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Appendix B |
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Arizona Energy Outlook
2010: |
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Executive Summary |
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The state of Arizona has long been noted for its sunny days, dry, warm climate, and scenic beauty. The Grand Canyon, deserts, mountains, rivers, and attractive business climate make the state a very popular tourist destination and a desirable place to live, work, and retire. As a result, the state is experiencing startling population and job growth, and the economy is thriving. This growth and economic prosperity is shaping a growing demand for energy. |
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The access to quality energy resources ensures the availability of adequate power to drive the state's industrial processes, electricity to provide light and water to homes and businesses, and fuels to transport both people and goods throughout the world. Yet Arizona's most significant resources - energy efficiency and solar energy technologies - are relatively untapped. |
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A recent study by the National Renewable Energy Laboratory notes, for example, that Arizona has one of the best markets in the nation for cost - effective customer - sited photovoltaic systems. Moreover, the state has a high-technology manufacturing capacity that is well-above the national average, and the financial resources to support new industrial initiatives. Combined, these and other factors make Arizona a prime area for developing the manufacturing capacity to produce its own renewable energy technologies. Hence, Arizona is poised to take advantage of its renewable energy resources and the many associated job and economic development benefits. |
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At the same time, energy that is inefficiently used will constrain Arizona economy. Conversely, energy efficient technologies will lower energy bills for residents and increase the productivity of Arizona businesses. The lower energy bills and higher productivity levels, in turn, will promote overall economic efficiency in ways that create new jobs in the state. Moreover accelerated investments in both energy efficiency and renewable energy technologies will enhance Arizona's air quality. Such investments will also diversify the mix of energy resources available to homes and businesses to ensure a stable and reliable resource base to meet future energy needs. Finally, new investments in energy efficiency and renewable energy technologies will encourage the development of new clean technologies and industries in Arizona. |
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In 1994, Arizona consumers and businesses spent approximately $7.5 billion to provide for their overall energy needs. This total is 33 percent more than the combined annual tax collections authorized by the Arizona legislature during that same year. Many community and business leaders are looking for ways to use state tax dollars more efficiently, yet few think about energy expenditures as a source of inefficiency. The size of the state's total energy bill suggests that Arizona consumers and businesses may also want to explore ways to use energy more efficiently. |
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Growing uncertainty about the economy and concern for continued environmental degradation are stimulating greater interest in energy efficiency and renewable energy technologies throughout the world. Largely due to significant increases in energy consumption, energy expenditures, and the resulting impact on the environment, interest in energy efficient technologies grows in spite of dramatic reductions in real energy prices in the past decade. Policy analysts and business leaders are looking at more productive strategies to meet the nation's economic needs, but to do so in a way that enhances environmental benefits. Energy efficiency and renewable energy technologies offer Arizona one such opportunity. |
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This report examines the current energy consumption patterns and expenditure within the Arizona economy. It projects what "business-as-usual" energy patterns might look like through the year 2010. The findings suggest that by 2010 the state will be almost 15 percent more efficient in how it uses energy (compared with 1994) to support a dollar of economic activity (measured as gross State Product). But the findings also show that total energy consumption will increase by 35 percent as a result of a rapidly expanding population and a growing economy. |
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The study then analyzes the economic benefits of an accelerated investment in energy -efficient and renewable energy technologies. The energy efficiency target evaluated in this study is the level of investment needed to create an economy that is almost 26 percent more efficient by the year 2010. This target is somewhat lower than the 30 percent target suggested by the Energy Policy Act, first enacted by Congress and signed by then - President George Bush in October 1992, but represents a more realistic short-term target for Arizona. Although the federal target is not a mandate, it is a reasonable objective to encourage the aggressive development of a more energy-efficient economy whenever cost-effective technologies are available to ratepayers and businesses. |
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The findings of the study suggest that Arizona has made important strides in reducing the inefficient use of energy, especially in the period 1977 to 1987. But there is a larger opportunity available for the state's economy. More important, the untapped potential of energy efficient and renewable energy technologies represents a critical economic development strategy for Arizona. This study provides a benchmark to understand the economic potential that clearly exists in Arizona from adopting and actively pursuing an energy future which incorporates energy efficiency and renewables. |
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The study paints two pictures of Arizona. The first, follows a "business as usual" energy course. The second, identifies an "alternative energy Arizona" which, in the year 2010, pays approximately $1.4 billion less in energy bills, has 11,100 more jobs, and enjoys a cleaner environment. Hence, increased investments in both energy efficiency and renewable energy technologies are important steps toward promoting a sustainable energy future for Arizona. More specific findings of the report include: |
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In 1994, Arizona consumed a total of 1,033 trillion Btus of energy for all end-uses, the latest year for which energy consumption data are available. That level of consumption represents a per capita consumption of 254 million Btus. If we were to think of this energy use in terms of an equivalent amount of gasoline, the Arizona economy annually consumes the heat equivalent of just over 2,000 gallons of gasoline per capita to maintain the economic well-being of each of its residents. |
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Under the baseline projections, Arizona's economy - represented by the change in Gross State Product (GSP) - will grow from $89.4 billion in 1994 to $141.5 billion in 2010 (measured in constant 1996 dollars). This is a 58 percent growth in GSP in that period. At the same time, the number of Btus of energy needed to support a dollar of GSP will decline by only 15 percent under the business-as-usual projection. This implies that total energy consumption will increase 35 percent to 1,395 trillion Btus in the year 2010. |
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The accelerated energy efficiency and renewable energy scenario outlined in this study would lower the number of Btus needed to support a single dollar of Arizona GSP by another 11 percent -- from a 15 percent decline in the baseline projection to a 26 percent decline in the alternative energy scenario. This combination of factors would lower Arizona's energy requirements to 1,216 trillion Btus. This change represents a 13 percent reduction in total energy consumption over the baseline energy projections for the year 2010 -- without reducing either the services or standard of living for Arizona residents and businesses. |
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Under the alternative energy scenario for the year 2010, new energy efficiency investments would provide 179 trillion Btus of energy savings while new renewable energy technologies would provide another 5.6 trillion Btus. Arizona ratepayers in 2010 would save approximately $ 1.4 billion in lower energy costs. Energy efficiency and renewable energy investments, on the other hand, would require a total of $461 million from residents and businesses in 2010. Net energy bills, therefore, would decline by approximately $952 million in 2010 (in 1996 dollars). |
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The energy efficiency and renewable energy scenario would require a $4.8 billion (in 1996 dollars) cumulative investment in the years 1998 through 2010. This relatively small level of investment (less than 0.3 percent of Arizona's cumulative GSP in that same period) can be achieved by redirecting technology investments toward more productive energy efficiency investments and a mix of renewable technologies. This includes $4.1 billion for efficiency in all end-use sectors, and $700 million for electricity generating renewables. |
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If successful, Arizona ratepayers would enjoy a cumulative energy bill savings of almost $9.2 billion over that same period of time. With all values in 1996 dollars, the energy efficiency and renewable energy scenario generates a positive benefit-cost ratio of 1.92 over the 13-year period of analysis. But even this value understates the cost-effectiveness of the alternative energy investments since the energy savings and environmental benefits will continue for many years after the year 2010. |
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New investments in energy efficiency and renewable energy technologies would increase Arizona's employment base -- from a net increase of 900 jobs in the year 2000 to a net gain of 11,100 jobs by the year 2010. |
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In 2010, renewable electricity generation accounts for 15 percent of total electricity consumption. This includes the expansion of existing hydro resources and a mix of new renewable energy technologies. The new mix of renewable energy technologies, providing an estimated 534 million kilowatt-hours (kWh) account for 1 percent of total electricity consumption in 2010. |
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The rise in employment in year 2010, driven largely by an increase in net energy bill savings, is equivalent to the number of jobs supported by the expansion or relocation of almost 90 small manufacturing plants in Arizona. Total wage and salary compensation would similarly rise by a net of $233 million by 2010 (in 1996 dollars), the equivalent of tourist expenditures from approximately 1.5 million Arizona visitor days. |
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While the average wage would fall by about $27 per job in 2010 under the alternative energy scenario (the result of a slightly larger increase in the number of jobs relative to the rise in wage and salary compensation), the cost of living would also fall by an average of $161 per job. Hence, Arizona's overall standard of living would be expected to increase by an average of $133 per job, or $ 195 per household by the end of the study period. |
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The alternative energy scenario examined in this study is aggressive and at the same time achievable. In fact, other studies suggest that additional gains in cost-effective energy efficiency improvements and greater use of renewables are highly possible. If these additional savings are pursued, the net return would extend the energy and economic benefits described in this analysis. Furthermore, if Arizona is able to develop a renewables manufacturing industry capable of producing 50 MW by 2010 -- to meet in-state renewable electricity generating needs and take advantage of growing export opportunities -- the market potential will be $115 million in 2010 and generate 1,100 new jobs in that year. |
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The next two pages of graphs, tables, and charts are unable to be reproduced due information formatted from a scanned document. Contact Docket Control for hard copies at 602-542-3477 |