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SOUTHERN

L E G I S L AT I V E
CONFERENCE

Copyright May 2017 by Anne Roberts Brody, Policy Analyst

I cant change the direction of the wind, but I can adjust to states, while adding to the diversification of a states
my sails to always reach my destination. Jimmy Dean energy portfolio.

T
he nations energy sector is undergoing substan- This SLC Special Series Report, the first in a series exploring
tial changes, as political and economic factors the myriad impacts of wind energy expansion on SLC states,
converge to encourage diversification in gen- examines the benefits of wind energy in the Southern region.
eration. Aided by state and federal tax credits, Forthcoming reports present case studies from three SLC
renewable energy generation technologies are experienc- states, examine SLC states capacity for wind energy genera-
ing unprecedented growth as production costs decline and tion and utilization, analyze state incentives, and explore
implementation increases. the challenges of wind energy generation in the region.

As the renewable energy sector continues to grow, concerns Overview


that such expansions could lead to widespread job losses in The wind industry had a banner year in 2016, with thousands
traditional energy sectors, such as coal, have proliferated. of new turbines installed across the country, supporting
Southern states are rich in traditional energy resources; a growing number of jobs. The United States had 82,183
thus, many state economies have long depended on these megawatts (MW) of installed wind capacity by the end of
resources. Because of the importance of these industries 2016, surpassing hydropower for the first time.1 Nationally,
to the region, both in terms of economic development installed wind energy capacity grew by 8,203 MW over
and employment opportunities, legislators often are faced the previous year and now generates about 5.5 percent
with balancing business interests with the need for envi- of the countrys electricity, enough to power 24 million
ronmental protection and conservation. Renewable energy homes.2 Although coal and natural gas currently account for
production often is viewed as a competitor of fossil fuels. approximately 66 percent of the countrys electric genera-
However, renewable energy sources such as wind can pro- tion, the U.S. Department of Energy (DOE) estimates that, by
vide tremendous economic and environmental benefits 2030, wind will provide one-fifth of the nations electricity.

Southern Legislative Conference and SLC are trademarks registered in the U.S. Patent and Trademark Office.
The many benefits of wind energy include long-term
cost competitiveness, economic development, support Glossary
for rural, agrarian communities and reductions in Hub height: Thehub heightis the distance from the turbine
energy-related water use. The growth in the nations platform to the rotor of an installed wind turbine and indicates
wind industry has had ripple effects across the Ameri- how high a turbine stands above the ground.
can economy. The DOE estimates that 101,738 workers
were employed at wind farms in the United States Nacelle: a covering that houses all generating components of
in 2016, representing an employment increase of 32 a wind turbine, including the gearbox, low- and high-speed
percent, up from approximately 77,000 in 2015. Addi- shafts, generator, controller, and brake.
tionally, technological advancement, coupled with the Rotor: a wind turbine component that, with the help of
falling cost of natural gas, have yielded cost-competitive the rotor blades, converts the energy of wind into rotating
deployment in optimal locations, making utility-scale mechanical movement.
wind power a cost-effective source of low-emissions
power generation. Finally, the overwhelming major- Utility-scale: wind energy projects capable of generation
ity of wind farms in the United States operate in rural greater than 1 megawatt.
areas where landowners and local communities reap Wind farm: a group of wind turbines in the same location
financial benefits. used to produce electricity.
Cost Competitiveness
Through the aforementioned innovations in technology increases rapidly in proportion to its height.4 This creates
and historically low natural gas prices, wind power gen- a trade-off between tower cost and the value of added
eration has become an economically compelling means of energy production, further emphasizing the importance
energy production. This shift is evidenced by the grow- of strategic site selection. However, wind turbine prices
ing demand for wind energy from major corporations. have fallen between 20 percent and 40 percent since
In recent years, companies such as Facebook, Amazon 2008, when prices peaked. The 2014 Wind Technologies
Web Services, Procter & Gamble, General Motors and Market Report by DOE found that wind projects built in
Walmart have signed contracts to purchase increasing 2014 had an average installed cost of $1,710/kW, down
amounts of wind energy. This trend suggests that wind almost $600/kW from a peak in 2009 to 2010.5
power no longer is a mere signifier of the private sectors
commitment to sustainability. Rather, these corporations Recent technological improvements have played an
increasingly are investing in wind power because it is important role in the declining cost of wind generation.
fiscally prudent. A 2015 report by the DOE found that through continued
innovation in technology, the deployment of incremental
Due to low natural gas prices, unprecedented fuel switch- wind power in the United States is both feasible and eco-
ing from coal to natural gas has been occurring in the nomically viable.6 Since 1998, hub heights have increased
energy sector. Gas-fired generation is more flexible than by approximately 50 percent, to an average of 82.7 meters
coal-fired generation, facilitating the integration of vari- (271.3 feet) for new turbine installations.7 Over the same
able renewable generation sources, such as wind. This, period of time, rotor diameters have increased more
in turn, drives down the cost of integrating these alter- than 100 percent, with some on newly installed tur-
native energy resources, further encouraging increased bines averaging approximately 99.4 meters (326.1 feet)
implementation. in 2014.8 These advancements increase the amount of
electricity a turbine can generate, allowing a turbine to
Wind is a free but variable resource. The annual energy capture wind at higher speeds. Meanwhile, larger rotors
production of a turbine is highly dependent on wind enable greater energy generation at lower wind speeds.
resource characteristics at a given site and the technical This trend toward heightened efficiency is projected to
specifications of the turbine itself.3 The cost of a turbine continue increasing benefits and lower costs.9

2 BLOWN AWAY: WIND ENERGY IN SOUTHERN STATES (PART 1)


simulate stability.12 Conversely, because wind PPAs can
Wind-Related Jobs by State in 2016
provide predictable pricing for up to 20 or 25 years,
State Wind-related jobs they become an attractive option for industrial buyers,
Alabama 1,077 for whom electricity ranks among the top operational
Arkansas 825 expenses. In selecting wind PPAs, companies can guar-
antee long-term, stable energy costs, removing one of
Florida 3,584
the many variables in operational expenses.
Georgia 483
Kentucky Not Available Economic Development
Louisiana 132 The implementation of wind power stimulates eco-
Mississippi 103 nomic development and contributes to the creation
of jobs related to development, siting, manufacturing,
Missouri 1,035
transportation and other industries. In fact, wind gen-
North Carolina 594 eration accounts for the third largest share of electric
Oklahoma 1,789 power generation employment.13A 2015 report by the
South Carolina 1,415 DOE found that the nations wind industry supported
an average of 73,000 total jobs between 2010 and 2014,
Tennessee 142
and an estimated 560 domestic manufacturing facili-
Texas 24,374 ties operating in 43 states.14 In 2016, that number grew
Virginia 1,260 to 101,738 workers nationwide.15 Of that, an estimated
West Virginia 460 50,000 jobs were supported by onsite and direct supply
Source: 2017 U.S. Energy and Jobs Report State Charts, chain investments. According to the American Wind
U.S. Department of Energy. Energy Association, an industry trade group, in 2016,
the nations wind energy supply chain included eight
Lower turbine prices and installation costs, along with utility-scale blade facilities, nine tower facilities and four
enhanced turbine productivity, have led to competitive turbine nacelle manufacturing facilities spread across
wind power pricing.10 In turn, this competitive pric- 14 states. Furthermore, approximately 95 percent of the
ing has stimulated demand for wind energy, both from wind power capacity installed in 2016 used a turbine
traditional electric utilities and non-utility purchasers manufacturer with at least one domestic manufacturing
such as corporations, municipalities and universities. facility, many of these in SLC member states.

Wind energys hedge value also has made it increas- To meet the growing demand for wind power installa-
ingly cost-competitive. On average, and in real dollar tions, manufacturers have increased production, creating
terms, buyers of wind energy, through power purchase new jobs and strengthening the domestic manufacturing
agreements (PPAs), will pay no more per megawatt hour base. As of 2014, the South was home to approximately
20 or 25 years from now than they do today, whereas 227 companies and 300 facilities involved in the full
it can be difficult to lock in low fossil fuel prices over value chain of the wind energy industry.16 Opportunities
long periods of time.11 for job creation extend beyond manufacturing and can
include operations and logistics, data analysis, commu-
Although fossil fuel prices, particularly natural gas, nications and safety and technical workforce training.
remain low, by adding wind power to existing port-
folios, buyers can effectively minimize the long-term The deployment of wind power also can stimulate
risk of increasing fossil fuel prices. Though currently indirect job creation and economic development. As an
low, natural gas prices are historically volatile. For this example, the town of Pryor, Oklahoma, has experienced
reason, the resource rarely is sold on a long-term, fixed- these benefits first-hand. In 2012, Google announced a
price basis. Instead, it frequently is sold with variable second data center at Pryors MidAmerica Industrial
pricing, and utilities must hedge fuel prices in order to Park.17 Mr. Andrew Silvestri, head of public policy and

BLOWN AWAY: WIND ENERGY IN SOUTHERN STATES (PART 1) 3


Active Wind-Related Manufacturing Facilities and
Installed Wind Power Capacity by State at End of 2016

Source: U.S. Wind Industry 2016 Annual Market Update, American Wind Energy Association.

external affairs for Google in Oklahoma, said the com- the turbine on the landowners property. Farmers and
pany built its Pryor data center in part because of the ranchers can tap into this market by leasing land to wind
availability of wind energy.18 This data center represents developers. Large wind turbines typically use between
a $2 billion investment in the community, including half an acre and two acres of land, including access roads,
more than $1.5 million in science and technology grants; allowing farmers to continue planting crops and graze
free public Wi-Fi; workforce development grants; and livestock up to the base of the turbines.20 Payments for
technology resources for nonprofits. Google employs land leases typically range from $2,000 to $5,000 per
approximately 400 people at this facility, 70 percent of turbine, per year. For some, this can mean the difference
whom are hired from the local area.19 This strategic deci- between keeping or losing the family farm.
sion, fueled in part by access to affordable wind energy,
has been a tremendous boon to the local economy. The American Wind Energy Association estimates that,
in 2016, domestic wind farm companies paid approxi-
Support for Rural Communities mately $245 million to farming families and other
For rural communities with strong and consistent wind rural landowners.21 In 2015, more than $156 million
resources, wind power can provide a vital economic was paid to landowners in counties with below aver-
boost. This is particularly true for rural, agricultural age incomes.22 Collectively, landowners in seven states,
communities. Though wind developers own the turbine including the SLC member states Texas and Oklahoma,
itself, they rarely own the land on which it is located. currently receive an excess of $10 million in annual
Instead, they often enter into long-term leases to site lease payments.23

4 BLOWN AWAY: WIND ENERGY IN SOUTHERN STATES (PART 1)


U.S. Wind Energy Industry Employment at End of 2016

Source: U.S. Wind Industry 2016 Annual Market Update, American Wind Energy Association.

The structure of land-lease agreements can take several by comparing their experiences to landowners in
forms, including a fixed annual payment; one-time, up- non-wind farm communities. While this survey was
front payment; revenue sharing; or some combination conducted outside the Southern region, the results
of the three. Revenue sharing can offer the highest rate nevertheless provide relevant insight. When com-
of compensation, but also the highest risk, particularly pared to neighbors who did not host wind farms or
if a project is unsuccessful. Fixed annual payments often turbines, the survey found that those community
are lower than revenue sharing agreements, offer less members with turbines on their property invested
risk to landowners and a more predictable source of twice as much capital in their farms; purchased more
income. A one-time, up-front payment also may be farmland over a five-year period; were more likely
attractive, but this option can complicate the terms to believe their land would be farmed in the future;
of sale if the property is sold during an active lease and reported it was neither easier nor more difficult
agreement. When considering a land-lease agreement, to farm around turbines.24
property owners may choose to consult with legal
counsel. Further, farmers and ranchers should consider Beyond the benefits to landowners, wind farms also
the terms of the lease in relation to the potential impact contribute to rural communities through tax revenues.
on farm operations. In most states, taxes assessed on energy production
equipment are collected by local, rather than state,
In 2014, a University of Michigan survey of farmers governments. These funds may then be utilized to
in the state sought to understand the impact of wind improve public services or to reduce the local property
turbines on landowners in wind farm communities tax burden on all landowners. In a recent study, the

BLOWN AWAY: WIND ENERGY IN SOUTHERN STATES (PART 1) 5


Oklahoma Chamber of Commerce found that owners
of existing and planned wind farms will pay an aggre- Conclusion
gate of $948.5 million in ad valorem taxes through Wind has become an increasingly compelling means of
2043.25 A 2012 study by the University of Nebraska energy generation, given its stimulation of job creation,
quantified the empirical impacts in counties host- support of rural communities, and ability to reduce
ing wind power projects that were installed between the power sector's water consumption and greenhouse
2000 and 2008. This study found an average increase gas emissions. These are compelling variables for state
in county-level per capita income of $11,000/MW of and local governments, along with the private sector,
installed capacity and an average increase in county- in the calculus for preparing a 21st century workforce;
level employment of approximately 0.5 jobs/MW.26 budgeting for potential cost-savings in utility rates; and
In this way, wind energy production may boost the off-setting expenditures in other areas due to the far-
economic prosperity of both rural communities and reaching impact that the development of wind resources
farming families. can have on communities and the environment.

Environmental Benefits As technological advancements drive down the cost of


Perhaps the most widely cited benefits of wind energy wind energy generation, this renewable resource likely
are environmental. When combined with other forms will become an increasingly advantageous driver of fis-
of electric generation, wind energy reduces energy sector cal decisions, allowing companies to lock in long-term,
water consumption, greenhouse gas emissions, sulfur stable energy pricing. Wind energy can support reduc-
dioxide and nitrogen oxide emissions. tions of water consumption and harmful emissions.
In addition, as states, utilities and companies seek to
The reduction in water use can be particularly impor- diversify their generation portfolios, wind energy will
tant for rural and farming communities that depend play an increasingly important role.
on significant use of freshwater to raise livestock or
grow crops. Unlike fossil fuel power plants, wind energy The deployment of wind power also stimulates eco-
production does not require water for cooling. The nomic development and contributes to the creation
American Wind Energy Association estimates that, in of jobs related to development, siting, manufacturing,
2016, wind energy helped avoid the consumption of transportation, construction, transmission and other
approximately 87 billion gallons of water.27 As water industrieseven in states that do not have optimal wind
resources become increasingly scarce, this characteristic resources. Further, the availability of low-cost wind
becomes progressively beneficial. energy, whether on-site or through PPAs, can attract
companies to rural communities, spurring indirect job
Like other renewable resources, wind energy is a clean creation. In states with strong wind resources, individual
source of fuel. The DOE estimates that wind energy landowners may benefit from land-lease agreements that
may reduce cumulative greenhouse gas emissions by can provide additional income and promote investments
14 percent, translating to a savings of $400 billion in in family farms, ranches and other facilities.
avoided global damage by 2050.28 Further, a 2015 study
by the DOE found that, in 2013, wind energy contributed While this SLC Special Series Report reviewed the many
to emissions reductions in greenhouse gasses (115 billion benefits of wind energy, subsequent reports will exam-
metric tons), sulfur dioxide (157,000 metric tons) and ine SLC states capacity for wind energy generation and
nitrogen oxide (97,000 metric tons).29 Continued integra- utilization, analyze state incentives, and explore the
tion of wind power, as part of a diverse energy portfolio, challenges of wind energy generation in the region. Part
can encourage further reductions, resulting in cleaner II of this Special Series Report will study the impact of
air and reduced water consumption. wind energy generation in Texas, Oklahoma and Vir-
ginia, specifically the installed capacity, transmission,
economic impact and available state incentives.

6 BLOWN AWAY: WIND ENERGY IN SOUTHERN STATES (PART 1)


Endnotes
1) Monies, Paul. Oklahoma Moves up to Third Place in State Rankings for Wind Power. NewsOK.com. February 10, 2017.
http://newsok.com/article/5537538 (accessed February 13, 2017).
2) Ibid.
3) Zayas, Jose et al. Enabling Wind Power Nationwide (U.S. Department of Energy. May 18, 2015).
https://www.energy.gov/sites/prod/files/2015/05/f22/Enabling%20Wind%20Power%20Nationwide_18MAY2015_FINAL.pdf.
4) Ibid.
5) Wiser, Ryan, and Mark Bolinger. 2014 Wind Technologies Market Report (U.S. Department of Energy. August 2015).
https://www.energy.gov/sites/prod/files/2015/08/f25/2014-Wind-Technologies-Market-Report-8.7.pdf.
6) Wind Vision: A New Era for Wind Power in the United States (U.S. Department of Energy. March 12, 2015).
7) Mooney, Chris. The U.S. Wind Energy Boom Couldnt Be Coming at a Better Time. Washington Post. August 10, 2015.
https://www.washingtonpost.com/news/energy-environment/wp/2015/08/10/the-boom-in-wind-energy-couldnt-be-coming-at-a-
better-time/ (accessed January 19, 2017).
8) Ibid.
9) Wind Vision: A New Era for Wind Power in the United States.
10) Wiser, Ryan, and Mark Bolinger. 2014 Wind Technologies Market Report.
11) Bolinger, Mark. Revisiting the Long-Term Hedge Value of Wind Power in an Era of Low Natural Gas Prices. 2013.
12) Ibid.
13) U.S. Energy and Employment Report (United States Department of Energy. January 2017).
14) Zayas, Jose et al. Enabling Wind Power Nationwide.
15) U.S. Energy and Employment Report.
16) Southeast Wind Energy Fact Sheet. (The Southeastern Wind Coalition. December 2014).
http://www.sewind.org/images/fact_sheets/SEWC%20SE%20Regional%20Wind%20Energy%20Fact%20Sheet%20-%20Dec%202014.pdf.
17) Google Growing Its Oklahoma Data Center - Article Photos - Photo Gallery. NewsOK.
http://newsok.com/article/5519404 (accessed February 9, 2017).
18) Ellis, Randy, and Paul Monies. Tax Incentives for Oklahoma Wind Farms Are Getting Scrutiny. NewsOK. April 24, 2016.
http://newsok.com/article/5493853 (accessed January 23, 2017).
19) Google Growing Its Oklahoma Data Center - Article Photos - Photo Gallery.
20) Farming the Wind: Wind Power and Agriculture. Union of Concerned Scientists. http://www.ucsusa.org/clean_energy/
smart-energy-solutions/increase-renewables/farming-the-wind-wind-power.html (accessed February 9, 2017).
21) U.S. Wind Industry 2016 Annual Market Update. American Wind Energy Association. April 13, 2017.
22) U.S. Wind Industry 2015 Annual Market Update. American Wind Energy Association. April 12, 2016.
23) U.S. Wind Industry 2016 Annual Market Update. AWEA.
24) Mills, Sarah. Farming the Wind: The Impact of Wind Energy on Farming (University of Michigan Gerald R. Ford
School of Public Policy. n.d.). http://closup.umich.edu/files/farming-the-wind-012115.pdf.
25) Ellis, Randy, and Paul Monies. Tax Incentives for Oklahoma s Are Getting Scrutiny.
26) Brown, J.P; Pender, J.; Wiser, R.; Lantz, E.; and B. Hoen. Ex Post Analysis of Economic Impacts from Wind Power
Development in U.S. Counties. Energy Economics (34:6), 2012; pp. 17431754. Accessed February 10, 2017:
http://digitalcommons.unl.edu/usdaarsfacpub/1144/.
27) U.S. Wind Industry 2016 Annual Market Update. American Wind Energy Association. April 13, 2017.
28) Wind Vision: A New Era for Wind Power in the United States.
29) Zayas, Jose et al. Enabling Wind Power Nationwide.

BLOWN AWAY: WIND ENERGY IN SOUTHERN STATES (PART 1) 7


REGIONAL VIEW NATIONAL REACH

T
his report was prepared by Anne Roberts Brody, support state policymakers and legislative staff in their
policy analyst and committee liaison of the work to build a stronger region.
Energy & Environment Committee of the
Southern Legislative Conference (SLC), chaired Established in 1947, the SLC is a member-driven organization
by Representative Lynn Smith of Georgia. This report and the largest of four regional conferences of CSG,
reflects the body of policy research made available to comprising the states of Alabama, Arkansas, Florida,
appointed and elected officials by the Southern Office of Georgia, Kentucky, Louisiana, Mississippi, Missouri,
The Council of State Governments (CSG). North Carolina, Oklahoma, South Carolina, Tennessee,
Texas, Virginia and West Virginia. The Annual Meet-
Opened in 1959, the Southern Office of CSG fosters inter- ing of the Southern Legislative Conference, convened as
governmental cooperation among its 15 member states, the focal point and apex of its activities, is the premier
predominantly through the programs and services provided public policy forum for Southern state legislators and
by its Southern Legislative Conference. Legislative leader- the largest regional gathering of legislative members and
ship, members and staff utilize the SLC to identify and staff. The Annual Meeting and a broad array of similarly
analyze government policy solutions for the most prevalent well-established and successful SLC programsfocusing
and unique issues facing Southern states. Meanwhile, SLC on both existing and emerging state government chal-
member outreach in state capitols and coordination of lengesprovide policymakers diverse opportunities to
domestic and international delegations, leadership develop- ask questions of policy experts and share their knowledge
ment and staff exchange programs, meetings, and fly-ins with colleagues.