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ENERGY & RESOURCES

Blowback

When Siemens came to town, Tillsonburg became a winner in Ontario's green-energy push. Then the economic winds shifted. Josh O'Kane reports on how changing technology, falling demand and politics have spiked a community's turbine-powered dream.

The first sign of impending trouble for the Siemens Wind Power plant arrived a couple of months ago in this small Southwestern Ontario town. Production of the factory's 55-metre wind turbine blades – beasts made of fibreglass and balsa wood, each weighing about 12 tonnes – was suddenly wound down. Employees at the facility were hearing that demand had simply dried up.

The staff continued to grind out slightly smaller blades, 53 metres long and bound for the U.S. market. They also traded in rumours that they would soon be told to stop making those, too, and that the plant would be closed down. Quietly, some started to seek work elsewhere, fearing the worst and hoping for better. "It's hard to look for something and give new employers a start date when you really don't know when you're going to be done," said Josh Dewachter, who has worked a number of jobs in the plant since 2013.

On Sunday, July 16, workers showed up to find the doors locked and a notice of an all-staff meeting to come. Two days later, at the town's community centre, the hammer came down: More than 200 people were let go immediately, with the rest of the plant's 340 jobs to be lost by the time it shuts down completely by early next year. "Everyone always said it was a five-year gig," Mr. Dewachter said. Even so, the job cuts were incredibly abrupt. "I didn't see it coming so fast."

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Josh Dewachter stands outside the fence at the Siemens plant in Tillsonburg, Ont.

The Siemens plant is situated in a 253,000-square-foot former Magna International Inc. factory, a relic of Southwestern Ontario's auto-making history. Soon enough, it will also be a symbol of the troubles afflicting Ontario's bold push into green energy.

The policies advanced by Queen's Park – phasing out coal-fired electricity plants and subsidizing wind and solar projects – have inarguably made the air cleaner and driven up the cost of power for consumers and businesses. But they were also designed to encourage a new kind of industry to take root in the province, one that would help replace some of the lost manufacturing jobs from a shrinking auto sector.

The Siemens plant sprung forth from plans to create 50,000 green-energy jobs provincewide. To date, the provincial government claims more than 42,000 have been generated. But some believe that figure is vastly inflated – and the events in Tillsonburg, a town of about 16,000 residents southwest of London, raise hard questions about the nature and staying power of those jobs, now that the government has lost its appetite for subsidizing such projects.

The closing will spill over Tillsonburg and the catchment of 100,000 people it serves. Already, fewer people are stopping at corner stores to pick up cigarettes and snacks. Everyone from caterers to fuel suppliers expects to see business slow down within a few months. And while no one factor set the shutdown in motion, it has sparked questions about the promise of a renewable-energy future that brought Siemens jobs to town in the first place.

What happened here highlights the precariousness of jobs in green energy – and wind power in particular. They're subject to rapidly changing developments in technology, demand and politics. When yesterday's world-class products easily become tomorrow's obsolete priorities, livelihoods are lost with a moment's notice.

As Ontario emerged from the last recession, the governing Liberals wanted to make the province's energy cleaner. But their efforts doubled as a means to ramp up hiring in a tough time. The province promised 50,000 jobs when it revealed the Green Energy and Green Economy Act in 2009, hoping to lure investment through long-term energy contracts at lucrative rates. It signed its deal with the Samsung-led consortium the following year.

The consortium was to invest $7-billion to develop renewable-energy projects in the province in exchange for sweetened, locked-in rates, plus $437-million in "economic development" incentive payments over decades if it fulfilled its obligations. It very quickly generated controversy for not providing a level playing field for other companies, including domestically controlled ones. Nonetheless, solar and wind facilities were announced for Windsor, London, Toronto and Tillsonburg, the latter through Siemens.

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Things did not go according to plan.

The consortium's incentive was soon slashed to $110-million in exchange for an extra year to get projects off the ground. In the 2011 provincial election, the Liberals lost their majority when seven candidates lost in rural ridings where wind power and green energy were hot issues. Then the World Trade Organization ruled in 2012 that the broader renewable-energy program unfairly pressured producers to buy hardware made in the province.

The ruling against the "buy local" policy exposed Siemens's blades to greater competition. "All of a sudden, that leg of the stool got kicked out," said Adam Fremeth, an associate professor and energy consortium fellow at the Ivey Business School at the University of Western Ontario, in London.

Electricity prices, meanwhile, were shooting up. Samsung missed deadlines. Kathleen Wynne replaced Mr. McGuinty as premier, and the province revised the deal again in 2013, announcing it would buy $3.7-billion less solar and wind power from the group than originally planned.

And last September – saying it did not need the power and citing high hydro bills once more – Ontario cancelled a round of green-energy project procurements, effectively drying up the provincial market for Tillsonburg's blades.

Glenn Thibeault, Ontario's Energy Minister since 2016, has admitted the province's previous green-energy prerogatives missed the mark. "Were there things that we did wrong when we procured it? Of course, hindsight being 20/20," he said in an interview. "The sole-sourcing of contracts and things like that made prices a little bit higher than what they should have been."

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While he called the Siemens job losses "disappointing," he declined to describe the 2016 cancellation of green projects as changing direction. "When you look at the Green Energy Act, there were a lot of incentives to get this going," he said. "But there still are programs in place to actually see the future procurement of our power, of our supply mix, and keeping it diverse."

The plant was recently making 10 to 12 blades a week, former employees said – down from about 18 at its peak – and has produced more than 2,500 since its inception.

It was good work, usually, with opportunities to move around to different roles. "More than not, you had a good day," one former worker told The Globe.

In the days after the plant shutdown was announced, the company lot was so full that blades were stockpiled across the street – some wrapped in plastic, in neat rows – closed off to the public by a barbed-wire fence, presumably to prevent vandalism, since you'd need an oversized-load transport truck with a police escort to haul the goods out of there.

A couple birds sit on finished Siemens wind turbine blades.

Two sources told The Globe and Mail that the overflow of blades was, at least in part, pre-emptively made for a contract that went unfulfilled after the procurement-round cancellation, though one person said all the blades had found buyers. (Siemens Wind Power declined the opportunity for an interview for this story, saying staff members were too busy completing orders and finding work for displaced employees.)

The blade plant is situated in Tillsonburg's southwestern corner and five minutes from its core. It was never meant to last forever. After opening in 2011, local partners were told it would operate until 2016 – employees had recently heard it might have contracts until 2020 – but it offered crucial diversification to the region. The town was once central to the "tobacco belt" along Lake Erie's northern shores, though changing health habits and government buyouts scuttled that industry.

Auto manufacturing later flourished in the area; Tillsonburg is a hop from Highway 401, but, to the south, Highway 3 serves as a convenient east-west corridor between Detroit and Buffalo. Then the most recent recession sideswiped that sector, too.

When Siemens arrived, it was just one factory. Its departure doesn't mean a whole industry is leaving. But the timing is terrible: More than 300 people will join the ranks of the unemployed in the region by early 2018, adding to hundreds of other layoffs from nearby Maple Leaf Foods and General Motors plants within the next year.

When it announced the closure, Siemens Wind Power said its hand was forced by a changing marketplace. Prices had fallen 66 per cent since the plant was announced, and regional demand had shifted away from Ontario. Bigger blades with better technology were now in demand – blades that could not physically be made in the Tillsonburg factory. Less income per blade shipped made it unreasonable to invest in expanding the plant, chief executive David Hickey told The Globe on the day of the announcement.

Market forces were to blame, he said. "We constantly evaluate our global manufacturing footprint based on … market changes, and we've seen how it can change quickly," he said July 18. "That's a constant evaluation process."

Wind turbine blade manufacturing is at a global crossroads. Navigant Consulting Inc.'s most recent report on the sector suggests blade revenue could reach $72.4-billion (U.S.) from 2016 to 2025, but manufacturing's growth rate will be limited because demand for wind power has peaked and levelled out worldwide. And a slew of mergers and acquisitions, the report says, has led newly expanded companies to assess their strategies.

Siemens Wind Power to close Ontario turbine blade plant, cut 340 jobs Tillsonburg, Ont., factory recently called ‘key part of global supply chain’ by Siemens will be shut down by early next year.

That just happened with Siemens AG, Its wind-power division merged with Gamesa Corporacion Tecnologica SA this year to form Siemens Gamesa Renewable Energy SA, which includes Siemens Wind Power Ltd. and remains controlled by the conglomerate.

Despite the odds being stacked against it, the Tillsonburg plant proved to be nimble for a few years. It was originally designed to make 49-metre blades for 2.3-megawatt turbines, but through subsequent contracts was adapted to make 53– and 55-metre models. "That was above and beyond what anyone expected," said Mr. Dewachter, the former plant worker.

But uncertainty around the future of U.S. tax policy, Siemens Wind Power has said, changed the outlook for exports. With Ontario dropping support for more local projects, the company said it couldn't afford to keep manufacturing in Tillsonburg.

In Canada, Ontario has the most installed wind capacity at 4,781 megawatts, according to the Canadian Wind Energy Association. But Canadian growth – according to the association, Siemens Wind Power and other industry players – is likely to be situated in Alberta and Saskatchewan, too far to affordably haul blades half the size of a football field, Siemens Wind Power has suggested.

After 2011, "we got to overproduction in the global supply chain – or at least the North American supply chain – and now you're seeing things get rolled back," said Prof. Fremeth. "This is part of a bigger story. … It's really easy to point the fingers at the provincial government on that one and say, 'You dropped the ball here,' but this is private capital that's making a decision."

But the Tillsonburg story, some argue, could have gone in a different direction were it not for Ontario policy. University of Guelph economics professor Ross McKitrick says the green-energy subsidies led to an artificial demand for wind manufacturing – until it came crashing down, bringing the Tillsonburg plant with it.

"You need to back up and ask why it opened in the first place – nobody was coming to Ontario to build wind turbine blades or components or towers originally," Prof. McKitrick said. "There are industries where we're world leaders … that grew out of localized skills and entrepreneurship. That didn't describe the wind-turbine construction industry, so it was created artificially through the contract with Samsung and through promises of procurement by the provincial government."

Ontario-based energy analyst Tom Adams says that "what Siemens was doing was mining – they were just mining local subsidies with ambitions to wider international trade." Now, he says, "their feelings are that the subsidies don't have good prospects in this part of the world, and so they're gone."

Downtown Tillsonburg, Ont., is seen on July 27, 2017.

So, too, are the benefits the blade factory brought to town.

Turbines have spun economic activity in Tillsonburg before. Its first mayor, E.D. Tillson, built a series of mills here in the 1800s, including one that helped him launch an oatmeal brand eventually bought by Quaker Oats. Near the site of the original oat mill was a pea and barley mill that Gordon and Lauralee Craig bought in 2000 and transformed into Mill Tales Inn, a restaurant and lodge whose basement still houses the original five-foot-wide water turbine that powered the mill.

The inn, three minutes from the blade plant down a tree-shrouded street, has 10 rooms. When Siemens first acquired its building off Highway 3, eight employees who had come from abroad stayed there for three months, Mr. Craig said. Since then, employees have stayed at Mill Tales Inn almost weekly and regularly book space there for meetings. "It meant a lot for us," he said.

Chrissy's Catering made meals for Siemens Wind Power meetings and gatherings roughly twice a month, and co-owner Marcel Rosehart is bracing for the drop in business. "Siemens was never one of these companies that was meant to stay there forever – we all knew that," he said. But it will still be tough. "Smaller companies that were involved in supporting them are going to tighten the belt."

That includes his family's convenience store, which is already seeing fewer customers. And Dodsley Propane, which exchanged as many as 700 cylinders a month for the company's forklifts. And Dowler-Karn Ltd., which supplied diesel for other yard equipment. Anyone who worked with the blade factory will lose business.

Prouse Electric & Mechanical Ltd. did electrical, heating, plumbing and other work to set the plant up for Siemens and spent six years doing routine maintenance. Combined with other forthcoming layoffs from the Cami automotive plant and elsewhere, "it's not good in Tillsonburg, but you've gotta expect the ups and downs," said owner Robert Prouse.

The shutdown will make the town less social, too. "They don't want to go to shows. They don't want to go to restaurants. They don't want to go to the neighbours' for steak barbecue and a beer," said Deputy Mayor Dave Beres, who runs a retail shop.

Mr. Craig, the innkeeper, doesn't want to see another company leave town. "Getting new ones is harder than keeping them," he said. "And we looked after them when they came here – God, my wife even did their laundry."

The business and political community is largely hesitant to ascribe blame for the plant closing, except in vague terms. The day the day the closure was announced, when asked by The Globe if Ontario's cancelled procurement program influenced the decision, Mr. Hickey of Siemens Wind Power said any change affecting demand "plays a factor."

"This entire discussion, especially outside the local area, has tended to be more focused on policies and regulation and philosophies," said Tillsonburg Mayor Stephen Molnar. "I would suggest and concur that there's a lot more that could be done and should be done to ensure that we're providing stability in our opportunities," declining to name who would provide that stability.

Sometimes it's not what people say that says the most. Like at Sammy Krenshaw's bar on Broadway, where the two urinals in the men's washroom have, well, targets. On the left, you'll find the logos of Hydro One Ltd., Union Gas Ltd. and Canada Revenue Agency. Inside the urinal on the right is a portrait of Premier Kathleen Wynne. It has a caption, too: "I'm a big fan of recycled beer! (Oh, and high hydro rates)."

The province's renewable energy policies have generated plenty of controversy, but experts such as Prof. Fremeth caution that green investments have been a small part of rising hydro bills. "The work that's been done at the nuclear power plants as well as transmission upgrades have [contributed] the lion's share of the increased rates we're seeing here," he said.

But this month, wind power is on everyone's mind in Tillsonburg. Residents with less skin in the game are more forthcoming about it. "We have a provincial government that seems to change the rules on an ongoing basis for many things," said John Lessif, who was mayor when Siemens first came to Tillsonburg. The company, he said, "didn't invest the millions of dollars they invested for a six-year operation. The rules changed, so they had to change."

Mr. Thibeault said the plant closure wasn't the government's responsibility. "With the Siemens decision, it was a business decision," he said. "The technology for our wind turbines have advanced so much that they no longer really needed" the 53– and 55-metre blades manufactured at the plant.

There have been more than 42,000 green-energy jobs created in a clean-tech sector "that wasn't there before," Mr. Thibeault said in an interview – which he calls evidence of Ontario's green-energy success, with jobs in construction, engineering, consulting, manufacturing and more, many with a focus on export markets.

"Growth will continue to be in the other parts of the world [requiring technologies] that we already have expertise in, and I'm hoping that they're able to share that and get those to market."

The Energy Minister was not able to say for sure how many of the 42,000-plus jobs he cited are permanent or temporary, such as in construction. And in a subsequent e-mail, a spokesperson said, "It would take some time to outline the specific terms of the different jobs created."

Whether or not they're permanent, Mr. Adams, the energy analyst, has studied how the province calculates jobs – and doesn't think the number is nearly as high.

"It's quite easy for government statisticians to track the level of investment that's going into the Ontario economy and then track the employment numbers and create this relationship," Mr. Adams said. "There is a huge difference between different types of investment, and green energy – the electricity system generally … it's an incredibly capital-intensive industry."

A billion dollars invested into green energy, he said, would deliver far fewer jobs than a billion dollars in traditional industries. "I'm amazed that they can keep pumping out these numbers and just insisting that there's something real behind it, because I don't buy it for a second," Mr. Adams said. "The jobs impact is a fraction of what the government's claiming – they just don't want to carefully investigate."

The damage from the blade plant experience spreads far beyond Tillsonburg's lost jobs, Prof. McKitrick said. "It doesn't leave us back where we started – it leaves us in a far worse position. … We have much higher electricity prices, which puts the entire manufacturing sector under stress."

The former workers have their own stresses to deal with. Plant employees who spoke to The Globe for this story said it was a good place to work and that management's efforts before and after the shutdown announcement – including setting up a job fair to find them new jobs – were appreciated. But whatever their next jobs are, they likely won't be as lucrative. "Matching the wage will be the hardest part," one former worker said.

As rumours that the plant would close down began flying this year, talk on the factory floor sometimes turned to the Liberals' role. "Government grant things are hard to bank on, because they can change in the blink of an eye and you have no influence on it," Mr. Dewachter said over coffees at a Tim Hortons just down Highway 3. "It's not like automotive, where you have supply and demand from the average Joe."

But he's still going to miss it. "The fact that it was so close to home, it felt like we were doing our part to make a difference. And now that we're not, it almost feels like a step backward."

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