alan collins, professor west virginia university wv wind working group october 20, 2009...
TRANSCRIPT
ALAN COLLINS, PROFESSORWEST VIRGINIA UNIVERSITYWV WIND WORKING GROUP
OCTOBER 20, 2009
Opportunities for Wind Energy in the Coal Fields of Southern
WVWind versus Coal on the Coal River
Mountain1
CONTRIBUTING AUTHORS
Evan Hansen, M.S. is the President of Downstream Strategies, LLC.
Michael Hendryx, Ph.D. is an Associate Professor at the West Virginia University Department of Community Medicine, Research Director at the West Virginia University Institute for Health Policy, and Faculty Research Associate at the Regional Research Institute.
Fritz Boettner, M.S. is a Senior Environmental
Consultant at Downstream Strategies, LLC.
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PRESENTATION OUTLINE
Research problem Study area description and dataThree scenarios (two wind and one coal), two
perspectives (landowner and society) and methods utilized in the analyses
Results – jobs, earnings, and local tax revenues
Conclusions
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RESEARCH PROBLEM
Increasing amount of WV coal is surface mined by mountaintop removal – about 35-40% as of 2007
Fundamental environmental and social opposition to the practice of mountaintop removal. Many people want to stop this practice.
Coal industry perspective of mountaintop removal – provides jobs, economic activity, and inexpensive coal for cheap electricity.
Those people opposed to mountaintop removal want to show what society gives up when a mountaintop is removed to extract the coal?
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RESEARCH PROBLEM
This research was conducted during the fall of 2008 under a contract with the environmental consulting firm of Downstream Strategies.
Funding was provided by Coal River Mountain Watch, Adam Lewis Foundation, and the Sierra Club. Being opposed to mountaintop removal, these organizations wanted to show that a “better” economic alternative to mountaintop removal exists.
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RESEARCH PROBLEM
A copy of this study is available at:
http://www.coalriverwind.org/?page_id=143
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STUDY AREA DESCRIPTION
Coal River Mountain is located in western Raleigh County (near Boone County) in southern West Virginia.
Our study area consisted of about 41,000 acres.
Coal River Mountain is flanked by the Clear Fork and Marsh Fork of the Little Coal River.
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The Coal River Mountain Study Area
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SURFACE COAL MINING
In the study area, three surface mines are proposed: Bee Tree, Eagle II, and Eagle III.
Mining permits specify the tons of coal produced annually for a projected life of each mine. Over all three mines, total production is projected at 47 million tons.
The valley fills proposed on Coal River Mountain would bury 901 acres, or about 1.4 square miles.
Part of nine proposed valley fills that will bury about 9 miles of streams in the Clear Fork sub-watershed
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Mountaintop removal mine permit boundaries
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UNDERGROUND COAL MINING
If mountaintop removal surface mining was not conducted on Coal River Mountain, how much of the 47 million tons could be recovered by underground mining?
We projected 8.7 million tons (18% recovery) using room and pillar plus auger mining techniques.
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WIND ENERGY POTENTIAL
A 2006 study by the consulting firm WindLogics utilized computer modeling of wind speeds to classify the wind energy potential for Coal River Mountain based on projected average wind speed at 80 meter heights.
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Wind energy potential on Coal River Mountain, Source: WindLogics(2006)
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WIND ENERGY POTENTIAL
We projected that it would be economically viable to place a total of 164 wind turbines on Coal River Mountain.
Turbine placement was based on identification of areas on the mountain with gross energy production of at least 4.5 million kilowatt-hours (kWh) and a gross capacity factor of at least 30%.
Spacing between turbines was assumed to be 3.5 times the rotor diameter.
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GAMESA G90
* 2 MW turbines
* Produces more power at lower average annual wind speeds (7-9 meters per second wind speed was projected for the proposed turbine locations )
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Turbine locations
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WIND ENERGY IMPACT FROM MOUNTAINTOP REMOVAL
Two impacts:(1)Conversion of bedrock to consolidated
rubble requires turbine base to be buried deeper compared to pre-mining conditions. This added expense may threaten economic viability.
(2)Mountaintop removal lowers the elevations along the mountain tops and ridges of Coal River Mountain. Lower elevations mean less wind energy potential.
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1,500
2,000
2,500
3,000
3,500 Ele
vatio
n (fe
et)
Turbines above mountaintop removal permit areas
Existing land surface
Top of Little Eagle seam
Class 7 - Superb
Class 6 - Outstanding
Class 5 - Excellent
Class 4 - Good
Class 3 - Fair
Class 2 - Marginal
Class 1 - Poor
LOWER ELEVATIONS OF COAL RIVER MOUNTAIN REDUCES WIND ENERGY POTENTIAL
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METHODS
We analyzed three scenarios for Coal River Mountain:(1) Mountaintop removal of coal (2) Wind energy development and underground coal mining (Conservative Wind)(3) Development of wind energy in conjunction with a local industry wind plus underground coal mining.
Two perspectives were evaluated:
(1) Society
(2) Mineral resource owner and landowner
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METHODS -SOCIETY
The main societal benefits quantified were jobs, earnings, and economic output that result annually from each scenario. Only jobs and earnings presented here.
Economic impact analyses were conducted using two input-output models: (1) IMPLAN (Minnesota IMPLAN Group Inc., 2008) for the coal mining, and (2) the Jobs and Economic Development Impact (JEDI) model (Goldberg and Tegen, 2008) for wind turbine development.
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METHODS -SOCIETY
Increased jobs and earnings were based on: direct, indirect, and induced effects.
All social analyses were conducted at the county level with 2007 data (coal and electricity prices, costs, economic structure, and population) for Raleigh County, West Virginia.
Additional tax revenue for Raleigh County was computed for wind development versus more coal mining.
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METHODS -SOCIETY
Time spans: Surface coal mining was projected over a 17 year period.Underground mining was assumed to span 15 years.Wind energy was projected over five, 20 year investment cycles.
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METHODS -SOCIETY
Difficult to accurately quantify externalities – many were not quantified. They include global environmental costs, tourism, property values, and cultural heritage.
Quantified external costs of coal production included pre-mature human deaths and illnesses among the general public, death and injury to coal miners plus local environmental costs.
These were subtracted from the analyses for income.
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METHODS -SOCIETY
Example: Valuing pre-mature deaths among the general public
Hendryx and Ahern (2008) found that for every 1,000 tons of coal mined translates into an extra 0.021 annual deaths per 100,000 population among the general public.
Exposed population: 15,109 people Tons of coal mined: 47 million for surface, 8.7 million for
underground Computed impacts: 149 additional deaths in the mountaintop
removal scenario and 27 in the wind scenarios One-half of these impacts were assumed to occur during mining
and the other half occur after mining has ceased. Value of a statistical life was $6.9 million based on most recent
figures recommended by the United States Environmental Protection Agency.
Resulting annual cost was $30.5 million for the mountaintop removal scenario and $6.3 million per year for the wind scenarios
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METHODS - PRIVATE
Land and mineral owner perspectives were based on payments from royalties - a percentage of the gross revenues from coal or electricity.
Royalty rates used were: 5.84% for underground coal and 7.01% for surface-mined coal.
Wind royalties were assumed to be 3.5% of gross electricity sold.
A Net Present Value (NPV) was computed for each scenario using a 12.2% discount rate.
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Category Numbers Description Sources
Coal types20% Metallurgical80% Steam
Rounded percentage for Massey coal mines in 2006 and 2007
Massey Energy Company (2008)
Coal prices
Metallurgical: $68.15 per tonSteam: $46.98 per ton
Three year averages (2005-2007)
West Virginia Department of Revenue (2008)
EmploymentUnderground: 135 Surface: 57
Annual full-time equivalent employees per million tons
Underground: Data for 2007 for underground mines on Coal River Mountain (MSHA, 2008)Surface: Eagle II community impact statement
Selected Assumptions and calculations utilized in coal resource development analyses
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Category Numbers Description Sources
Development cost $3.2 million per turbine
Four examples gave an average of about $1.5 million per MW in 2007 for 2 MW turbines. $1.6 million is a close approximation and is approximately the reported average for eastern projects between 2004 and 2007.
Tiffany (2007)Kildegaard et al. (2006)Hau (2006)Wiser and Bollinger (2008)
Transmission line$8 million for 10 miles of 115 kV line
Average of cost for transmission line construction in Vermillion, South Dakota and Texas
City of Vermillion (2008)Texas Comptroller of Public Accounts (2008)
Annual operations and maintenance costs
$44,000 per turbineService, maintenance, insurance, and utilities
Tiffany (2007)
Wind electricity price $61/MWh
Capacity-weighted average for eastern U.S. wind projects brought on-line during 2006 and 2007
Wiser and Bollinger (2008)
Landowner revenue $10,997 per turbine
Assumes 3.5% of gross revenue from electricity generation with 30% capacity and 98% operation time
Tegen (2006)
Property tax revenue to Raleigh County
$10,627 per turbineAnnual average over 20 years based on Senate Bill 441 taxation rules
Amburgey (2008)
Selected assumptions and calculations utilized in wind resource development analyses
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RESULTS - SOCIETY
• Society benefits reported here will be: A) the number of jobs created (full-time equivalents) B) employee compensation from the additional jobs created (earnings).
Earnings will be reported both with and without externality costs.
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0
500
1,000
1,500
2,000
2,500
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
Jobs
Mountaintop Removal Conservative Wind Local Industry Wind
Annual jobs for the first 30 years of each scenario
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0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2008
2013
2018
2023
2028
2033
2038
2043
2048
2053
2058
2063
2068
2073
2078
2083
2088
2093
2098
2103
2108
2113
Jobs
Mountaintop Removal Conservative Wind Local Industry Wind
Cumulative jobs for each scenario
30
0
10
20
30
40
50
60
70
80
90
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
Mill
ion $
Mountaintop Removal Conservative Wind Local Industry Wind
Annual earnings for the first 30 years of each scenario (not including externalities)
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0
200
400
600
800
1,000
1,200
1,400
2008
2013
2018
2023
2028
2033
2038
2043
2048
2053
2058
2063
2068
2073
2078
2083
2088
2093
2098
2103
2108
2113
Mill
ion $
Mountaintop Removal Conservative Wind Local Industry Wind
Cumulative earnings for each scenario (not including externalities)
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-40
-20
0
20
40
60
80
100
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045Ea
rnin
gs m
inus
exte
rnali
ties (
mill
ion $)
Mountaintop Removal Conservative Wind Local Industry Wind
Annual earnings for each scenario (including externalities)
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-800
-600
-400
-200
0
200
400
600
800
1,000
1,200
2008
2013
2018
2023
2028
2033
2038
2043
2048
2053
2058
2063
2068
2073
2078
2083
2088
2093
2098
2103
2108
2113
Earn
ings
min
us ex
tern
aliti
es (m
illio
n $)
Mountaintop Removal Conservative Wind Local Industry Wind
Cumulative earnings for each scenario (including externalities)
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RESULTS - SOCIETY
Underground coal mining is important in wind energy scenarios. Without mining, jobs, earnings and output never exceed mountaintop removal in the conservation wind scenario. Even under the local industry scenario, the time to exceed earnings and output increases greatly (jobs only takes four more years).
However, when externalities are included in the income calculations, wind energy without underground coal mining generates the largest cumulative earnings.
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RESULTS - SOCIETY
Only about $0.50 for every additional hundred dollars of severance tax collected from expanded coal mining would return to Raleigh County. This computes to an average of $36,000 per year over 17 years under the mountaintop removal scenario.
Tax revenue from wind turbines was computed using the provisions of Senate Bill 441 passed in 2007.
Averaged over 20 years, each turbine contributes $10,627 annually. All 164 turbines would then generate, on average, $1.74 million in property taxes per year.
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RESULTS -PRIVATE
Royalties from mountaintop removal generated a NPV of $63 million for the holders of land and mineral rights.
Wind and underground mining royalties had a NPV of $19 million.
Based on these results, it is not surprising that existing landholding companies prefer coal mining over wind farm development on Coal River Mountain. Put simply, landholding companies stand to profit much more from developing coal resources compared to developing wind resources.
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CONCLUSIONS
The results from these two perspectives stand in stark contrast.
Land and mineral rights holders have ample economic incentive to encourage coal resource development rather than wind.
Even if economic incentives favored wind energy, the presence of mineral right leases discourages any surface development on Coal River Mountain other than mining.
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CONCLUSIONS
While cumulatively greater, the economic gains from wind energy take time to surpass those created by mountaintop removal of coal.
The local industry wind scenario would provide more cumulative jobs than the mountaintop removal scenario after 2033—only eight years after the mountaintop removal mines would close.
With the conservative wind energy scenario, it takes approximately six decades to overcome the mountaintop removal scenario.
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CONCLUSIONS
Tax revenue to Raleigh County from wind development far exceeds that gained from additional coal mining.
From a societal perspective, when combining local externality costs with local earnings, the mountaintop removal mines actually cost the citizens of Raleigh County more than the income they provide.
The increased deaths and illnesses due to increased coal mining—combined with the environmental impacts— are costlier than the earnings provided by the mining.
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Questions or
Comments?
Available at:
http://www.
coalriverwind.
org/?page_id
=143
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