National Renewable Energy Laboratory 

Innovation for Our Energy Future 

A national laboratory of the U.S. Department of Energy

Office of Energy Efficiency & Renewable Energy

NREL is operated by Midwest Research Institute ● Battelle Contract No. DE-AC36-99-GO10337 

Comparing Statewide Economic 

Impacts of New Generation from 

Wind, Coal, and Natural Gas in 

Arizona, Colorado, and Michigan 

S. Tegen 

Technical Report 

NREL/TP-500-37720 

May 2006 
Comparing Statewide Economic 

Impacts of New Generation from 

Wind, Coal, and Natural Gas in 

Arizona, Colorado, and Michigan 

S. Tegen 

Prepared under Task No. WER5.6103 

Technical Report 

NREL/TP-500-37720 

May 2006 

National Renewable Energy Laboratory 

1617 Cole Boulevard, Golden, Colorado 80401-3393 

303-275-3000 • www.nrel.gov 

Operated for the U.S. Department of Energy 

Office of Energy Efficiency and Renewable Energy 

by Midwest Research Institute • Battelle 

Contract No. DE-AC36-99-GO10337
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Table of Contents 

Abstract............................................................................................................................... 1 

Summary............................................................................................................................. 1 

Introduction and Background ............................................................................................. 2 

Existing Research........................................................................................................ 3 

Goal and Scope ........................................................................................................... 4 

Methodology....................................................................................................................... 5 

Components of the Estimated Direct Economic Impacts................................................... 5 

Construction................................................................................................................ 5 

Financing..................................................................................................................... 6 

Operations and Maintenance....................................................................................... 6 

Fuel Extraction and Transport .................................................................................... 7 

Landowner Revenue ................................................................................................... 7 

Property Taxes............................................................................................................ 8 

Sales Tax................................................................................................................... 10 

Discount Rate............................................................................................................ 10 

State Specifics................................................................................................................... 10 

Arizona...................................................................................................................... 11 

Colorado.................................................................................................................... 12 

Michigan ................................................................................................................... 13 

Assumptions...................................................................................................................... 14 

Results............................................................................................................................... 17 

Individual State Results.................................................................................................... 19 

Colorado Results and Specific Sensitivities ............................................................. 20 

Sensitivity Analyses.......................................................................................................... 24 

Lessons Learned................................................................................................................ 26 

Conclusion ........................................................................................................................ 28 

Acknowledgments............................................................................................................. 28 

References......................................................................................................................... 29 

Bibliography ..................................................................................................................... 31 

Personal Communication.................................................................................................. 32 

i
Figure 1. Prediction of annual electricity sales from 1970 – 2025 by the Department of 

Energy’s Energy Information Administration (released February 2005)......... 2 

Figure 2. Construction lead time for coal, gas, and wind plants...................................... 6 

Figure 3. Arizona’s coal-producing area. Source: EIA, 1999........................................ 11 

Figure 4. Arizona’s electricity mix. Source: EIA, 2000................................................. 11 

Figure 5. Colorado’s wind resource at 50 meters. Source: NREL, 2004....................... 12 

Figure 6. Colorado’s electricity mix. Source: EIA, 2000............................................... 12 

Figure 7. Michigan’s gas and oil production fields. Source: Michigan Economic 

Development Corporation, 2000..................................................................... 13 

Figure 8. Michigan’s electricity mix. Source: EIA, 2000 .............................................. 14 

Figure 9. Natural gas transmission line capacities. Source: EIA, 2000 ......................... 15 

Figure 10. Average weekly coal spot prices ($/ ton) from May 2002 through April 2005. 

Source: EIA..................................................................................................... 16 

Figure 11. U.S. natural gas spot prices from 2000 to 2006 in $/ thousand cubic feet.

Source: EIA..................................................................................................... 17

Figure 12. Base case scenarios of economic impact from new power plants in Arizona, 

Colorado, and Michigan.................................................................................. 18 

Figure 13. Dollars spent on new electricity generation from coal, gas, and wind in 

Arizona............................................................................................................ 19 

Figure 14. Dollars spent on new electricity generation from coal, gas, and wind in 

Colorado.......................................................................................................... 19 

Figure 15. Dollars spent on new electricity generation from coal, gas, and wind in 

Michigan ......................................................................................................... 20 

Figure 16. Colorado vs. out-of-state impacts from new electricity generation................ 21 

Figure 17. Direct impact to Colorado economy from a new coal plant, with uncertainty 

bars.................................................................................................................. 22 

Figure 18. Spending in Colorado for a new natural gas plant, with uncertainty bars...... 23

Figure 19. Spending in Colorado for a new wind power plant, with uncertainty bars..... 23

Figure 20. Sensitivity scenario: 100% of coal is from Colorado mines........................... 25 

Figure 21. Sensitivity scenario: 66% of natural gas is from Colorado............................. 25 

Figure 22. Total impacts (in and out-of-state) for a new Colorado coal plant, with and 

without a discount rate of 5% ......................................................................... 26 

Figure 23. Total impacts (in-state and out-of-state) for a new Colorado coal plant, with 

and without a discount rate of 7%................................................................... 26 

Table 1. Energy Equivalents.............................................................................................. 3 

Table 2. Dollars Spent in Colorado from 270 MW New Energy Output over 20 Years. 20

Table 3. Direct Economic Benefits from New Coal Generation ..................................... 22 

Table 4. Direct Economic Benefits from New Natural Gas Generation.......................... 22 

Table 5. Direct Economic Benefits from New Wind Generation 

(635 1.5-MW turbines) ...................................................................................... 23 

ii
Abstract 

With increasing concerns about energy independence, job outsourcing, and risks of 

global climate change, it is important for policy makers to understand all impacts from 

their decisions about energy resources. This paper assesses one aspect of the impacts: 

direct economic effects. The paper compares impacts to states from equivalent new 

electrical generation from wind, natural gas, and coal. Economic impacts include 

materials and labor for construction, operations, maintenance, fuel extraction, and fuel 

transport, as well as project financing, property tax, and landowner revenues. We 

examine spending on plant construction during construction years, in addition to all other 

operational expenditures over a 20-year span. Initial results indicate that adding new 

wind power can be more economically effective than adding new gas or coal power and 

that a higher percentage of dollars spent on coal and gas will leave the state. For this 

report, we interviewed industry representatives and energy experts, in addition to 

consulting government documents, models, and existing literature. The methodology for 

this research can be adapted to other contexts for determining economic effects of new 

power generation in other states and regions. 

Summary 

This paper compares direct spending in Arizona, Colorado, and Michigan on the new 

construction and operation of three types of power plants: wind power, a natural gas 

combined-cycle baseload plant, and a coal-fired power plant. We follow the flow of 

money for each new plant and measure which dollars would be 

spent in Colorado (for example, dollars paid to a Colorado 

company to purchase concrete for a plant foundation or dollars 

spent on Colorado concrete workers’ salaries). To reach a fair 

comparison, spending is calculated based on the same amount of 

energy generated by each plant—approximately 2,000,000 

megawatt-hours (MWh) per year.1

 This amount of electricity 

would be generated by a 270-megawatt (MW) natural gas plant 

with an 87% capacity factor. Rated capacities of the coal and wind 

plants were adjusted so that they would generate the energy 

equivalent to the gas plant. The coal plant would be 280 MW in Arizona and Colorado 

but 300 MW in Michigan (VanderVeen 2005).2

 The wind plant capacity will vary in each 

state according to the wind regime. The components of each power plant included in this 

analysis are parts and labor for construction, operations and maintenance (O&M), fuel 

extraction, and fuel transport, in addition to money spent on financing, landowner 

royalties, and property taxes. 

Research components: 

o Construction 

o Operations and 

maintenance 

o Fuel extraction 

o Fuel transport 

o Land leases 

o Financing 

o Property taxes

 

1

 In this study, coal, gas, and wind comparisons are based on an equivalent amount of energy produced. 

Each resource will produce the equivalent energy from a 270-MW natural gas plant with a capacity factor 

of 87%. To equal the output of the gas plant, this means that a coal plant with an 80%-85% capacity factor 

will need 280 MW of generating capacity, and wind farms with a capacity factor of 25%-35% will need 

680 MW-900 MW. Capacity factors for wind were determined by aggregate data from developers in each 

state. 

2

 According to the assumption in the VanderVeen report for the Michigan Public Service Commission that 

a coal plant will have the capacity factor of 80% versus 85% in Colorado and Arizona. 

1
Of the various impacts to the state economy involved in power generation over 20 years, 

each state has varied results that show equivalent generation of wind power will bring the 

highest direct economic benefit to the state. Tax revenue (especially for wind plants) 

plays a significant role in the benefits to the state’s economies because a larger tax base 

makes it possible to provide more funding for public goods, such as parks, roads, and 

schools. If power plant owners negotiate a deal with localities in which they build so that 

they are exempt from property and sales taxes, the local economy may benefit from some 

job creation or fuel sales, but it will not receive what can be very significant property tax 

benefits over the life of the plant. As shown in the results, much of the labor force for 

plant construction, as well as for operations, is often brought in from outside each state. 

When the labor forces for construction or fuel transport come from within the state’s 

borders, economic impacts can be considerable, regardless of where the fuel is initially 

extracted. Of course, if coal or gas comes from the same state where the power plant is 

located, the economy is more likely to benefit from the sale of the fuel. 

Results are based on the best available data from industry and government sources. 

Examples of uncertainties in the data are represented for each generation technology in 

the Results section of this paper. The methodology detailed in this report is useful for 

researchers in regions where there are questions about which energy source to build next 

and which generation source most benefits the local economy. Results may also help 

inform decision-makers who want to maximize benefits to their state by providing an 

energy-equivalent method of comparison. 

Introduction and Background 

In the United States, the need for additional electricity generation continues to increase 

due to the growing population and demand from energy consumers. The Department of 

Energy predicts that this growth will continue (Figure 1). 

Figure 1. Prediction of annual electricity sales from 1970 – 2025 by the Department of 

Energy’s Energy Information Administration (released February 2005) 

2
With a growing focus on domestic power resources for energy independence and the 

need for new employment opportunities, it is important for decision-makers to understand 

the economic impacts of energy generation sources on their local economy. For example, 

when a new power plant is built, laborers will be needed to pour the concrete for the 

foundation of the plant. If the workers come from within the state, this new project will 

contribute to the state’s economic well-being by paying state residents. 

This paper compares the flow of money into and out of states from three potential sources 

of new electricity production. We examine the impact of developing three new 

hypothetical power plants to produce electricity from coal, natural gas, and wind. We also 

explore how much money each new plant would contribute to Colorado’s economy by 

adding labor from Colorado, equipment sold in Colorado, landowner payments, and 

property taxes. As indicated in Table 1, coal, gas, and wind comparisons will be based on 

the amount of energy produced.3

 

Table 1. Energy Equivalents 

Capacity Factor Equivalent MW Needed MWh Produced per Year 

Coal 80%-85% 280 - 300 ~ 2,084,880 

Gas 87%4 270 ~ 2,057,724 

Wind 25%-35% 680 - 900 (1.5-MW turbines) ~ 2,084,880 

The equivalent megawatts are determined by multiplying the capacity by the capacity 

factor by the number of hours in a year. For example: 

270MW x 0.87 x 8760 hrs/year = 2,057,724 MWh. 

The results of this study may be used in policy analysis for issues such as potential 

renewable portfolio standards and system benefits charges or in decisions based on 

maximization of economic benefits to states from their natural resource potential. Results 

also indicate how much the specific components of new energy generation will benefit 

the states’ economies. 

Existing Research 

Many informative studies about the impacts of electricity production have been 

performed, including an examination of which energy sources create the most jobs or 

produce the greatest advantages for consumers or the environment (Madsen et al. 2002; 

National Wind Coordinating Committee 1997; Clemmer 2001; Goldberg et al. 2004; 

Kaas Pollock and Gagliano, 2004; Regional Economics Applications Laboratory 2001; 

Wind Energy Creates 1995). The body of literature about wind’s economic development 

impacts and the uncertainty of gas pricing is growing (Wiser and Kahn 1996), as well as 

 

3

 Energy from each source is an estimate of potential generation for comparison purposes and is 

independent of operational constraints, including those that might be driven by changes in fuel prices. 

4

 87% is the highest capacity factor given to a natural gas power plant by the Energy Information 

Administration. This is used as a basis for comparison. Currently, natural gas prices are too high to make 

construction of a baseload natural gas plant economically feasible, but prices of gas and other resources 

will vary in the future. This study does not consider costs to consumers, but it should be noted that at 

present fuel prices, an 87% capacity factor is unlikely. 

3
several modeling tools to calculate economic impacts (Goldberg et al., 2004; Costanti 

2004). The methodology for this report was initially developed for a paper describing the 

economic benefits to Colorado published in the Global WINDPOWER 2004 conference 

proceedings (Tegen 2004). But a comparison of multiple states’ resources and their direct 

economic impacts from sources of new utility-scale generation has not been conducted. 

Unlike other work, this study compares direct impacts specific to statewide economies. 

Wherever possible, data were gathered from state-specific energy companies5

 and energy 

experts, instead of using national averages and extrapolating costs for each component. 

Goal and Scope 

The scope of this project is the measure of direct economic impacts from new sources of 

electricity. In other words, we calculated how much money will be spent in each state for 

salaries, purchasing materials, land revenues, financing, and taxes when new power 

plants are built and operated. For each resource, the study compares the following 

components of new electricity generation: 

• Materials and labor for construction 

• Materials and labor for O&M 

• Materials and labor for fuel extraction (gas well or coal mining) 

• Materials and labor for fuel transport (including railroads, shipping, and gas 

pipelines) 

• Project financing 

• Landowner revenues 

• Property taxes 

When analyzing direct economic impacts of coal, we include parts and labor for coal 

mining and coal transport (from the mine to the power plant by railroad or ship) under the 

fuel component for each state analyzed. For natural gas, we include parts and labor for 

gas extraction at the wellhead and parts and labor for gas pipeline costs. This research 

does not include indirect or induced effects of energy production (e.g., plant construction 

worker’s hotel bills).6

 The new power generation facilities are assumed to be grid 

connected. Other assumptions are found in the Assumptions section. 

The primary goal of this research is to provide a careful state-specific comparison of the 

money flow from new power generation. Project results are not meant to represent 

national averages or economic impacts in other locations. However, strategies and 

models for data gathering used in this study will be helpful for others working on similar 

projects (see Lessons Learned). It is important to remember that data for this paper were 

gathered in early 2005 and that the results presented here reflect these inputs. The 

 

5

 Companies include developers, utilities, municipalities, private wind generators, pipeline companies, coal 

railroad companies, and energy-equipment companies. 

6

 Indirect effects are additional economic activities stimulated by direct spending associated with power 

plant construction and operations (e.g., hotel revenue from out-of-state workers). Induced impacts are 

increases in economic activity associated with increased disposable income created by power plant 

constructions, operations, and other power plant spending (e.g., increased spending on clothing due to 

increase in family incomes from power plant work salaries). 

4
purpose of this paper is to introduce a useful methodology. When utilizing this 

methodology in the future, inputs should be changed to reflect the most current data 

available. 

Methodology 

The methodology for this project includes a number of data-gathering techniques. In 

addition to the aforementioned interviews with analysts, government energy offices, and 

industry contacts, we also conducted literature searches. We used the BaseCase database 

from Platts, a division of the McGraw-Hill Companies, Inc., and the jobs and economic 

development impacts (JEDI) economic development analysis tool for wind projects from 

the National Renewable Energy Laboratory (NREL).7

 After sufficient economic data 

were gathered for the chosen energy sources, we sent the assumptions to energy experts 

for each resource and compiled in a spreadsheet format most useful for comparisons of 

each power source. 

For each component of the study (e.g., labor for natural gas extraction), we compared the 

best-estimate value based on $/kilowatt-hour (kWh).8

 Next, sensitivity analyses were 

performed to determine how much higher and how much lower the dollar value could 

potentially be. For example, if some industry reports conclude that average annual O&M 

costs for natural gas are $15.50/kilowatt (kW, nameplate capacity), but reliable models 

report that the same costs are $27/kW, it is necessary to conduct further analysis and 

determine high and low ranges around a best-estimate dollar amount. Each component of 

this study is represented by a best-estimate cost with a range of uncertainty above and 

below it, when applicable. It is necessary to explain each dollar category or “component” 

so that the scope, assumptions, and uncertainties are clear when viewing the project 

results. 

Components of the Estimated Direct Economic Impacts 

Construction 

For each energy resource, we conducted many interviews to determine prices of new 

construction. We assumed that construction would begin in 2005. Interviews were 

primarily with industry contacts or from each state’s energy experts. In Michigan, we 

relied on experts and the Michigan Public Service Commission’s current reports. The 

construction component includes the capital cost of equipment as well as overhead, legal 

and permitting costs, and engineering. It also includes the cost of land, except for annual 

land-lease payments (e.g., to farmers paid for wind turbines on their land). The 

construction phase of a new power plant will vary for each generation technology. 

Constructing a coal plant of this size can take 3 to 6 years, whereas natural gas plants 

typically take 1.5 to 2 years, and wind plants can take between 6 months and 1 year to 

develop. Wind generation of such large size would likely take about 1 year. 

 

7

 An easy-to-use tool to analyze potential jobs, economic development, and impacts from wind 

development. www.windpoweringamerica.gov/filter_detail.asp?itemid=707 8

 Some costs are typically reported in $/kW or $/megawatt, but we used a $/kWh calculation for a fair 

comparison. 

5
1

2

5

20

20

20

Wind

Gas

Coal 

Construction Operation

Figure 2. Construction lead time for coal, gas, and wind plants 

Financing 

It is unlikely that an in-state bank would finance a utility-scale power plant project. Local 

banks are increasingly willing to finance new wind projects, but those projects are usually 

much smaller than 280-MW projects (typically 50 MW or less). A variety of financing 

techniques exist for power plants, but this study assumes financing by a utility or large 

bank. Options for funding a wind project are expanding, and there are examples of 

community-financed projects in which community members own the project or team with 

larger corporations to fund a wind project. In the latter case, known as the “flip” model, a 

corporation owns the wind project for the first 10 years while realizing tax incentives and 

then “flips” ownership to the local community. There are many options for funding wind 

generation. For this study, whether the project is financed in state and by what amount 

are important elements. We assumed that none of the financing for new power generation 

would be from within the states, based on interviews with Colorado lenders. Researchers 

may choose to use this methodology with the flip model or other community financing 

options and learn how in-state benefits are increased. 

Operations and Maintenance 

O&M spending from a new power plant includes unscheduled but routine maintenance, 

preventive maintenance, and costs of scheduled major overhauls. Some O&M estimates 

also include property tax and landowner payments, but this study separately examines 

those and does not incorporate them under this heading. O&M spending was difficult to 

determine for natural gas, whereas the energy community agreed on coal and wind O&M 

spending. Dollars spent for natural gas O&M ranged from $7.6/kW to $20/kW. We used 

$10-$14, depending on state data, for our average because it is from actual recent power 

plant figures (BaseCase). We used actual data from new power plants whenever possible 

and spoke with representatives from each energy generation source to determine the 

breakdown between parts and labor. In most cases, industry employees agreed that labor 

(not materials) is the much larger component of O&M costs (between 70% and 99%). 

One developer said labor might only comprise 60%, but most agreed it was a higher 

percentage. Variations are reflected in sensitivity analyses. 

6
Fuel Extraction and Transport 

This study includes the extraction of gas and coal from the well or mine and the transport 

by pipeline or railroad to the utility’s power plant. We spoke with representatives from 

the railroads and pipeline industries to obtain breakdowns of fuel costs (extraction vs. 

transport and labor vs. parts). Breakdowns for coal vary greatly. For example, if the coal 

is from Colorado, most of the direct dollar outflow for transport will also be by Colorado 

laborers, and this makes a significant difference in the results. In Michigan, none of the 

coal is from Michigan coal mines, but a large coal transport industry (rail and ship) is 

based in Michigan; thus some of the direct expenditures for transporting the imported 

coal will benefit Michigan’s economy. 

Using this scope of work, wind power has no economic benefits in the category of fuel 

extraction because the wind is free. Of course, having zero fuel costs could be viewed as 

a cost advantage for utilities and their customers, but this study considers the state 

economy’s overall impact from new power generation, not utility or customer costs or 

prices. 

Landowner Revenue 

In this study, landowner revenues for power generation apply only to wind power 

development. Studies show that the most common way for utilities to add wind to their 

resource portfolios is to purchase generation from private companies instead of owning 

and operating wind farms (Wiser and Kahn 1996, p.1). This means that the electric output 

from a privately owned wind farm, such as the wind farm in Lamar, Colorado, is sold to 

investor-owned utilities (IOUs) under long-term contracts. The company that owns the 

wind farm usually leases land for its turbines from rural landowners, who are typically 

farmers or ranchers. Wind developments are sited in rural areas for various reasons, 

including wind speeds and site selection processes. Annual payments range from $1,500 

to $6,000 per wind turbine per year, depending on individual contracts and size of 

turbines.9

 Land leases can be structured in several ways. The most common in the wind 

industry is to base lease payments on a percentage of gross revenue from wind power 

production. Normally, a guaranteed minimum annual payment is included in a lease to 

cover periods in which the project may be inoperable (National Wind Coordinating 

Committee). Some landowners choose to accept payments per turbine instead of 

payments based on gross revenue so that they are assured a set income. 

It is possible for a utility to own the entire wind project and make payments to farmers 

directly or even to buy the land outright. In another situation, an outside company, either 

a utility or non-utility, could purchase land for wind turbines up front and therefore not be 

required to make land payments to landowners after the initial payment. These cases are 

unlikely but possible. 

 

9

 Net landowner revenues: landowners must calculate their cost of lost productivity and subtract it from 

their income per turbine. Ranchers are usually not affected because animals can graze among installed 

turbines. A Pacific Northwest study shows that farmers gain approximately 85% of their gross revenue 

when land loss is figured in. 

7
For coal and gas plants, power plant owners usually purchase their land and include this 

under their construction costs. Much less land is needed for a coal or gas plant than for a 

wind farm, considering different technologies and the 25% to 35% assumed capacity 

factor for wind compared to much higher capacity factors for fossil-fuel generation.10 The 

larger amount of land required for wind projects benefits rural landowners in the form of 

landowner payments. Although wind plants need access to large land areas, they only use 

a small fraction for roads, turbine foundations, and electric equipment. More than 90% of 

the land used for a wind farm can still be used for crops or grazing. 

Property Taxes 

As mentioned, wind power requires much more land than either a natural gas or a coal 

plant. More than 400 1.5-MW turbines are required to produce the energy equivalent to a 

270-MW natural gas plant with a capacity factor of 87%. Utilities and plant owners may 

be exempt from property taxes depending on contract negotiations or state incentives. 

However, if taxes were collected, tax revenue would be greater from a wind plant than 

from a fossil fuel plant due to the increased size of the project.11 

In Colorado, property taxes are paid to counties, and all county property taxes are 

assessed by the State Office of Taxation (the State). The State bases assessments on the 

value of the utility’s or plant owner’s “business valuation,” or the sum of real property, 

personal property, tangible assets, and intangible assets.12 The State then takes 29% of 

the business valuation to be the assessed value of the company. The assessed value is 

communicated to each company and county, and property taxes owed to the county are 

based on power plant location. For example, if Xcel Energy Corporation were to build a 

coal plant in Pueblo County, Colorado, they would negotiate tax rates with Pueblo 

County assessors. Counties determine the amount of property taxes based on mill levies, 

which are specific to each county but are usually higher in rural areas.13 Annual county 

mill levies range from 3% (La Plata County) to 9.9% (Phillips County).14 For this 

research, we assume 7% in Colorado. Because of the popularity of granting coal and gas 

plants exemptions from property tax in Colorado, this study assumes that the coal and gas 

plants will pay property taxes all 20 years, but during the first 10 years, they will only be 

subject to half of the property tax. 

Tax exemption is often automatic for municipally owned utility plants. Tax exemption 

can play an important role in new power plant development for investor-owned or 

 

10 Much less land is needed for the actual power generation. However, land impacts are greater when the 

entire life cycle of the resource is considered. For example, coal mining sites, including roads and disposal 

sites, were not included in the scope of this research. 

11 In some states, wind energy projects are exempt from property taxes resulting from increased property 

value because of wind plant development (NWCC Wind Energy Series). 

12 It is common for utilities to operate in more than one state. In such cases, the Colorado Office of 

Taxation assesses companies based on total historic cost (depreciation rate plus net book value of assets) 

per county. According to Deb Meyer, State Division of Property Taxation, intangible assets could be for 

items like franchising or the worth of a brand name. 

13 Mill levies are a specified rate: 1 mill equals 1/10 of a cent ($0.001) per $1 of property value used to 

determine the tax or assessment on property. Mill levy taxes are used for things like school districts and 

road improvements. 

14 Colorado tax information is based on conversations with Mark Walker of the State Office of Taxation. 

8
privately owned utilities. Non-municipally-owned power plants may be exempt from 

property taxes unless they have non-operating properties, such as land that they do not 

use. Tax exemption is a great advantage to power plant owners. The utility will often 

negotiate a deal for tax exemption or partial tax exemption with counties in which they 

locate a power plant. 

For example, in Colorado, agreements between Xcel Energy and the City and County of 

Pueblo state that, if Xcel builds a power plant there, the company would be forgiven 50% 

of the total in property taxes over the next 10 years. The City also agreed to forgive salesand-use tax on the construction of the plant in return for a one-time $13 million payment, 

which may be used to construct a new building for Pueblo police (Amos 2004). Cities 

and counties negotiate deals like this because new plant construction and operations bring 

new jobs to the area. However, as results show, much of the construction and operations 

labor is brought in from out-of-state. For example, in-state coal plant construction labor 

accounts for less than 20% of total labor. 

In Michigan, the assessed value, or “State Equalized Value,” is equal to one-half of the 

total value for real and personal property. The state’s average tax level applied to the 

assessed value is 5% for annual property taxes. Air and water pollution control equipment 

on power plants is exempt from property taxes. 

Wind plants in Michigan will not be required to pay property taxes until the year 2013. 

According to the Michigan Economic Development Corporation, “Alternative-Energy 

Personal Property” ... is exempt from the collection of personal property taxes. This 

exemption includes (1) “Alternative-Energy Systems,” (2) “Alternative-Energy 

Vehicles,” (3) the personal property of an “Alternative-Energy Technology Business,” 

and (4) the personal property of a business not engaged in alternative-energy technology 

that is used solely for the purpose of researching, developing, or manufacturing 

“Alternative Energy Technology.” However, it is common for a community to negotiate 

“host fees” in lieu of property taxes from $3,000 - $5,000 per turbine per year. After 

discussions with a Michigan wind developer about recent projects, we have assumed a 

$5,000/turbine/year payment for this study. 

In Arizona, the assessed value of a plant is 25% of 80% of the installed project cost. Then 

mill levies are applied to this number to determine county property taxes. The average, 

and the assumed number for this report, is 7.6%. 

Because of specifics of individual project negotiations, taxes for the average new power 

plant are difficult to predict accurately. As stated, it is fair to assume that a utility-owned 

plant will likely be partially tax exempt in Colorado, but a privately owned power plant 

will be required to pay county property tax (Wiser and Kahn 1996). In Michigan, we 

safely assume that wind projects will not pay property taxes until 2013. For this project, 

we took examples of current power plant tax estimates and average tax payments from 

existing plants and applied them to the appropriate size of the new plant. For wind, we 

used existing plant data in Colorado and estimates in Arizona, and we based Michigan 

assumptions from the Michigan Public Service Capacity Needs Forum. 

9
Taxes paid on gas wells and for coal mines will not likely increase when 280 to 300 MW 

of generation are added to the state’s system mix. New gas wells and coal mines are not 

required for this amount of electricity production, so taxes on these items were not 

included in this study. If all the coal or gas came from within the state and resulting 

extraction efforts were larger, or if the plant were of larger capacity, it is conceivable that 

the associated increases in well or mine taxes should be considered. 

Sales Tax 

We did not separate sales tax in this report. We assume that sales tax is included in the 

dollar amount of parts, such as the wind turbine shaft, or of processes, such as the natural 

gas plant construction. To calculate sales tax, a researcher would have to obtain 

information about which parts of the power plants, fuel extraction, and fuel transport 

come from within the state or come from a company with an office within the state so 

that the company may charge sales tax. For example, if wind turbine blades were 

manufactured in South America or Denmark, but the manufacturing company had an 

office in Arizona, the wind farm owner would be required to pay Arizona state sales taxes 

for the wind turbine blade. If the Danish company had an office in Wyoming instead of 

Arizona, no sales tax would be paid to Arizona. Most companies do not make any of this 

sales tax information available. However, future studies may include estimated sales tax 

based on state-specific models. For example, Colorado sales tax is 2.9%, and this could 

be added (or broken out from existing dollar amounts) to parts purchased in Colorado, 

depending on whether the sales tax is assumed to be included. 

Discount Rate 

For purposes of this research, results are displayed without a discount rate applied. 

However, discount rates of 5% and 7% were applied to some results, and direct spending 

can easily be calculated with a discount rate of the researcher’s choice. In the Results 

section of this report, we show direct impacts without the discount rate, except when 

specifically noted. This is due to the wide range of discount rates used by government, 

policy makers, and industry. 

State Specifics

The Components section of this report above has detailed each area of dollar flow, 

including some state specific information (see Property Taxes). The Assumptions section 

explains general suppositions for the paper. Some areas of inquiry require individual 

explanation for each state’s energy background and attributes, which are in this section. 

10
Arizona 

In Arizona, most of the state’s power comes from imported coal. (Coconino County, 

Arizona, has some coal mines, but they supply an electricity generation facility in 

Nevada). Coal for a new coal plant would likely come from Wyoming or New Mexico 

(Tri-State Generation and Transmission Association, Inc.). The new plant is assumed to 

be a sub-critical plant, based on the most recent Arizona coal plant proposals 

(Springerville). The coal plant’s capacity factor is assumed to be 85%.

Figure 3. Arizona’s coal-producing area. Source: EIA, 1999 

Arizona's Electricity Mix

34%

46%

0%

10%

10% 0%

Nuclear

Coal

Oil

Gas

Hydro 

Other renewable

Source: Energy Information Administration, 2000

Figure 4. Arizona’s electricity mix. Source: EIA, 2000 

Arizona also imports its natural gas (see the Assumptions section for further aspects and 

complications on natural gas). The capacity factor for wind in Arizona is assumed to be 

30% for this research, so the wind plant would require 520 1.5-MW turbines to equal 780 

MW and generate the necessary amount of electricity. 

11
Colorado 

In Colorado, the coal plant is assumed to be a super-critical plant based on the most 

recent proposed coal plant in Colorado (Xcel Energy’s Comanche III coal plant in 

Pueblo). Coal will most likely be transported by rail from the Powder River Basin in 

Wyoming. The coal plant’s capacity factor is assumed to be 85%. 

Colorado has natural gas fields, and this study assumes that 40% of the natural gas for the 

new plant comes from within the state’s boarders. Colorado has a considerable wind 

resource, as shown by the pink and purple areas (Figure 5). 

Figure 5. Colorado’s wind resource at 50 meters. Source: NREL, 2004 

Colorado's Electricity Mix

0%

81%

0%

15%

3%

1%

Nuclear

Coal

Oil

Gas

Hydro

Other renewables

Figure 6. Colorado’s electricity mix. Source: EIA, 2000

12
Michigan 

Like Colorado, Michigan’s power mix relies heavily on coal, with a small amount of 

natural gas and almost no wind power. Michigan also imports coal to feed its power 

plants. Michigan does have some natural gas extraction fields, so we assume that 25% of 

natural gas used in Michigan comes from Michigan. The multiple in-state pipeline, 

railroad, and shipping companies provide direct benefits to the economy. For example, if 

the coal is transported from Wyoming, some of the labor and materials for the railroad 

cars are from outside Michigan. For the base cases in this study, we assume that 50% of 

the natural gas transport labor is based in-state and 60% of the coal transport labor is 

based in Michigan. These current estimates are from a report for the Michigan Public 

Service Company (VanderVeen 2005). 

Figure 7. Michigan’s gas and oil production fields. Source: Michigan Economic 

Development Corporation, 2000 

13
Michigan's Electricity Mix

18%

67%

1%

12%

2%

Nuclear

Coal

Oil

Gas

Renewables

Figure 8. Michigan’s electricity mix. Source: EIA, 2000 

Assumptions 

Assumptions for this study are based on scenarios that are most probable for building 

new energy-generation capacity. It is assumed that energy efficiency and demand-side 

management options have been considered earlier in the decision-making process. In this 

case, new energy generation is utility-scale and grid connected. 

The new wind, coal, or gas power plant would produce approximately 2,000,000 MWh 

per year for 20 years, and construction would begin in 2005. Power would be generated 

in each state for its ratepayers. We used the most recently proposed coal, gas, and wind 

projects in each state to determine our assumptions. 

The natural gas plant is assumed to be a baseload combined-cycle plant. It is very 

difficult to determine the exact wellhead in a power plant from which natural gas stems 

from (Figure 9). Natural gas flows through pipelines and is mixed with gas from many 

sources before it arrives at the plant. Interviews with 15 energy analysts and natural gas 

industry employees in and around Colorado provided answers that ranged from “most of 

our gas is from Wyoming” (Mercatur Energy ) to “80% of the gas should be from 

Colorado if the plant is far enough from Colorado’s borders” (Colorado Oil and Gas 

Commission). For this study, we assume that none of the gas used in the new power plant 

would be from Arizona, 40% of gas is extracted from Colorado’s natural gas wells, and 

25% of Michigan’s gas will be from Michigan. 

We also assume that the new gas plant would have a capacity factor of 87%. This is 

consistent with new efficient gas plants that are currently under construction.15 However, 

at the present (May 2005) high fuel price, some companies choose to only run their gas 

peaking plants – not baseload (these plants are too expensive to utilize for electricity 

 

15 Energy Information Administration’s maximum capacity credit assumption. Xcel Energy’s combinedcycle gas plant in Fort Lupton, Colorado, was rated 86.5% in 2002. 

14
because of the high gas prices). A report for the Michigan Public Service Commission 

assumes that natural gas has a capacity factor of merely 35% due to the heightened fuel 

prices (VanderVeen 2005). In this study, we assume that the price of natural gas will 

continue to fluctuate but will also be used as a baseload plant when costs for other 

generation (e.g., pulverized coal) and construction (steel, etc.) also increase in the future. 

One example of the market fluctuation is EIA data, which show that coal prices are also 

rising in each region of the country. These rising prices are for spot markets, not longterm fixed contracts, but they show the upward trend in prices nonetheless. The 

methodology for this report can be used with the assumption that resources have a much 

lower capacity factor, if required. 

We assume that the gas project financing would come from the utility’s regular financial 

lending institution (usually a large national or international bank not located within the 

state). 

Figure 9. Natural gas transmission line capacities. Source: EIA, 2000 

Making assumptions about natural gas prices today and for the next 20 years is risky and 

will inevitably be somewhat inaccurate. (See Figure 11 for obvious price shifts.) 

However, we use the EIA’s assumptions and include high and low scenarios above and 

below those predictions. Since the Colorado report (2003 data) (Tegen 2004), prices for 

natural gas have continued to rise. The assumptions for natural gas base case prices in 

this study range from $35/MWh to $55/MWh, or $5.2/MMBtu to $7.9/MMBtu, to 

incorporate a range of prices. Assumed prices are based on data from actual natural gas 

plants in each state. Utilities running natural gas plants have long-term contracts for 

baseload natural gas, so they are not as vulnerable to spot market fluctuations. 

15
Figure 10. Average weekly coal spot prices ($/ ton) from May 2002 through April 2005. 

Source: EIA 

We assume that the capacity factor for wind power will be 30% in Arizona, 35% for the 

wind farm installed in Colorado (Milligan, personal communication), and 25% in 

Michigan (VanderVeen 2005). We also assume that the landowner revenue paid to a 

landowner is a direct benefit to the state’s economy. This study does not try to determine 

the next step for dollars brought into the economies by using a multiplier or other 

calculations. 

16
Figure 11. U.S. natural gas spot prices from 2000 to 2006 in $/ thousand cubic feet. 

Source: EIA 

Results 

The results show that benefits to the three state economies from energy resources vary 

greatly, depending on specifics of each power plant project and its contracts. For fossilfuel-fired power, dollars spent on fuel are a significant benefit if the fuel is produced in 

state or transported by in-state industry and workers, or both. As expected, results show 

that states are positively impacted by new power generation when local labor is used to 

install equipment and operate the new energy-generating facility. 

Results in all three states show that adding wind facilities will provide a greater economic 

benefit to the state economy, due in large part to payments for property taxes. Wind pays 

a proportionally larger share in property taxes because more facilities must be erected to 

generate equivalent power. Below are state-specific results. Some notable differences are: 

• Prices for fossil fuels are assumed to be higher in Michigan than in the other 

states, and capacity factors are lower. This leads to an increase in overall capacity 

needed and in dollars spent in Michigan. 

• Based on actual data for proposed new plants, installed cost for a coal plant is 

much higher in Arizona ($2000/kW) than in Colorado ($1450/kW), which makes 

a considerable difference. Coal benefits Arizona’s economy more than 

Colorado’s. This could be due to varying pressures for new environmental 

equipment or state policies. 

17
• Even though a state may not have natural resources to generate electricity, if it has 

a large resource (coal or gas) transportation industry, like Michigan, the economy 

can benefit significantly from the imported resource. 

Figure 12. Base case scenarios of economic impact from new power plants in Arizona, 

Colorado, and Michigan 

Direct impacts to state economies from 

base case scenarios

$-

$100,000,000

$200,000,000

$300,000,000

$400,000,000

$500,000,000

$600,000,000

$700,000,000

$800,000,000

$900,000,000

$1,000,000,000

Arizona Colorado Michigan

Coal

Gas 

Wind

18
Individual State Results 

Figure 13. Dollars spent on new electricity generation from coal, gas, and wind in Arizona

Note: The fuel components for coal and natural gas are prices paid by the power plant for fuel. 

The contract price listed for wind is the amount the plant owner can charge for the output of the 

wind farm and is used to calculate landowner revenue. 

Figure 14. Dollars spent on new electricity generation from coal, gas, and wind in Colorado 

19
Figure 15. Dollars spent on new electricity generation from coal, gas, and wind in Michigan 

Colorado Results and Specific Sensitivities 

As Figure 14 and Table 2 indicate, the average wind plant would bring more dollars to 

the Colorado economy than coal or gas plants, provided that the wind plant hires some instate labor and uses some Colorado materials (e.g., concrete). This result is partially due 

to the large percentage of in-state workers (20%-46%) for construction, the even larger 

percentage of workers during the operations phase (90% in state), and the size of the 

project (680 MW versus 270 MW or 280 MW). A large part of the wind spending is also 

due to county property taxes. In other states, wind plant owners have negotiated partial 

exemptions from taxes, but this has not occurred in Colorado. However, coal and gas 

plants have historically been at least partially exempt from property taxes. 

Table 2. Dollars Spent in Colorado from 270 MW New Energy Output over 20 Years 

 Coal Gas Wind 

Construction $47,705,000 $24,458,963 $91,392,000 

O&M $90,125,000 $11,054,118 $223,040,000 

Fuel $8,756,496 $210,442,575 $ -

Landowner 

Revenue 

 $ - $ - $43,500,000 

Taxes $17,271,121 $8,406,060 $193,228,800 

* Construction times vary for each resource: coal 5 years, gas 2 years, wind 1 year 

When in-state versus out-of-state spending is calculated, it becomes apparent that a new 

gas plant would produce more total spending but that most of the money would be sent 

out of state. Each generating source spends more out of state than in Colorado, regardless 

of the fuel source or tax negotiation. Figure 16 shows in-state and out-of-state spending 

20
for new power generation. As previously noted, this project does not examine price 

impacts to consumers but considers overall state economies. Clearly, if consumers have 

to spend more of their income on electricity, they will have less to spend on other goods 

and services. When making an informed decision about new power generation, a 

policymaker should include consumer pricing and other issues, along with information 

from studies like this one. 

Direct impacts from new electricity generation in Colorado 

a comparison of instate vs. out-of-state money flow s

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

Coal Gas Wind

Dollars (millions)

Total instate

Out-of-state 

Figure 16. Colorado vs. out-of-state impacts from new electricity generation 

The following series of figures and tables show individual energy-generation resources 

broken down by component for the Colorado economy. In a forthcoming publication, 

these figures will be presented for Arizona and Michigan and will be located in 

assumptions sections specific to each state. The figures show direct economic benefits to 

the economy from each resource, given the most likely scenario. I-shaped bars represent 

uncertainty ranges in the data. Further explanation of sensitivity analyses for particular 

energy resources may be found in Sensitivity Scenarios. 

Table 3 and Figure 17 show direct economic benefits to Colorado for a coal plant with 

sensitivity bars. The biggest range of uncertainty is caused from the plant using Colorado 

coal, which is unlikely. 

21
Table 3. Direct Economic Benefits from New Coal Generation 

COAL Range % CO* %CO range 

Construction labor 25% $1,450/kW $1300 -$1800/kW 17% 7%-37% 

Construction materials 75% $1,450/kW $1300 -$1800/kW 5% 0%-15% 

O&M labor 65%-75% $25/kW $8 - $27/kW 65% 25%-95% 

O&M materials 25%-35% $25/kW $8 - $27/kW 63% 60%-93% 

Fuel $14/MWh $13 - $18/MWh 0% 0%-56% 

Mining 40% of fuel 40% - 50% 0% 0%-56% 

Railroad 60% of fuel 50% - 60% 10% 0%-10% 

*Money spent in Colorado 

Direct impact to Colorado economy from a 

new coal plant (with sensitivity bars)

-

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

Construction

O&M

Fuel

Taxes

dollars

Figure 17. Direct impact to Colorado economy from a new coal plant, with uncertainty bars 

As shown in Tables 4 and 5 and Figures 17 and 18, coal and gas have high uncertainty in 

their fuel categories. Almost all of the uncertainty for natural gas is related to gas price 

estimates. The price range is from $30/MWh to $55/MWh. Prices as high as the top 

scenario ($55/MWh) are unlikely but possible in Colorado power plants’ long-term 

contracts. Coal’s uncertainty bar has such a large range because of the chance that 100% 

of the coal may come from Colorado, as opposed to the assumed 0%. 

Table 4. Direct Economic Benefits from New Natural Gas Generation 

GAS Range % CO* Range % CO 

Construction labor 25% $595/kW $550-$800/kW 40% 15%-60% 

Construction materials 75% $595/kW $550-$800/kW 5% 0%-10% 

O&M labor 75% $10/kW $8-$19/kW 25% 16%-45% 

O&M materials 25% $10/kW $8-$19/kW 5% 10%-45% 

Fuel $35/MWh $30-$55/MWh 40% 10%-66% 

Extraction 80% of fuel - 15% 5%-20% 

Pipeline 20% of fuel - 0% 0%-10% 

*Money spent in Colorado 

22
$-

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

$300,000,000

$350,000,000

Construction

O&M

Fuel

Taxes

Figure 18. Spending in Colorado for a new natural gas plant, with uncertainty bars 

Table 5. Direct Economic Benefits from New Wind Generation (635 1.5-MW turbines) 

Wind Range % CO* Range % CO

Construction labor 10% $1,200/kW $1100-$1500 40% 20%-46% 

Construction materials 90% $1,200/kW $1100-$1500 8% 6%-10% 

O&M labor 70% $20/kW $10-$27/kW 90% 80%-99% 

O&M materials 30% $20/kW $10-$27/kW 20% 5%-33% 

Landowner revenue 3.5% of revenue $3000-$5,000 100% - 

Property taxes 1.2% of project 0.9% - 3% 100% - 

*Money spent in Colorado

$-

$100,000,000

$200,000,000

$300,000,000

$400,000,000

$500,000,000

$600,000,000

Construction O&M Land payments Taxes

Figure 19. Spending in Colorado for a new wind power plant, with uncertainty bars 

Table 5 and Figure 19 show direct economic impacts for building new wind power. For 

wind, the component with the most uncertainty is taxes. Typically, taxes are assumed to 

23
be between 0.9% and 3% of total installed costs. The large range in dollars per kilowatt 

for construction between $1100 and $1500, along with the property tax percentage, leads 

to the sizable range in construction results. O&M is considered by some developers to be 

60% labor and 40% parts, while most consider that the labor accounts for between 70%-

80%. Landowner revenue can fluctuate between $3,000 and $5,000 per turbine per year 

(based on the assumed 1.5-MW turbine size). 

The data show significant differences and implications between wind and fossil fuels in 

the category of property taxes in all states. Coal and gas plants owned by utilities are 

often but not always exempt from property taxes in Colorado, and the utility might 

negotiate a deal with local communities by paying for county improvements such as a 

library, school, or police station. Such negotiated costs cannot be captured in a study of 

average power plant benefits because they are unique to each deal made between the 

utility and county. It should be noted that these negotiated donations from utilities would 

also benefit communities and, therefore, the Colorado economy. The County presumably 

finds the short-term gain of the payment, in addition to jobs created by the new power 

plant, worth the exchange for property taxes. However, the utility makes a one-time 

payment to the county, whereas property taxes would be collected over the lifetime of a 

power plant. 

In addition to the consideration of tax exemption, wind plants purchase or lease a 

considerably larger piece of property for the same energy output as gas and coal. The 

State of Colorado does not base property taxes on the actual amount of space utilized by 

wind turbines but by the value of the installed turbines. The installed turbine value is 

greater than the value of a gas or coal plant because so many wind turbines are needed to 

generate the same amount of electricity. This is significant in rural communities because 

the county divides tax revenues to pay for services such as schools and roads. Wind 

plants also cause an increase in a landowner’s property values. 

Sensitivity Analyses 

Following is an exploration of some uncertainty scenarios or sensitivity analyses 

discussed above. In the most likely scenario, coal for a new Colorado coal plant will 

come from Wyoming. Figure 20 shows a scenario in which all of the coal comes from 

Colorado. With everything else remaining equal, coal will not bring as much spending to 

Colorado as wind (but more than gas), and spending will be significantly higher than it is 

with out-of-state coal. 

As mentioned, another uncertainty is the origin of Colorado’s natural gas plants. At the 

highest, according to most natural gas experts we spoke with, 66% of the natural gas will 

come from Colorado. With everything else remaining in the base case, here are the results 

for a higher percentage of gas from within the state. 

We mentioned the differences between results without an applied discount rate and a 

discount rate of 5% or 7%. In Figures 22 and 23 below, we see the results for Colorado 

coal. In forthcoming versions of this paper, we will display other components and 

resources with applied discount rates. When a discount rate is applied, the impacts are 

naturally smaller. 

24
Direct impacts to the Colorado economy from new coal, 

gas and wind plants (100% Colorado coal)

$-

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

Coal Gas Wind

Dollars in millions

Taxes

Landowner revenue

Fuel

O&M 

Construction

Figure 20. Sensitivity scenario: 100% of coal is from Colorado mines 

Direct impacts to the Colorado economy from new coal, 

gas and wind plants (2/3 of gas from Colorado)

$-

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

Coal Gas Wind

Dollars in millions

Taxes

Landowner revenue

Fuel

O&M 

Construction

Figure 21. Sensitivity scenario: 66% of natural gas is from Colorado 

 

25
Total coal costs for a new Colorado coal plant 

with and without a discount rate of 5%

$0

$200,000,000

$400,000,000

$600,000,000

$800,000,000

$1,000,000,000

$1,200,000,000

$1,400,000,000

Total NPV

Property taxes

Fuel

Financing

O&M

Construction 

Figure 22. Total impacts (in and out-of-state) for a new Colorado coal plant, with and 

without a discount rate of 5% 

Note that construction and financing in both cases remain relatively unchanged because 

construction occurs within the first 5 years, and we assume 10 years for financing. 

Total costs from a new Colorado coal plant with 

and without a 7% discount rate applied

$0

$200,000,000

$400,000,000

$600,000,000

$800,000,000

$1,000,000,000

$1,200,000,000

$1,400,000,000

Total NPV

Property taxes

Fuel

Financing

O&M

Construction 

Figure 23. Total impacts (in-state and out-of-state) for a new Colorado coal plant, with and 

without a discount rate of 7% 

Lessons Learned 

When conducting a “follow the money” study in other regions, it will be helpful to draw 

on lessons from this report to save time and frustration for researchers and interviewees. 

Methods detailed here are transferable to other projects that explore economic questions 

about which energy resource to build next. 

26
As with any research project, the first step is to define the required data and obtain 

contacts for that information. Local data are almost always preferred, but when it is not 

available, national averages may be sufficient. For example, is it important to have 

precise railroad data for your state, or can you use national averages? We carefully chose 

components of this research and selected the most economically significant benefits to 

represent graphically. Unfortunately, many developers consider this type of information 

proprietary due to competitive forces in the marketplace. Many costs and benefits of 

electricity generation are proprietary and cannot be released. Some dollar values for this 

project were indeed confidential and were given to us with the understanding that we 

would use aggregate numbers and not mention sources. 

Information for labor and equipment costs was obtained through much deliberation from 

key industry contacts. In addition, we used JEDI (Goldberg et al. 2004), which was 

especially helpful for cost breakdowns. For overall costs of fuel and O&M, we referred to 

power plant operating companies and BaseCase. For specific numbers, such as the labor 

component of natural gas transport, we spoke with industry representatives (e.g., natural 

gas pipeline manufacturers). We obtained manufacturer names by speaking with people 

at existing utility power plants. We did not add environmental or political costs and 

benefits, which would be much harder to quantify than direct economic benefits. We 

recommend including only operations and maintenance costs – not including “all-in,” or 

costs such as taxes or landowner revenues, which should be broken out separately. 

To obtain financing information, we initially contacted utility employees, who were 

generally unable to answer our requests. Eventually, we learned from other energy 

experts that financing for all three power sources is most likely an out-of-state impact, 

with no money flowing into the Colorado economy. Some small wind projects may be 

financed in-state, but usually financing comes from out of state, unless the plants in 

question were in New York or Massachusetts, where large lending institutions are 

located. We recommend contacting in-state independent banking associations. These 

organizations may know about power plant financing. Additionally, municipalities and 

electricity cooperatives might have helpful information and/or contacts. See the 

Components section of this report for other financing options. 

Tax information should be sought first from counties, which is where most property tax is 

collected. Obtain mill levies and the procedure by which property taxes are assessed. If 

county taxes are assessed by the State, researchers will likely need to combine 

information from state assessors with details from county assessors and treasurers. The 

Public Utilities Commissions, in this case, did not provide data for any categories 

analyzed by this project, but we do recommend interviewing them in case they are able 

and willing to help. Researchers working with the Public Service Commission in 

Michigan, for example, were extremely helpful. 

It is important to remain “resource neutral” when interviewing so that all parties feel 

comfortable providing information. It is also crucial to state assumptions early, so that 

they are clear in the project results. More important, stating assumptions early will ensure 

27
that they are clear to researchers throughout the project. Project boundaries and scope are 

closely linked to assumptions. 

Conclusion 

The addition of a new generating facility equivalent to a 270-MW natural gas plant will 

have direct economic benefits for a state’s economy. If the fuel of choice is coal or gas, 

impacts to the economy may be fewer from coal or gas than if the fuel is wind. But 

natural gas also has a significant impact to the economy if a portion of the natural gas 

comes from within the state and is transported by state industry. If a big portion of the 

labor for coal extraction or coal transportation comes from within the state, then coal will 

bring significant spending to the state (however, according to our assumptions, not as 

much as wind power would bring for the equivalent amount of energy produced). 

Energy planners and the energy industry should consider studies like this when deciding 

where to site a power plant and which benefits can be offered to local communities from 

the addition of a new power plant. This information is also valuable in making state- or 

regional-level policy decisions about energy resources and state-sponsored incentives, 

such as renewable portfolio standards or energy incentives. 

Additional research is needed on this topic, especially on county and state taxes and on 

project financing. It is likely that tax impacts are so specific to each case that they will 

have to be evaluated on a case-by-case basis. This study did not include externalities such 

as air pollution, effects to the local environment, or payments to the state for black lung 

disease. Another study might include such costs. Future work might also address the 

difference in consumer rate impacts associated with different plants. 

Acknowledgments 

This work was funded by the U.S. Department of Energy’s Wind Powering America 

program. An earlier version of this paper’s results was displayed in a poster session at the 

Global WINDPOWER 2004 Conference in Chicago, Illinois. The author wishes to thank 

the energy experts, developers, analysts, power plant owners and operators, railroad 

administrators, and the county and state government officials who provided information. 

Additionally, this work would not have been possible without generous help from 

Michael Milligan of NREL, Brian Parsons of NREL, Marshall Goldberg, Steve Clemmer, 

Rich VanderVeen, Kerry Battel, Peter Curtiss, Ron Lehr, John Nielson, Randy Udall, 

Dale Osborn, Craig Cox, and Paul Komor. Finally, the author thanks Larry Flowers of 

NREL for his support of this work. 

28
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30
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Acker, T.L.; Williams, S.N.; Duque, E.P.N. (September 2004). “Evaluating the Most 

Promising Sites for Wind Energy Development in Arizona USA.” Prepared for the 8th

World Renewable Energy Congress, September 2004. Working Paper Series 05-09. 

Flagstaff, AZ: Northern Arizona University, 5 pp. 

Bird, L.; Parsons, B.; Gagliano, T.; Brown, M.; Wiser, R., Bolinger, M. (2003). Policies 

and Market Factors Driving Wind Power Development in the United States. NREL/TP620-34599. Golden, CO: National Renewable Energy Laboratory. 

Boschee, Pam (ed.) As the pendulum swings: Riding high on the boom – Operating 

performance 2001-2002. Industry report for Energy Ventures Analysis, Inc. November 

2002, pp. 21-225. 

Colorado Tax Law from the Colorado Constitution “Uniform Taxation and Exemption,” 

Article X, Section 3 (1B). 

http://i2i.org/Publications/ColoradoConstitution/cnart10.htm#Section%203

Darmstadter, J. Productivity Change in U.S. Coal Mining. 

www.rff.org/Documents/RFF-DP-97-40.pdf. Washington, DC: Resources for the Future, 

July 1997. 

Energy Information Agency. Electric Power Annual 2000, Volume 1. 

www.eia.doe.gov/cneaf/electricity/epav1/epav1_sum.html

Jacobsen, M.Z.; Masters, G.M. “Exploiting Wind Versus Coal.” Science, Vol. 293, 

August 2001; p.1438. 

Laitner, S; Goldberg, M. Colorado’s Energy Future: Energy Efficiency and Renewable 

Energy Technologies as an Economic Development Strategy. A report for the U.S. 

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Northwest Economics Associates. Assessing the Economic Development Impacts of Wind 

Power Final Report. For National Wind Coordinating Committee, February 2003. 

31
Personal Communication 

Some personal communication for this research is considered confidential. Agencies, 

companies, and organizations allowed the author to use their data in aggregate only. In 

some cases, the author is able to list company or organization names, but not employee 

names. Personal communication for this project included data and advice from the 

following: 

Andy Wyatt, Prowers County Assessor

Aquila Networks 

Basin Electric Power Cooperative 

Boulder County Treasurer’s Office 

Colorado Mining Association 

Colorado Oil and Gas Commission 

Colorado Rural Electric Association 

Craig Cox 

Dale Osborn, DISGEN Systems 

Energy Intelligence Group, Inc. for pipeline capacity information 

EnXco, Inc. 

La Plata County Assessor’s and Treasurer’s Offices 

Mark Walker, State Division of Taxation 

Marshall Goldberg, MRG & Associates 

Michael Milligan, National Renewable Energy Laboratory 

Deb Meyer, Colorado Office of Taxation, State Division of Property Taxation 

Peter Curtiss, Curtiss Engineering 

Platts Energy Consulting, a Division of McGraw-Hill 

Prowers County Assessor’s Office 

Ryan Wiser, Lawrence Berkeley Laboratories 

Steve Clemmer, Union of Concerned Scientists 

Susan Innis, Western Resource Advocates 

Susan Norman Williams, Northern Arizona University 

Tri-State Generation and Transmission Association, Inc. 

Troy Gagliano, National Conference on State Legislatures 

Weld County Treasurer 

Xcel Energy’s power plant operators 

32
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5a. CONTRACT NUMBER

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4. TITLE AND SUBTITLE

Comparing Statewide Economic Impacts of New Generation from 

Wind, Coal, and Natural Gas in Arizona, Colorado, and Michigan 

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NREL/TP-500-37720 

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WER5 6103 

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S. Tegen 

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National Renewable Energy Laboratory 

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14. ABSTRACT (Maximum 200 Words)

With increasing concerns about energy independence, job outsourcing, and risks of global climate change, it is 

important for policy makers to understand all impacts from their decisions about energy resources. This paper 

assesses one aspect of the impacts: direct economic effects. The paper compares impacts to states from equivalent 

new electrical generation from wind, natural gas, and coal. Economic impacts include materials and labor for 

construction, operations, maintenance, fuel extraction, and fuel transport, as well as project financing, property tax, 

and landowner revenues. We examine spending on plant construction during construction years, in addition to all 

other operational expenditures over a 20-year span. Initial results indicate that adding new wind power can be more 

economically effective than adding new gas or coal power and that a higher percentage of dollars spent on coal and 

gas will leave the state. For this report, we interviewed industry representatives and energy experts, in addition to 

consulting government documents, models, and existing literature. The methodology for this research can be 

adapted to other contexts for determining economic effects of new power generation in other states and regions. 

15. SUBJECT TERMS

wind energy; economic development; economic impacts; coal; natural gas; Arizona; Michigan; Colorado; power 

plants 

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