MILLS BRANCH SOLAR: Economic Benefits

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1 MILLS BRANCH SOLAR: Economic Benefits Mills Branch Solar will help diversify and grow the local economy, produce clean and renewable energy for future generations, and reduce Maryland s dependence on out-of-state electricity. Produces enough energy to power 10,000 homes, or nearly every home in Kent County Avoids the equivalent of using 18,000 train cars full of coal Helps Maryland reach its goal of 2% of electricity provided by solar by 2020 Creates 90 jobs in Kent County during construction Brings $5.3 million in labor income to Kent County over the life of the project Contributes $13.3 million in economic output to Kent County over the life of the project Promotes Homegrown Energy Mills Branch Solar is an opportunity to lessen Maryland s reliance on out-of-state sources for energy. Currently, Maryland imports 42% of its electricity from out-of-state suppliers, which leaves the economic benefits outside of the state. Increases Tax Revenue Mills Branch Solar will increase the property tax contribution of the land on which it is located from $3,000 annually to about $45,000 annually. Property taxes account for two-thirds of total county revenue, and since 2011, that critical revenue source has experienced zero growth. Provides Diversity Farming is the backbone of Kent County s economy, but by using just 0.3% of the county s available farmland, Mills Branch Solar can help diversify the local economy. Over the life of the project, as compared to farming, Mills Branch Solar will provide a net benefit of $2.4 million in labor income, $5.2 million in economic output, and $2.5 million in state and local tax revenues in Kent County. Data source: Mangum Economics, March 2016 Graphics source: Freepik.

2 The Economic and Fiscal Contribution that MILLS BRANCH SOLAR WOULD MAKE TO KENT COUNTY AND MARYLAND MARCH 2016

3 Report prepared by Mangum Economic Consulting, LLC is a Richmond, Virginia based firm that specializes in producing objective economic, quantitative, and qualitative analysis in support of strategic decision making. Examples of typical studies include: Policy Analysis Identify the intended and, more importantly, unintended consequences of proposed legislation and other policy initiatives. Economic Impact Assessments and Return on Investment Analyses Measure the economic contribution that business, education, or other enterprises make to their localities. Dr. Mangum earned his Ph.D. in economics at George Mason University in He has more than two decades of experience in quantitative analysis and policy development at the federal and state level. Workforce Information Project the demand for, and supply of, qualified workers. Cluster Analysis Use occupation and industry clusters to illuminate regional workforce and industry strengths and identify connections between the two. Environmental Scanning Assess the economic, demographic, and other factors likely to affect your enterprise in the future DOMINION BOULEVARD, SUITE 114 GLEN ALLEN, VIRGINIA (804) MANGUMECONOMICS.COM

4 Executive Summary This report assesses the economic and fiscal contribution that Mills Branch Solar, a proposed 60 megawatt solar power project, would make to Kent County and the state of Maryland as a whole. The principal findings from that assessment are as follows: 1) Mills Branch Solar would be located in Kent County, Maryland: Mills Branch Solar is being developed by Apex Clean Energy. Apex Clean Energy was founded in 2009 by a leadership team with a successful track record in several of the country s leading renewable energy companies. Mills Branch Solar would be built on 330 acres of land more than ten miles from downtown Chestertown, the county seat. It is anticipated that once Mills Branch Solar is up and running, it will produce enough electricity to power up to 10,000 homes annually, or nearly all of the homes in Kent County. Mills Branch Solar would increase the state of Maryland s installed solar capacity by 20 percent. Thereby substantially aiding the state in meeting its legislative goal of ensuring that by 2022 at least two percent of the electricity consumed in Maryland comes from in-state sources of solar power. 2) Mills Branch Solar would be beneficial to Maryland s overall market for electricity production: Maryland s production of electricity fell from 52.7 million megawatt hours in 2005 to 35.9 million megawatt hours in 2013, even as the total population of the state increased from 5.6 million to 5.9 million. Maryland now only produces enough electricity to meet about 58 percent of its retail demand. As a result, the remainder must be imported from producers in other states. Which means, as with all imports, that the jobs, wages, and other economic benefits associated with that production currently go to localities outside of Maryland. Although coal-fired plants remain Maryland s largest source of electrical power, between 2005 and 2013 the share of electricity produced in Maryland by coal and petroleum fell from 63 percent to 44 percent. That transition has had a positive impact on greenhouse gas emissions from electricity production, which fell by 44 percent between 2005 and The Mills Branch Solar project will further aid in this transition by providing additional electricity generation through the use of near zero emission renewable solar power. i

5 3) Mills Branch Solar would strengthen Kent County s economy: Mills Branch Solar would aid in increasing employment in the County s Administrative, Support, and Waste Services sector, which is under-represented relative to the statewide norm. Mills Branch Solar would aid in reducing the County s disproportionate dependence on the highly seasonal Agriculture and Retail Trade sectors. These sectors contribute to the County s pronounced seasonal swings in unemployment, with January unemployment rates typically spiking about two percentage points above the average for the year. Mills Branch Solar would provide a boost to the County s Construction sector, which accounts for 6.4 percent of total County employment and pays the third highest wage of any major industry sector in the County. 4) Mills Branch Solar would make a positive economic and fiscal contribution to Kent County and the state of Maryland as a whole: During the construction phase of the project, it would generate one-time economic and fiscal impacts of approximately: o Kent County: 1) 90 jobs, 2) $3.7 million in labor income, 3) $9.2 million in economic output, and 4) $0.4 million in state and local tax revenue. o Maryland: 1) 129 jobs, 2) $8.3 million in labor income, 3) $18.3 million in economic output, and 4) $0.8 million in state and local tax revenue. Once Mills Branch Solar is fully operational, our analysis indicates that it will generate annual total economic and fiscal impacts of approximately: o Kent County: 1) 2 jobs, 2) $52,795 in labor income, 3) $136,887 in economic output, and 4) $59,425 in state and local tax revenue. o Maryland: 1) 4 jobs, 2) $329,408 in labor income, 3) $795,411 in economic output, and 4) $89,845 in state and local tax revenue. 5) Comparing the above estimates to the estimated economic and fiscal impact of the property in its current agricultural use shows that Mills Branch Solar would: Generate a large burst of economic activity during its construction phase that would contribute a total of 90 jobs, $3.7 million in labor income, $9.2 million in economic output, and $0.4 million in state and local taxes to Kent County. Thereby providing a significant boost to the County s Construction sector. Increase the annual tax revenue that Kent County receives from the property from $2,632 to $44,457, and increase the overall state and local tax revenue generated by the property from minus $12,039 to plus $59,425. Thereby providing a significant boost to a ii

6 funding stream that accounts for approximately two-thirds of Kent County s overall revenue, and also has exhibited zero growth since Contribute slightly less in ongoing annual labor income (down $39,095) and economic output (down $123,549) to Kent County than the property does in its current agricultural use. Contribute substantially more in ongoing annual labor income (up $198,995), economic output (up $332,199), and state and local tax revenue (up $101,628) to the state of Maryland as a whole than the property does in its current agricultural use. 6) In short, the proposed Mills Branch Solar project would aid in satisfying a larger proportion of Maryland s retail electricity demand through in-state production; assist in diversifying Kent County s economy to protect it against seasonal swings in employment and unemployment; provide a boost to the County s Construction industry; and make a positive economic and fiscal contribution to Kent County and the state of Maryland as a whole. iii

7 Introduction This report assesses the economic and fiscal contribution that Mills Branch Solar, a proposed 60 megawatt solar power project, would make to Kent County and the state of Maryland as a whole. The remainder of the report is divided into six sections. The Mills Branch Solar section provides a brief description of the project. The Electricity Production in Maryland section provides general background information on Maryland s electricity production sector and the role that solar energy could play in that sector. The Local Economic Profile section supplies context for the impact analysis to follow, by providing information on the local economy of Kent County. In the Economic and Fiscal Impact section, we provide an empirical assessment of the economic and fiscal contribution that Mills Branch Solar would make to Kent County and the state of Maryland as a whole. While in the Other Impacts section we discuss some of the other contributions Mills Branch Solar would make to its host community that, although difficult to quantify, are nonetheless important to recognize. Finally, in the Conclusion section we provide a brief conclusion and summary of our findings. Mills Branch Solar Apex Clean Energy has filed plans with the state of Maryland to construct Mills Branch Solar, a 60 megawatt solar power facility in Kent County Maryland. Apex Clean Energy was founded in 2009 by a leadership team with a successful track record in several of the country s leading renewable energy companies. In the few short years since, it has grown to encompass a team of over 150 industry professionals and has been involved in 54 renewable energy projects in 25 states. Apex Clean Energy s corporate mission is both simple and direct to speed the shift to clean energy. The Mills Branch Solar project would be located in Kent County Maryland, a rural community on Maryland s Eastern Shore directly across the Chesapeake Bay from the city of Baltimore. Mills Branch Solar would be built on 330 acres of land more than ten miles from downtown Chestertown, the county seat. The solar panels employed in the project would be no more than ten feet tall and Apex Clean Energy plans to buffer the views of the panels with vegetation. It is anticipated that once Mills Branch Solar is up and running, it will produce enough electricity to power up to 10,000 homes annually, or nearly all of the homes in Kent County. In addition, Mills Branch Solar would increase the state of Maryland s installed solar capacity by 20 percent. Thereby substantially aiding the state in meeting its legislative goal of ensuring that by 2022 at least two percent of the electricity consumed in Maryland comes from in-state sources of solar power. 1

8 Electricity Production in Maryland In this section we provide a backdrop for the proposed Mills Branch Solar project by profiling Maryland s electricity production sector and the role that solar energy plays in that sector. Overall Market As shown in Figure 1, in 2013 electricity sales in Maryland totaled 61.9 million megawatt hours, ranking the state 24 th among the fifty states in terms of electricity consumption. However, only 58 percent of that demand was met by in-state utilities, independent producers, and other sources. As a result, Maryland had to import more than two-fifths of the electricity it consumed from producers in other states. As with all imports, this means that the jobs, wages, and economic output created by that production went to localities in those states, not to localities in Maryland Total electric industry retail sales in Maryland Total net electricity generation in Maryland Net imports Figure 1: Demand and Supply of Electricity in Maryland in 2013 (in millions of megawatt hours) 1 1 Data Source: U.S. Energy Information Administration. In this chart, net imports also takes into account losses during transmission and production for direct use. As a result, it does not directly equal the residual of net generation minus total retail sales. 2

9 Sources of Production Between 2005 and 2013, the total amount of electricity produced in Maryland fell from 52.7 million megawatt hours to 35.9 million megawatt hours, even as the total population of the state increased from 5.6 million to 5.9 million. Figure 2 provides information on the energy sources that were used to produce electricity in Maryland in these years. What these data show is that coal-fired plants were Maryland s largest source of electricity in both years, providing 29.3 million megawatts in 2005 (56 percent of total production) and 15.5 million megawatts in 2013 (43 percent of total production). Nuclear power was the state s second largest source of electricity in both years, providing 14.7 million megawatts in 2005 (28 percent of total production) and 14.3 million megawatts in 2013 (40 percent of total production). Petroleum, which had been the state s third largest source of electricity in 2005 (3.8 million megawatts or 7 percent of production), fell to sixth in 2013 (0.2 million megawatts or 1 percent of production). Hydroelectric power remained fairly stable between 2005 and 2013 at 1.7 million megawatts (3 percent of production in 2005 and 8 percent in 2013). While, wind and solar rose from zero megawatts in 2005 to 0.4 million megawatts in 2013 (1 percent of production). Solar, 0, 0% Petroleum, 3,805,569, 7% Wind, 0, 0% Other, 1,259,392, 2% Solar, 63,485, 0% Petroleum, 189,553, 1% Wind, 321,670, 1% Other, 858,721, 2% Nuclear, 14,703,221, 28% Nuclear, 14,264,305, 40% Natural gas, 1,886,986, 4% Hydroelectric, 1,703,639, 3% Coal, 29,302,792, 56% Natural gas, 2,887,589, 8% Hydroelectric, 1,727,020, 5% Coal, 15,538,469, 43% Figure 2: Electricity Generation in Maryland by Energy Source (megawatt hours) 2 2 Data Source: U.S. Energy Information Administration. 3

10 Figure 3 provides similar data for the U.S. as a whole. A quick comparison of Figures 2 and 3 shows similar trends, even though the degree of reliance on specific energy sources for electricity production is quite different. In both Maryland and at the national level, the share of electricity produced through cleaner burning fuel sources (hydroelectric, natural gas, nuclear, wind, and solar) increased over the period. In Maryland the combined share of these five fuel sources rose from 35 percent in 2005 to 54 percent in 2013, while at the national level it rose from 45 percent to 58 percent. Reciprocally, in Maryland the share of electricity produced by coal and petroleum fell from 63 percent in 2005 to 44 percent in 2013, while at the national level the share of electricity produced by these two fuel sources fell from 53 percent to 40 percent. Solar, 550,294, Petroleum, 0% 122,246,486, 3% Wind, 17,810,549, 0% Other, 88,674,501, 2% Solar, 9,035,620, Petroleum, 0% 27,164,444, 1% Wind, 167,839,745, 4% Other, 98,392,127, 2% Nuclear, 781,986,365, 19% Nuclear, 789,016,473, 19% Natural gas, 760,960,254, 19% Hydroelectric, 270,321,255, 7% Coal, 2,012,873,046, 50% Natural gas, 1,124,835, 560, 28% Figure 3: Electricity Generation in U.S. by Energy Source (megawatt hours) 3 Coal, 1,581,114,716, 39% Hydroelectric, 268,565,383, 7% Impact on the Environment In discussing the impact of these trends on the environment, it is important to realize that electricity production is the U.S. s largest source of greenhouse gas emissions. In 2005, electricity production accounted for 43 percent of total carbon dioxide emissions from fossil fuel consumption in the U.S. and by 2013 that figure had only dropped to 41 percent. 4 However, that small change in percentage share masks some very significant changes in 3 Data Source: U.S. Energy Information Administration. 4 Data Source: U.S. Energy Information Administration. 4

11 absolute emissions from electricity production. Moreover, those changes in emission levels were largely attributable to the shift described above, which is to say that as the industry has transitioned away from coal-fired plants, its greenhouse gas emissions have fallen. Figure 4 depicts this change for both Maryland and the U.S. nationally. As these data indicate, between 2005 and 2013, as the share of electricity produced in Maryland by coal and petroleum fell from 63 percent to 44 percent (a 30 percent decline), carbon dioxide emissions from electricity production fell from million metric tons to 75.8 million metric tons (a 44 percent decline). Similarly, at the national level as the share of electricity produced by coal and petroleum fell from 53 percent to 40 percent (a 25 percent decline), carbon dioxide emissions from electricity production fell from 20,250.7 million metric tons to 17,378.8 million metric tons (a 14 percent decline) , ,000 20, , , , , Maryland U.S. Figure 4: Carbon Dioxide Emissions from Electricity Production (in millions of metric tons) 5 To further encourage this shift, in 2008 Maryland enacted a Renewable Portfolio Standard that establishes the goal that 20 percent of electricity consumed in Maryland must be produced by renewable energy sources by 2022, with 2 percent of that total coming from solar power facilities located within the state. 6 5 Data Source: U.S. Energy Information Administration. 6 Data Source: Maryland Energy Administration. 5

12 Local Economic Profile In this section, we provide context for the economic and fiscal impact assessments to follow by profiling the local economy of Kent County. Total Employment Figure 5 depicts the trend in total employment in Kent County from June of 2010 to June of As these data show, employment in Kent County is characterized by very pronounced seasonal swings, with employment typically peaking in July of each year. On average, total employment remained fairly stable in the neighborhood of 7,600 jobs for most of this period however. This general trend changed in 2015, as employment shifted upward. Over the period as a whole, County employment increased by 620 jobs, or 7.8 percent. To put this number in perspective, over the same period total employment in the state of Maryland as a whole increased by 5.2 percent. 9,000 8,500 8,000 7,500 7,000 6,500 6,000 Figure 5: Total Employment in Kent County June of 2010 to June of To control for seasonality and provide a point of reference, Figure 6 compares the year-overyear change in total employment in Kent County to that of the state of Maryland as a whole 7 Data Source: U.S. Bureau of Labor Statistics. 6

13 over the same five year period. Any point above the zero line in this graph indicates positive year-over-year employment growth, while any point below the zero line indicates a decline in year-over-year employment. The data shown in Figure 6 reveal three important characteristics: Kent County was more adversely impacted by the recession than the state of Maryland as a whole. Through the first half of 2014, economic performance in Kent County was much more ragged and generally below that of the state of Maryland as a whole. Beginning in the last half of 2014, economic performance in Kent County overtook and surpassed that of the state of Maryland as a whole. As of June 2015, the most recent month for which we have data, year-over-year employment growth was 5.6 percent in Kent County, as compared to 1.4 percent statewide in Maryland. 20% 15% 10% Kent County 5% 0% Maryland -5% -10% Figure 6: Year-Over-Year Change in Total Employment June of 2010 to June of Data Source: U.S. Bureau of Labor Statistics. 7

14 Unemployment Figure 7 depicts trends in the unemployment rate in Kent County and the state of Maryland as a whole for the period from December of 2010 through December of As these data show, the unemployment rate in both jurisdictions fell gradually throughout the period. However, where the unemployment rate in Kent County was typically about a percentage point above that of the statewide rate at the beginning of the period, those trend lines have since gradually converged and as of December 2015 the unemployment rate stood at 5.3 percent in Kent County as compared to 4.6 percent statewide. In addition, it is important to note that unemployment in Kent County is subject to much more pronounced seasonal swings than is typical at the statewide level, with the County s unemployment rate generally peaking in January of each year at about two percentage points above the average for the year. As will be demonstrated later in this section, that high degree of seasonality is likely attributable to the disproportionate share of county employment in the Retail Trade and Agriculture sectors, both of which typically suffer a decline in employment in the post-christmas winter months. 12% 10% 8% Kent County 6% 4% Maryland 2% 0% Figure 7: Unemployment Rate December 2010 to December Data Source: Maryland Workforce Exchange. 8

15 Employment and Wages by Major Industry Sector To provide a better understanding of the underlying factors motivating the general trends depicted in Figures 5 through 7, Figures 8 through 10 provide data on employment and wages by major industry sector in Kent County and benchmark those data against the state of Maryland as a whole. Figure 8 provides data on the distribution of employment across major industry sectors in Kent County s economy by ranking each sector as a proportion of total employment in the second quarter of 2015, and comparing that proportion to comparable data for the state of Maryland as a whole. Although these proportions are generally consistent, there are several important disparities: Kent County is more heavily dependent on the Manufacturing sector (5.3 percent of total employment) than is typical for the state of Maryland as a whole (2.0 percent of total employment). Kent County is much less dependent on the Professional, Scientific, and Technical Services sector (3.0 percent of total employment) than is typical for the state of Maryland as a whole (10.2 percent of total employment). Kent County is much less dependent on the Administrative, Support, and Waste Services sector (2.8 percent of total employment) than is typical for the state of Maryland as a whole (6.8 percent of total employment). This is a sector that provides general support services to businesses. The Retail Trade (12.4 percent of total County employment) and Agriculture (3.3 percent of total County employment) sectors are more heavily represented in Kent County than is typical at the statewide level (8.4 percent and 0.2 percent of total statewide employment respectively). This is important because these two sectors tend to be characterized by pronounced seasonal swings in employment. Figure 9 provides a similar ranking for average weekly wages by major industry sector in the second quarter of 2015 and also benchmarks those figures against comparable data at the statewide level. As these data show, the highest paying sectors in Kent County that quarter were Professional, Scientific, and Technical Services ($1,089 per week), Manufacturing ($970 per week), Construction ($875 per week), Finance and Insurance ($856 per week), and Wholesale Trade ($845 per week). By way of comparison, the average weekly salary across all industry sectors in Kent County was $681 that quarter and $1,046 at the statewide level. 9

16 Health Care & Social Assistance Educational Serv. 10.9% 16.4% 15.2% 14.3% Retail Trade 8.4% 12.4% Accommodation & Food Serv. Public Administration Construction 7.2% 6.4% 6.3% 10.9% 9.4% 10.0% Manufacturing 2.0% 5.3% Wholesale Trade 4.0% 3.5% Kent County Arts, Entertainment, & Recreation 2.1% 4.0% Agriculture 0.2% 3.3% Maryland Prof., Scientific, & Tech. Serv. Other Serv. 3.0% 3.0% 3.8% 10.2% Admin., Support, & Waste Mgmt. Information Finance & Insurance Real Estate Trans. & Warehousing 2.8% 2.7% 1.8% 2.7% 3.9% 1.1% 1.8% 0.6% 2.2% 6.8% 0% 5% 10% 15% 20% Figure 8: Major Industry Sectors as a Percentage of Total Employment 2015:Q Data Source: Maryland Workforce Exchange. 10

17 Prof., Scientific, & Tech. Serv. $1,089 $1,709 Manufacturing $970 $1,470 Construction $875 $1,107 Finance & Insurance $856 $1,669 Wholesale Trade $845 $1,410 Educational Serv. $801 $1,011 Public Administration Trans. & Warehousing $776 $768 $1,010 $1,457 Kent County Information $749 $1,393 Agriculture $747 $643 Maryland Admin., Support, & Waste Mgmt. $675 $763 Health Care & Social Assistance Real Estate $611 $565 $947 $1,059 Other Serv. Arts, Entertainment, & Recreation $534 $494 $583 $737 Retail Trade Accommodation & Food Serv. $463 $621 $300 $369 $0 $500 $1,000 $1,500 $2,000 Figure 9: Average Weekly Wages by Major Industry Sector 2015:Q Data Source: Maryland Workforce Exchange. 11

18 Public Administration 563 Retail Trade 183 Information 119 Health Care & Social Assistance 106 Accommodation & Food Serv. 86 Construction 60 Real Estate 39 Wholesale Trade 36 Educational Serv. 15 Prof., Scientific, & Tech. Serv. 13 Trans. & Warehousing 0 Other Serv. -6 Finance & Insurance -8 Arts, Entertainment, & Recreation -25 Manufacturing Figure 10: Change in Employment in Kent County by Major Industry Sector 2014:Q2 to 2015:Q Data Source: Maryland Workforce Exchange. 12

19 Lastly, Figure 10 details the change in employment between the second quarter of 2014 and the second quarter of 2015 by major industry sector in Kent County. Overall over this period, Kent County experienced a net gain of 853 jobs or a 10.7 percent increase in total employment. By way of comparison, at the statewide level total employment declined by 5.4 percent over this period. As these data show, the largest year-over-year gains in employment in Kent County over this period occurred in Public Administration (up 563 jobs), Retail Trade (up 183 jobs), and Information (up 119 jobs). While at the other end of the spectrum, the largest yearover-year declines in employment occurred in Manufacturing (down 328 jobs), Arts, Entertainment, and Recreation (down 25 jobs), and Finance and Insurance (down 8 jobs). Economic and Fiscal Impact In this section, we quantify the economic and fiscal contribution that Mills Branch Solar would make to Kent County and the state of Maryland as a whole. Our analysis separately evaluates the one-time pulse of economic activity that would occur during the construction phase of the project, as well as the annual economic activity that the project would generate during its ongoing operations phase. In addition, to provide a point of comparison, we also provide an estimate of the economic and fiscal contribution that the property makes to Kent County and the state of Maryland as a whole in its current agricultural use. Method To empirically evaluate the local and statewide economic impact attributable to the proposed Mills Branch Solar project, we employ a regional economic impact simulation model called IMPLAN. 13 The IMPLAN model is one of the most commonly used economic impact simulation models in the U.S., and in Maryland is used by the state s Department of Business and Economic Development, the Regional Economic Studies Institute of Towson University, the Jacob France Institute of the University of Baltimore, and other state agencies and research institutes. Like all economic impact models, the IMPLAN models uses economic multipliers to quantify economic impact. Economic multipliers measure the ripple effects that an expenditure has as it makes its way through the economy. For example, as when Mills Branch Solar purchases goods and services or when facility employees use their salaries and wages to make household purchases thereby generating income for someone else, which is in turn spent, thereby becoming income for yet someone else, and so on, and so on. Through this process, one dollar in expenditures generates multiple dollars of income. The mathematical relationship between the initial expenditure and the total income generated is the economic multiplier. 13 IMPLAN v.3 is produced by the Minnesota IMPLAN Group, Inc. 13

20 One of the primary advantages of the IMPLAN model is that it uses regional and national production and trade flow data to construct region-specific and industry-specific economic multipliers, which are then further adjusted to reflect anticipated actual spending patterns within the specific geographic study area that is being evaluated. As a result, the economic impact estimates produced by IMPLAN are not generic, they reflect as precisely as possible the economic realities of the specific industry, and the specific study area, being evaluated. In the analysis that follows, these impact estimates are divided into three categories. First round direct impact measures the direct economic contribution of the entity being evaluated (wages paid, goods and services purchased, etc.). Second round impact measures the economic ripple effects of the direct impact in terms of business to business transactions (also called indirect impact), and household (employee) to business transactions (also called induced impact). Total impact is simply the sum of the preceding two. These categories of impact are then further defined in terms of employment (the number of full time equivalent jobs that are created), labor income (the wages associated with those jobs and payments to proprietors), economic output (the total amount of economic activity that is created), and fiscal impact (the state and local tax revenues that are generated by this economic activity). Construction Phase In conducting our analysis of the one-time economic and fiscal impact that the proposed Mills Branch Solar project would have on Kent County and the state of Maryland as a whole during the construction phase of the project, we employ the following assumptions: Total construction costs, exclusive of solar panels, would be $66.8 million. Of that total, approximately $6.5 million would be spent with local vendors in Kent County (includes materials and labor), and approximately $10.8 million would be spent with vendors within the state of Maryland (includes materials and labor). 14 By feeding these assumptions into the IMPLAN model, we obtain the following estimates of one-time economic and fiscal impact. These data indicate that: Kent County: As shown in Table 1A, construction of Mills Branch Solar would directly provide approximately: 1) 65 jobs, 2) $2.9 million in labor income, and 3) $6.5 million in economic output to Kent County. Taking into account the economic ripple effects that direct investment would generate, we estimate that the total one-time impact on Kent County would be: 1) 90 jobs, 2) $3.7 million in labor income, 3) $9.2 million in economic output, and 4) $0.4 million in state and local tax revenue. 14 Data Source: Apex Clean Energy. 14

21 Maryland: As shown in Table 2A, construction of Mills Branch Solar would directly provide approximately: 1) 78 jobs, 2) $5.6 million in labor income, and 3) $10.8 million in economic output to the state of Maryland as a whole. Taking into account the economic ripple effects that direct investment would generate, we estimate that the total one-time impact on Maryland would be: 1) 129 jobs, 2) $8.3 million in labor income, 3) $18.3 million in economic output, and 4) $0.8 million in state and local tax revenue. In addition, Tables 1B and 2B provide a listing of the top ten industries affected at the local and state level respectively. Table 1A: One-Time Economic and Fiscal Impact of Mills Branch Solar on Kent County Construction Phase Employment Labor Income Output Total First Round Direct Economic Activity Second Round Indirect and Induced Economic Activity TOTAL Economic Activity* State and Local Fiscal Impact *may not sum due to rounding 65 $2,859,446 $6,500, $808,005 $2,708, $3,667,451 $9,208,796 $357,262 Table 1B: Top-Ten Industries Affected in Kent County Construction Phase Industry Employment Labor Income Output Construction of new power and communication structures 41.4 $2,112,966 $5,000,000 Environmental and other technical consulting services 24.1 $752,368 $1,511,832 Real estate 1.7 $11,082 $167,052 Full-service restaurants 1.3 $24,626 $56,899 15

22 Table 1B: Top-Ten Industries Affected in Kent County Construction Phase Industry Employment Labor Income Output Other personal services 1.3 $18,509 $26,122 Wholesale trade 1.1 $71,903 $238,073 Retail - Nonstore retailers 1.0 $14,889 $97,452 Hospitals 0.8 $48,187 $111,838 Retail - Food and beverage stores 0.7 $18,563 $43,922 Architectural, engineering, and related services 0.6 $27,732 $73,048 Table 2A: One-Time Economic and Fiscal Impact of Mills Branch Solar on Maryland Construction Phase Employment Labor Income Output Total First Round Direct Economic Activity Second Round Indirect and Induced Economic Activity TOTAL Economic Activity* State and Local Fiscal Impact *may not sum due to rounding 78 $5,647,138 $10,750, $2,698,846 $7,581, $8,345,983 $18,331,763 $776,444 16

23 Table 2B: Top-Ten Industries Affected in Maryland Construction Phase Industry Employment Labor Income Output Construction of new power and communication structures 61.9 $4,247,214 $9,000,000 Environmental and other technical consulting services 16.4 $1,414,599 $1,768,344 Wholesale trade 2.3 $206,681 $572,585 Architectural, engineering, and related services 2.1 $215,209 $365,591 Real estate 2 $50,270 $496,649 Hospitals 2 $144,780 $304,955 Full-service restaurants 1.9 $47,154 $94,365 Limited-service restaurants 1.8 $38,410 $159,375 Retail - General merchandise stores 1.4 $37,040 $95,384 Retail - Food and beverage stores 1.3 $46,737 $94,902 Ongoing Operations Phase In conducting our analysis of the annual economic and fiscal impact that the proposed Mills Branch Solar project would have on Kent County and the state of Maryland as a whole during the ongoing operations phase of the project, we employ the following assumptions: The total annual cost of operating the facility would be $1,515,204 (based on the sixth year of operation when the level of required operational support will have stabilized). Of that total, approximately $198,367 would be spent with local vendors in Kent County, and approximately $415,910 would be spent with vendors within the state of Maryland Data Source: Apex Clean Energy. 17

24 By feeding these assumptions into the IMPLAN model, we obtain the following estimates of annual economic and fiscal impact. These data indicate that: Kent County: As shown in Table 3A, annual operations at Mills Branch Solar would directly provide approximately: 1) 1 job, 2) $42,792 in labor income, and 3) $101,934 in economic output to Kent County. Taking into account the economic ripple effects that direct economic activity would generate, we estimate that the total annual impact on Kent County would be: 1) 2 jobs, 2) $52,795 in labor income, 3) $136,887 in economic output, and 4) $59,425 in state and local tax revenue (of which $44,457 would be direct county real estate taxes). Maryland: As shown in Table 4A, annual operations at Mills Branch Solar would directly provide approximately: 1) 2 jobs, 2) $197,641 in labor income, and 3) $415,910 in economic output to the state of Maryland as a whole. Taking into account the economic ripple effects that direct economic activity would generate, we estimate that the total annual impact on Maryland would be: 1) 4 jobs, 2) $329,408 in labor income, 3) $795,411 in economic output, and 4) $89,845 in state and local tax revenue (of which $44,457 would be direct county real estate taxes). In addition, Tables 3B and 4B provide a listing of the top ten industries affected at the local and state level respectively. 18

25 Table 3A: Annual Economic and Fiscal Impact of Mills Branch Solar on Kent County Operations Phase Employment Labor Income Output Total First Round Direct Economic Activity Second Round Indirect and Induced Economic Activity TOTAL Economic Activity* State and Local Fiscal Impact 16 *may not sum due to rounding 1 $42,792 $101,934 0 $10,004 $34,952 2 $52,795 $136,887 $59,425 Table 3B: Top-Ten Industries Affected in Kent County Operations Phase Industry Employment Labor Income Output Commercial and industrial machinery and equipment repair and maintenance 0.6 $30,504 $75,208 Landscape and horticultural services 0.5 $11,600 $24,058 Real estate 0.0 $202 $3,040 Business support services 0.0 $393 $1,010 Full-service restaurants 0.0 $365 $843 Waste management and remediation services 0.0 $631 $2,696 Accounting, tax preparation, bookkeeping, and payroll services 0.0 $539 $965 Wholesale trade 0.0 $790 $2, Includes an estimated $44,457 in direct county real estate taxes. This figure is based on applying the current Kent County real estate tax of $1.022 per $100 of assessed value to the sale price of the property and $650,000 in planned improvements. This $650,000 includes only the proposed operations and maintenance building and fencing. It does not include solar panels and associated capital improvements. 19

26 Table 3B: Top-Ten Industries Affected in Kent County Operations Phase Industry Employment Labor Income Output Hospitals 0.0 $703 $1,631 Retail - Food and beverage stores 0.0 $237 $560 Table 4A: Annual Economic and Fiscal Impact of Mills Branch Solar on Maryland Operations Phase Employment Labor Income Output Total First Round Direct Economic Activity Second Round Indirect and Induced Economic Activity* TOTAL Economic Activity** State and Local Fiscal Impact 17 *includes payments to landowners **may not sum due to rounding 2 $197,641 $415,910 3 $131,766 $379,501 4 $329,408 $795,411 $89,845 Table 4B: Top-Ten Industries Affected in Maryland Operations Phase Industry Employment Labor Income Output Electric power generation - Solar 0.8 $137,750 $281,711 Commercial and industrial machinery and equipment repair and maintenance 0.5 $35,257 $75, Includes an estimated $44,457 in direct county real estate taxes. This figure is based on applying the current Kent County real estate tax of $1.022 per $100 of assessed value to the sale price of the property and $650,000 in planned improvements. This $650,000 includes only the proposed operations and maintenance building and fencing. It does not include solar panels and associated capital improvements. 20

27 Table 4B: Top-Ten Industries Affected in Maryland Operations Phase Industry Employment Labor Income Output Landscape and horticultural services 0.4 $14,244 $25,285 Real estate 0.1 $2,479 $24,496 Hospitals 0.1 $8,322 $17,528 Wholesale trade 0.0 $4,370 $12,106 Limited-service restaurants 0.1 $2,252 $9,343 Full-service restaurants 0.1 $3,125 $6,254 Business support services 0.1 $3,599 $5,758 Marketing research and all other miscellaneous professional, scientific, and technical services 0.1 $2,931 $4,465 Current Use The 330 acres upon which the Mills Branch Solar facility would be constructed is currently used for agricultural production. In conducting our analysis of the annual economic and fiscal impact attributable to this current use, we employ the following assumptions: The total annual revenue generated by the property is estimated to be approximately $439,025 currently. 18 By feeding this assumption into the IMPLAN model, we obtain the following estimates of annual economic and fiscal impact. These data indicate that: Kent County: As shown in Table 5A, in its current use the property directly provides approximately: 1) 2 jobs, 2) $50,170 in labor income, and 3) $105,366 in economic output to Kent County. Taking into account the economic ripple effects that direct economic activity generates, we estimate that the total annual impact on Kent County 18 Data Source: Based on data from the Maryland Department of Agriculture that showed that in 2014 Maryland farms accounted for approximately 2,029,500 acres statewide and generated approximately $2.7 billion in gross income from commodity receipts and other farm-related work. These figures indicate that the average revenue per acre for Maryland farms was $1, that year. This implies that a 330 acre farm would generate approximately $439,025 in gross revenue annually. 21

28 is: 1) 4 jobs, 2) $91,890 in labor income, 3) $260,436 in economic output, and 4) minus $12,039 in state and local tax revenue (this negative result is attributable to the many tax subsidies that the agricultural sector receives, such as Maryland s sales tax exemption on equipment and supplies sold to farms). Maryland: As shown in Table 6A, in its current use the property directly provides approximately: 1) 3 jobs, 2) $31,848 in labor income, and 3) $175,610 in economic output to the state of Maryland as a whole. Taking into account the economic ripple effects that direct economic activity generates, we estimate that the total annual impact on Maryland is: 1) 5 jobs, 2) $130,413 in labor income, 3) $463,212 in economic output, and 4) minus $11,783 in state and local tax revenue (this negative result is attributable to the many tax subsidies that the agricultural sector receives, such as Maryland s sales tax exemption on equipment and supplies sold to farms). In addition, Tables 5B and 6B again provide a listing of the top ten industries affected at the local and state level respectively. Table 5A: Annual Economic and Fiscal Impact of Current Property on Kent County Employment Labor Income Output Total First Round Direct Economic Activity Second Round Indirect and Induced Economic Activity TOTAL Economic Activity* State and Local Fiscal Impact 19 *may not sum due to rounding 2 $50,170 $105,366 2 $41,720 $155,070 4 $91,890 $260,436 ($12,039) 19 Includes an estimated $2,632 in direct county real estate taxes. This figure is based on applying the current Kent County real estate tax of $1.022 per $100 of assessed value to the sale price of the property. 22

29 Table 5B: Top-Ten Industries Affected in Kent County Industry Employment Labor Income Output Grain farming 2.1 $50,741 $444,021 Support activities for agriculture and forestry 1.0 $6,530 $19,615 Real estate 0.2 $1,541 $23,228 Wholesale trade 0.1 $5,484 $18,159 Maintenance and repair construction of nonresidential structures Beef cattle ranching and farming, including feedlots and dual-purpose ranching and farming 0.1 $2,669 $8, $966 $4,175 Monetary authorities and depository credit intermediation 0.0 $1,721 $5,036 All other crop farming 0.0 $1,382 $2,911 Full-service restaurants 0.0 $552 $1,276 Marketing research and all other miscellaneous professional, scientific, and technical services 0.0 $785 $1,565 23

30 Table 6A: Annual Economic and Fiscal Impact of Current Property on Maryland Employment Labor Income Output Total First Round Direct Economic Activity Second Round Indirect and Induced Economic Activity TOTAL Economic Activity* State and Local Fiscal Impact 20 *may not sum due to rounding 3 $31,848 $175,610 3 $98,566 $287,602 5 $130,413 $463,212 ($11,783) Table 6B: Top-Ten Industries Affected in Maryland Industry Employment Labor Income Output Grain farming 2.7 $32,152 $443,225 Support activities for agriculture and forestry 1.4 $28,994 $49,770 Real estate 0.2 $4,168 $41,179 Wholesale trade 0.1 $9,250 $25,625 Maintenance and repair construction of nonresidential structures 0.0 $3,083 $8,251 Services to buildings 0.0 $759 $1,250 Limited-service restaurants 0.0 $648 $2,689 Hospitals 0.0 $2,255 $4,750 Full-service restaurants 0.0 $742 $1, Includes an estimated $2,632 in direct county real estate taxes. This figure is based on applying the current Kent County real estate tax of $1.022 per $100 of assessed value to the sale price of the property. 24

31 Table 6B: Top-Ten Industries Affected in Maryland Industry Employment Labor Income Output Beef cattle ranching and farming, including feedlots and dual-purpose ranching and farming 0.0 $312 $1,780 Comparing the economic and fiscal impact estimates in Table 5A and 5B to the earlier estimates in Tables 1A, 1B, 3A, and 3B shows that Mills Branch Solar would: Generate a significant one-time burst of economic activity during its construction phase that would contribute a total of 90 jobs, $3.7 million in labor income, $9.2 million in economic output, and $0.4 million in state and local taxes to Kent County. This burst of economic activity would also have a large positive impact on the County s Construction sector, which accounts for 6.4 percent of total County employment and pays the third highest wage of any major industry sector in the County. Increase the annual tax revenue that Kent County receives from the property from $2,632 to $44,457, and increase the overall state and local tax revenue generated by the property from minus $12,039 to plus $59,425. In this context, it is important to note that property tax accounts for approximately two-thirds of Kent County s overall revenue and since 2011 that key funding source has experienced zero growth. As a result, this projected 1,689 percent increase in the tax revenue that the County receives from the property is representative of a much needed change in trend. Contribute slightly less in ongoing annual labor income (down $39,095) and economic output (down $123,549) to Kent County than the property does in its current agricultural use. Contribute substantially more in ongoing annual labor income (up $198,995), economic output (up $332,199), and state and local tax revenue (up $101,628) to the state of Maryland as a whole than the property does in its current agricultural use. Other Contributions One of the methodological problems associated with conducting economic impact assessments is that not all of the benefits associated with a given enterprise can be easily captured and quantified in standard simulation models. To compensate for that limitation, in this portion of the section we attempt to at least qualify some of the potential benefits associated with the proposed Mills Branch Solar project that cannot be easily quantified. 25

32 State Energy Policy Maryland s Renewable Portfolio Standard requires that by 2022 at least two percent of the electricity consumed in the state must come from in-state sources of solar power, a nearly tenfold increase over current production levels. 21 Mills Branch Solar would increase the state of Maryland s installed solar capacity by 20 percent. Thereby substantially aiding the state in meeting its legislative goal of ensuring that by 2022 at least two percent of the electricity consumed in Maryland comes from in-state sources of solar power. Encouraging Economic Development Industrial development prospects with high energy needs are becoming increasingly sensitive to the proportion of their energy requirements that are produced through renewable sources. A good example of this are data centers, a very high-growth, very high-wage industry that provides the technological backbone of the modern economy. As a case in point, in November of 2015 plans were announced to construct the Amazon Solar Farm U.S. East, an 80 megawatt solar facility that will be located further down the Eastern Shore in Accomack County, Virginia. Construction of that facility was made possible as a result of a long-term power purchase agreement with Amazon Web Services, an affiliate of Amazon s cloud computing business. In 2014, the average annual private sector salary for the data center industry in Maryland was $87,800, 65 percent above the state s $53,144 average annual salary across all private sector industries. 22 Conclusion This report assesses the economic and fiscal contribution that Mills Branch Solar, a proposed 60 megawatt solar power project, would make to Kent County and the state of Maryland as a whole. That assessment has shown that the proposed Mills Branch Solar project would make a positive contribution to the local and state economy. Mills Branch Solar is being developed by Apex Clean Energy. Apex Clean Energy was founded in 2009 by a leadership team with a successful track record in several of the country s leading renewable energy companies. The Mills Branch Solar project would be located in Kent County Maryland, a rural community on Maryland s Eastern Shore directly across the Chesapeake Bay from the city of Baltimore. Mills Branch Solar would be built on 330 acres of land more than ten miles from downtown Chestertown, the county seat. 21 Data Source: Maryland Energy Administration. 22 Data Source: Maryland Workforce Exchange. 26

33 It is anticipated that once Mills Branch Solar is up and running, it will produce enough electricity to power up to 10,000 homes annually, or nearly all of the homes in Kent County. In addition, Mills Branch Solar would increase the state of Maryland s installed solar capacity by 20 percent. Thereby substantially aiding the state in meeting its legislative goal of ensuring that by 2022 at least two percent of the electricity consumed in Maryland comes from in-state sources of solar power. Looking at the overall market for electricity production in Maryland, our analysis has shown that are at least two characteristics of that market that are of particular relevance to the Mills Branch Solar project. First, production of electricity in Maryland fell from 52.7 million megawatt hours in 2005 to 35.9 million megawatt hours in 2013, even as the total population of the state increased from 5.6 million to 5.9 million. In part because of this, Maryland now only produces enough electricity to meet about 58 percent of its retail demand. As a result, the remainder must be imported from producers in other states. Which means, as with all imports, that the jobs, wages, and other economic benefits associated with that production currently go to localities outside of Maryland. Second, although coal-fired plants remain Maryland s largest source of electrical power, between 2005 and 2013 the share of electricity produced in Maryland by coal and petroleum fell from 63 percent to 44 percent. That transition has had a positive impact on greenhouse gas emissions from electricity production, which fell by 44 percent between 2005 and The Mills Branch Solar project will further aid in this transition by providing additional electricity generation through the use of near zero emission renewable solar power. Our analysis has also shown that the Mills Branch Solar project would aid Kent County by increasing employment in the County s Administrative, Support, and Waste Services sector, which is under-represented relative to the statewide norm (2.8 percent of total County employment, compared to 6.8 percent of total statewide employment). Thereby reducing the County s disproportionate dependence on the highly seasonal Agriculture (3.3 percent of total County employment, compared to 0.2 percent of total statewide employment) and Retail Trade (12.4 percent of total County employment, compared to 8.4 percent of total statewide employment) sectors. The high seasonality of these sectors contributes to the County s pronounced seasonal swings in unemployment, with January unemployment rates typically spiking about two percentage points above the average for the year. Mills Branch Solar would also provide a boost to the County s Construction sector, which accounts for 6.4 percent of total County employment and pays the third highest wage of any major industry sector in the County. 27