Three Distinctive Features of Tennessee’s Energy Economy: Part Two

Every state’s potential for the expansion of advanced energy technologies is shaped by economic factors and unique assets. TAEBC identified three distinctive features of Tennessee’s energy economy that together reflect the challenges and opportunities for the expansion of advanced energy technologies:

  1. High Per-Capita Energy Consumption
  2. A Gap in Personal Income
  3. The Potential of Three Major Players (and Who are They?)

In our last blog post, we elaborated on Tennessee’s high per-capita energy consumption, and for this post, we’ll focus on the gap in personal income.

While the size has fluctuated over the last three decades, there remains a historic gap between personal income in Tennessee and the national average. Although related indirectly to energy, this gap presents an opportunity in some regions of Tennessee to promote advanced energy as a vehicle for new companies and jobs.

While the U.S. per capita income rate grew by 72 percent between 1995 and 2010, income for Tennesseans increased by only 64 percent. Slower growth in Tennessee’s economy was accompanied by a reversal of the recent trend toward reaching the average U.S. per capita income. From the high water mark of 92 percent in 1995, Tennessee’s per capita income by 2012 had dropped to 88 percent of the national average, the lowest ratio in 17 years.[i]

Tennessee also required a longer period to recover from the economic deterioration that occurred from 2008-2010. The state’s unemployment rate of 6.7 percent in March 2014 represented the first time Tennessee had matched the national jobless figure since 2008. Statewide rates of unemployment and personal income serve to distort Tennessee’s economic picture, in which some regions are doing quite well while others continue to perform far below the state average.

This income and employment disparity among Tennessee’s regions is part of the context for discussing the state’s potential for creating advanced energy technology jobs.

A growing number of financially constrained local governments are looking at distributed generation and energy savings performance contracts as ways of reducing utility costs. The private sector increasingly is looking to cleaner sources of energy as a means of meeting sustainability goals and assuming more control over electricity costs. Many rural communities burdened with sustained double-digit unemployment may be particularly receptive to the idea of transitioning the local economy to include more advanced energy jobs. Likewise, the state of Tennessee has considerable flexibility in authorizing incentives for companies to locate in communities of high unemployment. Laid against the backdrop of a $1.1 trillion global economic opportunity presented by advanced energy, the state’s economic profile, and in particular the need to promote new jobs in a number of depressed regions, will be important factors in future discussions of how best to encourage the continued growth of an advanced energy economy in Tennessee.

[i]SA1-3 Personal Income Summary. Bureau of Economic Analysis. U.S. Department of Commerce. Retrieved from http://www.bea.gov.

Three Distinctive Features of Tennessee’s Energy Economy: Part One

As in every state, the potential for the expansion of advanced energy technologies will be shaped by economic factors and assets that are unique to Tennessee. TAEBC identified three distinctive features of Tennessee’s energy economy that together reflect the challenges and opportunities for the expansion of advanced energy technologies:

  1. High Per-Capita Energy Consumption
  2. A Gap in Personal Income
  3. The Potential of Three Major Players (and Who are They?)

We’ll elaborate on Tennessee’s high per-capita energy consumption for this blog post and explore the other features in subsequent posts. 

The most distinctive feature of the state’s energy economy – and perhaps the greatest opportunity for an investment in advanced energy technologies – is the fact that Tennessee ranks as the 20th largest user of energy, per capita, in the U.S. The average residential consumer uses far more energy than consumers in almost all other states. In 2011, the average Tennessean used 87.8 million Btu’s of electricity, ranking Tennessee the 4th highest consumer of energy in the residential sector.[i]

In terms of industrial and commercial energy consumption per capita, Tennessee ranks as the 25th highest user. However, roughly 47 percent of energy consumed in Tennessee is for industrial and commercial purposes, while only 24 percent of Tennessee’s total consumption is for the residential sector. Approximately 29 percent of Tennessee energy consumption falls in the transportation sector.[ii]

TVA’s decision in 2007 to promote energy efficiency initiatives offers hope that historic patterns of energy consumption in Tennessee might gradually be reversed through the adoption of a combination of new energy technologies, government policies and TVA incentives designed to reduce residential demand for electric power. By 2010, energy efficiency programs had resulted in a savings of 143,000 megawatts of power, or about .14 percent of the state’s power consumption.[iii]

The introduction of new advanced energy technologies, particularly in the automotive industry, holds the promise of substantial reductions of energy use, both in the manufacturing of vehicles and in the amount of transportation energy used by the vehicles. The incorporation of similar technologies could have equally significant energy reductions for large commercial companies such as Federal Express.

Linked to TVA’s effort to reduce energy consumption is the agency’s parallel desire to lower the volume of emissions from coal-fired plants that provide more than one-half of the state’s electricity. The implementation of new energy technologies, some of which may be developed in Tennessee research institutions, can assist TVA in reaching that goal. In some instances, the ability to move these advanced energy technologies into the market will depend upon providing entrepreneurs with available capital and the support services required to stand up a new company.

The effort to reduce emissions from coal-fired plants is supplemented by initiatives to reduce the use of fossil fuels in Tennessee’s transportation industry. Joining with Oak Ridge National Laboratory, the state of Tennessee has allocated substantial funds to promote research and deployment of biofuels. Working with the same two partners, in 2011 Nissan chose Tennessee as one of the first five states to introduce the company’s electric car. Memphis Bioworks Foundation has been a major catalyst for business-led approaches to commercial advanced biofuels, biomass and feedstocks across Tennessee and the Mid-South.

Tennessee’s largest employer, Federal Express, is partnering with the Department of Energy to test the ability of hydrogen fuel cells to reduce carbon emissions while simultaneously lowering costs in Fed Ex’s enormous fleet of delivery trucks by as much as 40 percent. Managed through a partnership that includes Smith Electric Vehicles and Plug Power, the $3 million project will equip 20 delivery trucks with lithium-ion batteries combined with a 10-kilowatt Plug Power hydrogen fuel cell system.[iv]

[i]Energy consumption per capita by end-use sector, 2011, U.S. Energy Information Administration., Retrieved from http://www.eia.gov/state/seds/data.cfm?incfile=/state/seds/sep_sum/html/rank_use_capita.html&sid=US.

[ii] Tennessee: State Profile and Energy Estimates, 2014, U.S. Energy Information Administration., Retrieved from http://www.eia.gov/state/?sid=TN#tabs-2

[iii] Clean Energy in My State: Tennessee Residential Energy Consumption, 2010. Department of Energy, Energy Efficiency & Renewable Energy. Retrieved from http://www.eere.energy.gov/states.

[iv] Energy Department Invests Over $7 Million to Commercialize Cost-Effective Hydrogen and Fuel Cell. Energy.Gov. U.S. Department of Energy. Retrieved from Technologies http://energy.gov/articles/energy-department-invests-over-7-million-commercialize-cost-effective-hydrogen-and-fuel.

America’s largest companies save $1.1 billion annually through advanced energy initiatives

Now we’re talking. A new report released last week found that 53 Fortune 100 companies reporting on climate and energy targets are collectively saving $1.1 billion annually through their emission reduction and renewable energy initiatives – which certainly qualify as advanced energy.

Fortune 100 and Fortune 500 companies are increasing the demand for cleaner, more efficient sources of energy. The states that provide not only the energy source, but also the technologies and the workforce will win. Why not Tennessee?

215 companies in the Fortune 500 have set targets in one of three categories and will be looking for ways to meet them: 1) greenhouse gas reduction commitments, 2) improving energy efficiency and 3) procuring more renewable energy. Many of these companies have Tennessee ties (including FedEx and General Motors) or would be welcome additions to our state.

The latest report adds to our evidence that Tennessee’s advanced energy sector is poised for a period of sustained growth. The Tennessee Advanced Energy Business Council (TAEBC) was created to help facilitate this growth by championing the use and manufacture of advanced energy technologies as an economic development strategy.

The Advanced Energy Now 2014 Market Report, published by Advanced Energy Economy, indicated strong growth globally and nationwide in the advanced energy market. Globally, advanced energy represents a $1.1 trillion-dollar market. With estimated revenues in 2013 of $169 billion, the U.S. now represents 15 percent of the world market, up from 11 percent in 2011.

TAEBC sees in these national trends an enormous opportunity for Tennessee. The opportunity includes, through the adoption of affordable technologies, a chance to grow Tennessee’s economy.

The University of Tennessee, the Tennessee Valley Authority (TVA), Oak Ridge National Laboratory (ORNL) and the state’s expanding automobile sector (as well as other key clusters) provide Tennessee with unique assets that together offer an unparalleled platform for collaboration, innovation, testing and implementation of advanced energy technologies.

Our goal is to help business and government view Tennessee’s advanced energy assets and challenges as an emerging sector that will play an increasing role in the state’s economic development.

 

Guest Blog: TAEBC board president Tom Ballard answers, “What is TAEBC?”

Tom Ballard

Tom Ballard

By Tom Ballard, Director of Innovation and Entrepreneurial Initiatives, Pershing Yoakley & Associates, and President of the Board of Directors, Tennessee Advanced Energy Business Council

The name of our organization – Tennessee Advanced Energy Business Council – is a mouthful, and our acronym – TAEBC – does not roll off the tongue easily.

Nevertheless, no one would question the important role that this new, statewide not-for-profit organization plays in advancing the interests of a burgeoning and important contributor to the Volunteer State’s economy.

From Renewable Algal Energy in Johnson City to the Memphis Bioworks Foundation about 550 miles to the west, Tennessee is home to a vast array of established commercial entities, research organizations, and start-ups focused on technologies that contribute to our nation’s energy independence.

TAEBC takes a broad definitional view of the term “advanced energy.” As such, we are pleased to include as members and partners global players like Alstom (nuclear energy) and Schneider Electric (energy management), technology start-ups like Silicon Ranch Corporation (solar) and Top Five Corporation (composites), top research organizations like Oak Ridge National Laboratory, and energy consulting firms like Strata-G.

As Tennessee’s only organization focused solely on companies in the advanced energy space, TAEBC has established a strong track record in its formative two years.

  • We worked with the Tennessee Department of Environment and Conservation and Pathway Lending to produce Tennessee’s Advanced Energy Asset Inventory, the first document of its kind dedicated to promoting the use of advanced energy technologies and assisting the development of Tennessee businesses in the emerging advanced energy sector.
  • We held three listening sessions – one each in Chattanooga, Knoxville and LaVergne – that drew more than 150 participants. During two of these sessions, we facilitated vibrant feedback sessions with top administrators from the U.S. Department of Energy.
  • We have partnered with the Energy Foundation to capitalize on that organization’s strong network and draw on its history of “best practices.”

In the months ahead, we will be hosting additional listening sessions, including West Tennessee, as we focus on understanding how to best serve this important industry sector.

You don’t have to be directly in advanced energy to be a member of TAEBC; certainly my employer is not. PYA does believe that technology advancements are critical to our state’s economy. If you share similar views, I invite you to join our organization and become an advanced energy evangelist. It’s as simple as clicking here.

Pershing Yoakley & Associates is the nation’s 10th largest privately held healthcare consulting company. Headquartered in Knoxville, PYA also has offices in Atlanta, Kansas City, Nashville, and Tampa. Tom Ballard is Director of Innovation and Entrepreneurial Initiatives for PYA and also Chief Operating Officer of PYA Analytics, LLC. The author has retired twice – from the University of Tennessee as Vice President for Public and Governmental Relations and from Oak Ridge National Laboratory as Director of Partnerships.

TAEBC talks opportunity with House Energy Task Force

TAEBC meets with House Energy Task Force

TAEBC meets with the House Energy Task Force

The Tennessee Advanced Energy Business Council kicked off the unofficial start of summer on May 23 by joining the House Energy Task Force on a tour of the Watts Bar Nuclear Plant Unit 2 facility and meeting with Task Force members to discuss energy as an economic driver for the state.

TVA’s Watts Bar team led a discussion and tour with House Energy Task Force Chair, Representative John Ragan, member Representative Sheila Butt and TAEBC members: Schneider Electric, White Harvest Energy and the Howard Baker Jr. Center through the construction site and into the Unit 2 reactor. About 3,200 people are working to complete Watts Bar 2, which will be the first nuclear plant in the U.S. to meet new Nuclear Regulatory Commission regulations set after the 2011 earthquake and tsunami in Japan.

After the tour, Rep. Ragan led a discussion with fellow House Energy Task Force member Rep. Sheila Butt about the Task Force’s desire to develop a state energy policy that is unique to Tennessee.

TAEBC members participated in the conversation by sharing information about their companies and why our state is uniquely positioned to gain its fair share of the $1 trillion, global advanced energy economy. TAEBC stands ready to share information and experiences with the Task Force so that Tennessee is well positioned to use advanced energy as an economic development and job creation strategy.

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