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Cheap power can be magnet for industries

In the economic development game, states constantly add to their portfolios of incentives to try to find a competitive advantage.

But if the comparative advantage is something that has been around for at least half a century, that’ll work too.

Moses Lake in Eastern Washington has a comparative advantage in electricity that’s cheap and plentiful.

With that electricity, Moses Lake has just landed a $100 million plant that will make carbon fibers for new cars.

German automaker BMW and composites producer SGL Group are the ones fronting the project. BMW/SGL also are taking advantage of available developable land, some tax incentives and training programs and a streamlined permitting process to get to groundbreaking as soon as June.

But electricity was the key factor that brought the consortium to Moses Lake, instead of Japan (where the raw material for the fiber is made), or Germany, where the fiber will be woven into fabric and then made into car parts and components.

Specifically, cheap Moses Lake hydropower got the officials of BMW and SGL so excited about “renewable, clean” energy that they mentioned it at a press conference in Seattle on Tuesday about the venture.

That the Columbia River hydropower system should provide the base for entire industries is a familiar story to people in the Northwest. Grand Coulee’s development as a power-and-irrigation project made Central and Eastern Washington’s huge agricultural industry possible. Cheap electricity also created the Northwest’s aluminum industry.

Agriculture still thrives, aluminum still survives in a much-diminished form, but the hydropower system, often neglected unless the conversation turns to salmon, is still paying dividends in new industries. Cheap power and some tax breaks are drawing huge server farms to towns such as Quincy and Wenatchee, for example.

The composites industry is becoming an important business in its own right after years of getting attention only in connection with other sectors.

Composite materials, and their strength and weight attributes, are an important element of the Boeing 787 story. They’re also showing up in boat-building and alternative-energy projects such as wind turbines. More applications are coming, such as the use of carbon fibers to reinforce concrete and cement.

Washington has a growing list of companies with expertise in making composite materials and products from them, including such local representatives as Toray Composites (America) Inc. at Frederickson, Strategic Composites Inc. in Pacific and Composite Solutions Corp. in Auburn.

Robert Koehler, SGL’s chief executive officer, explained why two German companies find themselves building a plant in Eastern Washington. His remarks must have gladdened the hearts of those politicians who have heard more than a few complaints about Washington’s competitiveness.

“I’m a little bit peeved that we couldn’t invest in Germany,” said Koehler, whose company operates multiple manufacturing sites in the U.S. and Canada.

“Why is this? It’s infrastructure, it’s hydropower, it’s competitive electricity costs which we can’t do in Germany. I have been accusing the German politicians left, right and center that they’re missing out on a future technology.”

BMW and SGL officials are optimistic that the Moses Lake plant will grow from the starting point of 80 jobs (not counting the 150 to 200 construction jobs). They’re not making any promises about whether their investment will lead to other companies in the composites business moving in. All of the fiber production from the Moses Lake plant is committed to BMW.

But the mere announcement will cause others to at least add Washington to the list, and being added to the list means more companies will figure out there is a composites sector to become a part of in this state.

If they, too, are coming for cheap electricity, what will they find?

Grant County’s public utility district owns and operates two Columbia River dams (Priest Rapids and Wanapum). It’s just one of the many power companies, municipal utilities and investor-owned power companies that control all or a significant portion of their electricity supply, and whose portfolios include low-cost hydropower. Those companies will be key to landing those economic-development projects for which power costs are a top consideration.

That could set up some interesting debates over how to allocate the power. Meanwhile, the region’s historic advantage in power costs could be eroded in the drive to add more expensive alternatives including wind and solar.

The BMW/SGL Group plant is a high-profile win for a state that is still smarting over Boeing’s decision to locate the second 787 final-assembly line in South Carolina rather than Everett. If economic-development officials and planners are interested in seeing more wins like BMW/SGL, they’ll get to work on a recruitment strategy for the composites sector on par with what’s being done for aerospace, clean energy and life sciences.

They’ll also make sure that the venerable hydropower system that made the BMW/SGL win possible continues to be as renewable, sustainable and affordable as the electricity that system now produces.

Bill Virgin’s column on business and economics appears Sunday in The News Tribune. He is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at bill.virgin@yahoo.com.

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