Sustainable Development
Arizona Solar Energy and Economics Outlook
By George Frisvold, William P. Patton, and Stan ReynoldsPrepared for Arizona Solar Energy and Economics Summit
January 09, 2009
Executive Summary
This report examined the potential to develop solar power generation in Arizona and the economic and sustainability implications of its deployment.
- Arizona Solar Potential
- Cost Competitiveness of Solar Power Units
- Economic Impact of Solar Power Development
- Capital Investment
- Economic Impact of Construction
- Economic Impact of O&M Activities
- Sustainability of Solar Power
- Conclusion
Arizona Solar Potential
The report found that there is a huge potential for solar power development in Arizona due to its vast land availability, its intense solar radiation resources and the State’s goal of accelerating renewable energy development through incentives and ACC mandated Renewable Energy Standards (RES). The levelized cost of solar energy in Arizona is much lower than it is in most other parts of the U.S. due to the abundant solar radiation and sunny climate. The land and water resources in Arizona are sufficient to support the amount of solar generation that would be required to meet the RES requirements for the next twenty years.
Cost Competitiveness of Solar Power Units
The levelized cost of energy was calculated for several solar reference units including: residential and commercial photovoltaic (PV) systems, and large scale PV and concentrating PV systems. It was also calculated for large scale solar thermal units including: solar parabolic troughs, solar parabolic dishes and central solar towers.
The report concluded that subsidies are still required to make solar power cost competitive with conventional generation systems. However, future reductions in solar equipment manufacturing costs and increases in solar system efficiencies will continue to make solar power even more cost competitive in the future.
The competiveness of solar electricity could be greatly improved by future spikes in the prices of fossil fuels used in generation since solar power has no fuels costs. In addition, coal generation could be negatively affected by restrictions on greenhouse gas emissions or taxes on emissions. This would make solar power even more competitive since it does not emit significant levels of greenhouse gases. Solar electricity production revenue could potentially be enhanced by selling carbon credit to other companies.
Economic Impact of Solar Power Development
The economic impact of solar power development in Arizona was estimated for both the construction phase and the operation and maintenance phase of the solar generation life cycle.
The economic impact of the solar power industry is driven by construction capital investment and by O&M expenditures. These, in turn, are determined by the rate at which solar capacity is added to the market and by the cumulative amount of operating solar generation capacity.
Solar Power Generation Capacity
Annual solar power generation will steadily increase from 32,300 MWh in 2010 to 9,544,100 MWh in 2030. This amount of production will require the construction of 4,340 MW of cumulative solar generation capacity by 2030. From 2025 to 2030, all of the incremental renewable energy requirements will be filled by solar power.
Capital Investment
Starting in 2010, the annual amount of capital investment will rise dramatically from $84 million in 2010 to a peak of $2.5 billion in 2025. By 2030 the annual rate of capital investment drops to about $1.1 billion. In total, the construction of solar power plants to meet the ACC RES requirements will cost around $22 billion in cumulative capital expenditures by 2030.
Economic Impact of Construction
The massive level of solar power plant construction over the next 20 years generates the lion’s share of solar power’s economic benefits in terms of employment, wages and value added. The O&M phase of the solar generation process adds very little economic impact in Arizona.
The annual amount of direct labor used on solar construction and installation projects will increase from 565 jobs in 2010 to a peak 16,530 jobs in 2025. The total amount of jobs created (including direct, indirect and induced jobs) increases from 1,068 to a maximum of 32,082 over the same period.
The cumulative impact of direct construction employment amounts to 142,368 man-years of direct employment by 2030. The cumulative total construction employment amounts to 277,759 man-years by 2030. Since these construction jobs only last a year and are not permanent, the cumulative employment represents man-hours of effort over the twenty year period, not total construction jobs at the end of the period.
The amount of wages generated by solar power construction and installation will be significant. The total annual wages (direct, indirect and induced) will rise from $51 million in 2010 to a peak of $1,560 million in 2025. The cumulative value of wages over the period 2010 to 2030 amounts to $13.5 billion.
The value added created by solar power construction and installation will also be significant. The total annual value added (direct, indirect and induced) increases from $74 million in 2010 to a peak of $2,240 million in 2025. The cumulative amount of wages from 2010 to 2030 amounts to $19.4 billion.
Economic Impact of O&M Activities
The amount of permanent jobs created from solar power O&M activities is insignificant compared to those created in the construction process. The O&M direct jobs added each year, rises from 2.5 in 2010 to a peak of 50 in 2025. Total employment (direct, indirect and induced) added each year increases from 3 in 2010 to a peak of 87 in 2025.
Cumulative O&M employment will result in a total of 809 direct permanent jobs by 2030. The total number of cumulative permanent jobs will be 1,198 in 2030.
The total (direct, indirect, and induced) incremental annual wages generated by ongoing solar O&M activity increases from $200,000 in 2010 to a peak of $8 million in 2025. The cumulative wages from 2010 to 2030 amount to $65 million.
The total (direct, indirect, and induced) incremental value added generated by ongoing solar O&M activity increases from $400,000 in 2010 to a peak of $6.6 million in 2025. The cumulative wages from 2010 to 2030 amount to $128 million.
Sustainability of Solar Power
The amount of water used for solar power production is insignificant. Compared to irrigation use, solar demand is less than 0.25 percent of agricultural applications, by 2030. It is only after 2015 that statewide solar water demand exceeds that of one average water-using farm. By 2030, solar demand is projected to be equivalent to about 6 average water-using farms.
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The amount of land needed by the solar power industry is readily available in Arizona. In 2030, the solar power industry would require 13,137 acres or 20.5 square miles of land to produce the amount of electricity required to support the ACC RES.
Solar power production emits virtually zero greenhouse gases. Substitution of solar electricity for fossil fuel generated electricity would beneficially lower the amount of greenhouse gases released into the Arizona environment.
Conclusion
The expansion of solar electric production in the State of Arizona will create economic and environmental benefits for the State of Arizona. The potential for expanded solar power production is massive. The solar resource quantity and quality in Arizona is higher than in most other regions in the U.S., makes it less expensive to produce electricity than it is in other states. In addition, the land and water resources needed to support solar electricity production are available in sufficient qualities. Large tracts of contiguous level land are available from the Bureau of Land Management, Arizona State Land Trust and Native American Reservations. Even though solar power is not a relatively large water user, water is available in many of the prime areas for solar power production.
The construction of solar power plants will have a significant impact on the state’s economy over the next twenty years in terms of employment wages and value added. However, the operation of those generating plants once they are online will have very little economic impact.
The expansion of solar power production will have a significant benefit on Arizona sustainability. Increased solar production in Arizona will have a positive environmental impact. It will lower the level greenhouse gas emissions. This will result in improved air quality and help to mitigate the potential for climate change.
It will have minimal impact on water use and many of the preferred sites occur in areas of the state that have sufficient water supplies. Although It requires a large amount of land use, but there is enough land available to easily accommodate solar power land needs.
Development of Arizona’s solar energy resources will have a positive social impact, as well. It will reduce impact of disruptions to the supply of conventional energy sources and reduce the impact of significant increases in the cost of conventional fuels
In conclusion, development of solar energy resources will support the growth of the Arizona population and economy on a more sustainable basis.
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