Energy-Forward Site Selection

The topic of energy comes up early and often as companies work to make site selection decisions regarding existing and future facilities.

By Jacob Everett
From the July/August 2023 Issue

In recent years, discussions around energy supply have gone from occasional, to frequent, to ubiquitous in the world of corporate site selection. Historically, quantity and cost were the key energy-related factors in location decision-making. The source (type) of energy has now become the third prong of energy strategies.

The significant uptick in interest in where energy is coming from can be attributed to a variety of forces—some internal and some external. Regardless of the motivations, this topic comes up early and often as companies work to make location decisions regarding existing and future facilities.

Energy-Forward Site Selection
(Photo: Adobe Stock)

 

Terminology abounds: clean, green, renewable, low-carbon, net zero. Where does nuclear fit in? What about the numerous variations of hydrogen energy? Rather than parse these terms, let us simply acknowledge that companies are placing a large emphasis on cleaner, lower-carbon energy supplies, regardless of the terminology used.

This “energy-forward” mentality has created two significant new dynamics in the site selection process.

Energy Source Requirements: Add Complexity To Site Search

For companies seeking specific energy attributes, the complexity of site selection has increased. Energy source concerns are additive, and the litany of location decision factors just got longer. This complexity adds pressure to timelines, and in some instances lengthens them. For those with moderate to ambitious clean energy goals, energy source factors may also impact implementation and operational timelines of expansion activities. Given the lengthy timelines around delivering new energy infrastructure, the lack of immediate availability constrains the ability of some projects to execute at the company’s preferred pace.

The timeliness of  availability is not expected to be resolved any time soon. In the near-term, there simply is not enough supply to keep up with the growing demand for clean energy. While globally we are adding significant low-carbon energy supplies each year, the overall worldwide demand for energy continues to increase (up 14% from 2011 to 2021). Further, traditional energy plants are being retired. When considering rising overall demand and traditional retirements, each megawatt of clean energy is not available for the market to gobble up; instead, portions of each green megawatt are already spoken for just to keep the lights on and to offset retiring supplies.

The progress is net positive, but it is incremental. Recent studies by the International Energy Agency (IEA) have suggested that the pace of renewable capacity additions needs to increase by 60% to 100% in order to meet net zero by 2050.

Inadequate Supply: Geographic Disparity (And Opportunity)

Just like most technological advancements, the energy transition will, unfortunately, result in geographic winners and losers. This technological shift in energy is unique in the extraordinary level of influence that state and local governments possess. This is because much of the authority to greenlight the location of most renewables projects rests in statehouses and county governments. Unlike many historical macro changes that happened “to” communities (trade policies, information technology, natural disasters), state and local leaders have a rare opportunity to control their own destiny in relation to the energy transition. The decisions regarding if, how, when, and where to engage with new energy developments are most often in the hands of the individuals elected to state and local offices.

As many companies continue to demand increased levels of cleaner energy, states and localities that are embracing and expediting the development of low-carbon energy supply will win the day. Not only will these communities reap the benefits of large amounts of private sector investment directly from energy development, they will also position themselves for other economic development successes by providing an energy mix that is attractive and in demand by businesses. Clean energy supply is becoming a fundamental in the marketplace—thriving industries need access to human capital, strategic transportation assets, stable fiscal and regulatory environments, and, increasingly, they need an energy mix that is low in carbon and high in alternative energy.

How Is This All Playing Out?

State and local governments run the gamut in terms of experience and attitudes around new energy projects. For areas that have not encountered alternative energies, there is a learning curve for elected officials and stakeholders. Elected officials and agency leaders throughout the country are focused now more than ever on how to manage and optimize the energy transition for communities, citizens, and businesses. Through hard work, education, communication, and forward thinking, countless areas across the U.S. have ultimately found a symbiotic relationship between energy and community.

“For companies with moderate to ambitious clean energy goals, energy source factors may impact implementation and operational timelines of expansion activities.”

Private sector developers (especially in wind, solar, hydrogen, and energy storage) are in a full sprint to control the necessary land and other resources needed to facilitate large-scale increases in clean energy supply. This sprint also involves working to align the timing of financing and regulatory approvals, which is a yearslong process. The breakneck pace is driven by the short- and long-term market demand as well as attractive financial opportunities created by Congress.

Companies are frequently operating with an energy-forward mentality. At the same time, they are discovering that the realities of the energy marketplace are often out of alignment with the private sector’s energy goals and timelines. Scoping of projects must now include setting reasonable expectations regarding the amount of clean energy that can be accessed for a given operation. Energy mix data at the state or regional level are now used early in the process to select (and eliminate) geographies in the site selection process.

While Congress has provided substantial financial motivations to spur alternative energy development, the broad federal regulatory system is preventing full acceleration in this space. In June, the recent debt ceiling bill included changes to the federal permitting process for major energy projects that many hope will create measurable improvements in the United States’ ability to quickly increase energy supply. The legislation also adds energy storage to the list of eligible project types for the FAST-41 program, a good sign for energy development. There was hope this portion of the bill would also include provisions to expedite the expansion of electrical transmission lines across the nation. However, the final bill only requires a study of electrical transmission which means transmission factors will likely remain a constraint on energy development for the foreseeable future.

(Editor’s Note: The FAST-41 program refers to Title 41 of the Fixing America’s Surface Transportation Act (enacted December 4, 2015) that established new coordination and oversight procedures for infrastructure projects being reviewed by federal agencies. FAST-41 is intended to improve the timeliness, predictability, and transparency of the federal environmental review and authorization process for covered infrastructure projects.)

New Energy Landscape

It is imperative for private and public sector leaders to “plug in” to the energy transition. The landscape is varied and evolving rapidly. Opportunities abound for both business and community in the near-term (construction of energy projects) and the long-term (spin-off benefits to economic development, research and development, and emerging industries such as end-of-life recycling of energy equipment).

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Business leaders must understand the pace of energy development throughout various global geographies in order to set and achieve realistic energy goals. State and local governments must develop proficiencies and policies that enable successful engagement with energy opportunities in a manner that ensures communities are an integral part of the new energy economy while maximizing positive impacts on quality of life, infrastructure, and education. The federal government must continue to streamline efforts to align the nation’s energy infrastructure with the demand for rapid green energy development.

The energy transition is well underway; through increased focus on responsibly shortening regulatory timelines (local, state, and federal) and improving communication (including disproving misinformation), we can achieve the best outcomes for our businesses, communities, and the environment.

Everett is the Founder of Corsa Strategies, which provides site selection and incentive advisory services across North America as well as leadership in renewable energy policy. He has nearly 15 years of experience working at the intersection of the public and private sectors. Everett is a Certified Economic Developer (CEcD) accredited by the International Economic Development Council and a graduate of the University of Oklahoma’s Economic Development Institute. He writes and speaks nationally on site selection, real estate, and economic development.

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