2020 Will See Utilities Play Larger Role in Economic Development

Driven by a $50B connected devices market, an increase in the use of global use of robotics on average for industrial robots per 10,000 manufacturing workers from 66 in 2015 to 85 in 2017,  Rising opportunities from electrification driven by the expansion of robotics, automation and Artificial Intelligence (AI), will drive utilities to play a larger role in economic development at the regional and state level in 2020. 

Utilities play an important role in economic development.  Utilities offer competitive base rates for large commercial and industrial rate classes, and economic development discounts for attraction, expansion and retention through investments in transmission and distribution infrastructure and adding advanced technologies to create a more reliable and resilient grids, and in solar resources, wind resources, energy storage/batteries, and/or other programs perceived by industrial customers as desirable options for environmental stewardship.  Utilities also develop specific initiatives for promoting “smart cities” including networks for coordinating operation of electric vehicles, electric vehicle charging, batteries, smart appliances, heating and cooling, street lighting, energy efficiency projects, demand response, demand side management programs, and other emerging energy optimization technologies, and assess investment in infrastructure for these offerings as well as in companies (e.g. unregulated affiliates or subsidiaries). 

For targeted, energy-intensive business, utilities will offer a reduce rate or economic development rider to retain or attract that company.  Ameren Missouri, based in St. Louis and serving 44 counties in Missouri, offers a strong example of an economic development rider designed to retain and attract energy intensive companies.  A prime method Ameren Missouri’s Smart Energy Plan, which was developed with the passage of Missouri Senate Bill 564, offers a model for state’s interested in utilizing utilities to promote economic development. Lawmakers crafted the program to encourage new and existing businesses to invest in Missouri, adding jobs and spurring economic growth in local communities throughout the state. The incentive will offer qualifying business customers an average 40 % discount from base rates over an agreement term of five years. Business eligibility is determined by specific criteria outlined in the rider EDI tariff, but, generally, these businesses must be non-retail in nature.  The new or expanding businesses must meet the following standards to be eligible for the Ameren Missouri Smart Energy Plan EDI: be receiving (or requesting) service from Ameren Missouri under Rate 3M – LGS, Rate 4M – SPS or Rate 11M – LPS, be an industrial and/or commercial facility not directly selling or providing goods and/or services to the general public; be receiving state, regional, or local economic development incentives in conjunction with its expansion/location project; must apply for the Ameren Missouri Smart Energy Plan EDI prior to a public announcement of the expansion/location project; have an average monthly demand increase of at least 300 kW and 55 % load factor; and discounted rates must be greater than Ameren Missouri’s marginal cost.  Some of the most common industries eligible for the discount are manufacturing operations, data centers, research and development operations, large-scale agriculture processing facilities and wholesale warehouse/distribution centers. Ameren Missouri’s economic development incentive is a win-win for business and residential customers alike and it offers an interesting model for other states to follow in 2020.

Utilities are central to industrial development as they often identify, assess, and improve industrial sites in the service territory, maintain up-to-date site inventory including electric and gas interconnection information (status, voltage level, redundancy, etc.), provide detailed mapping of sites, including but not limited to utility infrastructure, use drone technology and CGI to produce summary videos of key sites, establish a Site Certification Program, improve site readiness of key sites, and promote key sites.  The South Carolina Power Team’s Site Readiness Fund is another program that could be seen in other states in 2020 tied to utility site development efforts.  The South Carolina Power Team, the state’s rural electric cooperative, established a $36M Site Readiness Fund, which matches local funds to advance sites and buildings across South Carolina to make them market ready.  The South Carolina program is a smaller cousin to the Tennessee Valley Authority’s site development program which has provided nearly $524 M in tax equivalent payments in the eight states where it sells electricity or owns assets, and directly to 146 local governments where it owns power facilities.

Utilities also leverage existing key accounts for purposes of expansion and attraction, foster relationships with account managers, executives, and decision-makers, examine factors driving customer success, explore and identify new ways to create opportunities to further assist existing customers, and access information for corporate expansion planning at subsidiary and parent company levels, to promote expansion in the service territory, identify target business sectors for attraction efforts, attend target sector industry forums, foster relationships within target sector (e.g. federal, state and local trade associations), and tailor other best practices to align with target sector, and foster relationships with site consultants, corporate real estate professionals, and related outside service providers with a focus of retaining and attracting industrial customers. 

Utilities also foster relationships with state and local EDOs, elected officials, universities, and local business leaders, by offering loans for land or business development, new technology implementation, brownfield redevelopment, or other growth initiatives, matching of local funds to advance site readiness through awarding grants or sponsorships for workforce assessment, training and development, sponsoring other workforce development efforts led by key partners, and awarding grants to community EDOs or local governments to support economic development projects, studies, showcasing events, site visits, site selection outreach events.   economic development training for community partners, and related initiatives, sponsor other efforts led by key partners, e.g. training for entrepreneurs, technology implementation, and customized local initiatives. 

In addition, with the electrification growth opportunities due to automation, robotics and AI, look for more utilities to play a role in early-stage technology startup companies as does Comed with the Energy Foundry which invests venture capital in today’s most promising energy start-ups to build on alternative energy options for customers. Many utilities also place their economic development team in close proximity to key accounts/national accounts/large commercial & industrial customer service team, and place economic development team in close proximity to external affairs/public relations/legislative/community affairs team.  Finally, utilities may implement marketing campaigns focused on social media, trade shows and economic development thought leadership from their executive team. Most major power utilities operate private sector economic development organization that will play a larger role in 2020 across the United States.