Economic Development

Can Green Technology Propel Economic Development?

Traveling east along U.S. Highway 12 from Helena, Mont., it's entirely possible to drive for an hour or more without seeing another human. Windswept plains...
by | March 1, 2010

Traveling east along U.S. Highway 12 from Helena, Mont., it's entirely possible to drive for an hour or more without seeing another human. Windswept plains dotted by curiously named hamlets wait for signs of life to come careening down the mostly empty road.

Past Townsend, a small burg on the southern tip of Canyon Ferry Lake, the deer on the highway far outnumber vehicles; and when dusk settles in, they prove much more dangerous. But the farther east you travel, the more you notice one particular man-made structure - electric transmission towers. Specifically cross-like high-voltage direct current towers, which stand in stark contrast to the empty land that spreads in every direction.

The towers eventually terminate in an area known as Judith Gap, notable for its name and not much else. That is, until recently, when from the waving grasses and grazing cattle rose 90 masts looming hundreds of feet in the air. But here there are no sails whipping, no ropes cracking; rather atop these mammoth masts sit wind turbines, each with three enormous blades that turn gently in Big Sky country.

The wind farm at Judith Gap is one of many that have taken root in the vast expanse of central-eastern Montana. And the seeds are being sown for many more. Montana is part of a "wind belt" that envelopes Wyoming, Colorado, New Mexico and northern Texas. These states are in the midst of a wind rush that has driven Montana Gov. Brian Schweitzer and other governors to open their arms and offer incentives to businesses looking to harness the wind, in turn creating jobs and delivering a new kind of green to feed the economy.

In Montana, the abundance of both wind and state incentives have drawn investment from renewable energy companies like Chicago-based Invenergy and Spanish firm NaturEner. These and other companies say they find the state an ideal place to do business.

"What we find in Montana is a very open environment for development, both socially and politically," says Bill Alexander, chief development officer for NaturEner. "That's typical of a new market, an emerging market. But we found the legislative body in Montana has been very interested in helping to continue the incentives for development."

In 2007, Montana passed HB 3, "Clean and Green" legislation aimed at attracting renewable energy businesses to the state. The bill created new tax classifications and new, lower property tax rates for renewable energy firms operating in Montana. There are also grants available for renewable energy research, and loan and bond programs. In all, companies will find more than 30 additional state programs for renewable energy. For example, companies generating wind power would likely qualify for at least seven state tax incentives - not to mention a host of federal renewable energy programs.

"Montana has, according to recent studies, the second-best wind energy resources in the country, some of the best on the planet," says Schweitzer. "We have many energy resources that can be cleaner and greener. We're excited about developing our wind."

Schweitzer is among an emerging group of state leaders who are staking at least a piece of their futures on green technology. With states across the nation looking to kick-start their economic engines, green technology increasingly is viewed as, if not the engine, at least a piston helping drive it.

That's the case in Colorado, where Gov. Bill Ritter ordered his Energy Office, Economic Development Office and state CIO to collaborate on ways to nurture green technology start-ups and create demand among consumers for emerging - and typically more expensive - green products.

Colorado is testing a new Discovery Grant Program designed to help early stage companies, which are often simply groups of researchers attempting to take an idea out of the lab and into the commercial market.

"At that point, there's not a lot of available seed capital. So to give them some small grants at the very beginning really shows great support from the state," says Matt Cheroutes, director of communications and external affairs for the Colorado Governor's Office of Economic Development and International Trade.

Cheroutes, a founding member of the Colorado Cleantech Industry Association, says strong executive support for green technology in Colorado will lead to job growth and economic prosperity. But that won't happen, he says, unless companies can deliver their products to a public that can afford them - a tall order in green tech markets that are often too immature to deliver at affordable economies of scale.

Cheroutes says the state works closely with renewable energy firms to develop incentives for consumers. Take solar power, for example, where the cost of installing solar panels typically doesn't pencil out for the average homeowner.

"We've had a lot of people in our state say they want solar on their homes," Cheroutes says. "But they simply can't afford the initial investment to do it. We've seen estimates anywhere from $8,000 for a very small home to $15,000 for a medium-sized home. These days, not a lot of people have the ability to pay that."

The state worked with two Colorado solar firms - SolarCity and SunRun - to develop a financing model that makes solar installations more affordable. Instead of paying the full installation fee upfront, consumers instead put up a down payment that is a fraction of the total cost. Over the next three or four years, the energy savings the consumer realizes goes back to the solar company to pay the remaining balance. After the company is paid in full, the consumer's energy bill decreases significantly.

The Obama administration expects green technology companies to become important players in the nation's economy. The U.S. Department of Energy (DOE) estimates that the wind industry alone will support a half million jobs in the nation by 2030. In the western United States, this activity also would boost annual property tax revenues by more than $1.5 billion and increase payments to rural landowners to more than $600 million over the same time period, according to the DOE's 20% Wind by 2030 report.

The report explores the challenges and implications of generating one-fifth of the nation's electricity needs through wind power. Under that scenario, Montana stands to benefit handsomely from embracing wind power. Given the current and planned wind power capacity for the state, if 20 percent of the nation is in fact using wind power by 2030, Montana could expect 2,875 long-term new jobs, 16,888 short-term jobs, a $78.2 million increase in property tax revenue, and a $230 million annual economic boost over the long term. In addition, data indicates a two-year wind farm construction phase could generate a $900 million short-term economic boost.

But not everyone buys into the rosy predictions. Numerous industry analysts, economists and academics say the green technology sector is too small to drive economic recovery, or that the amount of government subsidies needed to make it successful would effectively cancel out any benefits. Observers also claim wind-power numbers, such as those in the DOE report, are wildly optimistic or simply made up.

"Green jobs estimates include huge numbers of clerical, bureaucratic and administrative positions that do not produce goods and services for consumption," according to the authors of Green Jobs Myths, a March 2009 University of Illinois Law and Economics research paper. Written by a group of business and economics professors, the paper also contends that, "Government interference - such as restricting successful technologies in favor of speculative technologies favored by special interests - will generate stagnation."

One of the authors, Roger Meiners, a professor of economics at the University of Texas at Arlington, went into further detail on the VoiceAmerica Talk Radio Network's Free Market program. "The numbers thrown around about the number of jobs that will be created by these alternative energy programs, primarily wind turbines and solar sources of energy, just range all over the place," he says. "One group will say a million jobs, another will say 3 million, and I think they're really just pulling them out of the air, because when you look for where they come up with these numbers, there's nothing there; they just simply make the assertion that this many jobs will be created."

Green technology may indeed create jobs, but it's worth questioning how much money will be spent upfront to create them, Meiners adds.

"If the administration pours tens of billions of dollars into this program as is built into the budget, then obviously there are going to be a lot of people put to work helping to build wind farms, a smart energy grid, expanded solar grids and so on. It could well be in the hundreds of thousands [of jobs created]. The question is, what's the cost, what's the benefit?"

Still, one California group says its research shows that green jobs are growing while the state's economy suffers. Next 10, a nonprofit focused on building the green economy, found significant expansion of California's green economy in a report released in December 2009. From 1995 to 2008, the Sacramento area saw green tech jobs grow by 87 percent, followed by the San Diego region (57 percent), the Bay Area (51 percent), and Orange County and Inland Empire (50 percent).

"Data shows that green-sector businesses are taking root across every region of California, generating jobs across a wide spectrum of skill levels and earnings potential," says F. Noel Perry, founder of Next 10, following the release of the data. "While green jobs clearly cannot solve the state's current unemployment challenges, over time these jobs could become a growing portion of total jobs in California."

Others add that government agencies can nurture green job growth by being early customers for green technology products.

"Government is a big buyer of products and services," says Gary Simon, co-chair of the Sacramento Area Regional Technology Alliance's CleanTech program. "If one pays attention to buying the cleaner, greener products over the standard, that's what we're trying to show is available. Really you're not paying that much more to be clean, green and sustainable. And if you look at the economics over time, it's actually cheaper to be green and sustainable."

But with the green technology industry still largely in its infancy, it can be difficult to know where to look for, say, a thin-film solar vendor. It wouldn't be surprising to find the staff of a green startup focused on simply trying to keep the lights on, to say nothing of navigating the treacherous waters of government procurement. But Simon says the companies are out there and that it may be on government to find them.

"[State and local governments] simply have to look a little bit harder. For everything they buy and use now, there's going to be a clean, green, sustainable alternative," he says. "Finding where those companies are now is a bit of a hunt because it's a small part of the overall economy in the U.S. But they are there."

In Montana, Schweitzer follows what could be described as a "Field of Dreams" approach to developing the state's green economy. In other words, build wind farms and companies that provide supporting technologies-and jobs-will come.

So far, Montana's clean energy incentives appear to be working. NaturEner is spending billions to construct wind farms in the state. Last October, the company opened the state's largest wind farm, a 210-megawatt facility in Glacier County. It's also in planning stages to open a second, even larger 309-megawatt facility a few miles north of the Glacier farm. These wind farms have already created hundreds of temporary and full-time jobs.

NaturEner's wind farms dwarf even the massive Judith Gap wind farm built by Invenergy. That 135-megawatt facility began operation in 2005 and features more than 90 wind turbines. It also generated hundreds of construction jobs and about a dozen full-time jobs, filled primarily by residents of the nearby and remote town of Harlowton.

"We took advantage of [an incentive] for new and emerging businesses for our first two wind projects there in Toole County," says NaturEner's Alexander, adding that the incentive is why the company is pursuing development of a third wind farm in the state. "The Rim Rock project is a 309-megawatt project that should go to construction sometime this winter. It will have 206 turbines. The one we just finished was 140 turbines, so this one will be 50 percent larger than that."

Schweitzer hopes this activity will spur technical breakthroughs that make clean power generation more practical. For instance, better storage technology would reduce the need for expensive transmission lines, a key concern for wind power and other renewable energy sources that generate electricity far from population centers.

"We actually have an unlimited supply of energy, whether it be tidal or wind or solar," Schweitzer says. "The most important technology of our time, and for the next decade, will be storage technology. If we could build a transmission system that had storage on the other end, so the consumer who had that battery in their car could be buying electricity or selling it back into the grid, we would need less transmission."

These obstacles are exactly what Schweitzer is counting on to drive economic progress in Montana, as innovative companies spring up in the state to tackle such issues. If these plans seem overly optimistic, consider the fact that San Diego Gas & Electric, a Southern California utility serving more than 1 million people, is currently a customer of the Glacier Wind Farm. California has also set a goal for 33 percent of the state's energy to come from renewable sources by 2020. That's an enormous business opportunity for Montana, even using traditional transmission lines. If investment in transmission technology results in significantly improved capacity and efficiency, or if a next-generation storage technology is developed, the level of economic opportunity in Montana becomes so sizable as to be difficult to fathom.

To be effective, however, green incentives must be carefully designed to avoid unintended roadblocks. Many businesses, having been promised grants or other financial perks, have opened shop only to discover the crippling disincentives of bureaucracy.

"If I were governor, I would have a full analysis done of the state's incentive programs, as well as certification programs, and look for those things which do serve to support investment in infrastructure, but also identify those things that work against it, like zoning laws," says K.C. Healy, director of Deloitte's Energy & Resources practice. "There are various sorts of structural things governments can do to where they incent one side but then they make it extremely difficult to carry it out on the ground."

NaturEner's Alexander said Montana takes a less "regulatory" approach than other states his company deals with. "The primary approach we get from Montana is how can they help us? How can the local community help us? How can the government help us expedite the permitting process, what do we need to help promote the projects?" he says. "In other areas, the first approach is sometimes for us to disclose everything we want to do, and let them vet that internally so they can decide if we're doing to right thing for the environment, if we're doing the right thing for the cultural and historical sites within the area."

Besides executive leadership, grants, financing packages and tax incentives, green technology's success as an economic engine may hinge on simple evolution. Despite the best efforts of government, it may come down to whether society has reached the point where the traditional economy, driven by fossil fuels, is no longer acceptable.

"The culture has changed in Colorado," says Cheroutes. "It's something that everyone in Colorado has sort of agreed to and bought in to. And whether that's out of a desire to protect our mountains or to keep our kids from being sent halfway around the world to fight, or if it's to keep kids who are home employed and working, it's a cultural mind change, and sometimes those are the hardest things to deal with in the beginning. So if you have the will of the people, of industry and of political leaders, you can make anything happen."

Of course, it doesn't hurt to have government leadership shepherding that evolution.

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