Bureau of Business Research August 1993 College and Graduate School of Business, University of Texas at Austin Toward a Sustainable Future: Energy Resources in Texas With the recent creation of the Sustainable Energy Development Council (SEDC), Texas joins a growing national and international trend toward crafting plans and policies to ensure sustainability of essential energy services and develop energy re­sources. At the 1992 Earth Summit in Rio de Janeiro, 178 nations met and agreed to a Declaration on Environment and Development. Principle 3 of the Rio Declaration states that "[t]he right to devel­opment must be fulfilled so as to equitably meet developmental and environmental needs of present and future generations."1 This principle, that development must meet the needs of the present without compromising the ability of future generations to meet their needs, has been embraced throughout the world. On June 14, 1993, President Clinton and Vice-President Gore supported the principle by announcing the creation of the Presidential Council on Sustainable Develop­ment.2 Likewise, the Business Council for Sustain­able Development, a group of 48 chief executive officers and chairs of the boards of national and multinational companies from all regions of the world, affirmed the goal of sustainable development in its own declaration.3 Further, the justification for promoting sustainable energy development is clearly established in Agenda 21, the United Nations' extensive blueprint for global sustainable development into the 21st century, which states: ''The need to control atmospheric emissions of greenhouse and other gases and substances will increasingly need to be based on efficiency in energy production, transmission, distribution and consumption, and on growing reliance on environ­mentally sound energy systems, particularly new and renewable sources of energy. All energy sources will need to be used in ways that respect the atmosphere, human health and the environment as a whole."4 Developing Renewable Energy Resources in Texas The Sustainable Energy Development Council builds on all these concepts. As stated in the Execu­tive Order, the purpose of the Council is the devel­opment of "a strategic plan to ensure the optimum utilization of Texas' renewable and efficiency resource base." The strategic plan will establish both a policy and a technical information base that will, in tum, foster an improved regulatory and economic climate for the development of renewable energy and efficiency resources in Texas. The potential for development of the state's renewable resource base has been identified (see following "Renewable Energy Resources in Texas"). Texas' abundant solar, wind, biomass, and geothermal resources have hardly been tapped. Even when hydroelectric power is included, renew­able energy resources account for less than 1 per­cent of the currently installed electrical generation in Texas.5 Nevertheless, Dr. Bruce Hunn of the University of Texas Center for Energy Studies, who has quantified the renewable resource potential for Texas, reports that "despite considerable uncertainty in both quantity and cost, renewable energy and energy efficiency should be major contributors to the Texas energy economy in the future."6 Jill I I I I II I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I IDr Developing a Sustainable Energy Resources Policy for Texas The SEDC strategic plan will be the combined product of two distinct efforts. First, the Council brings together representatives of the Governor's Office, the Texas Air Control Board (or its succes­sor agency), the Comptroller's Office, the Depart­ment of Commerce, the General Land Office, the Public Utility Commission, the Railroad Commis­sion, the Water Development Board, businesses, utilities, educators, consumer advocates, and envi­ronmental groups. This comprehensive group will work to create a policy framework for increased use of sustainable energy resources and will provide guidance for government and private industry. The second objective of the SEDC strategic plan is the development of a technical resources base. Incorpo­rated within the resource base will be a comprehen­sive assessment of renewable and efficiency re­sources within Texas. Particular attention will be devoted to analyses of the opportunities and limita­tions of sustainable energy technologies, economic development opportunities (especially in rural counties), industrial efficiency potential, and electric transmission and distribution systems. The policy framework and technical resources base will be integrated into the final strategic plan and tested through demonstration projects and government/industry partnerships. The goal of the strategic plan is the production of a business plan and sustainable energy blueprint for Texas. Policy Goals and Benefits Although the Council is still in the organizational stage, several anticipated benefits and intended goals of the SEDC effort have been identified. First and foremost is the creation of new sustainable energy jobs for Texas. The jobs created by the development of sustainable energy resources will stimulate the Texas economy and offset job losses experienced in fossil fuel sectors. Second, the SEDC will act as a vehicle for attracting federal dollars to the state. Currently proposed budgets for the U.S. Department of Energy include a 30 percent increase in funding for renewable energy and ener­gy efficiency programs. The Texas SEDC will help ensure that our state is a competitor for those funds. Finally, and most broadly, it is hoped that the efforts of the SEDC will offset and reverse the recent trend toward Texas becoming a net energy importer. By developing our renewable resource base and the technologies of efficient use of energy, Texas should be able to maintain its position as a national leader in the energy sector. The Texas Sustainable Energy Development Council is poised to take advantage of growing national and international trends toward sustain­ability in development and use of resources. The leadership of government, in partnership with industry and citizens, will ensure a sustainable future for all Texans. -Karl R. Rabago Commissioner, Public Utility Commission and Co-chairperson, Texas Sustainable Energy Development Council Notes 1. "Rio Declaration on Environment and Development," reprinted in Agenda 21 : The United Nations Programme ofAction from Rio, United Nations Publication E.93.1.11, 1993, p. 9. 2. White House Office of the Press Secretary, "Remarks by the President in Signing Executive Order on Presidential Council on Sustainable Development" (press release), June 14, 1993. 3. Stephen Schmidheiny, Changing Cowse: A Global Business Perspective on Development and the Environment (executive summary), Cambridge: MIT Press, 1992. 4. "Agenda 21," reprinted in Agenda 21: The United Nations Programme ofAction from Rio, United Nations Publication E.93.1.11, 1993, p. 78. 5. Public Utility Commission of Texas, Long-Term Electric Peak Demand and Capacity Resource Forecast for Texas 1992, Vol. 1, 1992, table 6.1 . 6. Bruce D. Hunn, "A Proposed Approach to the Quantification of the Texas Energy Resource Base," appendix to the "Report of the Committee on Renewable Energy," contained in the State of Texas Energy Policy Partnership (STEPP), Report to the Governor, the Legislature, and the Citizens ofTexas, Vol. 1, March 1993. Jill I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I IDr tltl I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I [Dr Employment and Unemployment Rate by Metropolitan Area Total nonagricultural employment (thousands) Total employment (thousands) Unemployment rate Area May 1993 May 1992 Percentage change May 1993 May 1992 Percentage change May 1993 Abilene 50.8 49.8 2.0 49.0 48.3 1.4 5.6 Amarillo 83.3 81.5 2.2 94.7 93.3 1.5 4.6 Austin 423.5 410.0 3.3 461.4 447.3 3.2 4.3 Beaumont-Port Arthur 152.0 150.8 0.8 160.5 159.8 0.4 9.8 Brazoria 68.2 69.4 -1.7 83.0 84.3 -1.5 7.8 Brownsville-Harlingen 83.2 81.1 2.6 100.7 98.3 2.4 10.2 Bryan-College Station 61.4 58.9 4.2 65.7 63.5 3.5 3.8 Corpus Christi 137.9 135.8 1.5 154.9 153.7 0.8 7.8 Dallas 1,421.0 1,395.5 1.8 1,385.3 1,365.0 1.5 5.6 El Paso 223.7 217.5 2.9 238.1 232.8 2.3 9.1 Fort Worth-Arlington 602.7 595.0 1.3 700.5 694.5 0.9 5.8 Galveston-Texas City 84.6 80.7 4.8 112.3 107.2 4.8 7.3 Houston 1,634.5 1,633.l 0.0 1,639.7 1,646.1 -0.4 6.7 Killeen-Temple 82.7 78.1 5.9 98.5 93.9 4.9 6.3 Laredo 51.9 49.9 4.0 54.1 52.0 4.0 8.1 Longview-Marshall 70.2 70.8 -0.8 73.0 74.0 -1.4 8.4 Lubbock 99.3 98.6 0.7 109.3 108.8 0.5 5.0 McAllen-Edinburg-Mission 109.7 106.6 2.9 143.9 140.8 2.2 13.3 Midland 45.5 46.I -1.3 45 .0 45 .7 -1.5 6.4 Odessa 44.6 44.5 0.2 48.3 48.8 -1.0 8.9 San Angelo 39.I 38.3 2.1 43.5 42.7 1.9 5.4 San Antonio 567.3 549.3 3.3 605.6 588.0 3.0 5.5 Sherman-Denison 37.0 37.1 -0.3 43.2 43.3 -0.2 6.1 Texarkana 47.7 47.3 0.8 53.8 53.5 0.6 6.9 Tyler 65.3 64.9 0.6 71.0 71.1 -0.l 6.7 Victoria 32.7 31.1 5.1 38.1 36.8 3.5 5.0 Waco 84.2 82.8 1.7 87.9 87.0 1.0 5.7 Wichita Falls 49.9 49.5 0.8 50.9 50.7 0.4 6.1 Total Texas 7,430. l 7,275.3 2.1 8,184.0 8,082.0 1.3 6.4 Total United States 110,449.0 108,908.0 1.4 119,201.0 117,535.0 1.4 7.2 Note: Data are not seasonally adjusted. Figures for 1992 have undergone a major revision; previously published 1992 figures should no longer be used. Revised figures are available upon request. All 1993 figures are subject to revision. Sources: Texas Employment Commisson and U.S. Department of Labor, Bureau of Labor Statistics. Nonagricultural Employment In Five Largest Texas Metropolitan Areas (January 1984=1.00) 1.40 1.35 1.30 1.25 1.20 1.15 1.10 1.05 1.00 0.95 Total Employment In Five Largest Texas Metropolitan Areas (January 1984=1.00) 1.40 1.35 1.30 1.25 1.20 1.15 1.10 1.05 1.00 0.95 tltlllllillllllll llll lllllllllllllllllllllllllllllllllllllllllllllllllllllllllllDr till I I I I l I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I IJDr Renewable Energy (continued) are sold in state. Besides the potential in Texas (5,000 MW would be a 10 percent penetration of cost of electricity is 4 cents/kwh from the U.S. DOE the state's electrical generation capacity), there is a Advanced Wind Turbine Program (turbines now growing market in other states and the world. being developed). Currently there is only one Texas manufacturer of advanced wind turbines. Texas (Adapted from State of Texas Energy Policy Partnership [STEPP], manufacturers of mechanical wind-powered water Report to the Governor, the Legislature, and the Citizens ofTexas, pumps sell about 2,000 units annually, half of which Vol.I, March 1993.) Texas Energy Supply Resources Maximum Technical Potential in Year 201 O en - "C ca ::s 0 en Cl> '-en >­ E ca (.) ::s ca ~ .S! c .S! c Cl> C> .c C> (.) ca .!!! 0 ca ::s (.) '-.... :J Cl> ::s ~ z == - Cl> ca cCl. -ca 0 w Cl> = (.) z a: ~ High Estimate • Low Estimate Source: Bruce D. Hunn, "A Qualified Approach to the Quantification of the Texas Energy Resource Base," State of Texas Energy Partnership Policy Committee Reports, Volume 2, March 1993. till I I I I l I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I IJDr ztll 111 ! II I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I IJDr Renewable Energy in Texas: Resources and Demand Renewables are those energy resources delivered in the form of sunshine, wind, plants (biomass), heat inside the earth (geothermal), and water movement (hydropower), including falling water and tidal movements. Until the last 150 years, most of human history was fueled by renewable energy. Renewable Resources Renewable energy is potentially the largest resource in Texas. However, the existing infrastruc­ture to capture that resource is minimal. Hydro­power currently provides 529 megawatts (MW) of capacity and 700,000 megawatt hours (Mwh) of electrical energy, or 0.008 quadrillion Btus (Q). While most hydropower potential in Texas has been utilized, some untapped low-head hydro sites and generator additions at existing sites are technically and economically feasible, bringing the total hydro potential capacity to 1,000 MW. The best solar sites in Texas can produce the equivalent of 800 barrels of oil per acre annually. A central receiver power plant could produce 100 MW for nine hours daily, using 1.5 square miles of solar collectors. There are 27,000 square miles of Texas land suitable for such plants, according to a Univer­sity of Houston report. Ifjust 5 percent of this land were dedicated to solar plants, it would produce 90 gigawatts of electricity. Assuming current electric prices (6.5 cents per kilowatt hour average state­wide) and technology, this would be sufficient to electrify the entire state at current rates of consump­tion (250 million megawatt hours, or 2.9 Q). The wind potential in the state far exceeds current electricity consumption. If the state's windier areas (lands with an average wind speed of 11.5 miles per hour [mph] and higher) are included, the potential is 250,000 megawatts (MW); on lands with wind speeds averaging above 12.5 mph (located primarily in the Panhandle), the potential is 130,000 MW. From the windiest areas of the state, the recoverable resource for wind is estimated at 280 billion kilo­ watt hours annually (3.3 Q). This would come from 130,000 MW of wind turbines, operating at 25 percent capacity factor. The wind turbines would occupy less than 5 percent of the land area, with the Annual Renewable Energy Potential Using Current Technology Resource Annual resource potential Economic potential (trillion Btu) (trillion Btu) Solar 50,000 >2,900 Wind 6,346 3,300 Biomass 2,300 >1,150 Source: STEPP Renewable Energy Committee, Final Report, December 1992. balance usable for ranching and farming. Recoverable biomass energy from agricultural wastes, municipal waste, and energy crops is estimated sufficient to provide fuel for 2.3 Q, just less than the current total annual electric consump­tion in Texas. The future production of these resources depends not only on price and technology, but on public policy as well. The international Global Climate Change Treaty executed in Rio de Janeiro in 1992 calls for developed nations to reduce carbon dioxide (C02) emissions to 1990 levels. Because the pre­dominant greenhouse gas, C02, is emitted in the combustion of nonrenewable fuels, renewable resources could help meet the world's energy needs without aggravating the C02 problem. The Demand for Renewable Energy Renewable energy technologies are benign from a C02 emissions standpoint. The world demand for renewables has been growing steadily and, in light of the 1992 Global Climate Change Treaty, will mcrease. Worldwide production of photovoltaics-the technology that converts sunlight to electricity in a silicon cell-is approximately 50 megawatts (MW). U.S. production is over 20 MW. This represents an annual growth rate of 30-35 percent for the past several years. U.S. demand for solar thermal electric plants is increasing, and the U.S. Department of Energy (DOE) has set a national goal of 1,500 MW of photovoltaics installed by the year 2000, thus creating a potentially substantial future market. Presently there are over 2,000 MW of installed wind electricity capacity in the world, with 75 percent of that in California. The Energy Policy Act of 1992 provides a 1.5 cent/kwh tax credit for electricity generated by wind power. The projected (continued on preceding page) ztll I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I IJDr ttllI I I I: I I I I I I I I I I I I I I I I I I I I I I I l~~~I I I I I I I I I I I I I I I I I I I I I I I IJUr- Announcements The 1993 edition of Texas Trade and Profes­sional Associations is now available from the Bureau of Business Research sales office. This directory provides names of officers, addresses, phone numbers, numbers of members, and titles and frequency of association publications. The price for the new edition-also available on diskette-is $12.50. The Role of Natural Gas in Environmental Policy should be ready for release in September. These proceedings from a Bureau-sponsored conference cover subjects ranging from the natural gas resource base to public utility regulation and feature authors from a variety of specialties. For additional information about either of these publications, call (512) 471-1616. Editor: Lois Glenn Shrout Assistant Editor: Sally Furgeson Texas Business Review is published six times a year (February, April, June, August, October, and December) by the Bureau of Business Research, Graduate School of Business, University of Texas at Austin. Subscriptions to Texas Business Review are available free upon request, as are bade issues. The Bureau of Business Research serves as a primary source for economic and demographic data on the state of Texas. An integral part of UT Austin's Graduate School of Business, the Bureau is located on the sixth floor of the College of Business Administration building. 6s;PL-£Il8l sex~J.. 'u~1snv