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.