The River Region’s energy industry goes beyond generating the power that runs our lives and businesses, serving as a conductor of increased connection and charging up our economic development efforts.
Walking into a room, flipping a wall switch and instantly being greeted by a flood of light is a daily occurrence for most of us. We never expect that the result of our instinctive reaction to dark followed by a minuscule, muscle-memory movement will ever be any different. We take our ready and lightning-fast supply of electricity for granted. It’s the same when our gas stove gives us a blue flame in response to a simple knob twist. Or when reliable warm water flows free from the faucet. In today’s world, the energy that powers countless facets of our lives stays in the background; we only think about it when it’s gone.
Leslie Sanders, Vice President of Alabama Power’s Southern Division, thinks about it every day. “We take very seriously our mission to serve every customer safely, reliably and at the best price possible,” she said. “That’s why system improvements that can minimize any outage — were it to occur — are our ongoing initiatives.”
Her counterparts at other energy utilities have the same thoughts at the top of their minds. Horace Horn, Vice President of External Affairs at PowerSouth, echoed Sanders. “We’ve been heavily involved in a lot of new infrastructure in Montgomery, keeping up with the growth,” he said. “We pretty consistently have projects going on across the River Region to ensure we keep up-to-date on power delivery,” he said.
ECONOMIC DEVELOPMENT DRIVERS
Yet “keeping the lights on” is not their sole focus. These companies contribute more than the products they generate and distribute; they’re all key players in our area’s quest to bring new business here and also aid in supporting the expansions of companies already here, creating jobs and building our tax base, as Gary Harrison, CEO/General Manager of Dixie Electric Cooperative explained.
“One of the most obvious benefits we [the energy industry] offer is job creation. We not only create jobs through our own employment opportunities, but also through economic development efforts,” he said. “By consistently maintaining system reliability levels above 99 percent and keeping rates economical, we help make it appealing for commercial businesses and industrial manufacturers to locate in our area, which creates even more jobs.”
Fred Clark, President and CEO of Alabama Municipal Electric Authority, agreed. “Electric utilities are foundational for our community and all communities as they relate to economic development,” he said. “We provide a low-cost reliable resource that invites industry to locate here and allows it to sustain itself; we are a critical infrastructure element.”
Horn pointed to recent economic development efforts — and wins — that PowerSouth played a part in. “We’ve been very involved in the water project coming to Montgomery and, along with many others, we were majorly involved with the work to bring the F-35 jet to Montgomery,” he said.
Southeast Gas has also been instrumental in boosting the area economy, as CEO Greg Henderson explained. “The utility providers often work collaboratively to create a strong appeal for industries hoping to locate in the region,” he said. “In particular, Southeast Gas and other energy providers recognize the benefit of a strong community and consider that when offering incentive packages for potential new industry, as well as existing industry.”
Alabama Power’s massive mega-watt role in the River Region’s economic development is common knowledge, and Sanders outlined why that will never change. “We work hard to partner to bring business to the area because we know that every business, large or small, that decides to locate here becomes an opportunity for someone,” she said. “Perhaps it brings a new job, a better-paying job, a new skill, a new technology, and the benefits just continue to expand. Related to this, our mission also includes focusing on the K-12 education system and working on entertainment and quality of life projects for this area.”
And while gas and electric companies have been and remain competitors, according to Henderson, pure motives prevail when it comes to enhancing prosperity in our community. “Now more than any time in the past 20 years, the energy industry is working together on behalf of communities,” he said. “Collaboration is key, and from economic development and industrial recruitment to energy efficiency programs and community support, we are trending toward ways to strengthen and grow the River Region and Alabama together.”
CHANGES & CHALLENGES
Our utilities’ ability to deliver the energy we need and want has improved greatly through the decades, and today, technology is bringing benefits like smart and automated metering. “This allows consumers to instantaneously see what their energy use is, and if needed, make adjustments for energy conservation,” said Clark. “This has been deployed and will be deployed further, giving consumers more and more knowledge.” Usage monitoring also helps consumers notice variances that could be indicative of an issue with their systems and appliances. Automated meter reading has streamlined operational processes, too, allowing utilities like Dixie Electric to offer options like prepaid electric service.
Southeast Gas makes use of new metering tech as well and also heavily relies on technology, including ultrasound, to track and trace gas pipelines to prevent damage, plus methane-detection systems to identify leaks before an accident occurs.
Other advances have put electricity on wheels, as the number of electric cars on the road continues to accelerate. This move is a direction all electric utilities are watching. “It’s causing an increase in the installation of charging stations,” Harrison said. “It will be interesting to see how this trend moves forward in the future.”
Clark noted that expansion in this area is a “when,” not an “if” proposition. “Electric vehicles are coming, and they will be part of our future,” he said. “They’ll reduce emissions and be economical resources for our communities. The real question is timing.” Clark believes recent developments will bring more growth sooner rather than later. “The cost of electric cars is decreasing, and the battery charges are lasting longer,” he said.
While most evolution in the industry has been positive, Harrison pointed to a challenge: changing regulations. “When our power supplier is faced with new regulations pertaining to generation sources, we also have to consider the economic impact of these changes on our cost of providing service,” he said. “This means finding a balanced approach that will allow us to avoid or minimize rate increases to our members.”
FOOT ON THE GAS
One major shift in the electric energy industry is the root source of the power it provides. Once primarily coal-fired, today’s power plants have moved to a different fuel mix. “Twenty years ago, we used 75 percent coal, and that has changed dramatically,” said Horn. “Most new generation is now natural gas.” Clark noted that AMEA’s power generation is now about 35 percent coal, and by 2026, it won’t have any coal generation in its fleet of resources.
The switch has largely been driven by natural gas’ greater cost effectiveness, a plus that has pushed the industry to be, according to Horn, currently “very dependent” on natural gas. While being so tied to one fuel could be an issue, he believes the industry is coping well.
The continual decline over the last 20-plus years in the cost of natural gas is an obvious plus for natural gas companies like Southeast Gas, and is primarily due to ease of access. “In the late 1990s and early 2000s, access to natural gas was limited primarily to traditional drilling resources, which made pricing of the commodity strongly dependent on weather and other external conditions. As an example, hurricanes during that time greatly impacted access to natural gas and drove the price to unprecedented highs,” Henderson said. “Since that time, technology has advanced, and access to natural gas from multiple sources is plentiful.”
Another industry challenge is also related to costs, notably their rise. “Everything we build can be expensive: new lines, new substations and more. We have to keep up with these things, and technology can help us, but new technology is expensive too, so it is now a large part of our budget,” Horn said. The expenditures that are necessary to continue business require a lot of capital. “So, we have to stay financially stable and strong,” he said. The good news? PowerSouth is, and Horn says prosperity is on the horizon for the sector overall. “There will always be changes and challenges, but I still see a bright and comfortable future for the entire industry,” he said.
COVID-19 IMPACTS
COVID-19, a challenge that very few saw coming, has changed the complexion and outlook of businesses across the state, which in turn affects — and is affected by — the energy and utility industry. “With the closures of businesses, there has been an impact on our revenue because we’ve not been selling energy to those places,” Clark said. “What this shortfall really does, how big it is, is still somewhat unknown at this point.”
Henderson is seeing similar losses and for the same reasons; right now, Southeast Gas is anticipating a direct impact to its revenues for the year. “We expect this amount to grow,” he said.
At the same time, during the “safer at home” and “stay at home” periods in March, April and early May, residential energy use rose, according to Clark. Ditto for Southeast Gas. “Our residential accounts in collections have risen,” Henderson said. Aware of the financial crunch this may put some residential customers in, thanks to virus-related job losses, Southeast Gas waived late fees and suspended disconnections for non-pay customers for a limited amount of time.
While Clark was quick to say that this uptick did not make up for the commercial and industrial load reduction, he remains optimistic about recovery in the wake of the pandemic. “I believe that things are improving and will continue to improve,” he said. “I hope our hot weather drives up revenues and kills the virus.”
Sanders is looking on the sunny side too. “I am confident we’ll all bounce back to the economic growth we enjoyed prior to the pandemic,” she said. “A reality, however, is that many businesses and employees need help. Our collective challenge will be to ensure businesses not only survive but are in a position to thrive when the economy fully reopens.”
Harrison shared similar sentiments. “With so many individuals out of work, and some businesses shutting down, we will be faced with many challenges to help our members as they work to recover financially from this pandemic,” he said.
Additionally, Sanders called for her industry and the community at large to pay close attention to critical needs the virus highlighted so we are better prepared for future problems. “We must be focused on things that will look different after the pandemic,” she said. “Connectivity has become a priority for every sector of our community, especially on the educational front.”
Horn agreed. “There’s still some uncertainty lingering from COVID-19, but our emphasis on keeping our workers safe then continues now,” he said. “At the end of the day, they keep the power flowing.”
Sanders also touted the workers who perform Alabama Power’s necessary functions as she stressed that commitment to community is an energy source that can’t be tapped out. “Our employees take great pride in providing reliable electric service, and our company has always been responsive to community needs,” she said. “We’ve always been a partner in the area of economic growth. We’ve always worked to prevent outages and to minimize the duration if one were to occur. In my time, the technology has changed, but our goals and objectives remain the same.”
UPDATE: STATE OF THE INDUSTRY
“The state of the natural gas industry is strong, and the estimated future supply of domestically produced natural gas is enough to support America’s diverse energy needs for more than a century. From our research, we know that two very important things to consumers are the importance of choice and the ability to save energy and money. In Alabama, we’re continuing to look at ways to provide safe, reliable and efficient energy to new communities and industries.” – Brian Davis, PE, Regional Manager, Spire
“The natural gas industry is strong and stable, with plentiful supply, historically low wholesale prices and demand for the fuel continuing to grow. Technology is advancing, and the natural gas industry is positioned to be part of balanced energy solutions to reduce carbon emissions while still protecting consumer choice for heating and cooking.” – Greg Henderson, CEO of Southeast Gas
“The industry is well-positioned to meet the future demands of a rapidly changing economy in Montgomery. While addressing short-term needs, our company's leadership is also thinking beyond just the next few years to ensure we are investing in the people and technology to meet those future demands.” – Leslie Sanders, Vice President of Alabama Power’s Southern Division
“I would say that overall, our industry is strong. Obviously, electricity is a commodity that people depend on every second of the day, so there will always be a need for economical, reliable energy.” – Gary Harrison, CEO/General Manager of Dixie Electric Cooperative
“Clearly our industry is very strong, we have resources to meet the demand. The South, I think, is still poised to be the real growth area of the country, so we have great opportunities for additional growth here and that will fuel our [energy industry] growth and prosperity.” – Fred Clark, President and CEO of Alabama Municipal Electric Authority
“PowerSouth is a very strong company; our business is stable. And we feel very good about the future. I think the same probably applies to others too.” – Horace Horn, Vice President of External Affairs at PowerSouth
HERE & NOW: NOTABLE PROJECTS
Alabama Power has proven a powerful partner with the City of Montgomery, working with city leaders to create a brighter future through the Smart City and Innovation District initiatives. “Working closely with the City of Montgomery, we are continuing to replace all city lights with brighter, more efficient LED lighting,” said Leslie Sanders, Vice President of Alabama Power’s Southern Division. “That project should be completed early next year.”
Other aspects have included the increased installation of fiber, as Sanders explained. “Excess fiber is now being used in partnership with the City of Montgomery and Montgomery Chamber of Commerce to bring a number of Smart City offerings to the downtown area,” she said. “We’re also expanding to meet the needs of our military partners and contractors. The new high-tech economy booming in Montgomery is a direct result of the faster, more secure, opportunities afforded by fiber and the phenomenal team that the City, County and Chamber put together.”
Sanders elaborated on the long-term impacts of these efforts. “The goals are to enhance digital City and County services to improve overall quality of life, leverage data to spur economic development, enhance telemedicine capabilities and expand extracurricular STEM offerings for Montgomery students,” she said.
RIVER REGION RISING UP COVID-19 RESPONSE
“COVID-19 has truly changed all of our lives. Within just a three-week period, many businesses were asked to close, school kids all became involved in distance learning, social gatherings became online chats and virtual meetings, and the list goes on. As a member of this community, I am so proud of the way we all have responded. We’ve got remarkable healthcare heroes working on the front-lines, first responders, including utility workers and those in the Department of Human Resources, working through trying times to keep us all safe. We’ve seen businesses altering their operations, but still finding creative ways to serve the customer and keep people employed. We’ve got government leaders working to know and address needs, and the not-for-profit community helping to meet whatever need might arise. Hopefully when this is published, we’ll be back to ‘normal.’ What I hope we never lose, however, is that problem-solving spirit that has embraced our entire community over the past month.” – Leslie Sanders, Vice President of Alabama Power’s Southern Division, commenting in April 2020
SMALL CHANGE CAN SAVE BIG$$
Switching to more energy efficient LED lighting in your office and other facilities can equal major savings on your utility bills. We asked Robert Jones, Owner of LED Solutions, how and why and asked former Chamber Chairman and State Farm Agent Willie Durham how working with Jones’ company has reduced his business’ energy costs.
WHAT DOES LED SOLUTIONS OFFER?
Jones: We are a “turn key” energy company offering investment-grade energy audits, savings assessments and lighting service contracts that allow your energy savings to pay for your lighting upgrade.
HOW DOES USING YOUR SERVICES BENEFIT A BUSINESS?
Jones: There is zero capital investment, zero maintenance and zero risk. We guarantee the savings in an off-balance-sheet transaction.
HOW MUCH CAN A BUSINESS TYPICALLY SAVE ON ENERGY COSTS WHEN THEY SWITCH TO LED AND WHY SHOULD THEY USE YOUR COMPANY TO DO IT?
Jones: A good rule to calculate for most facilities: HVAC is 60 percent of your total power bill. We reduce the remaining 40 percent by 70 percent. For example, if your monthly power bill is $5000, $3000 is for HVAC, and we would reduce the remaining $2000 to $600, saving your company $1,400 per month.
WHEN DID YOU MAKE USE OF LED SOLUTIONS SERVICES?
Durham: October 2019. The company provided a proposal to retro fit all fixtures throughout my office.
WHAT BENEFITS AND SAVINGS HAVE YOU SEEN SO FAR?
Durham: The proposal was to reduce my energy cost by approximately 68 percent annually. Also, it would reduce the amount of heat being transmitted by current lights as well as provide brighter/cleaner lighting for my office. It did all of that, and my initial cost will be recouped within an 18-month period.
POWERING OUR AIR POWER LEADER
Since the late 1990s, in a partnership with Central Alabama Electric Cooperative called Cooperative Utility Services, LLS, Dixie Electric Cooperative has been operating and maintaining the electric systems on Maxwell-Gunter Air Force Base. “When the Air Force announced their plan to privatize the utilities on their installations, we successfully bid on the opportunity, and were ultimately awarded a 50-year utility services contract,” said Gary Harrison, CEO/General Manager of Dixie Electric Cooperative. “Since the military plays such a vital role in our community, we felt it was important for us to support this initiative by the Air Force that allowed the installation commanders to focus on their core defense missions and functions, rather than being concerned about repairs and upgrades to utility systems.”
FOR THE FUTURE: SUSTAINABLE ENERGY
As increased emphasis is put on sustainability, Montgomery-based HCS Group has specialized in clean, renewable energy and is partnering with other entities to bring more solar power to Alabama. The company is currently working with the Alabama Power Company, Office of Energy Initiatives (OEI), Mobile District Corp of Engineers and the Anniston Army Depot on a new microgrid installation at the Depot that includes a 7.5 megawatt natural gas power plant and connecting a 3.7 megawatt solar energy farm.
The company has already completed similar projects, assisting Coronal Energy in performing the initial programming, planning and concept designs for five Southern Company Solar Centers, including one in Alabama.
HCS Group also puts its expertise to work beyond U.S. borders, including projects with USAID and TANESCO (the power utility of Tanzania) to modernize and provide more efficient and resilient microgrid installations by adding a solar component and energy storage into 18 existing microgrids. “We’ve developed a niche in the energy sector market worldwide creating cleaner and resilient energy for mission critical assets, economic stability and assisting third-world countries in establishing and sustaining a better quality of life,” said President and CEO Kent Hornsby.
Back here at home, Alabama Municipal Electric Authority is working in partnership with Lightsource BP on an 800-acre utility-scale solar project in south Montgomery County that will supply 100 megawatts, making it the largest solar power project in central and south Alabama once complete. AMEA has invested $125 million in the project, and Fred Clark, President and CEO of Alabama Municipal Electric Authority, explained why. “A few years ago, we created solar research parks, small sites where we could study the effectiveness and efficiency of solar power, with the very first one being built adjacent to our headquarters in Montgomery,” he said. “We spent $1 million and now have 10 with two more to come. They’ve taught us a lot, and what we’ve learned has moved us more into solar and to the Lightsource project.”
According to Clark, the decrease in the cost to construct and operate large-scale solar facilities coupled with federal subsidies are making solar competitive with coal and natural gas as a fuel source. And it’s the renewable fuel that makes the most sense for our region. “In some areas of the country, wind generation is big, but not here,” he said. “In the South, solar is where the big growth will be.” AMEA’s solar facility will be in service and conducting energy in 2023.
Horace Horn, Vice President of External Affairs at PowerSouth, noted the industry’s overall move toward more sustainability. “Industry-wide, there is a lot of pressure for all of us to take a harder look at renewable energy sources like solar, wind and bio mass,” he said. “We have invested in some solar recently, and that’s a new endeavor for us.” He stressed that PowerSouth is carefully weighing and examining all aspects of its decisions on the issue. “We are taking a hard look at all of it,” he said. “When it fits in our business plan and makes sense, then we are moving into those things. We aren’t doing it just because it’s the popular thing to do.”
Dixie Electric is also continually evaluating renewable resources. “While we already have some renewable resources in our generation mix,” said Gary Harrison, CEO/General Manager of Dixie Electric Cooperative, “we continue to monitor improvements in cost and technology to determine additional ways we can incorporate more renewables into our portfolio.”
The push to “get greener” is fueling some specific challenges for natural gas companies, though. This segment of the energy industry is facing “forced electrification.” “Many cities and towns across the country are passing ordinances that require newly built businesses and homes to use only electric appliances,” Greg Henderson, CEO of Southeast Gas, said. He stressed that the use of natural gas and reduction in greenhouse gas emissions are not mutually exclusive. “There are ways these reductions may be achieved through natural gas solutions, as well, and without increasing energy costs for most households.” He highlighted options including expanded energy efficiency programs, the advancement of highly efficient natural gas appliances and renewable sources of supply. “These can all play an important part in the clean energy mix,” he said. Balanced energy strategies that include natural gas, as well as electricity, wind and solar, as well as other sources, allow the entire energy industry to put our communities first.”
