My column this morning laments the fact that our energy providers/regulators don’t seem to put much emphasis on economic development. I particularly am concerned when both Enbridge and NB Power are not forecasting any new large industrial clients well into the future. They just assume there will be no large industrial projects. That bugs me. I guess they are just being conservative but for those of us who think that energy could and should be a tool for economic development, it’s a hard pill to swallow.
I received an email this morning suggesting that energy costs are not that important and the gentleman suggested Germany which has relatively high energy costs compared to France which has lower energy costs.
The truth is that competitive (or comparative) advantage comes from a variety of sources – not just the cost of inputs. If it were only about the raw input costs, everything would be manufactured in low cost countries. The Germans are known for high levels of productivity, efficiency and innovation that makes their overall production cost environment – for certain goods – very competitive.
In the North American context, places like New Brunswick need to focus on competitive wage, energy and other input cost because they are challenged in a number of other areas such as transportation costs, lack of scale, etc.
As for the relevancy of energy, it is true that for smaller manufacturing operations and those where energy costs are less than 10% of overall operating costs – the relative cost of energy is not that big an issue. However, for energy intensive projects such as forest products, mining, data centres, etc. high energy costs are a major barrier.
I realize that lots of people disagree with me on this one and that is fine. We can disagree agreeably. It’s always been a challenge for New Brunswick to differentiate itself and now many of the core features that it was selling such as available workers, a relatively low cost environment, etc. are slipping away and I don’t see much effort being undertaken to re-establish a new value proposition.