How to Prove Your Renewable Energy Development Will Revitalize Local Communities
Utility-scale renewable energy projects located in smaller, rural, less densely populated areas can bring significant economic benefits to these communities. Unfortunately, the community often lacks an understanding of what these benefits will be. This poses a challenge for developers when they engage with the local community, as local stakeholders often struggle to grasp what these benefits would mean for their county, township, or local area.
Problems developers face: The community lacks an understanding of the economic benefits
A recent article published in Energy Research and Social Science, authored by a group of researchers, addresses this. Click here to read the article: “Good fences make good neighbors: Stakeholder perspectives on the local benefits and burdens of large-scale solar energy development in the United States”
The article, released in February 2024, discusses the potential economic benefits of large-scale solar projects to communities in the US. These benefits may include increased property tax revenue, payments to landowners, and higher employment rates. However, few peer-reviewed studies have examined local or sub-state data regarding these impacts.
Here’s what this study found in regards to economic impacts: "While the most significant of these impacts to a community may be tax revenue, few residents we spoke with were aware of local tax revenues increasing due to the solar project.”
They discovered that the aspects most frequently mentioned and significant to community members and local officials were the local job opportunities, contracts for landscaping services, and increased business activity at the local level during the construction phase.
Dr. David Loomis, President of SER, speaks at a community meeting for a solar project.
Dr. David Loomis, President of SER, speaks about his experience in examining these economic impacts, “During permitting meetings, someone may mention a relatively small contract as evidence of support for the project, citing potential revenue enhancements. However, in my experience, this represents only a small portion of the economic benefits that could accrue to a local community.”
Sometimes a community doesn’t trust the numbers coming from a developer
Another survey was conducted late last year by Embold Research in partnership with TigerComm. They surveyed a broader group of 2,645 rural Americans in August 2023. They particularly focused on the rural Americans' support for renewable energy projects in their community.
What they found was that even if they understand the economic impacts being presented, sometimes a community may distrust the numbers, especially if they come directly from a developer.
Do community members care? How does it impact them directly?
There are community members that may understand the numbers, and trust the numbers, but they may say, "Well, what's in it for me? How is it going to impact me directly if I'm not one of the landowners that are leasing land? I don't see a benefit even though I'm in this community."
One of the difficulties for developers is to try and overcome that challenge and explain that there are benefits to everybody in the community. The clearest way to see that is in property tax revenue that will flow to schools, county government, and other taxing entities.
Our Solution
Our solution at Strategic Economic Research (SER) is to provide an economic impact study that will detail the amount and types of jobs that will be created or supported by the project, the earnings and output, and the property taxes.
We have an experienced team who can explain the benefits in a comprehensive report specific to your project
Dr. Loomis has 26 years experience in higher education and 13 years experience explaining economic impacts of renewables
A third-party report can build trust
We go into great detail regarding our methodology
We use the latest industry data from IMPLAN
Our knowledge is built on the experience of performing over 300 of these analyses and working with 8 of the top 10 developers of renewable energy projects
SER shows why the community should care about the numbers
We make our reports highly relevant to community members by including a section on their county economics, including population growth or decline, employment statistics, and median household income.
We includ a property tax section detailing how much revenue will go to the taxing entities such as county fund, schools, townships, etc.
SER has produced over 300 economic impact reports in 32 states
Economic impact methodology at SER
For any economic impact analysis, we start with a study area -- in this case, a project county or a project state. Then we divide it into two time periods: a construction period, which lasts about 0 to 3 years, and an operations period, which lasts about 25 to 50 years. Within each of those periods, we measure three levels of economic impact: direct, indirect, and induced.
Then, within each of those three levels, we report economic impacts in the form of jobs, earnings, and output.
On the direct side, for construction, think of the phrase "onsite personnel." Direct impacts on the construction side refer to the onsite construction personnel sourced from your project county or your project state. This includes construction workers, equipment operators, concrete porters, electricians, and similar roles. The same applies to the operations side, with onsite personnel like site managers, field technicians, O&M workers, or clerical staff.
The next level of impacts are the indirect impacts. Think of these as supply chain impacts resulting from inter-industry purchases due to direct final demand changes. These impacts stem from materials, equipment, and services spending within the study area. For example, if you're building a wind farm and purchasing materials from your project county or state, those purchases will be reflected in the indirect impacts. The same applies to solar farm construction and operations.
The final level of impacts are the induced impacts. Think of these as community spending resulting from the direct and indirect impacts. Workers receiving paychecks from your project spend money within the local community, contributing to increased spending. This increased spending within the local community is known as induced impacts.
If you're providing landowner payments throughout the operations period, the increased spending in the local community from those payments is reflected in the induced impacts level.
Now that we've discussed the direct, indirect, and induced levels, let's look at jobs, earnings, and output a little closer. In our reports, we show jobs as full-time equivalents (FTEs). The conversion factor is one job equals one FTE, which is about 2080 hours per year, equivalent to a full-time worker working for one year.
We use FTEs to accommodate part-time or temporary workers on your project. For example, a full-timer working for just 0.6 of a year on your project would be 0.6 FTE. Similarly, if two full-timers only work for half a year, their combined total would be one FTE. The same principle applies to part-time workers.
As for earnings and output, earnings include wages, salaries, and benefits resulting from a job. Output is similar to Gross Domestic Product (GDP), representing the sum value of all goods and services at the direct, indirect, and induced levels.
Other considerations include the impact of your project's budget, the robustness of the study area economy, and the amount of spending within that economy. Adjust your expectations for impacts accordingly, especially in rural areas with low populations.
The state impacts will always be greater than or equal to the county impacts since the county is within the state. The remainder between state and county impacts represents impacts outside the project county but within the project state.
With our reports, you're getting a comprehensive view of the economic impacts of your project, including construction worker impacts, supply chain impacts, and community spending impacts. This provides a full picture to communicate to your local community.
Property tax methodology
While economic impacts view a job as a job regardless of location, property tax legislation varies by state. Each state determines how they'll tax renewable energy projects.
Consequently, we generally see three categories for how projects are taxed, depending on the state. Some states tax based on the project's nameplate capacity, others on energy generation measured in kilowatt-hours, and some on capital expenditures.
It's simpler to differentiate personal property, like a laptop, from real property, such as a house. However, with solar and wind projects, determining which parts are personal or real property can be tricky. Each state has its own classification for equipment, further adding to the complexity.
Other differences between states include how land is treated, especially regarding replacement taxes, and how educational state aid is affected by increased taxable value. States have complex formulas for distributing state aid based on changes in taxable value, affecting school districts differently.
The availability of abatements for renewable projects also varies by state. These factors contribute to the complexity of calculating property taxes, requiring thorough research and understanding of state tax codes.
Understanding these nuances is vital for project permitting and community engagements. Property taxes can constitute a significant expense, and states vary in their efforts to incentivize renewable energy projects. We've conducted analyses in 32 states, providing expert testimony on property taxes.
Land use analysis
Furthermore, land use analyses evaluate the economic trade-offs between agriculture and solar projects. We assess the profitability of farming compared to solar leases, considering factors like crop prices, equipment costs, and yield trends.
Using Monte Carlo simulations, we model various scenarios to understand potential outcomes for landowners. By comparing net profits from farming to projected lease payments, we provide valuable insights into the economic viability of solar projects. These analyses help landowners and communities make informed decisions about land use conversions.
Contact Us to Discuss Your Project
If you have a utility-scale renewable energy project that might need an economic impact study, send us a message. We would be happy to discuss this with you in greater detail.