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.