The legislature met in special session last week and voted $247 million in state incentives (sweeteners) for Steel Dynamics’ new $2.5 billion recycled aluminum plant and other investments. The plant is to be built in The Golden Triangle. (Starkville-Columbus-West Point area) in Northeast Mississippi. The justification for the incentives is jobs, related investments, and other economic multiplier effects.
We’ve heard this justification before. Remember Kemper’s $7 billion failed lignite to synthetic natural gas experiment, Kior’s $76 million pine trees to diesel fantasy, Stion’s $75 million unworkable solar panels, Twin Creeks Technologies’ $24 million silicon panels bankruptcy, the infamous Beef Plant hustle, etc.
But it appears we learned something from those embarrassing fiascos. They left taxpayers on the hook while promoters and celebrity directors skated. (Remember Condoleezza Rice with Kior stock options gushing about its imaginary technology?)
This time there are strings attached to the incentives to prevent repeats. But they probably won’t be needed. This project looks real. Steel Dynamics is a real company with a successful track record with real products, technology, know-how, and skin in the game. This looks like the Toyota and Continental Tire projects.
The plant is to be located in the Golden Triangle Industrial Park where Steel Dynamics already has a steel mill. The location is significant. Why? The area is an advanced manufacturing hub with $6 billion existing investments and 6,000 jobs. It has a labor pool of 500,000 people. Mississippi State graduates 600 engineers annually. Community colleges offer advanced robotic training for companies in the area. It’s a manufacturing cluster with critical mass and flywheel growth momentum.
It has good infrastructure: interstate highway network, access to the Tennessee-Tombigbee waterway, regional airport, rail service to industrial parks, and electricity from the Tennessee Valley Authority (TVA). Reliable and affordable electricity is essential for recycling aluminum.
TVA is the most reliable and likely the cheapest source of electricity in the state for such projects. It has a diverse generation fleet and a robust transmission system to directly serve large customers.
Coincidentally, it is (lightly) regulated by the Federal Energy Regulatory Commission (FERC) – not by the Mississippi Public Service Commission which brought us Mississippi Power’s Kemper County Lignite Plant. And now brings us solar generating plants with higher cost and less reliable electricity.
TVA is essentially self-regulated. Not surprisingly, it seems to deliver more affordable more reliable electricity than other utilities in the state subject to oversight by the PSC (assisted by the Mississippi Public Utilities Staff).
There is predictable opposition to the Governor’s special session and incentives for the aluminum plant. Critics say it’s not right to provide incentives to encourage economic development while ignoring pressing human needs problems. They cite Jackson’s perpetual water plant issues, unused potential Medicaid funding, rural hospital closings, and so on. They also play the race card.
The reality is competition drives incentives. Company executives play the: “I can locate my plant in Alabama or another state” card. It’s true to a degree. But there are fewer location options if the plant requires lots of affordable reliable electricity. These options are decreasing as more electric utilities contaminate their grids with intermittent green energy (solar and wind).
So the Governor holds some cards too. Other companies with plants requiring reliable electricity will likely find the Golden Triangle attractive. Unfortunately, they are less likely to find central and south Mississippi as attractive. That’s because Entergy and Mississippi Power have monopoly service areas there. Their electricity is becoming more expensive. Entergy is adding expensive, intermittent, less reliable solar power to its grid. Mississippi Power is shutting down older plants with cheap electricity in favor of more expensive electricity from PSC face-saving remnants of the Kemper debacle.
The Governor would hold more cards if these utilities were more competitive. Mississippi is crossed by one of the country’s largest concentrations of high-capacity natural gas pipe lines. It has the potential to add almost unlimited reliable generating capacity to attract other energy intensive manufacturing plants. Many companies with such plants are fleeing Germany and other countries where mandated green energy has destroyed their economies and impoverished their citizens.
Mississippi could be a haven for these companies. Not just in the Golden Triangle. The PSC could encourage and enable the utilities it regulates to seize this opportunity. Why doesn’t it? Why does it permit and encourage those utilities to do foolish things that are good for their investor shareholders but bad for customers? And bad for the state’s economic growth.
Capital goes where it’s welcome and stays where it’s appreciated. The CEO of Steel Dynamics said: “We are eager to expand our presence in Columbus, and we appreciate the warm welcome and support that we have received from Governor Tate Reeves and Mississippi.”
Today, smart money goes where there’s reliable affordable electricity. Kudos for the Golden Triangle’s success and FERC / TVA’s contribution of cheap reliable electricity. Rotten tomatoes for the PSC / Entergy / Mississippi Power’s more expensive less reliable electricity in the rest of the state.
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