Across the country, public utilities are empowering local and state economic development while helping businesses amp up their site selection due diligence.
When you locate an appliance in the kitchen, the neat nook in the corner isn’t always the perfect spot, the cheapest and easiest use of manpower doesn’t always get the job done well, proximity to need doesn’t always match Chef’s discriminating tastes, and if there isn’t a socket to plug into, all the planning and execution in the world can snap like a taut power cord.
Manufacturing and logistics site selection follows a similar course—culinary twists aside. Businesses set unique priorities when they decide how and where to locate facilities within their supply chain networks and consequently use different criteria to evaluate new expansion opportunities. Every project has its individual wrinkle, and each wrinkle has its own threads.
Retail fulfillment values proximity to end demand and transportation density, in terms of infrastructure and service providers. Labor-intensive manufacturing industries prioritize workforce availability and costs. Financial service companies, less constricted by location and labor but heavily dependent on reliable energy capacity, look for public utilities that can support their electricity needs.
To varying degrees, these factors are considerations in all site selection due diligence. But the role of public utilities in economic development and location “siting” is growing in importance, particularly as businesses assess their power needs with traditional and renewable resources, and as fuel and energy costs oscillate.
As elsewhere in the supply chain, companies are re-evaluating energy components and costs while they explore new locations and better ways to optimize efficiencies.
THE CORE OF ECONOMIC DEVELOPMENT
Energy is at the core of all commerce. Even with demand, supply doesn’t move without force. Most energy companies provide economic development services simply because of the nature of their business. PSE&G, the publicly owned gas and electric utility company that serves New Jersey, has been doing it since 1929.
“The utility’s involvement in economic development began as an outgrowth of the railroad industry as carriers looked to generate business along their right of ways,” says Tim Comerford, manager of area development for PSE&G Area Development. “Like the railroads, utility companies can’t pick up and move their service territory, so economic development helps to generate business.”
The utility serves a specific function for commercial business, says Mike McKinney, director of economic development for Oncor, a regulated energy company that operates the largest distribution and transmission system in Texas.
“Oncor is unbundled, strictly a wire company,” he says. “We’re the infrastructure, the energy dealer, the commodity broker. Wherever the customer buys energy, we’re the common carrier.”
PSE&G and Oncor, like other energy companies spanning the country, serve their constituents in two ways: first, from a community perspective and what they can do to attract commerce and trade; second from a business point of view and what they can do to help companies locate sites in their respective areas.
“From a macro perspective, PSE&G works with various local and state jurisdictions to analyze major economic development issues and help them attract business,” says Comerford. “PSE&G also works with companies directly, providing an inexpensive source for information on siting a new location.”
Industries and companies that demand reliable power capacity consider energy partners a top priority. Utilities, in turn, are working to provide the best service at competitive rates.
Energy companies have dedicated geographic locations and distribution supply—in terms of energy and infrastructure—to reliably deliver electricity to data centers and mission-critical facilities. “Service and a redundant power supply are critical,” Comerford says.
Data centers have unique, site-specific requirements. Systems that exist in one location may be considerably different than those at a site in close proximity—across the highway, for example. Distribution, transmissions, and sub-transmissions infrastructure are critical to these types of businesses.
Location relative to fiber mile distance is an important criterion for financial service companies that use these types of data centers because they will often look to coordinate computer systems among multiple facilities.
“Two sites may operate at 50 percent capacity and synchronize their usage with fiber optic cables. But this linkage is limited by distance, between 60 to 90 fiber miles,” adds Comerford. “It places a premium on location.”
RURAL VS. URBAN
Rural areas experience competing fiber optic needs. These locations have limited electrical and communication infrastructure to support mission-critical facilities. They sometimes lack power redundancy and fiber networks, so companies are resigned to working with multiple suppliers of one-directional technology.
Urban areas, by contrast, often offer multiple service and communication options, and, in many cases, the systems have redundancy built in. PSE&G’s service territory, for example, is a loop design. Electricity is fed from multiple directions and circuits around, providing greater reliability.
“Service availability is very site-specific, so working early on with utility representatives is the most prudent method for site selectors to make sure quality matches need,” Comerford observes.
HUSKING FOR BUSINESS
Energy isn’t the only part of the site selection equation. Businesses have varying requirements, often exploring locations that are close to end-user demand, or that provide suitable transportation networks, tax incentives, and competitive land and labor costs. But the utility is arguably the one constant in all location decisions. Businesses need power.
“Oncor may not always be captaining the site selection process, but we’re generally in the mix. We’re always there and always on,” says McKinney.
Nowhere is this more apparent than in Nebraska, where public utilities and state and local economic development interests have been collectively amping up efforts to attract new business.
Nebraska is unique in the United States because all its public utilities are publicly owned. “Energy companies don’t have to worry about stockholder pressure to make a profit. Revenue is reinvested in the business,” says Roger Christianson, director of economic development for Omaha Public Power District (OPPD), which delivers energy to more than 340,000 customers in all or parts of 13 counties in east and southeast Nebraska.
This is one among many reasons why companies such as Yahoo! and Novozymes, a Denmark-based manufacturer of bio-industrial products, have located data centers in the Omaha region. Nebraska’s utility rates rank below the national average, providing yet more justification for high-energy-use companies to locate there.
Perhaps as a reflection of their “public” calling, Nebraska’s energy companies are highly attuned to their utilitarian purpose.
“We provide low-cost, reliable energy and customer service to enhance quality of life,” says Dennis Hall, economic development manager, Nebraska Public Power District (NPPD). “We prepare communities to seize economic opportunities that come their way.”
As the largest utility in Nebraska, NPPD serves all or parts of 91 of the state’s 93 counties. Like its Omaha peer, the utility has made a concerted effort to sell prospective pioneers on the entire state and all its beneficiaries.
NPPD works with various state departments, including workforce development and environmental authorities, as well as the railroads, notably Omaha-based Union Pacific, to market the state’s location advantages. It’s essentially a bundled economic development offering.
“Companies might contact NPPD looking for information. We answer their questions, then package that material in cooperation with local economic development areas,” notes Hall. “We introduce companies to suitable agencies that can meet their criteria.”
Power sources aside, both NPPD and OPPD are working with customers to make energy efficiency a cost savings, not a capital bleed. Both utilities offer services that allow companies to retrofit their facilities and conserve energy.
“OPPD offers a continuous commissioning program where we work with customers to identify inefficiencies and efficiencies,” says Christianson. “We put systems in place, then finance those investments with energy savings.”
These efforts might include helping companies explore different lighting arrangements or heating/cooling duct placement—mundane considerations that have measurable impacts.
“NPPD offers incentives to help companies upgrade equipment to improve efficiency,” reports Hall. “We often help warehouses and DCs improve lighting, assess how they can fix problems, then help subsidize those efforts financially.”
The fact that Nebraska utilities don’t make a profit adds power to their value proposition. Customers know that their partners are doing what’s in their best interest. “We want our customers to use as little energy as they can but as much as they need,” Hall says.
This, in turn, catalyzes a process of economic enrichment and empowerment that flows from the end user through the state. “The idea is for companies to invest the money they save on energy costs in capital expenditures that expand business, create more jobs, and drive the state economy,” Hall says.
In essence, energy efficiency at the enterprise level is padding the state’s bottom line by creating a magnet for more industrial growth.
THE GREEN PULL
In Nebraska and elsewhere around the country, the push for renewable energy sources is creating a pull for like-minded energy companies. Recently, demand for green power has become a force to be reckoned with.
“A tremendous green energy push began about three years ago with the commercial industry and is just starting to penetrate the industrial sector,” says PSE&G’s Comerford.
The commercial industry has been building LEED-certified facilities for the past seven or eight years, well before the economic downturn, adds Comerford. The Leadership in Energy and Environmental Design (LEED) sustainable construction rating system, pioneered by the U.S. Green Building Council, creates a standard for building facilities in a green way.
It’s still very much a socially driven mindset, minimizing carbon footprint, but topics such as waste disposal and water recapture are top of mind now when companies approach utilities.
“New facility constructions have the biggest impact because there are marginal costs to upgrading systems and it’s cost effective to save kilowatt energy output,” says Comerford.
Many businesses are quick to recall the fuel crisis in 2008 and mindful that energy costs will likely spike again. It serves as an equal reminder to utilities and customers alike that demand for renewable energy sources is here to stay.
“Demand for renewable energy has been largely customer-driven,” says Christianson. “Companies weren’t looking for green energy until a few years ago. Now OPPD is working to source 10 percent of its energy from renewable resources by 2020.”
OPPD currently has a diverse supply of power: 65 percent coal, 20 percent nuclear, and 15 percent a mix of oil, natural gas, landfill gas, wind, and solar-generated energy. NPPD shares a similar mix. Both utilities are heavily investing in and purchasing wind energy while also experimenting with landfill/waste gas, solar energy, and fuel cell technology.
THE WAY THE WIND BLOWS
But energy diversity can have a downside. “For example, OPPD doesn’t build wind farms, we buy wind. There’s a variable aspect because wind doesn’t always blow. We still need a core energy base and supply,” says Christianson.
That said, some states have no alternative. Governments are enacting renewable source index requirements to force energy diversity and further research and development. New Jersey is among the states adopting such mandates.
“Any company that produces or sells electricity has to source a small percentage from renewable resources, or buy credits from companies that do. So, if total capacity is 100 units, two units have to come from a renewable source such as solar, wind energy, or geothermal,” says Comerford.
PSE&G is actively looking at investments in renewable energy resources, and exploring major offshore wind generation farms. The utility also recently received funding to begin installing solar units on top of utility poles throughout New Jersey.
Nebraska, too, is a leader in renewable energy capture. In terms of logistics, NPPD is focused on what wind energy might mean for Nebraska. Currently, the state ranks in the top 10 for U.S. wind potential.
This emerging energy niche has yielded its own economic development potential. Katana Summit, a wind turbine manufacturer, recently opened a new plant in Columbus, Nebr., building support for a new industrial base in the region. Texas has also seen an updraft in wind component manufacturers and suppliers locating in the state. Wind power is a renewable energy source with fixed economic development potential that will continue to blow.
For enterprising businesses, public utilities have a lot to offer beyond energy. While some companies appreciate the core role their utility partners play, other verticals can similarly plug into their resources, if not their power.
“Many industries don’t look to utility companies as a source for site selection information. But PSE&G has been doing this type of work for years. We’re an untapped resource,” says Comerford.
Industry depends on utilities, and they, in turn, depend on customers to flip the switch. Business opportunity flows both ways and energy companies are conduits between economic development and logistics site selection, then execution.
“If our customers are successful in attracting business and industry, and if they are economically healthy, our utilities will be, too. It’s the reason utility companies are involved in economic development,” says NPPD’s Hall.
If you’re looking for information about the best place to site a new facility, contact your local utilities. It’s what they do. In the kitchen, you’re on your own—but at the mercy of the power cord.