1 Assessment of the Economic Benefits of Offshore Wind in the Mid-Atlantic February 2012 Delivered to:
2 Overview Impact Results New Jersey Tipping Point Discussion
3 Economic Impact Results Review Summary results shown here are based on the geographically specific expenditures described previously Capex data for AWC grid and offshore wind farms are cumulative, and therefore economic impact results cover total impacts over the project period Project period is for US and regional analysis State level results based on state components with each phase of construction schedule NJ: DE: MD: VA: O&M data is an annual expenditure
4 Economic Impact Results Review Sourcing allocations for the AWC grid and wind farm capex are based on Atlantic Grid and IHS understanding of existing supply chain capabilities and capacity As such, EI results for the US are well grounded and should be reflective of the industry response to the production schedule Regional model utilizes same inputs as US model Existing grid and wind farm supply chain is distributed across the US Baseline Scenario 2 for the AWC grid assumes quick transfer of supply base to the region Wind farm capex of all US production transferred within the region would be more likely a ceiling than a baseline scenario O&M expenditures and impacts will likely be allocated regionally so full application of those figures to the model is representative of the likely industry response
5 Economic Impact Results Review cont. State models utilize similar component shares as US model, but grid and wind farm capex values based on state MW share of total Baseline Scenario 2 for AWC grid will be less likely to be representative of initial ability of state to meet supply needs Scenario 2 state level results can frame the discussion of what the impacts would be if existing domestic supply capabilities could be built up locally Wind farm capex figures, which apply US sourcing shares to the state, should frame the discussion about how these significant expenditures can drive economic benefits locally if industry demand can be guaranteed and sourcing can be encouraged O&M expenditures will likely occur locally, especially if supply chain development occurs to support repair demand for parts and equipment, making impact results for O&M at the state level representative of likely industry response
6 Economic Impact Definitions Value Added Output Value added is payment to labor and capital used in the production of an industry. It is defined as the sum of labor income, indirect business taxes and business income. Output is the total industry output, or gross sales. Employment Employment is the average annual full- & part-time jobs. Labor Income Labor income is defined as wages and salaries and benefits as well as proprietors' income.
7 Economic Impact Definitions Economic Impacts Direct Effect Direct effect refers to the response of the economy to the change in the final demand of a given industry, refers to those directly involved in the activity. Indirect Effect Indirect effect refers to the response of the economy to the change in the final demand of the industries that are dependent on the direct spending industries for their input, also known as the supplier effect. Induced Effect Induced effect refers to the response of the economy to changes in household expenditure as a result of income generated by the direct and indirect effects, also known as the income effect.
8 Economic Impact Results NJ AWC Grid Summary 100% View Impact Type Employment Labor Income Value Added Output Direct Effect 5,053 $516,996,244 $947,721,687 $2,785,118,168 Indirect Effect 4,008 $369,724,251 $589,476,642 $1,186,686,910 Induced Effect 3,914 $234,633,974 $424,424,894 $714,690,459 Total Effect 12,975 $1,121,354,469 $1,961,623,224 $4,686,495,537 AWC Scenario 1 Impact Type Employment Labor Income Value Added Output Direct Effect 3,764 $391,104,067 $683,452,184 $2,083,736,149 Indirect Effect 3,246 $296,425,626 $472,786,653 $952,451,552 Induced Effect 3,037 $182,031,329 $329,283,391 $554,469,675 Total Effect 10,046 $869,561,021 $1,485,522,228 $3,590,657,375 AWC Scenario 2 Impact Type Employment Labor Income Value Added Output Direct Effect 2,119 $222,236,991 $342,026,149 $1,097,459,866 Indirect Effect 2,066 $184,890,174 $292,652,494 $579,276,449 Induced Effect 1,801 $107,934,226 $195,261,778 $328,777,585 Total Effect 5,986 $515,061,391 $829,940,421 $2,005,513,900
9 Economic Impact Results NJ Wind Farm and O&M Summary Wind Farm Impact Type Employment Labor Income Value Added Output Direct Effect 29,300 $2,496,466,797 $3,295,022,268 $8,594,691,277 Indirect Effect 17,065 $1,469,989,658 $2,280,773,657 $4,524,842,020 Induced Effect 17,562 $1,051,808,059 $1,903,098,564 $3,204,056,638 Total Effect 63,928 $5,018,264,514 $7,478,894,489 $16,323,589,936 Fully Operational Wind Farm O&M Impact Type Employment Labor Income Value Added Output Direct Effect 1,303 $137,645,401 $188,932,323 $447,138,951 Indirect Effect 952 $88,174,316 $133,748,280 $245,196,950 Induced Effect 921 $59,721,066 $108,036,247 $185,600,874 Total Effect 3,176 $285,540,782 $430,716,850 $877,936,775 Construction impacts will occur over the life of the construction period, which is expected to be 9 years based on full schedule Total construction jobs will be 70,000 77,000 over 9 years O&M expenditures are an annual expense so the jobs supported will be permanent jobs
10 Offshore Wind and Solar Are Currently Comparable in Terms of Cost Position Onshore wind should retain its current cost position relative to other renewable power options Offshore wind, at the low cost range, can provide lower prices than solar, and therefore shift development away from solar as a way to meet targets
11 Overview Impact Results New Jersey Tipping Point Discussion
12 Tipping Point Analysis Offshore Wind Supply Chain Direct employment growth impact primarily in construction of, and operation/maintenance of, the energy production system. Typical Existing Wind Manufacturing Supply Chain But also significant opportunities to develop local manufacturing supply chain to manufacture components for the wind energy sector.
13 Tipping Point Analysis Offshore Wind Supply Chain Modern wind turbines have over 8,000 components, ranging from steel towers to gearboxes to electrical wiring. Only about 2/3 of the components in U.S. wind turbines is currently manufactured domestically, presenting significant opportunities to local manufacturers. Local sourcing is preferred for towers, castings, forging services, nacelle cover and spinner to reduce transportation costs, decrease currency risk, and increase just-in-time turbine availability, product quality and service. As turbines become larger, few suppliers are equipped to produce the unique components and the size makes the components expensive and difficult to transport. The offshore wind industry s development will open up new markets for local suppliers and make retooling necessary.
14 Tipping Point Analysis Offshore Wind Supply Chain NAICS Code Subsectors Typically Associated with Wind Energy Sector Component Manufacturing 221 Utilities 484 Truck Transportation 3312 Steel Product Manufacturing from Purchased Steel Cement Manufacturing All Other Plastics Product Manufacturing Iron Foundries Fabricated Structural Metal Manufacturing Ball and Roller Bearing Manufacturing Industrial and Commercial Fan and Blower Manufacturing Turbine and Turbine Generator Set Units Manufacturing Speed Changer, Industrial High-Speed Drive, and Gear Manufacturing Mechanical Power Transmission Equipment Manufacturing Printed Circuit Assembly (Electronic Assembly) Manufacturing Other Measuring and Controlling Device Manufacturing Motor and Generator Manufacturing All Other Miscellaneous Electrical Equipment and Component Manufacturing Environmental Consulting Services Other Scientific and Technical Consulting Services All Other Professional, Scientific, and Technical Services
15 Tipping Point Analysis NJ Capacity Review Location Quotient for Key Wind Power Industrial Sectors in NJ STATE NAICS CODE NJ 221 Utilities NJ 484 Truck Transportation NJ 3312 Steel Product Manufacturing from Purchased Steel NJ Cement Manufacturing NJ All Other Plastics Product Manufacturing NJ Iron Foundries NJ Fabricated Structural Metal Manufacturing NJ Ball and Roller Bearing Manufacturing NJ Industrial and Commercial Fan and Blower Manufacturing NJ Turbine and Turbine Generator Set Units Manufacturing NJ Speed Changer, Industrial High-Speed Drive, and Gear Manufacturing NJ Mechanical Power Transmission Equipment Manufacturing NJ Printed Circuit Assembly (Electronic Assembly) Manufacturing NJ Other Measuring and Controlling Device Manufacturing NJ Motor and Generator Manufacturing NJ All Other Miscellaneous Electrical Equipment and Component Manufacturing NJ Environmental Consulting Services NJ Other Scientific and Technical Consulting Services NJ All Other Professional, Scientific, and Technical Services
16 Tipping Point Analysis Existing Industrial Capacity Review In 2004, NJ was one of top 20 states (ranked by average investment) for having firms with the technical potential to become active manufacturers of wind turbine components (especially rotor & nacelle & controls; also gearbox & drive train, generator & power electronics, & tower). In 2011, NJ already had above average employment concentration in key component manufacturing industry categories including misc. electrical equipment manufacturing, and environmental consulting services. And NJ had significant employment concentrations in several other key component manufacturing industry categories such as fabricated structural metal manufacturing and mechanical power transmission equipment manufacturing suggesting a strong manufacturing base to support the development of local component manufacturing supply chains.
17 Tipping Point Analysis Impact of Industrial Development Most of the labor for offshore wind will draw from local and regional sources. Analysis done at NREL extrapolated from European studies (EWEA 2009) estimated that offshore wind will create approximately 20.7 jobs per annual megawatt in the United States. In addition, approximately 0.8 jobs would be created for every cumulative megawatt of offshore wind in operation. (Source: NREL, Sept.2010) A 2004 report estimated that potentially 2,920 FTE jobs would be created in New Jersey s manufacturing sector based on average wind energy investment growth scenarios. The leadership position of the region s industry clusters (LQ>1) would most likely be accelerated by new demand from offshore wind development. A detailed analysis based on the current base of companies within the state would generate a more informed understanding of how New Jersey can best leverage wind sector investment to spur local component manufacturing (and other) supply chain development.
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