NEW ENERGY RISING IN THE ROCKIES

Clean Energy Leadership in the Rockies: Competitive Positioning in the Emerging Green Economy
June 2010 (Headwater Economics)

THE POINT
Figures lie and liars figure, goes the folk wisdom. And Mark Twain, that most penetrating among observers, famously observed that there are 3 kinds of liars: Liars, damned liars and statisticians. Still, some numbers are hard to argue with.

Clean Energy Leadership in the Rockies: Competitive Positioning in the Emerging Green Economy, from Headwater Economics, documents how the Rocky Mountain Energy Producers — Colorado, Montana, New Mexico, Utah, and Wyoming — are growing New Energy economies despite the recession. These states are leading the way in the development and implementation of policies that drive innovation in both New Energy and Energy Efficiency. As a result, they are showing growth in green jobs exceeding the growth in total employment and the national rate of green job growth.

Nationally, the 1995-to-2007 overall job growth was 10% while green jobs grew 18%. In the Rocky Mountain Energy Producers, overall job growth was 19% while job growth in their “core green economies” was 30%.

Energy-oriented venture capital investment in the Rocky Mountain Energy Producers has grown more than 10 times over in the 21st century, reaching more than half-a-billion dollars in 2008. They also won U.S. Department of Energy funding of almost a billion dollars.

What's the secret to such growth. The secret may be "it depends..." The Rocky Mountain Energy Producers’ policy approaches vary. Colorado has the second-most ambitious U.S. Renewable Electricity Standard (RES), mandate requiring the state's utilities to obtain a specific portion of their power from New Energy sources by a date certain. Utah has only a New Energy goal with no mandated requirement. Wyoming has nothing. Incentives vary as much. The lesson: There are choices. The necessary factor: A commitment to New Energy. A commitment with smart policies that include compliance provisions is even better.

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The cumulative impact from growing New Energy is more than riches. The Rocky Mountain Energy Producers, states rich in fossil fuels that are no strangers to energy production, are leading the transition to a New Energy economy. They are doing much more than merely generating emissions-free electricity. They are growing skilled workforces, building public and private research institutions, and winning supportive responses from state and local governments by demonstrating the benefits that come with the transition.

The study’s first section details the green economy in the 5 Rocky Mountain Energy Producers and the roles played by New Energy and Energy Efficiency.

Its second section documents the energy sources in the 5 states, including the role of New Energy in their mixes. It then analyzes the impacts of public policy and market forces on New Energy capacities and examines the strategies the 5 states are using to increase capacities.

The third section calculates an Energy Intensity (economic output per unit of energy consumed) for each of the 5 states and how Energy Efficiency increases economic growth by reducing the financial resources expended on energy, thereby freeing them for investment in the broader economy.

The fourth section compares the performance of each state’s green economy to its overall economic performance, using growth, green establishments, total jobs, patents, and venture capital as measures.

The study ends with a summary of the incentives, policies, and conditions that work.

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THE DETAILS
4 main topics of the report:
(1) The Rocky Mountain Energy Producers’ green economies are growing quickly, with New Energy and Energy Efficiency leading.
(2) The Rocky Mountain Energy Producers are among the top fossil fuel energy producers in the U.S. but also have the resources, talent and energy industry know-how to lead in New Energy production.
(3) Though Energy Efficiency reduces energy consumption, it encourages economic growth by freeing capital for investment.
(4) New Energy economy jobs are growing faster than jobs in the overall economy.

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(1) The Rocky Mountain Energy Producers are Colorado, Montana, New Mexico, Utah, and Wyoming. Their economies are transitioning quickly to “green” and New Energy and Energy Efficiency are leading the transition.

The green economy is defined as business activity in 5 sectors: (1) New Energy, (2) Energy Efficiency, (3) Environmentally Friendly Production, (4) Conservation and Pollution Mitigation, and (5) Training and Support.

The biggest sector, products and services associated with Conservation and Pollution Mitigation, provides 65% of the Rocky Mountain Energy Producers’ green jobs. This is the result of powerful 1960s and 1970s federal legislation. Examples: (1) The Solid Waste Disposal Act (supporting the recycling industry) (2) the Clean Air Act, (3) the Clean Water Act, and (4) the National Environmental Policy Act (all supporting environmental compliances).

Policies are emerging that emphasize New Energy and Energy Efficiency. They have produced big job growth in those sectors. The New Energy sector grew 78% from 1995-to-2007 and had 12% of green jobs in 2007. The Energy Efficiency sector grew 72% in the same time period and had 10% of green jobs in 2007.

The numbers and policy in New Energy and Energy Efficiency suggest continued policy development and continued job growth. The national and international emphasis on these sectors promises the sectors will continue to win public and private investment and drive further transition over the next two to three decades.

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(2) Colorado, Montana, New Mexico, Utah, and Wyoming – the Rocky Mountain Energy Producers – are among the 16 biggest U.S. overall energy producers and are positioned to lead the transition to the New Energy economy.

All 5 states have abundant fossil fuel coal and natural gas reserves. They are energy exporters. Wyoming sold 4 times more coal in 2008 than the next biggest coal producer (West Virginia). All but Colorado sell electricity through the Western Interconnection, the region’s grid. This makes them experienced in energy issues and especially sensitive to the emerging federal policies that will drive New Energy and Energy Efficiency.

The Rocky Mountain Energy Producers are also rich in wind, solar, and geothermal resources. Montana and Wyoming have great wind and geothermal potential, Utah has big solar and geothermal potential, and Colorado and New Mexico are strong in all 3 resources.

Though New Energy in 2007 remained a small portion of U.S. power generation, capacity is growing nationally and especially in the Rocky Mountain Energy Producers. Installed wind capacity in the 5 states increased by 3,000 megawatts from 1999 to 2009. Two-thirds of the growth was in the boom years of 2006–2009.

Obstacles to New Energy growth in the 5 states: (1) lack of capacity and connectivity in the regional electrical infrastructure, (2) lack of capital, (3) permitting slowdowns, (4) price competition from fossil fuels, and (5) high development costs.

The Rocky Mountain Energy Producers’ policy approaches vary. Colorado has the second-most ambitious U.S. Renewable Electricity Standard (RES). Utah has a goal with no requirement. Wyoming has nothing. Incentives vary as much. The lesson: There are choices of how to grow New Energy. The necessary factor is commitment. Commitment with effective policy is better.

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(3) Conservation and Energy Efficiency (EE), which encourage economic growth by freeing investment capital, come naturally in the Rocky Mountain West.

The Western Governors Association has called for a 20% improvement in Energy Efficiency by 2020 in the 19-member Western states group.

The Rocky Mountain Energy Producers have a mixed EE record. All but Utah increased per capita residential energy consumption from 1997 to 2006. Only Colorado and New Mexico have Energy Efficiency Resource Standards (EERS) that require their utilities to institute EE programs.

Only Colorado and New Mexico are working toward better vehicle fuel efficiency. None of the Rocky Mountain Energy Producers apply state funds toward public transit or have programs driving coordinated land use and transportation planning.

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(4) The Rocky Mountain Energy Producers are growing green jobs fast. Nationally,
overall jobs grew 10% from 1995 to 2007 and green jobs grew 18%. In the 5 states, overall jobs grew 19% and green jobs grew 30%.

The most growth was in New Mexico, where total jobs grew 13% from 1995 to 2007 and green jobs grew 62%.

There were 3,567 “green enterprises” in the the Rocky Mountain Energy Producers in 2007. 50% were in Colorado, 16% were in Utah and 16% were in New Mexico, 11% percent in Montana, and 6% in Wyoming.

Colorado and New Mexico have won the most private and public New Energy economy investment. Colorado got ~$800 million in venture capital from 1999 to 2008 (75% of the total) and was 5th in the U.S. for that kind of investment.

New Mexico won $239 million in investment and was 12th in the U.S. from 2006 to 2008.

In public funding, Colorado is 15th in the U.S., Utah and New Mexico are in the middle of the state rankings and Wyoming and Montana are 49th and 52nd.

Colorado is distinguished for its engineering, computing, and scientific research, with 100,000+ people employed in those areas in 2008. New Mexico and Utah are also storng in those areas but the more rural Montana and Wyoming are not.

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The study concludes by listing what it found to be the 5 keys to green economy success:
(1) Strategically combine incentives with policy goals.
(2) Obtain large-scale investment.
(3) Create a rich business environment.
(4) Develop leadership.
(5) Expand and/or work around limited infrastructure capacity.

(1) Strategically combine incentives with policy goals
Colorado’s strong RES and EERS are the most identifiable reason it has so much stronger a New Energy economy than Utah, which has many of the same advantages (strong electricity demand, urban and educated population, leadership, etc.)

(2) Obtain large-scale investment
Here the starkest contrast is between Colorado, which got 75% of the venture capital invested in the region and 69% of the energy-related competitive stimulus funding by developing policies, people and infrastructure that investors were drawn to, and Montana, which got no venture capital and was 52nd of 52 states in competitive public funding.

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(3) Create a rich business environment.
Solar energy industry leaders saw New Mexico positioning itself to win solar development and responded. Building on its great sun and its several internationally renowned research facilities, New Mexico provided developers and manufacturers with financial, logistical, and political support. Wyoming, in contrast, has failed to back its high revenues per capita, first-rate wind resources and fine wind technology training program with innovative policies and enterprise that encourage the creation of a nationally-recognized New Energy effort, so it has a very small wind capacity and less productive New Energy economy.

(4) Develop leadership
The outstanding efforts of the Montana, New Mexico, and Colorado governors to build New Energy economies have paid off. The lack of leadership in Utah and Wyoming has resulted in little New Energy investment.

(5) Expand and/or work around limited infrastructure capacity.
The Rocky Mountain Energy Producers need to overcome an outdated, overstressed electrical grid, and the failure of federal, state, and local governments to advance new facilities and transmission line construction.

In this, Wyoming is leading. It was the first (in 2004) with a state entity directly responsible for new transmission. Colorado and New Mexico established state infrastructure authorities in 2007.

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Though implementation must necessarily be different in each state, 2 key policy options apply generally:

(1) It is vital to create New Energy markets with (a) strong financial and logistical support for new state and regional transmission, (b) RESs and meaningful standards with compliance provisions, (c) requirements to interconnect and integrate the New Energies into the grid, (d) incentives that cut start-up costs for manufacturers, developers, and RD&D investors, and (e) New Energy leaders.

(2) It is crucial to develop Energy Efficiency with (a) the spending of a designated portion of utility revenues on EE education and technical assistance programs, (b) EERSs with specific targets and compliance requriements, (c) alternatives to car-based commuting, (d) vehicle emissions standards and incentives for using fuel efficient vehicles, and (e) building and appliance standards.

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QUOTES
From the report: “…[T]he emerging green economy is distinguished by strong growth in clean energy and energy efficiency related activities. All of the states have opportunities to profit in these sectors. Those states with the fullest complement of policy leadership, resources, markets, access to knowledge and capital—namely Colorado and New Mexico—have a far better competitive position in the green economy than do states that have fewer of the key ingredients (Montana) orsimply less demonstrated commitment (Utah and Wyoming).”