, said: “The wind turbines are a welcome asset for Michelin in Ballymena, and will help alleviate the challenge of increased energy costs, particularly as energy prices in Northern Ireland far surpass those in Europe.”

Ecotricity’s two turbines at Michelin’s Dundee site have already produced well over 43 million units (kWh) of energy since being commissioned in 2006: that’s enough electricity to power over ten and a half thousand average homes, keep an iPad going for over 3 and a half million years, or drive an electric car (Nissan LEAF) around the equator over six thousand times.

 However, as they have now learned, wind power is too intermittent to provide reliable power to a factory.

Five Reasons why we have reached saturation point with wind energy

To any impartial analyst, Ireland has reached saturation point with wind energy and it should now be time to put a pause on new wind development and consider our options. No damage was ever done down through history by pausing before deciding what to do next. Think of how many billions of euros we could have saved if this was done in 2006.

1. Dumping of wind power and the 50% limit on wind - recent evidence shows that during periods of high winds we have to dump more and more of available wind energy to maintain a safe secure supply of electricity.  On the 30th March, at least 26% of available wind energy was dumped. 
2. Over capacity - We now have generation capacity equivalent to double our peak demand and three times that of our average electricity demand needs. Let's use up this excess capacity before we start building any more. No new generating units (including wind) need to be built unless they are replacing retired units.
3. Baseload plant minimum load requirements - there is a requirement for 5 large generating units to be running at all times for "dynamic stability". These comprise combined cycle gas turbine plants and Moneypoint coal plant. This means they can never be completely switched off. Increasing wind penetration further will exacerbate the inefficiencies inherent in running these plant on low loads, thereby negating any additional savings due to adding more wind.
4. Electricity bills are one of the highest in Europe - government policy has locked society into high electricity prices with the preference towards subsidized forms of generation meaning savings from falls in wholesale prices can never filter down to consumer's bills. Another factor is that an over supply of generation capacity results in units requiring subsidies and capacity payments to recover their high fixed costs as payments for energy generation become insufficient and staggered due to low demand and more intermittent wind on the system. There are also extra costs due to new infrastructure required to carry the wind power.
5. Impacts on other sectors - The tourism and equine industries are two of the largest industries in Ireland supporting many direct and indirect jobs. Chances are if you live outside any of the main cities, your job is dependent in someway on either of these industries.  Planting wind farms and associated pylons near scenic and horse breeding locations will have a negative impact on these important industries.  The Irish Hotels Federation recently warned that the location of energy infrastructure should not diminish the natural beauty of the landscape because this is an important element of the Irish tourism product. Already, this impact is being felt with one castle owner recently saying "The tourists can't believe it. They said we're mad. They said we're ruining our heritage. They say it's disgusting to go around Ireland now"

Cadburys job losses - Our government is sleepwalking into another unemployment disaster

This week saw 100 new jobs in Ireland from Apple but over 200 job losses as Cadburys moved some of its manufacturing plant out of the country.

As can be seen on this chart, Poland is ranked 24th and Ireland the 5th for the highest electricity prices for industrial users in Europe :

http://ec.europa.eu/eurostat/statistics-explained/index.php/Energy_price_statistics

There is an interesting discussion here on the Polish energy policy :

Garcia called “illogical” the fact that companies will have to pay more for energy just because it is ecological. He argued that this would limit the investment potential of the sector, pose a threat in terms of competitiveness and lead to moving production outside the EU.  

“To grow, you need energy – in this case the cheapest energy possible. Energy prices in the EU are expected to grow and this is a threat,” he said.

Poland set a renewable target of 19% for electricity compared to Ireland's 40%. As can be seen here Poland is not expected to even meet these targets :

http://www.keepontrack.eu/keeping-track/poland/2014/

Their government did not transpose the EU Renewable Energy Directive into national law. The European Commission were not happy and in March 2013 proposed a daily penalty of €133,000, around €48m a year. By December 2014, this proposed fine was reduced to € 61,000 a day, about €22 million a year. I can find no date for a judgement that will actually impose the fine. There are no subsidies for renewable generation and no multi-billion Euro investment to upgrade its already adequate grid infrastructure.  We are told by Keep On Track that the Polish Prime Minister, Donald Tusk expresses the argument that energy generated from [renewable] sources is the most expensive one and contributes to growing energy prices for end users, deteriorates the landscape and adversely affects the functioning of the electricity system. Contrast this position with that of Irish politicians who tell us idiotically that renewable generation will bring down the price of electricity.

So where are Cadbury planning on moving their manufacturing plant to - well, you guessed it - Poland. England has seen two Cadbury plants close a few years ago and move to Poland so it shouldn't have come as big surprise that Irish plants were next :


But on Tuesday it said earlier plans by Cadbury to close the plant and move production to Poland were too advanced - Cadbury plant, Somerdale,  BBC News 2010 

But days after the takeover was completed the firm controversially announced that it would close the plant and move production to Poland - Cadbury plant, Keynsham, BBC News 2011

The plant in Coolock, Dublin opened in 1964, the Somerdale plant in England opened in 1935. 

Jobs Minister Richard Bruton said about the Irish closures :

“Unfortunately, due to a cost base which is significantly out of line with competitor countries, it appears likely that the company will proceed,” he said in a statement today.

Of course, the costs of energy is just one cost but it is quite a significant one for a manufacturing firm, whereas it would be less for say a financial services firm.

So we can see a trend here. The EU monster is getting angry and beginning to growl. The Polish government stands up to it, while the Irish government grovels at the monster's feet, while warning its own people about fines for disobeying Big Brother. The net result is that Poland gains 200 jobs, while 200 hard working Irish people are now forced to seek handouts at the Social Welfare office. 

This trend can only continue - 10 closures like the plant in Coolock equates to a minimum of social welfare payments of € 20 million per year, roughly equal to the fines threatened by the EU on Poland for failing to implement the EU's energy policy. Then there is the tax take, council rates and the contribution to local economies to take into account. Who are the smart people here, who are the ones who have the best grasp of maths and economics ?

Meanwhile Richard Bruton is flapping around like a headless chicken blaming a cost base which his government are responsible for. But we know the energy policy will not change, so expect more flapping and unfortunately more job losses to come.