How utilities and transportation drive Arizona economic development
Flicking a switch and filling a room with light is one of the most basic expectations of modern life. If darkness persists, the culprit is likely a dead bulb, not insufficient electricity. This reliability of power is easy to take for granted, but it is essential to the daily operations of society and the economy. Even small interruptions can have significant financial impacts.
In February 2021, Texas experienced a series of severe winter storms that caused a major power crisis in the state, leaving millions of people without power. The outage led to the loss of life and ground businesses to a halt.
“It was taken for granted that utilities have to be reliable and resilient. Now it’s very much at the forefront because of what happened in Texas,” says Karla Moran, senior project manager in economic development for the Salt River Project (SRP). “I had a client tell me that they were losing $1 million per hour throughout the emergency.”
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Arizona’s well-regarded power grid is an enticement to companies that are going through the site selection process. As major industrial users, from data centers to advanced manufacturers, continue to choose Arizona, utilities are playing a vital role in the state’s continued economic development.
Three of Arizona’s major utility companies, SRP, Arizona Public Service (APS) and Tucson Electric Power (TEP), all have staff who work with companies that are considering moving to or building in the Grand Canyon State.
“We talk about the benefits of locating their businesses within our service territory from the perspective of what the entirety of the community brings, but then we home in on the unique aspects of their business as it relates to power,” explains Camila Martins-Bekat, external affairs representative at TEP. “For example, if we are working with a company that has a lot of really sensitive equipment or a high power demand, the focus is on reliability and resiliency.”
The two terms have specific meanings in the energy-generation sector. Reliability refers to the ability of customers to receive a stable flow of electrons within the appropriate voltage to their site. Hiccups in power lines can be devastating to the sensitive equipment in industrial spaces, such as manufacturing facilities and data centers.
Resiliency is the grid’s ability to function when energy demand is at its highest. In Arizona, the summer months put the most strain on the grid as temperatures push 115 degrees and air conditioners hum across the state. During the unexpected freezing conditions in Texas, the grid struggled to be resilient under immense pressure.
Kelly Patton, economic development manager at APS, says that providing outage history in areas that a business is scouting is one of many services offered by her department.
“Clients want to know if we can provide a certain number of kilowatts or megawatts within a defined timeline. We’ll run a rate analysis based on their power demand and load factors to give them their long-term cost per kilowatt-hour (kWh). That information can be put into their operational budget and the whole financial piece of it when they are looking to locate in an area,” Patton notes.
Depending on the nature of the project, economic developers at APS, SRP and TEP help companies navigate the state’s tax incentive programs. Tucson Electric Power also offers companies a specialty rider, which is similar to a rate but only for a specified time period. In TEP’s case, the rider expires after five years.
“The economic development rider provides companies an offset on their electric bill if they meet certain benchmarks related to the Quality Jobs and Quality Facilities tax incentives the Arizona Commerce Authority administers. It’s not just about the increase in load but also the quality of the jobs and the amount of capital investment the customer brings,” Martins-Bekat says.
According to Patton, riders help attract companies that make significant capital investments and create jobs in the state while increasing the tax base. Like TEP, APS has a rider that gives qualifying businesses a kWh rate reduction for up to six years. The utility also offers various reimbursements to companies that build on sites that require new infrastructure.
Electric vehicle (EV) manufacturer ElectraMeccanica conducted a year-long nationwide search to find the best place to build its first U.S.-based assembly facility and engineering technical center. After weighing a dozen or so options, the company chose Mesa. Its $35 million facility will bring approximately 500 high-tech jobs to the community. A collaborative effort between SRP and APS helped finalize the deal.
“When a client comes here, they don’t see SRP service territory and APS service territory, they see Greater Phoenix,” Moran says. “We wanted to show how this region wants to see EVs grow, so APS and SRP worked together to build some infrastructure that not just ElectraMeccanica can take advantage of, but future clients too. It’s helping advance our own goals for EVs and the environment.”
Partnerships between organizations that may seem like competitors are common to bring investment to the state. Martins-Bekat, Moran and Patton all agree that business attraction is a collective effort.
“We’re all here for the betterment of the state, our community and neighbors. As economic developers we’re competitive, but we’re also very philanthropic,” Patton explains. “We’re competitive because we believe in the companies and organizations that we work for, but we’re philanthropic in that we all have to come to the table with our piece of expertise and be able to collaborate to ensure that Arizona comes out on top.”
The relationships that power companies have with organizations such as the Greater Phoenix Economic Council and the municipalities within the utilities’ service area are critically important. After all, electricity is just
one of the infrastructure needs that companies have when moving to Arizona.
No matter what product it manufactures or service it provides, a business today is going to require access to the internet. Cox has tens of thousands of miles of physical infrastructure throughout Greater Phoenix and into Southern Arizona that facilitates a connection to the internet. The company also makes significant proactive investments in areas that have been identified as business corridors to spur expansion into the market.
“Critical telecommunications infrastructure is important for economic growth,” says Ed Aaronson, vice president of Cox Business Arizona. “We’re frequently asked by the local economic development organizations within municipalities about availability of telecommunication infrastructure in a given geography to support their efforts.”
Driving economic growth
The ability to move goods efficiently is also critical for businesses. BNSF Railway is Arizona’s largest rail service provider; it works closely with municipalities throughout the state. “In many cases, having rail is a requirement for certain industries and is a primary factor as to whether or not a company will choose a specific location for its business,” notes Lena Kent, general director of public affairs at BNSF Railway.
Kent adds that the railway has been instrumental in locating several new facilities to Arizona in recent years, including IRIS USA, a plastics manufacturing facility, and Trimaco paper products, both in Surprise. Together, these projects have created more than 200 jobs and generated
$50 million of investments.
Like railways, freeways facilitate the movement of products throughout the state and the country. Eric Anderson, executive director for the Maricopa Association of Governments (MAG), argues, “You can talk about development, broadband, utilities, water — all of which are necessary — but if you have a piece of property and you can’t get to it, it’s not worth anything. Transportation is key to access, and access is key to property values and market size.”
Anderson adds that MAG is working with the utilities as EVs continue to become more viable for business purposes as driving ranges increase and costs decrease.
“We just finished our long-range transportation plan called Momentum, which goes out to 2050,” he says. “We’re looking to the utilities because we know that vehicle fleets are going to be a much higher percentage of EVs in the future. How do we provide the charging infrastructure as the fleet electrifies in the future?”
Martins-Bekat concludes, “Economic development is a team sport. There’s no other way to do it effectively, and the efforts of our economic development partners are key to ensuring that we’re all on the same page and rowing toward the same goal.”