TODAY’S STUDY: THE RICHES OF KANSAS WIND

The Economic Benefits of Kansas Wind Energy

Alan Claus Anderson, Britton Gibson, Scott W. White, Ph.D. Luke Hagedorn, November 19, 2012 (Polsinelli Shugharand and Kansas Energy Action Network)

Executive Summary

Overview

In the last decade, numerous wind energy generation projects spanning the state of Kansas have come online. While it is clear that the nineteen wind energy projects currently in operation and under construction in Kansas have significantly impacted the Kansas economy at the local, county and state levels, specific data about the actual economic impacts generated by these projects is not readily available. This report provides empirical, factual data based upon reports and actual experiences of Kansas citizens, utilities, and project developers. The report then seeks to compare that empirical data against non-partisan academic studies of the potential economic impacts of wind generation for state and local economies.

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Key Findings

The key findings of this report are as follows:

1. New Kansas wind generation is cost-effective when compared to other sources of new intermittent or peaking electricity generation.

Dockets filed for recently built utility energy projects indicate that wind projects are providing Kansas utilities with cheaper power per megawatt-hour (“MWh”) than other forms of intermittent or peaking electricity generation, including natural gas. As a result, the impact on electricity rates for retail customers for new wind generation is roughly equivalent to, or often less than, the rate impact that would be caused by other forms of new generation.

2. Wind generation is an important part of a well-designed electricity generation portfolio, and provides a hedge against future cost volatility of fossil fuels.

Wind generation is not intended to be a substitute for coal or natural gas generation, but instead plays an important role in balancing a utility’s load demands and offsetting volatile fuel costs. Because the bulk of wind generation costs are paid upfront (or set at a predetermined rate for the life of the project in the case of wind power purchased through a power purchase agreement), utilities use wind generation to introduce known costs into their long-term portfolios to hedge against the future cost volatility of fossil fuels.

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3. Wind generation has created a substantial number of jobs for Kansas citizens.

Based upon empirical data from each of the Kansas wind farms and economic studies conducted by third-party sources, Kansas wind generation has created a significant number of jobs for Kansas citizens.

4. Wind generation has created significant positive impact for Kansas landowners and local economies.

Empirical data from each of the Kansas wind farms and economic studies conducted by nonpartisan sources indicate that Kansas wind generation has created the following additional economic impacts for the state:

5. The Kansas Renewable Portfolio Standard is an important economic development tool for attracting new businesses to the state.

Sustainability is an increasingly important factor to companies looking to locate new facilities and the RPS is the most visible symbol to companies evaluating a state’s commitment to sustainability. Should the RPS be eliminated, or reduced to a non-material level, a similarly clear negative message would be sent to those companies that include sustainability as a factor in site selection.

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Introduction

In May of 2009, Kansas Governor Mark Parkinson signed into law a piece of comprehensive energy legislation, Senate Bill 108, the Economic Revitalization and Reinvestment Act. One of the provisions in that legislation enacted a Renewable Portfolio Standard (“RPS”) for the state of Kansas, stating “the nation’s energy challenge provides the opportunities for a ‘made in America’ energy program, and Kansas is ready to be a leader in that effort. I look forward to the new jobs, more wind power, and the stronger economy that will be a result of this legislation.”

Now, three years into the RPS program, Kansas has capitalized on its access to one of the best energy resources in the country to develop an important wind industry in the state. The nineteen wind projects currently in operation or under construction and the direct and indirect manufacturing jobs that have come to Kansas have created thousands of jobs for Kansans, and encouraged investments of hundreds of millions of dollars in local economies.

Unfortunately, very few studies have been conducted that provide an accurate, empirical analysis of the true economic impacts of the wind industry on the Kansas local, county and state economies. This report endeavors to answer some of the fundamental questions that will be raised as Kansas maps out its future energy goals:

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1.) What is the actual cost of new wind generation as compared to similar new generationfrom other resources?

2.) How many jobs does the Kansas wind industry create?

3.) What are the economic impacts for landowners that site wind projects on their property?

4.) What are the economic impacts for local and county governments that host wind projects?

5.) What is the value of the Renewable Portfolio Standard for Kansas beyond the power generated for Kansas utilities?

In order to help facilitate thoughtful policy discussions about these issues, this report analyzes the ample data that has been provided by the wind energy projects across the state, as well as various academic and economic analyses of the impacts that wind generation can provide for state and local economies, in order to determine the actual benefits that Kansas wind generation has brought to the Kansas economy…

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Primer On Kansas’ Wind Resource

In order to understand the current status of the wind industry in Kansas and its impact on the state economy, it is necessary to first understand why Kansas is uniquely positioned to reap its extraordinary wind resource.

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Kansas’ Abundant Wind Resource

Kansas enjoys one of the best wind resources in the world, ranking between first and third among the states in terms of total wind capacity.2 To quantify this resource, wind speed measurements are taken at several heights that reflect typical wind tower hub heights: 50 meters, 80 meters, and 100 meters. As Figure 1 below illustrates, at 50 meters most of western Kansas has access to “Class 4” winds, with wind speeds ranging from 7.5 to 8.1 meters per second, with a number of additional locations reaching “Class 5” status, with wind speeds ranging from 8.1 to 8.6 meters per second.

To understand how Kansas’ access to wind compares to other states across the country, it is necessary to consult Figure 2 below, which illustrates the wind speeds at a height of 50 meters for the entire United States.

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…Kansas is well positioned in America’s “Wind Belt.” This geographic advantage means that Kansas has access to a robust renewable energy source that few other states share. Kansas and its neighboring Plains states have access to one of the best wind resources in the United States. As Figure 3 below shows, the electrical transmission grid in the U.S. is broken into three distinct electrical interconnections: ERCOT, which serves most of Texas, the Western Interconnect, which serves all states west of the Colorado-Kansas state-line, and the Eastern Interconnect. With new transmission projects in the works to alleviate bottlenecks in the grid (See Section C.1 below), Kansas is in a prime position to export power from its excellent wind resource.

Prior to 2012, Kansas ranked ninth among states in terms of operational wind energy. Building on this success, Kansas has led the nation in new wind energy construction in 2012, with an anticipated operational wind energy capacity of approximately 2,714 MW by the end of 2012…

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Conclusion

Kansas is fortunate to be in a position to truly be a leader in an “all-the-above” energy strategy and, while there have been some attempts to guess at the impact of what wind energy development has done and will continue to do for the Kansas economy, there had not been a good study evaluating the data as to what has actually happened. Fortunately, because the Kansas utilities have embraced wind energy generation as a valuable component of their energy portfolios and made significant strides towards accomplishing the state’s RPS goal of twenty percent renewable energy by the year 2020, the data that is required to do this economic analysis is now publicly available.

Based upon empirical data from the wind energy projects currently operating and under construction in the state, we can make the following conclusions:

1.) New Kansas wind generation is cost-effective when compared to other sources of new electricity generation, as substantiated by the public reports filed by the utilities with the KCC.

2.) Wind generation is an important part of a well-designed electricity generation portfolio, and provides a hedge against future cost volatility of fossil fuels.

3.) Wind energy generation has provided a substantial number of jobs for Kansas citizens, and provides important economic benefits for landowners and local economies.

4.) The Kansas Renewable Portfolio Standard (RPS) is an important economic development tool for attracting new businesses to the state.

It is the authors’ objective to facilitate thoughtful policy discussions about these issues, as they will remain important to Kansas now and in the years to come.

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