Here’s what GM will pay for power at its new Lansing EV battery plant

General Motors and LG Energy Solution are finalizing a 20-year electricity purchase agreement with Lansing Board of Water & Light to power the EV battery plant the Detroit automaker and South Korean battery maker are jointly constructing west of Lansing.

The locked-in rate of 5.5 cents per kilowatt hour is far below Michigan’s 7.24-cent-per-kilowatt average for industrial electricity loads, which was likely a factor in GM’s decision to site a battery plant in the Lansing area.

Dick Peffley, general manager of Lansing BWL, said the 20-year contract for GM and LG’s joint venture, Ultium Cells LLC, is “unprecedented” for the publicly owned utility company.

“They jumped at this, they came here, they could have gone elsewhere,” Peffley said. “I’ve got to think that this rate is very, very attractive to them.”

BWL’s rate was set assuming GM and LG’s 2.8 million-square-foot battery plant will use a baseload of more than 120 megwatts of electricity — six times the electricity a typical automotive assembly plant uses, Peffley said.

“This rate does not negatively impact any existing customer, it won’t drive a rate increase,” Peffley said of the economies of scale used to set the price. “It’s just the sheer size of 120 megawatts.”

When the Ultium battery plant goes online in late 2024, the facility will increase the Lansing electricity company’s daily average load by 35 percent, Peffley said.

“When somebody brings that magnitude of energy consumption to it, you get a very, very attractive rate,” Peffley said.

Later this year, Lansing BWL has a new 250 megawatt natural gas-fired power plant — known as the Delta Energy Park — coming online that can accommodate the growth in industrial electricity usage, Peffley said.

“We have ample power right now to supply this load,” he said.

Separately, GM secured a 15-year contract with DTE Energy Co. for the expansion of its Orion Assembly Plant at a rate of 4.3 cents per kilowatt hour, said Peter Ternes, spokesman for the Detroit-based utility company.

“This rate will not impact any other business and residential customers,” Ternes said in an email to Crain’s. “In fact, we expect downward pressure on all rates because the large load associated with this rate will help offset some of the fixed costs of electric power generation and infrastructure.”

DTE’s rate for GM is based on a 50-megawatt load factor for the expansion at Orion Assembly and was part of new economic development electricity rates that the Michigan Public Service Commission approved in December, Ternes said.

In late January, GM and LG announced plans to jointly invest between $1.5 billion and $2.5 billion into the construction of a battery manufacturing plant in Eaton County’s Delta Township, next to GM’s existing Delta Township Assembly Plant west of Lansing.

GM’s Lansing area battery plant, which will employ up to 1,700 workers, will be the automaker’s third in the Ultium partnership with LG, along with battery plants under construction in Lordstown, Ohio, and Spring Hill, Tenn.

Until this week, Lansing BWL officials had been under a non-disclosure agreement as the utility negotiated the electricity rate deal with GM and LG. A final contract has not yet been signed, a Lansing BWL spokeswoman said.

The electricity rates GM secured for the Lansing battery plany and Orion Assembly Plant are more in line with southern states, which have historically had lower electricity rates than Michigan.

In 2020, the annual average rate for industrial users in Michigan was 7.24 cents per kilowatt hour, according to the US Energy Information Administration.

That average rate was above all of Michigan’s neighbors but Wisconsin (7.29 cents per KW): Ohio (6.16 cents); Illinois (6.7 cents); Indiana (6.98 cents).

Tennessee and Kentucky, which recently lured $11.4 billion from Ford Motor Co. and its battery partner, had average industrial electricity rates of 5.33 cents and 5.31 cents per kilowatt hour, respectively, in 2020, US Energy Information Administration data show.

“I know what the rates are around the country and this (BWL rate of 5.5 cents per kilowatt hour) rivals any rate in the country,” Peffley said.

GM viewed the electricity rates from BWL and DTE as part of the overall business case for investing in its home state, which includes $824 million in state taxpayer incentives.

“It is always up to the government entities to determine if and when incentives are granted, but securing available incentives plays a very important part in the development of a competitive business case related to an investment project,” GM spokesman Daniel Flores said Tuesday in a statement to Crain’s.

“Granting incentives helps us develop a strong business case,” Flores added. “They also indicate the willingness of the community and government officials to partner with us for continued growth and retention of jobs and a continued presence in the community, while helping us manage escalating costs.”

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