In recent years, the Texas economy has seen a significant resurgence. Though stifled by the national downturn in the 2001-2002 period, the Lone Star State has since led the pace in terms of major corporate locations, job growth, and output gains. This trend is expected to continue, with advances in key sectors driving broad-based expansion across the state.
However, this economic vitality and the resulting opportunities for all Texans can only be realized if improvement in the state’s infrastructure keeps pace. Highways, telecommunications lines, airports, water treatment facilities, and many other types of infrastructure will require enhancement in the decades to come. Similarly, the state’s electric generation and transmission capacity must expand to ensure sufficient power is available for residential, commercial, and industrial use. Moreover, this increase must occur within the context of high demand in urban centers with substantial environmental limits on their ability to accommodate large-scale generation projects.
The need for adding generating capacity is clear. Assuming current growth rates, the Electric Reliability Council of Texas (ERCOT) estimates that demand for electricity will rise by some 21% by 2015 and 47% by 2025. Total requirements (peak demand plus a 12.5% reserve margin) are expected to exceed existing capacity in the next few years.
Renewable energy is highly desirable as a mechanism to meet some of the emerging power requirements. The construction, operation, maintenance, and royalty payments associated with wind farms and other renewable energy resources can serve as crucial sources of business activity for rural areas while providing quality electric power for more populous regions. In addition, renewables involve little or no pollution or use of limited fossil fuels in their production. Not only do they, thus, protect the environment and conserve scarce natural resources, they are also less vulnerable to price volatility triggered by fossil fuel supply and demand conditions, strife in key oil-producing regions, or other market uncertainties.
My firm recently evaluated the economic impact of a substantial addition to wind generation capacity and transmission infrastructure. In particular, we looked at the effect of increasing renewable energy generation capacity to 10,000 MW by 2015; this increment represents a net addition to current capacity of 7,633 MW. We looked at the effect of these investments on not only business activity, but also related issues such as the likely effect on natural gas prices, other benefits of having the transmission capacity in place, collateral gains achievable through enhanced energy efficiency, and related topics.
Constructing transmission lines to connect additional renewable and other energy generated in West Texas to the power grid serving the more populous areas of the state would lead to gains of $587.7 million in output and more than 10,000 person-years of employment. It would also generate about $89.9 million in state and local tax revenues. Building additional wind and other renewable capacity to get us up to 10,000 MW would generate some $4.6 billion in output, almost 58,000 person-years of employment, and $277.7 million in tax receipts during construction. The first 10 years of implementation of these facilities would generate $2.1 billion in output, 28,700 person-years of employment, and $998.3 million in tax receipts to state and local governments.
The bottom line is that renewable energy creates net benefits during construction; generates an ongoing stimulus from operations, royalty payments, and reduced power costs on a continuing basis; and exerts downward pressure on natural gas prices. It also promotes rural economic development, helping to protect farm and ranch income fluctuations in weather, adverse agricultural market conditions, and other uncertainties and providing local and county governments with revenue enhancements in the form of property taxes and increased sales tax revenues, in addition to other benefits.
Energy derived from the wind is not subject to the price fluctuations that plague fossil fuels. Although such power has long been viewed as too expensive for widespread use, recent technological advances and increases in the price of other fuels have changed this situation dramatically. In the current market, wind power is increasingly becoming a cost-competitive alternative fuel. In addition, a concentration of wind farm activity increases the likelihood of locating related support production, while the process itself contributes to meeting long-term energy needs in an environmentally appropriate and cost-effective manner.