Economic Development Impacts of Wind Power

Assessing the Economic Development Impacts of Wind Power, FINAL REPORT; Prepared for National Wind Coordinating Committee; February 12, 2003; an 81-page PDF.

page ES-1

Introduction
Interest in wind power development as a means of expanding local economies is growing. It holds promise for providing a new source of short-term employment during construction of the facility and long-term employment from operating and maintaining the facility. It may add to the supply of electric power in the area and support some expansion of the local economy through the ripple effect of initial increases in jobs and income.

Despite a growing body of information about the local impacts — both positive and negative — of wind power, the economic impacts of existing wind power developments have not been analyzed in a consistent manner. This study uses three case studies {this abstract focuses on the Lake Benton study} to estimate the effects of wind power development on local economies. Both the effects of the construction and the annual operation and maintenance were studied.

Objectives
While there is a growing body of information about the local impacts of wind power, the economic impacts from existing wind power developments have not yet been documented and analyzed thoroughly and consistently.

The primary objective of this study is to provide examples of thorough and consistent analysis and documentation of economic impacts from wind power development.

page ES-2

Case Studies
The three case study areas are Lincoln County, Minnesota; Morrow and Umatilla counties, Oregon; and Culberson County, Texas. In Lincoln County, the project studied was Lake Benton I, placed in operation in 1998 with 107 MW.

To understand how an economy is affected by some external change, we develop a snapshot of the economy at a particular point in time. This snapshot shows us that some parts or “sectors” in the economy are linked to each other.

The extent to which exports {products sold outside the local area} are able to expand the local economy is greatly dependent on how much of the money received remains in the local economy. As money is received for exports, the local supplier then spends that money.

The household sector is linked to all economic sectors as it provides the labor and management needed by all sectors. Changes that affect the incomes of the household sector typically have significant impacts on a local economy compared to a change in the sales of other sectors.

page ES-3

Lake Benton I is the second wind power development in Lincoln County, the first being Buffalo Ridge (25 MW), just southeast of the town of Lake Benton. Lake Benton I consists of an array of 143 Zond 750 kW turbines located in several northwesterly strings from Lake Benton. Enron Wind {now GE Wind} brought the facility into production in August 1998, and the power is sold to Xcel Energy.

This study found that a total of about eight jobs and over $98,000 in personal income in the Lincoln County economy were supported by the construction phase of the project. While this study focused on Lincoln County impacts, additional jobs were also supported in neighboring counties. A total of about 31 jobs and over $909 thousand in personal income in the Lincoln County economy are supported annually by the operation and maintenance phase of the project.

The Lake Benton I wind power development resulted in the payment of $71,800 in total county property taxes in 1999, $611,200 in 2000, and $621,000 in 2001. Assuming that the project caused zero or only minor increases in government and school budgets, these tax payments have decreased the tax burden of other local taxpayers, as they pay less taxes than they otherwise would. This has a direct effect on household income, which is equal to the taxes paid by the project owner.

The Lake Benton I wind development includes lands that have been leased, as well as permanent easement purchases. Landowners receive a total net (after-tax) annual revenue of $501,125, which is a direct effect on household income.

page ES-5

Summary and Conclusions
Tables ES-1, ES-2 and ES-3 summarize the impacts of wind power development on

• employment
• income and
• taxes

for the three case study areas, during the initial construction phase, and the operation and maintenance phase.

Based upon our analysis of the three case study areas, we can draw the following conclusions about the economic impacts of wind power development in local areas

• in each of the case study areas, wind power development provided a modest to moderate source of new economic activity and new family wage jobs

• the leasing of land has an important economic effect on local areas, provided the income from leasing goes to local residents and adds to local household incomes

page ES-6

• tax effects, particularly property taxes that support local entities, were important in all cases

• the counties represented in the case studies had comparatively few economic sectors

• a major difference among the case study areas was the current rate of economic expansion.

--While wind power development was important to the economies of all case study areas, it was relatively more important to the counties in decline and


• the return on capital could be an important component of local annual income.

--In the three case studies, little or none of this income was received by local residents. Local ownership, where feasible, would retain more of this income in the local area and increase the size of the impact. No data was collected on sources of capital for this study, but little apparently came from the local area.

In recent years, there has been considerable interest in a value-added approach {mentioned at the 13 June post} to economic development in rural areas. This generally involves adding additional processing to an existing output or resource, which results in a more valuable product being exported from the area. Wind power development fits this approach by adding value to an existing resource. In this way, it can be a valuable means for adding to the economy.

page 3 - 4

Economic Links in Rural Economies
The more money spent within the local economy, the larger the local impact from the initial money received for the export. This round by round pattern of spending associated with export production is called the multiplier effect.

page 5

Identifying Construction Needs
To measure the effect that the construction of a wind power project has on a local economy, we need to identify the mix of things (inputs) that are necessary to construct a wind power project, and we need to do so in a way that allows us to relate this information to the picture we have of the economy.

page 6

Identifying Operation and Maintenance {O&M} Needs
A similar procedure is followed to estimate the effect of annual operation and maintenance activities on the local economy.

page 8

Local Interest in Wind Power Development
Residents and administrators of rural counties are generally supportive of new businesses locating in their county that will provide family wage jobs locally.

Landowner Revenues
Wind power developments can be a source of supplemental revenue for landowners in rural areas.

page 9

Job Creation
We are interested in the creation of new jobs because new jobs increase business and household income, which in turn creates more jobs which further increase business and household income, and so on. {"Direct" jobs are in the manufacturing, prospecting, planning, assessing, documenting, transporting, construction, installation, operation and maintenance work, where "hands-on" is routine. "Indirect" jobs are those in housing, retailing, hospitality, schools, barbershops and salons, banking/finance, suppliers, vendors, and all others that make "hands-on" possible.

Tax Effects
Taxes are a redistribution of benefits from wind power production to the federal, state, and local government jurisdictions in which the wind power production and sales occur.

pages 12 - 32
Economic Setting for Case Studies and Economic Effects on Case Study Economies
Lake Benton I (1998, 107 MW): The Economy of Lincoln County, Minnesota is promoted by the local tourism groups both as the “Little Europe” of Minnesota, and the “Windpower Capital of the United States.” The county is located in southwest Minnesota, bordered on the west by South Dakota. {Minnesota is ranked 9th in the nation for annual wind power potential; South Dakota is ranked 4th. Minnesota's "wind-friendly legislation and taxation spur its wind industry to outpace South Dakota's by a huge margin, 895 MW to 44 MW.}

In addition, a number of tables and charts are provided in these pages.
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A boring South Dakota day, mustering only four hours of "fair" (NREL) wind-

• 8 PM Jun 14, S at 15 mph
• 6 PM Jun 14, SSW at 16 mph
• 5 PM (21) Jun 14, S at 16 mph
• 4 PM Jun 14, SSW at 16 mph
• 10 PM Jun 13, Calm.

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'Til next time. Best Wind.