Energy Efficiency and Renewable Energy in 

Appalachia: Policy and Potential 

July 12, 2006 

 

Prepared for:

Appalachian Regional 

Commission 

Prepared by:

Center for Business and 

 Economic Research 

Marshall University 

One John Marshall Way 

Huntington, WV 25755 

Dr. Calvin Kent 

Christine Risch 
1

Table of Contents 

Chapter I. Resource Availability .................................................................... 3

1. Wind............................................................................................................................ 3 

2. Solar ............................................................................................................................ 4 

3. Geothermal.................................................................................................................. 5 

4. Biomass....................................................................................................................... 6 

5. Small and Low Impact Hydroelectric......................................................................... 7 

6. Biofuels....................................................................................................................... 8 

7. Chicken Litter ........................................................................................................... 10 

Chapter II. State Policies Promoting Use of Renewable Energy, Alternate 

Energy and Energy Efficiency in the ARC Region...................................... 11

1. Net Metering ............................................................................................................. 12 

2. Renewable Energy Portfolio Standards (REPS)....................................................... 14 

3. Public Benefits Funds ............................................................................................... 16 

4. Grant Programs ......................................................................................................... 17 

5. Loan Programs.......................................................................................................... 18 

6. Tax Incentives........................................................................................................... 20 

a. Personal and Corporate Income Taxes: Deductions and Credits.......................... 20 

b. Sales Tax............................................................................................................... 21 

c. Property Tax.......................................................................................................... 22 

7. Rebate Programs ....................................................................................................... 23 

8. Other Programs ......................................................................................................... 24 

Chapter III. State of Technology and Manufacturing in Appalachia........... 26

1. Wind.......................................................................................................................... 26 

2. Solar .......................................................................................................................... 27 

3. Geothermal................................................................................................................ 28

4. Small and Low Impact Hydro................................................................................... 28 

5. Biomass..................................................................................................................... 28 

6. Biofuels..................................................................................................................... 29 

Chapter IV. Hydrogen R&D......................................................................... 30

1. Solar Hydrogen Production....................................................................................... 31 

2. Non-Renewable Hydrogen Production R&D ........................................................... 31 

3. Hydrogen Storage R&D............................................................................................ 32 

Chapter V. Corporate Energy Efficiency and Renewable Energy ............... 33

1. Dublin, Virginia - Volvo Trucks............................................................................... 33 

2. Radford, Virginia - Radford Army Ammunition Plant............................................ 34 

3. Hagerstown, Maryland – Statton Furniture .............................................................. 35 

4. Huntington, West Virginia - Steel of West Virginia................................................. 35 

5. Spartanburg, South Carolina - BMW Manufacturing............................................... 36 

6. Tishimingo, Mississippi – Heil Environmental ........................................................ 36 

7. Russell, Kentucky - AK Steel, Ashland Works ........................................................ 37 

8. Uhrichsville, Ohio – Commonwealth Aluminum/Aleris Rolled Products ............... 37 

9. Ragland, Alabama - Ragland Clay Company........................................................... 38 

10. Freeland, Pennsylvania – Hazelton St. Joseph Medical Center.............................. 38 
2

11. Vestal, New York – Kopernik Space Education Center......................................... 38 

12. Burnsville, North Carolina – EnergyXchange Renewable Energy Center ............. 39 

13. Knoxville, Tennessee – Rohm and Haas Company................................................ 40 

14. Rome, Georgia - U.S. Biofuels ............................................................................... 40 

Chapter VI. Energy Intensity in Appalachia ................................................ 41

1. Energy Consumption Per Capita............................................................................... 41 

2. Energy Consumption Per Unit of Personal Income.................................................. 43 

3. Energy Demand Price Response............................................................................... 44 

4. Summary................................................................................................................... 45

Appendix A: Wal-Mart and Alternative Fueled Vehicles – The Role of the 

Private Sector................................................................................................ 46

Table of Figures and Tables 

Figure 1.1: Wind Potential in Appalachia........................................................................... 3 

Table 1.1: Reported Potential Wind Capacity by ARC State ............................................. 4 

Figure 1.2: Solar Potential in Appalachia (KWh/m2/day) .................................................. 5 

Figure 1.3: Biomass Potential in Appalachia...................................................................... 6 

Figure 1.4: Small Hydropower Potential in Virginia.......................................................... 7 

Table 1.2: Estimated Small and Low Power Hydropower by ARC State .......................... 8 

Figure 1.5: Potential Annual Biofuels Production by State (millions of gallons) .............. 9 

Figure 1.6: Potential Annual Electricity Production From Broiler Litter (MWh)............ 10 

Table 6.1: State and National Energy Intensity ................................................................ 41 

Figure 6.1: Estimated Per Capita Energy Intensity in Appalachia (MMBtu per Capita) . 43 

Figure 6.2: Estimated Economic Energy Intensity in Appalachia.................................... 44 

Table 6.2: Price Elasticity of Demand for Electricity in Appalachia ............................... 45 

Figure A.1: Location of Current Alternative Fuel Stations in Appalachia....................... 47 

Figure A.2: Location of Potential Wal-Mart Alternative Fuel Stations in Appalachia .... 48 
3

Chapter I. Resource Availability 

1. Wind 

The harnessing of the power of the wind to produce electricity is significantly 

undeveloped in the Appalachian region. Overall, this resource appears to be the greatest 

potential source of renewable power for the eastern U.S. The electricity production 

potential within the boundaries of the ARC region is difficult to isolate from the nonAppalachian areas of these states although for several states, notably Pennsylvania, West 

Virginia and Tennessee, the greatest wind potential is found in their mountain regions. 

For states with ocean borders the greatest potential lies offshore. The following figure 

shows maps of calculated wind speed for the ARC region at 100 meters above 

groundcover. Wind speeds of seven meters per second, corresponding with the pink to 

red areas of the map, are the wind Classes 4 through 7 most desired by developers. 

Figure 1.1: Wind Potential in Appalachia1

 

1

 TrueWind Solutions, LLC 

Small Hydropower
4

State by state estimates of wind potential have been calculated by various sources and are 

thus varied. For the states in the ARC area with the most wind potential, the following 

estimates of potential have been reported as shown in Table 1. Some estimates may not 

reflect higher production made possible by the larger turbines developed in the last 

couple years. It is important to note that generation potential for wind installations is 

typically only based on about 30 percent of installed capacity. 

Table 1.1: Reported Potential Wind Capacity by ARC State 

State Capacity (MW) Area 

New York 5,000+ On land 

Pennsylvania 5,120 State wide 

Maryland 338 State wide 

West Virginia 3,830 On private land 

Virginia 1,380 On shore 

North Carolina 835 State wide 

Tennessee 186 State wide 

 Sources: American Wind Energy Association and TrueWind Solutions, LLC 

2. Solar 

The ability to fully utilize solar energy remains restricted by technology and cost. The 

Appalachian region has only moderate to low solar capability due to its geography and 

resulting cloud cover and cooler temperatures. Nonetheless, solar energy still has 

potential for both thermal use and electricity generation using photovoltaic (PV) panels. 

Solar’s best potential in the eastern U.S., including Appalachia, is likely to be for 

residential application, where subsidies are necessary to induce even modest adoption. A 

recent Department of Defense study determined that daylighting, transpired heat 

collectors (solar ventilation air preheating), hot water heaters and pool heating give the 

best paybacks as opportunities to use solar applications on military installations.2

 

Estimated electricity generation capability allows comparison of solar capability in the 

ARC region. The grids in the following figure show ranges of KWh/m2

/day for a three 

kilowatt (KW) AC system. Grids in the Appalachian region could generate between 

4200 KWh per year represented by a brown grid in Maryland or Pennsylvania, and 6900 

KWh represented by a yellow grid in Georgia, depending on if the PV panels were fixed 

tilt or had two-axis tracking. 

In relation to daily electricity consumption, this resource can not meet the average 

household demand in most ARC areas. Average demand ranges from about six KWh per 

day in New York to nearly 14 KWh per day in Tennessee (refer back to a 13 state 

comparison chart). In Georgia and South Carolina, where potential is best, this resource 

 

2

 U.S. Department of Defense Renewable Energy Study, 2002. 
5

could provide up to half of the average household demand. However, because solar 

capability is higher in summer than in winter its potential favorably coincides with the 

highest electricity loads of the year. 

Figure 1.2: Solar Potential in Appalachia (KWh/m2

/day) 

SOURCE: National Renewable Energy Laboratory 

3. Geothermal 

Within the Appalachian region there is very little variation in geothermal capability. 

Deep earth temperature varies little by geography in the region and the very high 

geothermal temperatures found in the western U.S. – above 100 degrees Celsius – that are 

conducive to electricity production are not found in Appalachia. For Appalachia, direct 

use of geothermal energy via recovery of heat from subterranean air and water is the best 

method of taking advantage of this resource. Electricity generation using geothermal 

energy is not physically feasible in the eastern U.S. 

Direct use geothermal energy systems take advantage of the constant temperature of the 

earth to heat and cool buildings. In the summer, warm air is pumped into the cool 

subterranean areas where it is cooled and returned as air conditioning. In the winter, cold 

air is pumped into the relatively warm water – generally between 55 and 70 degrees 

Fahrenheit - and heated, then further heated via a heat pump as necessary and returned as 

heating. Geothermal systems are more efficient than gas furnaces and gas heat pumps, 
6

because the air that must be heated or cooled is not as hot or cold as outdoor air 

temperatures. The higher the water temperature, the more efficient the geothermal 

resource is. While the groundwater temperature of the Appalachian region is relatively 

low, there is much of it and this leaves room for considerably more development of this 

resource.3

 There are already several geothermal systems installed in the ARC region. 

These systems are most cost-effective for residential and small commercial buildings. 

4. Biomass 

For this presentation, biomass includes the following feedstock categories: crop residues, 

methane emissions from manure management, methane emissions from landfills and 

wastewater treatment facilities, forest residues, primary and secondary mill residues, 

urban wood waste, and dedicated energy crops grown on Conservation Reserve Program 

and Abandoned Mine Lands property. The following figure shows the available tonnage 

of biomass by county in the ARC region. For this region, counties with higher availability 

generally contain a sawmill industry. Sawmills are the largest source of wood byproducts. 

Sawmills are most likely the source of the very high biomass availability in Mississippi 

and Alabama as well as the higher biomass counties in Pennsylvania and West Virginia. 

The highest biomass available county in Ohio contains a paper manufacturing facility. 

Figure 1.3: Biomass Potential in Appalachia4

 

3

 Virginia Tech Regional Geophysics Laboratory (2003). http://www.geothermal.geos.vt.edu/. Some 

aquifers in the Appalachian region, particularly in New York, Pennsylvania, West Virginia and Virginia 

have temperatures up to 100 degrees C. 

4

 National Renewable Energy Laboratory, 2005. 

Biomass Potential

L

L

l
7

5. Small and Low Impact Hydroelectric 

Small and low impact hydroelectric capability is another largely undeveloped energy 

resource in the ARC region. The region is traversed with several major rivers and 

watersheds that create numerous opportunities for small-scale and low-flow hydro 

installations. For this evaluation, small hydro is defined as having power less than one 

megawatt but having a hydraulic head of more than 30 feet. There are three categories of 

low head/low power that are often referred to as “run of river” installations: 

1) Conventional Small Hydro - power > 100 KW and < 1 MW and hydraulic 

head >= 8 feet but < 30 feet 

2) Unconventional Low Power Hydro - power >= 100 KW and < 1 MW and 

hydraulic head less than 8 feet 

3) Microhydro - power less than 100 KW

The Idaho National Laboratory has estimated feasible hydropower potential for each state 

in each of these three categories. These estimates do not include streams excluded from 

development by federal statutes (national parks and monuments, wildlife management 

areas and designated wild and scenic rivers). The estimates are also based on feasibility 

as determined by proximity to population centers, industry, and existing infrastructure 

and location inside or outside non-Federal exclusion areas as well as environmental, legal 

and institutional constraints on development. 

 

A sample of for the State of Virginia, with potential installations is shown in Figure 4 

below. Small hydo is distinguished from the three categories of low power. 

 

Figure 1.4: Small Hydropower Potential in Virginia5

 

5

 Idaho National Laboratory, January 2006. Hydropower Prospector. “Feasibility Assessment of the Water 

Energy Resources of the United States for New Low Power and Small Hydro Classes of Hydroelectric 

Plants.” 
8

Total feasible hydropower potential is shown in the following table for each of the states 

within the ARC region. The quantity MWa refers to the average megawatts estimated to 

be available for that hydropower class. The electricity generation capability is then 

calculated at 100 percent of this capacity. Tidal power is not included in these estimates. 

Table 1.2: Estimated Small and Low Power Hydropower by ARC State6

 Low Hydro Power Potential 

State Total 

(MWa) 

Small 

Hydro 

(MWa) 

 Conventional 

Turbines 

(MWa) 

Unconventional 

Systems 

(MWa) 

Microhydro 

(MWa) 

Alabama 462 311 40 48 62 

Georgia 230 101 27 51 51 

Kentucky 518 441 25 18 33 

Maryland 91 57 20 2 12 

Mississippi 298 194 9 59 36 

New York 757 428 166 41 122 

North Carolina 348 199 69 28 53 

Ohio 319 197 39 38 45 

Pennsylvania 953 659 140 47 108 

South Carolina 211 153 11 25 22 

Tennessee 655 481 64 49 61 

Virginia 418 224 101 30 62 

West Virginia 484 339 90 17 39 

It is difficult to separate the non-ARC potential from that found within the region. 

However, due to the mountainous terrain found in Appalachia, it is expected that a large 

portion of this potential is found in the ARC region. 

6. Biofuels 

The conversion of agricultural products and byproducts to liquid fuel is an established 

manufacturing process that has not been widely developed due to its cost relative to 

production of petroleum-based fuels. Ethanol and biodiesel are the two primary types of 

biofuels. Ethanol is essentially distilled grain alcohol and can be produced from corn, as 

well as dedicated energy crops such as switchgrass and even wood. Biodiesel is made 

from vegetable or animal fat. Both fuels are available in limited quantity and are 

commonly blended with regular diesel fuel and gasoline. Ethanol is also used as a 

substitute for methyl tertiary-butyl ether (MTBE0 due to the Federal requirement to 

phase-out MTBE. 

 

The following figure shows calculated biodiesel production from soybeans and ethanol 

from corn based on total 2005 production of those crops in ARC counties. Total 

production is approximately 500 million gallons per year, or 12 million barrels of oil 

 

6

 Ibid. 
9

equivalent. This amount is equal to 0.2 percent of annual U.S. petroleum consumption. 

Inclusion of animal fat waste and dedicated energy crops would increase these numbers, 

but would require much more complex calculations and additional data collection beyond 

the scope of this report. 

Figure 1.5: Potential Annual Biofuels Production by State (millions of gallons)7

 

An alternative biofuel which is receiving increased attention in the southern ARC states 

is switchgrass8

. Switchgrass being native to the region is highly productive (2-3 cuttings 

a year) and extremely resistant to disease. It grows well even in marginal soils. Unlike 

corn, switchgrass produces five times the energy used in its production. It is also 

environmentally neutral as the greenhouse gases produced when it burns are sequestered 

in the crops that are being grown9

. 

Widespread use of biofuels can not occur with access to fueling stations. A potential 

partner is Wal-Mart, who is considering installing such stations at all its stores. Appendix 

A of this report discusses this possibility in more detail. 

 

7

 U.S. Department of Agriculture, 2005 Census of Agriculture. National Agricultural Statistics Services. 8

 “Biofuels from Switchgrass: Greener Energy Pastures” Oakridge National Laboratory 

http://bioenergy.ornl.gov/papers/misc/switgrass.html 9

 Bransby, D. “Switchgrass Profile” Oakridge National Laboratory 

http//bioenergy.ornl/papers/misc/switchgrass-profile.html 

AL

GA

KY

VA

TN WV

MD

MS

NY

NC

OH

PA

SC

167

133

48

41

38
10

7. Chicken Litter 

Chicken litter waste must be collected in very large quantities to make recovery of its 

energy content worthwhile. It is sometimes co-fired along with coal in conventional 

steam turbine power plants. Use of chicken litter for energy serves the dual purpose of 

preventing release of pathogens and pharmaceuticals into streams and rivers when 

untreated litter is land applied as fertilizer. 

Chicken litter produced from broiler manufacturing in the Appalachian region would 

produce little electricity on its own. The combined litter of the approximately 327 million 

broilers produced in the region would generation only about 719 MWh - the equivalent 

annual electricity demand of about 70 homes in the region. Alternate uses of chicken 

litter include fertilizer production via anaerobic digestion, which also produces a modest 

amount of methane gas that can supplement the energy needs of a processing facility. 

Thermophilic anaerobic digestion of chicken litter, such as that demonstrated at the 

Bioplex Project at West Virginia State University, neutralizes up to 99 percent or more of 

certain pathogens found in the litter and produces a high nitrogen liquid and solid 

fertilizer that can replace commercial fertilizers.10 Cow manure also contains recoverable 

methane and is also used in digester projects, including one at the University of Georgia. 

The following figure shows calculated potential electricity production based on broiler 

production for ARC counties in 2002. As the figure shows, within the region broiler 

production is most concentrated in Georgia and Alabama. 

Figure 1.6: Potential Annual Electricity Production From Broiler Litter (MWh)11

 

10 http://bioplexproject.wvstateu.edu/index.html 11 U.S. Department of Agriculture, 2002 Census of Agriculture. National Agricultural Statistics Services. 

AL

GA

WV TN

PA

SC

KY

MS

NC

OH

240 (109 million 

broilers)

297 (135 million broilers)

64

41

2002, USDA
11

Chapter II. State Policies Promoting Use of Renewable 

Energy, Alternate Energy and Energy Efficiency in the 

ARC Region 

There are a variety of policy measure adopted by the ARC states to promote the use of 

renewable energy, alternate energy, energy efficiency and conservation. This section 

provides an overview of these policies with highlights of developments in particular ARC 

states. In addition the activities of the Tennessee Valley Authority (TVA) are also 

covered as its programs cover all of Tennessee and impact significant portions of other 

states in the ARC region. 

Recent years have seen the passage or proposal of comprehensive energy plans in many 

ARC states. Many of the specific provisions in those plans are detailed later in this 

chapter. 

• In 2002 New York enacted 2002 State Energy Plan and Final Environmental 

Impact Statement (Energy Plan) which provides for increased energy diversity 

through use of energy efficient technologies and alternative and renewable 

energy. 

• Georgia has issued a draft State Energy Strategy for Georgia which is due for 

final release in September 2006. The draft plan stresses the production of ethanol 

and biodiesel and programs to increase the production of renewable energy. 

• Kentucky’s Governor has presented Kentucky’s Energy Opportunities for Our 

Future: A Comprehensive Energy Strategy (2006) for consideration by the 

legislature. One of the plans objectives is to maintain the low cost of energy in 

the state. It also emphasizes biofuels production and a promotion, but not 

mandate, the use of renewable resources in the sates electricity generation 

portfolio. 

• The North Carolina State Energy Plan (2005 revised) sees biomass (including 

animal waste) resources as having the greatest potential among renewable fuels in 

North Carolina. It also calls for consideration of a Renewable Portfolio 

Standard to encourage alternate energy development. 

• The 2006 Virginia legislature passed The Commonwealth Energy Policy. The 

policy places heavy emphasis on research. Clean coal, wind and solar are 

specifically mentioned for further development as is the increased use and 

production of biofuels. 

• West Virginia passed the West Virginia Energy Policy and Development Act in 

the 2006 session establishing a Division of Energy within the Department of 

Commerce and continuing the Public Energy Authority. The division was 

charged with energy policy and economic development in coalfield communities. 

The Authority is to prepare an annual plan for energy diversification and 

efficiency. 
12

1. Net Metering 

State policies and individual utilities offer a dual-metering option to certain customers. 

Under these programs residences and business which are generating electricity using 

renewables such as solar, small scale hydro, wind or geothermal are able to either sell 

back to the grid the energy they generate or receive credit for it on their electric bills. 

In most instances this is accomplished by dual-metering. The energy taken from the grid 

is metered as it is used while a second meter records the energy which is returned to the 

grid from the renewables. The customer is metered for all energy taken from the grid and 

either credited or paid for the energy supplied. Customers receive credit on next moth’s 

bill for energy supplied to the utility. Some states use only a single meter which “runs 

both ways”. The customer is only charged for the amount of electricity taken from the 

utility. 

A major issue regarding net metering is the price to be paid for the electricity generated. 

When a single meter is used this is not an issue as the only bill received by the customer 

is what is supplied by the utility. When a dual meter system is employed the issue 

becomes will the generator receive credit or be paid at the retail tariff he is being charged 

or some other rate. In some states the price is set at the utility’s “avoided cost” which is 

the lowest cost of power obtained from its own generation or purchased from another 

utility. Experience is some states with avoided cost has meant the return on installing 

small generation facilities can not be capitalized in a reasonable time period if at all. 

There is an issue with safety and reliability. All net metering states require that the 

renewable installation meet certain standards such as those of Underwriters Laboratories, 

National Electrical Code or the Institute of Electrical and Electronics Engineers. While 

no state requires its utilities to pay for the renewable generator or its installation, there is 

variance as to who must pay for the cost of interconnection. 

 

TVA and its related utilities have established net-metering for all residential and 

commercial customers through their Green Power Switch Program in Tennessee, 

Georgia, Mississippi and North Carolina. In addition TVA has a pilot Generation 

Partners Program. A two meter system is used with the TVA purchasing all the output at 

$0.15 for residential customers. For larger customers with units up to 50 kW the rate is 

$0.20. Larger units may be included with permission from TVA. For residential and 

small commercial both solar and wind systems are included, but larger commercial 

enterprises are limited to solar. For the ARC states there are only 22 of their distributors 

involved. With only 20 residential customers currently connected. Of the 158 

distribution companies supplied by TVA, 98 offer the voluntary program. 

In Virginia the program is limited to residential systems with less than 10 KW capacities 

while the limit on commercial systems is 500 kWh. Their program extends not only to 

renewables but to biomass, waste and sea motion. They use a single meter measuring 

flows in both directions. 
13

Maryland’s legislation allows net metering for systems with capacities up to 200 kWh 

without Public Service Commission approval and up to 500 kWh with approval. Solar 

wind and biomass systems are covered. A single bi-directional meter is used. The 

Maryland program is under revision to develop a credit system (other than based on 

kWh) which allows dollar for dollar offsets for electricity generated. There is a limit on 

allowable capacity equal to 0.2 percent of the state’s peak load forecast. 

The Ohio situation is similar to that in southern ARC states. All fuels including micro 

turbines and fuel cells are included. For power furnished to the grid the utility must pay 

their unbundled generate rate. New rules are under consideration by the Public Utilities 

Commission of Ohio (PUCO) 

. 

Net metering is provided in Kentucky for both private and co-op utilities only for solar 

units of 15 kW or less. But the states two largest utilities Kentucky Power and Louisville 

Gas and Electric extend the program to wind and hydro customers. A single bi-directional 

meter is used. There is a limit of 0.1 percent of a utilities single-hour peak load that can 

be net-metered. 

Net Metering rules in New York allow customers to sell the net excess generation from 

photovoltaic systems with a capacity of up to 10 kW, from farm-based biogas systems 

up to 400 kW, from residential wind turbine systems up to 25 kW and from farm-based 

wind turbine systems up to 125 kW. The net-metering program accept customers on a 

first-come, first-serve basis until the total net-metered solar-electric capacity equals to 

0.1% of a utility’s 1996 electric demand, the biogas system capacity equals to 0.4% of 

1996 demand, and the wind system capacity equals to 0.2% of 2003 demand. 

Electricity from these systems will be purchased at the utility’s avoided-cost rate except 

for the wind systems with a capacity higher than 10kW, which is credited at the state’s 

avoided-cost rate. 

Net Metering Rules in Georgia allow customers to sell all or part of the green power 

generated by their renewable-energy systems, include photovoltaic, fuel cells, and wind 

systems, up to 10kW for residential customers and 100kW for commercial customers. 

Utilities will purchase only up to the maximum capacity of 0.2% of the utility’s annual 

peak demand during the previous year. 

Evaluation

As a general statement net-metering has not become widespread even when it is 

available. Those contacted provided several reasons: 

• In those state with low energy costs, net-metering does not represent a significant 

cost savings which would warrant the up-front capital and maintenance costs of 

installing renewable technologies. 

• The uncertainty created in those states where there is no guaranteed purchase 

price, means few potential generators are willing to take the risk. 

• Problems with interconnection are present in many states. These include who 

bears the costs or the interconnection and the requirements for interconnection. 
14

Some states have required through their Distributed Generation Acts or other 

legislation that utilities provide interconnection at no cost to the customer. 

• Voluntary programs are of limited success if a utility already has a sufficient 

generating capacity or purchase agreements with other generators to meet its 

current or anticipated needs. 

• Caps on the amount of electricity that utilities are required to buy back under net 

metering when set at low levels may limit the usefulness of net metering. 

2. Renewable Energy Portfolio Standards (REPS) 

Renewable Portfolio Standards (RPS) require that a certain percentage of the power 

either consumed or generated in the state must come from renewable sources. In its most 

basic form an RPS requires a utility to either generate, build or buy renewable energy as 

part of the mix of fuels it uses. Only 19 states in the United States have currently adopted 

RPSs. In the ARC region Maryland, Pennsylvania and New York have adopted RPSs. 

But these standards are being actively considered in some of the other ARC states. 

The amount of renewable electricity to be included varies widely across the nation from 1 

percent to 25 percent. New York, which already makes extensive use of hydropower, has 

the nation’s highest percentage at 25. Maryland will ultimately reach 7.5 percent and 

Pennsylvania 18 percent. 

RPSs are viewed as a means of introducing new technologies and additional competition 

into electric markets. Since most utilities have little experience with renewables, the RPS 

provides a means by which they can adopt these technologies. Since most renewable 

fuels have little environmental drawbacks, their use contributes to reduction of problems 

associated with air pollution. Reduction of dependence on imported fuels will have 

significant economic and national security benefits as well. 

RPS can be met in several different ways. The utility can build its own renewable 

facility. It can purchase renewable power from other generators. A more recent 

development is the use of Renewable Energy Credits (REC). Under this system a utility 

which uses renewables can meter the amount of energy it creates. It can then sell RECs 

which designates that the generator produced one megawatt hour of electricity from 

renewable sources. Utilities which neither produce nor buy renewable energy can use 

RECs to meet their RPS requirement. Maryland explicitly allows the use of RECs. 

It is important to define what is included as renewables eligible for credit under a RPS. 

What is included in “renewables” vary considerably among the three ARC states which 

have adopted them. All included solar and wind. Hydro is usually included along with 

landfill gas. In a few cases waste from wood or coal, while not strictly renewable, are 

included. States such as Maryland and Pennsylvania divide their renewable fuels into 

two tiers. The RPS is to be met by employing a given percentage from each renewable 

source in each tier. 
15

The greatest issue concerning RPS is the initial high capital cost of installation. Once the 

facility is in place the fuel costs are essential zero for wind, solar and small scale hydro. 

But the issue remains who is to bear these initial costs since they are often as much as 

three times those of the lowest cost natural gas fired power plant. This problem is 

particularly acute in states which have deregulated electric utilities and the company 

adopting renewable technologies may find itself at a competitive disadvantage. In states 

with traditional regulation, the question is will the regulators allow the higher capital 

costs to be part of the rate base. The National Council of State Legislators has estimated 

that the RPSs in the Pennsylvania and New York increase costs by only $3-$3.50 a year 

for the average residential customer.12 

Other objections include utilities being forced to use technologies which are not fully 

technologically developed. Recent experience with renewable technology has 

demonstrated rapid deceases in costs and increases in efficiency. Forcing too early 

adoption under an RPS may be unwise until technologies are fully mature. 

There is also concern that RPSs add complexity to an already heavily regulated industry. 

These standards, particularly when tiers are employed, require extensive monitoring and 

oversight. The more detailed an RPS is regarding types of fuel, size of generators, 

percentage tiers for use of specific fuels and interconnection standards reduce the ability 

of renewable markets to fully function as utilities are restricted from finding and using 

the least costly renewable alternatives. 

Maryland’s RPS requires utilities to generate a given percentage of their power from 

renewable sources. This is a two tier program. The state’s electric companies must obtain 

1 percent of their electricity from renewable sources: solar, wind, biomass, anaerobic 

decomposition methane, geothermal, ocean, fuel cells and small hydro (less than 30 mw). 

The second tier consists of hydro (large scale), waste to energy facilities and poultry 

litter. The electric suppliers must get 2.5 percent of their electricity from these sources. 

The Tier one standard increases in annual increments of 1 percent until reaching 7.5 

percent in 2019 at which time the Tier 2 standard disappears. The program also includes 

renewable energy credits (REC) of 200 percent for solar 110 percent for wind and 

methane. A supplier not meeting the RPS standards must pay into the states Renewable 

Energy Fund 2 cents per kWh for Tier 1 and 1.5 cents for Tier 2 shortfalls. 

New York’s RPS stipulates an increase in the state’s current 19 percent level of energy 

consumption from renewables to 25 percent. It is a two tier system with wholesale 

generators buying renewable credits from generators who use virtually any renewable or 

alternative fuel. Customers under the second tier are encouraged to install renewable 

generation capacity which can be sold into the grid for credit on their electric bills. The 

25 percent target is divided into a mandatory 24 percent with 1 percent to be from 

voluntary generation under the state’s Green Marketing Program. 

 

12 National Conference of State Legislatures, (June 2005) State Renewable Portfolio Standards: A Review 

and Analysis. Washington, DC. P.6. 
16

Pennsylvania’s Alternative Energy Portfolio requires that 18 percent of the 

electricity supplied come from alternative energy or renewables. The State uses the 

broadest definition of what fuels are included of any of the ARC states. In addition to 

the usual solar, wind, low-impact hydro, geothermal, biomass, methane and fuel cells, 

which constitute the Tier I sources, waste coal, distributed generation systems demand 

side management, municipal solid waste wood byproducts are included in Tier II 

sources. Starting in 2007 1.5 percent of supply is to come from Tier I and 4.2 percent 

from Tier 2. These percentages increase to 8 percent and 10 percent by 2020. 

Interconnection rules are currently under development by the State’s PUC. 

Evaluation

• RPSs have major benefits and deserve consideration in all ARC states. But the 

cost of requiring the use of renewable electricity in those ARC states with 

already below average electricity costs may pose difficulties particularly if the 

state uses its low energy costs as an inducement for economic development.

• States should not restrict the source of renewable power to generators within 

their boundaries. Political boundaries have little to do with the efficient 

allocation of electricity and will increase costs. Considering that all ARC states 

are interconnected to multi-state grids, such a requirement is not appropriate. 

None of the ARC states have such a limitation.

• Consideration should be given to using the broadest definition for renewable 

fuels. This will allow generators to seek the least costly source of renewable 

electricity. The advisability of tiers (and specific percentages within those tiers) 

and their impact on flexibility and costs should receive careful consideration.

• The regulatory environment as to how the initial costs are to be covered needs 

clear delineation. The policies in the ARC states now using RPS can serve as 

guidelines.

3. Public Benefits Funds 

Public Benefit Funds go by different names in ARC states which have them. These are 

additional small charges to customers attached to their electric bills. The monies raised 

from these funds are used either for expansion of renewable energy, relief for low income 

households or promotion of energy efficiency. 

The purpose of New York’s Systems Benefit Charge is to collect a surcharge on the 

customers of the private utilities to support energy research, encourage energy efficiency 

and provide energy assistance to low income households. The charge may also be used 

to determine how to reduce the negative impacts of energy production and to increase 

competition in energy markets. During the five year period 2005-2010 the fund is 

estimated to receive $875 million. The program has demonstrated its effectiveness by 

reducing energy demand, saving utility consumers almost a quarter billion and generated 

almost $1.5 billion in energy investments. The fund traces significant reductions in air 

pollution and the creation of nearly 5,000 jobs to its projects. 
17

Ohio’s Energy Loan Fund (ELF) is financed by a surcharge collected from the state’s 

four public utilities to provide low interest loans and loan guarantees for energy efficient 

upgrades at residential, governmental educational small commercial/industrial and 

agriculture facilities. 

The five major private utilities in Pennsylvania have created Sustainable Energy Funds 

(SEF) which operate in their service areas. The specific programs supported by these 

funds are mentioned elsewhere in this report. The overall objectives are to promote 

renewable energy, advance clean energy technologies, encourage energy efficiency and 

support the clean energy business. Funds are collected from the customers by the utilities 

to support the programs. 

4. Grant Programs 

Grants as a means of encouraging the adoption of alternate or renewable technologies 

exist in many of the ARC states. A summary of sample state programs follows. 

• Alabama has a Renewable Fuels Program to assist business in the installing 

of biomass energy system, this program offers participants technical assistance 

and subsidies up to $75,000 to cover the interest payment on loans to install 

approved biomass projects. But interest rate on the project should be no greater 

than 2% above the prime rate. 

• Kentucky provides several grant programs focused on energy efficiency and 

alternate fuels. The Energy Efficiency Education Grant provided to the 

University of Kentucky gave $95,176 to promote energy efficiency education 

throughout the commonwealth. The Kentucky Energy Efficiency Program 

for Schools Program provided a $77,000 grant for the University of Louisville, 

which is aimed at managing the energy costs of schools in Kentucky. The 

program offers a complete package, including tools, curriculum, training, 

coaching and expertise to guide participating schools on how to reduce their 

energy costs and achieve energy efficiency. Further a $100,000 energy grant 

was awarded to the National Energy Education Development (NEED) Project 

for the design and delivery of an energy education program for teachers and 

students in grades K-12. R&D Grants for Renewable Energy and Energy 

Efficiency totaling $421,461for research and development grant renewable 

energy and energy efficiency initiatives, which include improved biomass 

conversion, advanced aluminum melting systems, improved biodiesel product 

and enzymes for the conversion of corn-fiber to biofuels. 

• Kentucky has also a $70,000 grant awarded to Kentucky Clean Fuels Coalition 

to establish a network of Kentucky public school bus fleet interested in using 

biodiesel or biodiesel blends and to manage the Kentucky’s Clean Cities 

Program. The grant provides $42,000 for schools to compensate for the 

additional cost of adding biodiesel to school bus fleets. 

• Under its Assisted Home Performance Grants, New York offers grants, up to 

$5,000 for single-home owners and $10,000 per building for 2-4 family units, to 

low-income residences for energy efficient improvement. New York further 

offers grant to support companies in the development, testing and 

commercialization of renewable-energy technologies that will be manufactured 
18

in New York. Funding varies by solicitation and is based in part on the 

likelihood that the technology will be competitive in the near future. Eligible 

technologies include solar thermal electric, photovoltaic, hydropower, 

alternative fuels, wind, landfill gas, and biomass. 

• Ohio offers a Fuel Cell Grant Program which would use the $100 million 

budget to support fuel cells related research, project demonstration and job 

creation. The State offers Dispersed Energy and Renewably Energy Grants

to commercial, institutional and industrial projects with a maximum capacity of 

25 MW for up to $100,000 per grant. The program also provides grants to 

residential renewable-energy projects for up to $25,000 per grant and to nonresidential projects for up to $150,000 per grant. A certain percentage of cost 

sharing is required for all grants. The. Energy Loan Fund Grant for Energy 

Efficiency provides funds to cover up to 25% of the total costs of projects that 

can improve energy efficiency by at least 15%. The maximum amount will be 

awarded is $50,000. 

• In Pennsylvania Metropolitan Edison Company SEF Grants and Penelec 

SEF of the Community Foundation for the Alleghenies Grant Program 

established by First Energy, grant funds for the development and use of 

renewable energy and clean-energy technologies, energy conservation and 

efficiency, and projects that improve the environment. The grant amount varies 

according to project, but the maximum limit is $25,000. Also the West Penn 

Power SEF Commercial Grant Program provides funds to nonprofit 

companies and community-based organizations for the development and the use 

of renewable energy and clean energy. Grant amount varies by proposal. 

• Small Wind Incentives Program offers funds to Virginia landowners for 

purchase and installation of small wind energy systems. The maximum award 

will be the lower of $10,000 or 33% of installed costs. 

5. Loan Programs 

ARC states also provide a variety of loans on very favorable terms for projects 

which use alternate or renewable energy or improve energy efficiency. Some of 

these are describes below. 

• Under the Solar Water Heater Loan Program participating Eastern Kentucky 

counties are offering customers a 6-year payback term loan with 5% down 

payment and an interest rate of 3% to cover the total cost of a solar water heater 

for residential and commercial applications. 

• New York provides three loan programs to its residents. 

o The Home Performance with Energy Star Loan Program offers up to 

$20,000 unsecured loan with a 5.99% APR to residential customers for 

the installations and developments of energy efficient and renewable 

resources measures. However, the measure has to meet the Energy Star 

qualifications to be eligible and the equipment must be installed by 

approved Building Performance Institute certified contractors. 

o The Energy $mart Loan Fund provides reduced-interest rate loans 

(4.0% below the lender rate for ten years; 6.5% below the lender rate for 
19

borrowers in the Liberty Zone) for lenders to fund projects to improve a 

facility’s energy efficiency or utilize renewable energy systems. 

o Moreover, all facilities can also apply for the Green Building 

Improvement Loan, up to $500,000, if the facility has been registered 

for the LEED certification with the United States Green Building 

Council. The maximum loans for residential is $20,000; for multifamily 

and all other non-residential is $1 million plus $500,000 for Green 

Building Improvement; and for existing multifamily is $2.5 million, plus 

an additional maximum of $2,500,000 for projects that include advanced 

meters. 

• Community Energy Loan Program (CELP) in Maryland offers loans to 

eligible local governments and nonprofit organizations, including hospitals and 

schools, to finance energy saving projects. On average, about $600,000 is 

available per loan and the current interest rate is approximately 3.5%. 

Organizations have up to 7 years to pay off the loan. By September 2005, 49 

organizations have utilized this program, generating an annual saving of 2.4 

million in the state. Also the State Agency Loan Program provides loans with 

0% interest and a 1% administration fee for state agencies to fund energy 

efficiency improvements in state facilities. This program offers about 1 million 

in new loans each year. A total of $1.5 million was awarded to state agencies in 

2005, estimated to generate savings of about $267,114 annually. 

• The Energy Investment Loan Program in Mississippi provides loans ranging 

from $15,000 to $300,000 at an interest rate 3% below the prime rate, with a 

maximum loan term of 7 years, for renewable energy and energy efficiency 

projects. 

• There are three loan programs established in Ohio.

o Double Saving Loan provides loans up to $10,000, with interest-rate 

reduced by up to 50% through a linked deposit, to qualified residential 

borrowers with projects that improve energy efficiency in one- to threeunit residential building. 

o Renewable Energy Loans offers loans to Ohio residents, range from 

$500 to $25,000 and businesses, range from $5,000 to $500,000, to 

implement energy-efficiency or renewable-energy projects. Also, this 

program will help applicants reduce interest rate by approximately half 

on standard bank loans. 

o Business and Institutional Loans are offered to businesses and 

institutions in Ohio. The loans will buy down the interest rate for energy 

efficiency projects, up to a maximum of $250,000 at a 50% reduced 

interest rate. Qualifying projects must reduce energy cost by at least 

15% have an energy payback of 5 years or less and have an expected 

project life longer than the energy payback time. 

• Pennsylvania has created four loan programs.

o Metropolitan Edison Company SEF Loans is a fund established by 

FirstEnergy to promote development and use of renewable energy and 

clean-energy technologies, energy conservation and efficiency, projects 
20

that improve the environment. The loan amount may vary according to 

project, but the maximum limit is $1 million. 

o Penelec SEF of the Community Foundation for the Alleghenies Loan 

Program also established by FirstEnergy, provides loans up to $500,000 

to promote the development and use of renewable energy and cleanenergy technologies, energy conservation and efficiency, projects that 

improve the environment. The loan amount varies according to project. 

o SEF of Central Eastern Pennsylvania Loan Program provides a 

limited number of grants and loans to organizations needing funds for 

projects on research and development of clean and renewable energy 

technologies. 

o West Penn Power SEF Commercial Loan Program (PA) – offers 

commercial loans to manufacturers, distributors, retailers and service 

companies involved in renewable and advanced clean energy 

technologies, as well as energy efficiency and conservation products and 

services to end-user companies and community-based programs. The 

amount of loans varies by proposal. 

• The ConserFund Loan Program in South Carolina offers loans to fund 

energy efficiency improvements in state agencies, local governments, public 

colleges and universities, school districts and non-profit organizations. The 

loans can help organizations cover up to 100% of eligible projects costs, from 

$25,000 to $500,000. 

• Local Government Energy Loan Program in Tennessee gives low interest 

loans to municipal and county governments for energy efficiency-related 

projects in courthouse, administration buildings, schools, maintenance facilities, 

and any other building owned by the city or county. Eligible projects can 

borrow up to $500,000 at an approximate 3% interest rate for up to 7 years. The 

Small Business Energy Loan Program creates low interest loans of up to 

$100,000 for a maximum of 7 years payback time to businesses with fewer than 

300 employees or less than $3.5 million in annual gross sales or receipts for 

renewable energy and energy efficiency projects. 

6. Tax Incentives 

Tax incentives are a frequently used method by state governments to induce a desired 

activity. Listed below are examples of ARC state programs which provide either 

deductions or credits to various taxes for use of renewable or alternative fuels as well as 

promoting energy efficiency. 

a. Personal and Corporate Income Taxes: Deductions and Credits 

o Wood-Burning Heating System Deduction: Alabama allows 

individual taxpayers to take the total costs of the installation of a woodburning heating system or the conversion from gas or electricity heating 

system to wood as a deduction on their taxes. 
21

o Tax Modernization Plan; The Kentucky Governor’s 2005 tax 

modernization plan includes a $1.5 million tax credit to bio-diesel 

producers and blenders. 

o Solar and Fuel Cell Tax Credit: New York offers a personal income 

tax credit for expenditures on solar-electric, solar-thermal and fuel cells 

equipment used on residential property, excluding the solar-energy 

systems used for pool heating or other recreational applications. The 

credit will equal to, 25% of the total costs of solar-electric and solarthermal systems (up to $3,750) and 20% for fuel cells systems (up to 

$1,500). To quality for the credit, the systems are limit to a maximum 

capacity of 25kW for the fuel cells and 10 kW for the solar-electric. 

Additionally, the fuel cells systems must also utilize the proton exchange 

membrane (PEM) technology. Further the state has a Green Building 

Tax Credit Program (Corporate & Personal) which provides owners 

and tenants of eligible buildings and tenant spaces, which meet certain 

“green” standards, with tax credits of up to $2 million per building. The 

credit can be used against corporate taxes, personal income taxes, 

insurance corporation taxes or banking corporation taxes. 

o Maryland’s Income Tax Credit for Green Buildings (Personal & 

Corporate) enacted in 2001, applies to only non-residential and 

residential multifamily buildings of at least 20,000 square feet. The 

credit encourages the use of alternate energy systems, such as PV, wind 

turbines and fuel cells. The tax credit amount differs depend on building 

type and renewable energy systems, for instances, 6-8% of the costs of 

construction or rehabilitation for green building, 20-25% for PV and 

wind systems and 30% for fuel cells systems. To be eligible, the 

buildings must meet specific environmental and energy requirement, but 

the renewable-energy system size is not specified. 

o Renewable Energy Tax Credit (Personal & Corporate) provided in 

North Carolina offers a 35% tax credit for the cost of renewable energy 

property in North Carolina. The ceilings for the credit vary depending on 

the sector and the type of renewable-energy system. The maximum for 

different technology used in residential facilities are between $3,500 and 

$10,500 and in commercial and industrial facilities is $2.5 million. 

o West Virginia has enacted a Business and Occupation Tax Reduction 

from 40 percent of generating capacity to five percent. 

b. Sales Tax 

o Georgia under its 3-Day Sales Tax Exemption exempts the sales of any 

qualifying energy efficient residential appliances (under $1,500) that 

meets or exceeds the “Energy Star” program requirements, sold between 

August 03 and August 06, 2006, from the state sales and use taxes, but 

not local sales taxes. In addition the State provided a sales tax 

exemption on purchases for non-commercial, home and personal use 

energy efficient products, under the price of $1,500, purchased between 
22

October 6 and October 9, 2005. Furthermore, Georgia mandates a sales 

tax exemption on energy purchases used for crop irrigation. 

o New York has a Solar Sales Tax Exemption applied to sales and 

installation of residential solar-energy systems, which utilize solar 

energy to provide heating, cooling, hot water and/or electricity, from the 

state’s sales and use taxes. 

o There is in Maryland a Wood Heating Fuel Exemption from the sales 

tax on all purchase of wood or “refuse-derived” fuel, used for heating in 

residential buildings. 

o A Conversion Facilities Tax Exemption exists in Ohio which exempts 

certain equipments used in energy conversion, such as thermalefficiency improvements and the conversion of solid waste to energy, 

from property tax, the state’s sales and use tax and the state’s franchise 

tax where applicable. 

c. Property Tax 

o According to New York’s Solar, Wind & Biomass Energy System 

Exemption solar, wind energy and farm-waste energy systems (limit to 

a maximum capacity of 400kW only), constructed in New York State 

prior to July 1, 1988 or between January 1, 1991 and January 1, 2006, 

and were eligible for a 15-year real property tax exemption. The amount 

of exemption will equal to the increase in assessed value attributable to 

the renewable energy system. 

o A Corporate Property Tax Credit allowing counties in Maryland to 

provide tax credits to corporate or property tax when solar, geothermal 

and other qualifying alternate energy systems are used for heating or 

cooling. The tax credit amount and the length of the credit vary, because 

counties have the autonomy to decide on the amount of credit and length 

of time up to a maximum of 3 years. In addition the State permits solar 

heating and cooling systems to be assessed at no more than the value of 

a conventional system for property tax purpose and a full property tax 

exemption for solar energy equipment. 

o The North Carolina Active Solar Heating and Cooling Systems 

Exemption program exempts active solar heating and cooling systems, 

placed on residential, commercial and industrial property, from being 

assessed at more than the value of a conventional system for property 

tax purposes. 

o Wind Energy Systems Exemption in Tennessee was enacted in 2003, 

providing that wind energy systems operated by public utilities, 

businesses or industrial facilities shall not be taxed at more than onethird of their total installed cost. 

o Virginia allows a Local Option Property Tax Exemption for Solar 

which any county, city or town may exempt or partially exempt solar 

energy equipment or recycling equipment, installed in residential, 

commercial or industrial property, from local property taxes. 
23

o For the installation of wind farms West Virginia provides a Property 

Tax Assessment Reduction for utility wind turbines which lowered the 

property tax from 100 percent to five percent of assessed value. 

7. Rebate Programs 

Another way that ARC states promote alternative, renewable and efficient energy is by 

offering rebates under the programs outlines below. 

• Biomass Energy Interest Subsidy Program in Alabama provides

reimbursement of interest to property owners on loans for installing biomass 

energy system. 

• The following rebate programs exist in New York

o Small Commercial Lighting Incentives Program offers incentives, up 

to $30,000, for businesses to install effective and energy-efficient 

lighting in small commercial spaces. Under this program, lighting 

contractors, distributors, manufacturers, and designers are also eligible 

for various incentives associated with bringing energy-efficient lighting 

to small commercial spaces. 

o Wind Incentive Program develops a network of eligible installers who 

will install end-use wind energy turbines for facilities in all sectors, the 

incentive program offers up to $100,000 per installation to eligible 

installers. The incentives are paid based on a percentage of the 

installation cost (50% of costs for systems of 500W to 10kW; 15% for 

systems larger than 80kW and 70% for commercial customers). 

o Under the $mart Equipment Choices Program applicants are eligible 

for rebates up to $10,000 for installation and replacement of electric 

efficiency equipment and up to $25,000 for gas efficiency equipment in 

non-residential structures. 

o Energy $mart New Construction Program promotes the incorporation 

of energy efficiency and renewable energy resources in the design, 

construction, and operation of commercial, industrial, institutional and 

multifamily building, the NYSERDA has a 10 million budget for this 

program to provide incentives up to $375,000 per project for Whole 

Building Design projects and up to $120,000 for most other projects. 

o PV Incentive Program provides incentives of $4 to $4.5 per watt, based 

on direct-current (DC) module rating, to eligible installers for the 

installation of approved, grid-connected PV systems that has a 

maximum of 50kW capacity. The total budget available for this program 

has been raised to 12 million in 2005. 

o LIPA Solar Pioneer Program offers rebates for approximately 50% of 

the costs of a PV system with a maximum of 10kW capacity. As the 

overall price of PV system has been decreasing, the program has 

adjusted its rebate from $5 per watt for the 1000kW of PV installed to 

$3.75 per watt (DC) for the next 1,000kW block for residential and 
24

commercial customers and $4.75 per watt (DC) for schools, nonprofits 

and government agencies. 

• Maryland’s Solar Energy Grant Program provides funding for homeowners, 

businesses, local governments and non-profit organizations to install solar 

water-heating and solar-electric (PV) systems. The reimbursement is 20% of the 

equipment cost (up to $3,000 for residential property, $5,000 for commercial 

property and $2,000 for solar water-heating equipment). Systems have to meet 

the minimum size requirement set by the U.S. Department of Energy to be 

eligible. The Clean Energy Rewards Program approved by the Montgomery 

county council offers residents and businesses incentives for buying clean 

energy. However, the reward levels and incentive rates have yet to be set. 

• Sustainable Development Fund Solar PV Grant Program issues rebates to 

PECO customers for purchase of PV systems. The grant is paid based on system 

performance and customer type. For example, $4 per watt up to $20,000 is the 

buy-down incentive for the PV system owner; $1 per kWh in the first year up to 

$5,000 is the performance incentive for PV system owner; and $0.1 per kWh in 

the first year up to $250 is the performance incentive for the participating 

contractor. 

• Residential Solar Initiative for EarthCraft Homes Rebate in South 

Carolina offers homebuilders a rebate for every home built with a solar hot 

water heating system. A maximum of $20,000 in total rebates has been 

allocated for this program, so a total of 20 rebates of $1,000 each will be 

awarded to builders for approved new installations. 

• Under Kentucky’s Solar Water Heater Rebate Program the Kentucky Solar 

Partnership is offering a $500 rebate for solar water heaters installed on 

residences. The budget is available for 25 installations in total. 

8. Other Programs 

The TVA has established a Green Power Partners Program in its service territory. 

Green power consists of electricity generated from renewable sources. Green Power is 

sold in 150 kWh blocks which is about 12 percent of an average households use. The 

cost is four dollars ($4) for each block. The green power used is from the TVA’s 18 

wind turbines, 16 solar facilities and one methane plant. No expansion is currently 

planned as there is a 30 percent surplus of unsold green power available. 

Clean Energy Procurement programs require that public bodies obtain a certain 

percentage of their electric power from renewable sources. Maryland requires state 

owned facilities to acquire 6 percent and 11 cities and one county have established 5 

percent requirements. New York’s requirement is 10 percent. Several localities in ARC 

states also have renewable procurement standards. 

Solar Easement Guidelines have been established in Georgia, Kentucky, Tennessee and 

Virginia. These allow owners of solar systems to obtain easements which insure access 
25

to direct sunlight to operate their systems. These restrictions would limit new 

construction or other impediments to be constructed which block sunlight. 
26

Chapter III. State of Technology and Manufacturing in 

Appalachia 

1. Wind 

Today’s wind turbines are much larger and more efficient than those of the 1980s. 

Modern turbines are as large as 5 MW each while in early 1980s, during that wave of 

wind power development, a typical turbine was 25 to 100 KW. Today’s turbines produce 

much more power and also require a larger physical footprint. Costs have declined by 

about 90 percent over the last 20 years, mostly from capital cost decreases and efficiency 

improvements.13 

As rotor diameters have gotten longer, increasing from about 10 meters in early 1980s to 

over 80 meters today, capacity and energy production actually increased as a faster rate. 

This recent development of larger turbines has made Appalachian wind more attractive to 

commercial developers due to the greater quantity of electricity that can now be 

generated per turbine as well as improved availability. Turbines up to two MW in size, 

such as those installed at the Bear Creek Wind Farm in Pennsylvania, or the 2.5 MW 

turbines proposed for Clipper project in Garrett County, MD, are among the largest onshore turbines in the world. Due largely to the State of Pennsylvania’s active policy 

toward wind development, wind-energy company Gamesa Corp. of Spain selected an 

industrial park in Ebensburg, PA as the site for its U.S. blade manufacturing facility. The 

increased size and height of turbines has spurred debate over the issue of “viewshed” 

impacts from wind installations. Larger turbines have hub heights over 300 feet and are 

thus visible from further distances compared to older, smaller turbines that may have 

been only 30 to 40 feet tall. 

Wind energy efficiency improvements have included use of advanced electronics to 

develop variable speed turbines and longer lived turbines. Systems integration 

improvements have induced system operators to give wind capacity credit on the 

electricity grid, increasing the viability of wind projects. New R&D on low-speed landbased turbines can help take advantage of lower speed winds, which have applicability 

throughout the Appalachian region. 

Other wind-related manufacturing activity in the ARC region includes General 

Electric’s wind turbines R&D facility in Greenville, SC. That location does wind turbine 

fleet support engineering focused on the generator and other electrical components. 

Magna Machine in Cincinnati, OH is a manufacturer of blade hubs. Its proximity on the 

border of the ARC region promises potential synergies with manufacturers in 

Appalachian. 

 

13 American Wind Energy Association, 2005. 
27

2. Solar 

The primary barrier to widespread installation of solar energy conversion systems is 

price. Photovoltaic (PV) systems are still expensive, up to 32 cents per KWh. These 

systems are also still fairly inefficient: thin-film cells are less than 10 percent efficient 

and crystalline-silicon cells are 12 to 14 percent efficient. Further improvements in 

efficiency would allow the less intense sun areas of the Appalachian region to get more 

from a PV cell. Other issues that continue to stymie expansion include low component 

manufacturing rates; the industry has a goal of creating a 200 MW factory by 2020. 

Silicon production is also expensive and a larger supply chain is needed. In spite of these 

issues, PV production costs have fallen by 100 times since the mid-1970s.14 

Breakthroughs in system integration have improved the ease of maintaining solar systems 

which promotes usability. In addition, marketing of solar systems in nationwide stores 

such as Home Depot has also made the technology more accessible. 

Other means of capturing solar power, such as concentrating solar power, where thermal 

solar energy is collected as heat and directed toward a conventional power generating 

system, have also made progress but are less applicable to the Appalachian region. Since 

the 1980s DOE R&D support has allowed the costs of this type of system to decline 

considerably while also improving efficiency. 

Solar manufacturing and solar R&D activity in the Appalachian region is concentrated in 

Pittsburgh area. Plextronics Inc. conducts research to manufacture polymer cells that are 

thinner, lighter and more flexible than current PV cells. Polymer cells are made from 

regioregular polythiophenes, self-assembling nanoscale conducting polymers. This type 

of PV cells has the potential to be more cheaply produced (printed) than other PV cells. 

Plextronics was founded in 2002 as a spin-off from Carnegie Mellon University’s 

McCullough Lab. 

A firm by the name of Solar Power Industries, Inc. in Belle Vernon, PA makes 

crystalline cells, primarily for the gardening products. 

AFG Industries’ Blue Ridge Plant in Kingsport, TN is a flat glass manufacturer that 

supplies BP Solar, Shell Solar and GE Solar with photovoltaic glass. 

There are several other solar manufacturers that are in ARC states but not in the ARC 

region, that are worthy of mention. These include Atlantis Energy Systems, Inc. in 

Exmore, VA that makes building integrated PV products including PV roofing slates and 

PV glass laminates and BP Solar in Frederick, MD, which is one of the larger PV panel 

manufacturers in the country. 

 

14 U.S. Department of Energy, Solar Energy Technologies Program. 
28

3. Geothermal 

Most recent geothermal technology improvements have been related to system design. 

Some increased efficiency has also been seen but most improvements are due to the way 

air and water is delivered from the ground to the building. Staging and zoning of delivery 

have become more sophisticated, which has reduced the costs of supplying geothermal 

heating and air conditioning to multiple zone buildings. 

There are two geothermal system design companies in the ARC region. Both of these are 

in Pennsylvania: Sunteq/Enviroteq in State College, and Hydro Delta Corp. in 

Monroeville. Both companies design, build and install custom geothermal systems 

designed for specific applications. Enviroteq manufactures compressor units, with up to 

three stages of heating and cooling that interface with conventional air handlers. Hydro 

Delta manufactures a broad range of heating, cooling and water heating systems, 

including on-demand water heating equipment, and was the industry's first manufacturer 

to custom-insulate tube-in-tube heat exchangers to prevent condensate from forming on 

the outer surfaces. 

4. Small and Low Impact Hydro 

Modern hydroelectric technology has made progress in several areas. Overall, a major 

aspect of advancement has been in improved hydrologic assessment and project 

identification. Standardized design of turbines and generators also allows for greater ease 

of operation and maintenance. 

Modern turbines also perform better regarding environmental impact. Newer turbines 

contribute less to fish mortality, with advanced turbine technology such as that supported 

by the DOE’s Wind and Hydropower Technologies Program having the ability reduce 

fish mortality resulting from turbine passage to less than two percent, in comparison with 

turbine-passage mortalities of 5 to 10 percent for the best existing turbines and 30 percent 

or greater from other turbines. Newer turbines also have improved compliance with water 

quality standards in terms of maintaining required downstream dissolved oxygen levels. 

The study team was not able to locate any regional firms that specialize in small-scale or 

low impact hydroelectric installations. 

5. Biomass 

Biomass energy recovery systems utilize mature technology. The primary barriers 

to its further development are policy and knowledge based. Landfill gas systems, for 

example, are comprised of common commercial piping and compressions systems and 

generators. Eight of the 13 ARC states currently have landfill gas projects within the 

region’s counties that are used both for generating electricity and for direct methane use. 
29

The States of West Virginia, Ohio, Maryland, Virginia and Mississippi do not have 

landfill gas projects.15

6. Biofuels 

Cost if the primary barrier to widespread use of domestically produced biofuels. 

However, many states are providing financial incentives to overcome this barrier. 

There are several biofuels production facilities in Appalachia and the development of 

biofuels is a large focus of many state energy plans in the region. Several states have 

operating biodiesel manufacturers. The manufacturers that were found for this report are 

summarized by state and should not be considered an exhaustive list of regional 

producers: 

• The State of Kentucky is implementing a large-scale effort to power its school 

buses with biodiesel. Producers in the ARC region include: 

o Green Earth Bio Fuels is building a 3.2 million gallon biodiesel plant in 

Irvine, KY. 

o Owensboro Grain is building a 50 million gallon biodiesel plant in 

Owensburg, KY. 

• The State of Georgia has at least two biofuels producers in the region. These are: 

o U.S. Biofuels uses chicken fat to produce three to five million gallons of 

biodiesel a year in Floyd County, GA. 

o Peach State Labs in Rome, GA produces soybean based biodiesel. 

• The State of Alabama has at least one biodiesel producer in the region:

o Alabama Bio-Diesel in Moundville, AL uses soybean oil to produces 

24,000 gallons of biodiesel per year the Birmingham Airport Authority, 

with plans to triple production. 

• The State of Pennsylvania has at least one biodiesel producer in the region:

o Capital Technologies International in Pittsburg, PA has a 10 million 

gallon capacity plant that can use a combination of soybean, corn, and 

canola oils, as well as used cooking oil and animal fats.

• The State of Ohio already has several ethanol plants, although only one closed 

facility may be in the region: 

o South Point Ethanol in South Point, OH is now a fairly antiquated 

facility that closed in 1995. 

 

15 The Berkeley County Solid Waste Authority in West Virginia had a landfill gas to energy project from 

1985 to 1996 that was a direct use line to a nearby Veterans’ Administration hospital. The landfill was 

forced to close in 1992 following a lawsuit by a private landfill operator. 
30

Chapter IV. Hydrogen R&D 

Hydrogen research and development (R&D) is focused in several major categories: 

production, use, delivery and storage. In all areas, research includes some focus on basic 

science as well as practical application. Hydrogen production from natural gas and less 

commonly through electrolysis already occurs in a number of industrial settings, where it 

is quickly transformed into other products. Its production is costly and is not efficient 

enough to justify its use over direct use of the fossil feedstock. Hydrogen also cannot yet 

be practically stored in a way that makes distribution possible. 

Hydrogen production R&D is being pursued in several parallel pathways. It has not yet 

been determined what method of production is the most efficient and sustainable. In the 

renewable arena several methods are under evaluation: reforming bio-gas, water 

electrolysis from electricity generated from renewable resources, biological production 

from algae, and several types of early-stage direct solar applications including 

photoelectrochemical and thermochemical production. Research on other methods of 

separating hydrogen from fossil fuels include natural gas reforming, coal gasification and 

nuclearchemical cycles as well as other basic materials research is also underway. 

Production of hydrogen from renewable energy resources is most likely to come from 

electricity produced from those resources. Electrolysis, a process whereby electricity is 

used to separate hydrogen and oxygen in water, produces hydrogen with water as a byproduct. Alkaline electrolysis systems are mature and commercial, although quite 

expensive and only used in niche processes. Proton exchange membrane systems are 

even more costly and need improved durability. Both types need greater efficiency. 

Other barriers are of course, the cost of renewable electricity itself and the intermittency 

of that power. Electrolysis also requires constant supply of clean power. 

Hydrogen storage research is pursuing several potential storage mediums including highpressure compressed storage, chemical storage and materials-based storage such as 

carbon, boron and metal hydrides. Storage, both for distribution and on-board vehicles, is 

a key component of a hydrogen-based economy. 

Hydrogen use is likely to achieve the highest potential efficiency via fuel cells. Separate 

research on this energy conversion device is also underway, but is not discussed here. 

Fuel cells are also quite expensive to produce and do not yet have the durability and 

efficiency necessary for widespread use. 

At least 15 hydrogen research projects are underway in the Appalachian region. The most 

concentrated research effort takes place at Oak Ridge National Laboratory in Tennessee. 

Research also takes place in several of the major universities in the region, with much of 

that work conducted at the Pennsylvania State University and the University of Alabama. 

A portion of this research is described below, with research on renewable hydrogen 

production discussed first. 
31

1. Solar Hydrogen Production16

Several types of early stage research are underway on the potential production of 

hydrogen using solar heat to induce water electrolysis to separate hydrogen and oxygen. 

These include photoelectrochemical production, whereby water is split directly upon 

illumination using semiconductor materials and thermochemical production, whereby 

water is split as chemical or metal compounds such as sulfuric acid, metal sulfate, or 

metal oxides interact with water to produce hydrogen. Solar concentrating systems could 

provide heat for these processes. Another very early-stage research area is 

photobiological production, whereby hydrogen is produced from unicellular green algae 

or cyanobacteria that live on solar energy. 

Hydrogen research in the Appalachian region based on production from renewable 

energy is concentrated in solar applications and includes: 

• Pennsylvania State University – 

o observation of the efficiency of solar electrolysis by isolating single 

crystal silicon photovoltaic cells. 

o development of novel silicon and cadmium selenide nanowire for water 

splitting 

o development of “A Hybrid Biological/Organic Half-Cell for Generating 

Hydrogen” 

• Virginia Polytechnic Institute and State University – 

o studies of trinuclear, rhodium-centered mixed-chemical complexes for 

water splitting. 

• Oak Ridge National Laboratory – 

o Research to increase the rate of algal hydrogen production by designing a 

proton channel to stabilize proton activity during production, thus 

removing a physiological obstacle to efficient conversion of light energy. 

• Marshall University (Huntington, WV) – 

o Adaption of photosynthesis to the production of hydrogen from algae.17

2. Non-Renewable Hydrogen Production R&D18

Much hydrogen research is also focused in production from fossil fuels. 

• Oak Ridge National Laboratory – 

o Fossil Hydrogen Production: Use of microporous inorganic membranes to 

separate hydrogen from a synthesis gas (possibly coal derived) at certain 

pressures and temperatures. 

 

16 U.S. Department of Energy (2005). “Solar and Wind Technologies for Hydrogen Production,” Report to 

Congress. http://www1.eere.energy.gov/hydrogenandfuelcells/pdfs/solar_wind_for_hydrogen_dec2005.pdf 17 The lead researcher on this project, Dr. Sergei Markov, is no longer with Marshall University. 18 http://www.hydrogen.energy.gov/annual_review06_delivery.html#electro
32

o Nuclear Hydrogen Production: This method attempts to extract hydrogen 

from water at a low-temperature reaction – between 650C and 750C – 

through the use of a sulfur dioxide reaction and use of microporous 

membranes. 

• Media and Process Technology, Inc. (Pittsburgh, PA) – 

o Use of a carbon molecular sieve membrane as reactor for water gas shift 

reaction. This method takes carbon monoxide and water through high 

temperatures into a ceramic membrane that facilitates the creation of 

carbon dioxide and hydrogen. 

• Ohio University – 

o This project tries to tackle the problems of hydrogen sulfide in syngas 

derived from coal into the creation of solid oxide fuel cells through the use 

of specialized anodes. 

3. Hydrogen Storage R&D19

• Pennsylvania State University’s Carbon Center of Excellence – 

o Use of boron in metal loaded high porosity carbon materials for the 

reversible storage of hydrogen. 

• University of Pittsburgh’s Metal Hydride Center of Excellence – 

o Computational work on finding workable alloys in metal hydride systems. 

• Oak Ridge National Laboratory – 

o Research on the use of carbon for the storage of hydrogen, including of 

carbon-based solutions and compounds. 

• University of Alabama’s Chemical Hydrogen Center of Excellence – 

o Evaluation of the chemical storage of hydrogen using carbenes and 

cyanocarbons, both types of electron deficient molecular compounds. 

o Evaluation of the use of boron in the storage of hydrogen. 

 

19 http://www.hydrogen.energy.gov/annual_review06_storage.html
33

Chapter V. Corporate Energy Efficiency and Renewable 

Energy 

The following facilities in the ARC region are examples of the use of energy efficient 

processes and renewable energy in corporate settings. These cases highlight innovative 

implementation of waste reuse and energy saving system design. Some of these examples 

are Federal facilities that have reduced energy consumption through the Department of 

Energy's Federal Energy Management Program (FEMP). Others are partners in the 

DOE’s Industrial Technologies Program. 

 

1. Dublin, Virginia - Volvo Trucks 

Volvo’s New River Valley Plant is the largest Volvo Trucks manufacturing facility in the 

world and assembles all Volvo trucks sold in North America. This facility also makes 

electric cabs for Volvo’s emerging line of fully electric cabs for long-haul trucks. In 

recent years, the New River Valley plant has made considerable changes in its industrial 

processes that have focused on reducing consumption of water, energy and materials, 

while increasing recycling and minimizing waste material. The facility utilized the 

Siemens Energy Management Program to reduce energy usage through the automation of 

lighting and building heating and cooling. 

Photo: Volvo Trucks New River Valley Plant 

Since 2003, the plant has reduced water consumption by half through recycling and reuse 

of water used for cab leak testing and in painting. A recycling program and increased 

sorting of refuse cut landfill waste in half since 2000; the plant currently recycles more 
34

than 75% of the waste it generates. The amount of energy consumed for each truck 

produced has dropped by more than 60% since 2001, through a comprehensive energy 

management program. The facility was awarded the 2005 Governor’s Environmental 

Excellence Award for its efforts to reduce emissions. These include replacing all paints 

and lacquers with lead and chromium-free products. 

2. Radford, Virginia - Radford Army Ammunition Plant 

Photo: Radford Army Ammunition Plant 

This 4,080 acre manufacturing area supplies solvent and solventless propellant and 

explosives to the U.S. Armed Forces. The facility undertook an energy savings program 

that emphasized low cost energy conservation initiatives. Much of the savings were due 

to increased nitrocotton/ nitrocellulose production, which reduced the magnitude of steam 

line losses as a percentage of total plant steam. Other projects included installing an 

oxygen trim for powerhouse boilers, reducing reactive power charges from their utility, 

and varying steam turbine extraction pressures. The facility’s energy saving projects 

allowed cost savings of more than $350,000 and 230 billion btu per year. 
35

3. Hagerstown, Maryland – Statton Furniture 

Statton Furniture is a manufacturer of quality, hand-crafted cherry furniture. The 

company has operated since 1926. Since 1973 the company has utilized over 40 percent 

of its wood waste by using this fuel source to operate a boiler within the company’s plant 

facility. The wood waste used to run the boiler is transferred from the company’s wood 

saws to storage where it is eventually fed to the boiler unit. The unit is currently used to 

heat the entire plant facility. The plant’s utilization of wood waste enables the plant to 

obtain a 60 percent yield on lumber.20 

4. Huntington, West Virginia - Steel of West Virginia 

Steel of West Virginia is a supplier of structural beams, channels and special shape steel 

sections made of recycled steel. The company is one of three mills in the U.S. that uses a 

laser gauge to photograph steel bars for defects, allowing considerable time saving for 

that stage of production. 

Over the past few years, Steel of West Virginia has spent more than $60 million 

to modernize its production process. Due to the energy-intensive nature of the operation, 

virtually every upgrade was related to energy consumption. Upgrades included a new 

high-speed reheat furnace, quick-change mill roll stands, installation of finger doors on 

furnaces and a reduction in the amount of time gas torches were on. As a result of these 

investments, productivity doubled and the facility has seen annual energy savings of $1.6 

million or more. Current plans include more energy saving improvements, including the 

elimination of one of two scrap melting furnaces, without reducing capacity. 

Photo: Steel of West Virginia 

 

20 Interview with Bill Whittington, plant manager, July 11, 2006. 
36

5. Spartanburg, South Carolina - BMW Manufacturing 

BMW manufactures its X5 Sports Activity Vehicle, Z4 Roadster, M Roadster, Z4 Coupe 

and M Coupe at its Spartanburg facility. The facility gets 53 percent of its energy needs 

from methane gas from a nearby landfill. A 9.5 mile pipeline from the landfill feeds the 

gas directly to the facility, where it is used to power BMW’s generators and paint shop 

oven burners. The paint shop is the largest energy user within the BMW facility. The 

installation has saved BMW over $1 million in annual energy costs and reduces the 

company’s exposure to volatile natural gas prices. 

Photo: BMW Manufacturing 

6. Tishimingo, Mississippi – Heil Environmental 

 Heil Environmental manufactures refuse truck bodies for the garbage collection 

industry. Following an energy assessment conducted by the Mississippi Development 

Authority and implementation of recommended upgrades, the company reported annual 

savings of $500,000. The savings were a major factor in the decision to keep the facility 

open and the resulting additional investments made in more efficient equipment and 

building upgrades. 
37

7. Russell, Kentucky - AK Steel, Ashland Works 

AK Steel’s Ashland Works produces carbon and ultra-low carbon steel slabs, along with 

hot dip galvanized and galvannealed coated steels. AK Steel recently installed a new 

briquetting process to recycle and reclaim up to 250,000 tons per year of iron and carbon 

units, reducing the amount of raw materials that must be purchased. The facility also 

implemented several conservation and efficiency measures that reduced natural gas 

consumption per ton by approximately three percent since 2003. These cost savings have 

helped the facility to remain a player in an increasingly competitive international steel 

market. 

Photo: AK Steel’s Ashland Works 

8. Uhrichsville, Ohio – Commonwealth Aluminum/Aleris Rolled 

Products 

Commonwealth Aluminum manufactures alloy aluminum sheet from recycled aluminum 

and aluminum and nonmetallic wiring products. The company’s Uhrichsville plant is a 

continuous-casting mini-mill. Commonwealth Aluminum is a partner with the State of 

Ohio and the U.S. Department of Energy’s Industrial Technologies Program. 

Results of the energy assessment identified several upgrades that could save the facility 

more than $1 million per year. These included upgrading the melter/holder furnaces, 

improving the melt stirring process, implementation of best practices for melting and use 

of infrared imaging technology for process diagnostics. Several of these upgrades would 

have an immediate payback, while upgrading of the melter was estimated to give a five 

year payback. 
38

9. Ragland, Alabama - Ragland Clay Company 

Ragland Clay Company is a manufacturer of brick and brick paver products. The 

company has been making extensive modifications and improvements to their plant since 

1996. One of the most recent changes is the use of a biomass gasification unit that uses 

wood chips as fuel. The gasification unit was installed in order to reduce energy costs and 

to reduce moisture in the bricks themselves leading to a higher quality product. The 

gasification unit has been in use for less than three months making exact energy savings 

difficult to measure. However, it is estimated that the new unit will result in an energy 

savings that will range from $400 to $600 per day. 

10. Freeland, Pennsylvania – Hazelton St. Joseph Medical Center 

This 6,500 sq ft facility is heated and cooled with a geothermal air conditioning system. 

The system is comprised of two five-ton and one 7.5 ton water-to-air heat pumps. Six 

220-foot vertical boreholes deliver constant temperature air via circulating groundwater 

loops all year round.21 This system has caused the center’s energy costs to be lower than 

comparably used smaller sized buildings. 

Photo: Hazelton St. Joseph Medical Center 

11. Vestal, New York – Kopernik Space Education Center 

 Installation of a geothermal HVAC system in this 8,000 sq ft building allowed the 

Roberson Museum and Science Center to expand its astronomical observatory and 

improve its energy efficiency without having to build a natural gas pipeline to the 

relatively remote hilltop where the observatory is located. The system includes eight 

 

21 http://www.geoexchange.org/pdf/cs-021.pdf
39

circulating tubes drilled 250 deep into granite bedrock. The payback on the system 

relative in terms of energy savings over a conventional system was about six years.22 This 

investment was made possible through a grant from the State of New York. 

Photo: Kopernik Space Education Center 

12. Burnsville, North Carolina – EnergyXchange Renewable 

Energy Center 

 

This demonstration facility uses landfill gas to fuel a pottery kiln, glass furnace and a 

regional forestry and horticulture center. The complex also includes a micro-turbine 

demonstration of electricity generation in partnership with Carolina Power and Light. The 

project is an example of a combined Federal, State and private partnership. 

Photo: EnergyXchange Renewable Energy Center

 

22 http://www.geoexchange.org/pdf/cs-066.pdf
40

13. Knoxville, Tennessee – Rohm and Haas Company 

Rohm and Hass is a specialty chemical manufacturer that provides products to a number 

of industries including paints, electronics, adhesives and plastics manufacturers. The 

company is a partner with the U.S. Department of Energy’s Office of Industrial 

Technology energy assessment program. Rohm and Hass’s energy assessment identified 

potential energy savings in steam and electricity use equivalent to $1.5 million in cost 

savings. Energy savings implementation as of 2003 included 20 billion btu per year in 

fuel savings and 1,600 MWh per year in electricity savings. Specific identified energy 

projects included: optimization of steam system maintenance, recovery of preheated 

water, optimization of refrigerated water use and flow, and use of a consolidated 

compressed air management system.23

 Photo: Rohm and Haas’ Knoxville, TN plant 

14. Rome, Georgia - U.S. Biofuels 

U.S. Biofuels makes biodiesel from poultry grease. The company was started in 2003 as a 

spin-off from the owners’ chemical business. The company is in the process of expanding 

its operations to increase production from 300,000 gallons a month to 800,000 gallons.24 

 

23 http://www.nrel.gov/docs/fy04osti/34705.pdf 24 6/20/2006, The Atlanta Journal-Constitution, “Biodiesel, Ethanol Hold Big Promise.” 
41

Chapter VI. Energy Intensity in Appalachia 

 Understanding energy use patterns at the local level is a critical part of evaluating 

policy innovations directed at altering energy use among individuals and firms. 

Unfortunately, local energy use patterns must be estimated from more aggregated state 

level data. To do so, the study team estimated several measures of state level energy use 

in a series of models which account for the dominant determinants of energy use. 

 Two of the most common measures of energy intensity are total energy 

consumption per capita and per unit of personal income. The study team estimated per 

capita energy use as a function of personal income, average electricity prices, 

manufacturing’s share of employment income, average annual temperature spreads and 

the proportion of a county living in urban areas. We also employed a statistical technique 

that permitted the capture of unobserved variables to be accounted for in our model. We 

tested this model on a panel of the lower 48 U.S. states from 2000 to 2004. 

National and state-level energy intensity is shown in Table 6.1 below. Five of the 

Appalachian states have lower than average state-wide energy use per capita. These states 

are more urban than the other eight states and energy use is undoubtedly weighted toward 

the urban areas which are not in the Appalachian region. Eight of the states have aboveaverage energy use per capita. 

Table 6.1: State and National Energy Intensity 

STATE MMbtu/Capita Mmbtu/$1000 

Personal Income 

New York 218 5.6 

Maryland 268 6.4 

Pennsylvania 319 9.5 

North Carolina 322 10.3 

Virginia 327 8.6 

Ohio 351 11.2 

Georgia 352 10.8 

Tennessee 386 12.5 

South Carolina 386 13.6 

Mississippi 412 16.5 

West Virginia 421 16.3 

Alabama 437 15.5 

Kentucky 465 16.6 

United States 338 11.0 

1. Energy Consumption Per Capita 
42

State-wide statistical results were applied to county-specific data within the 

Appalachian region to estimate county-level energy intensity. Figure 6.1 presents 

estimated per capita energy consumption. These results show broad dispersion in per 

capita energy use, with manufacturing and population density having important effects. 

The overall region is very close to the national average per capita energy use. However, 

this is dominated by energy use trends in the heavily urban states of New York and 

Maryland. As shown above, most states have above-average consumption rates. This is 

likely due to high rates of electrification in some states, which may increase overall 

energy use, and a somewhat elevated share of manufacturing; the ARC counties account 

for about 26 percent of manufacturing income in the ARC states, but only 24.5 percent of 

the population. 

 

At the county level, estimates of energy use per capita can are strongly influenced 

by the relative proportion of energy-intensive manufacturing to population. A sparsely 

populated county with a heavy industry present will have high per capita energy 

consumption. Conversely, urban counties with modest manufacturing presence may have 

low to average rates of energy consumption due to the more efficient residential use of 

energy in densely populated areas. 
43

Figure 6.1: Estimated Per Capita Energy Intensity in Appalachia (MMBtu per Capita) 

2. Energy Consumption Per Unit of Personal Income 

Estimates of total energy use per dollar of personal income are shown in Figure 

6.2. This is a county level measure of the energy intensity per dollar of economic 

activity. Again, the findings show that total energy use per dollar of personal income is 

heavily affected by industrial use and population density. 

This measure of energy intensity also varies considerably by county. 

Economically distressed and at-risk counties with low personal income and little 

manufacturing will show below average consumption per unit of income, while those 

same counties with a single heavy manufacturing facility may be above-average 

consumers due to the dominance of that facility and the sparse population. 
44

Figure 6.2: Estimated Economic Energy Intensity in Appalachia 

(MMBtu per $1000 personal income) 

3. Energy Demand Price Response 

 

The responsiveness of residents and businesses to energy prices in another 

important policy consideration. In an effort to understand how policy innovations may 

alter use of energy, the price elasticity of demand for electricity for residential, 

commercial and industrial consumers in the Appalachian states was estimated by 

comparing price and demand trends from 2000 through 2004. The price elasticity of 

demand is formally the percentage change in quantity demanded when there is a one 

percent change in the price. These types of estimates are the stock in trade of economic 

analysis for more than a century. The results shown in Table 6.2 show that consumers of 

electricity are not very price responsive. 
45

Table 6.2: Price Elasticity of Demand for Electricity in Appalachia 

Residential Users -0.15 

Commercial Users -0.17 

Industrial Users -0.55 

 

 The results of this estimate reaffirm a familiar belief among economists regarding 

price responsiveness of firms and consumers towards electricity use. In the short run 

electricity users are fairly price insensitive, and that this is especially true for residential 

and commercial users. These users are not likely to trade in appliances just because 

energy prices have increased. This is intuitively appealing since residential users tend to 

spend a small proportion of their total incomes on electricity, thus price fluctuations tend 

not to cause large changes in consumption. Further, since prices are dependent on factors 

that are local, both input costs and public utility pricing policies, they tend to change 

infrequently. This same argument is also true for commercial users, whose electricity 

costs are a relatively small share of their total production costs. In these cases, the capital 

costs of adopting new technologies may not be covered by the energy savings until the 

very long run. 

 Industrial users, who may bear very high energy costs, tend to be more price 

responsive than commercial users, and this may influence firm location decisions. This is 

especially true since industrial users are somewhat more flexible in their location 

decisions, as their sales are less tied to proximal population centers. 

 The policy insight garnered from this evidence is useful. For example, fiscal 

efforts to alter the effective price of electricity will have far more modest impacts on 

residential users than on industrial users. Policies to encourage installation of energy 

efficient or new technologies will not have very positive effects unless accompanied by 

heavy subsidization and education. On the other hand, energy audits which demonstrate 

how energy can be saved in industrial processes have positive results, as indicated 

elsewhere in the report. 

4. Summary 

 Appalachian energy intensity is somewhat higher than in other areas of the 

country. Price, temperature variation, manufacturing share of employment and the 

degree of urban residences all matter in formulating both energy intensity and overall use. 

Appalachian residents and businesses are, like their counterparts in other regions, 

relatively unresponsive to electricity price changes in the short run. This thus provides 

some evidence of the magnitude of policy changes needed to alter short run use of 

energy. 

 
46

Appendix A: Wal-Mart and Alternative Fueled Vehicles – 

The Role of the Private Sector 

Public sector efforts to spur alternative fuel use will necessarily be limited to the fiscal 

and regulatory instruments wielded by governments. Ultimately, these efforts will lead to 

changes in the private sector that are consistent with profit maximizing efforts by firms. 

One clear example is in the evolution of alternative fueled vehicle (AFV) adoption by 

consumers. 

 

In 2005, the Center for Business and Economic Research evaluated the economic 

alternatives related to location of a FutureGen facility in which AFVs were examined. 

This study performed a detailed analysis of the role incomes, population concentration, 

gasoline and alternative fuel prices, state and federal gasoline taxes and state tax 

incentives played on adoption rates of AFVs. Among the policy relevant findings were 

that state and federal gasoline tax rates and state tax incentives for AFVs played an 

important role in the adoption of the new technology. However, even with extensive tax 

incentives, per capita rates of AFV usage are quite low. For example, while the study 

found that extending or strengthening these incentives would, in some instances, double 

the AFV usage rates, this translated into perhaps a few hundred to at most a few thousand 

additional vehicles in most states. 

The authors attribute this disappointing result to the widespread absence of refueling 

facilities, both in Appalachia and nationwide. Thus the absence of an AFV fueling 

network may well then dampen the effectiveness of public policy. Happily, a recent 

announcement by Wal-Mart, that it is considering locating AFV fueling stations at many 

of its stores potentially changes dramatically the network availability of AFV fueling 

stations. To illustrate this, compare the two accompanying figures. 

Figure A.1 employs data from the Energy Information Administration showing AFV 

fueling stations currently located in Appalachia. The relative paucity of stations and their 

clustering in urban areas clearly presents the problem. Figure A.2 illustrates the Wal-Mart 

and Super Center locations in Appalachia. The introduction of AFV fueling facilities in 

even 50 percent of these locations would dramatically extend the network of AFV fuel. 

This extension would, at the very least, better enable public policy efforts to promote 

alternative fuel use in the region. 
47

Figure A.1: Location of Current Alternative Fuel Stations in Appalachia 
48

Figure A.2: Location of Potential Wal-Mart Alternative Fuel Stations in Appalachia