Wind Energy: Powering Economic Development for Colorado

Travis Madsen Stephanie Bonin Matt Baker

Colorado Public Interest Research Foundation November 2002 ACKNOWLEDGEMENTS

The Colorado Public Interest Research Foundation gratefully acknowledges Ronald Lehr, formerly with the Colorado Public Utilities Commission, Morey Wolfson of the National Renewable Energy Laboratory (NREL), Ronald Larson, retired from NREL, Tim Olsen of Tim Olsen Consulting, Rob Sargent of the Massachusetts Public Interest Research Group, John Nielsen of the Land and Water Fund of the Rockies, and George Sterzinger of the Renewable Energy Policy Project for peer review. Thanks to Tom Smith of Public Citizen’s Texas office and to the many other analysts who provided information for this report.

This report was made possible by the generous support of the Argosy Foundation and The Energy Foundation.

The authors alone bear responsibility for any factual errors. The recommendations are those of the Colorado Public Interest Research Foundation. The views expressed in this report are those of the authors and do not necessarily express the views of our funders.

©2002 The Colorado Public Interest Research Foundation

The Colorado Public Interest Research Foundation is a 501(c)(3) organization working on environmental protection, consumer rights, and good government in Colorado.

For additional copies of this report, send $20 (including shipping) to:

The Colorado Public Interest Research Foundation 1530 Blake Street, Suite 220 Denver, CO 80202

For more information about the Colorado Public Interest Research Foundation, please visit the COPIRG website at www.copirg.org.

2 Wind Energy CoPIRG Education Fund TABLE OF CONTENTS

Executive Summary ...... 4 Introduction ...... 6 Colorado’s Wind Energy Potential ...... 8 Projected Growth in Electricity Demand and Wind Power Generation...... 8 Coal and Natural Gas Options ...... 9 Colorado’s Renewable Energy Industry ...... 12 Representative Organizations and Companies in Colorado’s Renewable Energy Industry ...... 13 Current Wind Energy Generation ...... 14 Economic Benefits of Meeting New Demand with Wind Power ...... 17 Employment Impact...... 17 Landowner Revenue ...... 21 Local Tax Income ...... 22 Avoided Water Use from Displaced Conventional Energy Generation ...... 23 Electricity Pricing Impacts ...... 24 State Policies Supporting Wind Energy ...... 27 Texas ...... 27 Iowa ...... 28 Minnesota ...... 29 Policy Findings ...... 31 Methodology...... 33 Notes ...... 35

Wind Energy 3 CoPIRG Education Fund EXECUTIVE SUMMARY

ind energy can help Colorado Colorado could reasonably develop meet a growing demand for elec- enough wind power to meet half of new de- W tricity in a clean and sustainable mand through the next decade and three quar- way while providing significant economic ters of new demand in the following decade. development for rural parts of the state. Through 2020, the benefits of this scenario Colorado has excellent wind resources. include: With these resources, Colorado could poten- • 6,300 one-year jobs in wind farm manu- tially generate more than 200 gigawatt-hours facturing, installation, and supporting ar- (GWh) of wind power per year, nearly five eas, with a payroll value of $210 million. times more than the state’s current needs. But out of all that potential, wind currently pro- • 1,300 long-term, highly local jobs in wind duces less than one percent of Colorado’s farm operation, maintenance, and support- electricity. ing areas with an annual payroll value of $51 million. Developing just 10% of the state’s reason- ably accessible wind resources could meet • $230 million in additional property tax all anticipated growth in electricity de- revenue for rural counties. mand from now until 2020. • Conservation of more than 25 billion gal- Utility companies have chosen natural gas lons of water, with water rights worth for nearly all recent capacity additions, shy- more than $120 million at current Front ing away from coal-fired plants because of Range prices. their high capital costs, stringent environ- • $76 million in royalties paid to landown- mental requirements, poor public image, and ers. 5-year construction times. However, wind Additionally, wind energy will diversify energy can now compete with natural gas on Colorado’s generating portfolio, insulating equal economic footing. On March 18, 2001, consumers from the increased electricity the Colorado Public Utilities Commission costs that will stem from gradually increas- determined that wind power can reduce elec- ing natural gas prices and unpredictable price tricity costs for utility customers in the state spikes. Wind energy’s ability to reduce elec- compared to an all-natural gas portfolio. tricity costs will leave consumers with more Meeting new electricity demand with wind money in their pockets, potentially creating power instead of natural gas would result large benefits across the entire state economy. in roughly twice the total economic ben- State policy can effectively promote the efit to Colorado over the next two decades. development of economical wind energy. Even with conservative assumptions for in- State policy is crucial to realizing the ben- state manufacturing for wind farm compo- efits of wind energy. Texas, Minnesota, and nents, wind power could provide 70% more Iowa are driving the development of wind one-year jobs and more than three times as energy through purchasing requirements and many permanent jobs as natural gas. Wind financial incentives. These policies help to power could also provide property tax pay- provide market guarantees for renewable ments to local governments distributed across power, reduce costs, and attract investment. a wider area of the state, conserve water that For example, strong wind resources and a natural gas plants would otherwise consume, renewable energy purchasing standard in and pay royalties to farmers, ranchers, and Texas allow new wind farms there to pro- other rural landowners. duce power at less than three cents per kWh,

4 Wind Energy CoPIRG Education Fund competitive with fossil technology even at fect financing thirty years of power low gas prices. all at once. Guaranteed markets cre- With effective policy, Colorado can en- ated by renewable energy purchas- courage the use of wind energy to meet fu- ing requirements can ease this hurdle ture energy needs and ensure stable prices significantly and lower overall costs. while minimizing environmental impact and Tax incentives for wind farm construction or revitalizing plains communities. Effective manufacturing. policies include: Tax incentives for the sale of Renewable energy purchase requirements equipment and materials used to ensuring that more than half of new demand build wind farms reduce the high for electricity generation will be met with initial capital costs renewable energy renewable sources of power during the next producers must overcome. two decades. Service Charges to Fund Renewable Energy Creating a guaranteed market for Development renewable energy with a purchasing requirement will ensure that wind A small charge on monthly utility developers do not overlook Colo- bills can raise funds to support re- rado. The biggest barrier to devel- newable energy research, develop- oping renewable energy resources is ment, promotion, and other that most of the total cost is up-front, energy-related environmental im- with high capital costs followed by provements. These activities can very low operating costs, since the help Colorado deepen its renewable “fuel” is free and inexhaustible. Re- energy industry and retain more en- newable energy producers are in ef- ergy dollars in-state.

Wind Energy 5 CoPIRG Education Fund INTRODUCTION

olorado is a windy state, as anyone ence in rural areas of the state. With enough who has walked along a ridge or wind energy to meet state demand many Cacross the open plains can testify. times over, Colorado could soon be harvest- Colorado’s wind can do more than move the ing a powerful bounty. clouds. It can also generate the electricity we Some small Midwest towns are already need. It can light our homes and businesses, discovering the benefits of wind power first- provide power to industry, and drive the hand. For example, take the town of economy. Montezuma in Kansas, a small farming com- Colorado’s wind resources offer an oppor- munity southeast of Lamar. FPL Energy re- tunity to steer the state down a new energy cently installed a 110 MW wind farm in this path, fueled by an inexhaustible and clean area. Around the same time, Debbie energy source. Wind energy technology Wehkamp’s farm equipment supply business works better every year and costs continue was closing its doors for good. The wind to decline. Already, wind projects in Colo- farm could not have come at a better time rado are cost effective compared to tradi- for her. Now she works as the administra- tional plants, based on bids reviewed last year tive assistant for Gray County Wind Energy, by the Colorado Public Utilities Commis- alongside a newly employed operation and sion. The best wind energy projects now pro- maintenance staff. With all the new activity duce electricity for less than three cents per in town, she said, “I don’t think there is any- kilowatt hour (kWh), on par with new gas- one in town who is not completely thrilled fired or coal-fired power plants.1 to have the wind farm here.”3 Additionally, wind power presents an op- Even with access to Colorado’s rich renew- portunity to develop Colorado’s rural able energy resources, the state’s electric economy, which has not benefited from the power industry currently relies almost com- last decade of growth and prosperity like the pletely on the unsustainable extraction and rest of the state. With waning opportunities combustion of fossil fuels. This system harms in mining, farming, and ranching – traditional public health, contaminates water with mer- staples of the rural economy – rural commu- cury, pollutes air with soot and smog, dam- nities have sought out new opportunities ages crops, and changes the climate. The while attempting to preserve their traditions. risks of continuing down this path include More than a third of net farm income across continued pollution, unpredictable tempera- the country last year came from direct gov- ture changes, increased fire danger, the dis- ernment payments and emergency assis- ruption of snow-fed water supplies, and other tance.2 Wind power is a new kind of crop unforeseen changes that could damage both these communities can look to for income. the economy and Colorado’s quality of life.4 This new income source could be a boon Despite these risks, Colorado’s utilities for Colorado’s Eastern plains farmers and continue to do business as usual. Xcel En- ranchers, many of whom are struggling to ergy, the state’s largest utility, has been build- keep their family businesses afloat in the face ing natural gas power plants due to low of declining commodity prices. A few thou- up-front costs and established technology.5 sand dollars a year for every wind turbine Tri-State Generation and Transmission, the taking up a small fraction of crop or range second largest electric generating company land could mean the difference between in the state, recently proposed the first new abandoning agriculture and maintaining a coal-fired power plant in Colorado in 20 way of life. With extra money flowing into years, arguing that natural gas price fluctua- the school system and government services tions make coal the answer to the state’s elec- as well, wind farms could make a big differ- tricity needs.6

6 Wind Energy CoPIRG Education Fund However, the state has an important re- fuel costs, and the reality of limited fuel sup- sponsibility to encourage the development plies. The other path leads toward renewable of electricity sources that can ensure an ad- energy sources, cleaner air and water, re- equate supply of energy at stable prices with duced impacts from climate change, and a positive impacts on the state’s economy and new source of revenues for rural economies environment. Colorado’s utilities will defi- searching for support. The renewable course nitely meet new demand for power. The ques- offers a unique opportunity to unite economic tion is, how will they meet it? development, environmental, and industrial One path leads deeper into fossil fuel de- interests around a common vision for the pendence, with associated environmental and future of Colorado.

Wind Energy 7 CoPIRG Education Fund COLORADO’S WIND ENERGY POTENTIAL

olorado has a wealth of natural re Colorado’s fiercest winds blow across the sources which could easily meet the crests of ridges in the Rocky Mountains (see Cstate’s need for electric power. These Figure 1). Strong winds also blow north of resources are not limited to coal and natural Fort Collins and near the New Mexico bor- gas. As anyone who has hiked to the top of a der around Trinidad. Much of the Eastern ridge or driven across the plains knows, parts plains has excellent wind resources, espe- of the state are very windy. Wind contains cially on the relatively high elevation areas energy in the motion of air. Unlike fossil fu- above the Platte and Arkansas River Valleys. els, however, wind requires no extraction and In general, places with average wind speeds will literally never run out. above 14.3 mph (class 3) are usable for util- Enough wind blows across the state to meet ity-scale electricity generation, and areas our energy needs many times over. The Pa- with winds faster than 15.7 mph (class 4 and cific Northwest Laboratory estimates that above) are especially strong candidates for Colorado has enough wind resources to gen- wind farms. Because wind power increases erate 481,000 gigawatt hours (GWh) of elec- at the cube of wind speed, small increases in tricity per year, enough energy to meet state wind speed can produce much more power. demand 11 times over.7 Limiting consider- Although mountain ridges may have strong ation to the windiest locations within ten wind capabilities, the best sites are located miles of existing transmission lines, the Na- on easily accessible terrain outside of Na- tional Renewable Energy Lab in Golden es- tional Parks or other wilderness areas, have timates that wind could still generate 204,000 reasonable access to transmission infrastruc- GWh per year, or nearly five times as much ture, are reasonably far away from cities and electricity as was used in 2000.8 other urban areas, and have excellent expo- sure to strong winds. Most of the more promising potential sites Note on Units for wind farms are in the Eastern plains. The size of a power plant is expressed in terms of mega- Strong candidates include the high ground watts (MW). This unit indicates how much electricity a between the South Platte and Arkansas Riv- plant can generate. Utilities also measure their ability to ers east and northeast of Colorado Springs, supply demand on the grid at any one time in terms of the Culebra Hills in Costilla County, the area MW. Megawatts are like the horsepower of a car engine. north of Fort Collins and east along the Wyo- Power plant output and electricity consumption are mea- ming border, and on some moderate peaks sured in terms of megawatt-hours (MWh). This unit indi- and mesas near Trinidad along the southeast cates the total amount of electricity generated during a border of the state. Many other places across period of time. A 100 MW power plant operating at full the state may have good local geography and capacity for 10 hours would produce 1000 MWh, or 1 gigawatt-hour (GWh) of electricity. Megawatt-hours are be excellent locations for wind farms as well. like the number of miles a car travels. Wind turbines do not always produce their maximum Projected Growth in output due to natural variability in wind speed. Thus, wind Electricity Demand and power is often described in terms of average capacity, as well as maximum capacity. Wind farms can operate at Wind Power Generation an average of 30% to 40% of peak capacity, depending on the strength and consistency of the wind. In this re- Development of a relatively small amount port, we determine a wind facility’s ability to generate elec- of Colorado’s wind resources could supply tricity using the average capacity value, but describe the much of the state’s need for new generation size of the facility in terms of peak capacity. capacity.

8 Wind Energy CoPIRG Education Fund Figure 1: Predicted Wind Speeds Across Colorado9

Figure 1 shows predicted wind speeds across Colorado. The best wind farm locations are generally on the Eastern plains, including the high ground above the Platte River valley stretching toward the northeast corner of the state, the land above the Arkansas River valley east of Colorado Springs and south of Lamar, north of Fort Collins along the Wyoming border, and near Trinidad along the New Mexico border.

Colorado Public Service Company esti- Figure 2: Projected Growth in Electricity mates 2.2% annual growth in electricity use Demand and Wind Power Generation in their most recent resource plan.10 At this rate, in 2020 Colorado’s utilities will need 70 62,000 GWh, or 20,000 GWh more than current power plants can generate. Devel- 60 oping just 10% of the state’s reasonably ac- 50 cessible wind resources, as identified by the Statewide Total National Renewable Energy Laboratory, 40 could meet all of this demand.11 30 Wind The economic analysis in this report pos- Energy its a conservative scenario in which Colo- 20 rado wind power meets half of new demand 10 through the next ten years and then three- quarters of new demand in the following Electricity Generation (Thousand GWh) 0 decade. At this rate, wind farms will gener- 2002 2005 2008 2011 2014 2017 2020 ate 5,110 GWh of electricity by 2012, or 10% of Colorado’s total electricity needs. By 2020, wind farms will be generating 12,600 ditions in 2004 due to the fact that no other GWh per year, or 20% of Colorado’s total projects are currently proposed. The result- electricity needs (see Figure 2). ing lag in generating capacity is made up for Assuming that wind turbines will be able with extra installation activity in 2005. to operate more and more efficiently with technological advances over the next 20 Coal and Natural years, this course would require the installa- tion of 1,800 MW of wind facilities in the Gas Options 12 next decade and 4,100 MW by 2020. The Utilities in Colorado have many supply op- scenario includes the addition of the 162 MW tions at their disposal, including coal, natu- wind project near Lamar in 2003 and no ad- ral gas, and renewables. Coal-fired plants are

Wind Energy 9 CoPIRG Education Fund the electricity generating industry’s old- external to the apparent cost included in elec- guard technology. Many of Colorado’s coal tricity rates. Traditional accounting sets these plants were built in the 1950s, and none more costs at zero, which clearly underestimates recently than the early 1980s. Most recent the true price of coal use. While there is no capacity additions have been powered by universally agreed upon method for putting natural gas, the industry’s new standard- a price tag on these costs, accounting for bearer. Renewable energy resources, includ- them would significantly raise the price of ing wind power, make up a third option. coal-fired power. For example, a recent Eu- Many competing factors will affect the role ropean Union study found that if the health each of these technologies will play in and environmental costs of coal use were Colorado’s future energy mix. Raw econom- considered, the price of coal-fired power ics, environmental costs, and socioeconomic would double, even without considering the impacts will all play a role. economic impacts of climate change or car- Although coal supplies more than 80% of bon sequestration.13 Colorado’s electricity today, the environmen- Coal mining is also problematic. It con- tal and socioeconomic costs of coal-fired taminates surface and ground waters, and power plants make them an unlikely choice damages land. The most economical coal for meeting new capacity needs in Colorado. mines, based on open pit techniques, produce The health, visibility, and local air quality coal through removing the material that cov- costs are borne by society at large, and are ers coal seams, removing the coal, and re- placing the soil, followed by reclamation of the surface. This practice can disrupt local Table 1: Projected Wind Power ecosystems. Coal mining is a dangerous oc- Capacity Additions cupation, as well. Deaths can sometimes oc- Wind cur due to accidents with equipment and Energy Total explosives.14 Assumed Capacity Added Percent Burning coal creates unacceptable levels Capacity Added Capacity of Total Year Factor (MW) (MW) Generation of air pollution. Coal combustion produces chemicals like sulfur dioxide, nitrogen ox- 2003 30% 162 162 1% ides, soot, and mercury. Sulfur dioxide and 2004 31% 0 162 1% nitrogen dioxides form smog and soot, im- 2005 31% 366 528 3% pacting respiratory health. Mercury contami- 2006 32% 176 704 4% nates the food chain through fish in polluted 2007 32% 180 884 5% waterways, exposing people to the threat of 2008 33% 178 1,063 6% neurological or developmental damage. 2009 33% 182 1,245 7% Burning coal also produces large amounts 2010 34% 181 1,426 8% of carbon dioxide, a gas implicated in global 2011 34% 185 1,610 9% warming scenarios. These scenarios have 2012 35% 183 1,794 10% projected adverse impact on everything from 2013 35% 281 2,075 11% Colorado’s water supply, to the health of the 2014 36% 279 2,355 13% ski industry, to the continued existence of 2015 36% 286 2,640 14% Rocky Mountain meadows.15 2016 37% 284 2,924 15% The coal industry hopes for “clean coal” 2017 37% 290 3,215 17% technology to solve these problems. They 2018 38% 289 3,504 18% claim that energy can be harnessed from coal 2019 38% 295 3,799 19% without causing extensive environmental and 2020 39% 294 4,093 20% health risks or costs. However, the actual

10 Wind Energy CoPIRG Education Fund pollution reduction from these technologies the state’s largest utility, withdrew its par- to date has been marginal and expensive. ticipation in Tri-State’s proposed new plant Ultimately, these technologies redirect tox- in August, 2002.18 In its most recent resource ins to the land and water instead of the air. plan, Xcel identifies high capital costs, strin- The General Accounting Office recently con- gent environmental requirements, poor pub- cluded that federal spending on “clean coal” lic image, and 5-year construction times has been a waste of taxpayer money.16 facing coal plants as challenges to the de- On the economic side, Colorado’s baseload velopment of any new coal plant. coal plants are able to produce cheap elec- Although Xcel also identifies the intermit- tricity because they are old and the initial tency of wind as a challenge facing wind investments have been extensively depreci- power, they have responded to the strong ated on their owners’ accounting systems. public support behind renewable energy. In Although coal supplies and prices are more 1997, they launched one of the country’s first stable and less costly than natural gas, in- voluntary wind power purchasing programs, creasing environmental requirements and which attracted nearly 15,000 customers in public scrutiny, the potential for a carbon tax its first two years.19 or the need for carbon sequestration technol- Based on these reasons, this analysis com- ogy, and Clean Air Act enforcement actions pares baseload natural gas and wind as the all could make electricity generated from two most likely electricity supply options for coal more expensive. The owners of a 1000 the state. Meeting half of new demand MW coal-fired power plant in Craig recently through the next ten years and then three- paid a half-million dollar fine and invested quarters of new demand through 2020 with 160 million dollars in pollution control new gas-fired turbines would produce the equipment for massive violations of federal same amount of electricity as wind power in and state air pollution laws.17 The same the above development scenario. This would amount of money could completely fund the require 2,400 MW of additional gas-fired construction of a 180 MW wind farm. capacity by 2020.20 These projections form Finally, the construction of a new coal plant the basis of the economic analysis in this re- is a lengthy and costly endeavor. Citing the port. resulting problems with timing, Xcel Energy,

Wind Energy 11 CoPIRG Education Fund COLORADO’S RENEWABLE ENERGY INDUSTRY

olorado’s renewable energy indus vided important research and development try is ready to take up the challenge services. Colorado’s primary economic ad- Cof developing the state’s wind en- vantage is the potential for industrial devel- ergy potential. Although the industry is rela- opment based on new technology developed tively young, it is poised for rapid growth. by NREL, universities, and company re- We possess a highly-skilled work force search.21 trained at excellent universities and the In 1997, 347 renewable energy organiza- nation’s premier sustainable energy research tions and companies in Colorado employed and development center, the National Re- about 1,125 people, in addition to 750 re- newable Energy Laboratory (NREL). searchers and staff who worked at NREL. Based on a survey conducted by the Busi- The largest employers provided services in ness Research Division of the University of manufacturing, design, engineering, and new Colorado in 1997, Colorado’s renewable technology development. These companies energy industry was modestly sized, but pro- employed 882 workers, making up 83% of the jobs in the industry. The remaining em- Figure 3: Size of Renewable Energy ployees worked in industry support areas Companies in 2000 such as policy, training, and planning, or in 22 60% sales of renewable energy equipment. Most renewable energy companies were 50% small (see Figure 3). In 1997, 81% had less than 11 employees involved in renewable 40% energy activities. However, they were grow-

30% ing quickly, predicting yearly renewable en- ergy employment growth of 10% through 23 20% 2000.

Percent of Companies of Percent The industry in Colorado is also quite 10% young (see Figure 4). Of the companies in

0% existence in 1997, just under half opened 1 2 to 10 11 to 25 26 to 100 More than 100 their doors during the 1990s, and only 24% Number of Employees were active before 1980.24 To put this in per- spective, all of Colorado’s coal-fired power plants were built before 1980, some as early Figure 4: Age of Colorado’s Renewable as the 1950s. Energy Companies (Based on 1997 Survey) Most companies work on several different 50% generation technologies. In 1997, 9% of the companies identified wind energy as their 40% primary activity, and 29% as their second- ary activity. 30% These industries had a modest impact on the Colorado economy in 1997, heavily 20% weighted toward research and development by NREL.

Percent of Companies 10% • NREL awarded $21.5 million in purchase

0% orders, research, and subcontracts to Colo- 98 89 79 69 60 0-19 0-19 0-19 0-19 re 19 rado businesses. They employed 750 199 198 197 196 Befo Year Business Began Coloradans that year, with wages of ap- proximately $38 million.25

12 Wind Energy CoPIRG Education Fund • Governments, universities, and electric- search and development.29 The lab develops ity generators employed 75 people in re- new energy technologies in almost 50 fields, newable energy activities, with wages of ranging from photovoltaics to wind energy $2.6 million.26 to advanced vehicle systems. It currently • 237 renewable energy related companies employs 1,100 researchers and support staff employed about 1,075 people with a pay- in the Denver metro area, the largest single roll of $31.4 million, had $97 million in group of renewable energy and energy effi- renewable energy sales (about one-third ciency experts in the world. The lab is home in-state), and spent $36 million on sup- to the National Wind Technology Center, plies and raw materials (about one-third where new turbines are designed and tested in-state).27 in the gusty winds on the northern perimeter of Rocky Flats, north of Golden. Increasing domestic use of renewable en- The more efficient turbines and other tech- ergy spurred by state renewable portfolio nological breakthroughs by NREL have requirements and incentives in states like helped drive the price of wind power down Texas, Minnesota, Iowa, Nevada, California from 30 ¢/kWh in 1980 to 3 ¢/kWh today. 30 and potentially Colorado should open new NREL estimates that prospective wind en- markets for Colorado renewable energy com- ergy markets could generate several billion panies. Worldwide, renewable energy de- dollars in sales for the U.S. wind industry mand is growing quickly, driven by increased by 2005. demand for electricity, legislation support- ing renewables, and international agreements CH2M Hill to reduce greenhouse gas emissions from CH2M Hill is an environmental engineering fossil fuels. Of renewable technologies, wind firm headquartered in Denver that is involved power is the fastest growing, with global in- in many phases of wind project development. stallations increasing at about 25% per The firm provides services including re- year.28 source assessment, siting, permitting, licens- ing, transmission analysis, construction management, production forecasting, and Representative operation and maintenance. Organizations and CH2M Hill has worked on some of Companies in Colorado’s America’s largest new wind projects, includ- Renewable Energy ing: Industry • The 263 MW Stateline Wind Project be- tween Oregon and Washington. Colorado has a variety of organizations and • The planned 494 MW Maiden Wind companies working in the renewable energy Project in Washington’s Rattlesnake Hills. field, both large and small. These companies provide services ranging across the board, • The 250 MW Kittitas Valley Wind Project from design to installation. A few of the Colo- near Ellensburg, Washington. rado-based companies that could participate CH2M Hill employs over 10,000 people in a large expansion of wind power in the at over 300 offices and project sites around state include: the world.31 The National Renewable Energy PanAero Corporation Laboratory (NREL) Pan Aero is a wind energy consulting firm NREL is the U.S. Department of Energy’s based in Lakewood, which performs feasi- premier laboratory for renewable energy re-

Wind Energy 13 CoPIRG Education Fund bility studies and wind resource assessments, Architectural Energy Corporation and provides planning and implementation Architectural Energy Corporation provides services for international wind energy consulting services, hardware, and software projects. The firm employs 5 people in Colo- products for sustainable design. The firm’s rado, and much of its business is currently clients include architectural design teams, overseas in areas like the South Pacific. Pan building owners, utilities, energy service Aero specializes in making the use of large, companies, and government agencies on a 32 commercial wind systems cost-effective. wide variety of projects. In addition to con- The Industrial Company sulting on energy use, they provide wind energy design and data collection services. The Industrial Company (TIC) builds facili- They employ a broad staff of mechanical, ties for heavy industry. With origins in build- electrical, and architectural engineers; archi- ing mining equipment in the 1970s, TIC has tects; computer scientists; technicians and now branched out into the installation of re- research support staff, based in Boulder.34 newable energy equipment. The firm has experience installing geothermal, biomass, Verde Power photovoltaic, and wind energy facilities. TIC Verde Power finances renewable energy headquarters are in Steamboat Springs, with projects, invests in individual companies, and satellite offices in Denver and across the owns equity in operating renewable energy 33 country. projects. The company employs five people NextWave Energy in Telluride, and does most of its business in the Midwest and Intermountain region.35 NextWave Energy, based in downtown Den- ver, assists renewable energy companies with capital formation, market analysis, and busi- Current Wind ness development. Energy Generation R.W. Beck Despite our technical expertise, world-class R.W. Beck provides consulting and engineer- companies, and ample wind resources, Colo- ing services for a wide range of projects, in- rado currently generates only a small amount cluding renewable energy development. of electricity from wind. At the end of 2001, Their wind energy services include environ- Colorado had 61 MW of wind energy facili- mental impact assessment, feasibility stud- ties up and running, supplying less than 1% ies, and monitoring. They are based in of the state’s energy needs. The Ponnequin downtown Denver, with offices spanning the facility in Weld County and the Peetz facil- country. ity in Logan County currently supply all of Tim Olsen Consulting the wind-generated electricity for the state. Tim Olsen Consulting provides a wide vari- Public Service Company of Colorado, owned ety of wind energy services, including wind by Xcel Energy, uses most of the energy pro- resource assessment, feasibility studies, site duced by these farms for Windsource, a vol- evaluation, project management, research untary program in which consumers pay a 36 and development, wind turbine design, and premium to support wind energy. hybrid system design. On the Peetz Table However, wind power will play a much wind power project in Logan County, this greater role in Colorado’s future. An addi- company provided resource assessment, tur- tional 162 MW wind farm under construc- bine siting, budgeting, and planning with the tion near Lamar should come online in 2003. utility, community, the FAA, and local gov- This facility, built by GE Wind Energy, will ernments. be a standard part of Xcel Energy’s genera-

14 Wind Energy CoPIRG Education Fund tion portfolio. It will provide wind power for The Peetz Table wind farm was added to all Xcel Colorado customers, or 70% of the the Windsource program in 2001. The tur- state electricity market, through their base bines are located just across from the high electric rates. When this facility begins op- school football field in the small town of erating, Colorado will be generating about Peetz, near the Nebraska border in northeast 1.4% of its energy from wind. Colorado. 41 Peetz was the “queen city of the northern plains” in the early part of last cen- Windsource tury, with a healthy farming and ranching Subscribers to Xcel Energy’s Windsource economy.42 The town even had its own program subsidize the production of energy power company. Although a lot of the old from the Ponnequin and Peetz wind farms businesses have been closed for years, some by purchasing blocks of wind power at 2.5 of that history is returning to life with the ¢/kWh above normal rates. Grassroots mar- addition of the wind farm. keting efforts and strong public support have made this program the most successful at The Lamar Wind Project attracting participants in the nation. Colorado’s newest wind energy development Windsource is supported by over 16,000 resi- project is located 23 miles south of Lamar, dential customers, as well as commercial and in southeastern Colorado. The facility is institutional subscribers, including the U.S. scheduled to come online in 2003. It will Department of Energy and the University of operate independently of the Windsource Colorado.37 The 61 MW demand for program, supported by rates paid by all Xcel Windsource has exceeded all expectations for customers. At 162 MW, it is five times larger a demonstration project with a 25% sur- than any other wind plant in the state. The charge. Windsource has helped to pave the story behind this facility and the economic way for making wind energy a mainstream motivations behind its development signal part of Colorado’s energy future. the arrival of the next generation of Colo- The Ponnequin wind farm is Colorado’s rado wind power. first utility-scale wind power facility. The In 1999, Xcel submitted to the Colorado first turbine began operating in April 1998, Public Utilities Commission (PUC) its plan taking advantage of average wind speeds in for acquiring new capacity to meet demand the range of 17-18 miles per hour.38 The tur- in the years 2003 through 2005. The com- bines are located East of highway I-25 near pany planned 124 MW worth of conserva- the Wyoming border, in Weld County. Keith tion measures, 25 MW of wind power for and Myrna Romans own most of the land the Windsource program (which later became originally used by the wind farm.39 The Ro- the 30 MW Peetz project), and a portfolio of mans are retired small-scale ranchers from new generation all fueled by natural gas. Wyoming who raise beef cattle. When asked Although GE Wind (formerly Enron Wind) about the royalties he earns from the wind submitted a bid to build a wind plant near turbines, Keith says: “I can tell you we’re Lamar, Xcel deemed the bid uneconomical making much more off this than we did off and did not include it in its proposed capac- cows. And, you don’t have to feed them, you ity additions. don’t have to break ice, and you don’t have The Public Utilities Commission is to calve them out.” 40 Overwhelming cus- charged with granting approval for all utili- tomer demand required expansion of the site ties’ plans to increase capacity. The onto land owned by the State Land Board, Commission’s own staff and renewable en- which now collects royalty payments to sup- ergy advocates questioned whether it was port state schools. truly appropriate to exclude the GE wind bid

Wind Energy 15 CoPIRG Education Fund from Xcel’s generating portfolio. In ruling the experience of other utilities with large on these issues, the PUC faced the challenge amounts of wind power. In fact, using PUC of comparing the economics of natural gas approved estimates of ancillary costs, Xcel’s and wind-powered energy. Uncertainty in the own modeling found that including the price forecasts for natural gas and the extent Lamar project would result in a net present of “ancillary” or back up power costs to op- value savings of $6.9 million over the 15- erate the wind plant were the central issues. year contract period, compared to an all natu- Xcel predicted that natural gas prices ral gas generation portfolio.45 would be low and decline over time, fore- In March 2001, the commission ordered casting a 7% price decline from 1999 to Xcel Energy to add the Lamar project to its 2000. With several revisions of its gas price resource plan. The commission based its de- forecast, the utility eventually settled on a cision solely on the fact that “the acquisition forecast that predicted a gentle increase in of the Lamar facility will likely lower the gas prices at the rate of inflation over 20 cost of electricity for Colorado’s ratepayers, years. However, while bids were being evalu- … [and] is justified on purely economic ated in 2000 and while the PUC was hearing grounds, without weighing other benefits of the case raised by intervening parties and its wind generation.”46 One PUC analyst found staff, natural gas prices skyrocketed to $10 that, “in terms of levelized cost… the wind per thousand cubic feet, more than three project was the lowest cost resource in the times Xcel’s highest fuel price forecast. Nev- entire portfolio.”47 ertheless, Xcel continued to forecast prices After all was said and done, the PUC de- for future years that were several dollars less termined that when gas costs are higher than per thousand cubic feet of gas than the ac- about $3.50 per thousand cubic feet, wind is tual values at the time.43 the most competitive energy source. In 2002, The PUC disagreed with Xcel’s prediction electric utilities have so far paid prices in the of gas prices. The commission determined range of $3.10 to $3.85 per thousand cubic that future prices were likely to rise due to feet.48 the astonishing number of new gas-fired In late September 2002, Xcel and GE wind power plants being installed around the coun- agreed on a contract for the purchase of wind try. They decided to “lean toward the higher power from the Lamar facility. The price was range of the gas forecast to protect set at 3.261 ¢/kWh escalating with inflation, Colorado’s ratepayers against the substan- a very cheap price compared to the 2.5 ¢/ tial possibility that natural gas prices will kWh premium Xcel charges on top of nor- rise.”44 This made the wind facility all the mal rates for its Windsource program.49 more attractive. The Lamar project heralds a new age for Xcel also claimed that because wind en- wind power in Colorado. As the wind indus- ergy cannot be relied upon to generate elec- try continues to realize economies of scale tricity at all times, they would incur tens of and deploys larger, more efficient turbines millions of dollars in ancillary service costs that can generate power at lower wind covering for times of low wind. Again, the speeds, the economics of wind power will PUC disagreed, finding that Xcel’s estimates only improve. Wind energy is now a main- were as much as 10 times too high based on stream generation technology.

16 Wind Energy CoPIRG Education Fund ECONOMIC BENEFITS OF MEETING NEW DEMAND WITH WIND POWER Investing in wind power will do more than ing areas with an annual payroll value of supply electricity to Colorado citizens. It will $51 million. benefit the economy as well, providing • $230 million in additional property tax roughly double the benefits of new natural payments to rural counties over the next gas generation (see Table 2). 18 years. The analysis in this report posits a conser- vative scenario in which Colorado wind • Conservation of more than 25 billion gal- power meets half of new demand through lons of water, with water rights worth the next ten years and then three-quarters of more than $120 million at current Front new demand in the following decade. At this Range prices. pace, the state’s wind energy capacity would • $76 million in royalties paid to farmers, reach 4,100 MW by 2020.50 According to ranchers, and other landowners. the Electric Power Research Institute, wind farms cost $900,000 per MW to build.51 At this price, this wind power development sce- Employment Impact nario would bring a $4.3 billion dollar capi- Developing Colorado’s wind energy poten- tal investment to the state. tial will create jobs in component manufac- An investment in wind power of this scale turing, turbine installation, facility operation will create significant economic benefits and maintenance, and in a variety of areas through the year 2020, including: which indirectly support these activities. • 6,300 one year jobs in wind farm manu- Manufacturing requires skilled laborers facturing, installation, and supporting ar- who design and build the enormous towers, eas, with a payroll value of $210 million. rotor blades, generators, hubs, and assorted • 1,300 long-term, highly local jobs in wind electronic controls which make up a wind farm operation, maintenance, and support- turbine. Installation typically involves local

Table 2: Summary of Projected Economic Impacts of Electricity Generation Options

Total through 2012 Total through 2020 Wind Natural Gas Wind Natural Gas Electricity Generation 5,110 GWh 5,100 GWh 12,600 GWh 12,600 GWh Capacity 1,800 MW 990 MW 4,100 MW 2,400 MW One-Year Jobs Manufacturing 370 340 840 830 Installation 920 480 2,100 1,200 Supporting Areas 1,500 950 3,400 2,300 Long-Term Jobs Operation and Maintenance 260 40 590 100 Supporting Areas 300 120 680 290 Taxes Paid to Local Governments $74 million $46 million $230 million $150 million Royalties Paid to Landowners $20 million 0 $76 million 0 Conserved Water (Gallons) 6.8 billion 0 25 billion 0 Value of Rights to that Water $47 million 0 $120 million 0

Wind Energy 17 CoPIRG Education Fund construction firms, boosting local economies. able to find a Colorado manufacturer of prod- The operation and maintenance needs of a uct components (see Figure 5).53 wind plant create permanent, high-quality Growth in the wind energy market could local jobs ranging from servicing the turbines bring additional manufacturing capability to to accounting. the state. In Montana, for example, some current contracts for wind energy include Manufacturing offers to open in-state wind-turbine manu- Much of the work involved in creating a wind facturing facilities.54 farm goes into manufacturing the compo- Colorado was almost home to the Ameri- nents, which include rotor blades, structural can headquarters of Vestas, Inc., the world’s towers, hubs, gearboxes, generators and elec- leading wind turbine manufacturer. In June tronic controls. The Electric Power Research 2000, Vestas announced plans to open their Institute, a utility-funded energy research U.S. headquarters and build their first Ameri- consortium, estimates that every megawatt can turbine manufacturing plant in Pueblo. of wind energy capacity installed creates 2.06 The facility would have employed 600 work- year-long manufacturing jobs.52 ers. Vestas cited Colorado’s central location Most manufacturing of specialized com- to the Midwest renewable energy market as ponents will happen out-of-state, at least in the prime reason for the decision, and urged the near term. Many of the world’s major the state to help promote renewable energy. turbine manufacturers are based in Europe, 55 However, Vestas eventually decided to and the U.S.-based industry is mostly in Cali- locate its facility in Portland, Oregon instead, fornia. where it will bring up to 1,200 jobs by However, Colorado already has some ca- 2003.56 Vestas officials have refused to com- pacity to manufacture renewable energy ment on the reason for the decision. Possi- components. Based on a 1997 survey of the bilities include access to port facilities, strong Colorado renewable energy industry, over incentives offered by the city of Portland, half of renewable energy companies were support by state and local officials for the able to obtain the manufacturing equipment federal wind energy production tax credit, they required from in-state sources, with 31% interest in and support for wind development by local utilities, or proximity to the large wind energy projects that are currently be- Figure 5. Availability of Goods and Services ing planned and built along the border be- for Renewable Energy Companies57 tween Washington and Oregon. In-state companies already producing com- Transportation and ponents ranging from ball bearings to air- Distribution craft warning lights could become involved Manufacturing Equipment in developing the wind energy capacity of the state. For example, Colorado’s steel mills Finished products make steel rails for railroads. Along the lines of Trinity Structural Towers and Bergen Raw Materials and Supplies Southwest Steel in Texas, they could supply 58 Contract Services a growing demand for steel towers. Based on these facts, this analysis assumes

Product Components 10% of manufacturing for Colorado wind farms will happen in-state. Following capac- 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% ity growth projections, in-state manufactur- Percent of Companies Able to Obtain Goods or Services In State ing of wind energy components could create

18 Wind Energy CoPIRG Education Fund 840 person-years of manufacturing employ- people. At the average Colorado salary for ment through 2020. According to the Colo- industrial and electrical equipment repairers rado Department of Labor, the average wage of $39,940, these workers would earn $24 in electronics and fabricated metal product million per year.64 manufacturing is $39,848 per year.59 At this Table 3 summarizes the employment ben- rate, the payroll value of these jobs would efits wind power could create in wind farm be $33 million. installation, manufacturing, and operation and maintenance through 2012 and through Installation 2020. A wind farm needs up to 300 workers on site during construction. These workers assemble Comparison with Natural Gas turbines, erect towers, build roads, and lay If Colorado were to meet its electricity de- cable. Unlike traditional power plants, wind mand growth with natural gas power plants farms are built quickly, usually in a year or instead of wind energy, fewer jobs would be less.60 created. The Electric Power Research Institute es- To produce the same amount of energy as timates that every megawatt of wind energy wind under the development scenario used capacity installed creates 0.5 year-long lo- in this analysis, Colorado would have to in- cal installation jobs.61 Using this estimate, stall 2,400 MW of gas-fired power plants. installing 4,100 MW of capacity would cre- The installation of these plants would create ate 2,100 year-long jobs. At the average just over half the jobs that wind power would. Colorado construction worker salary of Although Colorado utilities do not make $35,464 per year, these jobs would have a employment figures public, power plant de- payroll value of $75 million.62 velopers in California are required to esti- mate the number of jobs to be created by Operation and Maintenance proposed power plants as part of the permit Wind farms need staff to operate and regu- application process. A review of the appli- larly service the turbines throughout their cations for the 19 plants that have been built roughly 30-year lifetimes. These needs cre- or approved since July 2001 reveals that ate long-term, full-time employment close these plants were projected to create a total to the wind farm. The Electric Power Re- of 6,337 person-years of work directly within search Institute estimates that every 6.9 MW the construction projects, including new gas of capacity requires one full-time employee transmission lines, for 12,853 MW of capac- to operate, monitor, and service it.63 ity.65 The construction of these plants cre- According to growth projections, in 2020 ated an average of 0.49 person years of work the operation and maintenance needs of per MW. Assuming the same value for power Colorado’s wind farms could employ 590 plants in Colorado, building new natural gas

Table 3. Projected Direct Employment Benefits of Wind Power through 2012 and 2020

Manufacturing Installation Operation and Maintenance Wind Energy 1-Year 1-Year Permanent Annual Year Installed Jobs Payroll Value Jobs Payroll Value Jobs Payroll Value 2012 1,800 MW 370 $15 million 920 $33 million 260 $10 million 2020 4,100 MW 840 $33 million 2,100 $75 million 590 $24 million

Wind Energy 19 CoPIRG Education Fund plants would create 1,200 year-long jobs in highly automated and relatively easy to plant construction. maintain, even more so than wind farms. The Although wind energy creates more manu- plans for 19 new plants in California include facturing jobs than natural gas per MW, the an average of only 25 jobs per plant, yield- established market for gas-fired power plant ing a rate of only 0.04 direct jobs per MW of components could result in a greater propor- capacity. At this rate, the natural gas route tion of in-state manufacturing for gas com- would create only 100 permanent jobs by pared to wind. Assuming that Colorado’s 2020.67 capability to make natural gas components In terms of overall direct employment, the is three times larger than for wind, gas plants natural gas option would produce 920 fewer could create about the same number of manu- one-year jobs and 500 fewer permanent jobs facturing jobs. About 30% of the costs of a than wind power. natural gas plant go toward construction, while 70% go toward manufacturing of tur- Indirect Employment bines, electrical systems, boiler islands, in- The economic impact of building power strumentation, and controls.66 Assuming that plants extends beyond the direct jobs created 70% of the jobs created by gas plants go to- in building and installing the equipment. ward manufacturing of these components, Each dollar invested creates impacts that manufacturing needs would create about 1.14 ripple outwards throughout the local jobs per MW, compared to 2 jobs per MW economy. for wind. The high energy concentration in For example, workers at a manufacturing fossil fuels require much smaller power con- plant need raw materials and equipment. version systems per MW rating, yielding a Their work in assembling turbines supports lower employment intensity for fossil fuels. jobs in equipment manufacturing and com- Colorado has no manufacturing capability for ponent supply. Contractors at a construction gas turbines, which are the most expensive site need concrete and heavy equipment, and part of the power plant. Assuming that 30% their work supports additional jobs supply- of natural gas plant manufacturing activity ing these needs. Natural gas power plants will happen in Colorado yields enough ac- need a steady supply of gas, supporting jobs tivity to support 830 one-year jobs through in resource extraction and delivery. 2020. This assumption is conservative com- The Texas Comptroller’s office estimates pared to the assumption of 10% in-state that 1.15 indirect jobs are created for every manufacturing for wind power. direct wind energy job, based on the new Building more natural gas power plants wind farms that have gone up over the last would result in many fewer permanent jobs few years.68 Using this estimate, wind farm than wind energy. New natural gas plants are manufacturing and construction in Colorado will create 3,400 year-long jobs in support- ing areas, and operating and maintenance Table 4. Direct Employment Summary needs will support 680 ongoing indirect jobs for Wind and Natural Gas by the year 2020. Natural Since natural gas plants create fewer over- Type of Job Wind Gas all jobs, the indirect employment they sup- Installation Jobs 2,100 1,200 port is also less. Estimates of indirect Manufacturing Jobs 840 830 employment from several California natural Total One-Year Jobs 2,900 2,000 gas plant developers yield a similar multi- Long-term Operation plier effect as wind, in the range of 1.1 indi- and Maintenance Jobs 590 100 rect jobs for every direct job.69 Assuming that

20 Wind Energy CoPIRG Education Fund the employment multiplier effect is the same Overall, natural gas plants would create as wind energy, natural gas plants would sup- 1,060 fewer one-year indirect jobs and 390 port 2,300 indirect one-year jobs and 110 fewer permanent indirect jobs than wind indirect permanent jobs. power. Combining the figures for direct and Natural gas plants also support ongoing indirect employment, wind power will sup- jobs in the extraction and delivery of natural port 70% more temporary workers and over gas. Even if Colorado’s established natural three times as many permanent jobs as natu- gas production industry creates new jobs to ral gas. meet a small increase in demand, added em- ployment from natural gas extraction would Table 5. Indirect Employment still not create as many permanent jobs as wind farm operation and maintenance. Supported by Wind and Natural Gas Electric utilities in Colorado currently use through 2020 a small fraction of total Colorado natural gas Natural output. Public Service Company’s gas power Type of Job Wind Gas plants accounted for less than one percent of Short-Term Indirect Jobs 3,400 2,300 state production in 1999. 70 Utilities overall Long-term Indirect Jobs 680 290 that year used about 19 billion cubic feet of gas to produce about two thousand GWh of electricity, or 9 million cubic feet per GWh. Because Colorado is connected to a regional market by pipelines, Public Service Com- Landowner Revenue pany estimates that 42% of the natural gas it uses comes from Colorado sources.71 At this Farmers, ranchers, and other rural landown- efficiency rate and considering the regional ers can take advantage of the income result- nature of supply, using natural gas instead ing from leasing a portion of their land to a of wind would increase demand for Colo- wind farm developer. Unlike wheat or corn, rado natural gas by less than 7%. payments from wind energy are steady and In 2001, Colorado employed 4,478 people year-round. If the land is owned by a gov- in oil and gas extraction and transportation ernment entity, the income can be funneled activities.72 Since many of these jobs involve into local government, schools, and services. both crude oil and natural gas, government Although wind farms occupy large areas, and industry analysts measure employment the actual physical footprint of each wind for both resources combined. Allocating turbine is small. A landowner could lease up these jobs according to the economic value to 10% of their land area for the construc- of oil and gas produced by the U.S., an esti- tion of wind turbines, while continuing to mated 59% of these jobs stem from natural grow crops or graze their animals. Lease gas extraction – 2,642 jobs in 2001.73 These terms vary, but they typically represent 2.5% 75 workers produced 736,299 million cubic feet of gross revenue from electricity sales. The of natural gas, yielding a job intensity of Union of Concerned Scientists estimates a 0.0036 jobs per million cubic feet.74 Using typical farmer or rancher with good wind re- the 9 million cubic feet per GWh figure and sources could increase the economic yield 76 Colorado’s 42% share of the regional mar- of their land by 30% - 100%. ket outlined above, increased demand for Assuming a contract price for electricity natural gas from building natural gas power generated from wind power of 3 ¢/kWh, the plants would support only 180 permanent projected electricity generated by wind jobs in gas extraction. power through 2020 would sell for $3 bil- lion.77 At lease terms of 2.5% of gross rev-

Wind Energy 21 CoPIRG Education Fund enue, the lease payments associated with amount of electricity. As a result, wind farms generating this electricity would supplement often shoulder a higher property tax burden the income of farmers, ranchers, and other than conventional power plants. landowners by a total of $76 million between In 2001, Colorado passed legislation that now and 2020. In the year 2020, 4100 MW attempted to equalize the property tax bur- of wind farms would produce nearly $380 den of renewable energy plants with compa- million worth of electricity, and landowners rable nonrenewable facilities.80 The law has would earn an additional $9.4 million per not yet been implemented and there is some year on top of their normal crop yield. uncertainty in how it will be applied. The Natural gas plants would not be located law does not specify average capacity or on land actively used for growing crops or rated capacity. It also does not define com- grazing animals. Generating capability at parable nonrenewable technology. If coal is natural gas plants is much more concentrated, the comparable technology, the law will have and occupies much less land than a compa- little effect. Coal-fired power plants are more rable wind farm. The land for these plants expensive than wind per kW of rated capac- would most likely be purchased outright at ity. If natural gas is the comparable technol- the cheapest price available, in areas rela- ogy, assessed values for wind turbines will tively close to the Denver Metropolitan decline by about 40%. The average new natu- Area.78 Accordingly, they would not provide ral gas plant costs about $540,000 for every lease payments to rural landowners. installed MW based on California data, which is about 40% less than a comparable wind turbine.81 Table 6. Landowner Income Depending on how the law is implemented, and Property Taxes From Wind renewable energy facilities will provide dif- and Natural Gas fering amounts of property tax revenues for Natural local governments. This analysis assumes Wind Gas that wind facilities will be valued using the Landowner Income $76 million $0 capital cost of a natural gas plant based on Property Taxes $230 million $150 million rated capacity. Using wind development pro- jections, the depreciating values of wind fa- cilities, and the average Colorado property tax rate of 1.6%, wind power would funnel Local Tax Income $230 million into local government coffers 82 Wind turbines will raise the property tax base through 2020. Approximately 54% of these tax payments would go to fund needy school of a county, creating a new revenue source 83 for education and other local government districts. services. According to the Electric Power Increases in the tax base from installing new wind farms will be largest in rural coun- Research Institute, wind energy plants cost about $900,000 per installed MW, a total of ties where the wind resources are greatest. $4.3 billion for all projected capacity addi- Although the direct impact to the statewide tax base will be relatively modest, just as with tions. 79 A typical plant will operate for a 25- year lifetime, and the assessed value of the new fossil-fueled plants, new wind farms can facility will depreciate slowly over this pe- make a big difference to small communities, especially on the Eastern plains. For ex- riod. Because fossil fuels are a more con- centrated form of energy than wind, natural ample, the installation of the 162 MW wind gas and coal-fired plants need less equipment farm in Lamar will add about 29% to the tax base in Prowers County. Tax base increases at less capital cost to generate an equivalent

22 Wind Energy CoPIRG Education Fund Figure 6. Increase in Tax Base in Colorado’s Windiest Counties After Installation of a 162 MW Wind Farm 120%

100%

80%

60%

40%

20% Percent Increase In Tax Base

0%

a e a o o a n r s n n s k nt l rt o e a l p rs c ac e til an o lli i B B lbe iow m c oga i we w os l Pas E K arim in L h o C E uerf L L P r heyenn H it Cars P edg C K as Ani S L in other windy counties from an equivalent Thermoelectric energy generation requires wind farm are shown in Figure 6. large amounts of water for steam and cool- New natural gas plants installed on the ing. Tri-State Generation’s coal-fired power same schedule would increase the property plants at Laramie, Wyoming and Craig, Colo- tax base less than wind plants. The average rado use 10 billion gallons of water every new natural gas plant costs about $540,000 year from the Laramie and Yampa rivers. The for every installed MW.84 With an assumed plants dispose of the water in evaporation lifetime of 30 years, new natural gas plants ponds on site, with no discharge back into would provide $150 million in property taxes the river.85 through 2020, about 35% less than wind For every MWh generated, natural gas farms. power plants use about 250 gallons of wa- ter.86 Some power plants have already expe- Avoided Water Use from rienced some close calls with water shortages during this year’s drought. Tri-State had to Displaced Conventional open the release gates at their backup reser- Energy Generation voirs for the first time in nearly a decade to keep the Craig power plant operating.87 Wind energy could conserve billions of gal- Growing water demand will make even less lons of water that would otherwise be used water available for use at new thermoelec- for electricity generation by conventional tric power plants. power plants. Especially in times of drought, In contrast, generating electricity through water is a valuable commodity in the state wind uses very little water, no more than that of Colorado. Utilities, municipalities, and required for an occasional washing of the farmers spend millions of dollars to secure turbine blades and for the mixing of concrete. water rights.

Wind Energy 23 CoPIRG Education Fund Front Range. Recently, rights to one unit of Table 7. Projected Water Use and Value of water per year from this river have been sell- Water Rights for Wind and Natural Gas ing for about $12,000. In a wet year, one unit Wind Natural Gas is about an acre-foot of water, or 326,000 gallons. During a drought like the one Colo- Water Use in 2020 negligible 3 billion gallons rado is currently experiencing, a unit can be Total Water Use, one-third that amount.88 With the continu- 2003-2020 negligible 25 billion gallons ing drought in Colorado coupled with a Value of Water Rights $0 $120 million growing population, demand for water will grow much faster than supply. At projected development rates, wind power At current prices, the right to withdraw 3 could save 25 billion gallons of water com- billion gallons of water, the amount wind pared to the use of natural gas through 2020. energy would save in 2020, would be worth In the year 2020, wind power could reduce $120 million.89 water use from Colorado’s scarce supply by 3 billion gallons per year, or 9600 acre-feet Electricity Pricing per year. Wind power could make more wa- ter available for residential use, crop irriga- Impacts tion, recreation, and other important needs. Wind energy could also have potentially Water rights from the Big Thompson River large macroeconomic benefits for the state are representative of the resources on the due to impacts on the cost of electricity. First,

Impact on Prowers County The installation of the Lamar Wind Project will have a large impact on the economy in Prowers County. Prowers county is a relatively small community on the Eastern plains whose largest city is Lamar. In 2000, approximately 14,240 people lived there. 90 The local economy is oriented toward agriculture, including farming and ranching. Crops include wheat, milo, millet, alfalfa, and corn. The main institutional employers in the county are NeoPlan USA, Lamar Community College, Lamar School District, and local government.91 In 2000, the county had $88 million in taxable assets and retail sales of $399 million per year.92 On top of this, the Lamar wind project will add: • 83 installation jobs lasting for one year, indirectly supporting 95 additional jobs which could be located in other parts of the state. • 23 full-time operation and maintenance jobs for workers who will be employed lo- cally for at least 25 years, supporting another 26 indirect jobs. • Increased landowner income of $350 thousand per year from lease payments.93 • Increased sales of local goods and services of $810,000 per year for the operation and maintenance needs of the wind farm.94 Compared to 2000, this project will increase the number of jobs in Prowers county by 1.3% during the construction process, and by 0.36% permanently. The wind farm will have an assessed value of around $25 million, raising the tax base in Prowers County by 29% and providing approximately $1.4 million per year in increased property tax revenue, about half of which will go to local schools.

24 Wind Energy CoPIRG Education Fund wind energy can insulate consumers from are tied to the rest of the Western market. secondary price spikes due to unpredictable Supply problems in other Western states can fluctuations in natural gas costs by diversi- drive up natural gas prices across the board. fying the state’s energy generation portfo- Over the past two years, natural gas con- lio. Second, natural gas prices overall will sumers have had to pay a premium of roughly continue to rise while wind energy prices 0.5 ¢/kWh over expected spot prices to lock continue to fall. As a result, consumers will in natural gas prices for the next ten years.97 save money that they can then apply to other Because wind power has no fuel costs, it can sectors of the economy. serve as a hedge against volatile natural gas Natural gas prices are projected to increase, prices, reducing the need to speculate on fu- sometimes unpredictably. Xcel Energy has ture fuel expenditures. Diversifying overwhelmingly chosen natural gas plants to Colorado’s generation portfolio, just like di- meet Colorado’s new generating needs, in versifying investments in the stock market, line with most other utilities across the coun- can insulate consumers from unpredictable try. With their low up-front capital costs, price fluctuations. natural gas power plants make attractive in- Limited domestic reserves of natural gas vestments. However, the unpredictable price and uncertain foreign supplies make it nearly of natural gas leaves ratepayers vulnerable certain that gas costs overall will gradually to dramatically increased prices. Over-reli- rise over time. Proven domestic reserves will ance on natural gas also exposes customers be spent by 2008, according to demand pro- who use natural gas for heating to price jections by the U.S. Department of Energy. spikes caused by increased demand and de- The U.S Geological Survey estimates that creased supply. future domestic finds will total 1,049 trillion Since natural gas power plants are depen- cubic feet of gas, which Department of En- dent on unstable supplies of natural gas and ergy growth predictions suggest will only get fluctuating prices, electricity generating costs us to 2040.98 As we begin to import more of from gas plants can rise dramatically during our natural gas supply, prices will rise due gas price spikes. In late 2000, natural gas to increased delivery costs.99 costs more than tripled to $10 per thousand Wind energy prices, in contrast, are pro- cubic feet.95 One of the biggest reasons for jected to decline as the industry matures, this price spike was natural market fluctua- takes advantage of economies of scale, and tion. Fifteen years of low gas prices and the deploys more advanced technologies. Over resulting disincentive for resource develop- the past several decades, the cost of wind ment followed by a cold winter led to de- power has dropped over 80%.100 As the in- pleted stocks and unprecedented wholesale dustry grows and takes advantage of im- prices. proved technology and increased economies With rapidly increasing natural gas de- of scale, the cost of wind energy will con- mand in the Western market and far from tinue to decline. In 2010, wind energy is pre- guaranteed supply, such price spikes are al- dicted to be one of the cheapest electricity most certain to be a periodic occurrence in generating technologies available at electric- the future. One recent study documents a risk ity costs of 2.1 to 2.7 ¢/kWh.101 in California of volatile and rising gas prices Wind power is already competitive with and recurring supply problems, because there natural gas, and its advantages will grow is a good chance that existing and currently stronger in the future. In 2001, the Colorado anticipated infrastructure will not be able to Public Utilities Commission determined that meet rising demands.96 As the state found when gas costs are higher than about $3.50 out in late 2000, Colorado natural gas prices per thousand cubic feet, well-designed wind

Wind Energy 25 CoPIRG Education Fund projects can be the most competitive energy average homeowner’s monthly electricity source. In 2002, electric utilities have so far bill by 0.7%.104 The Lamar wind project paid prices in the range of $3.10 to $3.85 scheduled to be built in Eastern Colorado per thousand cubic feet.102 In a similar hear- next year will sell electricity for 3.261 ¢/ ing regarding wind power in Minnesota, the kWh, a very cheap price compared to the 2.5 Minnesota Public Utilities Commission ¢/kWh premium Xcel charges on top of nor- found that “the only reason given by any mal rates for its Windsource program.105 In party for finding the additional wind gen- fact, using estimates of backup costs ap- eration not in the public interest is that it will proved by the Colorado Public Utilities Com- allegedly cost more than natural gas genera- mission, Xcel’s own modeling shows that tion, currently the lowest-priced competitor. including this project in their portfolio re- The Commission finds that this price differ- duces overall costs by a net present value of ential, if it exists, is not large enough to over- $6.9 million. come the strong public policies favoring the Consumers will experience these savings development of this wind resource.”103 directly in their wallets, increasing the One study found that installing 1,200 MW amount of money they have available to of new wind generation over 15 years in Iowa spend in other sectors of the economy. The would yield a net savings of $300 million effects will be felt throughout the state. dollars over the next 30 years, reducing the

26 Wind Energy CoPIRG Education Fund STATE POLICIES SUPPORTING WIND ENERGY 1999. The standard requires 2,800 MW of tate policy is crucial to realizing the renewable energy to be in place by 2009, or benefits of renewable energy. His approximately 3% of the state’s generating torically, there has never been a new S needs. An enforcement surcharge for miss- energy technology commercialized without ing renewable energy credits backs up the help from the government. Existing fossil requirement.106 The market created by this fuel technologies benefit from large tax and standard supported the construction of 912 public expenditure subsidies and from free MW of wind energy capacity in 2001 alone, use of the air, land, and water for waste dis- putting Texas firmly into the leading ranks posal. Mature technologies have the advan- of sustainable electricity generation. tage of occupying large and proven markets. Most of this requirement will be met with Policy makes it possible for new energy tech- wind energy, currently the least expensive nologies to compete with conventional en- renewable resource available. Wind speeds ergy sources. These policies act like a ladder, in the range of 18 mph and turbines produc- easing passage over an initial hurdle and ing an average of 40% of their peak capacity helping technologies compete based on their allow wind energy facilities in West Texas inherent strengths and weaknesses, rather to produce cheap electricity. With the re- than on market share alone. cently renewed federal Production Tax Credit Other states prove how crucial policy is. of 1.7 ¢/kWh, these facilities produce energy From state contracts for renewable power to for less than 3 ¢/kWh, competitive with renewable purchase obligations to tax incen- Texas’ natural gas plants even at low natural tives, many states are finding ways to bal- gas prices.107 Some of the largest wind en- ance the playing field for renewable energy ergy facilities in the world are being built in with well-established fossil fuel technologies West Texas. Most recently, FPL Wind En- like coal and natural gas. The lasting market ergy built a 278 MW project there, north of for renewable power thus created is helping McCamey. states to realize the long-term advantages of In response to Texas’ renewable energy renewable energy and promote outcomes requirement and uncertainty about the dura- they find beneficial for society. For example, tion of the Federal Production Tax Credit, these types of policies are helping Texas, utilities and wind companies invested $1 bil- Minnesota, and Iowa to develop more wind lion in 2001 to build new wind energy energy than other states in the Midwest, pro- projects.108 These projects created 2,500 di- tecting consumers from price spikes, reduc- rect jobs with a payroll of $75 million, and ing air pollution, and strengthening the rural will create $13.3 million in tax revenue and economy. $2.5 million for landowners in 2002 alone.109 The renewables standard is driving utili- Texas ties to gain experience with new technolo- gies. As written, the renewables standard A renewables portfolio standard, requiring applies only to investor owned utilities. Al- that utilities purchase a small amount of their though all utilities in Texas have access to electricity from renewable energy providers, federal incentives for wind power and to a is driving rapid growth in the Texas wind renewable energy credit trading program in energy market, helping to reduce air pollu- Texas, only investor owned utilities made tion, ease demand for natural gas, revitalize significant acquisitions of wind power. Three struggling rural areas, and provide inexpen- of these companies bought 610 MW of wind sive electricity. energy in 2001, while six other utilities with- The renewables standard was signed into out a purchasing requirement bought only 1 law by then-Governor George W. Bush in

Wind Energy 27 CoPIRG Education Fund MW. These three investor owned utilities alone exceeded the entire state requirement A Few Wind Farms Created by for 2001 by more than 200 MW. They seem Iowa Policy to have found renewables to be less expen- Iowa’s wind farms at Storm Lake (196 sive and more reliable than predicted, and MW) and Clear Lake (42 MW) directly they bought more than strictly necessary.110 result from state policy. These wind This policy provided dramatic benefits to farms pay royalties to 115 different land- the people of Pecos County, Texas. This owners, totaling roughly $640,000 per county is one of the top ten oil producing year. They pay $2 million in property counties in the state, but now it is attracting taxes to counties. They employed 200 people for 6 months in construction, new types of prospectors – ones that search and support 40 permanent operations for landowners with excellent wind re- and maintenance workers.121 sources.111 With over 400 MW of installed wind farms, the county added 14% to its to- nomic and environmental benefits of renew- tal tax base in just one year.112 The County able power, which the state wanted to en- will receive $4.6 million in additional prop- courage.116 The Board felt that this price erty tax revenue in 2002. balanced the need to encourage renewable energy development with reasonable rates for Iowa consumers. They noted, “While the immediate impact Motivated by a desire to “conserve … finite of the 6-cent rate may be negative … if and expensive energy resources and to pro- viewed from a rate impact standpoint only, vide for their most efficient use,” Iowa policy ratepayers gain from diversity of fuel sup- encourages the development of renewable ply, lock-in of a 6-cent rate for the long-term, 113 energy facilities. The 1983 Alternative and environmental and economic benefits” Energy Production Law and its 1991 amend- resulting from the development of ments require electric utilities to enter into renewables.117 long-term contracts for renewable energy. Two economic incentives back up this re- This law required that investor-owned utili- quirement. The Federal Production Tax ties in the state acquire 105 average mega- Credit reduces the price of wind-generated 114 watts of renewable energy. For over 10 electricity by 1.7 ¢/kWh over the first 10 years, the utilities resisted the requirement, years of electricity production. This credit is balking at any type of forced terms coming available to facilities commissioned in any from the state utility board. state through 2003. Iowa also has a sales tax Windustries, Inc. and Midwest Wind De- exemption for manufacturing or purchasing velopers filed petitions with the Iowa Utili- wind energy equipment. This statute exempts ties Board in 1995, urging the Iowa Utilities from the state sales tax the total cost of wind Board to enforce the law. The board found energy equipment and all materials used to that the utilities were not meeting their pur- manufacture, install, or construct wind en- chase requirements, and that willing renew- ergy systems.118 able energy providers were ready to supply The collective impact of these policies has power. made Iowa one of the leading wind energy In 1996, the Board set the standard con- markets in the Midwest. At the end of 2001, tract price at 6 ¢/kWh over 33 years, guar- Iowa had 324 MW of wind power capacity anteeing a long-term market for some of the installed. Another 200 MW is in various first renewable energy facilities in the Mid- stages of planning. west.115 The price was set to reflect the eco-

28 Wind Energy CoPIRG Education Fund The utilities have already met their require- 1994, they ordered Xcel Energy to purchase ment, but are installing additional facilities wind energy in exchange for allowing them because they make economic sense, and utili- to store nuclear waste at one of their plants. ties are willing to enter into power purchase In 1999, the Minnesota Public Utilities Com- agreements. mission identified wind as a least-cost re- Renewable energy development in Iowa source, competitive with traditional has not begun to approach its potential, how- technologies. Finally, in 2002, the legisla- ever. Iowa is ranked 10th in the country in ture helped to level the playing field between wind energy potential, just ahead of Colo- wind power and traditional technologies by rado. A recent study by the Iowa Policy linking property tax payments to output in- Project, looking at several scenarios the state stead of assets for wind facilities. was considering to increase renewable en- Minnesota’s electrical resource planning ergy generation, found that alternative en- process has a clear preference for renewables ergy provides an excellent opportunity to and conservation. The rules are designed to generate and retain dollars in Iowa and re- ensure that utilities give adequate consider- duce the demand for coal.119 Another study ation to socioeconomic and environmental projects that increasing renewable electric- impacts of different resource mixes. Every ity generation could save the state’s two years, a utility must prepare and submit ratepayers over $300 million over the next least-cost estimates for meeting 50% and 30 years.120 75% of their new energy needs through con- servation and renewable energy. They also must evaluate the environmental costs of the Minnesota generation technologies they select.122 The Faced with growing pollution problems, es- Public Utility Commission also approves pecially the lack of safe storage space for nonrenewable energy facilities only if their nuclear waste, the Minnesota legislature es- renewable equivalents can be shown to be 123 tablished a preference for renewable energy. against the public interest. The legislature determined that renewable The legislature ordered Xcel Energy to buy power was the best way to reduce the harm- renewable power as part of a nuclear waste ful impact of conventional electricity gen- storage deal eight years ago. Xcel operates a eration. They put several policies in place to nuclear power plant at Prairie Island, Min- shift electricity production in a more sustain- nesota. In 1994, they ran out of viable places able direction. to store the extremely radioactive waste, and First, the legislature established a clear asked the legislature for permission to store preference for renewable energy and conser- it in dry casks on site. As a part of this deal, vation in their resource planning process. In the legislature prodded Xcel to get out of the

Landowners Take Advantage of Wind Energy Roger and Richard Kas of Woodstock were part of the first group of landowners to lease land to wind developers in response to the XCEL order. They have 17 turbines taking up two percent of their 320 acres of crop-producing land. Their turbines began generating electricity in 1999. The project has been so successful that the brothers have purchased and put up their own turbines, financed by a local bank. The brothers see it as an opportunity to grow one more crop. In a recent newsletter for farmers looking to take advantage of the wind on their land, Roger said, “we’re here everyday feeding the cattle and taking care of the farm, and we see the wind turbines as just a few more machines for us to take care of.”129

Wind Energy 29 CoPIRG Education Fund nuclear business by ordering Xcel to pur- tional property taxes, and created a direct chase 425 MW of wind and 125 MW of bio- payment program based on the actual elec- mass facilities by 2002. 124 This law spurred tricity generation of the project. Basing tax the construction of the Lake Benton wind payments on output rather than assets brings farms (211 MW), creating 240 year-long Minnesota one step closer to establishing tax construction jobs, $1.5 million in contracts equity between wind and conventional tech- to Minneapolis engineering firms, and 61 nologies. ongoing jobs in operation, maintenance, ad- Minnesota also has a renewable energy ministration, and sales in rural Minnesota. goal of generating 10% of its electricity from A second part of this deal stipulated that renewables by 2015, excluding the 825 MW an additional 400 MW of wind must be added Xcel was ordered to purchase. This goal re- if the Public Utilities Commission found that quires “good-faith” efforts from utilities, and wind was competitive as a part of its least- does not include any enforcement mecha- cost resource planning process. In 1999, the nism other than the resource planning pro- commission ordered Xcel to bring the addi- cess.127 As a result, this goal is unlikely to tional capacity online by 2012, finding that drive the renewable energy market signifi- wind was at least as attractive as natural cantly. gas.125 At the end of 2001, Minnesota had 319 In 2002, the Minnesota legislature enacted megawatts of wind energy capacity. Within a change in the way that wind farms are the next decade, Minnesota will have at least taxed, helping to level the playing field be- 825 MW of wind energy capacity.128 Min- tween wind energy and traditional technolo- nesota ranks 9th in terms of wind energy po- gies.126 Since the assets of renewable energy tential, just ahead of Iowa and Colorado. producers are worth more in terms of replace- Given this potential, much more renewable ment value, they paid higher taxes. The bill energy development should happen in the exempted wind energy projects from tradi- state.

30 Wind Energy CoPIRG Education Fund POLICY FINDINGS

he single biggest impediment to de- Transmission Planning veloping renewable energy projects Other potential obstacles to renewable energy is that nearly all of the costs are in- T development can happen when transmission curred up-front, in the form of initial con- capacities are inadequate. Because adding or struction costs. In effect, renewable energy upgrading transmission lines often takes longer producers are financing 30 years worth of than building a new wind plant, problems can power all at once. In the absence of long term occur in getting the wind-generated electricity contracts, building renewable energy plants to market. For example, there is a small bottle- involves more risk to investors due to uncer- neck between the Lamar wind facility and the tain future markets. Traditional power plants rest of Xcel’s grid which is not scheduled to be fixed until 2005.132 Some of the wind farms in can be more attractive to investors because West Texas are experiencing similar prob- the technologies have been around longer, lems.133 require less initial investment, and attract long-term purchase contracts from utilities; In order to accommodate sustained new wind power development, Colorado will need to make fuel costs are then incurred over time, and sure that necessary transmission upgrades are increases due to fuel cost changes can be timely. By keeping a close eye on transmission passed on to consumers. planning with wind power in mind, the PUC can Due to the real and perceived risks associ- play an important role in helping the state real- ated with wind power, lenders have offered ize the benefits of wind energy. less favorable financing terms and demanded a higher return on investment than for tradi- 130 nologies will then be able to gain a larger tional energy sources. For capital-inten- market share with less assistance. sive technologies like wind, the price of Colorado can choose from a variety of electricity depends greatly on the interest rate policy options to enable the state to success- at which the owners pay off debt. A 1996 fully develop its wind energy resources, meet study by the Lawrence Berkeley National more than half of new demand for electric- Laboratory found that contract prices for ity with clean and sustainable energy over wind-generated electricity could decrease by the next two decades, and realize the eco- 25% with financial terms typical of natural 131 nomic benefits that renewable energy can gas projects. provide. Based on the experience of other High plant construction costs followed by states, the most effective policies ensure a almost free production makes renewable en- lasting, stable market for renewables upon ergy unique in the world of electricity gen- which developers and investors can depend. eration. But, electricity is also somewhat These policies include renewable purchase unique in that it is a commodity we all use obligations and several types of tax incen- which has a long history of regulation to tives. ensure stable supplies at fair prices. To pro- mote renewables, the state can provide a Renewable Purchase Obligations guaranteed market for renewable energy, Creating a guaranteed market for renewable without vast subsidies or regulation of spe- energy with a purchasing requirement will cific investments. If renewable energy pro- ensure that wind developers do not overlook ducers had a guaranteed price for much of Colorado. To ease the hurdle of high up-front the lifetime of their plants, the high construc- costs and uncertain markets, the state can tion costs would present less of a barrier and require utilities to enter into long-term con- attract better financing terms. Given a foot- tracts with renewable energy producers. Such hold in the market, renewable energy tech- agreements guarantee a set price for much

Wind Energy 31 CoPIRG Education Fund of the lifetime of the plant, reduce the risk of Service Charges to Fund Renewable En- investment, and make it possible to produce ergy Development cheaper electricity. Along with several other A small charge added to monthly utility states, Texas has chosen this type of policy bills can raise funds to support renewable to encourage renewable energy generation. energy development. Colorado has a similar Effective purchase requirements include a service charge on telephone bills known as clear way to track utility compliance and a the Universal Service Charge. This charge system of incentives and penalties to encour- ensures that rural Colorado has access to af- age utilities to follow through with procur- fordable telephone service. A service charge ing renewable energy. for renewable energy can support a variety Tax Incentives for Renewable Energy of activities to support renewable energy Equipment generation, including research, development, transmission upgrades, promotion of Tax incentives such as Iowa’s sales tax Colorado’s renewable energy resources and exemption for equipment used in wind farm capabilities, and other energy-related envi- construction or manufacturing can help make ronmental improvements. The funds could wind energy more economical. These incen- help Colorado attract and retain more renew- tives reduce the initial capital investment able energy activity and dollars within the required to develop a wind farm and produce state. a lower levelized cost for wind-generated electricity.

32 Wind Energy CoPIRG Education Fund METHODOLOGY

his study provides a sketch of the eco- towards local labor for installation, and 80% nomic impacts of supplying a signifi- will go towards manufacturing. They further Tcant amount of Colorado’s electricity estimate that operating and maintaining 1 needs with wind energy. The intent is to give MW of wind energy requires 0.29 people, a relatively simple estimate of the economic half of which will be local workers. value of various activities supported by the Natural gas employment estimates derive wind industry, as if all of the wind installa- from employment intensities at 19 proposed tion happened in the present. Accordingly, natural gas plants in California and Colorado future dollar values do not include inflation demand projections.137 These plants require or discount estimates. Key assumptions and an average of 0.49 installation jobs and 0.04 calculations are summarized below. operation and maintenance jobs per MW. The manufacturing estimate in this report projects Demand Prediction and employment of 0.34 jobs per MW, assum- Wind Power Growth ing a representative cost breakdown for a Public Service Company of Colorado (PSCo) natural gas plant of 30% installation and 70% assumes 2.2% yearly growth in Colorado’s components, 2.3 times as many jobs for electricity generating needs in their 1999 manufacturing than installation, and 30% in- demand forecast.134 Baseline utility genera- state manufacturing.138 tion from 1988-2000 in Colorado is reported Indirect employment figures derive from by the Energy Information Administration an estimate of 1.15 indirect jobs for every (EIA).135 The economic analysis is based on direct job by the Texas Comptroller’s of- assuming that wind energy will meet one half fice.139 Natural gas extraction employment of new demand from 2003 through 2012 and estimates employ the following sources: the three quarters of new demand from 2013 natural gas capacity projection of 2,400 MW, through 2020. The amount of wind energy PSCo’s estimate of 42% Colorado natural gas facilities necessary derives from assuming supply for its power plants, figures on elec- the turbines will operate at 30% capacity in tricity generated by natural gas in 1999 2002, and that technological advances will (2,049,492 MWh) and amount of gas used result in an increase in capacity factor of 1% for electricity generation in 1999 (19,149 every two years. The analysis of the impacts mcf) from the Energy Information Adminis- of natural gas stem from the amount of new tration, the 2001 Colorado employment fig- natural gas plants required to supply the same ures for oil and gas extraction and pipeline amount of electricity, based on a 59% ca- work (4,478 people), the economic value of pacity factor as projected by PSCo for their domestic natural gas production vs. oil pro- newest plants. 136 duction (59% natural gas), and total Colo- Employment rado natural gas production in 2001 (736,299 mcf).140 Wind energy employment impacts derive The total employment figures reported in from applying employment estimates from the summary sections derive from adding all the Electric Power Research Institute (EPRI) of the direct and indirect jobs, split between to the projected development of 4,800 MW temporary installation and manufacturing of wind power as described above, assum- jobs and permanent operations and mainte- ing only 10% of manufacturing activity will nance jobs. happen in-state. EPRI predicts that the manu- facturing and installation of 1 MW of wind Landowner Income power requires 2.57 people working for one Royalties from land leases to wind farm year. They estimate that 20% of that will go owners are estimated at 2.5% of the yearly

Wind Energy 33 CoPIRG Education Fund sale of electricity at 3 ¢/kWh, escalating with a $540,000 / MW estimate of capital cost projected growth in wind power use. depreciating over a 30 year lifetime.141 Local Taxes Displaced Water Use Wind farm property taxes are estimated us- According to the American Wind Energy ing projected yearly growth in wind power association, natural gas plants use 250 gal- use, the average Colorado county property lons of water per MWh generated.142 Water tax rate of 1.59%, and a natural gas equiva- use for natural gas plants was calculated ac- lent $540,000/MW capital cost depreciating cording to this rate applied to growth pro- over a 25-year lifetime. Natural gas prop- jections. erty taxes derive from growth projections and

34 Wind Energy CoPIRG Education Fund NOTES by an average capacity factor. Capacity factors are 1. Texas SEED Coalition and Public Citizen, Renew- assumed to increase one percent every two years, be- able Resources: The New Texas Energy Powerhouse, ginning with an average capacity factor of 30% in September 2002. 2002. 2. Jason Henderson, “Will the Rural Economy Re- 13. European Commission, Research Program, New bound with the Rest of the Nation?” The Main Street Research Reveals the Real Costs of Electricity in Eu- Economist, published by the Center for the Study of rope (press release), 20 July 2001. Rural America, January 2002. 14. Jeff Fleshman, Mine Safety and Health Adminis- 3. Debbie Wehkamp, Gray County Wind Energy, per- tration, Colorado District 9, Accident Investigation sonal communication, 11 October 2002. Report: Fatal Explosives Accident, Trapper Mine, Craig, Moffat County, Colorado, 12 August 1999. 4. Andrew Revkin, “U.S. Sees Problems In Climate Change,” New York Times, 3 June 2002; U.S. Depart- 15. See Andrew Revkin, “U.S. Sees Problems In Cli- ment of State, U.S. Climate Action Report 2002, May mate Change,” The New York Times, 3 June 2002; U.S. 2002. Department of State, U.S. Climate Action Report 2002, May 2002. 5. Public Service Company of Colorado, 1999 Draft Integrated Resource Plan, 1999, 13(3). Public Service 16. U.S. General Accounting Office (GAO), Clean Company is a wholly owned subsidiary of Xcel En- Coal Technology (RCED-00-86R), March 2000; U.S. ergy, which views coal plants as unfavorable because GAO, Fossil Fuels: Outlook for Utilities’ Potential they are more expensive to build than gas-fired plants Use of Clean Coal Technologies RCED-90-165), May and face increasing regulation and environmental scru- 1990. tiny. 17. Compliance Publishers, “Global Settlement for 6. Tri-State Generation and Transmission Association, Citizen Suit,” Colorado Compliance, 31 January 2002. Headline News, downloaded from www.tristategt.org, 18. Cathy Proctor, “Xcel Pulls Out of Coal-Fired Pro- 8 October 2002. posal,” Denver Business Journal, 16 August 2002. 7. Wind potential: D. L. Elliot, et al , Pacific North- 19. Public Service Company of Colorado, Draft Inte- west Laboratory, An Assessment of the Available Windy grated Resource Plan, 1999, 13(3), available at Land Area and Wind Energy Potential in the Contigu- www.ncenergies.com; Public Service Company of ous United States,1991; Current Colorado energy de- Colorado, Windsource (factsheet), downloaded from mand: Gary Schmitz, Colorado Public Utilities Com- www.psco.com/solutions/windsource.asp, 8 October mission, Colorado Utility Landscape (presentation), 2002 Colorado Wind and Distributed Energy Conference, 20. In their most recent resource planning document, 8 April 2002. Public Service Company of Colorado estimates that, 8. U.S. Department of Energy, National Renewable on average, their new natural gas plants will operate Energy Laboratory, U.S. Wind Resources Accessible at about 59% of their full capacity. (Public Service to Transmission Lines, 5 August 1994. Company of Colorado, Draft Integrated Resource 9. Michael Brower, Patrick Hurley, and Rich Simon, Plan, 1999, available at www.ncenergies.com). Wind Brower and Company and RLA Consulting, A GIS- energy requires more peak capacity to supply the same Assisted Approach to Wide-Area Wind Resource As- energy because of natural variability in wind speed. sessment and Site Selection for the State of Colorado, Wind farms typically operate at 25% to 40% of peak presented at WINDPOWER 1996: The Annual Con- capacity, depending on location, wind speed, and tech- ference and Exhibition of the American Wind Energy nology. The analysis in this report assumes the aver- Association, June 1996. age wind farm will operate at 30% capacity in 2002, increasing 1% every 2 years due to technological im- 10. Public Service Company of Colorado, Draft Inte- provements such as bigger turbines and taller towers. grated Resource Plan, 1999, available at www.ncenergies.com; The Energy Information Ad- 21. University of Colorado at Boulder, Business Re- ministration estimates growth in the range of 1.8 to search Division, Colorado Renewable Energy Indus- 2.1% for the whole country. try: Current Economic Impact and Growth Require- ments, December 1998, available at www.state.co.us/ 11. U.S. Department of Energy, National Renewable oemc. Energy Laboratory, U.S. Wind Resources Accessible to Transmission Lines, 5 August 1994. 22. Ibid. 12. Reported in nameplate, or peak, capacity. Wind 23. Ibid. farms produce less than their maximum output because 24. Ibid. of variability in the wind. Energy output is described 25. Ibid.

Wind Energy 35 CoPIRG Education Fund 26. Ibid. Settlement Agreement, Decision No. C02-1122, 2 Oc- 27. Ibid. tober 2002. 28. Gbenga Alaran, World Markets Research Centre, 46. See note 43. World Markets in Focus 2002: Renewable Energy 47. Ibid. Outlook: Vying for Market Share, downloaded from 48. U.S. DOE, Energy Information Administration, www.worldmarketsanalysis.com, 9 October 2002. U.S. Natural Gas Prices, Most Recent Monthly Data, 29. U.S. Department of Energy, National Renewable downloaded from www.eia.doe.gov, 22 October 2002. Energy Lab, NREL at a Glance, 13 February 2002. 49. See Note 45. 30. Ibid. 50. Reported in nameplate, or peak, capacity. We as- 31. CH2M Hill, Wind Power Development (brochure), sume an average capacity factor of 30% for wind fa- 2002. cilities in 2002, growing at 1% every two years, reach- 32. Marilyn Hardee, Pan Aero staff in Lakewood, CO, ing 39% in 2020. Because natural gas facilities oper- personal communication, 9 October 2002. ate at a higher capacity, less total MW will be required to produce an equivalent amount of electricity as wind. 33. The Industrial Company, TIC Background, down- loaded from www.tic-inc.com on 10 October 2002. 51. G. Simons and T. Peterson, Electric Power Re- search Institute, California Renewable Technology 34. Architectural Energy Corporation, Company Pro- Market and Benefits Assessment, Report #1001193, file, downloaded from www.archenergy.com on 10 November 2001. October 2002. 52. G. Simons and T. Peterson, Electric Power Re- 35. John McKinney, Verde Power, personal commu- search Institute, California Renewable Technology nication, 17 October 2002. Market and Benefits Assessment, Report #1001193, 36. Public Service Company of Colorado, Windsource November 2001; Of the 2.57 jobs / MW created by (factsheet), downloaded from www.psco.com/solu- wind farms, EPRI estimates 20% are local labor, and tions/windsource.asp, 8 October 2002. the other 80% are manufacturing labor, potentially 37. Land and Water Fund of the Rockies, Grassroots distant from the site of installation. Campaign for Wind Power (webpage), viewed at 53. See Note 21. www.cogreenpower.org, 10 October 2002. 54. Mike Dennison, “PSC Sets Hearing on Wind Farm 38. Public Service Company of Colorado, Windsource Offer,” Great Falls Tribune Online, 10 October 2002. (factsheet), downloaded from www.psco.com/solu- 55. Robert Muniz, “Up To 600 Jobs Blow Into Town,” tions/windsource.asp on 8 October 2002; American The Pueblo Business Journal, 23 June 2000. Wind Energy Association, Project Case Study: Ponnequin (factsheet), 1999. 56. Jack Lyne, “Denmark’s Vestas Blowing Into Port- land, Ore., Bringing 1200 Jobs,” The Site Selection 39. Geoffrey O’Gara, “Beyond Fossil Fuels: The New Online Insider, 29 April 2002, available at Cash Crop,” Sierra Magazine, July/August 2002. www.conway.com. 40. Ibid. 57. See Note 45. 41. Stephen Yatsko, EnXco, Peetz, Colorado Wind 58. See Note 1. Project: A Primer on Project Development, presented at the Colorado Wind and Distributed Energy Confer- 59. Colorado Department of Labor, Employment and ence, 8 April 2002. Wage Data, 2 October 2002, available at navigator.cdle.state.co.us. 42. Jay Warburton, Peetz, downloaded from www.ghosttowns.com/states/co/peetz.html, 10 Octo- 60. See Note 1. ber, 2002. 61. See Note 51. 43. Colorado Public Utilities Commission, Decision 62. See Note 59. Approving Phase II of Integrated Resource Plan, De- 63. G. Simons and T. Peterson, Electric Power Re- cision No. C01-295, 34, 28 March 2001; Ron Lehr search Institute, California Renewable Technology et.al., National Renewable Energy Laboratory, Colo- Market and Benefits Assessment, Report #1001193, rado Public Utility Commission’s Xcel Wind Decision, November 2001; EPRI estimates 0.29 operations and September 2001, NREL/CP-500-30551. maintenance jobs per MW, with 50% going to local 44. Ibid. labor. 45. Colorado Public Utilities Commission, Initial 64. See Note 59. Commission Decision Approving Stipulation and

36 Wind Energy CoPIRG Education Fund 65. Permit applications and related staff analyses are able Resources: The New Texas Energy Powerhouse, available at www.energy.ca.gov/sitingcases/ September 2002). approved.html. Similar data from Colorado power 78. PSCo indicates a preference for areas relatively plants was not obtainable. close to Denver, such as Brush. (Public Service Com- 66. Robert Taud, Juergen Karg, and Donal O’Leary, pany of Colorado, Draft Integrated Resource Plan, “Gas Turbine Based Power Plants: Technology and 1999,. available at www.ncenergies.com.) Market Status,” The World Bank Energy Issues, No. 79. See Note 51. 20, June 1999. 80. Colorado Statutes 2002, Title 39, Article 4, Sec- 67. See Note 65. tion 102; Senate Bill 01-144, 2001. 68. See Note 1. 81. Based on applications for Blythe, Antioch, High- 69. Based on applications for Sunrise, Moss Land- Desert, La Paloma, Metcalf, Mountainview, Otay ing, La Paloma, Elk Hills, and Midway-Sunset. Esti- Mesa, Pastoria, Russell City, and Three Mountain. mates are included in the Commission final decisions Capital cost estimates are included in the Commis- for these plants, available at www.energy.ca.gov/ sion final decisions for these plants, available at sitingcases/approved.html. www.energy.ca.gov/sitingcases/approved.html. 70. Derived from 1999 summary electricity statistics 82. 29% of the capital cost of a facility applies to the for Colorado, (U.S. Department of Energy, Energy taxable resources of a county, and the average county Information Administration, State Electricity Profiles, has a mill levy of 55.8 (State of Colorado, Division of Colorado, 1999, available at www.eia.doe.gov.); also Property Taxation, Annual Report, 2001). Public Service Company of Colorado, Draft Integrated 83. State of Colorado, Division of Property Taxation, Resource Plan, 1999,. available at Annual Report, 2001. www.ncenergies.com. 84. See note 81. 71. Public Service Company of Colorado, Draft Inte- grated Resource Plan, 1999, available at 85. Tri-State Generation and Transmission Associa- www.ncenergies.com. tion, Description of Laramie and Craig Stations, viewed at www.tristategt.org, 8 October 2002. 72. See Note 59. 86. American Wind Energy Association, How Much 73. Calculation based on average production levels Water Do Wind Turbines Use Compared to Conven- and wellhead prices from 1996-2000 (EIA, Annual tional Power Plants? (factsheet), 1999. Energy Review 2000, Table 5.2 and Table 6.8; EIA, Natural Gas Annual 2000, Table 3; EIA, Petroleum 87. Frank Knutson, “Drought Driving Up Power Marketing Monthly, Table 1, 31 May 2002). Costs, Hurting An Already Distressed Ag Industry,” GM’s Forum, downloaded from www.tristategt.org, 74. U.S. Department of Energy, Energy Information 14 October 2002. Administration, Natural Gas Production and Use by Colorado, 1997-2002, available at www.eia.doe.gov. 88. Jori Hawkins, Water Colorado, personal commu- nication, 22 October 2002. Recent prices of water sales 75. Lease payments range between 2 percent to more are available at www.watercolorado.com. than 10% of yearly gross revenues, depending upon competing land uses (National Wind Coordinating 89. Coal plants use nearly twice as much water. If Committee, The Effect of Wind Energy Development wind energy displaces coal-fired generation, the state on State and Local Economies, Wind Energy Series would save 6 billion gallons of water per year in 2020, #5, January 1997, available at with water rights worth $210 million. www.nationalwind.org.); an assumed lease payment 90. Colorado Department of Local Affairs, Colorado of 2.5% is common (see National Wind Coordinating Economic and Demographic Information System, ac- Committee, The Effect of Wind Energy Development cessed at www.dola.state.co.us/is/cedishom.htm, 14 on State and Local Economies, Wind Energy Series October 2002. #5, January 1997, AWEA, Texas SEED Coalition and 91. U.S. Comptroller of the Currency, Community Public Citizen, Renewable Resources: The New Texas Reinvestment Act Performance Evaluation, First Com- Energy Powerhouse, September 2002). munity Charter Bank in Lamar, 3 March 1997. 76. M. Brower, et al., Union of Concerned Scientists, 92. See Note 90. Powering the Midwest: Renewable Electricity for the Economy and the Environment, 1993. 93. Using a capacity factor of 30% and the contract price of $0.03261 per kWh. 77. The best wind energy projects in Texas have elec- tricity purchase contracts in the range of 3¢/kWh 94. According to the National Wind Coordinating (Texas SEED Coalition and Public Citizen, Renew- Committee, operation and maintenance expenditures

Wind Energy 37 CoPIRG Education Fund for a 100 MW wind farm create about $500,000 in Rights; A New Type of Prospector,” Wall Street Jour- spending per year for local goods and services (Na- nal, 23 September 2002. tional Wind Coordinating Committee, The Effect of 112. Texas SEED Coalition and Public Citizen, Re- Wind Energy Development on State and Local Econo- newable Resources: The New Texas Energy Power- mies, Wind Energy Series #5, January 1997). house, September 2002. 95. Energy Information Administration, United States 113. Iowa Code 476.41 through 476.45, viewed in Country Analysis Brief, May 2002. 2002. 96. Mark Bernstein, Paul Holtber, David Ortiz, RAND 114. Database of State Incentives for Renewable En- Science and Technology, Implications and Policy ergy, Iowa, viewed at www.dsireusa.org, 3 Oct 2002. Options of California’s Reliance on Natural Gas, 2002. 115. Iowa Utilities Board, Docket Nos. AEP-95-1 97. Mark Bolinger, Ryan Wiser, and William Golove, through AEP-95-5, 9 August 1996. Lawrence Berkeley National Laboratory, Environmen- tal Energy Technologies Division, Quantifying the 116. Iowa Utilities Board, Docket No. RMU-90-35. Value That Wind Power Provides as a Hedge Against 117. See Note 115, 6. Volatile Natural Gas Prices, the proceedings of 118. Iowa Code 422.45(48), 1999. WINDPOWER 2002, June 2002. 119. David Swenson and Liesl Eathington, The Iowa 98. Brad Heavner and Marianne Zugel, California Policy Project, Statewide Economic Values of Alter- Public Interest Research Group Charitable Trust, Pre- native Energy Sources and Energy Conservation, dictably Unpredictable: Volatility in Future Energy March 2002. Supply and Price from California’s Over-Dependence on Natural Gas, September 2001. 120. See Note 104. 99. U.S. Department of Energy, Energy Information 121. The American Wind Energy Association, Iowa Administration, Assumptions to the Annual Energy Factsheet, viewed at www.iowawind.org/facts.html, Outlook 2001, December 2000, 75. 7 October 2002. 100. American Wind Energy Association, The Eco- 122. Minnesota Statutes, 216B.2422, subdivision 2, nomics of Wind Energy (factsheet), March 2002. 2002. 101. California Energy Commission, Energy Technol- 123. Minnesota Statutes, 216B.2422, subdivision 4, ogy Status Report, 1996; U.S. Department of Energy, 2002. Office of Utility Technologies, Renewable Energy 124. Minnesota Statutes, 216B.24.23, 2000. Technology Characterizations, December 1997; U.S. 125. Minnesota Public Utility Commission, Order Department of Energy, Levelized Cost Summary for Modifying Resource Plan, Requiring Additional Wind NEMS, (AEO2001/D101600A), 2001. Generation, Docket E-002/RP-98-32, 17 February 102. See Note 48. 1999. 103. Minnesota Public Utility Commission, Order 126. Minnesota Statutes, Chapter 377, 2002. Modifying Resource Plan, Requiring Additional Wind 127. Michael Noble, Minnesotans for an Energy Ef- Generation, Docket E-002/RP-98-32, 17 February ficient Economy, Personal Communication, 3 Octo- 1999, 9 (emphasis added). ber 2002. 104. Thomas Wind, Wind Utility Consulting, Pro- 128.The New Rules Project of the Institute for Local jected Impact of a Renewables Portfolio Standard on Self Reliance, Renewable Generation Policies Iowa’s Electricity Prices, 31 January 2000. (factsheet), viewed at www.newrules.org/electricity/ 105. See Note 45. rmandateMN.html, 7 October 2002. 106. Ryan Wiser and Ole Langniss, Lawrence Berke- 129. Windustry, “Kas Brothers Plant 25-year Cash ley National Laboratory, The Renewable Portfolio Crop This Season: Wind Power,” Windustry Newslet- Standard in Texas: An Early Assessment, 13 Novem- ter, Spring 2001. ber 2001. 130. American Wind Energy Association, The Eco- 107. Ibid. nomics of Wind Energy (factsheet), March 2002. 108. See Note 1. 131. Ryan Wiser and Edward Kahn, Lawrence Ber- 109 Ibid. keley National Laboratory, Energy and Environment Division, Alternative Windpower Ownership Struc- 110. Ibid. tures: Financing Terms and Project Costs, May 1996. 111. Thaddeus Herrick, “The New Texas Wind Rush: 132. Colorado Public Utilities Commission, Docket Oil Patch Turns to Turbines As Ranchers Sell Wind No. 02A-438E, 26 September 2002.

38 Wind Energy CoPIRG Education Fund 133. See Note 1. gas vs. oil: calculation based on average production 134. See Note 71. levels and wellhead prices from 1996-2000 (EIA, An- 135. Energy Information Administration, State Elec- nual Energy Review 2000, Table 5.2 and Table 6.8; tricity Profiles, Colorado, 1999, available at EIA, Natural Gas Annual 2000, Table 3; EIA, Petro- www.eia.doe.gov. leum Marketing Monthly, Table 1, 31 May 2002; total 2001 natural gas production in Colorado: U.S. Depart- 136. See Note 71. ment of Energy, Energy Information Administration, 137. See Note 65. Natural Gas Production and Use by Colorado, 1997- 138. See Note 66. 2002, available at www.eia.doe.gov. 139. See Note 1. 141. Tax rate: State of Colorado, Division of Prop- erty Taxation, Annual Report, 2001; Capital cost for 140. Colorado natural gas vs. regional supply: Public wind: G. Simons and T. Peterson, Electric Power Re- Service Company of Colorado, Draft Integrated Re- search Institute, California Renewable Technology source Plan, 1999,. available at www.ncenergies.com; Market and Benefits Assessment, Report #1001193, electricity generated by natural gas and natural gas November 2001; Capital cost for natural gas estimated use by electric utilities: U.S. Department of Energy, from applications of 10 plants in California: Estimates Energy Information Administration, State Electricity are included in the Commission final decisions for Profiles, Colorado, 1999, available at these plants, available at www.energy.ca.gov/ www.eia.doe.gov.; Colorado natural gas extraction sitingcases/approved.html. employment: Colorado Department of Labor, Employ- ment and Wage Data, 2 October 2002, available at 142. See Note 86. navigator.cdle.state.co.us; economic value of natural

Wind Energy 39 CoPIRG Education Fund