Blog

The Energy Challenge in Site Selection

In the U.S. we are facing major challenges in both the supply and transmission of electric power. Since the beginning of this decade, we have witnessed an unexpected surge in electric power demand. Electric utilities have doubled their forecasts of how much additional power will be required over the next six years. Contributing factors include a renaissance in manufacturing, including power intensive industries (e.g., EVs, EV batteries, semiconductors, steel/aluminum, etc.), a profusion of data centers, and global warming resulting in greater usage of air conditioning.

Exacerbating the situation are mandates to reduce fossil fuels and connect to green energy. When taking these dynamics into account, the transmission system in the U.S. cannot accommodate future electric power demand. Consider the following:

  1. America’s Grid is fragmented (3 grids)
  2. A patchwork of operators with competing interests exists in each grid
  3. Grids only connect at a few points and share little power
  4. Transmission capacity will need to expand by 60% by 2030 and 300% by 2050
  5. Transmission congestion is also negatively impacting reliability
  6. There is no federal agency that can marshal this expansion, similar to what was accomplished for Interstate Highways
  7. Permitting is lengthy and cumbersome

Unless an urgent, all-encompassing effort is undertaken to alleviate the energy supply and transmission shortage, economic growth will be stunted. Some areas will be hit harder than others. Consequently, this dynamic will require more in-depth scrutiny when evaluating and selecting new locations for corporate facilities. Importantly, companies will also need to be vigilant as expansion at existing sites could be problematic due to electric power challenges.

What can be done to ameliorate this emerging crisis?

A few suggestions gleaned from a range of experts follow:

  1. Create a Federal Agency to build new transmission capacity (but might be wishful thinking)
  2. States should engage in more power sharing arrangements
  3. States must engage in comprehensive planning for transmission upgrades/expansions
  4. Pursue non-wire alternatives, e.g.,
    • Distributed energy resources (e.g., small wind turbines)
    • Energy storage
    • Grid enhancing technologies (e.g., sensors)
    • Microgrids
  5. Relax unrealistic clean energy goals
  6. Increase R&D and investment in de-carbonization technologies
  7. Encourage utilities to invest in “Advanced Reconducting” (replacing existing power lines with state-of-the-art materials for advanced cables)
  8. Federal government must provide additional funding to states for transmission upgrades and expansion
  9. Federal government needs to streamline permitting
  10. States/localities should provide incentives for companies to become more energy efficient

Among factors requiring extensive scrutiny for locating new manufacturing plants are:

  1. Transmission capacity/congestion
  2. Planned investment in transmission capacity
  3. Current/future sources of power generation
  4. Electric power price escalation
  5. Green/clean energy goals
  6. Availability/cost of green power
  7. Electric Power Reliability
    • Systemwide
    • Substations serving targeted sites
  8. Electric power resiliency at targeted sites
  9. Presence of large scale/mega industrial sites that could attract power intensive operations
  10. Target industries of pertinent economic development organizations to ascertain which, if any, could be power intensive. Then, seek an explanation of how these power needs could be accommodated

The implications for economic development organizations include:

  1. Fully understand electric power supply, demand, transmission, reliability, and cost within respective service territories
  2. Become more involved with energy planning at state and local levels
  3. Place greater emphasis on energy efficiency in business retention/expansion efforts
  4. Adjust both site development and target industries predicated on the respective electric power situation
  5. Be better prepared to address inquiries about electric power (given the national crisis) that corporate prospects will raise in their evaluation processes
  6. Foster greater interaction with state energy offices