Utility Costs and Locating a New Manufacturing Facility


here are several key decision making factors when a manufacturing plant is considering a relocation or new facility expansion project.  Geographic placement is typically a driving factor, but shortly after on the list is labor availability and cost, access to transportation systems (highways, waterways) and utility availability and cost.

Utility costs can represent upwards of 30% of the annual operating budget in a manufacturing facility, which makes this a critical component of the site decision. Water, electricity, and sewer utilities are the big three to look at first.

Water – Water is used primarily for fabrication, processing, washing, cooling and transporting products.  Most manufacturing facilities can rely on the local municipal water system for their needs.  Evaluating the availability, the costs, and the water quality may be factor to look at.  Water costs vary greatly in different communities across the country and a critical evaluation of this factor is typically high on a company’s list.

Electricity – “The industrial sector accounts for approximately 31% of all energy consumption in the United States”.   This makes electricity, typically, the most prominent factor for consideration in the utilities category.  Electricity needs very greatly between different types of manufacturing.  A look at the type of equipment being used, the amount of daily electricity being consumed and the time of day where power fluctuations can occur could all be data points to consider.  The site selector can mine the data of various communities under consideration to help assess whether the needs of the manufacturer can be met.

Sewer – Many manufacturing industries including food production, iron and steel production, and even facilities that use oil in its processing can create wastewater that can be contaminated or include contaminants that need treated or must meet certain specifications before they can be released into the public sewer system.  An understanding of the local system, its capacity and any special requirements suited to the specific type of industry, may need evaluated as some communities have additional charges dependent upon the type of wastewater a facility is producing.

In addition to the annual continuing operating costs related to utilities, start-up costs should be considered when evaluating a greenfield, brownfield or existing building during the relocation or expansion decision. A site selection consultant can research the information of each site under consideration, aggregate the data and make appropriate connections with utility providers during the site selection process.

At Ginovus we have worked across North America with manufacturing plants that have a variety of utility requirements.  Having an experienced site selection consultant can help ensure no surprises happen down the road. When solid data is analyzed, informed decisions can be made and a manufacturing facility project will have the opportunity to move forward in the location that best suits its needs.