Springs faces big hurdles in renewables

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Competition in the renewable energy sector is increasingly intense and many cities are far ahead of Colorado Springs, posing huge hurdles in the region’s effort to gain a foothold in the market.

That’s the clear-eyed conclusion of a UCCS study published recently by Dr. Fred Crowley’s MBA class.

The class, which generated a 226-page assessment of the region’s odds of success in the field, said the area is lacking many of the critical resources — manufacturing facilities, rail service, alternative or biofuel sources, wind or sunshine — necessary to power large solar arrays or wind farms that feed the nation’s grid systems.

Areas that enter the field later rather than sooner — as Colorado Springs is now doing — will have fewer chances to create significant job growth and economic wealth in the field, their report said.

The Pikes Peak region’s best bet: capitalizing on its intellectual capital and technical know-how to get new energy sources to market.

Crowley hopes those in economic development, including the fledging Operation 6035 team, will heed his class’ recommendations.

Crowley has earned a reputation for keen economic analysis. His trend reports are regularly used by the chiefs of industry in the Pikes Peak region.

His class’s three-month study on alternative energy, “Assessing Domestic Renewable Energy Markets” was released in mid-May and is just now getting attention.

Its conclusions could provide valuable information to economic promoters in search of more primary jobs that create wealth.

“You hear a lot of people talk about wind farms. They create a few jobs installing the turbines, but once they’re in, you’re only talking about 20 or 30 jobs to maintain them. That doesn’t create much wealth,” Crowley said, adding that the same is pretty much true of the solar energy market.

The study points out that El Paso County’s utility companies are unlikely to be competitive with solar energy giants like Xcel Energy, which is Colorado’s largest investor-owned utility.

Not only has Xcel already invested hundreds of millions of dollars in its solar power infrastructure, but because it’s an investor-owed company, it qualifies for numerous state and federal tax incentive and grant programs. Colorado Springs Utilities, because it’s publicly owned, can’t obtain those incentives without City Council approval. Xcel’s first 8.2- megawatt solar power plant was built near Alamosa. A second plant, twice that size, is slated for completion this year.

“When you have strong companies that already are carving out the lion’s share of the market, at best you will be second,” Crowley said.

The same realities apply to wind power, he added.

Colorado’s best location for a wind farm, for example, is along a crescent near the Colorado-Wyoming border that extends from Laramie to Cheyenne and Casper, Wyo.

“There’s enough wind for a smaller wind farm in northwest El Paso County, but by the time we’d get the infrastructure in place and get the (wind) turbines installed, it’s likely other stronger markets will already be up and selling their outputs,” he said.

The infrastructure Crowley refers to includes financial incentives similar to aggressive tax and state funding programs already in existence in states like New Mexico, Arizona and Nebraska.

Federal wind power tax credits, meanwhile, will expire soon. Unless they are extended by Congress, the credits so vital to attracting companies like Denmark-based Vestas, which is doing business in several other Colorado cities, run out on Dec. 31, 2012.

And then there are the local hurdles to increasing the Pikes Peak region’s profile as a progressive renewable energy area.

For CSU to be able to qualify for solar tax credit incentives necessary to attract entrepreneurs, for example, the City Council would have to either sell it off or create an independent body to oversee it, and that’s not likely to happen any time soon.

In addition, the area doesn’t have the rail system necessary to deliver and ship equipment manufactured to support alternative energy — and it has no manufacturing plants capable of delivering iron, steel or plastic products used by wind and solar power companies, Crowley said.

“The only area that would even come close would be Fountain. They do have rail service necessary for manufacturing,” he said.

Elsewhere, some cities with old manufacturing plants are converting them to “mini-mills” that can be used to produce components required by wind and solar energy companies.

“Look at Pueblo — they had the old steel mill. It converts old cars into flattened metal sheets used by the wind industry. They also have rail service right up to the plants. Vestas could move in and set up operations right away,” Crowley said.

To build a mini-mill in Colorado Springs would take years, and, again, by then the city’s competitors would have cornered the majority of the market, he said.

Phil Lane, Operation 6035’s volunteer executive director, said the study could be helpful in keeping the team focused on the right opportunities.

“This (report) is a great example of the outstanding work our university is doing. It’s industry-specific and provides a resource that EDC and Operation 6035 can use collaboratively,” he said.

David White, the Economic Development Corp.’s executive vice president of business development and marketing, said the report identified what are the area’s biggest weaknesses as well as its “sweet spot.”

One of the key findings was that success in the renewable energy industry requires government subsidies.

“We lose some companies to states that offer incentives,” he said, pointing to Germany-based Schott Solar Inc.’s recent decision to open a New Mexico plant instead of one in Colorado Springs.

New Mexico has aggressive financial incentives in place and a critical mass of other solar companies already in operation.

White said he is focused on attracting clean technology providers. The most likely companies that might relocate here will be small-to-medium engineering or research and development firms, he said.

More than anything, these companies are likely to be at work improving upon existing energy production and transmission methods, not manufacturing.

Crowley hopes his students’ study inspires the right kind of economic development.

“What these students did by taking a dispassionate look at the industry is an enormous step forward,” he said.

Click here to read the full report.

4 Responses to Springs faces big hurdles in renewables

  1. Why not give HUGE discounts to landowners who want the solar and wind generation and let the land owners become self sufficient without the politics and red tape of government charging the people?

    brian
    June 26, 2010 at 12:13 pm

  2. a few more issues if adressed by our city could bring progress and a greener image:
    1. There is a city policy in place which prohibits solar electricity leasing or PPA programs. This policy could be altered (the original foccus of this was to give CSU a monopoly within the city and bar companies like excel to compete with CSU for electricity customers). My suggestion would be that ppa (power purchasing agreements) or leases would not violate the non compete clause as long as the CSU customer or even CSU itsself would have the right to buy the equipment after a time period of 6 years. This would in effect help all non profit organisations in our city to at least indirect benefit from federal grants or tax credits. It does cost the city or CSU not a dime but would help existing companies and organisations in our beloved city to become greener..
    2. financing is a big issue for most alternative energy investments, but payback can be in most cases achived weill below 10 years. What is needed is program in tandem with banks or via a bond issue by the city (city would lend to home or property owners and payback would come from a special assesment on teh property taxes). what would that achieve:
    a) contractors which are craving for work would get jobs to insulate houses (payback in some cases below 2 years)
    b) Heating and plumbing companies would be busy installing energy effcient furnaces or solar hot water systems
    c) electricty companies and solar companies would be busy installing systems for home and commercial property owners
    d) we would be a green city (green equals to massive energy savings in our wallets and we would be helping to lower our impact on the environment) this should be a win win for both sides of the political spectrum…

    these are only 2 soloutions (the biggest) which i can envision which would improve our city, create jobs and do not cost us local taxpayers a dime.. In most cases we would be able to improve our financial situation..

    chance that this happens?

    maybe after the elections for mayor and city councill, before that can’t see this so another 10 month of doing nothing and wasting money..

    peter
    June 26, 2010 at 8:00 pm

  3. Peter,

    This sort of vision seems to work well in cities where there IS vision and leadership that combines a collaborative effort between the local governments and the business sector who see the wisdom in working together and fully funding their regional economic development organization.

    There is an excellent regional EDC for the Pikes Peak Region – but one that is operating with one hand behind their back due to several factors:

    1. No serious funding from either the city of the county,
    2. An under-performing Chamber of Commerce,
    3. Lack of candidates running for office with significant business, accounting or municipal administrative backgrounds – something that appears to be continuing into the next election cycle.

    It would be my opinion that much stronger review, planning and control over the city-county, by the business community would be of great advantage to the region in that there is no one agency coordinating all the talent is available.

    To date, the local politicians tell us what great strides they are making but it is from people who are all hat and no cattle. Hopefully, what appears to be serious concern by the private sector/business community over the state of local government and the formation of teams to implement Project 6035 and consideration by the developing “City Commission” to consider a comprehensive review of not only the city, but the county — will begin to reverse the dismal performance of the past and bring young, new, non-politically aligned thinkers to the campaign trail.

    The central issue is money. The failed policy of local milqtoast, weak-kneed Republicans whose policy of “just lower taxes and business will flourish” — how well is that really working?

    I think it is to the advantage of everyone to pay closer attention to the positive developments that are in the embryonic stages and encourage and support those who are behind these efforts.

    fortworthrick

    Rick Wehner
    June 27, 2010 at 11:08 am

  4. rick,

    it does not always need money. what is needed is support of private initiatives not road blocks. I am running a few businesses and a lot could be accomplished just with the city or the county instead of blocking initiatives supporting them. I have highlighted just two above these cost the city or county not a dime but would help the economy.

    I share your view that most politicians are not the best business people, but what we might want to ellect are people who are at least able to listen and learn…

    peter
    June 28, 2010 at 8:32 pm