Tools for Assessing Economic Effects of Renewable Resource Projects

URI Environmental andNatural Resource Econ

Tools for Assessing Economic Effects of Renewable Resource Projects

James J OpaluchEdson Okwelun

Georges SfinarolakisEnvironmental & Natural Resource Economics

University of Rhode Island


Organization of Talk

• Background and Purpose• Methods • Illustration of Tools• Conclusions• Questions?





Hydroelectric

Renewable Energy Siting Partnership (RESP)




RESP Project Goals

“… provide technical expertise about the effects that renewable energy facilities may have on the people, wildlife and natural resources of Rhode Island”

RESP Website


RESP Project Goals

“… make state and municipal information accessible to the public …”

RESP Website


Relation of EconomicsStudies to RESP

• Provide information to communities on financial effects renewable energy investments

• Provide Statewide information on economic impacts (jobs, wages, etc) of renewable energy

• Create common ground for agreements between developers and communities


Existing Tools Available

• Federal Gov. created tools to help communities w/economics of renewable energy

• Easy to apply, use industry standard data, or site specific data

• National Renewable Energy Labs (NREL)




Economic Analyses:Three Principal Tasks

• Financial Costs and Revenues– e.g. identify promising investment opportunities

• Economic impacts (jobs, wages, expenditures)– Jobs in new Green Economy

• Examine case studies of compensation to community for hosting projects


• Financial Costs and Revenues • Economic Impacts (jobs, wages, expenditures)• Compensation to host communities

Economic Analyses:Three Principal Tasks





Methods:

• Provide information on financial effects of communities investing in renewable energy

• Provide information regarding economic impacts (jobs, wages, etc) of renewable energy

• Provide common ground for agreements between developers and communities


Financial Costs and Revenues

• Cost of financing, building, operating and maintaining renewable energy facilities

• Discounted revenues, internal rate of return, etc.

• Cash Flow, Debt‐Service Coverage Ratio


Existing Spreadsheet Tools: CREST

• Cost of Renewable Energy Spreadsheet Tool• Spreadsheet‐based model developed by NREL. • Calculates project net present value, levelizedcost etc.

• Used to determined feed‐in‐tariffs (FIT), cost‐based incentives, etc.

• Solar, geothermal and wind, but not hydro.


Existing Spreadsheet Tools: RETscreen

• Spreadsheet‐based model developed by Natural Resources Canada

• Analysis of energy production, cost, emissions, financial analysis, and sensitivity/risk analysis

• Solar photovoltaic, solar thermal electric, geothermal, wind, fuel cell, hydropower, wave, reciprocating engine, tidal power, etc.


Methods





Economic Impacts

• Effects of activity on the region’s economy–Direct Effects– Indirect Effects– Induced Effects

“Multiplier” Effects


Direct Effects: Project Development Expenditures and Onsite Labor

• Truck drivers, crane operators, earth moving, cement pouring

• Construction, management, and support


Indirect Effects: Supply Chain and Finance

• Blade and tower manufacturing• Steel mill jobs, parts, services, equipment manufacturing,

• Sales, finance, banking and accounting


Induced Effects:Local Expenditures

• Local area purchases of goods and services due to the activity

• Restaurants, grocery stores, retailexpenditures, etc.


JEDI Model: Jobs and Economic Development Impact Model

• Developed by National Renewable Energy Labs (NREL)

• Based on IMPLAN (IMpact analysis for PLANning)– A leading regional economic model

• Turned into spreadsheet tool, customized for renewable energy

• Project‐specific data or industry average defaults• Freely available


JEDI Models

• Wind• Solar Photovoltaic• Biofuels• Natural Gas• Marine & hydrokinetic


JEDI Models

• All JEDI models use same user interface• Users enter basic information about a project,

– State, year of construction, and capacity

• Model estimates: – Project costs (i.e., specific expenditures)– Economic impacts: jobs, wages and salary– Output (i.e., value of production)


JEDI

• Default information can be used, assuming wind industry averages

• Or project‐specific values, as available• Basic vs. Detailed Inputs



Organization



Jedi Photovoltaic Basic Inputs

Operations and Maintenance Cost does not include debt or equity financing, land easement or taxes

Base System Cost does not include batteries, generators, or any additional electicalmaterials and equipment beyond those necessary for the base system.


Installation Costs

Subtotal $7,100,000 $7,100

JEDI PV Detailed Inputs: Installation Costs


JEDI PV Detail Inputs: Operating and Maintence Costs

PV System Annual Operating and Maintenance Costs


JEDI PV: Other Parameters


Jedi PV Project Summary


Jedi Economic Impacts



Methods





Summarize Siting Agreements

• Identify and summarize criteria for agreements elsewhere


Next Steps

• Identify additional tools? • Validate model inputs and results against existing RI case studies

• Provide on‐line “back of envelope” calculator for web site?


Conclusions

• Exceptional Tools Available for Assessing Financial Aspects of Renewable Energy

• Can provide “quick and dirty” results with minimal information requirements

• More accurate estimates can be obtained with project‐specific data


Questions?

Technology

Tools for Assessing Economic Effects of Renewable Resource Projects