TODAY’S STUDY: The Big Opportunities In Offshore Wind
Offshore Wind Generating Economic Benefits On The East Coast
August 2018 (Environmental Economics)
The U.S. offshore wind industry is poised for substantial growth, thanks to falling costs and increasing recognition by state and federal policy makers that there are tremendous economic benefits in harnessing clean, renewable energy offshore. BW Research, on behalf of E2, found that if each of the five states below added an average-sized offshore wind energy farm (352 MW) nearly 25,000 construction and operational jobs would be created up and down the eastern seaboard. The Department of Interior is developing lease sales for a strong pipeline of projects in this region—28 in total—which could equal 23,735 MW of new generating capacity, which if all developed would result in tens of thousands of more jobs and added economic benefits for those states. Through its expected growth over the next several years, offshore wind energy has the potential to significantly add to the Gross Regional Product (GRP) and state and federal tax revenues of South and North Carolina, Virginia, New Jersey, and New York.
The country’s emerging offshore industry will add jobs and new economic opportunities to already robust coastal economies. In 2015, the ocean-related tourism and recreation industry in North and South Carolina, Virginia, New York, and New Jersey supported over 34,500 business establishments and 572,667 jobs, with $15.6 billion paid in wages and over $32.6 billion in contributions to the country’s gross domestic product (GDP)1 (2018 USD).2 Additionally, in 2016 commercial fisheries landings3 in the five Atlantic states had a total landed value of $582 million.4,5 These two industries, critical to the region’s economy, are dependent on clean and healthy oceans.
While responsibly developed offshore wind is compatible with coastal recreation, tourism, and commercial economies, offshore oil and gas development pose a threat to those industries. The Bureau of Ocean Energy Management (BOEM)’s draft proposed five-year offshore oil and gas leasing program would open nearly the entire U.S. continental coastline, including the Atlantic coast, to oil and gas drilling.6 Allowing drilling along the U.S. coast threatens not only critical natural resources, but also vital sectors of the U.S. economy and the livelihoods of many of the millions of Americans living along the coastline.
The second part of this analysis quantifies several key economic impacts of an oil spill, including identifying important industries that would be at risk, as well as the costs involved in cleanup efforts.7 The analysis assumes that the Atlantic coast would be open to offshore drilling and, more specifically, that an oil spill would occur offshore in the following states: North Carolina, South Carolina, Virginia, New Jersey, and New York. Using NOAA’s Digital Coast ENOW data and National Ocean Economics Commercial Landings Data, the analysis assesses the economic impact of one month of fishing and beach closure due to an oil spill,8 which results show would have significant impacts to states’ economies.9 Considerable evidence also indicates that the impacts of oil spills persist for many years, indicating that the immediate impacts of closures are only part of the economic and environmental picture.
The conclusions of this analysis are clear: responsible offshore wind development is a source for new employment and economic growth while the potential oil spill threats that could arise from an offshore drilling accident jeopardize jobs and businesses that rely on a clean ocean environment.
OFFSHORE WIND DATA BY STATE
The data below show direct and indirect impacts for the construction phase of projects off the coast of South Carolina, North Carolina, Virginia, New Jersey, and New York. Total impacts vary by state depending on factors such as the state’s economy (which industries and businesses are present), workforce availability and cost, total project expenditures, and total leakages to outside-the-region businesses (or contrarily, the percentage of local purchases).
For example, expenditures for the construction phase varied from $843 million in New Jersey to $993 million in South Carolina and local imports (money spent outside-the-region) ranged from $386 million in South Carolina to $619 million in North Carolina.
Results show that building offshore wind energy farms along the five east coast states could have significant economic benefits throughout the region (Table 1). These include:
In addition to jobs created, the economic impacts of the offshore wind energy farms include income paid to its employees (i.e. labor wages11), contributions to the Regional Gross Product (i.e. GRP or value added12), and total sales (i.e. economic benefits13)…
Once the construction is complete, wind farms require ongoing maintenance and operations such as turbine and blade inspection, routine operations maintenance, and management of energy generation.
// Operating and maintaining an offshore wind farm is responsible for 148 to 204 jobs in each of the five states.
// Labor income (wages) totals $10.5 million in North Carolina to $13 million in New Jersey
// Total value-added to states ranges from $14.7 million in North Carolina to $18.5 million in New Jersey.
// Total economic benefits ranged from $26.9 million in North Carolina to $31 million in New Jersey. These impacts are significant, especially considering they are expected to continue annually throughout the lifetime of the project.
In addition to jobs, income, and value added, offshore wind energy development also provides significant state, local, and federal tax revenue.
Total state, local, and federal taxes paid by offshore wind farm construction are provided in the table below. State and local taxes range from $18.8 million to $43.8 million and federal taxes from $25.5 million to $66 million.
The ongoing operations and maintenance of the wind farms are also responsible for significant state and federal tax revenue. During this phase tax contributions would be on-going and expected to last throughout the lifetime of the wind farm.
Total annual state and local tax revenue range from $1 million to $1.6 million annually and federal taxes from $2.2 million to $3 million annually…
Five economic impact analyses were conducted to determine the impacts of building and operating offshore wind energy farms in the states of South Carolina, North Carolina, Virginia, New Jersey, and New York.
Results show that building offshore wind energy farms along the Atlantic coast can have significant economic benefits to the region. Total jobs created range from 2,556 in Virginia to 5,647 in South Carolina and these jobs provide wages and income ranging from over $108 million in Virginia to $281 million in New York. Total contributions to the GRP, or value added, range from $173 million in Virginia to $419 million in New York.
In a region such as the Atlantic coast where beaches and barrier islands dominate the landscape, the economic loss from an oil spill could be significant. An oil spill would threaten the ocean-related tourism and recreation and commercial fishing industries along the five states of South and North Carolina, Virginia, New Jersey, and New York.
Results from the oil spill impact analysis show that total tourism and recreation GDP loss would be greatest in New York at $1.8 billion, with New Yorkers losing $870 million in wages as well. Looking at the impact to commercial fishing, the landed value lost would be significant as well, with the largest cost expected in Virginia ($17.7 million) (Figure 1) and (Figure 2)…