Community
Power Sources

Look who’s coming to town: Partnerships bring in big business

Public power utilities work to serve their communities. One way to help communities flourish is to draw in big corporations. Corporations bring jobs during construction, boost jobs during operations, and provide a large, steady electric load to the utilities — a win for all involved.

Drawing corporations into a town is a team effort. Attracting and retaining big corporations involves creating a desirable environment, which includes business-friendly taxes and regulations, and also meeting specific business needs and community characteristics. Particularly in the Midwest, corporations are looking for new locations for data centers and homing in on areas with low energy rates, renewable energy options, energy incentives, and welcoming communities.

To attract big business and improve their local economies, utilities team up with state and local governments and other key players. Here are a few ways public power utilities are working to draw businesses to their communities.

Options for competitive renewable rates

Recognizing that many major corporations aim to use 100 percent renewables in the future, the Omaha Public Power District in Nebraska recently launched a new rate program that allows qualifying companies to pick any level of renewable energy they wish. The rate program, Rate 261M, is an extension of the already established Rate 261 — a high-voltage service level where the energy is priced on an hourly basis by the Southwest Power Pool.

“We’re part of the Southwest Power Pool, so that market index is their market price, and companies can have their renewable asset in the market,” says Tim O’Brien, OPPD’s director of economic development and external relations. “If wind or solar is $20 in the market and the market [index] is $20, there’s a net wash on the cost of their energy. They can hedge their consumption needs by using the market renewable source.”

To qualify, a company must require at least 20 megawatts of demand for 161-kilovolt service and 200 MW of demand for 345-kV service. The customer also must own or acquire its own substation. OPPD manages the process and provides fully integrated service for qualifying customers.

This rate structure makes OPPD highly competitive when it comes to bringing in big business.

261M is the result of a long-term effort between OPPD, the Omaha Chamber of Commerce, and local government officials to attract large corporations to the area and grow the economy. The effort aimed to create a strong tax and political environment that’s business friendly.

“We wanted to know what bleeding-edge companies are doing and build a solution to help them do that,” said O’Brien. “It was a true definition of partnership and understanding.”

The Omaha area already has big names, such as Yahoo, Fidelity Investments, and Travelers Insurance. Working with these companies has allowed OPPD to learn about the various needs of data centers and large corporations.

OPPD worked with the city to develop a master plan for an area ideal for a data center by building out zoning, water, and sewer infrastructure. When OPPD saw that Facebook was considering opening a new data center, the team was able to pitch a tailored plan and showcase the area’s benefits to the social media giant.

Facebook chose to build its data center, which is expected to be online by 2020, in Papillion, Nebraska. Facebook announced the new project in April and broke ground shortly thereafter. OPPD is moving quickly to expand a substation and install all necessary infrastructure to meet the deadline.

The data center expects to bring hundreds of millions of dollars in its lifespan and to provide 1,000 construction jobs in the Omaha area right now. It also will provide a large, steady power load for OPPD.

“Facebook is the project we always wanted. They are one of the biggest corporations in the country and a wonderful corporate citizen,” said O’Brien. “This project happened because of a partnership with Facebook, the community, and the state of Nebraska.”

Giving companies room to grow

In 2013, the Salt River Project in Arizona was contacted by a site selector working for a client interested in operating in the area. The client was looking for a site that had ample space, adequate transmission capacity, and a qualified local workforce.

SRP worked with the city of Mesa, the Arizona Commerce Authority, and Rosendin Engineering to ensure the site would fit the client’s needs.

The client turned out to be Apple — and by late 2014, an agreement was signed to build the Apple iCloud Command Center in Mesa, Arizona.

Apple chose Mesa because the community was able to show that it could meet all the requirements. The site was formerly owned by a clean-tech firm, which resulted in plenty of space for Apple to operate and offered room to expand the existing substation infrastructure.

Beyond the jobs and economic boost the command center will bring to the area, Apple and SRP developed a plan to add renewable energy to SRP’s system in a way that benefits Apple and residential customers alike. Apple is building a 50-MW photovoltaic solar power plant located east of Mesa in Florence, Arizona. Power from the plant will be delivered to SRP’s transmission system using an onsite substation, and SRP will build a substation to connect Apple’s substation at the solar facility to SRP’s transmission system.

SRP will purchase power generated from the solar plant at a wholesale market rate. That power will feed directly into SRP’s grid — which also provides power to Apple.

“All SRP customers benefit from the addition of renewable energy on the system,” said Dean Duncan, senior director of strategic planning for SRP. “[Customers] benefit from the economic boost of new jobs and the environmental benefits of renewable energy … and SRP customers did not pay for any of the project.”

Combining goals, aligning business

With an interest in capturing carbon from fossil units, the Nebraska Public Power District was looking for ways to expand its energy portfolio. It wasn’t long before NPPD connected with Monolith Materials, which manufactures carbon black — an ingredient in common products such as tires, batteries, rubber, and plastics.

To make carbon black, Monolith Materials uses a high-temperature process to disassociate the natural gas, leaving hydrogen as a byproduct. “Monolith wanted to use hydrogen in a way that would provide economic and environmental benefit, so they were looking for a utility with a coal-fired plant interested in doing that,” said Tom Kent, NPPD’s vice president and chief operating officer. “From their standpoint, it was an opportunity to do something positive.”

Although NPPD entered Monolith’s location selection process late, the utility quickly rose to the top because of its diverse energy mix and competitive rates. To finalize the deal — which will bring the largest industrial electric load in Nebraska — NPPD worked with the state of Nebraska and the local department of environmental quality as well as the health and economic development departments. The utility also worked with the Norris Public Power District, which will be the retail power supplier for Monolith Materials.

“During the review process, we quickly saw the environmental benefits and economic growth opportunities for the state of Nebraska,” explained John Swanson, generation strategies manager for NPPD. “We kept waiting for the shoe to fall, to figure out what could be wrong with the situation. In the end, it was sound environmentally, economically, and in regard to benefits for the state.”

NPPD will use the hydrogen byproduct — which produces almost zero greenhouse gas emissions — to replace coal at its Sheldon Station Unit 2 in Hallam, Nebraska.

Now that the deal is complete, NPPD is working to alter Sheldon Station to make it able to produce hydrogen. NPPD will need to rebuild and expand the boiler, changing it from a coal-fired boiler to a hydrogen-fired boiler.

When the transition is complete and Monolith is up and running, Sheldon Station Unit 2 will produce 2,125 MW of nominal hydrogen — the same amount of energy produced when it was a coal-fired plant — and will result in more than 60 percent of NPPD’s generation being carbon-free. All hydrogen energy will go directly into the electric grid.

Monolith is building a facility, Olive Creek 1, less than a mile from the Sheldon Station, and its facility will be connected to NPPD’s station using a hydrogen pipe and control system. Olive Creek 1 is expected to go live in 2018 and create 30 to 50 new full-time jobs. In 2021, Monolith is expected to complete a second facility, Olive Creek 2, which will create another 50 full-time jobs. Monolith also will build its headquarters in Lincoln, Nebraska, just 20 miles north of Hallam, creating more jobs.

“Monolith could have put their own generator in to burn their own hydrogen; that’s the typical co-gen opportunity,” said Kent. “But they wanted to focus on their core business, which is creating carbon black. They aren’t good at generating electricity, and we aren’t good at producing carbon black, so they wanted a partner.”

Incentives to expand

Competition is fierce to attract big corporations to communities across the United States. When determining where to expand, corporations consider electric costs, renewable energy sources, the labor force, and development sites available. Communities that want to attract these businesses must offer top value in many — if not all — of these aspects.

After losing a few projects that would have brought big names to its community, the Indiana Municipal Power Agency decided to make a change.

In early 2017, IMPA launched the Economic Development Rider for its 61 communities in Indiana and Ohio. The rider aims to provide communities and local economic development officials with an incentive to draw in new companies, as well as retain already established companies and encourage them to expand.

The Economic Development Rider provides a five-year discount on electric rates for qualifying customers. In the first year, companies can receive a 20 percent discount on their electric rate, followed by a 15 percent discount in the second year, a 10 percent discount in the third and fourth years, and a 5 percent discount in the fifth year.

To qualify, companies must meet two criteria: a $1 million investment at one location and 1 MW of new load from that location. The discount applies to companies interested in newly investing in the area as well as companies interested in expanding.

“When we looked into what competitors were doing, we wanted to offer something to compete with that. When companies evaluate the short- and long-term benefits of operating in our area, they can see how we would be competitive,” said Bryan Brackemyre, IMPA’s director of marketing and economic development. “We rely on our competitive rates, and, in the long term, that’s a great option for investing in our community too.”

The effort is relatively new, but IMPA has received a lot of support from stakeholders in its communities. And as the rate discount only impacts the wholesale side of operations, not utility revenue, member utilities have also reacted positively.

“The best-case scenario from the Economic Development Rider is to see a continued influx into our communities. Eligible companies would be in the community for the long haul,” said Brackemyre. “When they are investing that much money and have equipment requiring that load, they will be major players in the community for years to come.”

IMPA launching the initiative is just the first step in attracting new business. Now, it’s up to member utilities and their local governments to put the incentive to work.