Area Development
Corporations and site selection teams consider a wide diversity of criteria when evaluating locations for investment. Site accessibility, labor market attributes, tax climate, operational requirements, utilities and physical infrastructure, and incentives are all critical items to analyze in making site selection decisions. Increasingly, energy availability, cost, and reliability are becoming high priority items for today's emerging and growth industries.

In 2007, in Area Development's Corporate Survey, energy availability and costs rose to third among priority site selection factors, behind only highway accessibility and labor costs. Some 89 percent of surveyed corporations ranked energy factors as "important" or "very important." This speaks to the heightened energy sensitivity of emerging industries, as well as some pervasive trends like rising energy costs and limitations of energy availability.

The rise of this issue in the corporate survey is significant for a number of reasons:

Corporate Survey 2007
Combined Ratings* of 2007 Factors
Site Selection Factors                   2007
1. Highway accessibility 96.9
2. Labor costs 92.3
3. Energy availability and costs 89.0
4. Availability of skilled labor 88.7
5. Occupancy or construction costs 88.2
6. Available land 85.4
7. Corporate tax rate 83.8
8. State and local incentives 83.4
9. Environmental regulations 83.2
10. Tax Exemptions 82.8
*All figures are percentages and are the total of "very important" and "important" ratings of the Area Development Corporate Survey and are rounded to the nearest tenth of a percent.
• Energy consumers whose recurring costs have a significant energy component will place a high emphasis on energy factors.
• Energy is a primary driver of the economy. Energy concerns of general consumers are paralleled by the rising importance of energy in national policy. Renewable energy portfolio standards (RPS), energy security, and potential pressure on carbon emissions are all national issues that will decide how we generate and use energy in the future.
• There is increasing energy awareness across all sectors. Industries as diverse as call centers, financial services, warehousing, wholesalers, farming, and logistics organizations are all paying more attention to energy and energy efficiency.
• Utility companies (investor and non-investor owned) are generation and distribution constrained. Nationally, this business is facing rising commodity prices, increased regulation, and unseen demand. Energy security is critical in this environment. John Bradley, Senior VP at the TVA, recently observed, "Rates are critical, but recently, availability and reliability are what people are really concerned about."

 Increasing Prices and Demand
From 2000 to 2007 the average price of industrial electricity increased 3-4 percent per year, and there is little reason to expect that this trend won't continue in the near future. While recent national generation capacity has remained ahead of demand, the margins of this excess are forecast by the EIA (Energy Information Administration) to decline from 16 percent in 2006 to 13 percent in 2011. While these U.S. averages seem to suggest that excess power levels are diminishing, on average there is still plenty of power predicted to be available. Averages, however, do not account for nuances in local conditions.

Another trend that no one disputes is the increase in energy demand. Despite trends favoring conservation and energy efficiency across all sectors, energy use will continue to rise, driven primarily by residential and commercial consumers, and also by increasing industrial loads. As the cost of building new facilities and environmental concerns continues to rise, there is considerable pressure to shrink the footprint of new industrial, commercial, and residential facilities. The graph on page 50 represents the increase and the scale of associated challenges of higher energy density facilities.

At CH2M HILL we see rapid growth in the photovoltaics, electronics, and data center markets. These sectors all share significant reliance on reliable, available, and cheap power. Across these industries, factors like automation, speed to market, public image, power quality, reliability, and redundancy are forcing site selectors to be more energetic in understanding and embracing energy siting criteria.

Today's design technology for such energy-intensive facilities is capable of delivering unprecedented energy efficiency. Unfortunately, many owners and developers undertake the development of such projects without seeking and implementing the latest energy-reduction strategies, which are capable of saving millions of dollars in long-term operating costs while benefiting the environment in the process.

Reliability and Other Concerns
In photovoltaics, power requirements for a progressive large-scale manufacturing operation can range from 10 to 100 MW while operating around the clock. Phased over only a few years, these factories are focused on speed-to-market and rapid scale up. If possible, they seek to compress or avoid typically long lead times for things like electrical gear by looking to existing buildings or sites that are power-ready. A critical concern, however, is that converting existing buildings to an advanced technology function as specialized as photovoltaics manufacturing poses many cost and performance risks that could cancel out any potential schedule advantages achievable by choosing an existing building. The decision to convert an existing building versus building a new one must be carefully made, starting with strong confidence that the design approach for the building conversion benefits from the most advanced power-reducing strategies.

Power reliability is important, but it does not typically dominate decision-making in photovoltaic manufacturing. Electricity can represent only up to 5 percent of the cost of goods sold depending on the manufacturing technology, but every opportunity to reduce costs is critical in the increasingly competitive PV industry.

The electronics industry requires a deep network of suppliers and partners, and has grown up around the United States in clusters that are accustomed to dealing with the necessary exotic gasses and chemicals, as well as power demands up to the 40 MW scale ramped up over a few years. These companies can sometimes follow automotive manufacturing because of some overlap in the support base, but locating electronics manufacturing beyond established support regions is difficult. Tight and elaborate environmental controls and complex, very high-value products running 24/7 require extremely reliable power.

An hour of lost time can cost millions of dollars in lost production wafers. While control and emergency systems can be backed up to ensure safe shutdowns and control of hazardous materials, production power is reliant on the grid. Electricity price is not a priority, as it is a tiny fraction of the costs of finished product. However, a facility design that incorporates energy-saving technology is attractive nonetheless because it still represents the ability to achieve savings - savings that drop straight to the bottom line over a facility's entire operational life.

Data center site selection is driven by energy more than any other sector. While risk analysis and distance to backup facilities or related institutions are important criteria, energy (right next to telecom) is the primary concern. Electricity represents the entire operating cost (excluding depreciation), and some data centers simply cannot ever afford to "go down" due to power problems. That's why reliable, cheap power will make or break site selection decisions in this market sector. Depending on the tier level, data centers use redundancy and backup power to guard against outages, but every client insists that activation of these systems is a rare occurrence. Using multiple feeds and typically falling in the 10-30 MW range, data center clients typically want to stay away from heavy industry and even transportation hubs to minimize risk. Paradoxically, this preference can place data centers further from the ready electrical supplies they so critically need.

Changing Dynamics

Fifty years ago, chemicals, metals, pulp and paper, and other industrial operations were sited near cheap power or water because that was the only economically feasible option. For today's growing industrial groups, things are different. Better infrastructure, new technologies, and a different business environment are opening up new siting options that would have been considered impractical not too many years ago.

This changing dynamic adds a higher level of importance to site selection processes as they experience increasing pressure to include sustainability, renewable energy, and carbon footprint information in decision-making. Generally applauded, the growth of renewable power sources can make grid management more difficult. The consistency of a wind farm, for example, is not its selling point. As alternative energy sources become more widespread, renewable infrastructure will learn to adapt to industrial needs, but for now it is a concern. On-site generation is also an option for mission-critical or very large-scale processes, or where co-generation opportunities can provide access to necessary facility heat and/or cooling. If high power demand, high price of grid power, cheap land, and a sunny region intersect, options like onsite solar PV or solar thermal become potentially viable.

Scenarios such as these are exciting because they reflect the kind of challenges and opportunities that the rapidly evolving energy dynamic are bringing to bear on the site selection process. The focus on energy won't be a passing fancy. It's here to stay as energy security increasingly drives economic success for companies in many markets. More than ever it will be up to site selection professionals to carefully weigh the growing significance of energy criteria against the full range of other site selection factors to produce the most prudent location decisions.