Renewable Energy Companies Prepare for Rising Tide of Demand
Renewable energy companies considering investment locations should look for areas that are supportive of the industry in terms of an RPS, site readiness, and the presence of suppliers.
Ed McCallum, Senior Principal, McCallum Sweeney Consulting (April 2012)
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The perception that renewable energy is not cost-effective is true for some methods, but the calculations say otherwise for others. Simply stated, if local policymakers do not understand the issues and do not support renewable energy, then manufacturers probably should avoid locating there.
Supply Chain at Home
The majority of renewable energy components coming from outside the United States makes a lot of sense if you think about it. The unreliability of the U.S. domestic renewable energy policies makes it almost impossible for suppliers, particularly those that involve casting and machining, to commit to a long-term strategy in the United States, even though many of the OEMs have. Typically, the capital expense for these industries is equal to or greater than those of the OEMs they supply. Making a long-term investment into the states is only required when there is domestic competition, which unfortunately currently does not exist.
It is ironic that many of the displaced workers in the automotive industry, as well as several of the distressed suppliers, could provide the skills and expertise to supply at least some of the components for this industry. In fact, where the automotive suppliers are currently located reflects closely where the renewable energy supplier base would most likely be situated. Unfortunately, U.S. domestic policies regarding not only renewable energy, but also local content requirements and trade balance, are working against us - at least in the short term. It is our belief that eventually this will be sorted out, and there will be renewed interest for investment into the United States. When this occurs, look to the communities and states that have ready sites, programs, and training to support your needs.
In addition to renewable energy production, make sure that there is an appreciation and understanding of other opportunities, such as smart grid technology. One in particular that we have had recent experience with is energy storage technology. It is an area that has been overlooked, and judging from the lukewarm response we received from several candidate states, way underappreciated. Nevertheless, it shows a tremendous amount of promise for the power grid - with or without renewable energy.
Solving the energy storage problem would greatly enhance the cost-effectiveness and efficiency of renewable energy technologies. Most utilities, if given the choice of building additional base load power generation capacity or supplemental power augmentation, would reluctantly consider supplemental power augmentation with peaker units, pump storage facilities, or other power sources during peak energy demand. Why are they reluctant? Because both base- and peak-load power generation are very, very expensive. In contrast, spending hundreds of millions of dollars for a peak demand power source compared to tens of millions for energy storage is not a difficult decision - especially if the storage solution is completely scalable, reliable, and efficient. States and communities that understand the whole spectrum of renewable energy will naturally set themselves apart from the competition when a company is looking to select a location for their new facility.
Recognizing the Opportunity
If you are responsible for selecting the location of the next manufacturing plant for your company, consider the following advice. Inquire into the willingness and interest of elected officials to create an RPS if the state does not already have one. If the state does have a RPS, ensure that elected officials are up to date on the industry and why it is important to either create, maintain, or strengthen the RPS. If they do not understand and support your industry now, what is the probability that they will in the future?
Second, make sure that the communities you investigate have shovel-ready sites or buildings that are free of problematic schedule constraints. You cannot meet deadlines or deliver product in a timely manner if you have no idea when permits can be obtained or when infrastructure will be brought to your site.
Third, investigate the existing supply chain and ascertain why suppliers are either present or absent. A comprehensive incentive policy that supports the entire industry is important to entice suppliers to locate and create clusters. These are important items to consider for a renewable energy company looking to invest capital in a new location and are fundamental building blocks to building a successful enterprise. Once these factors have been addressed, the rest is just normal site selection due diligence.