The New Energy
Largely known for its plentiful fossil fuel supply, the Lone Star State is also rich in renewable energy potential with abundant solar, wind, and biomass resources. While fossil fuels remain an important part of the state and national economy, investment in renewable energy and energy efficiency is growing. Despite what you might hear to the contrary, there is no doubt that the vast majority of domestic energy needs will be met by traditional, hydrocarbon sources (oil, natural gas, coal, etc.) for the foreseeable future. Nonetheless, there are enormous opportunities in Texas for the next generation of resources as well. Texas leads the nation in wind power generation capacity with over 2,000 wind turbines in West Texas alone, and substantial new wind generation capacity under construction in other parts of the state. In addition, Texas is home to the largest wind power facility in the world. The Roscoe Wind Complex, just recently opened, generates 781.5 MW at full capacity, enough to power 230,000 homes. The state is also home to the second largest wind power facility in the world, Horse Hollow Wind Energy Center, at 735.5 MW. Wind energy throughout the United States increased by 1,152% from 1995 to 2008. Texas showed a much larger investment in wind which grew nearly 5,000% from 1999 to 2008 from 116 MW to 5,871 MW. The latest data from the Energy Information Administration reveal that Texas represents nearly 30% of wind power capacity in the nation (measured by net summer capacity), and 27% of net generation of wind in the nation for 2008.
In addition, Texas is developing wind transmission capacity in order to allow wind generation to reach its full potential. The goal is to eventually reach some 18,456 MW of power, which would provide electricity to nearly four million Texas residents, many in rapidly-growing metropolitan areas. Furthermore, Texas is one of the top states in the nation for solar potential, with high levels of direct solar radiation in parts of West Texas. Texas’ large agricultural and forestry sectors have the potential for an abundance of biomass energy resources. Unused oil and gas wells provide geothermal sources as well. One factor at work in spurring development of renewable resources is the introduction of competition in the retail portion of the state’s electric utility industry. Since 2002, most of Texas has been functioning under a system of competitive, choice-driven electric companies. In addition to consumer choice, which allows consumers some latitude in deciding the source of their energy purchases, the Texas law required that competitive electric service providers sell a minimum amount of renewable energy. A number of colleges and universities already provide training in renewable energy. A trained workforce is needed to attract investment in renewable energy, making research and educational institutions across the state essential to realizing Texas’ renewable energy potential. Utilizing funds from the American Recovery and Reinvestment Act (ARRA), the US Department of Energy has allocated funding for research in a number of areas including advanced energy technology, increased renewable energy capacity and high-tech applications for efficiency, and development of fossil energy. Other funding opportunities include alternative-fueled vehicle programs, clean diesel programs, clean coal initiatives, and modernizing electric grids. Clean energy industries represent a notable potential growth area for Texas. With links to other state industries ranging from high-tech manufacturing to nanotechnologies, the clean energy sector is likely to emerge as a significant source of future jobs. In 2007, there were roughly 770,000 clean energy jobs throughout the US and 68,203 clean businesses. Texas was home to 4,802 of those businesses with 55,646 jobs and represented 7.2% of the clean energy jobs in the nation. The state also attracted $717 million in venture capital funds for clean technology from 2006 to 2008, representing 5.7% of all venture capital invested in clean energy in the US. Recent allocations to the state through the American Recovery and Reinvestment Act of 2009 are aimed at improving energy efficiency and reducing consumption throughout Texas. Investments in all levels of government, as well as in educational programs, creating not only an informed public but a skilled workforce, have started Texas on a road to realizing its full potential in renewable energy and energy efficiency. Renewable energy, coupled with already existing technology, can help Texas meet the energy needs of a growing population and economy while creating a skilled labor force, attracting new venture capital, and spurring economic growth through an expanding clean energy sector.
posted @ 08:06 AM CST [link]
Friday, October 23, 2009
How Things Get Gone!
Seldom has the awarding of Nobel prizes received such worldwide attention as happened recently. Although much of the focus was on the Peace Prize, perhaps of even greater historic significance was the awarding of the Nobel Prize in Economics.
Of the 537 Nobel Prizes bestowed in the areas of physics, chemistry, medicine, literature, peace, and economics since 1901, twenty-three organizations have been awarded the prizes, and 762 men and 40 women have been individually honored. The youngest recipient was 25 and the oldest 90 years of age; winners this year are 76 and 77. This month was the 41st occasion for the presentation of the economics prize since the first was given in 1969.
While President Obama was the third sitting US president to be awarded the Nobel distinction, another American was the first female to receive the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, commonly known as the Nobel Prize in Economics. She is Dr. Elinor Ostrom, professor of political science and professor at the School of Public and Environment Affairs, both at Indiana University. To some, her selection was a complete surprise. She didn’t appear significantly in any of the betting pools. Her impact, however, has been profound.
The co-winner, Dr. Oliver E. Williamson, is professor emeritus of business, economics, and law at the University of California, Berkeley. Both were recognized for their pioneering research into how individuals act and react within various settings, with particular notice given to the scholars’ analyses of economic governance. Simply stated, they have helped us to understand how things get done.
Human interaction is normally governed by sets of rules and regulations. The overarching purpose of these concepts or institutions is to facilitate production and exchange. Research into economic governance pertains to the nature of these entities when handling specific or general economic problems.
The Royal Swedish Academy of Sciences, which gives the award, cited the two Americans for their studies in economic governance, which began in the early 1970s, and noted how their efforts complemented each other. The citation particularly spotlighted their work on the way people and organizations make decisions and cooperate outside of traditional markets. It happens a lot more than you would think.
Professor Ostrom was especially lauded for her efforts in examining how “common property can be successfully managed by user association.” A significant portion of Ostrom’s efforts involved field work experiments, case studies, and research on comparisons of the preservation of land governed by indigenous groups rather than central rule.
Over the years, Ostrom has given special attention in examining the viability of conventional wisdom with regard to the roles played by politics, economics, and legal systems in determining how natural resources are used. She has challenged the idea that common property is normally managed poorly and, therefore, should be regulated by central authority. Her studies have pointed out that a wide variety of strategies can be useful in creating and operating economic institutions, rather than just limiting the understanding of the relationship between individuals and companies. Because she is a political scientist, her work is not well known in mainstream economics. There is no doubt, however, that she has contributed profoundly to the way we think about the systems that sometimes guide our behavior.
Williamson, the better known of the two (though both are relatively obscure to folks who don’t live and breathe this stuff), was honored for his studies of the ways conflicts of interest are handled in different kinds of hierarchical organizations. Williamson’s research findings note some of the intricacies pertaining to the haggling and disagreements inherent in markets, particularly the potential for abuse by authority. His studies emphasize that in case of dissent, competitive markets work well since buyers and sellers can seek other trading partners. However, according to the theories he developed, when competition is limited, business firms are better suited for conflict resolution outside a market context. He also demonstrated how such systems evolve. For example, purchasers who initially buy items in the open market over time often develop relationships with particular vendors and limit their future searches. Such trust relationships dictate a surprisingly large volume of current economic activity throughout the globe.
The studies of these two researchers into economic governance beyond the financial markets have played a significant role in challenging traditional thinking on these matters. As a result of their collective efforts, economic governance research has moved to the forefront of scientific notice.
In essence, these two outstanding academicians have, through their years of study and research, substantially enhanced the understanding of non-market institutions and have shed new light on economic governance by pointing out the values and methods of cooperative efforts. More importantly, they have furthered our appreciation for the complexity of interactions in the modern world.
posted @ 08:02 AM CST [link]
Friday, October 16, 2009
A Texas State of Minds
Residents, new and old alike, often refer to Texas as a “state of mind.” There is little doubt that this large and rugged land that was once an independent country has a personality and character all its own. In the future, however, it is critical that Texas enhance its current economic base and evolve in a manner that can consistently achieve and sustain global business leadership. The state that carved its early success out of a vast base of natural resources has adapted to new realities, but much remains to be done. To assure future prosperity, the “state of mind” must become the “state of minds” – attracting and developing the very best and brightest for generations to come.
Education is a key factor of success not only for individuals, but also for local and state economies. In an increasingly competitive US and international market, nationally recognized, top-quality academic research universities are critical to securing a highly skilled workforce, creating and dispersing knowledge, cultivating entrepreneurship and associated capital investment, attracting activity in high-growth sectors, and promoting economic development.
Texas lags behind other populous states in the number of nationally recognized research universities. Texas’ adverse ranking has notable negative consequences for the economy because Tier One universities attract billions of dollars in research funding and the most talented high school graduates, as well as generate startup firms in emerging fields and foster major clusters of technology-oriented production. They also help improve university attendance more generally. Moreover, in key workforce categories (particularly in science and engineering), Texas lags other states such as California and Massachusetts, thus hampering the outlook for future performance; the addition of more nationally recognized research universities would help eliminate this gap.
In a recent study, The Perryman Group (TPG) quantified the potential incremental effects of a concerted effort to develop additional top-tier research universities on the Texas economy. This analysis, provided as a public service, illustrates the importance of this critical investment in the “intellectual infrastructure” of the state.
A proposed Texas constitutional amendment, Proposition 4, would create a National Research University Fund to help fund state universities meeting certain quality requirements for the purpose of becoming nationally recognized research institutions. This initiative is important given Texas’ current position compared to other areas. While there is no single universal definition of a Tier One university, membership in the Association of American Universities (AAU) is one common criterion. Among the 60 US universities with memberships in the AAU, three are located in Texas, of which two are large public universities: The University of Texas at Austin, Texas A&M University, and Rice University.
Seven public universities have been classified as “emerging research universities” with the potential of receiving the above funds including Texas Tech University, University of Texas at Arlington, University of Texas at Dallas, University of Texas at El Paso, University of Texas at San Antonio, University of Houston, and University of North Texas. Overall, the advancement of some of these institutions to Tier One standing would generate a large potential economic impact for the state.
To illustrate the benefits of securing a greater number of nationally recognized research universities, TPG developed three scenarios related to the number of institutions achieving Tier One status and the corresponding change in per-capita output in emerging sectors. In every case, the economic benefits were substantial.
If four of the seven emerging research universities could attain Tier One status by 2035 (which would put the state on a par with California and Massachusetts on a per-capita basis), the impact on the Texas economy (in constant 2009 dollars) could reach up to $603.3 billion in total spending per year, $306.6 billion in output, and 1,289,419 permanent jobs. Even if only two are successful (which would bring Texas to the national average on a per-capita basis), incremental activity would include an estimated $161.1 billion in total spending each year, $81.8 billion in annual output, and 344,393 permanent jobs.
Proposition 4 permits resources to be available to the seven emerging universities to work toward Tier One recognition without any additional tax dollars being required. Using existing funds to further the goal of achieving nationally recognized (Tier One) status of high-performing universities would lead to enhanced opportunities for individuals, facilitate the economically and socially desirable goal of increasing the education level of the state residents, and generate sizable economic gains.
Texas has a number of positive attributes and is projected to achieve ongoing expansion under current conditions. The incremental benefits of pursuing a concerted strategy to promote high-quality educational institutions, however, are quite substantial and worthy of aggressive pursuit. Texas will always be a “state of mind.” As a “state of minds,” however, it is characterized by much greater prosperity and competitiveness on a sustainable basis. The importance of Proposition 4 as an initial catalyst to this outcome cannot be overemphasized.
posted @ 07:59 AM CST [link]
Friday, October 9, 2009
Going for the Gold
Last week, the eyes and ears of people throughout the world (particularly residents of Chicago, Tokyo, Madrid, and Rio de Janeiro) were focused on a unique group of people in Copenhagen, Denmark. The reason for all this attention, of course, was the International Olympic Committee’s decision regarding the host city for the 2016 games. I had more than a passing interest, as I was in Chicago during the hoopla, and was, in fact, with one of my friends the day before he made the trek to Denmark.
The Olympics are often considered the ultimate competitive arena. However, with all the expenses involved in just vying for the games, coupled with the inevitable disappointment of those who do not receive the nod, plus the financial requirements to produce the games, one might wonder, “Are the effort and costs really worth the benefit?”
Rio, the winner, certainly believes in the potential value of the games and has tried on three previous occasions to be the host city (1936, 2004, and 2012). The expected total cost for Brazil to put on the myriad competitive events will likely range from about $14.4 billion to approximately $16 billion. This price tag could escalate depending on various conditions. Cost overruns are not at all rare among those cities that have lifted the Olympics rings over their skyline. And, in many cases, the projected profits never reach their goals.
The 1972 Munich Olympics and the 1976 Montreal Olympics both lost big bundles. According to various studies of the summer games conducted since that time, indications point toward positive impacts on the economies of the host cities and nations. Estimates range from a low of some $30 million to upwards of $10 billion for the various host areas.
With so much uncertainty then, are there substantive advantages of being the center of worldwide attention? A brief examination of what is involved might be the most appropriate way to answer that question.
A major sporting event such as the Olympics could conceivably be worth its weight in gold, so to speak, because such an occasion usually serves as the catalyst for the regeneration of the area’s economy. In order to conduct the games, certain facilities are required, most of which do not already exist. For those extant, major upgrading is normally needed. Being on the world stage and in the spotlight demands the best not only in facilities but in overall infrastructure and communication links. To provide such essentials requires huge investments (often both private and public) in stadiums, hotels, transportation, and security, just to name a few. These investments often continue to pay dividends long after the athletes have returned to their homes.
Each of these elements creates new opportunities for employment. The 1984 games in Los Angeles, which really raised the bar on how to capitalize on such an event, created 73,375 new jobs. Each of the Olympics since then has experienced even higher levels of job creation. Brazilian sports authorities estimate that preparation for the 2016 Olympics will lead to 120,000 new workers each year across the country. An additional 130,000 jobs will be generated annually during the decade following the event. Compensation for these jobs will be a positive economic multiplier.
For the few weeks of the Olympic competition, tens of thousands of foreigners from around the world will visit the host city and surrounding areas. Spending by these people for food, accommodations, and various local items will, of course, provide a substantial boost to the host country’s economy, even if it is only for a short period of time. In some cases, the Olympic introduction of a new city and culture serves to bring back visitors and helps develop the area as a major long-term tourist destination.
Despite such apparent positives, questions still remain about the overall advantages of being the host city for the Olympics. They include: “Should the monies be used in some other way? Will the infrastructure ever be used again? Will the required security disrupt normal business operations? Will the transportation facilities cause delays to normal travel because of overcrowding?
The organizing committees of the cities that host the Olympics are well aware of these matters. Some cities have experienced greater success than others in answering these questions and in their attempts to assuage the public’s concerns. On balance, most areas have seen a net benefit.
Even though the massive investment required for a successful Olympics might result in only a short-term economic lift to specific areas, there is no question about the five-ring pride that the Olympics generate among the host city’s populace. And that “gold” will last for a lifetime.
posted @ 08:09 AM CST [link]
Friday, October 2, 2009
The Three Rs
Normally, when one is asked to name the “Three Rs,” the response is “Reading, ’Riting, and ’Rithmetic.” In the case of the Texas Gulf Coast, a year after having endured the historic invasion of Hurricane Ike, the answer might be “Reaction, Resilience, and Recovery.”
It’s been a little more than a year since Hurricane Ike roared ashore and nearly overwhelmed many parts of the Texas coast, especially Galveston Island. Beginning within a few hours and continuing over the next several months, the vast devastation of the region taxed the resources available to help restore a semblance of normalcy.
However, unlike in some massive tragedies, the reaction of the citizens of the area, as well as Texans across the state, supported by various government entities and numerous volunteer groups, was highly positive and resulted in an orderly approach toward restoration.
More than 40,600 people fled the third most destructive storm to hit the US in history, and a large percentage of them found solace in over 230 shelters set up in both small and large communities throughout Texas. The Disaster Recovery Centers coordinated the myriad activities and were generously reinforced by the innate resilience that Texans demonstrate on a daily basis, regardless of the challenge.
As a result, by the first anniversary date of the massive storm’s assault on the lives and businesses along the Gulf Coast (September 13), the wounds, while still evident, showed remarkable healing because of the immense recovery efforts put forth by all interested parties.
Even with property damages to the coastline of more than $27 billion, the vast majority of property owners have returned, tourism has rebounded, and most of the businesses are back in operation. In some cases, new enterprises have replaced those unable to gear up again. Hope and renewal are evident on almost every street corner as recovery from the ravages of the giant storm continues.
Although some people may feel that the situation caused by Ike affects only those living and working along the coastline, in reality there is a unique interconnectivity between surfsiders and Texans residing in all parts of the state. My company, The Perryman Group, has performed a special study on business operations in various cities along the Texas Gulf Coast. A part of our findings noted that this area is vital to the economy of Texas and has linkages to all regions of the Lone Star State. Without the key inputs and services provided by the industrial base located on or near the coast, prosperity and business activity from the Panhandle to the Rio Grande Valley and from the Big Bend to the Piney Woods would be notably diminished.
The coastal area handles the vast majority of water shipments for goods produced for export throughout the state. Moreover, refined petroleum and petrochemical products from the area are used extensively in every portion of Texas and are essential to the viability of many industrial sectors.
The bottom line is that the economy of every segment of the state is critically linked to the dynamic Texas Gulf Coast area. Thus, because of the interdependency in which we all share, the reaction, resilience, and recovery exhibited along the coast and throughout the state—necessitated by the assault of Hurricane Ike—is truly a victory for everyone.
posted @ 08:07 AM CST [link]