Energizing Appalachia: A Regional Blueprint for Economic and Energy Development
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Table 1 |
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The energy industry involves a broad range of sectors, including oil and gas extraction; petroleum refining; natural gas distribution; electric power generation, transmission and distribution; coal mining; and other sectors (not shown are indirect supplier and distribution jobs). |
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Sector | U.S. Employment | Appalachian Employment |
Electric power generation, transmission and distribution
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436,000
|
64,000
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Oil and gas extraction
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330,000
|
20,000
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Petroleum refining
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123,000
|
8,800
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Natural gas distribution
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116,000
|
3,500
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Coal Mining
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74,000
|
50,000
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TOTAL
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1,079,000
|
146,300
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Source: U.S. Department of Labor, Bureau of Labor Statistics and Regional Economic Models, Inc. 2002
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Appalachia's Energy Consumption
Appalachia's energy consumption patterns differ from those of the United States as a whole because the Region exports electrical power. As Table 2 shows, Appalachia's higher share of coal and nuclear electric energy consumption reflects the use of these fuel sources to generate electricity for local consumption and to export to surrounding states. It is noteworthy that the Region's share of high-cost natural gas is lower than the nation's, while its share of "other sources," which is largely made up of renewable energy sources, is lower than the nation's, even though the Region possesses considerable potential in renewable energy sources.
Table 2 |
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Trillion BTUs* (United States) |
Share (United States) |
Trillion BTUs* (Appalachia) |
Share (Appalachia) |
Coal |
21,903 |
22% |
3,532 |
38% |
Natural Gas |
23,806 |
24% |
1,415 |
15% |
Petroleum |
38,400 |
39% |
2,840 |
31% |
Nuclear Electric |
8,143 |
8% |
1,020 |
11% |
Hydroelectric |
2,689 |
3% |
160 |
2% |
Biomass |
2,571 |
3% |
317 |
3% |
Other |
570 |
1% |
4 |
0% |
TOTAL |
98,082 |
100% |
9,287 |
100% |
*British Thermal Units (BTUs) refers to a standardized measure of energy content. Source: Energy Information Administration, 2006; Appalachian estimates prepared by ARC based on EIA state-level data. |
Appalachia's electrical generation capacity and output is far more dependent on coal than the nation's. As Figure 2 shows, more than three-quarters of the Region's electrical output is derived from coal, and 16.5 percent is derived from nuclear power, while gas and oil together contribute about 3 percent. By contrast, the nation as a whole generates half its electricity from coal, 20 percent from nuclear power, and more than 21 percent from gas- and oil-fired power plants.
Another dimension of the Region's energy consumption is how it uses its energy in the residential, commercial, industrial, and transportation sectors. As Figure 3 shows, Appalachia uses slightly more of its energy on residential uses than does the United States as a whole. This probably reflects the lower efficiency of the Region's housing stock. Appalachia's commercial and transportation sectors are relatively smaller than the nation's, so they consume less energy; while the Region's greater manufacturing and electrical production is reflected in the higher share of the industrial sector's energy consumption.
Appalachia's Energy Resources
Coal is abundant in Appalachia. The Region currently has recoverable reserves of 3.9 billion short tons of coal at active mines and recoverable reserves of 52 billion short tons. (Energy Information Administration Annual Coal Report 2005, Tables 14 and 15.) New technologies are under development that will make possible new applications to enhance the extraction, processing, and conversion of coal to a variety of products, including gas and liquid fuels for electricity generation and as substitutes for imported oil. In addition, these coal gasification processes will use new techniques that minimize environmental impacts, such as the extraction of pollutants and carbon gases. The economic consulting firm Global Insight's analysis of the coal industry prospects over the next ten years, which was based on likely scenarios for energy price trends and demand, identifies key opportunities in clean-coal power generation and coal manufacturing of coal-to-liquids, coal-to-gas, and coal-to-chemicals products. The scenarios also suggested the likelihood of the implementation of a comprehensive national greenhouse gas emissions-control policy that provides economic incentives for investments in carbon gas capture and sequestration technology. A national policy could open still more opportunities for coal. (Global Insight Inc. [July 30, 2006]. "Non-Renewable Energy Innovation, Research to Support the Appalachian Energy Initiative.")
The Region also has about 5 percent of the recoverable natural gas resources in the nation, primarily in Kentucky, New York, Ohio, Pennsylvania, Virginia, and West Virginia. The Appalachian Region also contains three to four billion barrels of unconventional oil resources, as evident in Kentucky's oil sands and oil shale.
Though Appalachia is best known for its coal resources, it is beginning to develop its potential for the development of renewable energy sources found in wind, water, and waste products. Wind power is significantly underdeveloped in the Region, and has the greatest potential for development along the ridge lines of the Appalachian Mountains. There are 528 megawatts of installed wind power capacity in the Appalachian states, nearly 1,000 megawatts of planned capacity, and the potential for over 11,000 megawatts of additional capacity.
Significant renewable energy opportunities can also be found in the development of energy from biomass, biofuels, solar power, and hydropower. Energy from biomass converts specially grown crops, sawmill wood residue, agricultural wastes, and other organic matter into new energy sources and fuels. The total annual biomass resources for the Appalachian states are estimated to be over 108 million tons. Biofuel potential is estimated to be 500 million gallons annually, based on converting 2005 output for corn and soybean production to ethanol and biodiesel fuels. Solar power's best potential in the eastern United States, including Appalachia, is likely to be for residential or commercial application. In the Appalachian Region, production of residential and commercial photovoltaic (PV) power is currently viable in southern Appalachia, and several PV manufacturing plants are located throughout northern Appalachia. Passive solar installations such as day-lighting, solar ventilation air preheating, hot water heaters, and pool heating may give the best return on current investment in solar technology. Small and low-impact hydroelectric capability is another largely undeveloped energy resource in Appalachia. The Region is traversed by several major rivers and watersheds that create numerous opportunities for small-scale and low-flow hydropower installations. This category of hydroelectric generation is based on damless technology. Total hydropower potential could be as high as 5,700 megawatts of average available capacity. (Center on Business and Economic Research, Marshall University. [August 28, 2006]. Energy Efficiency and Renewable Energy in Appalachia: Policy and Potential. Retrieved August 31, 2006, from http://www.marshall.edu/cber/research/index.htm)
In addition to this impressive array of potential alternative energy resources, the Appalachian Region possesses an extensive industrial manufacturing base that is already engaged in the production of some of these emerging energy technologies, particularly wind turbine components, solar components and photovoltaic panels, and biofuel plants. (Ibid., chapter 3; and see Economic Development Potential of Conventional and Potential Alternative Sources in Appalachian Counties, Amy Glasmeier, Pennsylvania State University, June 21, 2006.) Appalachia's industrial base has numerous potential supplier chain links that could be cultivated within these alternative energy sectors and that promise additional job creation for the Region's manufacturing base. (Ibid., Glasmeier, June 21, 2006.)
State Policies for Conventional and Alternative Energy, and Energy Efficiency
Recent years have seen comprehensive energy plans either passed or under consideration in many Appalachian states. (Center on Business and Economic Research, Marshall University. [August 28, 2006]. Energy Efficiency and Renewable Energy in Appalachia: Policy and Potential. Retrieved August 31, 2006, from http://www.marshall.edu/cber/research/index.htm) All have similar provisions but emphasize different approaches. These include:
- Promoting conventional fuel production and clean conventional technologies.
- Promoting the use of clean energy technologies, and energy efficiency.
- Maintaining or renewing an ecologically strong environment.
- Expanding electrical generation from renewable or alternative fuels.
- Using biomass, including landfill methane.
- Developing biofuels, including ethanol and biodiesel.
- Providing the lowest-cost energy consistent with other goals.
- Increasing economic development through the creation and expansion of alternative energy manufacturing and distribution.
Specific policies used in various Appalachian states include:
- Conventional Fuels Incentives programs are in place in many states to support the production and use of coal, oil, and gas, including tax exemptions for enhanced recovery of coal and gas and coal-bed methane and incentives for the development of clean coal technologies. Alabama and Virginia have production tax incentives for coal; and Kentucky, Maryland, and Virginia have incentives for indigenous use of coal in their states. Kentucky, New York, and Pennsylvania have clean coal tax incentives. Ohio has a $1/ton tax incentive available to Ohio's investor-owned utilities that use Ohio coal. Several Appalachian states offer tax incentives for the purchase of pollution control technologies. Natural gas tax incentives are offered by Alabama, New York, Pennsylvania, Virginia, and West Virginia. Oil production tax credits are offered by Alabama, Kentucky, New York, and West Virginia. Other incentives include provisions for coal-bed methane recovery in West Virginia and Virginia. Ohio has a clean-coal technologies research, development, and demonstration/deployment (RD & D) program with projects supported by a $100 million coal revolving bond fund. Various other states also have clean-coal technology research and development activities.
- Net Metering, where those who use qualified distributed generators powered by renewable or alternative fuels receive credit or payment for the electricity they produce. Net metering is allowed in North Carolina, Virginia, Maryland, Ohio, Kentucky, New York, Pennsylvania, and Georgia. It is also available through the Tennessee Valley Authority (TVA) in the parts of Tennessee, Mississippi, and North Carolina TVA serves. The provisions in these laws vary, including what types of renewables are eligible, what size generators can be used, whether the programs are voluntary or compulsory, what price is paid for the distributed generation, who pays for the installation to the grid, and the total amount of generation a utility must accept.
- Renewable Energy Portfolio Standards require that a certain percentage of the power either generated or consumed in a state must come from renewable fuels. The utility is required to either build a renewable energy facility or buy renewable energy from another generator to meet the requirement. New York, Pennsylvania, and Maryland have renewable energy portfolio standards.
There are differences among the states as to what should be considered "renewable energy." All include solar and wind power, along with small-scale hydropower. Landfill gas is included by most states. Pennsylvania's standard includes waste from wood or coal, as well as demand-side management.
Standards are often divided into tiers, with requirements that given percentages must be met by using certain fuels such as solar or wind. While the tiers add complexity to the standards, they are considered desirable because they encourage the development of certain renewables.
A recent development is the market for renewable energy credits. Under this program, a generator using renewables can meter the amount of energy produced. The producer then sells the renewable energy in one-megawatt credits, which can be can purchased by a utility to satisfy its renewable-energy requirement.
- Public Benefit Funds, which attach a small charge to each customer's monthly energy bill, are used in New York, Ohio, and Pennsylvania. Monies collected under these programs are used in a wide variety of ways, including subsidizing energy efficiency for low-income households; making low-cost loans or grants for the installation of renewable or alternative energy generation; supporting the research and development of renewable, alternative and efficient energy; encouraging the location of renewable-energy related industry in the state; and remediating impacts from pollution caused by energy generation from conventional fuels.
- Grant and Loan Programs are available in all Appalachian states for certain uses. These programs encourage the adoption, installation, and use of alternative or renewable technologies; provide low-cost loans; promote energy efficiency education; assist low-income consumers; finance research and development; locate renewable energy manufacturing; support the use of biofuels; and reward energy conservation. Differences among state programs are considerable and reflect both the priorities and the financial capabilities of the states using them.
- Tax Incentives are not as widespread as other inducements, but some Appalachian states grant personal and corporate tax incentives, such as deductions or credits for installing or producing renewable or alternative energy. New York, Maryland, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia provide or allow property-tax exemptions or rate reductions for certain forms of renewable generation or installation. Limited sales tax reductions are also available in Georgia, New York, Maryland, and Ohio for renewable installation.
- Rebate Programs are in place in some states, including New York, Maryland, Pennsylvania, South Carolina, and Kentucky. These programs include the installation of solar equipment, the purchase of energy-efficient appliances, and the production and use of alternative fuels.
- Green Purchasing Programs, which allow consumers to support the generation of clean energy by paying a slight additional charge, have been established by some states and utilities in the Region.
The Region possesses a diverse set of energy resources that hold the potential to generate new businesses and jobs. In addition, Appalachian energy production for the U.S. market will lessen dependence on foreign energy sources while strengthening the regional and national economies.
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