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Project Overview
Applied Analysis was retained by the Clean Energy Project to review and analyze the economic impacts of various changes to Nevadas Renewable Portfolio Standard (RPS). This presentation provides a summary of our general approach the salient findings of our review and analysis; a more detailed analysis and economic impact assessment model have been prepared and submitted separately. Finding are as of the last date of our fieldwork: March 22, 2013.
General Approach
Four (4) alternative scenarios were provided by the Clean Energy Project, ranging from a continuation of the status quo (Base Case) to those that significantly increase the RPS and the way it is calculated. Aspen Environmental Group provided development and operating costs estimates under each alternative scenario; Applied Analysis utilized the Michigan IMPLAN Groups economic input-output model to estimate the economic impact under each provided scenario. Reported impacts are incremental, reflecting additional capital and labor requirements as in comparison to the Base Case; positive and negative impacts were identified, measured and analyzed.
General Approach
Alternative Cases Analyzed
Status Quo (Base Case)
An electricity provider must generate, acquire or save electricity from renewable energy or energy efficiency measures in the following percentages: 9% in 2007-08; 12% in 2009-10; 15% in 2011-12; 18% in 2013-14; 20% in 2015-19 22% in 2020-24; and 25% in for 2025 and each calendar year thereafter. Solar of at least 5% for each calendar year up to and including 2015; and 6% for 2016 and each calendar year thereafter.
Note: Scenarios provided by Clean Energy Project; cost data provided Aspen Environmental Group.
General Approach
Economic Impacts Considered
Economic Factors Measured
Jobs (Employment) Labor Income (Wages and Salaries) Output (General Business Activity)
General Approach
Impact Summary Illustration
Construction Impact O&M Impact Rate Increase Impact Total Impact
Negative Impact
Positive Impact
Findings in Summary
Findings in Summary
Net Positive Economic Impact. Although positive and negative impacts are attributable to a proposed increase to Nevadas RPS, the net overall economic impacts of the cases reviewed herein are positive. Positive impacts are reflected in higher rates of employment, wage and salary payments and economic output. One-Time Construction Impacts Significant. Net new facility construction is estimated to range from $3.0 billion to $6.4 billion depending on the RPS scenario analyzed. Including indirect impacts, the implications of this level of investment translate into between $5.2 billion and $11.0 billion in increased economic activity throughout the state of Nevada. It also translates into between 37,300 and 78,400 person-years of employment (i.e., one person employed for one year). These employees would earn between $2.1 billion and $4.4 billion in wages and salaries throughout the study period. Recurring Operations Impacts Modest. Incremental operations and maintenance of the alternative renewable facilities would generate between 127 and 250 net new jobs annually, increasing labor income by between $10.2 million and $20.2 million and output by between $41.8 million and $82.3 million each year.
Findings in Summary
Impact Summary Matrix
Construction Impacts1
Alternative #1 (Clean RPS)
Operations Impacts2
Rate Impacts2
Net Impacts1
Jobs: +20,878 to +37,777; labor income: +$1.5 billion to +$2.2 billion; economic output:+$3.7 billion to +$5.8 billion
Incremental investment: Incremental spending: Rate increase $12.8 million to $3.0 billion. Resulting $33.4 million. Resulting $131.7 million. Resulting impact: impact: +37,262 jobs, impact: +127 jobs, +$10.2 -95 to -980 jobs; -$4.0 million to +$2.1 billion in labor million in labor income; -$41.6 million in labor income; income; and +$5.2 +$786 million in economic -$11.8 million to -$121.5 million billion in economic output in economic output output Incremental investment: Incremental spending: Rate increase $14.1 million to $3.4 billion. Resulting $37.4 million. Resulting $144.9 million. Resulting impact: impact: +41,518 jobs, impact: +144 jobs, +$11.6 -105 to -1,079 jobs; -$4.4 million +$2.3 billion in labor million in labor income; to -$45.8 million in labor income; income; and +$5.8 +$47.5 million in economic $13.0 million to -$133.6 million billion in economic output in economic output output
Annual Fuel Costs $192.7 million; combined, all years: $4.2 billion
Jobs: +24,212 to +42,151; labor income: +$1.7 billion to +$2.4 billion; economic output:+$4.2 billion to +$6.5 billion
Alternative #3 Incremental investment: Incremental spending: Rate impact $24.1 million to (Clean & Expand RPS) $6.4 billion. Resulting $65.7 million. Resulting $248.3 million. Resulting impact: impact: +78,366 jobs, impact: +250 jobs, +$20.2 -180 to -1,848; -$7.6 million to +$4.4 billion in labor million in labor income; -$78.4 million in labor income; income; and +$11.0 +$82.3mbillion in -$22.2 million to -$229.0 million billion in economic economic output in economic output output
1Values
Annual Fuel Costs $330.2 million; combined, all years: $7.2 billion
Jobs: +45,256 to +79,934; labor income: +$3.2 billion to +$4.6 billion; economic output:+$8.0 billion to +$12.3 billion
expressed as total impact through 2040; employment expressed in person-years. 2Values expressed as annual impacts after all new plants built through 2040. 3A portion of overall Rate Impacts and not included individually in Net Impact calculation; assumes $5 per mmBTU natural gas price.
Findings in Summary
Rate Increase Impact Significant and Uncertain. Nevada consumers will bear higher energy costs under all scenarios analyzed, negatively impacting employment, incomes and economic output. Rate impacts on Nevada consumers are highly influenced by assumption regarding fuel costs, carbon taxes and electricity sales. Under assumptions most favorable to the status quo (e.g., low cost of fossil fuels and no carbon taxes) more jobs are lost due to decreased spending by consumers as they bear higher relative energy costs. Increased electricity cost to consumers are as high as $5.2 billion throughout the study period, resulting in an annual loss of as many as 1,848 jobs and $78.4 million in labor income. Avoided Fossil Fuel Cost Key. An estimated $175,180 in fossil fuels as assumed to be avoided annually for each megawatt of renewable power built in the analyzed scenarios. Fuel required by these plants is acquired from outside Nevada, resulting in minimal in-state impacts in terms of jobs, wages and output. Avoiding these cost allows the Nevada to effectively lower the cost of deploying additional renewable energy alternative. It is this trade off that shifts what would be a negative economic impact to a positive economic impact.
Findings in Summary
Environmental, Health, Economic Development and Other Impacts Not Included. With the exception of those rate impact models that include carbon tax assumptions, the analyses reflected here do not attempt to quantify the environmental, public health and social impacts associated with the alternative RPS strategies. Additionally, this analysis does not attempt to quantify or analyze the economic development and/or economic diversification impacts associated with an increased level of investment in renewable technologies. While beyond the scope of this analysis, these impacts are likely to be material and warrant additional study.
Study Period: Incremental Capacity/Investment: Solar PV1 Solar CSP2 Geothermal Wind Transmission Total Avoided Out-of-State Fuel Purchases3:
Source: Aspen Environmental Group (2013) and calculations. 1PV: Photovoltaic. 2CSV: Concentrated solar power 3Assumes $5 per mmBTU Natural Gas Cost
Indirect 7,173 $374.1 $904.5 251 $12.9 $34.4 0 $0.0 $0.0 7,425 $387.0 $938.8 275 $14.3 $34.8
Induced 11,129 $443.5 $1,322.0 1,010 $40.3 $120.1 -10,113 -$429.1 -$1,252.7 2,026 $54.8 $189.4 75 $2.0 $7.0
Total 37,262 $2,072.2 $5,248.2 2,334 $188.3 $768.1 -10,113 -$429.1 -$1,252.7 29,483 $1,831.5 $4,763.6 1,092 $67.8 $176.4
18,960 $1,254.6 $3,021.7 1,072 $135.2 $613.6 0 $0.0 $0.0 20,032 $1,389.7 $3,635.4 742 $51.5 $134.6
impacts vary materially depending on assumptions specific to the presence of carbon taxes, fossil fuel costs, and out-of-state sales. For ease of summary, a mid-case scenario is provided. A summary of all rate impact analysis for all scenarios is provided at the end of this section.
Study Period: Incremental Capacity/Investment: Solar PV1 Solar CSP2 Geothermal Wind Transmission Total Avoided Out-of-State Fuel Purchases3:
Source: Aspen Environmental Group (2013). 1PV: Photovoltaic. 2CSV: Concentrated solar power 3Assumes $5 per mmBTU Natural Gas Cost
Ending 2040 Cost ($ in millions) $ 319.0 $ 1,313.3 $ 1,693.6 $ 586.0 $ 246.4 $ 4,158.3 $192.7 Million Annually
Indirect 7,993 $416.9 $1,007.8 276 $14.2 $37.7 0 $0.0 $0.0 8,269 $431.1 $1,045.5 306 $16.0 $38.7
Induced 12,400 $494.2 $1,473.1 1,109 $44.2 $131.9 -10,735 -$455.5 -$1,329.8 2,774 $83.0 $275.1 103 $3.1 $10.2
Total 41,518 $2,309.0 $5,847.8 2,563 $206.8 $843.3 -10,735 -$455.5 -$1,329.8 33,346 $2,060.3 $5,361.3 1,235 $76.3 $198.6
21,126 $1,397.9 $3,366.9 1,177 $148.4 $673.8 0 $0.0 $0.0 22,303 $1,546.3 $4,040.7 826 $57.3 $149.7
impacts vary materially depending on assumptions specific to the presence of carbon taxes, fossil fuel costs, and out-of-state sales. For ease of summary, a mid-case scenario is provided. A summary of all rate impact analysis for all scenarios is provided at the end of this section.
Study Period: Incremental Capacity/Investment: Solar PV1 Solar CSP2 Geothermal Wind Transmission Total Avoided Out-of-State Fuel Purchases3:
Source: Aspen Environmental Group (2013). 1PV: Photovoltaic. 2CSV: Concentrated solar power 3Assumes $5 per mmBTU Natural Gas Cost
Indirect 15,087 $786.9 $1,902.2 570 $29.3 $78.0 0 $0.0 $0.0 15,657 $816.2 $1,980.3
Induced 23,405 $932.8 $2,780.4 2,294 $91.5 $272.7 -20,752 -$880.5 -$2,570.8 4,947 $143.8 $482.4
Total 78,366 $4,358.2 $11,037.7 5,300 $427.7 $1,744.2 -20,752 -$880.5 -$2,570.8 62,914 $3,905.4 $10,211.2 2,330 $144.6 $378.2
39,875 $2,638.5 $6,355.1 2,435 $306.9 $1,393.5 0 $0.0 $0.0 42,310 $2,945.4 $7,748.6
Net Economic Impact (Annual) 1,567 580 183 Jobs $109.1 $30.2 $5.3 Labor Income $287.0 $73.3 $17.9 Output 1Rate impacts vary materially depending on assumptions specific to the presence of carbon taxes, fossil fuel costs, and out-of-state sales. For ease of summary, a mid-case scenario is provided. A summary of all rate impact analysis for all scenarios is provided at the end of this section.
High fuel costs and/or carbon taxes would lead to increased impact from the alternative renewable scenarios consider in this analysis, as maintaining the status quo (Base Case) would become more expensive relative to the renewable options Allowing renewable sales to other states helps to damper rate increases with a few notable exceptions The challenge from an analytical standpoint is that this makes the impact assessment three dimensional. For each of the three scenarios analyzed, there are 17 rate scenario combinations. They are summarized on the following page.
Source: 2009 & 2012 NV Energy IRP, IMPLAN, Aspen Environmental Group, Calculations
Source: 2009 & 2012 NV Energy IRP, IMPLAN, Aspen Environmental Group, Calculations
Source: 2009 & 2012 NV Energy IRP, IMPLAN, Aspen Environmental Group, Calculations
Source: 2009 & 2012 NV Energy IRP, IMPLAN, Aspen Environmental Group, Calculations
Source: 2009 & 2012 NV Energy IRP, IMPLAN, Aspen Environmental Group, Calculations
Source: 2009 & 2012 NV Energy IRP, IMPLAN, Aspen Environmental Group, Calculations
Source: 2009 & 2012 NV Energy IRP, IMPLAN, Aspen Environmental Group, Calculations
Analysis Assumptions
Analysis Assumptions
Energy Facility Assumptions
Cases are based on Nevada Energys 2009 Integrated Resource Plan, in which the three combined cycle plants replace 1,403 MW of renewable energy in alternate options The base case scenario assumes the following power plants to replace 1,403 MW of renewable energy:
525 MW Combined Cycle Plant in 2017 Two 558 MW Combined Cycle Plants in 2018 and 2022
In the renewable alternative, a different fossil fuel plant must still be constructed to meet demand when renewables are unable to do so:
576 MW 8-7EA Combustion Turbine Plant
Analysis Assumptions
Summary of Fossil Fuel Construction Costs
($ in millions) Base Scenario Lost Construction Costs Combined Cycle 525 MW in 2017 Combined Cycle 558 MW in 2018 Combined Cycle 558 MW in 2022 Total Base Scenario Lost Construction Combustion Turbine 8-7EA 576 MW in 2017 Total Renewable Fossil Fuel Construction -$604.3 -$642.3 - $642.3 -$1,888.9 Renewable Scenarios Construction Costs $640.0 $640.0 Net Base Scenario Lost Construction Costs Net Base Scenario Lost Construction Costs
*This figure is scaled by a multiplier for each scenario
Source: 2009 NV Energy IRP, Aspen Environmental Group, Calculations
-$1,248.9*
Analysis Assumptions
($ in millions, totals after 2022)
Base Scenario O&M Costs -$10.7 -$11.4 -$11.4 -$33.4 Renewable Scenarios O&M Costs $7.0 $7.0 Net Base Scenario Lost O&M Costs Net Base Scenario Lost O&M Costs -$26.4*
Source: 2009 & 2012 NV Energy IRP, Aspen Environmental Group, Calculations
Analysis Assumptions
Ratio Assumptions
General Formula: Scenario MW (Alternative Scenario 1, 2, or 3) Nevada Energy Plan MW (1403 MW of Renewables)
Alternative #1: 1000 MW1403 MW = 0.713 Alternative #2: 1100 MW1403 MW = 0.784 Alternative #2: 1885 MW1403 MW = 1.344
Source: 2009 NV Energy Integrated Resource Plan (Cases 3 and 5 in Report), calculations
Analysis Assumptions
Incremental Capacity and Investment Matrix ($ in millions)
Alternative #1 (Clean RPS) Capacity Cost Solar PV1 Solar CSP2 Geothermal Wind Transmission Total
Source: Aspen Environmental Group (2013). 1PV: Photovoltaic. 2CSV: Concentrated solar power
Alternative #2 (Expand RPS) Capacity Cost 200 250 325 325 1,100 $319.0 $1,313.3 $1,693.6 $586.0 $246.4 $ 4,158.3
Alternative #3 (Clean & Expand RPS) Capacity Cost 360 400 600 525 1,885 $602.1 $2,223.0 $3,197.3 $981.0 $724.9 $ 7,728.3
Analysis Assumptions
Impact of Out-of-State Fuel Purchases
One of the largest costs for traditional power plants are fuel purchases from out-of state vendors Fuel imports remove dollars from the Nevada economy
Renewables redirect what would have been fuel costs towards capital costs The capital costs of renewables have some impact that remains in-state, whereas the costs of fuel do not
A 576 MW combined cycle plant (the type of plant not built with renewables in Base Scenario), is expected to produce 2.688 million MW-hours of electricity in a year A plant of this size is estimated to consume 18.8 trillion BTUs of natural gas in production At $5 per million BTU, the plant will spend an estimated $93.8 million on fuel each year; roughly 3 additional plants of this size will be needed in the base scenario when compared to an additional 1,403 MW of renewable capacity.
Source: Calculation based on data reported by NV Energy and Aspen Environmental Group