Job losses and rising human costs from the energy crisis

Hundreds of workers have lost their jobs and many are facing layoffs as factories close due to high energy prices. (File photo)
photo: AFP/PhotoAlto – James Hardy

The toll of the energy crisis is mounting, with hundreds of workers at pulp and paper mills in many communities facing permanent closure or temporary layoffs.

Blame has been placed squarely on wholesale electricity prices, which have risen sharply from an average of about $100 per megawatt-hour in September 2021 to around $700 earlier this week.

Maurice Upton, a shift electrician at Oji Fibre Solutions in Penrose, said the company’s 75 employees received frustrating news when they returned from a scheduled maintenance stoppage.

“At the beginning of the business, we received a letter saying they had news for us, they wanted to make a proposal to us, and that’s how it all unfolded.

“Basically, the recommendation is to close the plant because of the cost of doing business.”

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Upton, who represents the E Tū union, said while there had been some rumours about the plant’s future, it still came as a shock to workers.

“They were a bit shocked… they were just listening. They were basically just given a proposal and told that this is what was proposed. We just have to wait and see.

“I mean they might restructure. There’s been talk of some restructuring but it makes you question what might happen.

“If it gets worse, they will close in December.”

Dr. Jon Ryder, CEO of Oji told RNZ on Thursday A host of issues, including electricity costs, have led to losses for the business.

Margaret Cooney, chief financial officer at power provider Octopus Energy, said the overall situation was entirely predictable.

Margaret Cooney of Octopus Energy
photo: Photo courtesy of Steve Montgomery

“The current crisis is ultimately a symptom of underlying problems with competition in the sector and that the levels of investment required have not yet occurred, so there are definitely issues with gas but we should see more other forms of generation coming into the market to fill the inevitable gap.”

She said people affected by spot pricing were hurting right now, but soon mum and dad would feel the pain too, as the energy component of their electricity bills had doubled in price and It will soon be reflected in the residential report.

“Depending on how much energy you use and where you are located, your total bill could increase by 25 to 40 percent.”

Margaret Cooney said the New Zealand market needed stronger regulation to achieve true competition.

Near Napier, Pan Pac Forest Products has suspended pulp production, mirroring a move by Winstone Pulp International. Two Ruapehu hydroelectric stations.

Pan Pac managing director Tony Clifford said they had no choice.

“The pulping process is not only energy intensive but also trade-risky, meaning we have to compete internationally with other suppliers of Winstone Pulp mechanical pulp, so it is absolutely impossible to pass on the high electricity prices to our supply chain. So, we have no choice but to stop or cease production.”

He said the move would have a negative knock-on effect on the local economy.

“Pulp mills use a lot of chemicals, and if those chemical manufacturers can’t supply, they face downtime and fixed costs, and then there’s all the logistics aspects of our system, you know, all the trucks and fleets that bring the logs to the site, the transportation of the product, and then our infrastructure, the port infrastructure, the product that goes through the port.

“We have a fairly integrated supply chain and when one link in the supply chain fails it certainly has a knock-on effect throughout the supply chain so there are significant consequences.