Energizing Appalachia: A Regional Blueprint for Economic and Energy Development

Section II: A Regional Agenda for Energy-Based Economic Development

By using its full range of energy resources and staying at the forefront of emerging energy technologies and practices, the Region has the potential to increase the supply of locally produced, clean, affordable energy, and create and retain jobs. This approach will help the Region find new ways to satisfy domestic energy demand, minimize environmental impact, and attract service and supply-side industries and businesses that rely on energy resources to grow and sustain jobs. Developing Appalachia's energy potential will provide clean, safe, affordable, locally produced energy to customers, create and retain jobs, help companies stay competitive, and keep the Region economically strong and moving toward energy independence.

To help the Region achieve this energy goal, it is important for all stakeholders to work to realize the economic potential of energy efficiency, innovation, and independence. Engaging multiple stakeholders and leveraging the Region's finance, technology, and human resources will allow the Appalachian Region to maximize its energy potential.

Action Areas for Strategic Objectives

Five key action areas are vital to helping the Region reach its strategic objectives and realize the job creation potential of an energy-based economic development agenda.

1. Public-Sector Investments. Financing and expertise should be available to jump-start and support new energy initiatives and attract private-sector investment. State policies have helped stimulate diversification of the Region's energy mix; yet much of this potential is unrealized. Risk, uncertainty, and long turnover time on investments can be mitigated by public funds to help attract private investment and reduce risk for entrepreneurs, utilities, and companies interested in implementing new energy technologies to create jobs and compete globally.
2. Research and Analysis. Two types of energy research and analysis take place in the Region: one helps create and test technological innovations; the other identifies the best opportunities for growth in the Region's energy sector. Appalachia is fortunate to have many respected universities and research institutions working on energy issues. By tapping this scientific and technological expertise and applying it in targeted economic development efforts, the Region can grow and keep energy-related jobs in Appalachia.
3. Workforce Development. Appalachia needs a skilled workforce to support existing and new energy and energy-related industries. Educating students and adult workers in science, technology, math, and engineering must be a priority for Appalachia's high schools, community colleges, and universities. A technically educated workforce is vital for the Region to grow its energy sector. The Region also needs architects, scientists, and engineers trained to design energy-efficient communities and the next generation of energy industries. Development of a workforce with an interest in and understanding of energy issues should begin with grade school and continue through universities, colleges, and technical schools.
4. Public Awareness and Outreach. The public needs clear information on the current energy environment and on the actions industry, government, educational institutions, and households can take to improve quality of life while using energy efficiently. Awareness campaigns can help citizens understand how to maximize efficiency in homes, schools, public buildings, and private businesses; and encourage the use of renewable energy and advanced coal.
5. Supportive Policies. There is a need for additional supportive government policies throughout the Region to encourage and reward investments in innovative and alternative energy solutions. One example is the fact that investors are currently unwilling to accept the risk necessary to develop alternative transportation fuel plants because the long-term market is uncertain. A change in government policy to commit to long-term fuel contracts would provide an incentive for this kind of innovation. There is also a need to provide technical and informational clearinghouses to facilitate energy business development.

Objectives and Strategies for Energy-Based Economic Development

The first step in implementing these strategic objectives is to identify and engage potential partners in the needs, resources, and roles in energy-based initiatives. Many energy initiatives are too large for a single entity to undertake alone. Some will require multi-state, multi-county, or public-private partnerships.

Partnerships could be developed with state energy offices (some states have several different types of energy offices); federal agencies, such as USDOE and USDA's Natural Resources Conservation Service, Rural Utilities Service, and Rural Development; state-based trade associations for coal, renewable energy, oil and gas, and others; local economic development organizations; environmental organizations; universities engaged in energy research and development, and university extension services; business and industry, and foundations that support environmental work such as development of clean energy.

Many energy initiatives are already under way, on a small scale, in parts of the Region and the country, and there is great potential to share and replicate best practices throughout the Region.

Not every source of energy is addressed in the Energy Blueprint's strategic objectives. For example, hydrogen is not discussed because it is not expected to be widely available to the public for at least several years. And, although several nuclear power plants throughout the South are under development or scheduled for operation in the next five years, there are ongoing national issues with mining, transporting, and storing nuclear fuels, as well as with the disposal of wastes, that would require a more in-depth analysis than could be covered here.

Strategic Objective 1: Promote energy efficiency in Appalachia to enhance the Region's economic competitiveness.

Energy efficiency strategies reduce energy costs and can help eliminate or reduce the need to import foreign energy. To maintain a competitive position in the global marketplace, businesses must pursue energy efficiencies, or higher energy costs will result in a market disadvantage, lost sales, and potential job layoffs. Efficiency measures are often the most cost-effective strategies to reduce energy costs and can be implemented the most quickly.

Efficiency is one of the best ways to maximize energy use with minimal environmental impact. Since 1970, about 75 percent of all new energy demands in the United States have been met by reducing energy needs through the use of energy efficiency measures. (Annual Energy Outlook 2006, EIA, p. 6-8.)

Energy audits, energy efficiency standards, and financial incentives are often used to promote efficiency. Energy audits provide an independent review of buildings to determine ways to cut energy costs or enhance efficiency. Energy efficiency standards can be established for high-energy consumers, such as appliances and buildings. Finally, some states, utilities, and local governments also offer a variety of financial incentives, such as grants, loans, tax credits, rebates, and exemptions, to encourage energy efficiency improvements.

Energy efficiency does face some implementation obstacles. There is less incentive to use energy-efficiency measures when energy costs are low, as they have been over the last decade. When an energy audit has been performed, recommendations are not always implemented due to lack of expertise or available funds. And architects, builders, and home manufacturers often lack incentives to apply energy-efficient strategies in the design and construction of commercial and residential buildings. These obstacles must be addressed as efficiency programs are created or enhanced.

Strategies

The following strategies are examples of ways to support and promote energy efficiency.

Public-Sector Investments

• Develop or expand programs for technical assistance grants, loans, or incentives for energy audits/assessments and retrofits.
• Support the expansion of weatherization and state energy efficiency programs.
• Support programs for green construction and retrofitting of public buildings.
• Support demonstration projects to test and validate energy-efficiency approaches.
• Support programs that encourage efficiency in transportation, such as rural van-sharing programs, telecommuting, public transportation, smart growth planning, and fleet management, including purchase of hybrid or alternative-fuel vehicles.

Research and Analysis

• Determine the effectiveness of technical assistance initiatives or incentives for encouraging expanded energy-efficiency practices.
• Collect, analyze, and distribute information on the employment and economic effects of energy-efficiency practices in the Region.
• Support the Region's universities and other research institutions in developing new technologies for energy efficiency, and support the commercialization of these technologies.
• Research consumer energy attitudes, values, awareness, and willingness to act on energy issues.
• Examine the potential for eco-industrial development in the Region.

Workforce Development

• Partner with those who offer workforce training, such as community colleges, technical schools, and workforce investment boards, to develop programs for training workers in existing and emerging energy fields; specifically, work to identify future jobs in energy efficiency audits/assessments and retrofits.
• Support the training of workers in the building-trades, architects, developers, and building code officials in techniques and approaches to creating more efficient buildings.
• Support programs that increase the capacity of the private sector to provide technical assistance in energy efficiency.

Public Awareness and Outreach

• Create multi-state partnerships to augment existing outreach materials and activities and enhance their delivery.
• Deliver education and outreach materials or training for residents, local governments, businesses, and industry on available energy-efficiency incentives, technical assistance, and the costs and benefits of implementing efficiency measures.
• Compile, maintain, and promote information on emerging technologies, best practices, and the economic as well as environmental benefits of energy efficiency.

Supportive Policy

• Promote approaches to regulating utilities that create incentives for energy efficiency, such as efficiency portfolio standards.
• Support state and local governments in developing or strengthening residential and commercial energy codes for buildings and industry.
• Support federal, state, and local governments in expanding rebates, grants, loans, and sales tax incentive programs for energy efficiency technology, audits/assessments, and retrofits.
• Support the development or update of state energy plans.

Strategic Objective 2: Increase the use of renewable energy resources, especially biomass, in Appalachia to produce alternative transportation fuels, electricity, and heat.

Appalachia has a wide array of renewable energy resources with potential for expanded use, including biomass, biofuel, wind power, solar power, landfill gas, and hydropower.

Biomass is organic matter, including waste streams from paper factories, lumber mills, and agriculture, and crops such as corn and switchgrass. It can be used directly for the production of electricity, or converted into biofuels such as biodiesel and ethanol. Biomass has been identified by many energy experts as possibly having the greatest regionwide potential of all renewable energy sources.

Biofuel is liquid fuel derived from biomass. Biofuels can be made from crops grown specifically for fuel production, such as corn, soybeans, and switchgrass, or recycled from fryer oil. Two major biofuels, ethanol and biodiesel, are often mixed with varying amounts of petroleum and require special transport, storage, and blending. Biofuel refineries are most prevalent in the southern part of Appalachia, where paper plants and farms are more plentiful and can provide biomass for conversion.

Wind energy turbines use existing wind to create electricity. In 2006, wind energy installations in the U.S. exceeded 10,000 megawatts in generating capacity—the amount of electricity needed to power over 2.5 million homes on an average day. (American Wind Energy Association. [2006]. Retrieved August 31, 2006, from http://www.awea.org) The potential for wind energy in the Region is greatest along the ridgelines of the Appalachian Mountains.

Solar power harnesses energy from the sun's light. Building designs that incorporate passive solar heating and daytime lighting features reduce dependence on traditional fuel sources for light and heat, and photovoltaic (PV) panels can contribute to meeting commercial and residential energy needs. The solar power PV industry is a $7 billion a year industry, with 5,000 megawatts of production capacity in place in the United States. The industry is growing at a rate of 40 percent annually, and is projected to create more than 40,000 new jobs in the next decade. In the Appalachian Region, production of residential and commercial PV power is currently viable south of Virginia and Kentucky, and several PV manufacturing plants are located throughout northern Appalachia.

Landfill gas (methane created from decomposing garbage) can be harnessed to generate electricity or heat. In one year, a typical four-megawatt landfill gas project can reduce enough greenhouse gases to equal removing the annual carbon dioxide emissions from 45,000 cars or offset the use of 1,000 railcars of coal. In addition, the cost of generating electricity from methane is very low.

Hydropower plants located throughout the Region generate electricity from several of Appalachia's waterways. While there may be some potential for small-scale hydropower installations throughout the Region, development is often complicated by river or stream bank issues. For this reason, development of hydropower is not specifically discussed in the following strategies.

Net metering, renewable energy portfolio standards, financial incentives, and utility bill fees are often used to encourage the development of renewable resources. Net metering provides an opportunity for customers producing energy (from PV panels or other sources) to sell it back to the grid or have their meter run backward when they are providing energy. Renewable energy portfolio standards, usually set at the state level, establish a percentage of energy that must come from renewable sources by a set date. Financial incentives, such as grants, loans, rebates, and tax incentives, are available at the federal, state, and local levels to encourage the development of renewables. In addition, fees can be added to utility bills to provide funds for investing in renewable energy sources. Two common fees are public benefit funds, which add a fee to every customer's bill, and green power programs, which allow customers to choose if they want to pay extra to support the development of renewable energy.

Each renewable energy source faces its own challenges. Biomass energy generation requires appropriate feedstock, and presents policy issues. The development of biofuels will require widespread infrastructure improvements to transport, blend, and sell the fuels on a large scale. Areas in Appalachia most valuable for wind development are often protected from development, and can face opposition due to a real or perceived impact on wildlife, habitat, and views. Solar power is dependant on access to sufficient sunlight. Landfill gas projects face knowledge and policy barriers. And, as described above, development of new hydroelectric power is complicated by local issues.

The following strategies are examples of ways to support and promote the development of renewable energy.

Public-Sector Investments

• Support risk-reduction actions for new business and renewable energy market development through measures such as public procurement policies, guaranteed product prices, and guaranteed purchase volumes.
• Increase access to venture capital for renewable energy businesses by convening meetings with venture capitalists and interested firms.
• Provide grants, loan guarantees, tax incentives, and technical assistance to support the production and distribution of biofuels and other renewable energy sources.
• Facilitate investment in infrastructure to support renewable energy initiatives, especially biofuels initiatives.
• Coordinate with regional alternative fuels initiatives to maximize impact for the Appalachian Region.
• Examine the use and trading of Renewable Energy Credits to support renewable energy production in the Appalachian Region.
• Partner with existing federal energy programs to extend their reach in the Region.

Research and Analysis

• Develop a baseline analysis of existing energy-related employment within the Region, and project the employment and economic impact of several plausible scenarios for alternative energy investments, including an examination of the net effects on the existing conventional energy base in the Region.
• Partner with state agencies, Appalachian universities and research institutions, and nonprofit organizations working on renewable energy research, including research on project viability and development of appropriate technologies for both short- and long-term horizons.
• Examine opportunities for clustering value-added industries related to renewable energy technologies within the Region.

Workforce Development

• Partner with those who offer workforce training, such as community colleges, technical schools, and workforce investment boards, to develop programs for training workers in existing and emerging renewable energy sectors; specifically, manufacturing of parts for and production of biomass/biofuels, wind, and solar energy.
• Support science and math teachers' training, curricula development, expanded career opportunities and other actions to integrate energy issues into local education systems.

Public Awareness and Outreach

• Compile and disseminate information and conduct workshops on emerging technologies; best practices; and the benefits, including economic and environmental benefits, of renewable energy approaches.
• Convene meetings and support public dialogues to explore technological aspects of various renewable energy approaches, to partner with existing state and regional organizations and to raise awareness among residents, businesses, and industries.

Supportive Policy

• Pursue multi-state and local initiatives to examine renewable or alternative energy portfolio standards, possibly through a regional renewable or alternative energy credit trading system.
• Promote distributed energy production, net metering, green purchasing requirements for utilities, green prices by utilities, uniform interconnection standards, and the use of regional feedstock for biofuel production.
• Provide infrastructure for alternative fuels such as biodiesel and ethanol throughout the Region by partnering with regional fuel distributors.
• Create or expand incentives and requirements for use of alternative fuel and hybrid vehicles (private or fleet); for the production of biofuels that meet American Society for Testing and Measurement standards; and for the exploration and development of other energy renewables, including wind, solar power, landfill gas, hydropower, and geothermal power.
• On an ongoing basis, convene state and local public and private leaders to discuss and implement effective renewable energy programs.

Strategic Objective 3: Support the development of conventional energy resources, especially advanced clean coal, in Appalachia to produce alternative transportation fuels, electricity, and heat.

The Appalachian Region is historically linked to the coal industry, and many states in the Region still rely economically on coal and coal-related businesses. Many Appalachian states also are home to substantial oil and gas businesses. As a result, there are still strong reasons to support fossil fuel development, particularly coal, in the Region. The future for continued coal development is known as "advanced coal," which includes integrated gasification, combined cycle, and other clean coal technologies; carbon capture and sequestration; and coal-bed and coal mine methane capture and use.

According to the U.S. Department of Energy, fossil fuels—coal, oil, and natural gas—currently provide more than 85 percent of all the energy consumed in the United States. They provide nearly two-thirds of the nation's electricity and most of its transportation fuels, as well as the raw materials for other industries, such as petrochemicals. Appalachia boasts over 3,907 million short tons of America's economically recoverable coal reserve. The Region 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. Fossil fuel exploration, extraction, processing, and distribution provide an economic boost to Appalachia in the form of jobs and taxes. In 2004, an average of 49,327 Appalachians worked directly for mines in the Region, and the oil and gas industry employs almost 17,000 Appalachian workers annually. Most of these workers are in small and independent oil and gas exploration and production companies and service firms.

The U.S. government anticipates that the nation's reliance on fossil fuels will increase in the next 20 years, despite the aggressive focus on expanding the development of renewable energy. One reason for this is that the United States has one quarter of the world's coal reserves. Due to its low cost and abundance, coal will likely continue to be the dominant fuel for electric power production in the United States for many years to come. And coal is not only a fuel, but also a feedstock that can be used to produce value-added products such as coal liquids, coal-to-process gas, and others. Coal use may also expand as natural gas costs rise and oil becomes more difficult to import.

Fossil fuels are not without their share of challenges. Carbon is released when fossil fuels are burned, and researchers in the Region are investigating clean coal processes to find ways to diminish greenhouse gas effects by reducing the amount of carbon emissions released when coal is burned, or by capturing and sequestering it before it can enter the atmosphere. At present, the technology is immature. Application of new technology is expensive, but the race is on to make it consistently and economically in anticipation of federal mandates on greenhouse gases.

In addition to pollution controls, workforce issues are an important consideration. The coal industry will need advanced skills to operate equipment and manage processes. For instance, an advanced coal facility is more like a chemical plant than a traditional coal plant. Engineers and chemists will be required for operations. As new advanced coal facilities open around the world, competition for resources and qualified workers will be great. An additional challenge is increasing public awareness of and support for advanced coal processes and applications.

The following strategies are examples of ways to support and promote the development of advanced coal and other conventional energy sources.

There is a need for further discussion on what the public-sector role is in large, mature industries working with other fossil-energy sectors in the Region, such as coal-bed methane, enhanced oil recovery, and natural gas. A few strategies stand out, including advocating for advanced conventional energy development, addressing the needs of existing electric transmission plants and energy infrastructure, and developing regulatory policies that are consistent with replacing imported energy with domestic energy.

Public-Sector Investments

• Enhance infrastructure related to advanced coal development.
• Facilitate partnerships and broker deals that promote advanced coal products and seed regional and local innovation in advanced coal.
• Support the use of a portion of coal, oil, and gas tax revenues for general economic and community development efforts in Appalachia.
• Identify coal-to-liquids and coal gasification as a national priority, to be addressed through financing and product-purchasing incentives.
• Encourage energy development as a recognized economic development activity.
• Address issues related to carbon capture and sequestration through the adoption of technologies that mitigate greenhouse gas emissions at existing energy facilities.

Research and Analysis

• Coordinate and partner with a consortium of research institutions and nonprofit organizations in Appalachia to work on clean coal technologies.
• Collect, analyze, and distribute information on the employment and economic effects of advanced coal technologies and other fossil fuel sources in the Region.
• Examine opportunities for clustering value-added industries related to advanced coal and other advanced energy and fuel technologies.

Workforce Development

• Partner with those who offer workforce training, such as community colleges, technical schools, and workforce investment boards, to develop programs for training workers in existing and emerging energy fields; specifically, work to identify future jobs in advanced coal and other fossil energy sources and develop training programs for them. This will include training a new generation of coal miners, mining engineers, oil and gas workers, and propane industry workers.
• Develop or improve energy education modules for students at all levels of education and support an emphasis on appropriate preparatory subject matter (including geology, engineering, math, and chemistry) for entering the energy field.

Public Awareness and Outreach

• Disseminate information on emerging technologies and best practices in energy.
• Disseminate material to integrate information on coal, oil, and gas extraction in elementary and secondary education.
• Partner with states and regional carbon-sequestration organizations to convene public dialogues and public outreach to explore technological aspects of geologic, terrestrial, biological, and chemical sequestration technologies.

Supportive Policy

• Pursue a multi-state initiative to examine Alternative Energy Portfolio Standards (AEPS) that might include more than renewable sources. For example, Pennsylvania's AEPS include waste coal, coal mine methane, polygeneration, and coal gasification.
• Pursue a multi-state initiative to explore regional climate change approaches. Many experts feel that it is only a matter of time before carbon and other greenhouse gasses face greater regulation in the United States. Creating such a partnership now would place the Region's industries in a favorable position when regulations are adopted. New York and Maryland are currently participating in a multi-state climate change initiative.
• Actively participate in existing carbon-sequestration regional partnerships and address gaps in current plans. Appalachian states are currently members of two such partnerships: the Southeast Regional Carbon Sequestration Partnership includes Alabama, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee, and Virginia ; and the Midwest Regional Carbon Sequestration Partnership includes Maryland, Ohio, Pennsylvania, Kentucky, and West Virginia.
• Establish policies that encourage the development of clean coal technologies, such as integrated fluid bed combustion, and the infrastructure, such as electric transmission lines, needed to support this development; this can include helping facilitate permitting processes, compiling information needed to site projects, and providing utility regulation flexibility to allow such plants to be financed.



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