Renewable energy potential in Texas by HRI Socio-Economics Group

Renewable Energy Potential in Texas

SOCIO-ECONOMICS GROUP HARTE RESEARCH INSTITUTE THE GULF OF MEXICO STUDIES

June 2010

Renewable Energy Potential in Texas By: Carlota Santos, MBA David Yoskowitz, PhD

With assistance provided by: Emily Williamson

Report funded partially with a grant by The Energy Foundation

Harte Research Institute for Gulf of Mexico Studies Texas A&M University- Corpus Christi 6300 Ocean Drive, Corpus Christi, Texas 78412

Suggested Citation: Santos, C. and D.W.Yoskowitz, 2010. Renewable Energy Potential in Texas, Harte Research Institute. June. 69 pages.

Table of Contents Executive Summary ...................................................................................................................................... 1 I. Introduction ...................................................................................................................................... 3 II. Traditional Energy Use and Trends .................................................................................................. 3 i.

Worldwide ........................................................................................................................ 3

ii.

U.S. ................................................................................................................................... 8

iii.

Texas ............................................................................................................................... 11

III. Renewable Energy Use and Trends ................................................................................................ 13 i.

Worldwide ...................................................................................................................... 13

ii.

U.S. ................................................................................................................................. 18

iii.

Texas ............................................................................................................................... 29

IV. Renewable Energy Opportunities‐ The Future ............................................................................... 51 i.

Areas for Improvement .................................................................................................. 51

V. Economic Impact ........................................................................................................................ 54 VI. Conclusion .................................................................................................................................. 60 References ....................................................................................................................................... 63

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Executive Summary Energy is king in Texas. In 2006 the oil and gas industry alone accounted for 14.9% of the Gross State Product. The State produces more energy than any other state, 11.3 trillion Btu (2007) and consumes more than any other state per year, 11.8 trillion Btu (2007). A result of that dominance is that the State is also the largest emitter of CO2 from electric power production, 252 million metric tons in 2008. At the same time that Texas leads the country in traditional energy production and consumption, there is also tremendous opportunity in development of renewable energy. The expansiveness of the State drives the opportunity in the renewable energy sector. A recent study by the National Renewable Energy Laboratory ranks Texas number one with regards to wind energy potential generation at 6.5 million Gigawatt-hours (GWh). The state also has 250 “quads” of solar energy accessible every year, more than enough to meet the demands of every citizen in the State. Renewable energy sources are not just limited to the wind and solar. Texas also has great potential in other sources as well such as geothermal, biomass, and biofuels from algae and other sources. Texas already has a strong presence in renewable energy: • 72% of total biomass energy was used by the industrial sector, compared to the national average of 55% (Combs, 2008a). • By the end of 2009, Texas had installed 9,410 MW of wind energy capacity, leading the country. • Wind-related manufacturing is growing in Texas. Companies based in Texas now produce different parts for wind turbines, like blades, towers, and nacelles. However, it is the potential of the renewable energy industry in Texas, from manufacturing to production, which can have a significant impact: • Biomass and Bio-energy o Algae production for use in bio-fuel is extremely promising. Algae require three ingredients to grow: carbon dioxide, high solar radiation, and brackish water or water high in salt concentration. In Texas, the best areas for algae production are West Texas and the Gulf Coast. A perfect situation would be to match petrochemical facilities and power plants in the Gulf of Mexico and algae production, so CO2 could be captured to produce biofuels/bioproducts (Combs, 2008a) • Geothermal o In five to ten years, Texas could have 2,000 to 10,000 MW of geothermal energy capacity provided through oil and gas wells. In April 2009, the Land Office awarded three geothermal energy leases off the Texas coast to Geo Texas Co., which will be generating geothermal energy on 128,758 acres of state underwater land off the coasts of Brazoria, Galveston, and Matagorda counties. • Solar 1

â&#x20AC;˘

o One study estimates that Texas could capture around 13% of all new jobs and investments concerned with solar PV technologies by 2015 (Combs, 2008b, 2008c). o West Texas has enough resources to produce up to 351 million MWh of electricity and 75% more direct solar radiation than East Texas. Wind o 17,000 MW of installed capacity could generate 1,700 full time jobs. o Texas is one of the regions in the country with the lowest cost due to higher performance and lower development and installation costs (Combs, 2008d, 2008c). Lower costs lead to lower prices, which makes this energy source more attractive.

While all sections of the State are in a position to benefit from some level of renewable energy manufacturing and/or production, South and West Texas are in particularly good position to take advantage of future growth. The potential impacts of two similar sized projects of 100 MW, one being wind and the other, a centralized solar power trough plant is: Solar Wind 1 Jobs during construction 2,249 496 Jobs during operation 112 23 2 Earnings during construction (millions) $145 $19 Annual earnings during operations (millions) $6 $1 If Texas were to double the amount of installed capacity generated from wind it could potentially create 466,736 jobs during the construction phases, 2,164 permanent jobs during the operation phase, $1.7 billion in earnings during the construction phase, and $94 million annually during operations. The impact from solar facilities is even greater. There are still a few issues that will impact the future of the renewable energy industry in Texas. The economics of construction and operations is still challenging. Development of renewable energy sources has, over time, been supported by various incentives and standards at the federal and State level. The major incentive for construction and production of renewable energy is the federal production tax credit (PTC) set in 1992 at $0.015/kWh. Since then, it has been renewed and expanded several times, most recently in 2009, and is currently set at $0.02/kWh. The Texas Renewable Portfolio Standard (RPS) is also a major engine for the development of renewable energy. Additionally, transmission lines from rural parts of the State where the energy is produced to where it is consumed are critical.

Jobs during the construction phase and operation phase include direct, indirect, and induced. Income during the construction phase and operation phase are in millions of dollars and include direct, indirect, and induced. 2

Introduction The major contributor to greenhouse gas emissions is the burning of fossil fuels (more than 80%), such as natural gas, coal, and oil. The U.S. and the world rely heavily on this type of nonrenewable energy source leading to a serious and continuous rise of GHG emissions. Developing renewable “green” energy sources such as solar, biomass, wind, and geothermal can help reduce GHGs emissions and mitigate climate change. Although renewable energy sources still represent a small fraction of the world’s energy supply, the use and efficiency of this energy can increase significantly (World Resources Institute, 2008). Renewables can improve human health with its insignificant or zero GHG emissions and potentially help boost the economy by creating new jobs. II.

Traditional Energy Use and Trends

i. Worldwide Energy comes from different sources. Fossil fuels, like oil, coal, and natural gas are the most common. For many years coal was the main source of energy, it was responsible for 70% of all energy produced. Today it only supplies 26% of worldwide energy. The majority of energy is now supplied by crude oil, while natural gas, although not so significant, is growing and becoming more important globally. Studies predict that the remaining amount of reachable fossil fuels will last 170 years at current rate of consumption (Climate Institute, 2008). On the other side of the table are the renewable energies. These sources are not finite and can be explored indefinitely. In recent decades, this source of energy has been improved and new technologies have been developed to capture the energy of the sun, earth, wind, and oceans (Climate Institute, 2008). Demand for energy continues to rise as a consequence of increasing population around the world and expanding economies. Nevertheless, increasing prices and alarms about insecure energy supplies will limit growth in fossil fuel consumption (IPCC, 2007). The primary goal of any energy improvement is to create energy services that improve productivity and people’s quality of life, whether it’s health, comfort, or life expectancy. Secure, affordable, equitable, and sustainable energy supply is essential for future prosperity. Economic policies focused on sustainable development will bring co-benefits that include the use of new energy technologies and better access to affordable modern energy. This will determine if and how many people will achieve a good quality of life in the future (IPCC, 2007). If the current global rate of energy consumption remains the same, energy consumption will double by 2030 and triple by 2060, when compared to 1995 levels (Climate Institute, 2008; Environmental and Energy Study Institute, 2007; IPCC, 2007). This increase in energy demand poses serious risks to the environment and human health. The production and consumption of energy already produces more environmental damage than any other human activity. It contributes almost 80% of the air pollutants and more than 88% of the greenhouse gas emissions responsible for global warming (Climate Institute, 2008; IPCC, 2007). A solution to reduce GHG emissions would be a transition away from the traditional use of fossil fuels to zero- and low-carbon-emitting modern energy supplies. A mix of choices to decrease the amount of energy per unit of GDP and the carbon intensity of energy systems is needed to achieve a sustainable energy future (IPCC, 2007). The figure below illustrates the complexity that exists between primary energy sources and energy carriers.

Figure 1: Complex interactions between primary energy sources and energy carriers to meet societal needs.

Source: IPCC, 2007.

In recent years, energy consumption and demand has increased worldwide (Figure 2). By 2030, a 65% global increase above 2004 levels is expected. Consequently, without mitigation measures, to cut the increasing rates of carbon emissions people will have to start using all possible cost-effective means (IPCC, 2007). Figure 2: Global annual primary energy demand by region, 1971-2003.

Source: IPCC, 2007. Note: EECA = countries in Eastern Europe, the Caucasus and Central Asia.

In 2004, roughly 40% of the global primary energy was used as fuel to produce 17,408 TWh 3 of electricity (Figure 3). The production of electricity has had an average growth rate of 2.8%/yr since 1995 and is expected to continue growing at a rate of 2.5-3.1%/yr until 2030. In 2005, global energy production was provided 40% by hard coal and lignite fuels, 20% by natural gas, 16% by nuclear, 16% by hydro, 7% by oil, and 2.1% by other renewables. Non-hydro renewable plants have increased significantly in the last decade with solar PV installations and wind turbine growing by 30% yearly. Yet, they only provide a small portion of electricity production (IPCC, 2007). Figure 3: Worldâ&#x20AC;&#x2122;s Primary Energy Consumption by Fuel Type

Source: IPCC, 2007.

Figure 4 shows the global annual energy consumption per capita by region. As illustrated, the consumption of energy per capita in North America is high compared to other regions of the world.

Terawatt hour (TWh) equals 1012 kWh.

Figure 4: Global Annual Energy Consumption per capita by Region (toe 4 /capita).

Source: IPCC, 2007.

Primary Energy Resources Fossil Fuels Fossil fuels are still abundant, but release significant amounts of carbon during combustion. The current reserves of oil and gas are expected to last for decades and in the case of coal for centuries. Potentially unknown resources increase these projections even further. In 2004, 80% of the world primary energy demand was supplied by fossil fuels. In the absence of policies limiting carbon emissions, the use of fossil fuels is expected to grow even more over the next 2030 years (IPCC, 2007). Eighty five percent of the annual anthropogenic CO2 emissions come from fossil fuels. From those fossil fuels, natural gas is the one that produces the lowest level of GHG per unit of energy consumed and is therefore the preferred one among mitigation policies. Fossil fuels have enjoyed high economic advantages that maybe other technologies will never overcome. Even so, there is a global trend for fossil fuel prices to rise and renewable energy prices to decline due to continuous improvement in productivity and economies of scale (IPCC, 2007). If choosing which fossil fuel conversion method will depend only on the market, all fossil fuel options will continue to be used. On the other hand, if GHGs are to be reduced, either fossil energy will have to shift to a zero or low-carbon sources, or new technologies will have to be developed to absorb and store CO2 emissions (IPCC, 2007). Coal and peat Coal is the most plentiful fossil fuel in the world and remains the most important one in several countries (Table 1; (IPCC, 2007; World Coal Institute, 2007).

A tonne of oil equivalent (Toe) is the amount of energy released by burning one tonne of crude oil (Austin Clean Energy Initiative IC2 Institute, 2002).

Table 1: Percentage of Coal for Electricity Generation for Different Countries.

Poland South Africa Australia PR China

93% 93% 80% 78%

Israel Kazakhstan India Morocco

71% 70% 69% 69%

Czech Rep Greece USA Germany

59% 58% 50% 47%

Source: Adapted from World Coal Institute, 2007.

Coal generates 41% of the world’s electricity. Upon combustion, coal releases various gaseous byproducts like greenhouse gases, including carbon dioxide, nitrogen oxide, sulfur dioxide, and methane gas. These gases can create acid rain, impact trees and water, and contaminate fish and shellfish and affect animals and people who eat them (Climate Institute, 2008). Coal-burning plants generate the most carbon dioxide per unit of energy generated, when compared to other fossil fuels, and contribute significantly to air pollution (Climate Institute, 2008). Nevertheless, the demand for coal is predicted to more than double by 2030 (IPCC, 2007a; Climate Institute, 2008). The coal industry found several ways to reduce impurities from coal. More effective ways of cleaning coal before it leaves the mine, like “scrubbers” to clean sulfur from smoke (Climate Institute, 2008). Gasifying coal before its conversion to heat decreases sulfur, mercury, and nitrogen oxides emissions. This results in a much cleaner fuel and reduces the cost of capturing CO2 emissions (IPCC, 2007). It is known that improved efficiencies in plants can reduce the amount of CO2 and waste heat emitted per unit of electricity produced. CSIRO Sustainable Ecosystems (2005) is developing ultra-clean coal production that reduces ash under 0.25%, sulfur to small levels, and GHG emissions by 24% per kWh, when compared to other conventional plants (IPCC, 2007). Natural Gas Natural gas is a nonrenewable energy source and one of the main components (21%) of the world’s energy supply (IPCC, 2007). From the production and consumption of natural gas, emissions have also been increasing steadily since the 1980s. Natural gas is still the cleanest of all fossil fuels, with lower emissions of sulfur, nitrogen, and carbon than oil or coal (Table 2; Climate Institute, 2008).

Table 2: Fossil Fuel Emission Levels- Pounds per Billion Btu of Energy Input.

Pollutant

Natural Gas

Carbon Dioxide

Oil

Coal

117,000

164,000

208,000

Carbon Monoxide

208

Nitrogen Oxides

448

457

Sulfur Dioxide

1,122

2,591

Particulates

2,744

0.0000

0.007

0.016

Mercury Source: Climate Institute, 2008.

Petroleum Fuels Conventional oil products from crude oil-well bores represent 35% of the worldâ&#x20AC;&#x2122;s total energy consumption and are mostly concentrated in just a few countries. Two thirds of its reserves are in the Middle East and North Africa (IPCC, 2007). Predictions suggest that the total available reserves and resources should be enough for the next 70 years at present rates of consumption. However, consumption rates are forecasted to increase, a 30 to 40 yearsâ&#x20AC;&#x2122; supply is a more reasonable estimate (IPCC, 2007). ii.

U.S. Most of the energy produced in the U.S., as in most industrialized countries, comes from fossil fuels (78.6% in 2008). It includes oil, coal, and natural gas. Production and consumption were closely balanced during the 1950s, but since the 1970s consumption clearly surpassed production (Figure 5). In 2008, energy production totaled 73.7, while consumption was 99.3, which in return generated a net import of 25.775 (values are in quadrillion Btu) (U.S. Energy Information Administration, 2009a). Figure 5: U.S. Energy Overview (billion Btu) 120,000,000 100,000,000 80,000,000 60,000,000 40,000,000 20,000,000

1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007

Production

Consumption

Imports

Exports

Source: U.S. Energy Information Administration, 2009a.

In 2008, the United States produced close to 74 quadrillion British thermal units (Btu) of energy and exported 7 quadrillion Btu. Total consumption for that year was a little over 99 Btu, which led imports to reach nearly 33 Btu, close to 23 times the 1949 level (U.S. Energy Information Administration, 2009a). The increasing energy imports were driven mostly by petroleum demand. In 1973, U.S. petroleum imports reached the 6.3 million barrels per day. In October of the same year, the Arab countries of the Organization of Petroleum Exporting Countries (OPEC) restricted the exportation of oil to the U.S., prices increased dramatically, and imports decreased as a consequence. In 1986 the rising trend in imports carried on and has continued ever since (Figure 6). In 2008, U.S. petroleum imports reached a high of 13 million barrels a day (U.S. Energy Information Administration, 2009a). Figure 6: U.S. Petroleum Imports (Thousands of Barrels per Day) 16000 14000 12000 10000 8000 Petroleum

6000 4000 2000 2006

2003

2000

1997

1994

1991

1988

1985

1982

1979

1976

1973

Source: U.S. Energy Information Administration, 2009.

The different energy sources have changed over time. In the residential and commercial sector, while coal was dominant in the 1950s, after that it disappeared quickly. Petroleum rose progressively until 1972 and it decreased slowly after that. Natural gas has become more dominant, as well as electricity, which was a minor source in 1949 and since then it has increased significantly (U.S. Energy Information Administration, 2009a). The increased use of electricity was partly due to the electrification of U.S. households. In 1950, 9% of American households had a TV and in 2009 that percentage increased to 98.9% (Elliott, 2008; Television Bureau of Advertising, Inc., 2009). In 1978, only 56% of American Households had air conditioning. In 2001, that number increased to 75.5%, or 80.8 million of households. Air conditioning is accountable for the largest share of household electric use and these numbers, rather than being static, are likely to be on the rise (U.S. Energy Information Administration, 2009a).

Figure 7: U.S. Energy Consumption by Source (Quadrillion Btu) 45 40 35 30 Petroleum

25 20

Natural gas

Coal

Geothermal Power

Hydroelectric Power 2006

2003

2000

1997

1994

1991

1988

1985

1982

1979

1976

1973

Source: U.S. Energy Information Administration, 2009.

Primary Energy Resources: Fossil Fuels Coal Coal is the most abundant fossil fuel in the U.S., with ¼ of the world’s total coal reserves. Coal reserves in the U.S. are enough to last around 236 years at today’s level of consumption. It is mostly used as a fuel to produce electricity and heat through combustion. Coal combustion is responsible for 36% of total carbon dioxide emissions in the United States. Government and industries have teamed up to develop “clean coal technologies” that would remove nitrogen oxides and sulfur from coal or convert coal to a liquid or gas fuel. New programs in clean coal technology, like the Clean Coal Power Initiative (CCPI), are fundamental to develop the original Clean Coal Technology Program. The CCPI is a cooperative and cost-saving program shared by the government and industry to develop new coal-based power generation technologies. Programs like this help reduce mercury and carbon dioxide emissions and increase fuel efficiencies (Climate Institute, 2008). Natural Gas Around 23% of all the energy consumed in the U.S. comes from natural gas and a little over 50% of all American homes use natural gas as their heating source. One benefit of using natural gas is its smaller impact on the environment when compared with other fossil fuels. It burns more cleanly and emits fewer amounts of carbon, nitrogen, and sulfur than oil or coal (U.S. Energy Information Administration, 2009b). Natural gas is predicted to be the fastest growing primary energy source in the next few decades, mostly for being a clean fuel (Climate Institute, 2008; IPCC, 2007; U.S. Energy Information Administration, 2009b). To satisfy this rise in demand, the International Energy Agency (IEA) predicted that around $3 trillion dollars will be needed in investment. Infrastructure to handle the supply, transportation, exploration, and production will be part of the investment (Climate Institute, 2008). 10

In 2007, total U.S. production of natural gas was 19,278 billion cubic feet and total consumption was 23,056 billion cubic feet. In 2008, consumption reached an almost-record level at 23.3 billion cubic feet (a 0.1% increase over 2007 level). Imports were higher than exports with 4,608 billion cubic feet versus 822 billion cubic feet (U.S. Energy Information Administration, 2009b). Figure 8 illustrates the increase in gas consumption over time and the high number of imports versus exports. Figure 8: Total U.S. Natural Gas Imports and Exports, 1994-2007

Source: U.S. Energy Information Aministration, 2007.

Natural gas prices delivered to electric generators have fallen drastically for the last year, which brings an opportunity for displacing coal-fired electricity generators with natural gas fired generators. Since transportation costs are higher in the southeast region of the country, the areas with the biggest potential for substitution are East South Central (ESC) and South Atlantic regions (SA) (U.S. Energy Information Administration, 2009a). iii. Texas Texas is the leading state in fossil fuel reserves. Texas reserves for crude oil account for almost one-fourth of total U.S. reserves and for natural gas for almost three-tenths of total U.S. natural gas reserves (U.S. Energy Information Administration, 2009b). Due to its large population, hot climate, and energy-dependent economy, Texas produces and consumes more electricity than any other state (over 1/10 of total U.S. energy use). The stateâ&#x20AC;&#x2122;s per capita residential use is higher than the countryâ&#x20AC;&#x2122;s average. Some of the energy-demanding industries in Texas include aluminum, forest products, chemicals, and petroleum refining (U.S. Energy Information Administration, 2010).

Fossil Fuels Texas is the number one state in both crude oil production and refining capacity. Its 27 oil refineries produce close to 4.8 million barrels of crude oil (1/4 of total U.S. capacity) and are located close to major ports along the Gulf Coast, such as Houston, Corpus Christi, and Port Arthur. Texas is the state with the highest petroleum consumption, along with products such as asphalt and road oil, jet fuel, distillate fuel oil, lubricants, and liquefied petroleum gases (LGP). Texas use of LGP is higher than that of all the states combined, mostly due to its intensive petrochemical industry, the largest in the country. To meet its air quality requirements, the state has to use four different motor gasoline blends, including reformulated motor gasoline blended with ethanol (U.S. Energy Information Administration, 2010). It is the number one state in natural gas production, accounting for ¼ of the country’s total production. Natural gas production reached its peak in 1972 with 9.6 billion cubic feet of annual production and since then it has been declining (Figure 9). In 2007, Texas natural gas production was 6.09 billion cubic feet, a 30.4% share of the total U.S. production. Today’s extensive network of pipelines expands from Texas to reach consumption markets in California, the Midwest, the East Coast, and New England (U.S. Energy Information Administration, 2010). Figure 9: Annual Texas Natural Gas Production

2006

2003

2000

1997

1994

1991

1988

1985

1982

1979

1976

1973

1970

1967

10000000 9000000 8000000 7000000 6000000 5000000 4000000 3000000 2000000 1000000 0

Natural Gas Marketed Production Source: U.S. Energy Information Administration, 2009a.

Texas leads the country in natural gas consumption, accounting for near 1/5 of the country’s total consumption. This high demand for natural gas is dominated by the electric power and industry sectors, which represent over 4/5 of the State’s use (U.S. Energy Information Administration, 2010). Coal and Electricity Around 50% of electricity in Texas is generated from natural gas and the remainder from coal. Although the state produces significant amount of coal, it relies mostly on rail-delivered coal from Wyoming for the greater part of its supply. Texas is the leading state in coal 12

consumption and its emissions of carbon dioxide and sulfur dioxide are one of the highest in the country (U.S. Energy Information Administration, 2010). The state is also the biggest consumer and producer of electricity in the country. Its per capita residential electricity usage is higher than the national average, primarily due to the high demand for electric air-conditioning during the hot summer months and the common use of electricity as the main source for home heating during the winter months (U.S. Energy Information Administration, 2010). The table below provides the electricity consumption per capita and by source in Texas and its comparison to the U.S. Table 3: Electricity Consumption per Capita and by Source.

Per Capita Total Energy By Source Total Energy Total Petroleum Natural gas Coal

Texas 496 million Btu Texas 11,834 trillion Btu 1,208 million barrels 3,515,902 million cu ft 104,784 thousand short tons

U.S. Rank 5 Share of the U.S. 11.7% 16.0%

Period 2007 Period 2007 2007

15.2%

2007

9.3%

2007

Source: U.S. Energy Information Administration, 2010.

III.

Renewable Energy Use and Trends

Worldwide Renewable energy sources (from now on renewables) are virtually infinite and include hydropower, biomass, solar, wind, wave and tidal action, and ocean thermal. Renewables constituted more than 15% of the world’s energy supply in 2005 (Figure 3; IPCC, 2007). They are the world’s fastest growing source of energy with an increase in consumption of 3% per year. Two reasons for this is the rising concern about the environmental impacts caused by fossil fuels and the increased government incentive for using renewables in most countries in the world (U.S. Energy Information Administration, 2010). In 2006, total world’s electricity generated by renewables was 4.14 trillion kilowatt-hours, or close to 19% of the world’s total electricity generation. Renewable energy sources are the fastest growing source for world electricity production, with a 2.9% increase per year from 2006 to 2030. Of all the new renewable power added, 54% is generated with hydroelectric power and 33% with wind power. Other than hydroelectric power, other renewables are still not capable of competing with fossil fuels. Government policies and incentives are therefore very important for the sustainability of renewables (U.S. Energy Information Administration, 2009a). Renewable Energy Sources Biomass and Bio-Energy Biomass refers to living and recently dead biological material that can be used as fuel or in industrial production (Climate Institute, 2008). It is the world’s major source of food, stock fodder, and fiber. It is a renewable resource used to generate heat, steam, electricity and gases, 13

liquid fuels, and chemicals (IPCC, 2007; SECO, 2008a). Biomass resources include forest, agricultural and livestock residues, forest plantations, herbaceous energy crops, organic components of municipal solid waste, and other organic waste streams. These are used to produce energy transporters in the form of solid fuels (pellets, logs, briquettes, and chips), liquid fuels (methanol, butanol, ethanol, and biodiesel), gaseous fuels (synthesis gas, biogas, and hydrogen), and electricity and heat (IPCC, 2007). Some of the environmental benefits of using this source of energy include reduced air and water pollution, reduced erosion, increased soil quality, and improved wildlife habitat (U.S. Energy Information Administration, 2009a). The world’s biomass and waste generated electricity was 229.5 trillion kilowatt-hours in 2006, a 7% increase from 2005. The world’s total biofuels production in 2007 was 1.06 million barrels per day, a 30% increase from the previous year. The world consumption of biofuels on the other hand was 1.03 million barrels a day, a 34% increase from 2006 (U.S. Energy Information Administration, 2009a). As figure 10 shows, the world’s total biofuels consumption and production go hand-in-hand. Figure 10: World's Total Consumption and Production of Biofuels, 2001-2007 1200 1000 800 600

Total Biofuels Consumption

400

Total Biofuels Production

200 0 2001200220032004200520062007 Source: U.S. Energy Information Administration, 2009a.

The major reason limiting the continuous growth of Biofuel production has been tax subsidies in various countries with tough support from agricultural interests (Monfort, 2008). Another reason is the pressure on the most common feedstock, corn. Corn prices have been rising, which makes the profit coming from ethanol production volatile and limited. However, things have changed. In 2007, the U.S. Energy Independence and Security Act extended the U.S. Renewable Fuels Standard mandating the use of 136 billion of liters of biofuels by 2022. Other similar policies in the same year included England’s adoption of a 5% goal by 2010, Japan’s target of 6 billion liters production by 2030, and China’s goal to produce annually 13 billion liters of ethanol and 2.3 billion liters of biodiesel by 2020. In sum, at least 17 countries have endorsed mandates for adding biofuels into vehicle fuels (Monfort, 2008). As a consequence of all these initiatives, investment in Biofuel production increased worldwide in 2007. On the reverse side, in 2007 the U.N. Food and Agriculture Organization (FAO) stated that demand for Biofuel was partially accountable for an 8% increase in food price inflation in China, 13% in Indonesia and Pakistan, and 10% in Russian, Latin American, and India. In the U.S. the increases in price were also felt and Pilgrim’s Pride, Inc., a company based in Texas, announced that it would close its chicken processing plant in Silver City, North 14

Carolina, and six of its 13 distribution centers due to higher corn and soybean prices, combined with an oversupply of chicken. These closures eliminated 1,100 jobs (Combs, 2008a). Additionally, the International Monetary Fund and other agencies stated that using food to produce biofuels will keep on stressing already scarce water and arable land resources (Monfort, 2008). Wind Energy Wind power has been booming worldwide despite the financial crisis and economic downturn. In 2008, world wind power added 27,051 megawatts (MW), finishing the year with 120,798 MW of wind energy capacity. This renewable source generated in that same year over 1.5% of the world’s electricity (Sawin, 2009). In 2009, wind energy rose 31%, leading to 157.9 GW of wind energy capacity (Dorente, 2010). The United States was the leading country in new installations, surpassing Germany, the former leader, in 2008. U.S. capacity rose by 50%, reaching the 25,170 MW at the end of that year and 39% in 2009. New additions could have been even greater if the extension of the federal Production Tax Credit had not been delayed, which caused investors to postponed some of the projects to 2009 (Sawin, 2009). In 2009, China surpassed the U.S. and became the world’s wind growth leader. For the fifth consecutive year, China doubled its wind power capacity (Dorente, 2010). For the first time, in 2008, wind power was Europe’s leading source for new electricity capacity with 65,946 MW, beating natural gas with 6,939 MW and coal with 763 MW. At the end of 2008, Europe had 55% of the global wind capacity and wind power represented 8% of European Union (EU) power capacity (Sawin, 2009). The global market for wind turbine installations was worth $47.5 billion, in 2008, an increase of 42% from the previous year and $63 billion in 2009, a 32.6% increase from 2008 (GWEC, 2009). Over 400,000 people are employed in the wind industry worldwide. Nevertheless, an important part of these jobs can be lost due to project financing problems brought by the world economic crisis (Sawin, 2009). Wind power is the most economically competitive of all the renewable energies (SECO, 2009) and although short-term expectations for this industry are cloudy, long-term expectations are promising. Turbine prices are expected to fall as a consequence of the economic crisis, while several entities and organizations are still moving forward with projects for this source of energy. The economic stimulus packages in the United States and other countries targeting wind power and other renewables are also contributing to the development of wind energy (Sawin, 2009). The global Wind Energy Council predicts an added wind capacity of 332,000 MW to be installed by 2013 (Sawin, 2009) and the World Wind Energy Association expects a continuous net growth rate of more than 21% annually until 2010 (SECO, 2009). Lastly, a Danish research firm, BTM Consult, predicts that wind power new installations will account for almost 6% of the world’s electricity generation by 2017 (Sawin, 2009). Figure 11 shows how world wind-energy capacity has been increasing over time.

Figure 11: Global Annual Installed Capacity in MW (2000-2009) 37,466

40,000 35,000 30,000

26,282

25,000

19,865

20,000

15,244

15,000

11,531

10,000 5,000

3,760

6,500

7,270

8,133

8,207

2001

2002

2003

2004

0 2000

2005

2006

2007

2008

2009

Source: (GWEC, 2009).

Solar Energy The sun provides two forms of energy: heat and light. Technologies such as photovoltaics (PV) and solar thermal systems exploit the sun’s energy and provide power in the form of light and heat. Every year, the amount of sunlight that reaches earth’s surface is enough to produce around 1,000 times more the amount of energy that would be generated if all fossil fuels were burned during the same period of time (Climate Institute, 2008). This amount of solar radiation is also 10,000 times the current world’s annual energy consumption (IPCC, 2007). Solar thermal systems produce heat which can be directly used as heat energy or transformed into electricity. There are three solar electric thermal technologies under development or in place around the world: central receivers, parabolic troughs, and parabolic dishes. All three use tracking mirrors to reflect and accumulate sun radiation (Climate Institute, 2008). Solar water heaters can supply half or more of an average house hot water needs. Simple or complex, these heaters are inexpensive ways of saving money from heating water. It replaces the cost of gas or electricity usually used for such purposes. Solar water heating system can vary in price from $800 to $3500. Typically, conventional water heater cost less than $1000 when installed (SECO, 2008b). Solar panel prices are expected to decline due to the increase of global polysilicon supply (Malik, 2008). In 2008, solar power saw the most significant growth ever, with increases in installation of PVs and solar thermal plants by 48%. New added power from PV reached the 5,600 MW, more than double the 2,400 MW from 2007. Cumulative PV power installed totaled 15,000, a much higher number than 9,000 from 2007(Liu, 2009). In 2009, solar grew by only 26%. Europe is the leader in the market for PVs, with over 80% of the market share in 2008 (Figure 12). Spain surpassed Germany to become the leading country in world PV market, with its market increasing by 364%, from 560 MW to an estimated 2,600 MW in 2008. The United States occupied the third position with a much lower 348 MW of new installations, followed by Italy, South Korea, and Japan (Liu, 2009).

Figure 12: Share of Global PV Market by Country or Region, 2008

South Korea 5% United States 6%

Rest of World 4%

Japan 4%

Europe 81%

Source: Liu, 2009.

The growth of solar power in leading countries such as Spain and Germany show that Governmental support policies are essential to the development of the solar market. In Spain, a feed-in tariff policy demands utilities to buy electricity generated from solar power projects at premium, an initiative to promote the use of renewables. Germany, former leading country in solar power generation, has also a feed-in tariff program. Its goal is to reduce solar electricity prices until solar energy becomes competitive with conventional power. The feed-in tariff program has proven to be successful for the development of the market and Germany is expected to regain its PV market leading position again this year (Liu, 2009). Global PV cell production saw an increase of 87% in 2008, from 3,715 MW in 2007 to 6,940 MW in 2008. Concentrating solar power (CSP) is also expanding around the world, especially in areas with abundant solar resources. Between mid-1980s and mid 1990s, 350MW of CSP was built in California. The U.S. hosts one of the world’s largest CSP plants in Nevada with 64 MW (Liu, 2009). Geothermal Energy Geothermal energy involves using the high temperatures (heat) produced beneath the earth to create electricity (Climate Institute, 2008; Combs, 2008e). Geothermal energy can also be used for direct functions such as drying crops, while geothermal heat pumps can be used for heating and air conditioning systems; it accounts for 4 percent of the country’s total renewable energy generation (Combs, 2008e). The world’s total installed geothermal energy capacity in 2005 was 9064.1 MW, with 24 generating countries involved (International Geothermal Association, 2009). However, the number of countries producing geothermal power could increase to as many as 46 by 2010 (Gawell & Greenberg, 2007). The table below illustrates some of the countries producing geothermal energy.

Table 4: Estimated Production of Geothermal Energy by Country and MWe in 2010

Country United States Philippines Indonesia Mexico Italy New Zealand Iceland Japan El Salvador Costa Rica

MWe 3,000 1,991 1,192 1,178 910 590 580 535 204 197

Country Russia Kenya Nicaragua Turkey Papua New Guinea France Portugal China Germany Ethiopia

MWe 185 164 143 83 56 50 35 28 8 7

Source: (Gelman & Hockett, 2009).

Overall, geothermal energy generation seems to be rising. Both the number of producing countries and the total of new megawatts of power capacity installed are increasing. Once again, linked with this development are the country’s government policies and incentives. The degree of development of geothermal energy seems to be more connected with policies and adequate funding than with geologic factors (Gawell & Greenberg, 2007). Some of the advantages of using geothermal energy over conventional energy sources include (Climate Institute, 2008): • Geothermal energy is the most energy-efficient, cost-effective, and environmentallyclean system for temperature control. • Geothermal power plants only occupy a fraction of what other power plants usually occupy and that land can be used simultaneously for other purposes, like agriculture. • Even if geothermal energy is technically finite, its typical lifecycle is so long, from 5,000 to 1,000,000 years, that it is considered a renewable energy source. II.

U.S.

In 2007 in the U.S., consumption from renewable sources totaled 6.8 quads (quadrillion Btu) (a 1% decrease from 2006), or about 7% of the country’s total energy consumption (Figure 13). The peak of renewable energy consumption was in 1997, with 7.2 squads. More than half of the total renewable energy used goes to electricity generation, followed by the production of heat and steam for industrial purposes (U.S. Energy Information Administration, 2009b).

Figure 13: U.S. Energy Consumption by Energy Source, 2007

Nuclear Electric Power 8%

Renewable Energy 7%

Coal 22%

Petroleum 40%

Natural Gas 23 %

Source: U.S. Energy Information Administration, 2009b.

From 2003 to 2007, renewable energy consumption grew at an annual average of 3%, compared to total energy consumption average of 1%. The increase was mainly due to biomass and wind energy. Within the biomass category, biofuels consumption grew the most (U.S. Energy Information Administration, 2009b). The use and consumption of renewables in the U.S. have been increasing faster in recent years. This is mainly due to increased prices of oil and natural gas and due to a number of State and Federal incentives 5 . Although the U.S still relies on non-renewable energy sources for most of its energy needs, renewables are expected to grow during the next 30 years (U.S. Energy Information Administration, 2009b). As seen in the Figure below, energy from renewable sources comes mainly from biomass.

Including the Energy Policy Acts of 2002 and 2005, which were signed as an attempt to fight energy problems by providing tax incentives and loan guarantees to accomplish a diversified energy portfolio.

Figure 14: U.S. Renewable Energy Consumption by Energy Source, 2007 Solar/PV 1% Wind 5%

Hydroelectric Conventional 36%

Biomass 53%

Geothermal 5% Source: U.S. Energy Information Administration, 2009b.

A major step towards the development of renewable energy was given in June, 2009. A federal renewable portfolio standard was approved in the American Clean Energy & Security Act of 2009. One of the requirements is 20% of energy coming from renewables by 2020 and through 2039. Also, the Federal government must purchase 6% renewable energy by 2012 and 20% by 2020 (SEIA, 2009a). Additionally, on May 22, 2008 Congress passed a new farm bill to speed up the commercialization of biofuels, including cellulosic ethanol, to promote the production of biomass crops, and to develop the U.S. Department of Agriculture’s Renewable Energy and Energy efficiency programs (U.S. Department of Energy- Energy Efficiency & Renewable Energy, 2008a).

Renewable Energy Sources Biomass and Bio-Energy Biomass is the country’s largest source of renewable energy representing 53% of total renewable energy consumption in 2007. Hydroelectric energy declined by 14% in 2007 due to a decrease in precipitation in various areas of the country while biomass energy increased by 7%. The major reason for the increase seen in biomass energy was the production of biofuels such as ethanol and biodiesel (U.S. Energy Information Administration, 2009b). Federal subsidies have also contributed significantly to this increase (Combs, 2008a). Wind Power In 2008, the U.S. wind energy industry installed more than 8,500 megawatts (MW) of new generating capacity, which is enough to power more than two million homes. This increased the 20

nation’s total wind power generating capacity by 50% to over 25,300 MW (AWEA, 2008). In 2009, the U.S. Wind energy industry broke all previous records and installed close to 10,000 MW of new wind energy capacity. The total installed capacity in the country is now 35,000 MW. The major factors driving this development were the federal stimulus bill passed early in 2009, expectation of action on climate change, state policies, and attractive wind project economics. The Recovery Act incentives also pushed the growth of construction, operations, and management jobs in 2009 (AWEA, 2009b). Figure 15: Existing Power Capacity by State- 4th quarter of 2009

Source: AWEA, 2009.

For the fourth year, wind power ranked second after natural gas in new power capacity installed. America’s wind energy generating facilities will avoid approximately 62 million tons of carbon dioxide every year, equivalent to 10.5 million cars off the road. It will also preserve close to 20 billion gallons of water annually, which would be used for steam or cooling in traditional power plants (AWEA, 2009b). To incite increased wind energy capacity, the 2009 American Recovery and Reinvestment Act (ARRA) includes a three year extension of the renewable energy production tax credit (PTC) 6 and additionally a new program that gives renewable energy developers the option to abstain from PTC and instead accept a grant from the Treasury Department of 30% investment tax credit (ITC). This program can be crucial to the growth of wind energy industry in the face of the downturn in 2009 caused by the global economic crisis (AWEA, 2008) One benefit of wind energy is reduced dependence on fossil fuels. A report by the U.S. Department of Energy suggested 20% of the country’s electrical energy coming from wind by 2030. With this 20% wind scenario, wind power would displace 50% of electric utility natural gas consumption by 2030. This represents an 11% decrease in natural gas consumption on all industries and an 18% reduction of coal consumption. CO2 emissions would also be reduced by 25% (U.S. Department of Energy- Energy Efficiency & Renewable Energy, 2008b). 6

PTC or Production Tax Credit is a federal tax code that supports renewable energy by giving companies that generate wind, solar, or geothermal energy 2.1-cent per kilowatt-hour (kWh) (Combs, 2008a; UCS, 2008).

Wind turbines are very effective in reducing emissions of CO2. A single wind turbine (750 MW) produces around 2 million kilowatt-hours (kWh) of electricity annually. Based on average fuel levels, for every kWh produced, 1.5 pounds of CO2 is emitted. This means that one single turbine (750KW) is responsible for avoiding the emission of 1500 pounds of CO2 every year, the same that could be absorbed by a 500-acres forest (AWEA, 2009a). Wind energy can bring increased property tax base for rural counties and income to farms and ranches (AWEA, 2005). Challenges related to Wind Power There are still some constraints around wind turbines that are better understood now, but remain present. Such constraints include noise, aesthetic (visual) impacts, electromagnetic interference (EMF), airline flight paths, protection of areas with high landscape value, land-use, and bird and bat strike (IPCC, 2007; Climate Institute, 2008). Another challenge for using such an energy source is that wind is not always constant (Climate Institute, 2008; Combs, 2008c). The system must be capable of reacting to swings in wind intensity and in electricity usage by customers (Combs, 2008d). A way of overcoming this is by using batteries that will guarantee turbines remain working when no wind is available and weather forecasts that will predict when strong winds will occur (Climate Institute, 2008); yet, another opportunity for economic development. Wind energy faces transmission barriers, for some the greatest barrier. Some of the windiest places are located in remote areas away from population centers. This makes wind power dependent on long-distance transmission. The problem is wind energy is produced on site and cannot be transported by pipeline, road, or rail, like fossil fuels and biomass. Thus, wind energy can only be transported by electric transmission lines and extending transmission lines to windy places can be expensive (Combs, 2008d). A major step was taken in March, 2009 when the Public Utility Commission (PUC) assigned seven utility companies to build some parts of a $5 billion transmission line project to bring power from West Texas and connect it to North Texas and Houston. The proposed improvements in the transmission lines are expected to save consumers over $3 billion yearly tied to lower fuel costs and competition in the market. This transmission line will bring power from where the wind is stronger (where energy is produced) to where the electricity is most needed (Souder, 2009). Since the commercialization of wind energy is significantly new, it has to compete for transmission with established generators. It can also outstrip transmission capacity because it can be developed at a much faster rate than new transmission capacity (it can be developed in a matter of months, while transmission capacity can take several years to develop). For all these reasons, transmission capacity is crucial for wind power development and the new project connecting West Texas, North Texas, and Houston was a major step to the development of wind energy in the state (Porter, 2004; Souder, 2009). Wind Energy Costs Wind power economics typically involve investment costs, operation and maintenance costs (O&M), electricity production per average wind speed, turbine lifetime, and discount rate. Of all these, wind turbinesâ&#x20AC;&#x2122; electricity production and their investment are the most important ones (AWEA, 2009a). The cost of wind energy depends significantly on the wind speed of the specific site. As seen in Figure 16, as the wind speed increases (expressed in meters per second), the cost per kilowatt22

hour decreases. The costs presented below include the wind production tax credit (AWEA, 2005). Figure 16: Cost of Energy and Wind Speed (for a 51MW farm)

Source: AWEA, 2005.

Improvements in wind turbine technology and design can also decrease the costs; the longer the tower and bigger its blades, the more productive the turbine. Table 5 illustrates how a 1.65 MW turbine generates 120 times the electricity at one-sixth the cost of an older 25-kW turbine (AWEA, 2005). Table 5: Comparison between different wind turbines

Rated Capacity Rotor Diameter Total Cost ($000) Cost per kW Output, kWh/year

1981 1981: 25 kW 10 meters $65 $2,600 45,000

2000 2000: 1,650 kW 71 meters $1,300 $790 5.6 million

Source: American Wind Energy Association, 2005.

Another factor influencing the cost of wind-generated electricity is the wind farm size, meaning that economies of scale work for wind energy. A large wind farm generates electricity at a lower cost than a smaller farm by spreading the costs over more kilowatt-hours than a smaller one. Thus, larger projects have lower operation and maintenance costs (AWEA, 2005). Wind generation systems can be obtained by about $1000/kW (AWEA, 2009b; SECO, 2008c). Nevertheless, total onshore wind farm costs can range from around 1000 to 1400 US$/kW, depending on location, proximity to load, or road access. O&M costs vary from roughly 1% of investment costs in the first year, to 4.5% after 15 years. Thus, on good sites with capacity exceeding 35%, power can be produced for roughly 30 to 50 US$/MWh (IPCC, 2007).

Table 6: Technology Assumptions

Project Life (Years) Construction Period (Years) Average Annual Capacity Factor (%) Heat Rate (Btu/kWh) Total Project Cost ($/kW) Fixed O&M 7 ($/MWh) Variable O&M ($/MWh)

Wind Farm

Natural Gas Combined Cycle

Pulverized Coal

0.5

40%

91.60%

6,900

10,070

$1,000

$600

$1,200

$15.00

$24.00

$20.00

$0.00

$2.40

$1.80

Source: (AWEA, 2009a)

The increasing demand for power has led many governments setting goals to increase the percentage of energy generated by wind power. Costs for this energy source can vary broadly with location (IPCC, 2007). Yet, with improved manufacturing methods and technology, happening every day, costs have dropped to less than 7 cents per kilowatt-hour, compared to 4-6 cents to operate a new coal or natural gas power plant. Costs are expected to drop even more over the next 10 years. In the last 22 years, wind power prices per kilowatt-hour with the help of PTC 8 decreased by 80%. In 2006, the countryâ&#x20AC;&#x2122;s wind power price, including the PTC, was between 3 to 6 cents per kWh (Climate Institute, 2008). Solar Energy Solar energy is one of the cleanest and most abundant sources of energy in the country, yet it only accounted for roughly 1% of the countryâ&#x20AC;&#x2122;s total renewable energy consumption in 2007 (Figure 17). One of the biggest challenges the U.S. faces is leveling out production so that the costs of producing solar energy decrease and become competitive with fossil fuel sources (SEIA, 2009b). A study found that in the U.S., a 1kW solar electric system can produce an average of over 1,600 kWh annually, versus 1,200 kWh per year in Germany. The same solar system in parts of Nevada, Arizona, New Mexico, and West Texas can generate 2,100 kWh per year (Combs, 2008b). 7

Operation and Maintenance (O&M) typically involve insurance, regular maintenance, spare parts, repair, and administration (American Wind Energy Association, 2009b). 8 PTC or Production Tax Credit is a federal tax code that supports renewable energy by giving companies that generate wind, solar, or geothermal energy 2.1-cent per kilowatt-hour (kWh).

In 2008, U.S. total solar energy grew by 1,265 MW, higher than the 1,159 MW installed in 2007. This means that total cumulative capacity increased by 16% to 9,183 MW (SEIA, 2009b) . More than 62,000 new solar thermal and solar electric installations occurred in 2008, an increase of 16% from 2007 (Sherwood, 2009). Installations happened mostly in 6 states, California, Hawaii, Maryland, North Carolina, Ohio, Oregon, and Pennsylvania. Figure 17 shows some of the states with higher solar water heating systems installed in 2008. Texas is not in the picture, showing that although with tremendous potential, Texas is not exploring its natural resources as other states are. In 2006, solar energy accounted for only 0.01% of all U.S. electricity mostly because it was more expensive than other power options (Solar Energy Industries Association, 2009b). Figure 17: Solar Water Heating Systems Installed in 2008

Colorado New 5% England and NY 5%

Arizona 5%

Oregon 2%

California 7% Mid‐ Atlantic 7%

Hawaii 37%

Other States 12%

Florida 20%

Source: Solar Energy Industries Association, 2009b.

Federal subsidies have played a big role in developing the solar energy industry and it will continue to play for the expected future (Combs, 2008). The Emergency Economic Stabilization Act of 2008 (EESA) prolonged the 30% solar investment tax credit (ITC) for eight years, lifted the cap for residential PV installations, removed the restrictions against utilities’ use of the ITC, and allowed the use of tax credits against the alternative minimum tax (AMT) (SEIA, 2009b). The American Recover and Reinvestment Act of 2009 (ARRA) was signed by President Obama to mitigate the economic slowdown felt in the solar industry. It established a grant program that allows commercial solar customers to receive payment covering 30% of the cost of installing solar equipment. The Act also formed a fund to assure up to $60 billion in loans, expressly for renewable energy and transmission projects (SEIA, 2009b). Countries with the strongest incentive programs have seen the fastest growth and innovation in their solar energy industries. The extension of the federal income tax credit has led to rapid growth in the solar energy market (Combs, 2008b). One example is the booming of solar hot water installations that occurred since ITC was extended to residential installations in 2006 (Sherwood, 2009). 25

The Federal Renewable Portfolio Standard (RPS) was very important for the development of renewable energy. The RPS requires retail electricity providers to supply a minimum percentage of energy from renewable sources. President Obama set a minimum of 25% of electricity from renewable sources by 2025, which is roughly equal to what the European Union has set for its members (SEIA, 2009b). Access to a strong transmission infrastructure is another important factor. Transmission lines in the Southwestern part of the country are near or at capacity and access to new high-voltage transmission lines is essential for the development of utility-scale solar power plants. The expansion of the transmission grid to areas abundant in solar resources is definitely very important (SEIA, 2009b). Solar energy could not escape from the global economic crisis and as such, many companies and investors decreased their involvement in renewables. Nevertheless, PV capacity increased in 2008 by 58% and solar heating capacity grew by 40%; although these numbers remained below the record levels set in 2006 (Figure 18; SEIA, 2009b). Figure 18: Solar Energy Capacity Additions

Source: Solar Energy Industries Association, 2009b.

Solar water heating installations continued to grow through 2008, with total installed capacity reaching 485 megawatts thermal-equivalent (MWTh). With over 80 million singlefamily homes in the U.S. and all needing heated water, the market potential for solar water heating is huge. Furthermore, the U.S. Department of Energy set a goal of â&#x20AC;&#x153;zero-energy homeâ&#x20AC;?, which means each home would produce as much energy as it uses by the end of 2020 (SEIA, 2009b). U.S. manufacturing of PV modules grew significantly in 2008. Some manufacturers reported an increase of 60% over 2007 numbers. Directly or indirectly this increase will create thousands of new permanent jobs in the U.S. Efforts were also made to increase transmission capacity for renewable energy sources, with Californiaâ&#x20AC;&#x2122;s Renewable Energy Transmission Energy Zone Initiative (RETI) (SEIA, 2009b).

In the U.S., 2008 retail electricity prices averaged almost 10 cents per kWh for all sectors, but for residential use the price averaged 11 cents per kWh. Parabolic CSP systems generated electricity for 12 cents per kWh and PV systems for about 18 to 23 cents per kWh (Arvizu, 2008; Combs, 2008b). During peak hours however, the retail electricity price can rise to between 25 to 40 cents per kWh in some parts of the country. When this happens, solar energy becomes much more competitive (Combs, 2008b). PV systems generally create more electricity during the hottest time of the day and this can be very helpful in decreasing the need to add expensive generating capacity to satisfy higher demand (Combs, 2008b). An important factor is also the size of the system. The price per watt is actually significantly lower for larger systems. According to California Solar Initiative database, installations of systems larger than 500 kW cost 17% less per watt than residential installations, the majority of those are smaller than 10 kW (Sherwood, 2009). Additionally, research by New Energy Finance suggests that solar power costs will decrease by 50% by the end of 2009, as compared to the end of 2009 (Shahan, 2009). Geothermal Energy The United States remains the world leader in online geothermal energy capacity and growth (Jennejohn, 2010). Though little recognized by the general public, geothermal energy (“earth heat”) is the third largest source of renewable energy in the United States, behind hydropower and biomass (U.S. Energy Information Administration, 2009c; USDE, 2008). In 2007, Geothermal Energy accounted for 0.35% of the U.S. total energy consumption, 5% of the country’s total renewable energy consumption, and 4% of the country’s renewable energy-based electricity consumption (Jennejohn, 2010; Slack, 2009; U.S. Energy Information Administration, 2009a). The attractiveness of geothermal energy has been changing over time due to the rising prices of electricity and the high price of hydrocarbons. Some geothermal systems that may have seemed not viable before may seem profitable now due to increased electricity prices, tax incentives, and new portfolio standards (McKenna & Beardsmore, 2006). The U.S. has more geothermal electric production capacity than any other country (Combs, 2008e). As of September 2009, eight states produced geothermal electric power: Alaska, California, Hawaii, Idaho, Nevada, New Mexico, Utah, and Wyoming (Jennejohn, 2010; Slack, 2009). Other states such as Colorado, Florida, Louisiana, Mississippi, and Oregon will soon be on the list. As of October 2009, the U.S. had a total installed capacity of 3,152.72 MW (Jennejohn, 2010)

Table 7: August 2009 U.S. Geothermal Power Capacity On-line (MW) 3500

3152.72

3000 2605.3 2500 2000 1500 1000 500

448.4

0 Capacity California Nevada

15.8

Utah

Hawaii

Idaho

0.73

0.25

0.24

Alaska Wyoming New Mexico

Source: (Jennejohn, 2010)

Improvements in geothermal technology have brought some benefits. Locations that were once considered non-commercial are now being considered as potential sites (Jennejohn, 2010; USDE, 2008). Some of those technologies include: • Enhanced geothermal systems (EGS), once called ‘Hot Dry Rock”, if proven commercially effective can allow significant expansion of and production from existing fields, as well as the utilization of geothermal energy in previously implausible locations. This technology is referred to by scientists as any resource that requires artificial stimulation, either by being fully engineered or one that produces hydrothermal fluid (Slack, 2009). A study sponsored by the U.S. Department of Energy concluded that geothermal energy could supply 100,000 MW or more in 50 years if EGS were to be used (U.S. Department of Energy- Energy Efficiency & Renewable Energy, 2008c). • Hydrocarbon/geothermal co-production involve using geothermal fluids, often found in oil and gas production fields, and produce electricity with it. The Southern Methodist University Geothermal Energy program has calculated that this co-production in the Texas Gulf Plains can supply 1000-5000 MW of power. Interestingly, there is no geothermal energy production in that region (Jennejohn, 2010; Slack, 2009). The geothermal heat pump (GHP) industry has been growing for the past four years. While present in various states, the most significant resources are seen particularly in Texas and Louisiana (onshore and offshore) (Jennejohn, 2010). The Energy Information Administration (EIA) stated that heat pump shipments rose by 36% in 2007 to 86,396 units (Slack, 2009). GHP have a high initial cost for installation, but those costs can be recovered within two to ten years through energy savings (Combs, 2008e). While these systems are usually more expensive than traditional heating and cooling systems, they are appealing through their high efficiency and continuous cost-saving potential (Slack, 2009). The GHP systems cost around $2,500 to $5,000 per ton of capacity. Conventional geothermal-generated electricity is sold for 28

five to eight cents per kWh and establishing a steam geothermal power plant costs around $1,400 to $1,500 per kW, including drilling and exploration. However, for the systems that use existing oil and gas wells, exploration and drilling costs can be significantly reduced (Combs, 2008e). The costs of a typical geothermal power plant development are shown on Table 8. Table 8: Typical 20 MW Geothermal Power Plant Development Costs

Development Stage Exploration and resource assessment Well field drilling and development Power plant, surface facilities, and transmission Other development costs (fees, working capital, and contingency) Total development cost

Costs ($/kW) $400 $1,000 $2,000 $600 $4000

Source: (U.S. Department of Energy- Energy Efficiency & Renewable Energy, 2008c).

Some Federal research programs are trying to promote geothermal energy. In 2007, the Advanced Geothermal Energy Research and Development Act of 2007 authorized $90 million annually for fiscal years 2008 to 2012 for research and development (R&D) of technologies to identify and improve geothermal resources. The bill also established a research program to identify potential harm that geothermal energy may cause to the environment and to test technologies to mitigate or avoid those adverse environmental impacts (Committee on Science and Technology- U.S. House of Representatives, 2007). III. Texas Due to its size and diverse climate, Texas has great potential to use clean, renewable energy resources. It can develop more renewable energy than any other state in the country. The State’s resources are large enough to meet all of its energy needs (SECO, 2008a). The State of Texas established that by 2011, it must have 4,264 MW of renewable energy capacity and by 2015 the number should increase to 5,880 MW, about 5% of the state’s electricity demand. Of the total renewable energy generated, at least 500 MW must come from a source other than wind power after September 1, 2005 (DSIRE, 2009). The most common resources of renewable energy in Texas are solar, wind, and biomass. These sources not only protect the environment, but they can also be beneficial by creating new jobs for the local communities (SECO, 2008a). Although Texas has large amounts of fossil fuels like coal, oil, gas, and uranium, the state has even more renewable energy potential. Texas’ solar, wind, and biomass potential is equal to 4,330 quadrillion British Thermal Units (BTUs) per year, or about 400 times the annual amount of energy used by the state. Wind energy alone could provide eight times more the amount of power generated by the state’s electric power plants combined (SECO, 2008a). Thus, to meet the total energy demand, Texas just has to explore a small portion of its renewable energy resources. An argument against renewable energy sources is that it wastes too much land to be practical, but this is not always the case. In Figure 19, each square represents the land area needed in millions of acres to produce enough electricity for the entire state. Oil wells and wind power produce almost the same amount of energy per land needed (7 versus 9 million of acres). Solar energy on the other hand generates the same amount of energy per significantly less land needed 29

(0.7 million of acres) (SECO, 2008a, 2008c). Although biomass needs a larger amount of land to produce energy than other sources, a study found that photovoltaics use less land to produce energy than the amount required to produce food (ex: agriculture). The land required to produce food averaged 900m2, to produce energy from biomass sources 13,427m2, and from photovoltaics 151 m2 (Nonhebel, 2005). Figure 19: Land Area Needed For Various Texas Energy Sources.

Source: SECO, 2008a.

The existence of federal and state incentives to the development of renewables has been crucial. Although the state of Texas is a major producer of oil and gas, it has recently been taking action towards developing renewable energy. The major incentive for construction and production of renewable energy is the federal production tax credit (PTC) set in 1992 at $0.015/kWh. Since then, it has been renewed and expanded several times, most recently in 2009, and is currently set at $0.02/kWh (Combs, 2008c; DSIRE, 2009; Union of Concerned Scientists, 2009). Texas does not currently have a tax exemption program that offers funding for renewable energy equipment on an individual basis, although it offers some tax exemptions. Manufacturers, sellers, and installers of solar energy devices can benefit from a franchise tax exemption (SECO, 2008a). The Texas Renewable Portfolio Standard (RPS) is also a major engine for the development of renewable energy. This program requires 5,880 MW of energy from renewables by 2015 and 10,000 MW by 2025. Of these 5,880 MW, 500MW should come from a renewable energy other than wind energy. Wind accounts for nearly all the renewable energy in Texas (DSIRE, 2009). Additionally, the Public Utility Commission of Texas (PUCT) established a renewable-energy credit (REC) trading program that began in July 2001 and will continue through 2019. Under PUCT rules, one REC represents one megawatt-hour (MWh) of qualified renewable energy that is produced and metered in Texas. A capacity conversion factor (CCF) is used to convert MW goals into MWh requirements for each retailer in the competitive market (DSIRE, 2009). The state offers a corporate deduction from the state’s franchise tax for renewable energy sources. Companies can deduct from the company’s taxable capital the total cost of the system or take 10 percent of the system’s cost off the company’s income. The state provides a 100 percent 30

property tax exemption on the value of an on-site solar, wind, or biomass power-producing equipment. Additionally, companies may be eligible to take advantage of economic development credits for certain research and development expenses, payments incurred, qualified capital investments, and certain new jobs created in Texas on or after January 1, 2000 (See publication 96-686, Franchise Tax Credits for Economic Development) (SECO, 2008a). The Texas Biofuel Incentive Program, which started in 2006, promotes the production of Biofuel. Producers can register and if qualified receive grants based on the amount of biofuel produced. Eligible producers can receive 20 cents per gallon of ethanol or biofuel produced. The limit is 18 million gallons produced per year for the first 10 years (SECO, 2008d). A press release on December 11th, 2008 announced that farmers and ranchers were encouraged to go “green” by upgrading their farm equipment and replace older diesel or gasoline-powered engines and consequently reduce harmful air pollutants (Texas Department of Agriculture, 2008b). Todd Staples, Agriculture Commissioner, declared that $5 million was available to help farmers and ranchers improve production efficiency and air quality through the Texas Emissions Reduction Plan (TERP). TERP is operated by Texas Commission on Environmental Quality (TCEQ) (Texas Department of Agriculture, 2008b). To access all kinds of grants and “green” programs, the Database of State Incentives for Renewable Energy (DSIRE) includes federal and state incentives for energy efficiency upgrades, construction of new energy efficient buildings, and purchases of energy efficient products or systems. Businesses and individuals can easily have access to this database (SECO, 2008a). Biomass and Bio-energy As an agricultural state, Texas possesses many resources that can be used for biomass energy production. All crops that can be used to produce biomass are grown in Texas (Combs, 2008a). The areas with most potential are East Texas and parts of North and Central Texas (Figure 20). Currently, the state has 24 landfill gas energy projects and 57 additional sites that might be feasible for more projects. All of the current projects, except two, are currently producing electricity generating at least 79MW (SECO, 2008d). Figure 20: Texas Energy Resource Areas.

Source: SECO, 2008a.

The best sources of biomass energy in the state are probably waste materials. 72% of total biomass energy was used by the industrial sector, compared to the national average of 55% (Combs, 2008a). It has been estimated that using just half of the accessible biomass waste is enough to supply 10% of the state’s electric needs. Below is a small description of each energy resource: • Forests- The state of Texas has very productive forests with many available biomass resources at a low cost. Sawdust and waste wood are two examples that when burned can generate steam and electricity at timber-processing plants (SECO, 2008a). • Agriculture- When cotton, rice, sugar cane, and peanuts are harvested many waste materials are left behind. These crop wastes can be used as a fuel (SECO, 2008). • Urban Sources- All big cities produce biomass sources. Sewage treatment facilities, furniture factories, food packaging plants, and landfill are some of the examples (SECO, 2008a). • Energy Crops- Fast growing crops like cottonwood trees can be used as biomass sources. Some believe that 25% or more of the state’s electricity and transportation needs could be met by using these types of sources if more trees are planted (SECO, 2008a). Figure 21: Energy Potential from Texas Biomass Waste Resources

Source: (SECO, 2008d) *Quads: Equivalent to one quadrillion British Thermal Units (1,000,000,000,000,000 BTU’s). It is enough to serve all annual energy needs for about 3,000,000 Americans).

In 2008, 15% of Texas’ renewable electricity generation was from biomass sources (Figure 22). In what concerns the state’s total net generation, biomass accounted for a low 0.3% (U.S. Energy Information Administration, 2009d).

Figure 22: Texas Electricity Generation by Renewable Source, 2008 Solar 0.23%

Wind 14%

Biomass 15.03%

Geothermal 4%

Hydroelectric Conventional 66.74%

Source: (U.S. Energy Information Administration, 2010a)

The Texas Agricultural Experiment Station predicts that the use of biofuels will grow at a higher rate than other types of biomass energy. Although ethanol made from corn is the most consumed in the country, “lignocellulosic” biofuels made from crop remains, wood products, grasses, and agricultural waste are expected to complement it (Combs, 2008a). Currently in Texas, there are three operational ethanol plants, one under construction, and ten planned to be built (DTN Ethanol Center, 2009). Public and private funding for more research in cellulosic biofuels is also growing. In Texas, the most significant sources of lignocellulosic feedstock are high biomass sorghum, switchgrass, and energy cane (Combs, 2008a).

Table 9: Texas Total Energy Potential of all Crop Residues

Northern High Plains Southern High plains Northern Low Plains Southern Low Plains Cross Timbers Blacklands East Texas North East Texas South Trans-Pecos Edwards Plateau South Central Coastal Bend Upper Coast South Texas Lower Valley Combined District STATE

Tons of Biomass 3,404,400,000 388,600,000 363,200,000 430,200,000 180,600,000 2,254,500,000 80,600,00 78,600,000 9,800,000 229,200,000 412,600,000 424,200,000 850,800,000 79,000,000 560,400,000 5,100,000 9,751,800,000

BTU/Year (Millions) 25,533,000 2,914,500 2,724,000 3,226,500 1,354,500 16,908,750 604,500 589,500 73,500 1,719,000 3,094,500 3,181,500 6,381,000 592,500 4,203,000 38,250 73,138,500

Source: Combs, 2008a.

Algae One promising source of biomass energy is algae. Algae are small biological production plants that use photosynthesis to transform carbon dioxide and sunlight into energy (University of Virginia, 2008). Microalgae can redevelop in 48 to 72 hours and these short generation times, when compared to seed crops like soybeans, mean that algae have a great potential as feedstock for biodiesel (Table 10; (Combs, 2008a). Algae may double their weight several times a day (University of Virginia, 2008). Another great advantage is the fact that they donâ&#x20AC;&#x2122;t need fresh water, a limited resource in much of Texas and which may limit inputs of a biomass energy production system (SECO, 2008e). Using algae to produce biofuels can be beneficial because they grow rapidly, yield significantly more Biofuel per hectare than oil plants, can sequester carbon dioxide as hydrocarbons, do not compete directly with food, fiber, and other uses, produce a fuel with low toxicity, no sulphur, and that is highly biodegradable, and do not involve destruction of habitats (Campbell, Beer, & Batten, 2009). Table 10: Production potential of biodiesel from dedicated fuel crops

Dedicated Fuel Crop Algae Palm Canola Sunflower Soybean

Biodiesel Production Potential (gallons/acre/year) 5,000 560 90 90 57 Source: (Combs, 2008a).

Assuming optimal conditions, the potential for biodiesel production from algae is 15,000 gallons/acre per year. For large-scale outdoor production the actual production can be between 3,000 to 5,000 gallons/acre per year. Either way, the potential for algae biodiesel can be near ten times higher than the potential of palm oil and 100 times that of soy oil, the two most frequently used feedstocks for biodiesel production, if irrigation is needed (Combs, 2008a). Environmental conditions and nutrient availability affect the growth of algae. Algae require three ingredients to grow: carbon dioxide, high solar radiation, and brackish water or water high in salt concentration. In Texas, the best areas for algae production are West Texas and the Gulf Coast. A perfect situation would be to match petrochemical facilities and power plants in the Gulf of Mexico and algae production, so CO2 could be captured to produce biofuels/bioproducts (Combs, 2008a). If this would happen, algae would be producing biofuels while cleaning up other problems (University of Virginia, 2008).

Figure 23: Annual Average Daily Solar Radiation per Month

Source: (Combs, 2008b).

There are usually two methods to produce algae: raceway ponds and photo bioreactors (PBRs). Raceway ponds are generally cheaper to build, but since they are open to the environment and temperature has to be steady for optimal algae growth, ponds entail more induced control. PBRs on the other hand are enclosed, more costly to build, but can usually function year round due to its indoor conditions (Combs, 2008a). Due to its high potential, research on algae production has been increasing. In theory, algae could satisfy the entire countryâ&#x20AC;&#x2122;s diesel demand using only 2.7 million acres of land. In contrast, currently crops and grazing use about 970 million. Since algae are not a food crop and would be cultivated with high salinity water where traditional food crops cannot sustain, it would not compete for the same land (Combs, 2008a) The first commercial algae production plant started its operation on April 1, 2008 near Harlingen, Texas. It was estimated to produce around 4.4 million gallons of algal oil and 110

million lbs of biomass per year. Its producer, PetroSun, will be conducting jet fuel and bioplastics research in the future (Kram, 2008; University of Virginia, 2008). A study by Campbell, Beer, and Batten (2009) concluded that by using saltwater ponds to produce algae, it is possible to generate algal biodiesel at less cost than fossil fuel and with a greenhouse gas and energy balance advantage. However, when production is done at large commercial levels, the costs may exceed those of fossil diesel. The economic feasibility of algal biodiesel is highly dependable on the amount of oil necessary to have high productivity yearround. In short, algae have great potential to produce biodiesel. A study found that biodiesel from microalgae seems like the only renewable biofuel with the likelihood to completely displace petroleum-derived transport fuels without negatively affect food and crop prices (Chisti, 2008). Currently, ten potential sources of biomass for liquid biofuel production seem to be economically feasible. Forest resources (wood), crop residue, high-tonnage sorghum, grain ethanol, oilseed crops, municipal solid waste, energy cane, sweet sorghum, switchgrass, and algae can possibly replace petroleum (Combs, 2008a). Figure 11 shows that close to 2 billion gallons of biofuels could be produced in Texas from biomass sources. Table 11: Texas Biofuels Potential

Input Volume/Acreage 961,400 3,000,000

Units

Yield

Gallons

Dry tons Dry tons

75 g/dt 75 g/dt

72,105,000 45,000,000

355,000,000

Gallons

355,000,000

High-tonnage Sorghum Oilseed Crops Algae Municipal Solid Waste Energy Cane

348,300

Acres

108,110 100,000 2,530,279

Acres Acres Dry tons

Fixed production rate 75 g/dt at 10 dt/ac 100 g/ac 3,000 g/ac 75g/dt

6,375

Dry tons

Sweet Sorghum Switchgrass

42,130

Acres

2,162,291

Acres

Crop Residue Forest/Wood Resources Grain (Ethanol)

TOTAL

75 g/dt at 10 dt/ac 300 g/ac 75 g/ac at 4 dt/ac

261,225,000 10,811,000 300,000,000 189,770,897 4,781,250 12,639,000 648,687,300 1,900,019,447

Source: Combs, 2008a.

Wind Power Wind energy has been the leading renewable energy source in Texas for the last several years (Combs, 2008d). By the end of 2008, Texas had consolidated its role as the leading state in wind energy capacity with 7,118 MW, the second being Iowa with 2,791 MW, and by the end of 2009, 36

Texas had installed 9,410 MW of wind energy capacity, with 2,292 MW installed during that year (AWEA, 2009b). If it were a country, Texas would rank sixth in the world in the list of countries with the most wind energy installed (AWEA, 2009b). It is predicted that the number of commercially attractive sites will continue to increase as development costs continue to decrease and wind turbine technologies to improve (SECO, 2008a; Shahan, 2010).

Table 12: State Total Wind Power Capacity, as of 09/30/2009 (MW)

State

Existing

Texas Iowa California Washington Minnesota Oregon Illinois

9,410 3,670 2,794 1,980 1,809 1,758 1,547

Under Construction 302 200 121 170 60 337 539

Rank (Existing) 1 2 3 4 5 6 7

Source: AWEA, 2008b.

In 2007, Texas had more than 80,000 windmills enough to power around 1 million homes, based on 2006 average electric use (Combs, 2008c; SECO, 2008a). Since then, capacity more than doubled and wind power in the state is already reducing electricity costs. According to a Bernstein Research report, the fast growth of wind energy is decreasing the consumption of natural gas and consequently decreasing the cost of electricity generation. Essentially, the more wind power generating electricity, the less need to turn to gas-fired turbines and that lower demand for natural gas will bring its prices down (K. Johnson, 2009). The wind energy growth is mostly due to different factors such as tax incentives and government subsidies, higher prices for fossil fuels, improved technology, and investor concerns about possible federal action to decrease carbon emissions, which would result in increased electricity prices (Combs, 2008d). A study by West Texas A&M Universityâ&#x20AC;&#x2122;s Alternative Energy Institute found that Texas has 524,800MW of potential wind energy capacity, which is enough to power 121 million homes (Table 13; (Combs, 2008d).

Table 13: Texas Wind Energy Power: Potential Electricity Production

Wind Power Class

Area (km2)

Percent of State Land

Potential Capacity (MW)

3 4 5 6 Total

143,400 29,700 5,000 300 178,400

21.13% 4.38% 0.74% 0.04% 26.29%

396,000 101,600 21,600 1,600 524,800

Potential Production (Billion kWh) 860 231 48 4 1,143

Percent of Texas Electric Consumption 371% 100% 21% 2% 493%

Source: Combs, 2008c.

It is also important to note that Texans use more electricity than any other state (34,602,270 MWh in 2007) and Texasâ&#x20AC;&#x2122; hot climate increases electricity use for air conditioning (AWEA, 2009b; Combs, 2008c). As a consequence, a MW of wind energy powers 230 homes in Texas compared to the U.S. average of 300 homes (Combs, 2008c). According to numbers provided by Nogee, et al., (1999) on 10,000 MW of wind capacity, 17,000 MW of wind energy could generate $28.9 million annually in land-use payments to the owners of the land and $151.3 million annually from maintenance and operations. According to number provided by (SECO, 2008c), 17,000 MW could also generate around 1,700 full time jobs. Wind-related manufacturing is growing in Texas. Companies based in Texas now produce different parts for wind turbines, like blades, towers, and nacelles. Local farmers benefit as well, since they receive over $2,000 per MW for siting wind turbines on their property (Wind Power Works, 2009). In 2006, Teco-Westinghouse and Composite Technology Corporation (CTC) signed a strategic alliance for ten years to produce wind turbines in the state. Supply-chain businesses that produce wind turbine components are also moving or expanding their operations to the state (Combs, 2008d; Market Wire, 2008). In June of 2009, Martifer Energy Systems (a Portuguesebased company) and Hirschfeld Wind Energy Solutions signed a joint venture agreement to produce wind towers and other wind power gears in San Angelo and thus serve customers in the North American market (Laforteza, 2009). Besides manufacturing, wind energy industry creates jobs in different fields such as engineering, legal and financial services, and transportation (Combs, 2008d). This industry is also attracting more and more out of state and international companies to Texas.

Figure 24: Texas' Wind Business is growing (some examples)

* The Nacelle sits stop the wind tower and houses the gear box, shafts, generator, controller and brake. Source: Combs, 2008c.

One challenge that wind energy development faces is transmission. Usually the best wind sites are in remote areas, which make them dependent on long-distance transmission. The problem is that extending transmission lines can be expensive. An ERCOT study found that building transmission lines from West and North Texas to urban areas can cost around $1.5 million per mile and to install the lines, the utility company has to reach an agreement with landowners. Landowners usually receive a one-time payment for the easement, which include the towers and the transmission lines (SECO, 2008c). To offset the transmission problem the American Clean Energy and Security Act of 2009 planned a regional transmission grid system to support cooperation and coordination across regions (SEIA, 2009a). Some of the environmental benefits of wind power are the fact that to generate wind electricity, water is not required and gases such as CO2, NOX, and SOX are not emitted. Water is a scarce resource in Texas and fossil fuel power plants use around 440 gallons of water per MWh generated. In 2003, that amounted to 100 billion gallons of water. In 2008, the 4,500 MW of wind power installed saved about 5 billion gallons of water per year. With the 20,000 MW expected by 2015, wind energy can save up to 20 billion of water per year (Combs, 2008d). Wind Power Costs In the last 22 years, wind energy prices per kilowatt-hour have been decreasing significantly (about 80%), using the federal production tax credit (PTC). The PTC, by reducing wind power prices by 2.0 cents per kWh turns wind power into a more feasible choice to customers. The credit expired three times in seven years before it was extended again and every time that happened, wind energy capacity decreased significantly. These changes usually disrupt the market and discourage investment (Figure 25; Combs, 2008c).

Figure 25: U.S. Annual Wind Energy Capacity Additions

Source: Combs, 2008c.

Texas is one of the regions in the country with the lowest cost due to higher performance and lower development and installation costs (Combs, 2008d, 2008c). Lower costs lead to lower prices, which makes this energy source more attractive. At very windy places in Texas (21 mph winds), wind energy can cost only 2.6 cents per kilowatt-hour (SECO, 2008c). Taller wind towers lead to output increases and the cost to decrease, while improved monitoring and analysis of wind resources lead to better placement and increased performance. As an example, in California 139 wind turbines were producing 11 MW in the 1980s. Those same turbines were recently replaced by four new ones generating the same amount of energy (SECO, 2008c). According to New Energy finance, the price of wind turbines have dropped by 18% worldwide, with contracts signed at the end of 2008 and 2009, for delivery in 2010. This happened because in 2008 there were supply bottlenecks that caused increased turbine prices, with a peak at $1.66 million per MW. In 2009, the situation changed; a decline in the demand for turbines, mostly due to finance, and a growing supply chain led to turbine oversupply worldwide, which consequently led to decreases in turbine prices to about $1.36 million per MW (18%) (Power Engineering International, 2009). Solar Energy Texas, with its large size and plentiful sunshine has the largest solar energy supply compared to all the other states. Yet, other states lead the country in solar energy usage, generally due to state policies and incentives that support the installation of solar energy systems (Combs, 2008b). Solar electric market activity has more to do with state incentives than with actual available solar resources (Sherwood, 2009). California has the most solar energy installed, followed by New Jersey, Arizona, Colorado and Nevada. Texas ranked fifth in the grid-tied PV installed capacity in 2006 (Combs, 2008b) and in 2008 the state fell to the 12th place (Sherwood, 2009). Solar energy can be used for central and distributed electrical production as well as for decentralized thermal power, such as space and water heating. The distributed solar system 40

brings great advantages because it produces energy locally and it does not require transmission and distribution infrastructure (SECO, 2009d). As seen in table 14, the sun’s energy can be used to generate heat, light, electricity, hot water, and cooling for homes, businesses, and industry (Austin Clean Energy Initiative IC2 Institute, 2002). Table 14: The Four Different Types of Solar Techniques

Photovoltaics

Passive Solar Heating Concentrating Solar Power (CSP)

Solar Hot Water and Space Heating and Cooling

Directly convert sunlight into electricity. Examples include small cells to power calculators and complex systems that provide power to the electric grid. Buildings that combine materials to absorb and slowly release the sun’s heat. It concentrates reflective materials such as mirrors to concentrate the sun’s energy, which is then converted into electricity. It uses that sun to heat either water or a heat‐transfer fluid into collectors

Source: Austin Clean Energy Initiative and IC2 Institute and the University of Texas at Austin, 2002.

Texas has enough solar energy available to meet the energy needs ofevery citizen (SECO, 2008b) and yet, solar energy accounted for only 1.25% of total renewable energy consumption in 2008 (Figure 26) (Combs, 2008b; U.S. Energy Information Administration, 2009b). This lower percentage is mainly due to higher costs compared to other sources (Combs, 2008b) and the absence of strong state incentives (Sherwood, 2009). Figure 26: Texas Renewable Energy Consumption by Source, 2008 Solar, 1.25% Hydro‐ Electric, 33.59%

Geotherma l, 4.91%

Biomass, 53.21%

Wind, 7.04%

Source: U.S. Energy Information Administration, 2009b.

Although minor in total energy consumption, the state has the sunshine, research institutions, and manufacturing capabilities to become a leader in the global solar energy market (Global PV industry revenues were $11.2 billion in the third quarter of 2009) (Solarbuzz, 2009). One study estimates that Texas could capture around 13% of all new jobs and investments concerned with solar PV technologies by 2015 (Combs, 2008b, 2008c). 41

Insolation is the exposure to sunlight that a particular location receives over a period of time, usually during a single day. Horizontal insolation is the exposure of a horizontal surface, like a rooftop or a lake. Figure 27 illustrates the mean daily horizontal insolation for several cities in Texas. Throughout the state, global horizontal insolation (blue plus orange) averages 5kWh/m2 per day and varies only 25% between Houston and El Paso. This means that contrary to what many people think, not only does West Texas have good sunshine, but this is true throughout the state (SECO, 2008b). Figure 27: Global Horizontal Insolation for Texas Cities Port Arthur Houston Victoria

Direct

Corpus Christi

Diffuse

Austin Abilene Lubbock El Paso 0

4000

8000

12000

Source: SECO, 2008b.

As seen in Figure 28, annual variations from 1991 to 2005 are small, on average around 15%. They usually occur at the same time in the whole country and thus are of little concern for solar power plants. Seasonal variations in Texas tend to occur at the same time as demand for energy, usually because higher radiation means warmer temperatures and higher demand for air conditioning. Seasonal variations may pose a threat for solar plants if solar energy becomes more relevant in the state’s energy portfolio mix. Daily variations, on the other hand, are harder to predict and pose the biggest threat to solar power plants. Storage of energy for daily variations is likely to be more feasible than for long-term variations. Research is also ongoing to better forecast these changes (SECO, 2008b).

Figure 28: Annual variation in Global Horizontal Insolation 7000 6000 Houston 5000

Dallas

4000

Brownsville

3000

Lubbock SanÂ Antonio

2000

ElÂ Paso

1000

Austin

0 19951996199719981999200020012002200320042005 Source: SECO, 2008b.

Solar energy is different from most energy technologies since it can be produced on site, and thus decreases or eliminates fuel transportation, electricity transmission and transmission costs (Combs, 2008a). Solar water heating and space heating appliances are not connected to the electric grid. A PV system provides electric power directly to a consumer and can be either used by itself or connected to the electricity grid; these types of systems are called distributed power generators (Combs, 2008a). Thus, a great benefit of using PV is that sunlight does not have to be explored, transported, extracted, combusted, or imported (Combs, 2008d; Climate Institute, 2008). In Texas, PV systems are being used for several things; from powering school crosswalk warning signs (Figure 29) to powering homes and water pumping systems in a distributed system (Climate Institute, 2008). An advantage of small-scale energy systems, like those powering school crosswalk signs, is that they have batteries and donâ&#x20AC;&#x2122;t necessarily need to be connected to the electric grid. Instead, they store and provide energy without expensive batteries or power lines (Combs, 2008b). Figure 29: School Crossing Signal Powered by PV

Source: Anaheim Public Utilities, 2009.

When electric power is needed and there are no power lines, PV can be very beneficial at a low cost. During an emergency or disaster relief, like after a storm when electric power is not available due to broken electricity lines, PV can generate power for search and rescue operations and other important activities. In some situations using solar panels in houses and buildings can significantly decrease the electric bill. In Austin, a day care center built solar panels and saved around $900 annually in its electric bill (SECO, 2008b). Powering water pumps is another use for PV. It is one of the most cost-effective uses since it is simple, dependable, and it needs little maintenance. PV can save taxpayers money and time by avoiding costly constructions to install underground power lines. In Texas, there are thousands of school zone flashing lights powered by PV. PV is also used for Texas road maintenance warning signs, bus stops, security lights, and billboard lighting (SECO, 2008b). On a bigger level, utility-scale solar power plants (CSP) utilize centralized power plants and transmission lines to deliver electricity to customers (Combs, 2008a). CSP systems can usually generate 50 to 200 MW, enough electricity to power around 7,800 to 31,000 homes in Texas, based on 2006 average electricity usage (Combs, 2008b; SECO, 2008b). A 2007 study recognized seven southern states as having good potential for CSP: California, Arizona, New Mexico, Nevada, Utah, Colorado, and Texas. West Texas has enough resources to produce up to 351 million MWh of electricity and 75% more direct solar radiation than East Texas. One benefit of CSP is that peak energy generation occurs during the hot summer months, when wind and hydro sources are low. Another is that prices are fixed and not vulnerable to fuel price variations (Combs, 2008b). Land and Water use Solar radiation has a low energy concentration when compared to other energy sources, thus it requires large areas to collect substantial amounts of energy. Typically, a solar power plant requires 5 acres per MW of generated power. This can be a challenge since the land would be deprived from other uses such as farming or ranching. Nevertheless, this situation can be offset by the fact that usually feasible lands are in remote unpopulated areas and distributed solar systems are placed on rooftops (SECO, 2008b). According to U.S. Environmental Protection Agency (EPA), even if requiring a lot of land, CSP plants do not damage the land they sit in; they just take it out of use for other purposes such as agriculture (Combs, 2008b). The availability of water may be an issue for solar thermal electric technologies. These systems require a significant amount of water to cool down. Although the amount needed is similar or less than that needed for agriculture, depending on water is an important consideration, especially in sunny, dry areas of Texas, which are more favorable for solar power plants. Solar systems based on photovoltaics and dish-Stirling engine designs do not require water. These systems can actually decrease water consumption by mitigating water usage from conventional energy generators (SECO, 2008b). Challenges and Solutions The best places for solar energy plants are locations in the west part of the State. Thus, to transport energy from those areas to urban areas, adequate transmission is mandatory. Intermittent solar radiation can pose a challenge for efficient utilization transmission, which can result in higher transmission costs. Consequently, solar power developers need to evaluate the tradeoffs of locating the projects where the best resources are or where they are most needed (SECO, 2008b). 44

A solution for the transmission problem may include building hybrids fueled by other energy sources (Climate Institute, 2008). Solar and wind generation in Texas usually occur at different times; solar during the day and wind during the night. Combining both technologies can be very important to maximize transmission capacity and improve utility loading (SECO, 2008b). Figure 30: Cost of Energy in constant 2005 $, Historical (1980-2050) and Projected (2006-2025)

Source: SECO, 2008b.

The U.S. Department of Energy predicts that solar energy will be more prominent in the next 5 to 10 years, as costs decrease and solar energy becomes more competitive against conventional sources (SECO, 2008b). Figure 31: U.S. Solar Market Trajectory

Source: SECO, 2009b.

Table 15: Price Trends for Solar Power Through 2015

2006 Status in the United States PV CSP 18 to 23 cents per kWh 12 cents per kWh Potential for PV and CSP Pricing: PV CSP 11 to 18 cents per kWh by 2010 8.5 cents per kWh by 2010 5 to 10 cents per kWh by 2015 6 cents per kWh by 2015 Source: (Combs, 2008b).

Commercial PV systems can convert 7 to 17% of sunlight into electricity (Climate Institute, 2008a). These systems are very reliable lasting 20 years or more, but nonetheless still relatively inefficient. PV energy now powers more than 1.5 million homes worldwide and it is growing 20 times faster than the oil industry (SECO, 2008b). The overall goal of PV industry is to reduce costs while improving solar cell efficiency. Improved PV technologies using cheaper materials could reduce the cost of PV-generated electricity to 11 cents per kWh by 2010. Unlike other energy systems, 90% of the costs of a PV system are up front. So once installed, there are no fuel costs and the system needs little maintenance (Combs, 2008b). A study by the University of Massachusetts found that to support a healthy solar industry, subsidies alone are not enough. More investment is needed from the manufacturing sector. California leads the country in U.S. federal research awards, scientific publications, business establishments, and patents related to PV solar energy. Texas ranks fourth in the country in the number of federal research awards in PV solar energy and fifth in the number of PV businesses located in the state. Only 3% of the nationâ&#x20AC;&#x2122;s scientific literature on photovoltaics is accounted to Texas. Thus, although Texas has the necessary PV technologies and intellectual capacity, current research and business and state resources are not enough to achieve a continuous success in the solar energy industry (Combs, 2008b). Legislation and Incentives The solar energy industry has grown as a direct response to federal, state, and local policies and subsidies. At the federal level, a significant incentive is the 30% federal tax credit (ITC) for solar equipment which is a dollar reduction of a businessâ&#x20AC;&#x2122; or individualâ&#x20AC;&#x2122;s tax liability. Initially, individuals could qualify for a tax credit up to $2,000. In October 2008, the ITC was extended for 8 more years and the $2,000 cap was eliminated. The extension of this federal income tax credit for 8 years was very important since the uncertainty that the credit will remain inhibits further investment (SECO, 2008b). A study by Solarbuzz found that government incentives can decrease solar PV system costs to around 10 to 12 cents per kWh, compared to 22 to 40 cents per kWh without any incentives (Combs, 2008b; Solarbuzz, 2009). State and local initiatives such as rebate programs, tax policies, net metering and standardized interconnection rules, and renewable portfolio standards are very important to promote the growth of solar energy in Texas. The state has both a franchise tax reduction and a 46

franchise tax exemption for businesses. It has also a property tax exemption for the assessed value of a solar energy device for local energy production and distribution. However, even with these programs the State has not been able to spur the solar energy market significantly (Combs, 2008b; SECO, 2008b). Geothermal Energy In Texas, geothermal energy is the focus of significant attention due to the appearance of new technologies and the state’s long history with dealing with subsurface oil and gas extraction (Combs, 2008e). Some of the best areas in Texas for this source of energy are the eastern part of the State, one area that cuts the central part of Texas, and others that border the Rio Grande in the Trans-Pecos (SECO, 2008f). The table below shows some of the possible uses for geothermal energy based on available temperature. Table 16: Temperature-based Classification of Geothermal Energy

Resource Temperature Surface Temperature (40°F to 80°F) Low Temperature (70°F to 165°F)

Moderate Temperature (165°F to 300°F)

High Temperature ( > 300°F)

Best Applications for Geothermal Heat Geothermal HVAC systems for homes and buildings Direct Use: agriculture and greenhouses, aquaculture (fish farming), mineral water spas and bath facilities, district water heating, soil-warming, fruit and vegetable drying, concrete curing, food processing. Binary fluid generators for electrical production; direct use: absorption chillers, fabric dyeing, pulp and paper processing, lumber and cement drying, sugar evaporation. Electricity production, minerals recovery, hydrogen production, ethanol and biofuels production.

Source: SECO, 2009f.

Geothermal heat pumps have improved and they can be used for both air-conditioning and heating needs. These pumps use a fluid loop to exchange the overload heat or cold inside the building with the one from the Earth. From 10 to 50 feet (3-15 m) underneath the Earth’s surface, the ground and/or groundwater temperature remains constant year-round. At this depth, the ground temperature in the Panhandle is around 54°F ± 2°F (12°C) and in South Texas is 78°F ± 2°F (25°C) (SECO, 2008f).

Figure 32: Average Texas Surface Groundwater Temperatures

Source: SECO, 2009f.

Using the constant ground temperature for additional cooling or heating of a building usually translates in less energy used, as compared to traditional HVAC systems that depend on heat transfer from outside air temperatures. Geothermal HVAC can save cooling and heating energy usage by 40 to 70 percent, depending on the energy efficiency of the building, heat pump unit, and local climate. Excess heat may also be used to heat hot water tanks and/or swimming pools (SECO, 2008f). The production of geothermal electric power in Texas has increased the value of the resource due to its potential for development and its small environmental impact. As see in Table 18, there are different uses for geothermal energy and each has a preferred implementation in Texas. The most expensive areas are those with basement rock at the surface, such as the Hill Country and parts of North Texas (SECO, 2008f). Geothermal resources are found throughout the state. Its accessibility varies by regions and sometimes by county. For its extraction to be profitable, heat must be removed from the ground at a cost that brings profit. This usually depends on the quality of the resource (mostly its temperature, depth and fluid characteristics) and the simplicity and speed with which fluids can be extracted and reinjected. In Texas, low to moderate temperature wells have been used for a long time. Central Texas and the area of far West Texas are two important areas (SECO, 2008f): • Central Texas- This area has had a history of geothermal activity from springs and mineral water which supported more than 50 spas since the end of the 19th century. It has waters with suitable salinity, temperature, quantity, and drilling depths for direct use geothermal projects. The total area ranges from a band from Val Verde County to Red River County, including many of Texas’ big cities which use the resource to cool the water rather than to use the excess heat. • Trans-Pecos, West Texas- this area has great potential and runs from the Rio Grande Rift for over 300 miles to the Big Bend region. The area is famous for its recharging ground water that flows to a depth of more than 3,400 feet (1030 m). It represents the best area for conventional hydrothermal geothermal development in Texas and includes Culberson, El Paso, Hudspeth, Jeff Davis, Presidio, and Brewster Counties. 48

Enhanced Geothermal System Resource The enhanced geothermal systems (EGS) are geologic formations with slim amount of water and with high temperatures if a fluid is injected into the rock to act as a heat carrier. EGS has tremendous potential when compared with other resources in Texas because it can be produced everywhere. To become economically suitable, it needs a minimum temperature of 300ºF (150ºC). The basement rock of East Texas is the area in the state with the biggest potential, especially if combined with coproduction of oil and gas. Using a conservative conversion from thermal energy to electrical of 10% and a very conservative availability rate of 0.2%, EGS could still produce 100 times more power than the total Texas annual electrical consumption (SECO, 2008f). Many homes and other buildings in Texas use geothermal heat pumps for cooling and heating. By 1990s, the state had over 100 schools with geothermal heat pumps (GHP) systems, more than any other state at that time (Combs, 2008a). As of 2008, 34 school districts and 140 schools in Texas had geothermal HVAC systems installed (SECO, 2008f). Direct Use Applications A good example of direct use applications is a project that started in the 1970s as a geothermal well developed for heating the Falls Community Hospital and Clinic in Marlin, Texas. The water is used in the summer for the warm water needs and in the winter to heat the hospital (SECO, 2008f). Another direct use application in Texas is spa facilities. Even though there were several geothermal wells and mineral springs used for that purpose in Texas, currently there is only one hot spring destination in the state. It is in West Texas at Chianti Hot Springs, which receives annually more than 80,000 visitors (SECO, 2008f). According to a study by the Oregon Institute of technology, the state of Texas has 43 communities with access to water for direct use applications. Wells offering water with temperatures ranging the 100 to 140ºF (38-60ºC) are present and ready to be used in the following counties: Austin, Eden, Kennedy, Marlin, Ottine, San Antonio, Taylor (SECO, 2008f). Since the state devotes so much energy to cool buildings, this type of geothermal energy has great potential (Combs, 2008e). Based on sales in the 90s, there are close to 10,000 residential geothermal HVAC systems installed in Texas, equivalent to 0.004% of energy offset (that is, reduced electrical production) (SECO, 2008f). Commercial geothermal electrical production is still under development in Texas (SECO, 2008f). Currently, geothermal energy is not being used to produce electricity. Yet, some of the emerging technologies hold significant potential for the state. One study suggested that electricity produced by geothermal power plants is becoming cost competitive, with prices averaging $0.05 to $0.08 per kWh (Combs, 2008e). As a sign that things might be changing, in April 2009, the Land Office awarded three geothermal energy leases off the Texas coast to Geo Texas Co., which will be generating geothermal energy on 128,758 acres of state underwater land off the coasts of Brazoria, Galveston, and Matagorda counties. Once the company starts producing electricity, the state’s Permanent School fund (PSF) should receive over $386,000 per year. Particularly interesting for Texas is the research being done into the use of existing deep oil and gas wells as an entrance to areas that are hot enough for geothermal power. Micropower plants have also become needed as part of a distributed energy system and that resulted in companies designing new projects for geothermal energy generation. Examples of companies in 49

Texas include: UTC Power, ORMAT Technologies, ElectraTherm, Inc., and Deluge, Inc. (SECO, 2008f). The Geothermal Laboratory at Southern Methodist University (SMU) estimated that in five to ten years, Texas could have 2,000 to 10,000 MW of geothermal energy capacity provided through oil and gas wells (in 2006, one MW of electricity was enough to supply about 630 houses). The great advantage of crossing both oil and gas drilling and geothermal energy is the existence of large amounts of data on existing wells (Combs, 2008e). Figure 33: Potential Geothermal Energy Production Regions

Source: Combs, 2008b.

Most places suitable for geothermal electricity production are located close to urban areas, so transmission lines already exist. The Trans-Pecos region (Figure 33) has a limited transmission system and gas and oil often use diesel for electricity generation in rural areas. In this situation, onsite generation of geothermal electricity would be very important (SECO, 2008f). The most expensive thing for a geothermal HVAC system is the ground loop field. The payback period is usually about two to ten years, depending on the heat pump and energy efficiency of the building. Nevertheless, the materials are usually expected to last at least 50 years. Residential geothermal HVAC systems cost around $3,000 to $5,000 per ton of air conditioning capability (SECO, 2008f). The costs of starting a geothermal power plant range from $1,400 to $1,500 per kW. However, if systems use existing oil and gas wells, then costs can be significantly reduced (Combs, 2008e). Benefits of Using Geothermal Energy in Texas A benefit of a geothermal power plant is that the surface environmental impact is limited to the plant, wells, and pipelines. Also, the current areas favorable for geothermal electricity lay on an existing infrastructure built by the oil and gas industry, which means, only a small additional impact is expected (SECO, 2008f). Geothermal resources have an advantage over other renewable sources. Unlike electricity from other renewables, geothermal is considered baseload capacity, that is, it is produced 50

continuously and as such it competes with other baseload sources such as coal and natural gas plants. It is available 24 hours a day, 365 day a year and it does not vary with day or season. One big concern for using this source of energy is related to water: its availability, disposal, and quality. Energy production from geothermal resources requires large amounts of water (with temperatures from 200°F (92°C) and higher) and Texas already suffers from water scarcity (SECO, 2008f) Subsidies and Incentives The Federal Energy Policy Act of 2005 (EPAct) produced incentives which include a property tax credit for geothermal equipment (excluding geothermal heat pumps- GHPs), a personal income tax credit, and the Renewable Energy Security rebate for homeowners who include GHPs (Combs, 2008e). The Congress amended the Geothermal Steam Act of 1970 changing how royalties are designed, how land is leased, and how Federal income from geothermal development is dispersed (Neron-Bancel, 2008). IV.

Renewable Energy Opportunities- The Future Texas has been a long time a leader in the world’s energy industry, whether it is in production, technology, or refining (SECO, 2008a). Currently, it has the opportunity to become a leader once again, but now in the renewable energy market. Wind turbines in west Texas and solar panels in Austin can provide clean, reliable, and efficient energy to thousands of Texans (SECO, 2008d). i.

Areas for Development

Biomass The future of biomass and biofuels in Texas depends on several key issues. The fast growth of ethanol production has driven commodity prices up and led to an increased concern about poverty and the environment. Corn prices increased from $2 per bushel in 2000 to $6 or more per bushel in 2008. Concerns about poverty and the increased price of food have been offset however by the fact that the agricultural incomes are rising worldwide. A study by Texas A&M University found that only 15% of the price increases were attributable to ethanol production. Contrarily, a study for Kraft Foods Global by Keith Collins in 2008 found that 60% (or $20 billion) of estimated food price increases from 2006 to 2008 were attributable to biofuels (Collins, 2008; SECO, 2008e) Land conversion is another issue concerning ethanol, especially forests which are environmentally sensitive. An inevitable consequence of ethanol expansion is higher commodity prices and pressure for land conversion. The oil embargo in the 1970s and the increase of gas prices spurred the interest in biofuels. Likewise, interest dropped when prices dropped, reflecting that interest in biofuels is high only when gas prices are high. However, even with fluctuations, predictions suggest prices will remain high since demand for energy will continue to increase globally, particularly in Asia (Combs, 2008a; SECO, 2008e). Greenhouse gas policies can have an important impact in the development of biofuels. More than 80% of greenhouse gases are emitted through the combustion of fossil fuels. Carbon taxation, carbon cap and trade, and energy efficiency subsidies are very important in the development of biofuels. Given the problem with increased food prices, land conversion, and not enough corn production, an alternative manufacture method of ethanol would be important. 51

Cellulosic ethanol is an area for future development, as well as pyrolysis and gasification9 as alternatives to liquid energy forms such as bio-crude. Cellulosic ethanol is currently produced at a very small scale and its future is still unknown. Pyrolysis and gasification although with great potential will not reach commercialization for a minimum of three years. Corn production reached a record in 2007, when compared to previous years, and this was due to improvements in technology and expansion in land used. Thus, an increase in the rate of growth of corn yield driven by technological advances in production is very important for the future of this energy source (SECO, 2008e). Some additional issues concerning the future of biomass are the availability of water, reliable transportation of biomass, and climate change that can bring warmer and drier weather and more intense precipitation, which will consequently affect crops (SECO, 2008e). Wind Texas’ wind energy industry benefits from great natural resources and federal and state incentives. A decrease of federal and state support towards wind energy could limit the expansion (Combs, 2008d; SECO, 2008c). Additionally, higher fossil fuel prices together with more efficient wind turbines make wind power more competitive with conventional power sources (Combs, 2008d). The growth of wind energy seen during the last few years can slow down if inadequate transmission lines, siting and permitting issues, and a failure to extend the Federal PTC occur (Combs, 2008c). Local opposition to wind power is usually backed up by the risk of endangering birds and bats, the noise of turbines, aesthetics, land values, and the economic impacts of wind turbines on tourism. However: • Noise from the gearboxes has been decreased to less than ambient noise (Combs, 2008c; SECO, 2008c). At a distance of 750 to 1,000 feet, a modern wind farm is said to generate as much noise as a kitchen refrigerator (Figure 21; Combs, 2008c). • A study looking at annual avian mortality due to anthropogenic causes found that mortality due to wind turbines was less than 0.01% (Erickson, G. D. Johnson, & Young, 2005). Several studies are currently looking at the flight patterns of migratory birds to discourage future placement of wind turbines in sites that interfere with bird flight paths. This is particular important since Texas has no regulations for wind farm siting and decommissioning (Combs, 2008d). • Studies were not able to find a correlation showing that wind farms could actually lower property values within a 10-mile radius of their sites (National Research Council, 2007). A new comprehensive study by Lawrence Berkeley National Laboratory showed that property values are not affected by wind turbines and wind power facilities. The study examined 7,500 sales of single-family homes located within 10 miles of 24 existing wind facilities in nine different states and found no correlation (Hoen, Wiser, Cappers, Thayer, & Sethi, 2009). Economical energy storage is another area for improvement. If it becomes practicable, then wind will become even more competitive. The three main options are batteries, compressed air, and hydrogen production. When carbon dioxide trading becomes included in the energy policy in 9

“Gasification is a high-temperature process that is optimized to produce a fuel gas with a minimum of liquids and solids” “Pyrolysis is a medium to high temperature (500-1000¡C) process for converting solid feedstocks into a mixture of solid, liquid, and gaseous products”. Definitions taken from the North Carolina Department of Environment and Natural Resources website: http://www.p2pays.org/ref/11/10516/gas.html.

the United States, then wind energy will become more valuable, by approximately 2 to 3 cents per kWh increase. An important issue is being able to forecast winds 6 to 36 hours in advance (SECO, 2009). Transmission continues to be the biggest challenge for this renewable energy source (Combs, 2008d). Thus, the continuous development of wind energy will depend on the following (Combs, 2008d; SECO, 2009): • Reliable and effective transmission lines, especially in West Texas. • The effective sitting and permitting of wind turbines, which can become more challenging especially offshore and in areas such as the hill country. • The accessibility of wind turbines to respond to its demand, since a shortage drives the prices up and slows development; eventually this involves bringing manufacturing companies to the state. • Net energy billing with no additional cost to the producer and subsidies for small wind systems. • The extension of the Federal production tax. Solar A key issue in solar energy is coping with solar variability. Consequently, improvements in storage capability or an additional energy source to back it up when radiation is low are necessary for solar energy to become a bigger player in the state’s energy portfolio. Solar technologies are still expensive, so new technology types and improvements in manufacturing processes are important steps in the future so solar energy becomes more cost-efficient (SECO, 2009). Subsidies and incentives have played a major role in the development of solar energy and are predicted to continue to do that in the future. Therefore, incentives and subsidies are very important in the present and future (Combs, 2008d). Geothermal For geothermal electricity to stay competitive, the price of electricity needs to be high; more than 8 cents per kWh. However, if oil and gas wells with fluid temperatures higher than 200°F switch to electrical production, rather than not using it at all, then the price is expected to decrease. As technology improves, prices can also decrease. Thus, these two measures are very important in the future. Being able to use CO2 as a fluid for heat extraction is being researched and developed due to its reduced surface friction and higher heat capacity over water. This hydrocarbon/geothermal co-production would mean creating a geothermal power plant that is carbon free, a very important measure to mitigate climate change (SECO, 2009). Another of the emerging technologies includes enhanced geothermal systems (EGS). If this technology becomes commercially viable, then it will expand significantly the production from existing fields and the use of geothermal energy in previously unlikely places (Slack, 2009). Geopressured geothermal resources are also considered of great potential. The most significant resources are located in the northern Gulf of Mexico (offshore and onshore). This technology may permit more economical recovery of both geothermal and gas resources (Slack, 2009).

Economic Impact The global market value for environmental products and services is currently around $1.3 trillion and is estimated to be about $2.7 trillion by 2020, according to German-based Roland Strategy Consultants (Environmental and Energy Study Institute, 2007). Although it is often thought that environmental protection comes at a financial cost, more and more studies are finding that that is not necessarily true when it comes to renewable energy (Kammen, Kapadia, & Fripp, 2004). The benefits of using renewables can be important decision criteria for policymakers, but many times they are neglected: not quantified, monetized, and even identified (IPCC, 2007a). These economic benefits include creating a reliable and sustainable energy source, creating new jobs, and boosting the economy (SECO, 2008d). It is estimated that in South Africa, the increased use of renewables could lead to more than 36,000 direct jobs by 2020, while in Europe over 900,000 new jobs could be also created by 2020, as a result of the development of renewable energy technologies (IPCC, 2007). Texas and the U.S. depend mainly on only a few energy sources and that makes the state and country vulnerable to volatile prices and political turmoil from the supplier countries. On the other hand, renewables do not depend on fuel markets and are not subject to price fluctuations due to changes in demand, decreased supply, or manipulation of the market (Nogee, Clemmer, Paulos, & Haddad, 1999). Amazingly, in Texas in 2007 only 1.7% of energy was generated by green energy sources (U.S. Energy Information Administration, 2010b). U.S. A major step towards the development of the renewable energy industry was the federal stimulus bill enacted in February 2009. This bill includes a set of terms to develop clean energy production, energy efficiency, and jobs and investment. A total of $84.8 billion has been set for energy and transportation spending. Table 17 describes how the money will be spent. Amounts are in thousands (Urahn & Reichert, 2009). Table 17: The federal stimulus bill spending (in thousands)

Area of Investment Energy efficiency and conservation Improving the grid Energy research Clean energy generation Jobs training Vehicle spending Transportation spending Climate science research Tax credits for renewable energy and energy efficiency Tax credits for alternative fuel pumps Investment credits in energy generation and energy efficiency technologies TOTAL

Total Investment $16,470 $11,000 $7,900 $6,000 $500 $2,600 $18,400 $570 $19,668 $54 $1,600 $84,762

Source: (Urahn & Reichert, 2009).

Renewable energy technologies are more labor-intensive than traditional technologies for the same energy output (Environmental and Energy Study Institute, 2007; IPCC, 2007). As an example, solar PV creates 5.65 person-years of employment, wind-energy industry creates 5.7, and coal energy industry creates only 3.96 person-years of employment per US $1 million investment (over 10 years) (IPCC, 2007). According to a PEW study (2009), in 2007 in the U.S. there were 770,000 jobs and 68,200 businesses related to clean energy. Texas ranked second, after California, in both areas with 4,802 businesses and 55,646 jobs. The researchers found that the growth of this industry is due to the stateâ&#x20AC;&#x2122;s policies on renewable energy (Urahn & Reichert, 2009). According to a Union of Concerned Scientists estimate, a national renewable portfolio standard (RPS) of 20% by 2020 would generate 185,000 new jobs from renewable energy development, increase by $25.6 billion the income of ranchers, farmers, and rural landowners, and save consumers $10.5 billion in lower electricity and natural gas bills (Environmental and Energy Study Institute, 2007). By increasing its renewable-energy use, Texas would see its renewable-companies become globally competitive, it would create wealth, attract out-state firms, expand jobs, and provide reliable energy to millions of Texans (Kellison et al., 2007). Biomass In the biomass industry, it is estimated that for each MW of installed capacity, six full-time jobs are created and nationwide this industry employs 18,000 workers (California Biomass Energy Alliance, 2005). The production of biofuels can also be an important player in the economy. If the prices of crude oil remain higher than $100 per barrel, then ethanol production will cost less than petroleum based fuels. At the same time, the production of ethanol led to a rise in commodity prices, which slowed the rapid expansion of ethanol production (SECO, 2008d). For every 1 billion gallons of ethanol produced, 10,000 to 20,000 jobs are created. The ethanol industry, according to the Renewable Fuels Association, generated 147,000 jobs in several sectors of the economy in 2004. Additionally, an ethanol plant in Texas producing 100 million gallons annually, could add 1,600 new jobs to the economy. However, some of these jobs may be created out of state, since feedstocks necessary to produce ethanol are not available in Texas (Combs, 2008a). Biodiesel plays an important role in Texas economy since the state became in 2007 the leader in the production of this fuel. Biodiesel is estimated to have created up to 8,636 jobs in Texas and added $392 million to the economy. Several of the stateâ&#x20AC;&#x2122;s universities are trying to develop new sources of oils and fats to produce biodiesel. Algae is one promising alternative since it can produce 50 times more oil per year to generate biodiesel on a per-acre basis (Biodiesel Coalition of Texas, 2009). With regards to wood biomass, a 1999 study by the National Renewable Energy Laboratory (NREL) claimed that 4.9 full-time jobs are created by every MW of capacity. Seeing that Texas has an estimated potential of 4,600 MW, wood generated capacity could create over 22,000 jobs in Texas. Mesquite Fuels & Agriculture was planning a wood-fired plant in Hamlin and anticipated that employees would be paid around $10 to $14 per hour (Combs, 2008a). However, lack of adequate water supply has put the power plant construction on hold (Emison, 2009). The economic impacts of feedlot biomass in Texas are not yet estimated since this practice is not fully commercialized. A plant close to Hereford, Texas was using 1,400 tons per day of 55

manure as a fuel to produce 61 permanent jobs and between 500 to 600 construction jobs (Combs, 2008a). However, this plant was recently acquired by Ethanol Acquisition LLC and put into â&#x20AC;&#x153;mothballâ&#x20AC;? status (Christiansen, 2009). Wind The wind energy industry can provide significant economic benefits to landowners and local communities. Landowners who lease their land to put wind turbines on it receive bonuses and installation payments, royalties, and operating fees or monthly payments. Landowners who let transmission lines pass across their properties receive a one-time payment, based on the landâ&#x20AC;&#x2122;s market value, and additional compensation for any damage on their property value. These additional compensations exist because some argue transmission lines decrease the market value of a property (Combs, 2008d). A study found an average discount on property value ranging from 1% to 10% from power lines proximity (Colwell & Foley, 1979). The decrease in value is usually due to potential health hazardous, safety concerns, visual unattractiveness, and troubling sounds (Delaney & Timmons, 1992). However, a more recent study by Lawrence Berkeley National Laboratory showed that neither proximity to wind facilities nor views of wind farms have a significant impact of property values (Hoen et al., 2009). A wind farm with a 100 MW capacity would need 6,000 acres, which can involve 10 to 30 landowners. The return on land is around $4,000 per acre per year, a much higher return than if the land were used for farming or ranching. During 2008, the 4,500 MW of wind power installed generated nearly $18,000,000 for landowners (SECO, 2009). At the end of 2009 the wind power generated increased to 9,410 MW, so revenues for landowners are estimated to have increased to $37.6 million. A study by the Union of Concerned Scientists (UCS) found that farmers could increase their return-on-land by 30 to 100% by leasing a part of it for wind turbines while still farming (Nogee et al., 1999). Several seminars have been presented across the State for landowners on the benefits of leasing their lands for wind farms (SECO, 2009). More information is given to landowners on the website www.windenergy.org. Besides creating jobs, wind plant construction, operations, and maintenance boost local businesses and communities. The National Renewable Energy Laboratory (NREL) projects that six to ten maintenance and operations jobs are created for every 100 MW of installed wind capacity (Combs, 2008c). 100 MW also generate around 100 to 200 short-term construction jobs during 4 to 8 months (Combs, 2008c; SECO, 2009). An estimated 4,000 MW of wind power installed in 2008 generated around $16 million in payroll and the installation of an additional 20,000MW of wind power by 2015 would then generate 2,000 or more full time jobs (SECO, 2009). A case study in Nolan County, Texas, home for over 2,500 MW of operational wind power, found that the economic impact of wind energy was estimated at $315 million in 2008 and $397 million for 2009. Landowners royalties on 2,500 MW is calculated at $12,264,000 annually and expected to increase to more than $17 million by the end of 2009 (West Texas Wind Energy Consortium, 2009; SECO, 2009). In the U.S., wind supplies more jobs per dollar invested than any other energy technology and five times more than coal or nuclear power (Climate Institute, 2008). As of 2009, around 85,000 people were employed in the wind industry in the U.S., versus the 50,000 in 2008. This has expanded the number of jobs in manufacturing since the share of 56

domestically produced wind turbine components has increased from less than 30% in 2005 to around 50% in 2008. Seventy new construction facilities were added or expanded, included 55 in 2008 alone (AWEA, 2008). With the continuous increase in jobs generated, the wind energy surpassed the coal industry in the number of people it employed (AWEA, 2009a). Although the wind industry is growing, uncertainty remains about the future. The economic stimulus plan that set billions of dollars aside for alternative energy and President Obama’s position in developing renewable energy sources seems promising. The U.S. Department of Energy claimed that by 2030 wind energy could supply 20% of the country’s electricity. This new step would generate 250,000 new jobs (Dynowatt, 2009). According to a study by VERA, a wind energy consulting firm, 1,000 MW of wind development would generate local taxes totaling around $150 million ($13 million in the first year), preserve about 50 billion gallons of water, and lead to a cleaner air by reducing NOx by about 4,000 tons annually (12 tpd). It would also create jobs and economic benefits from $1 billion worth of investment (Marshall, 2004). In 2002, Texas wind energy projects paid $11.6 million in school taxes, which corresponds to $10,000 per year per turbine. In 2003 wind projects paid $11.5 million (Marshall, 2004). With future leased offshore projects, that amount is expected to increase. Over the next 30 years, wind farms are expected to provide the state’s Permanent School Fund a minimum of $448 million (Lombardi, 2009). Additionally, in 2008 the 4,500 MW in Texas reduced CO2 emissions by 40 million metric tons per year. The value of CO2 trading in Europe is $30 per metric ton, the same as $20 per MWh. Thus, when CO2 becomes a national policy, the projected 20,000 MW by 2015 will generate around $1 billion per year. This could counterbalance the loss of the PTC after the initial 10 years and diminish the need for it in the future (Combs, 2008d). Solar Energy Currently, the solar energy industry alone employs more than 80,000 people in the U.S. and created over 15,000 jobs in the last two years. According to Navigant Consulting, by 2016 the solar energy sector will create 440,000 permanent jobs and stimulate $325 billion in private investment (SEIA, 2009b). In 2007, global solar industry generated $17.2 billion in revenues (Solarbuzz, 2009). Data for solar industry revenues in Texas is not available. Yet, the IC2 Institute predicts that the solar energy industry will create more jobs and contribute billions of dollars in investment and salaries to the U.S. economy over the next ten years. For this to happen, incentives need to be given to support solar industry. A study by IC2 assumed that PV capacity would grow from 340 MW in 2004 to 9,600 MW in 2015 and argued that PV manufacturing industry would bring jobs to Texas that have been previously outsourced offshore. It predicted that Texas would acquire about 13% of all new U.S. solar PV jobs and investment. This accounts for approximately 5,567 new jobs (93% in manufacturing and 7% in construction/installation) and $4.5 billion of investment in Texas by 2015 (Combs, 2008b, 2008c). The Solar Energy Industries Association (SEIA) projects that for every MW of solar power, 32 jobs are created, of which 8 are in system design, distribution, and installation. The Prometheus Institute predicts that solar energy will generate 22,000 American jobs in manufacturing, distribution and several building trades during the next 10 years (Combs, 2008e; Combs, 2008d).

Austin Energy conducted a study on the economic benefits of solar energy in 2006. The results suggest that a 100 MW solar manufacturing plant in the Austin area could generate 300 new jobs and add about $1 billion to the regional economy by 2020. Sales tax and property tax would also increase and benefit both the city of Austin and Travis Country (Combs, 2008e). On April 15, 2008, Texas Governor Rick Perry announced that the state would give HelioVolt, an Austin based solar energy company, $1 million for the construction of a development and manufacturing facility, which would generate 160 jobs and $62 million in capital investment by December 2010 (Calnan, 2010; Combs, 2008c). As of February 2010, the company had begun production of thin film solar cells, but extended the agreement to create 160 jobs to December 2012 arguing that because of the global recession the demand for solar cells had decreased. According to the companyâ&#x20AC;&#x2122;s vice-president, Iga Hallberg, the company employs currently around 100 people (Calnan, 2010). According to the IC2 Institute, the solar industry could also generate significant savings for energy consumers in Texas through avoided fuel costs, avoided carbon dioxide emissions, avoided capital costs, avoided distribution costs, and the value of fossil fuel price hedging (Combs, 2008a; Combs, 2008d). Another benefit of using solar energy is that it can reduce price volatility linked to fluctuating natural gas prices (Combs, 2008e). During peak periods and as utilities start to charge higher prices, PV systems which generate the most electricity during the hottest time of the day, can create significant savings on energy costs (Combs, 2008e; Combs, 2008d). Geothermal Energy Based on a survey, Geothermal Energy Association (GEA) estimates that the geothermal energy industry employed 18,000 people in 2008, approximately 5,000 direct jobs in operating, construction, and manufacturing and 13,000 additional supporting jobs (GEA, 2009). According to the U.S. Department of Energy, creating geothermal power plants generates 11 times more jobs than creating a comparable natural gas power plant (GEA, 2009). Besides creating stable, long-term jobs, geothermal energy generates almost no air emissions, and its related health impacts, and supplies billions of dollars to local, state, and federal economies through renewable energy production (Kagel, 2006). According to an anticipated project in the Glass Mountain Known Geothermal Resource Area in California, the mean salary at the plant would be more than twice the average salary in nearby counties. The average salary for the anticipated project would also be higher than both the county and state averages, totaling between $40,000 and $50,000 in 1998 US$ (or $52,835 and $66,044 in 2008 US$ using the consumer price index) (GEA, 2009; Williamson, 2010). Geothermal projects are usually located in rural areas where there are few job opportunities. Geothermal projects can then provide jobs and spur the economy in such rural places. The developers of these projects usually generate long-term jobs since they negotiate contracts that last for about 20 to 30 years. Geothermal energy can bring diversity to the economy, since rural places tend to focus on one single source of revenue, such as manufacturing or agriculture. These projects usually employ people with a variety of backgrounds: welders, pipe filters, mechanics, plumbers, electricians, machinists, carpenters, surveyors, geologists, architects and designers, hydrologists, mechanical, electrical, and structural engineers (GEA, 2009). Geothermal energy is expected to bring additional jobs in the future. In 2009, more than 5,000 MW of geothermal projects were under development. If a fifth of these projects (1,000 MW) come on line during the next few years, a very conservative estimate, then 6400 person58

year (p * y) manufacturing and construction jobs and 740 power plant operation and maintenance (O&M) jobs will be created. If these 1,000 MW last 30 years, then 28,600 p*y jobs are generated by new production. Compared to other renewable energy sources, geothermal generates almost 5 times more permanent jobs per 500 MW of capacity than Solar and Wind energy (Table 18). Compared to natural gas, geothermal generates close to 11 times more employees to produce electricity (GEA, 2009). Table 18: Jobs Created by Resource Type

Power Source

Wind Solar Electric Solar Thermal Geothermal

Construction Employments (jobs/MW) 2.6 7.1 5.7 4.0

O&M Employment (jobs/MW)

Factor Increase over Natural Gas

0.3 0.1 0.2 1.7

2.3 2.2 2.5 10.9

Source: GEA, 2009.

For every dollar spent on geothermal energy, $2.50 is invested back into the U.S. economy (GEA, 2009; Meyer, 2008). This increase in output and revenue affects mostly rural areas where there is usually high rate of unemployment and significant number of minority populations (GEA, 2009). A 50 MW Geothermal power plant generates the following impact (in 2006 US$): Table 19: Sample Economic Benefits at 50MW Geothermal Power Plant (2006 US$)

Employment (direct, indirect, and induced) Economic Output (over 30 years, nominal) Contribution to the Federal Royalties Government Contribution to the State Contribution to the County

212 fulltime jobs/800 person‐years (p‐*y) $749 million $5.46 million $10.9 million $5.46 million

Source: Kagel, 2006.

A study by GEA, published in the Electricity Journal, found that the emissions savings from using geothermal energy instead of coal, considering carbon dioxide, sulfur dioxides, nitrogen oxides, and particular matter is $225.4 million annually. Additionally, if environmental costs were included, such as potential hazardous air emissions, land degradation, health impacts, and the extinction and destruction of animal and plants, then power generation costs would increase 17% for natural gas and 25% for coal (Kagel, 2006). In Texas, geothermal energy initially provided a small amount of revenue recently. The amount was $55,645 in fees paid for energy leases on 11,000 coastal acres of state lands in February, 2007. Ten percent of any revenue from energy generated in this land will go to the Texas’ Permanent School Fund (Combs, 2008e). Consequently, in 2009 the General Land Office leased three areas for geothermal development and that will result in $386,000 in annual revenue for the state’s Permanent School Fund, even without any energy production (TGLO, 2010).

Currently, geothermal energy plays a very small role in Texas’ economy. Yet, that could change with additional technical improvements and if the current proposed projects move forward. Jobs and Income Utilizing the National Renewable Energy Laboratory’s JEDI (Jobs & Economic Development Impact) Models we are able to estimate the potential impact of a wind and solar facilities. While all sections of the State are in a position to benefit from some level of renewable energy manufacturing and/or production, South and West Texas are in particularly good position to take advantage of future growth. The potential impacts of two similar sized projects of 100 MW, one being wind and the other, a centralized solar power trough plant is: Jobs during construction 10 Jobs during operation Earnings during construction (millions) 11 Annual earnings during operations (millions)

Solar 2,249 112 $145 $6

Wind 496 23 $19 $1

Now, if Texas were to double the amount of installed capacity generated from wind it could potentially create 466,736 jobs during the construction phases, 2,164 permanent jobs during the operation phase, $1.7 billion in earnings during the construction phase, and $94 million annually during operations. The per MW impact from solar facilities is even greater.

VI.

Conclusion

Energy is very important in Texas. In 2006 the oil and gas industry alone accounted for 14.9% of the Gross State Product. The State produces more energy than any other state, 11.3 trillion Btu (2007) and consumes more than any other state per year, 11.8 trillion Btu (2007). A result of that dominance is that the State is also the largest emitter of CO2 from electric power production, 252 million metric tons in 2008. At the same time that Texas leads the country in traditional energy production and consumption, there is also tremendous opportunity in development of renewable energy. The expansiveness of the State drives the opportunity in the renewable energy sector. A recent study by the National Renewable Energy Laboratory ranks Texas number one with regards to wind energy potential generation at 6.5 million GWh. The state also has 250 “quads” of solar energy accessible every year, more than enough to meet the demands of every citizen in the State. Renewable energy sources are not just limited to the wind and solar. Texas also has great potential in other sources as well such as geothermal, biomass, and biofuels from algae and other sources. Texas already has a strong presence in renewable energy: 10

• • •

72% of total biomass energy was used by the industrial sector, compared to the national average of 55% (Combs, 2008a). By the end of 2009, Texas had installed 9,410 MW of wind energy capacity, leading the country. Wind-related manufacturing is growing in Texas. Companies based in Texas now produce different parts for wind turbines, like blades, towers, and nacelles.

However, it is the potential of the renewable energy industry in Texas, from manufacturing to production, which can have a significant impact: • Biomass and Bio-energy o Algae production for use in bio-fuel is extremely promising. Algae require three ingredients to grow: carbon dioxide, high solar radiation, and brackish water or water high in salt concentration. In Texas, the best areas for algae production are West Texas and the Gulf Coast. A perfect situation would be to match petrochemical facilities and power plants in the Gulf of Mexico and algae production, so CO2 could be captured to produce biofuels/bioproducts (Combs, 2008a) • Geothermal o In five to ten years, Texas could have 2,000 to 10,000 MW of geothermal energy capacity provided through oil and gas wells. o In April 2009, the Land Office awarded three geothermal energy leases off the Texas coast to Geo Texas Co., which will be generating geothermal energy on 128,758 acres of state underwater land off the coasts of Brazoria, Galveston, and Matagorda counties. • Solar o One study estimates that Texas could capture around 13% of all new jobs and investments concerned with solar PV technologies by 2015 (Combs, 2008b, 2008c). o West Texas has enough resources to produce up to 351 million MWh of electricity and 75% more direct solar radiation than East Texas. • Wind o 17,000 MW of installed capacity could generate 1,700 full time jobs. o Texas is one of the regions in the country with the lowest cost due to higher performance and lower development and installation costs (Combs, 2008d, 2008c). Lower costs lead to lower prices, which makes this energy source more attractive. While all sections of the State are in a position to benefit from some level of renewable energy manufacturing and/or production, South and West Texas are in particularly good position to take advantage of future growth. The potential impacts of two similar sized projects of 100 MW, one being wind and the other, a centralized solar power trough plant is: 61

Jobs during construction Jobs during operation Earnings during construction (millions) 13 Annual earnings during operations (millions)

Solar 2,249 112 $145 $6

Wind 496 23 $19 $1

If Texas were to double the amount of installed capacity generated from wind it could potentially create 466,736 jobs during the construction phases, 2,164 permanent jobs during the operation phase, $1.7 billion in earnings during the construction phase, and $94 million annually during operations. The impact from solar facilities is even greater. There are still a few issues that will impact the future of the renewable energy industry in Texas. The economics of construction and operations is still challenging. Development of renewable energy sources has, over time, been supported by various incentives and standards at the federal and State level. The major incentive for construction and production of renewable energy is the federal production tax credit (PTC) set in 1992 at $0.015/kWh. Since then, it has been renewed and expanded several times, most recently in 2009, and is currently set at $0.02/kWh. The Texas Renewable Portfolio Standard (RPS) is also a major engine for the development of renewable energy. Additionally, transmission lines from rural parts of the State where the energy is produced to where it is consumed are critical.

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