For years, Washington state masked its high business and regulatory costs with low priced, reliable electricity — lots of it.
However, Tennessee packages low cost, reliable electricity along with a very favorable business climate to lure new billion-dollar auto industry investments.
Today, costs of electricity are more important than ever and investors want CO2-free electricity at their facilities. Hydropower fits that requirement.
As an example, Ford and SKI Innovative just announced an $11.4 billion partnership to build the next generation F-150 Lightning (all-electric pickup truck) and create three new battery factories in Kentucky and Tennessee to power it.
“Energy costs were a big consideration for the battery factories because of the immense amount of electricity they use — five times more than Ford’s typical assembly plan,” Lisa Drake, Ford’s operations chief for North America, told the Wall Street Journal (WSJ).
Despite enormous electric loads for semiconductor manufacturing, carbon-fiber production, and computer server farms, U.S. Energy Information Office data from July shows Washington still has the nation’s lowest electricity rates (10.4 cents per kilowatt hour). Tennessee is close behind at 11.26 cents.
Tennessee has long had a leg up in the area of available and affordable power, an advantage known as the Tennessee Valley Authority (TVA), established in the 1930s as a federally owned utility. Today, it’s a public power wholesale provider serving more than 150 local power companies, and customers in its area have rates lower than 70 percent of the nation.
Interestingly, TVA facilities are very diverse and customers, such as Ford, view its 19 hydroelectric dams and one pumped-storage hydroelectric plant as renewable, CO2 free electrical generation.
TVA supplements its hydroelectric dams with seven natural-gas fired, four coal-fired power and two nuclear power plants.
In Washington, by contrast, there are moves to reduce the hydro-power base by breaching the four lower Snake River Dams. Those dams can provide enough electricity for 1.87 million homes when generating at full capacity.
The state’s last coal-fired power plant in Centralia will be shuttered in 2025. TransAlta Corp. already ceased power production from the first of two coal-fired burners. Closing both plants shoots a 10 percent hole in our state’s electrical generation.
On the other hand, Tennessee leaders continue to leverage lower cost power and electricity availability to their advantage. Energy supply certainty is a big selling point and has worked for auto manufacturers and battery manufacturers planning to build massive electric car and lithium battery facilities.
Tennessee’s auto production started in 1983 when Nissan built its first American assembly line in Smyrna, which is located a half-hour’s drive southeast of Nashville. Nissan employs 11,000 people. Statewide, nearly 66,000 jobs in Tennessee are tied to motor vehicle manufacturing.
“Tennessee is emerging as a leader in a national scramble to develop electric-vehicle and battery production, as states compete to woo multibillion-dollar investments from auto companies pivoting away from the combustion engine,” according to the Wall Street Journal (WSJ).
In 2021 rankings for states with the best business climate, Tennessee moved up to second place, placing at or near the top of various rankings of business friendliness and positive climate categories, according to Area Development.com. Georgia is still number one.
Finally, in a recent Area Development report on top states for doing business, the only states outside the southeast were Indiana, Ohio and Arizona. Washington did not crack the top 20 — and that ought to be a wake-up call for state leaders that we need to improve our game and can no longer rest on low-cost electricity to bail us out.
It should also to tell us that our current energy strategy needs some serious rethinking.
Don C. Brunell is a business analyst, writer and columnist. He retired as president of the Association of Washington Business, the state’s oldest and largest business organization, and lives in Vancouver. He can be contacted at theBrunells@msn.com.