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

Office of Energy Efficiency & Renewable Energy

National Renewable Energy Laboratory 

Innovation for Our Energy Future 

Variables Affecting Economic 

Development of Wind Energy 

E. Lantz and S. Tegen 

National Renewable Energy Laboratory 

Presented at WINDPOWER 2008 

Houston, Texas 

June 1-4, 2008 

Conference Paper 

NREL/CP-500-43506 

July 2008 

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

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

Introduction ......................................................................................................... 1

Methods ............................................................................................................... 3

Results ................................................................................................................. 5

Landowner Lease and Property Tax Payments ....................................................... 5

Analysis ....................................................................................................................... 7

Local Labor, Materials, and Components ................................................................ 8

Construction Labor ...................................................................................................... 9

Non-Turbine Construction Materials .......................................................................... 10

Wind Turbines ........................................................................................................... 11

Wind Power Manufacturing in Iowa ........................................................................... 12

Operations Period Labor ........................................................................................... 13

Operations Period Materials ...................................................................................... 14

Summary ................................................................................................................... 15

Local Ownership of Wind Projects ......................................................................... 16

Local Ownership Structures....................................................................................... 16

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

Comparing Economic Development of Wind and Coal Power...................... 19

Results ..................................................................................................................... 20

Conclusion ........................................................................................................ 23

Bibliography ...................................................................................................... 25

iii 
Abstract 

As electricity demand increases, policymakers must make decisions about which energy 

resources will meet future demands. Much of the recent literature has focused on the 

contribution of new coal power plants to carbon emissions (Milford et al., 2005; Milford 

et al., 2007; MIT 2007). However, policymakers and industry are increasingly interested 

in job creation and economic development analyses to understand the full impacts of new 

electricity generation projects.1 Additionally, economic development impacts are often a 

critical piece in building public support for wind power projects. 

The purpose of this research is to look at the specific factors that drive wind-powerrelated economic development and to better understand the impact of specific economic 

development variables on new wind project economic benefits. We also compare 

economic development impacts of wind and coal power. 

We used the National Renewable Energy Laboratory’s (NREL’s) latest Jobs and 

Economic Development Impacts Wind (JEDI Wind) model to perform a sensitivity 

analysis of wind-power-related economic development drivers, and economic 

development benefits for wind and coal were estimated using NREL’s JEDI Wind and 

JEDI Coal models. 

Our research shows that economic development impacts can be dramatically enhanced 

through the development of local wind power manufacturing industries. We determined 

that if 10% of the wind turbine supply, for 1000 megawatts (MW) of development, is 

manufactured in-state, then construction-period economic development benefits are 68% 

greater than if all wind turbines are imported from out of state. On a secondary level, 

benefits are enhanced by developing and maintaining a skilled operations and 

maintenance labor force. Preliminary work shows that ownership structures that rely on 

local equity are likely to enhance in-state economic benefits, but our research suggests 

the majority of this benefit will accrue from the return on equity associated with a 

profitable wind project. Finally, we find that the economic development impacts of wind 

are generally forecast to exceed those of coal (except in some cases when coal consumed 

in new coal power plants is supplied by an in-state mining industry). 

Introduction 

The United States (U.S.) Energy Information Administration’s (EIA’s) Annual Energy 

Outlook 2008 forecasts total electricity use to grow at an average annual rate of 1.1% 

over the time period 2006-2030. Such growth is expected to bring an increase in 

electricity consumption of 30% over 2006 levels and will require more than 120 

gigawatts (GW) of new generating capacity to be brought on line between 2006 and 

2030. 

 

1

 This statement is based on the authors’ experience providing state outreach in NREL’s Wind Powering 

America Program. Economic development impacts are frequently and increasingly requested by high-level 

policymakers, including state energy offices, state Governor’s offices, and occasionally Public Utilities 

Commissions. 

1 
The EIA projects that the bulk of this new electricity demand will be met by new coalfired power plants. However, as the number of proposed coal plants has increased, the 

environmental community has become increasingly critical of new coal power 

generation.2 Furthermore, as public concern regarding carbon emissions has increased3

and the cost of clean energy alternatives, such as wind, has declined in recent decades 

(Wiser and Bolinger 2008), policymakers have begun to include the concepts of energy 

independence, price stability, and economic development in their thinking about new 

energy investments. 

New energy generation constitutes a major investment, often on the order of hundreds of 

millions or potentially billions of dollars (O’Connell and Pletka 2007). Such spending 

results in widespread economic development, often in the form of increased work 

opportunities, higher salaries, and new customers for local business (Tegen 2006). 

Estimating the local or in-state economic development impacts allows decision-makers to 

incorporate economic development in their decision-making. Given an economic 

development impacts analysis, decision-makers are able to assess impacts based not only 

on the cost of energy but also on a project’s ability to provide jobs and economic growth 

within a given constituency. Furthermore, understanding the drivers of economic 

development as it relates to new energy projects can allow policymakers to tailor local 

policy so that their economic development benefits are enhanced. 

The purpose of this paper is to consider the various drivers of local economic 

development impacts from wind power and to ascertain the sensitivity of local economic 

development benefits to specific parameters. This is performed to highlight specific areas 

in which policy action would most efficiently increase economic development benefits 

and to direct the research of other analysts to the most critical parameters in wind power 

economic development research. In addition, we compare the local economic 

development impacts of new wind projects with those of new coal projects. 

Our research suggests that land lease payments and property taxes are often critical in 

securing local landowner and public support for a given project. Although our sensitivity 

analysis shows that they only represent a portion of the total economic benefits, they 

should not be overlooked when considering wind projects or policies that are designed to 

increase the economic benefits of new wind projects. In addition, policies that increase 

the local manufacturing of wind turbines and components for in-state use by as little as 

10% can increase statewide economic benefits during construction by 68%. Policies that 

 

2

Such concern is evidenced by increasing public opposition to proposed new coal power plants. 

Institutions including the Sierra Club (http://www.sierraclub.org/environmentallaw/coal/) and Western 

Resource Advocates (a Boulder, Colorado-based environmental law and policy group, 

(http://www.westernresourceadvocates.org/energy/coal/index.php) have mounted widespread campaigns 

against new coal-fired power plants. 

3

 Public concern has reached the point at which it is influencing public policy. One example is in the state 

of Kansas, where Governor Kathleen Sebelius upheld the State Department of Environment and Health’s 

refusal to permit construction of proposed new coal-fired power plants on the basis of carbon dioxide 

emissions. In addition, Governor Sebelius has vetoed multiple state bills that would require construction on 

the plants to move forward. For more information see Sebelius prevents and reduces pollutants with veto, 

executive order. Office of the Governor of Kansas. Nicole Corcoran Press Secretary. March 21, 2008. 

http://www.governor.ks.gov/news/NewsRelease/2008/nr-08-0321a.htm

2 
3 

ensure local labor is well trained and available for operations and maintenance work will 

keep economic benefits local over the life of the project by reducing monetary leakage to 

other states and regions. Preliminary research suggests that local project ownership may 

result in benefit increases on the order of 79% to 164% depending on the ownership 

structure and the rate of return on investment. Finally, with current levels of locally 

sourced labor, materials, and fuel, the economic development benefits of wind power 

frequently outweigh those of coal, except when a coal-fired power plant is able to acquire 

a large portion of its fuel from in-state coal resources. 

Methods 

To analyze the economic development benefits of wind power, we conducted research 

and interviews to obtain data for modeling inputs. Applicable information was acquired 

from state-specific electric industry contacts, local tax officials, wind power project 

developers, federal energy databases, press releases of proposed new wind and coal 

facilities, and state mining associations.4

 

We used NREL’s latest JEDI5 models to estimate economic development benefits of 

wind and coal. We used the JEDI Wind model to assess sensitivity of wind power 

economic development parameters. Economic development benefits were calculated at 

the state level. For our sensitivity study, analyses were run for 1000 MW of wind power. 

To compare wind and coal economic development benefits, we considered a 500-MW 

coal power plant and an equivalent-energy-producing wind power facility.6 Standard 

JEDI model inputs for this research are summarized below (Tables 1 and 2). 

Table 1. Summary of Standard Default Inputs

 Wind Power Coal Power 

Capacity Factor 33%-44% 85% 

Construction Cost $1,800/kW $1,830/kW 

Operations and 

Maintenance $24.70/kW/yr $48.00/kW/yr 

Property Tax $2,900-$21,400/MW/yr $7,100-$20,600/MW/yr 

Fuel Cost n/a $1.10-$1.43/mmbtu 

Landowner Royalty $2,667/MW/yr n/a 

 

4

 This data is cited as NREL Economic Development Database in the rest of this report. 5

 The JEDI Wind Model was developed by Marshall Goldberg of MRG & Associates. It can be 

downloaded from NREL at http://www.nrel.gov/analysis/jedi/. 6

 New coal power plants typically operate with a higher capacity factor than wind power plants. As a 

result, a larger nameplate capacity (MW) in wind power is required to produce the same amount of energy 

(megawatt-hours) as a 500-MW coal power plant. In this case, we used state-specific wind capacity factors 

to determine the number of MW of wind power required to produce the same amount of energy as a 500-

MW coal power plant. Our wind and coal comparisons are based on facilities that are estimated to produce 

approximately 3,723,000 MWh annually. 
Table 2. Default Scenario Local Supply Percentages

 Wind Power Coal Power 

Basic Construction 

Materials and General 

Facility Equipment 

78% 15% 

Construction Labor 70% 19% 

Turbine Equipment 0% n/a 

Miscellaneous 

Construction Costs 77% 4% 

O&M Labor (wind) 100% n/a 

O&M Materials (wind) 63% n/a 

Fixed Costs (coal) n/a 61% 

Variable Costs (coal) n/a 62% 

Economic development impacts analyses were performed for Colorado, Michigan, and 

Kansas. Each state represents a unique set of wind and coal resources, a different energy 

policy environment, and a distinctive work force. In some cases, interstate variability is 

minimal, and data are only presented for an individual state. 

Sensitivity analyses were performed for property tax payments, land lease payments, 

local coal supply, wind turbine manufacturing, local labor, local non-turbine materials, 

and local wind plant ownership. Sensitivity scenarios were limited to manipulation of the 

local supply value for the parameters noted above and were based on adjustments of 

default JEDI inputs and state-specific landowner lease and property tax payments. 

Results are presented as constant (2008) dollars and full-time equivalent (FTE) jobs. 

Construction period impacts represent the total construction period impacts regardless of 

the length of the construction process.7 Annual impacts represent the expected annual 

impacts for each year of operations. Cumulative, or total impacts, are based on the 

construction period plus 20 years of operations. 

Our results represent the total impacts resulting from wind or coal project development. 

They are not intended to represent the net8

 benefit experienced from a given investment 

in new energy generation. Our comparison of wind and coal economic development uses 

estimates of wind power total economic development benefits and compares this value 

with an estimate of the total economic development from coal power. 

 

7

 If the construction period lasts more than 1 year, annual construction period impacts may be determined 

by dividing construction period impacts by the number of years required for construction. 

8

 The net benefit is defined as the specific benefit above and beyond a given alternative or set of 

alternatives. 

4 
Finally, our results represent the expected impacts based on the current status of the wind 

industry and the current distribution of benefits. In time, such factors may change as a 

result of economic structure changes in the states that are analyzed, increased efficiencies 

in the industry, changes in state or federal policy, or a change in labor, turbines, and/or 

raw material supply relationships. 

Results 

Elements of Economic 

Development 

• Landowner revenue and 

property taxes 

• Local labor, materials, and 

components 

• Manufacturing 

• Local financing and 

ownership structures for 

wind 

We focused our analysis on four elements of economic development impacts. First, we 

assessed the role of landowner lease payments and local property taxes. We considered 

the magnitude of these payments, implications of variability in these parameters, and 

their proportion of the total, cumulative, economic development impacts. Second, we 

examined variability in local labor use and in purchasing of local goods and services that 

are utilized in wind projects. This allowed us to assess which aspects of project 

construction and operations will have the largest impact on state-level economic 

development. As a part of this analysis, we analyzed the role of local manufacturing in 

economic development analysis and considered the 

potential impacts of increased reliance on local 

manufacturing. We also display the projected changes in 

total economic benefits that may accrue in Iowa as a result 

of the emerging wind manufacturing industry there. In 

addition, we considered the role of local ownership 

structures in shaping economic development impacts. 

Finally, we compared the economic development benefits 

of wind and coal and considered the role of a local coal 

industry in the economic development benefits of coal 

power. 

Landowner Lease and Property Tax Payments 

Landowner lease payments represent a sizable direct economic impact. Frequently on the 

order of $2,700-$2,900/MW,9

 these payments constitute millions for wind projects on the 

order of 375 MW and greater. In addition, they constitute a direct payment to rural 

landowners that on a per-acre basis is much greater than the gross revenue from common 

agricultural crops including corn, wheat, and soybeans.10 Likewise property tax payments 

are a large benefit to local communities; averaging $8,000-$9,000/MW,11 these payments 

 

9

 NREL economic development database 

10 Assuming approximately 1 acre/MW and based on the average yield per acre for irrigated corn, wheat, 

and soybeans using 2002 USDA Ag. Census data available at 

(http://www.agcensus.usda.gov/Publications/2002/Volume_1,_Chapter_1_US/index.asp) and July 2008 

prices listed on the Chicago Board of Trade (http://www.cbot.com/) on May 20, 2008, farms can expect 

gross profits of $945/acre, $571/acre, and $574/acre respectively. Furthermore, wind turbines on leased 

land require no farmer inputs except the additional resources required to navigate around the obstructions 

created by the turbines. 

11 NREL economic development database 

5 
can increase the local tax base allowing for budget increases or a lowering of the taxing 

district’s general tax rate.12

Our research revealed that land lease payments vary across the country. Figure 1 shows 

the direct, indirect, and induced impacts in Kansas from variable land lease payments. 

The high and low scenarios shown (Figure 1) are representative of the range of payments 

made to landowners across the Great Plains and provide a sense of how variability in land 

lease payments impacts economic development. This range results in economic impacts 

that are roughly $2.0 to $8.0 million from 1000 MW of development. When considered 

as a part of the total economic impact, landowner lease payments typically make up less 

than 10% of the total economic impact over the life of the project. 

Portion of annual economic impacts attributed to Land Lease Payments in 

Kansas

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

$9.0

Low ($1,300/MW) National Average High ($5,000/MW)

millions of dollars

Figure 1. Variable land lease payment implications on economic development from 1000 

MW of wind power13

Similarly property tax payments are often of significant interest, and wind power projects 

are widely recognized for their contributions to local taxing districts.14 However, our 

research indicates that property tax payments have a wide range from 3% to 22% of the 

 

12 The Lamar Wind Farm in southeastern Colorado (162 MW) is estimated to currently contribute more 

than $1.2 million per year to the local taxing district (Prowers County Treasurer’s Office 2008). Though 

this contribution declines as assets depreciate, such payments are typical of wind farms, and this 

demonstrates the dramatic impact these investments can have on the rural tax base. 

13 Reported values represent portion of total (direct, indirect, and induced) economic output that is 

attributed to land lease payments. Because a portion of these payments are reinvested and spent locally, this 

value is larger than the total direct payment. This condition is also true in respect to property taxes (Figure 

2). 

14 A specific case is highlighted by the Prowers County, CO Chamber of Commerce 

http://www.lamarchamber.com/new%20website/windfarm.html. In addition, popular press coverage 

frequently cites property tax payments from these developments in the form of contributions to local school 

districts or other public works. 

6 
total project lifetime economic impacts. Variability occurs at the interstate level as well 

as between taxing districts within a given state.15 Figure 2 shows the impacts of property 

tax variability on annual economic development impacts. Estimated tax is based on the 

average state tax rate while the alternative scenarios represent moderate deviations from 

the estimated state average. 

Portion of Annual Economic Impacts from Property Tax Payments 

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

Michigan Kansas Colorado

Millions of dollars

NREL estimated annual tax payment

25% low er tax payment

25% increased tax payment

Tax based on estimated national average

Figure 2. Economic development implications from variable property tax payments on 

1000 MW of wind power 

In Figure 2, it is important to note that the bars represent the direct, indirect, and induced 

spending due to the amount of money the county or state retained for the property tax 

payment. The fourth orange bar is based on the national average payment of $8,700/MW 

in each state, but because Michigan and Kansas have higher economic multipliers in the 

wind industry, the same payment will provide a larger benefit to their in-state residents. 

Analysis 

While landowner lease payments and property tax payments generally constitute a 

moderate portion of economic development impacts, the high-profile, direct nature of 

these payments suggests that state and local communities are likely to pay increased 

attention to these parameters if they are thinking about policy to promote wind 

development. 

 

15 NREL economic development database 

7 
Policymakers may have little direct influence over land lease payments. These 

arrangements are typically priced by the market and may depend on the local wind 

resource, local property values, access to transmission, and developer or corporate 

practice. However, policymakers may be able to enhance the value of land lease 

payments secondarily by establishing education and outreach programs for landowners 

with high-quality wind sites, or by facilitating transmission infrastructure development to 

wind resource areas. Such efforts may serve to increase landowner knowledge regarding 

the value of their property16 and ensure that viable resource sites are accessible to 

developers. 

As noted in Figure 2, the magnitude of property tax benefits varies widely. Kansas and 

Michigan represent two opposite extremes in this regard. With this in mind, property tax 

policy may present a conundrum for state and local governments. Some states have 

chosen to provide property tax abatements with the hope that the reduction in property 

taxes will provide incentives for wind power development. On the other hand, a property 

tax abatement coupled with relatively low payments in lieu of tax, as is observed in 

Kansas,17 means foregoing millions of dollars in economic development benefits. 

Since a typical property tax contribution to economic development is about 10% of 

lifetime development impacts, policymakers may feel that it is reasonable to reduce 

property tax rates to promote wind power development. If policymakers do reduce the 

property tax burden to the developer to account for the lost tax benefit, a policymaker 

may seek to promote wind power manufacturing investment and wind power training of 

the states’ labor force. However, such a policy may result in a transfer of development 

benefits from rural taxing districts to the urban manufacturing and commercial 

construction sectors. In addition, it may reduce public support for wind power in rural 

communities where wind resources are abundant. To that end, in some cases, reducing 

property taxes or providing property tax abatements for wind power may not be the 

preferred incentive for wind development. 

Local Labor, Materials, and Components 

For the purpose of this analysis, local labor, materials, and components are defined as instate labor, materials, and components. These economic development factors are also 

referred to as local supply parameters. To analyze the impacts of local supply parameters, 

we divided a wind project investment into five categories: 

• Construction labor 

• Non-turbine-related construction materials 

 

16 The implication here is that increased landowner knowledge may increase land lease payments by 

increasing the awareness and therefore power of the landowner who is negotiating land access. However, 

full awareness of property and resource value may or may not result in increased landowner lease 

payments. 

17 Kansas exempts wind power plants from property taxes. In place of property taxes, wind power 

producers make payments in lieu of tax (PILOT). While these payments vary, the early precedent 

established these payments to be in the $2,900/MW range (Personal Communication, Kansas State Energy 

Office). Our modeling of Kansas property tax impacts relies on this value. 

8 
• Wind turbines18

• Operations period (O&M) labor 

• Operations period (O&M) materials. 

In each category, we developed a high, low, and most likely (or default) scenario to 

assess the extent of change that results from varying the percentage of local labor and 

components that are derived from in-state suppliers. Default scenarios represent current 

JEDI assumptions based on national averages that were developed primarily through 

interviews with the wind industry. High and low scenarios are based on the variability we 

observe in existing projects and the potential implications of trends that have been 

observed anecdotally in interviews with project developers and industry experts. 

Construction Labor 

Economic development considerations typically focus a great deal of attention on local 

jobs. In addition, because of the relatively high capital costs associated with wind power 

projects, construction period jobs are an important piece of economic development 

impacts. In the past, JEDI research has determined that local labor supplies 

approximately 70% of the construction period jobs. However, more recent anecdotal 

observations suggest that this category may experience a high level of variability among 

projects and among developers. This is especially true in rural regions where construction 

labor is not familiar with wind projects or may not be readily available. However, our 

analyses demonstrate that from an economic development perspective, trends toward 

decreased local construction labor may not be a great concern.19 

Construction labor represents large benefits in a brief time period. However, adjusting instate labor supply from 70% to 40% in Colorado only reduces the total construction 

period economic development benefits by 4%. Furthermore, increasing the local 

construction labor supply from 70% to 90% brings an increase in construction period 

economic development benefits of only 3% (Figure 3). 

 

18 Including towers, blades, gearboxes, and rotors 

19 The underlying driver for this phenomenon is that construction labor costs represent a relatively small 

proportion of construction costs. To the extent the construction labor provides local jobs, it may be 

important. However, the inherently brief nature of wind project construction jobs diminishes their value for 

economic development purposes. 

9 
Construction period economic impacts in Colorado as local labor supply 

varies

$0

$50

$100

$150

$200

$250

$300

$350

$400

Low (40%) Default (70%) Medium (90%)

millions of dollars

 

Figure 3. Construction period economic development variability associated with local 

labor supply variability (1000 MW of wind power) 

Non-Turbine Construction Materials 

Many wind farms rely heavily on non-turbine construction materials like sand, gravel, 

asphalt, and concrete for construction of roads and foundations. In addition, wind projects 

require general electrical construction materials. Due to their prevalence in conventional 

construction industries, most regions are capable of supplying a high level of the former 

category of materials to wind projects. 

In this analysis, we considered three alternative scenarios from our standard assumption 

that 78% of local materials come from in-state suppliers. Reducing local materials 

supplies in Colorado from 78% to 50% results in a decline of 38% in construction-period 

impacts. Increasing local material supplies from 78% to 90% results in an increase of 9% 

in construction period impacts (Figure 4). 

10 
Construction period economic impacts in Colorado from changes in 

use of local non-turbine materials

$0

$50

$100

$150

$200

$250

$300

$350

$400

 Low (25%) Medium (50%) Default (78%) High (90%)

millions of dollars

 Figure 4. Construction period economic development variability associated with local 

non-turbine material supply variability (1000 MW of wind power). 

As a part of the total cumulative economic benefits, reducing utilization of local materials 

to levels of 50% and below begins to have a dramatic impact on local economic 

development. However, due to the relatively commonplace nature of traditional materials 

like sand, concrete, and gravel and our experience in interviewing wind project 

developers, it is our perspective that we are unlikely to see local materials supply change 

significantly from the standard, default JEDI value.20

Wind Turbines 

Our research suggests that the single greatest local supply parameter affecting economic 

development benefits is the supply of wind turbines and their components. Wind turbines 

frequently constitute 65% to 85% of the total construction cost for a new wind farm.21 As 

a result, increasing the in-state supply of wind turbines from 0 to10% provides a 68% 

increase in construction-period economic development impacts. Moving from 0 to 50% 

in-state manufacturing generates a 341% increase in construction-period impacts. 

As such, the single largest potential driver of economic development benefits is local 

manufacturing. Policymakers seeking to maximize economic development benefits from 

wind power are likely to gain the greatest increased benefit by attracting new wind power 

 

20 Based on our surveys, it is very common for developers to obtain local gravel, sand, and concrete in high 

levels (90% and more). Local supply of electrical materials has a higher degree of variability. However, our 

research suggests that basic materials like gravel, concrete, and sand comprise the largest proportion of 

non-turbine-related construction materials. As a result, we feel it is unlikely that usage of local material 

supplies will change dramatically in the near future. Furthermore, it is unlikely that policy measures will 

have a significant impact on use of local non-turbine construction materials; generally project developers 

utilize local construction materials if they are available. 

21 NREL economic development database 

11 
manufacturing to their state. Figure 5 illustrates the potential change in jobs created for 

Michigan given 1000 MW of wind development under local manufacturing scenarios 

from 0 to 50%. 

Jobs sensitivity to increased local manufacturing in Michigan

0

2,000

4,000

6,000

8,000

10,000

12,000

Default (0%) Low (10%) Medium (25%) High (50%)

Jobs (Full Time Equivalents)

 

Figure 5. Construction Period Jobs Impacts in Michigan from increased reliance on local 

manufacturing (1000 MW of wind power) 

Wind Power Manufacturing in Iowa 

Iowa is one of the leading states in terms of installed wind power capacity. In addition, it 

is the leading state for large-scale wind power manufacturing. Presently, there are six 

major existing or planned manufacturing facilities in Iowa which, when completed, will 

have the capacity to supply more than 1,000 MW of turbine blades and turbine generator 

components.22 In addition, it is estimated that 13% of current proposed projects in Iowa 

have selected turbines that could be manufactured by facilities in the state.23 Based on 

this information, we developed three scenarios for Iowa that demonstrate the potential 

economic development impacts that in-state manufacturing can provide from Iowa’s next 

2,400 MW of wind power.24 Figure 6 highlights the results of this analysis. 

 

22 Two tower manufacturers have announced plans to build production facilities in Iowa; however, recent 

developments suggest that one of these proposed facilities may fall through. It is possible that these 

facilities will also produce at least 1000 MW of turbine towers annually. However, potential production 

numbers from these facilities are not yet known. 

23 Data provided by personal communication with a major wind power developer in Iowa and a database of 

proposed projects maintained by Global Energy Concepts http://www.globalenergyconcepts.com/. 24 The first scenario is the projected total economic impact in the absence of Iowa-based manufacturing. 

The second scenario is based on proposed projects in the state and relies on projects that have identified a 

specific turbine manufacturer. It assumes that turbine suppliers will use their Iowa-based facilities to supply 

Iowa projects that use their turbines. This number may ultimately vary if output from local facilities is 

committed to supplying wind projects outside of the state or if additional proposed projects ultimately 

select turbines that are being manufactured in the state. Our third scenario is based on a case in which 35% 

of the turbines, towers, and blades installed in Iowa are manufactured there. We believe this to be a 

12 
Total economic development impacts in Iowa 

(2,400 MW of development)

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$5,000

 0% IA manfacturing 13% IA manufacturing

(current proposed projects)

 35% IA manufacturing

(increased utilization of current

manufacturing capacity)

Millions of Dollars

Landowner Payments

Property tax payments

Operations Period

Construction Period

Figure 6. Economic development benefits for Iowa with different levels of local 

manufacturing 

In this analysis, the moderate scenario, based on proposed projects, demonstrates a 24% 

increase in total lifetime economic development benefits while the 35% local 

manufacturing case increases the total lifetime economic benefits by 70%. This analysis 

demonstrates that large economic development benefits are likely to result from attracting 

local manufacturing to a given state. However, attracting wind power manufacturing may 

require intentional efforts and local policy support. Much of Iowa’s success at attracting 

manufacturing facilities has resulted from provision of local incentives for new 

manufacturing projects as well as the states broader recognition of the value of wind 

power and its benefits for the state (Levesque 2008, AWEA press release 2008, and 

NREL Economic Development Database). 

Operations Period Labor 

In addition to wind turbine supply changes, local supply of materials and labor during the 

operations period of a wind power plant’s life can have a notable impact on annual 

economic impacts. Such changes in operations period impacts are critical because of their 

implications for the total economic impact incurred over the life of the project. Default 

JEDI assumptions assume that O&M labor is fully derived from within the state where 

development has occurred and that 63% of the materials utilized for wind turbine 

maintenance and repair are derived from in-state suppliers. In the past, O&M labor has 

been provided extensively by in-state labor, and this is likely to continue for daily site 

operations. However, recent evidence suggests that wind farm maintenance may be 

 reasonable, incremental increase in manufacturing based on the diversity of manufactures present in the 

state, the large number of proposed projects that have not yet identified a turbine supplier, the lower 

transport costs associated with Iowa-based development, and the high level of manufacturing capacity that 

is expected from these facilities. 

13 
evolving toward a contractor industry.25 If routine maintenance is performed by crews 

that travel from one wind farm to the next performing regular and major maintenance, 

states may see a drop in local labor utilized during the operations. 

Based on this evidence and our default scenario that assumes 100% local labor, we 

analyzed the impacts scenario for O&M labor with medium and low local labor supplies 

of 25% and 50% respectively. The observed declines in annual economic impacts 

associated with these lower scenarios were on the order of 15% and 23% for the medium 

and low scenarios respectively in Kansas (Figure 7). Over a 20-year operations period, 

this change can represent as much as a $117 million loss in economic development 

benefits if O&M labor supply drops from 100% to 50% in-state and a $176 million loss if 

the in-state labor supply drops from 100% to 25% in-state. In order to minimize lost 

economic development benefits, policymakers seeking to increase economic 

development benefits may benefit from increased workforce training programs to ensure 

that local labor is capable and competitive. 

Annual Economic Impacts in Kansas 

$0

$5

$10

$15

$20

$25

$30

$35

$40

Default (100%) Medium (50%) Low (25%)

millions of dollars

Figure 7. Implications of declining reliance on local labor for wind plant O&M on 1,000 MW 

of wind power 

Operations Period Materials

Wind turbine repair materials are sometimes not available from local suppliers; because 

of this we use a default value of 63% in-state supply for operations period materials. 

Nevertheless, incremental changes in local material supply can have a notable impact on 

annual economic development impacts. We adjusted local material supply down to 40% 

and up to 75%. In Kansas, if local supply of O&M materials drops from 63% to 40%, we 

 

25 This practice is not well documented in the industry, but it has been noted in a few instances. In addition, 

conventional generation facilities often rely more heavily on out-of-state contractors for O&M, and we feel 

that as the industry consolidates and matures, this trend could increasingly predominate in the wind 

industry. 

14 
observe a 19% decrease in annual economic benefits. In contrast, a 9% increase in annual 

benefits results from increasing local material supplies from 63% up to 75% (Figure 8). 

As was the case for labor impacts, when these increases or declines are accumulated over 

a 20-year operating period, the changes are magnified such that the drop from 63% to 

40% local materials is a loss of approximately $144 million in economic output while the 

increase from 63% to 75% is a $71 million dollar increase in economic output over the 

life of the project. 

Annual Economic Impacts in Kansas 

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

Default (63%) High (75%) Low (40%)

millions of dollars

Figure 8. Implications of variable O&M materials sourcing for 1,000 MW of wind power 

Summary 

If a policymaker or stakeholder is interested primarily in the economic development 

benefits of building wind power, the single greatest means of insuring increased 

development benefits is to increase the use of local labor and components throughout the 

construction and operations period. However, our research shows that targeting policies 

to specific aspects of wind power development and operations may be more efficient at 

increasing the economic development benefits associated with building wind power 

plants. 

Attracting wind power manufacturing to one’s state and using this manufacturing for instate wind power projects has been shown to dramatically enhance economic 

development. Furthermore, wind power manufacturing in a given state allows it to realize 

economic benefits from wind development in other states that do not have their own local 

supply of wind power materials and components. On a secondary level, creating policies 

to ensure maintenance materials are supplied by in-state business and that the local labor 

force is trained to perform wind turbine maintenance is also likely to have a large impact 

for wind power plants operating for 20 or more years. In contrast, policies geared toward 

15 
training a construction workforce are less likely to have an impact on total economic 

development benefits.

Local Ownership of Wind Projects 

In addition to local labor and components, in-state economic benefits can be enhanced by 

local ownership of wind projects. Literature in the past has generally associated the 

increased economic benefits with an increased preference for local labor and materials 

during construction and operations as well as the cash inflow that results from the energy 

sales. Economic development impacts in these studies have typically been focused on 

county-level analyses and have varied widely (Goldberg et al., 2004, Galluzo 2005, and 

Kildergaard 2006). 

Our analysis of local ownership was performed at the state level. Therefore, our 

economic development impact results are likely to be greater in magnitude than countylevel local ownership analyses. However, our analyses result in a lower percent change 

because county-level benefits are typically much smaller and therefore more dramatically 

affected on a percentage basis by a given change in local benefits. As such, it is difficult 

to compare the ratio of benefits between corporate- and locally owned projects with the 

same ratios that were developed in previous analysis of county-level economic impacts. 

In addition, this analysis of local ownership and economic development is intended to 

represent preliminary work and provide a general order of magnitude assessment of the 

difference in benefits associated with locally owned projects versus corporate-owned 

projects. 

Local Ownership Structures 

We modeled two types of local ownership structures; both local ownership scenarios are 

all-equity scenarios. For both scenarios, we demonstrated a preference for local 

construction labor and materials. To do so, we adjusted the share of local components and 

labor during the construction period to the maximum level that we believe is generally 

attainable, given the variability we currently observe in individual projects. Rather than 

calculating expected returns based on variable power purchase agreements, tax liabilities, 

and efficient use of the PTC, we assigned an expected plausible rate of return for the 

individual equity that is in accordance with typical returns from these projects.26 The rate 

of return for local equity investors in both of our local ownership models was set at 9%. 

The first ownership structure is a 100%-local equity structure in which a variety of local 

residents invest small amounts of capital in the project. Based on the Minwind projects, 

developed in Southwestern Minnesota,27 this ownership structure involves a large 

number of investors and allows for relatively high efficiency or potentially even full 

value use of the production tax credit (PTC).28 In the first scenario, benefits were 

 

26 This value is based on an interview with an active community wind developer, who noted that a typical, 

approximate, estimated return on investment for locally owned projects is 8% to 10%. 

27 For more information, see http://www.windustry.org/minwind-iii-ix-luverne-mn-community-windproject 28 This can occur through aggregation of the small passive tax appetite of a large number of individual 

investors. 

16 
calculated annually with 100% of investors accruing a 9% return on investment; we 

assumed that the full value of the cash return remains in the 29 local community.

 

The second investment scenario relies on a “flip” model of wind power development. 

This version is most closely aligned with the “strategic investor flip” as described by 

Harper et al. (2007). In this specific case, we assume local equity investors maintain a 1% 

stake in the project over the first 10 years of operations and receive 1% of the sum of the 

cash and tax benefits accrued over this time. Subsequently, after year 10, we assume local 

investors buy out the strategic tax investor. At this point, the local investors acquire full 

ownership and a 100% equity stake, thereby providing them with 100% of the cash 

benefits during years 11 to 20 of operations. This equity structure results in an average 

annual ownership value of 51%, for which they receive the 9% return on investment 

noted above. As in the first scenario, we assume the full value of the cash return is 

reinvested in the local community. 

Results 

Under these conditions, we determined the state-level construction period economic 

development benefits of local ownership to be 7% greater than those incurred with 

corporate-developed and -owned projects. However, this increased benefit is based on the 

ability of local owners to acquire increased levels of local labor and materials versus 

corporate developers (Figures 9 and 10). The increased benefit is equivalent during the 

construction period under both local ownership scenarios. 

The relatively marginal increased benefit that occurs during the construction period is 

primarily the result of the high levels of local labor and material reliance that are 

commonly associated with corporate-owned projects. As a result, an increased preference 

for local labor and materials does not provide a large magnitude change.30

During the operating years, annual economic benefits are notably higher for locally 

owned wind projects than for corporate ownership. The 100% local equity projects are 

observed to have an annual impact that is 164% greater than corporate-owned projects. 

The 51% local equity scenario, representative of a strategic investor flip, results in a 79% 

greater local economic output than an equivalent corporate-owned project (Figures 9 and 

10). These results are due to the cash inflow, in the form of profits, at a 9% annual return 

on investment. 

29 This may or may not reflect the actual on the ground conditions. However, we lacked data suggesting 

how this money might be spent. To the extent that individual investors reinvest or spend their returns 

outside of the state, the economic benefits resulting from these scenarios are diminished. 

30 While we feel this conclusion is justified, it should be noted that there may be significant variability 

construction period impacts between projects. Recent evidence suggests that on an individual project basis, 

local labor supplies may vary from the expected value that we utilized in our JEDI modeling. As a result, in 

some instances the increased preference for local labor that is commonly associated with local ownership 

may play a greater role than our results suggest.

17 
Jobs impacts from varying ownership structures in Colorado

0

50

100

150

200

250

300

350

Construction Period Operations period (long-term jobs)

Jobs (full time equivalents)

Corporate Equity and Debt Financing

All Equity Individual Investors (M inwind)

All Equity Flip (Strategic Investor Flip)

Figure 9. Jobs impacts from varying ownership structures in Colorado 

Economic output from varying ownership structures in Colorado

$0

$5

$10

$15

$20

$25

$30

$35

$40

Corporate Equity and Debt

Financing

All Equity Individual

Investors (Minw ind)

All Equity Flip (Strategic

Investor Flip)

Millions of dollars

Construction Period

Annual Impacts (during

operations)

Figure 10. Economic output from varying ownership structures in Colorado 

One critical caveat in modeling local ownership implications is that we assume a 9% 

return is achieved for these projects. This assumes such projects are profitable and 

performing at this rate. Furthermore, this does not account for the opportunity cost of 

capital. Assuming that local investors can obtain a 5% annual yield from alternative 

investments means that the net economic impact from a locally owned project depends on 

the potential availability of alternative investments that may be more or less profitable 

than the wind farm. As such, what we demonstrate is the gross magnitude of benefits that 

18 
results from investment in a locally owned wind power project rather than the net benefit 

that accrues from such an investment. 

A second caveat is that we assume that the total return on investment is initially 

reinvested, or spent, in the state where the project is located. Performing these analyses at 

the state level, rather than limiting them to the county, increases the likelihood that 

investment returns are spent locally; however, to the extent that an investor utilizes his or 

her return to purchase goods manufactured out of state or pursue investment opportunities 

located out of state, the economic benefit will be diminished. 

Comparing Economic Development of Wind and Coal Power 

This portion of the analysis highlights the economic development benefits of equivalent 

power-generating wind and coal-fired facilities. Before discussing the results of this 

analysis, it is important to highlight two considerations. First, capacity factor is critical. 

Wind power generally operates at a capacity factor that is much lower than coal power 

plants, 30% to 45% versus 85%. As a result, a significantly greater proportion of wind 

power in nameplate capacity must be constructed for the power output to be equivalent to 

a given coal power plant. However, economic development benefits are associated with 

the magnitude of the investment in a new power-generating facility. Assuming a similar 

local supply of labor, components, and materials, a project with a larger total investment 

will have larger economic development impacts. Therefore, lower capacity factor wind 

projects may have greater economic development benefits per unit of energy generated. It 

may be argued that because of capacity factor disparity, it is unfair to compare economic 

development benefits from equivalent energy-producing facilities. 

We offer two responses to this argument. First, wind power has no fuel costs, so 

increased capital costs are countered by lower operating costs. In addition, local fuel 

sources enhance the economic development benefits of coal power. Second, evaluating 

the levelized cost of these generation resources reveals that on a per-unit energy basis, 

prices are comparable (O’Connell and Pletka 2007). Therefore, as long as a project is 

economically viable, a lower capacity factor should not discount the economic 

development benefits. In other words, if the cost of energy from wind power is 

comparable to that of coal, then the difference in nameplate capacity installments 

required for a given energy equivalent analysis should not be a consideration when 

comparing different power generation technologies. 

Likewise, low-wind-speed sites, with similar local supply parameters to high-wind-speed 

sites, have a greater economic development impact than high-wind-speed sites. 

Nevertheless, as long as the levelized cost of energy is competitive with other generators 

in power markets, capacity factor and the associated nameplate capacity required for a 

given project should not be a factor in economic development analysis. 

Much like the other research conducted for this paper, we forecast economic 

development benefits with the NREL-sponsored JEDI models. Likewise, for this portion 

of the analysis we utilized data collected from interviews conducted with state-specific 

electric industry contacts and local tax officials. In addition, we used federal energy 

19 
databases, press releases of proposed new wind and coal facilities, and state mining 

association data to supplement and validate information acquired through interviews. 

NREL’s JEDI wind model is publicly available and has been widely applied for analysis 

of wind power projects. The JEDI coal model has been peer reviewed but has not yet 

been released to the public. Both models were developed by Marshall Goldberg at MRG 

& Associates for NREL. 

Results 

The results of our analyses demonstrate that in Kansas and Michigan, the economic 

development benefit of wind is clearly greater than that of coal. In Kansas, our research 

suggests that wind power will result in a 31% greater economic development benefit than 

coal power (Figure 11). Likewise in Michigan, the expected economic development 

benefit is 93% greater than a similar energy-producing coal power facility (Figure 12). 

Total Economic Impacts from energy equivalent new wind and new coal

$0

$200

$400

$600

$800

$1,000

$1,200

KS Wind 44% Cf (962 MW) KS Coal (500 MW, 0% instate)

dollars in millions

Landow ner revenue

Property taxes

Operations

Construction

 

Kansas 

Figure 11. Comparing wind power and coal power economic development impacts in 

Kansas 

20 
Total Economic Impacts from energy equivalent new wind and new coal

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

MI Wind 33% Cf (1278 MW) MI Coal (500 MW, 0% instate)

dollars in millions

Landow ner revenue

Property taxes

Operations

Construction

 

Michigan 

Figure 12. Comparing wind power and coal power economic development impacts in 

Michigan 

In Colorado, our results require a higher degree of nuance because of Colorado’s coal 

mining industry. In addition, we show the economic development benefits in Colorado 

for development at high- and low-wind-speed sites (Figure 14). 

Recent analysis of EIA data shows that in 2006, Colorado coal supplied 55% of the 

state’s coal-powered electricity generation needs. However, depending on the location of 

a new coal power plant, it may or may not receive Colorado coal. Assuming that a new 

500-MW coal power plant receives the same proportion of Colorado coal that was 

determined for the Colorado electricity sector in 2006 means that a significant benefit for 

the state’s coal mining industry will result from a new power plant. Subsequently, this 

has a dramatic impact on the economic development benefits of coal power. However, 

past research suggests that a new coal power facility on the Front Range in Colorado is 

likely to be supplied by Wyoming Powder River Basin coal (Tegen 2006 and Xcel 

Energy 2004). If this is indeed the reality, then no in-state benefit accrues from coal 

consumption, and the economic development benefit of coal power is reduced. In short, 

when local coal is consumed, coal power often has similar or in some cases a greater 

economic development benefit than wind power. Figure 13 highlights states that rely on 

in-state coal resources for electricity generation. 

21 
 

Figure 13. Percentage of coal consumed for electric power generation that is 

supplied from in-state coal resources31

Assuming high capacity factor wind development (43%) and a new coal power plant that 

utilizes 55% Colorado coal, coal power economic development benefits exceed wind 

power by approximately 50%. Assuming profitable wind development at a 35% capacity 

factor and 55% reliance on Colorado coal, the benefit of coal over wind is reduced to 

17%. In contrast, if we assume all the coal for a new coal-fired facility is supplied by 

Wyoming Powder River Basin coal, wind power economic development benefits are 32% 

and 61% greater than coal for the high- and low-capacity-factor scenarios respectively 

(Figure 14). 

 

31 Calculated by NREL from EIA 2004 data 

22 
Total economic impacts from energy equivalent wind and coal

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

CO Wind 43% Cf

(991 MW)

CO Wind 35% Cf

(1328 MW)

CO Coal (500 MW,

55% in-state coal)

CO Coal (500 MW,

0% in-state coal)

millions of dollars

Landowner revenue

Property taxes

Coal mining & transport

Operations

Construction

Figure 14. Comparing wind power and coal power economic development impacts 

Colorado 

When comparing wind and coal, it is also worthwhile to note that the domestic wind 

power manufacturing industry is undergoing rapid growth. As noted above, wind turbines 

account for 65% to 85% of the entire construction costs of new wind facilities. However, 

at present, the majority of wind turbines installed in the United States are imported. If 

states are able to secure and develop new wind turbine manufacturing, as Iowa has done, 

the economic benefits of wind power could greatly exceed coal power, even in states 

where local coal mining is a dominant industry. 

Conclusion 

Energy policies are driven by a variety of values and interests. As new electricity 

generation technologies have become more prevalent, policymakers increasingly make 

decisions based on a more holistic understanding of the costs and benefits of different 

forms of electricity generation. One of the impacts to consider in this more inclusive 

portfolio of costs and benefits is the economic development impact of energy investments 

on a decision-maker’s local constituency. 

We have demonstrated with this analysis that a variety of factors must be considered 

when conducting economic development analysis and that policies intended to enhance 

economic development from wind power can be more efficient if targeted to specific 

facets of the wind industry. In addition, not only is the magnitude of the impact important 

but also the type of impact and the specific constituency that a policymaker hopes to 

benefit. This is especially critical when evaluating property tax and land lease payments. 

Any policy that will facilitate the use of local labor, materials, and components for wind 

projects will increase local economic impacts of wind projects. Policies that attract local 

wind power manufacturing are likely to have the greatest impact on total economic 

development benefits. Following local manufacturing, it is the operations period labor 

and materials that are most likely to drive the total economic impact. In contrast, 

emphasizing construction workforce training to increase use of local construction labor 

23 
may not be as efficient a use of limited policy resources as workforce training to increase 

use of local manufacturing, materials, and labor during the operating period of the wind 

farm’s life. 

As with any economic forecast, the specific results of this analysis are subject to 

variability based on individual project specifics and changes within the wind industry. 

However, policymakers seeking to increase the local benefits that will result from the 

rapid growth of the wind industry can influence policy so that their constituents are able 

to participate in the wind manufacturing and maintenance industries. Pursuing policies 

that support these wind development aspects are likely to provide the greatest economic 

development benefit for states from the growing wind industry.

24 
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25 
26 

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F1147-E(09/2007) 

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Variables Affecting Economic Development of Wind Energy 

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14. ABSTRACT (Maximum 200 Words)

We used the National Renewable Energy Laboratory’s (NREL’s) latest Jobs and Economic Development Impacts 

Wind (JEDI Wind) model to perform a sensitivity analysis of wind-power-related economic development drivers, and 

economic development benefits for wind and coal were estimated using NREL’s JEDI Wind and JEDI Coal models. 

Our research shows that economic development impacts can be dramatically enhanced through the development of 

local wind power manufacturing industries. 

15. SUBJECT TERMS

wind; wind energy; economic development; JEDI Model; Jobs and Economic Development Impacts Model; economic 

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