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Electricity prices and industrial competitiveness: A case study of final assembly automobile manufacturing in the United States and Canada

Mordue, Greig
Energy policy 2017 v.111 pp. 32-40
automobiles, case studies, decision making, electricity, electricity costs, interviews, inventories, manufacturing, prices, Ontario, United States
This paper studies the real and perceived impacts of electricity pricing on competitiveness in the United States and Canada. Financial analysis is combined with interviews to explore whether and how the cost of electricity affects competitiveness in one of North America's most important sectors: automobile manufacturing. The cost of electricity in top automobile manufacturing jurisdictions in Canada and the US is captured over a six year period starting in 2010. At between approximately US $2.00 and $11.00 per vehicle, the paper finds that the per vehicle gap between electricity costs in the most expensive automobile making jurisdiction in North America (Ontario) and all others is quite small. How, then, to explain the preoccupation of industry actors with electricity costs in Ontario? Several reasons are suggested including media coverage, the relatively narrow inventory of issues under local management control and mechanics of the pricing system itself. The paper explains how the pricing system causes manufacturers to make decisions that depart from core mandates (making things) and generates the unintended effect of heightened scrutiny, a combination of factors that has the effect of aggravating tension around electricity pricing and damaging perceived competitiveness.