Catching the Wind: The impact of local vs. non-local hiring practices on construction of Minnesota wind farms JUNE 2018 This report was written by Katie Hatt and Lucas Franco. Design and layout by Rachel Weeks. About North Star Policy Institute: North Star Policy Institute is a Minnesota progressive think tank that advances public awareness of and discussion about state-level public policies. Our vision for Minnesota is a state where working families get ahead instead of just getting by; where all Minnesotans have the opportunity to succeed in the changing economy; and where smart investments in public services and infrastructure support healthy and connected communities. www.northstarpolicy.org CONTENTS Executive Summary . .2 Findings Recommendations Introduction . 3 The Wind Farm Industry in Minnesota . 6 Local Versus Non-Local Labor On a Typical Wind Energy Project . 8 Workers and Wages Local versus Non-Local Spending Patterns The Cumulative Impacts of Local Versus Non-Local Labor . 14 Conclusion . 16 Catching the Wind: The impact of local vs. non-local hiring practices on construction of Minnesota wind farms 1 EXECUTIVE SUMMARY Minnesota’s wind energy economy is w The difference in local economic booming. The state is eighth in the nation output of a largely local (50-70%) in net generation from wind energy. There versus non-local (10-30%) workforce are currently at least seven major wind would be approximately $32 million. farm projects seeking permits or in pre- w construction in Southern Minnesota. These By including retirement benefits that will be spent down the road by local projects will generate an additional 1,400 workers, the potential difference grows megawatts in renewable power and add to by approximately $13 million to $45 Minnesota’s already impressive wind energy million. portfolio. w For a region of the state that has These seven projects and others in the historically lagged the rest of Minnesota pipeline have the capacity to create in construction job creation and overall thousands of family-supporting construction economic vitality, this is a particularly jobs. Unfortunately, Southern Minnesota will concerning loss in economic activity. miss out on many of the economic benefits of new wind farm construction if developers Recommendations rely primarily on non-local construction workers. Unlike local workers, who spend The following recommendations could help their wages locally, non-local workers on to maximize the local employment and wind projects typically take the wages they economic benefits of new wind projects. earn back home when they leave. w First, to secure specific commitments To better understand the consequences of from developers and engineering, using local versus non-local workers, this procurement and construction (EPC) report analyzes the potential economic contractors to set local hire goals for impact of seven major wind farm projects in new wind farm projects during the Minnesota. project approval process. w Second, to require regular reporting by Findings developers on their use of local workers. w Third, to encourage collaboration with w Use of a 50% to 70% local workforce to state-registered apprenticeship programs, build 1,400 megawatts of proposed wind which can help recruit and train local generation is projected to generate $73 to workers in skills needed to build wind $89 million in local economic activity. energy facilities. w Use of a 10% to 30% local workforce to Through these modest proposals, we can build the same wind energy facilities would assure efficient use of investments and generate approximately $41 to $57 million maximize local benefits. in local economic activity. 2 North Star Policy Institute INTRODUCTION Minnesota’s wind energy economy is The majority of jobs needed to develop a booming. The state now ranks eighth in the wind farm are in the construction industry. nation in net generation from wind energy.1 A 200 megawatt wind farm, consisting of There are currently at least seven major 60-100 turbines, requires 150-200 wind farm projects seeking permits or in construction workers.6 pre-construction, all in Southern Minnesota. The construction of A 200 megawatt a wind farm relies on These projects will generate an wind farm, the labor of a range of additional 1,400 megawatts in skilled construction renewable power 2 and add to consisting of workers. Construction Minnesota’s already impressive 60-100 turbines, laborers help to build the wind energy portfolio. Today wind requires 150-200 access roads needed to energy conversion facilities provide construction carry heavy machinery nearly 18% of the state’s power, up to turbine installation 14% percent from 2012.3,4 workers. sites and they pour the concrete foundations for New wind farm development new turbines. Operating has created economic benefits for both engineers prepare the site and hoist the workers and land owners. The American turbine components. Iron workers secure Wind Energy Association (AWEA) the tower and help construct the foundation. estimates that, in 2017, wind farm projects Electricians connect the turbines to in Minnesota provided annual land lease transmission lines. payments of between $10 million and $15 million, generated $7.1 billion in total capital These jobs offer opportunities for investment and supported between 3,000 Minnesotans across a broad spectrum of and 4,000 direct and indirect jobs.5 construction experience – from those with no experience to career journeymen and 1 Energy Information Administration, “Minnesota State women. Profile and Energy Estimates,” https://www.eia.gov/ state/?sid=MN. A wind farm project typically includes 2 Minnesota Public Utilities Commission, “Project Database,” https://mn.gov/commerce/energyfacilities/ workers with extensive experience and highly Docket.html?searchSubject=Wind+power&searchSta- specialized skills (e.g. electrical workers with tus=openProjects&searchCoverage=&dateStart=&da- wind turbine expertise), workers with some teEnd=&B1=Submit. wind construction experience (e.g. operating 3 Department of Commerce, “Minnesota Renewable Energy,” http://mn.gov/commerce-stat/pdfs/2016-renew- engineers with past experience hoisting able-energy-update.pdf. turbine components), workers with only 4 Minnesota Public Utilities Commission, “Project general construction experience (e.g. laborers Database,” https://mn.gov/commerce/energyfacilities/ Docket.html?searchSubject=Wind+power&searchSta- tus=openProjects&searchCoverage=&dateStart=&da- 6 Jobs estimates based on author’s analysis of the teEnd=&B1=Submit. National Renewable Energy Laboratory’s (NREL) Jobs 5 American Wind Energy Association (AWEA), “Wind and Economic Development Impacts (JEDI) model. Energy in Minnesota,” http://awea.files.cms-plus.com/ Methodology for job estimates described later in this FileDownloads/pdfs/Minnesota.pdf. report. Catching the Wind: The impact of local vs. non-local hiring practices on construction of Minnesota wind farms 3 with experience in pouring concrete) and “It seems like a few of our wind developers those that are new to the industry with little have forgotten that Southern Minnesota is to no construction experience. home to one of the best wind construction workforces in the country. Our members Thus, there are many opportunities for haven’t just been building wind projects workers from Southern Minnesota to begin a safely, on-time, and on-budget in Minnesota well-paid job on a wind farm project. for more than twenty years. They’ve also been contributing to their communities Unfortunately, Southern through their paychecks, Minnesota may be missing health and retirement out on many of the economic “It seems like a benefits, and volunteer benefits of wind farm few of our wind hours.” 7 construction when developers developers have and contractors rely on non- When wind developers local construction workers to forgotten that increasingly rely on out- build wind energy projects. Southern Minnesota of-state labor for new Unlike local workers, who is home to one wind farms, Minnesota typically pay local property of the best wind communities miss out on the taxes, send children to local positive economic impacts schools, spend their earnings construction of hiring local workers. The at local establishments, and workforces in the Red Pine Wind Farm, for donate to local churches countr y.” example, became the subject and non-profits, non-local of controversy in 2017 when workers on wind projects take area construction workers the wages earned and the and community members skills developed on wind projects back home criticized the project for employing a largely when they leave. non-local workforce at the expense of local residents.8 Mankato Building Trades President Stacey Karels, whose organization represents Developers and construction contractors thousands of construction workers across that rely on non-local workers often argue Southwestern Minnesota, observes that that there are not enough workers locally to for decades the industry has relied on local meet their workforce demands. This tradesmen and tradeswomen to build wind argument is challenged, however, by the fact farm projects. In recent years, however, that many projects such as the Prairie Rose Karels and his members have seen an wind farm have relied on a majority local increase in the number of projects built with workforce, according to locals familiar with largely non-local labor. the projects.9 7 This interview was conducted on June 13th, 2018. 8 Karl Evers-Hillstrom, “Southwest Minnesota