NREL is a national laboratory of the U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, operated by the Alliance for Sustainable Energy, LLC. Deployment of Renewables to Support Regional Economic Development Solar Technical Assistance Working Group David Keyser February 24, 2015

2 Overview Summary of how regional economies work Unique aspects of regional economies and how these affect growth Quantifying gross economic impacts from renewable energy expansion Additional resources Discussion

3 Simplified Diagram of a Regional Economy Exports (Money Flows In) Purchases from Outside of the Region (Imports) Local Businesses Work (Labor) Wages, Property Income Local Consumer Purchases Imported Inputs (Money Flows Out) Local Population Business Purchases from Other Local Businesses Outside Income (Retirement Income, Investment Income, etc.)

4 Regional Implications A larger, more diverse local economy can better capture revenue If returns on investment (i.e., property type income) accrue locally this will have a greater local economic impact Development outside of a region can still have a local economic impact via exports or other types of income received by the local population But just because an local economy has resources does not mean that developers and customers will use them

5 Regional Growth Considerations If the goal of a policy is to increase local industrial activity while supporting renewables, there are many considerations Are there local businesses that can meet anticipated demand? Will local businesses have to hire workers? Is there a workforce that they can draw from? o Commuting and job-driven population change have implications for public planners, developers, and the local economy as a whole – may or may not be desirable depending on community priorities

6 Jobs and Economic Development Impacts (JEDI) Freely available input-output tool to estimate gross employment and economic impacts that result from an investment in new power generation or fuel production JEDI default inputs are from developers and industry experts, based on existing projects User input can be minimal with defaults or be very detailed for more precise results. Photo Credit: David Hicks, NREL PIX #18397

7 Downloading the JEDI model 7

8 What Technologies are Available? Current JEDI models o Land based wind o Natural gas (combined cycle) o Coal (pulverized coal) o Marine and hydrokinetic o Concentrating solar power o Dry mill corn ethanol o Lignocellulosic ethanol o Solar photovoltaic o Conventional hydropower o Transmission o Geothermal o Biopower o Petroleum refining JEDI models under development o Distributed wind o Biorefinery – Fast Pyrolysis Photo from Sally Wright, Renewable Energy Research Lab - Umass, NREL/PIX15160

9 JEDI Model Approach Build project development and operation scenarios o Scenarios contain project expenditures and other characteristics o Can be based on default data or a model user can supply detailed project information Feed project scenario into an input-output model to estimate impacts o Currently uses the IMPLAN model o User has ability to change I-O data to represent different geographies or models such as RIMS II

10 Input-Output Models Snapshot of the relationships between sectors of an economy at a single point in time o Industries, labor, households, capital, investments, government, imports/exports Expenditures in an economy o Inputs: goods/services from other industries, payments for labor, capital, taxes, imports o Outputs: goods/services to other industries, households, and governments, exports Captures feedback within a region, i.e. an increase in demand for electricity might increase demand for turbines, which will further increase demand for electricity

11 JEDI Results Jobs (FTEs) o Number of people working the equivalent of 40 hr. weeks, 52 weeks/yr. Earnings o Income from work o Includes wages, salaries, employer provided supplements (retirement, health) Gross output o Measure of total economic activity o At the business level, can think of this as revenue plus expenditures on inputs (if the business isn’t losing money) o Not the same as GDP Value added (select models) o Can think of this as revenue less expenditures for inputs purchased from other industries o Industry’s contribution to GDP

12 Project Development & Onsite Labor Impacts Most localized impacts Sample job types o Installer o Electrician o Truck driving o Crane operation o Management, support o Siting Photo from Cross Island Farms, NREL/PIX Photo from Stephanie Lively, Boise State University, NREL/PIX Photo from Northern Power Systems, NREL/PIX Photo by David Parsons, NREL/PIX Photo from istock Photo credit: Dennis Schroeder / NREL PIX #22182Photo credit: Susan Bilo / NREL PIX #21393 Photo Credit: Craig Miller Productions / NREL PIX # Photo credit: Jim Tracy / NREL PIX #09275

13 Local Revenues, Turbine, Module, & Supply Chain Impacts Polysilicon manufacturers Module and component manufacturers Equipment sales and financing Property taxes, banking, accounting NREL/PIX 11074Photo from iStock/ Photo from iStock/ Photo from iStock/ Photo from iStock/ Photo Credit: Frank Jeffrey / NREL PIX #07781 Photo Credit: SunPower / NREL PIX #13451 Photo Credit: John De La Rosa / NREL PIX #26513 Photo Credit: Shell Solar Industries / NREL PIX #13856 Photo Credit: United Solar Ovonic / NREL PIX # Photo Credit: Evergreen Solar / NREL PIX #14722 Photo Credit: Dennis Schroeder / NREL PIX #22569

14 Induced Impacts Money spent in the local area on goods and services from increased revenue: sandwich shops, child care, grocery stores, clothing, other retail, public transit, new cars, restaurants, medical services Photo from iStock/ Photo from iStock/ Photo from iStock/ Photo from iStock/ Photo from iStock/ Photo from iStock/

15 Explaining Variability in Economic Development Impacts Size and cost of the project Higher costs often results in increased impact for both construction and O&M Size and diversity of the local economy Level of analysis Multiplier effect Developer preferences Local share/local purchase coefficient Magnitude and allocation of project revenues e.g. community wind Photo Credit: NREL PIX #16116

16 Interpreting Results and Model Limitations JEDI results are gross, not net JEDI does not factor in far-reaching impacts from development such as changes in utility rates, greenhouse gas emissions, property values or public health Input-output models cannot estimate impacts from supply-side changes such as technological improvements, price changes, or changes in taxes/subsidies JEDI doesn’t evaluate a project’s feasibility or profitability NREL is not responsible for how the model is used, applied, or how the results are interpreted

17 How JEDI Can Inform Economic Development Describes the potential scale of impacts, different ways of implementing policies. JEDI Impacts are gross, but research shows that at a local level the order of magnitude of JEDI impacts for land-based wind is close to observed net impacts (Brown et al. 2012). o It is still important to consider that this isn’t always necessarily true and JEDI doesn’t quantify whether it is or isn’t. o This study didn’t estimate impacts in areas outside of where wind plants were built – possible negative and positive impacts in other regions. I-O analysis is commonly used by economic developers.

18 Additional Resources Source: Department of Energy WINDExchange

19 Resource Center Contacts Renewable Northwest o David Wolf Four Corners o Meghan Dutton Midwest o Lisa Daniels Northeast o Val Story o Deborah Donavan Southeast o Brian O’Hara o Jen Banks Web o

Discussion

21 References Brown, J.; Pender, J.; Wiser, R.; Lantz, E.; Hoen, B. “Ex post analysis of economic impacts from wind power development in U.S. counties.” Energy Economics (34). 2012; pp