MONDAY STUDY: How To Spend $100 Billion On New Energy

Economic Impact Of Stimulus Investment In Advanced Energy; An Economic Assessment Of Applying Stimulus Funds To Advanced Energy Technologies, Products, And Services In California

Paul Hibbard and Pavel Darling, September 2020 (Analysis Group via Advanced Energy Economy)

Executive Summary

In the wake of the coronavirus pandemic, states will need to make decisions about where and how to invest government dollars – whether state funds dedicated for this purpose or potential stimulus funding from the federal government – to get their economies moving again.

This report focuses on one way in which government stimulus dollars could be put to work in the state of California – investment in advanced energy technologies. Focusing stimulus spending on programs and infrastructure in advanced energy technologies can generate economic activity while also helping California achieve its ambitious energy and climate goals.

For the purpose of this analysis, we postulate a hypothetical level of stimulus spending invested across a range of advanced energy technologies and services: energy efficiency, renewable energy (solar and wind), electrification of buildings, electrification of transportation (electric vehicles and charging infrastructure), energy storage, grid modernization (smart meters, microgrids), and high-voltage transmission.

We then estimate the economic impact of these investments using an industry-standard macroeconomic model (IMPLAN), focusing on overall contribution to the California economy, level of private spending and investment stimulated by these investments, jobs created, and consumer savings on energy costs.

The results of the analysis point to strong economic benefits associated with advanced energy technology investments. In short, an advanced energy stimulus investment of $100 billion in California would produce the following economic benefits:

ž Over $700 billion added to the California economy;

ž Over 4 million new jobs, measured in job-years, resulting in a mix of short-term construction/installation employment and more ongoing positions;

ž Almost $46 billion in additional tax revenues to local and state governments; and

ž Over $28 billion in annual consumer savings.

A greater or lesser level of stimulus investment would result in greater or lesser economic impact. But our analysis finds that advanced energy stimulus investments can generate important and positive economic benefits in the state of California, adding substantial value to the California economy, creating millions of jobs, and sending additional revenue to state and local governments.

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Overview And Findings

As of September, over 190 countries have responded to the worldwide coronavirus pandemic with some form of economic relief. 1 The specifics vary widely, but the basic idea is the same: introduce public money to bolster health care efforts, support people’s ability to meet basic needs, help businesses that are threatened, and stimulate economic activity to generate income and jobs.

In the U.S., individual states have also had to respond to the public health crisis with emergency spending measures. Going forward, they too will be faced with the challenge of jumpstarting their economies in its wake. Whether in dedicating state funds for this purpose or making decisions about where to put federal stimulus funds (should they be forthcoming), states will need to make decisions about how to deploy dollars to stimulate economic growth.

In this report we focus on one way in which government stimulus dollars could be put to use in the state of California – investment in advanced energy technologies. Focusing stimulus spending on programs and infrastructure in advanced energy technologies can generate economic activity while also helping California achieve its ambitious energy and climate goals. The advanced energy technologies considered for the analysis include:

ž Energy efficiency (EE) measures and programs;

ž Renewable electric generating resources (solar, wind);

ž Electrification of buildings (electric heating, cooling, and appliance installations);

ž Electrification of transportation (public investment in or support for private or commercial vehicle charging infrastructure, and support for the purchase of electric vehicles (EV));

ž Energy storage installation;

ž Grid modernization and distributed grid resources (e.g., smart meters, microgrids, combined heat and power, and other integrated distribution system technologies);

ž High-voltage transmission to access remote renewable resources (e.g., new wind resources); and

ž Other low/zero-carbon fuel sources.

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The analysis sets a hypothetical level of stimulus spending and allocates the stimulus dollars across advanced energy technologies. It then estimates the economic impacts of these investments using an industry-standard macroeconomic model (IMPLAN), focusing on a number of key questions:

ž How would public investments in a range of advanced energy technologies affect the state’s economy, and generate jobs and tax revenues?

ž To what extent would public spending in these areas stimulate private investment, and amplify the economic impacts of the stimulus spending?

ž How do the results in overall economic activity, job growth, and other economic benefits vary across the technologies and programs?

The starting point for the analysis is a hypothetical $100 billion of economic stimulus investment, spread across a range of advanced energy technologies (as described in Section III). Allocation of this investment is weighted toward technologies and products that based on historical experience are likely to generate significant in-state economic activity, with incentive levels designed to attract participation from customers and investors, thereby adding private investment to the overall economic impact.

The results of the analysis point to advanced energy stimulus spending as a strong pump-primer for private investment, job creation, and economic growth. In short, $100 billion of advanced energy stimulus investment in California would generate the following economic benefits:

ž Over $700 billion added to the California economy;

ž Over 4 million new jobs, measured in job-years, resulting in a mix of short-term construction or installation employment and more ongoing positions;

ž Almost $46 billion in additional tax revenues to local and state governments; and

ž Over $28 billion in annual consumer savings.

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All categories of advanced energy stimulus spending generate positive impact on the economy, jobs, and tax revenue. The overall benefits accrue due to the direct impact of stimulus spending and private investment, as well as additional economic activity induced by the additional flow of dollars in the economy.

Figures 1 and 2 show how our allocation of $100 billion in stimulus – which is representative rather than prescriptive – translates into economic activity on a technology-by-technology basis, as measured by overall economic impact (addition to Gross State Product, or GSP) and jobs created. In total, $100 billion of advanced energy stimulus results in $263 billion in complementary private investment, $727 billion in overall economic activity, and increase in employment of 4.1 million jobs, measured in job-years, for California.

Energy efficiency investments give the greatest overall boost to the California economy, totaling $373 billion in GSP. The next biggest impact comes from renewable energy generation (solar and wind), totaling $163 billion, followed by electrification of transportation, with $80 billion in economic activity. Energy storage contributes $46 billion and building electrification $41 billion. Transmission and grid modernization combine for another $23 billion in GSP. (See Figure 1.)

In terms of jobs, energy efficiency creates over 1.9 million jobs, calculated in job-years (i.e., a job created by stimulus spending that lasts one year equals one job-year; a new job that is supported by the spending for three years equals three job-years) and resulting in a mix of short-term construction or installation employment and more ongoing positions. Renewable energy investments produce over 850,000 jobs, and electric vehicles over 475,000. Energy storage investments generate nearly 380,000 jobs and building electrification over 320,000; over 180,000 new jobs result from grid modernization and transmission investments. (See Figure 2, next page.)

In addition, certain advanced energy investments provide direct savings to consumers associated with reduced electricity consumption, increased savings from onsite solar production, and reduced fuel costs by use of electric vehicles.2 Based on our representative allocation of $100 billion of stimulus funds for California, energy savings would come to over $28 billion annually. Of this total, $15.3 billion in savings would come from residential energy efficiency, $3.1 billion from residential rooftop solar, $1.6 billion from EV fuel savings, and $8.7 billion from commercial energy efficiency and onsite solar. (See Figure 3, next page.)

Finally, the additional economic activity created by $100 billion in advanced energy stimulus is projected to increase tax revenues for state and local government by $45.8 billion per year.

A greater or lesser level of stimulus investment would result in greater or lesser economic impact. But our analysis finds that advanced energy stimulus investments can generate important and positive economic benefits in the state of California, adding substantial value to the California economy, creating millions of jobs, and sending additional revenue to state and local governments. In Section III we provide more detail on the analytic method and economic model behind this analysis, the data and assumptions applied, and the various modeling inputs and outputs resulting from the analysis…

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