Source: NEI | Mitch Singer & Mark Flanagan | June 30, 2015

  • Alcoa-home-sliderLow-cost, reliable electricity big incentive in company relocation
  • Diversity of energy sources, including nuclear, is a selling point for states
  • Keurig, Volvo, Alcoa among firms attracted to Southeast

Doug Lawyer has spent a number of years wooing companies to East Tennessee. As the Knoxville Chamber of Commerce’s director of economic development, his recruitment negotiations emphasize key elements such as skilled labor, access to reliable transportation, and the reliability and cost of utilities—especially electricity.

“Universally the cost of utilities, electricity for the most part, is a key factor in companies’ location decisions,” Lawyer says. “Cost, reliability and redundancy of power supplies in our region are critical.”

Nuclear energy provides a lot of electricity. When states add generation capacity, such as the new nuclear reactors being built in Georgia, South Carolina and Tennessee, their ability to recruit electricity-intensive businesses such as heavy industry and high-tech operations increases exponentially. Lawyer and his counterparts in these three states—where nuclear energy already supplies 40 percent of the electricity, on average—have lots of megawatts to boost their recruiting efforts.

The Knoxville Chamber looks to bring specific economic sectors to the region. Among these are advanced manufacturing, especially medical equipment, automotive components and food processing—all big users of electricity. Lawyer says his organization involves regionwide electricity provider Tennessee Valley Authority (TVA) and the local utility in discussions with prospective businesses from the beginning. The purpose is to zero in on companies’ requirements to ensure that the right infrastructure is in place.

Established in 1933 as a federal corporation, TVA is the nation’s largest public provider of electricity, serving 9 million people in parts of seven southeastern states at prices below the national average.

“I think any significant manufacturing operation looks at site selection as a 20-year commitment,” Lawyer says. “The fact that we have low-cost, reliable electricity is a big incentive for companies thinking of coming to this area.”

One of those companies is Local Motors, a Phoenix-based independent motor vehicle manufacturing company. In collaboration with the Oak Ridge National Laboratory (ORNL), the company earlier this year built the first example of its Strati, the world’s first 3-D-printed electric car. The company is building a 44,000-square-foot micro-factory and showroom in Knoxville.

Local Motors' Strati 3-D-printed car

3-D printing the Strati electric car requires abundant supplies of cheap, reliable electricity
Photo: Local Motors

Jesse Smith, the manager for industrial partnerships and economic development at ORNL’s Science and Technology Partnership, said the 3D printing process uses a lot of electricity.

Smith told NEI that for such enterprises the cost of electricity is paramount and TVA’s ability to produce electricity cheaply has always given the region an advantage in attracting new business. Electricity reliability is “expected to be a given,” he says. “In the case of the 3-D printing of the car, any interruption in the flow of electricity would result in them having to restart the building process all over from the beginning.”

Electricity sources aren’t equal when it comes to reliability. Nuclear energy handily outperforms all other sources, operating more than 90 percent of the time in all kinds of extreme weather.

TVA is working to complete Watts Bar 2, a nuclear reactor expected to begin providing electricity to more than 600,000 homes and businesses by the end of the year. Does the prospect of additional generation—especially one that is carbon-free—play a role in convincing a company to move to a certain area?

“We do use the diversity of power as a recruitment tool,” says Gary Human, East Tennessee regional director of the Tennessee Department of Economic and Community Development. “Some industries have asked about green power and it is increasing as they’re becoming more and more aware of the positivity of being green.”

Lawyer says the Knoxville Chamber does mention Watts Bar 2 in its business recruitment efforts, and when TVA explains the environmental benefits of nuclear energy, it resonates.

“This is particularly true with companies such as food processing, craft breweries and others that have an environmental mindset,” Lawyer says. He cites Keurig Green Mountain Inc. as an example of a company the chamber recruited. It began operating in Knoxville in 2008 and has expanded several times over the past seven years.

As important as reliable and reasonably priced electricity is to attracting new business, it’s equally important in retaining existing businesses.

Alcoa Inc. Tennessee Operations has been operating in East Tennessee for more than a century. In 2013 the company announced a $275 million expansion expected to be completed this year. The purpose is to convert capacity at its rolling mill to support the trend in the automotive industry to use more aluminum in cars and light trucks to increase gas mileage, durability and performance.

Alcoa aluminum rolling operations in Tennessee

The Southeast region is a good fit for Alcoa’s aluminum rolling operations.
Photo: Alcoa

“Reliable energy is essential to the aluminum industry because it needs electric power 24 hours every day,” says Jason Buck, term trader and market analyst at Alcoa Energy Marketing. “Alcoa’s Tennessee Operations appreciates the reliable electric power provided by TVA generating units—including nuclear power plants—through the TVA transmission system.”

Like TVA, South Carolina’s state-owned utility Santee Cooper has a dual mission, to provide both electricity and economic development in its service area.
Corporate Communications Manager Molly Gore says this means the company, a partner in South Carolina Electric & Gas’ (SCE&G) V.C. Summer nuclear power plant project, takes an active hand in selling prospective companies on South Carolina and ensuring that they will have the energy infrastructure necessary to successfully operate their businesses.

Gore notes that two of the fastest developing regions in the country are in Santee Cooper’s service area. She says in addition to the high-tech industry, many traditional industrial concerns are attracted to the area.

These include Swedish car manufacturer Volvo, turbine makerWyman-Gordon, carbon-fiber manufacturer Sigmatex and call center service provider Startek. Volvo’s South Carolina plant will be its first in the United States.

For all these companies, the need for plentiful electricity was a prime consideration in settling their operations in the state. And Santee Cooper, Gore says, has been planning to boost its capacity for at least a decade, very substantially through the new reactors at V.C. Summer.

“Santee Cooper needed electricity that would be reliable, baseload and safe. And we wanted to diversify into something that was emissions-free. Expanding into nuclear energy was a good idea,” she explains.

Santee Cooper also has coal and natural gas facilities, but Gore says the need for more electricity and the push to limit carbon dioxide emissions inspired the utility to expand its ongoing nuclear partnership with SCE&G.

“We will be getting all we can out of the Summer units and, depending on the price of natural gas, bring that on as needed,” Gore says.

Santee Cooper closed four coal-fired power plants in 2012, so some of the 2,234 megawatts of nuclear capacity provided by the new Summer reactors will replace them. Gore adds that V.C. Summer 2 and 3 also will add to Santee Cooper’s total capacity and allow it considerable flexibility in dispatching electricity.

Doug Lawyer and his counterparts wouldn’t say their jobs are easy, but in the Southeastern United States, they sure don’t seem to be getting harder.