The nation is gripped by a debate about the cost of keeping our homes warm this winter. There is another important matter to raise – the impact high energy prices has on our industries.
Industry transforms raw materials into valuable products. To do so it uses a lot of heat. Gas is also an important feedstock for the chemical industry. Activities like petrochemicals, steel making, ceramics manufacture, general chemicals, glass production and cement require large quantities of energy and gas.
At the centre of the Grangemouth closure is a loss making petrochemicals plant which has been losing £10m a month. The dispute with the Union is the immediate cause of the possible closure. The Union was unwilling to accept a rescue plan based on maintained salary levels with a less generous pension deal. The underlying reality is dear energy and dear gas feedstock making it difficult to run a profitable business. Meanwhile US competitors buy gas at much lower prices. It is good that the Union is thinking again about their refusal to accept the recovery plan. The management tell us that the average wage at Grangemouth is twice the Scottish average. The recovery plan requires substantial expenditure on new facilities to import US gas.
One of our leading steel makers has warned the EU that European carbon targets and related costs are pushing more steel making to other continents. BASF have just announced the closure of their Paisley chemical plant, owing to high energy prices and other costs.
Tata Chemicals closed its soda ash factory at Northwich owing to high gas prices.
The EU summit has been discussing the need to remove unhelpful EU regulations that are damaging business and destroying jobs. Dear energy is one of the worst features of an EU regime that is giving a big competitive advantage to Asian and Amercian industrial competitors.
If the Uk wants to rebuild its industrial base, it has to extract a lot more of the gas under our feet as quickly as possible. It also needs to use cheaper forms of electricity generation than wind farms. It is not just the high energy using businesses at risk. Modern assembly plants have very large power bills as they have automated extensively. Power can often cost more than wages in a modern factory.