Today, in his first budget address as Governor of Pennsylvania, Tom Wolf proposed $325 million in investments in the state’s energy sector, including significant investments in wind, solar, and energy efficiency. This proposal is part of an overall economic development plan aimed at investing in education and creating high-paying jobs across the Commonwealth. What does it mean?
The governor proposed placing a 5 percent severance tax on natural gas extraction in Pennsylvania, which is the only state that does not currently have such a tax. The Pennsylvania Education Reinvestment Act is expected to generate $1 billion in annual revenue, primarily to fund public education.
Gov. Wolf’s budget outlined a suite of investments in Pennsylvania’s energy sector totaling $325 million, $250 million of which would come from a bond leveraging financing from the natural gas severance tax. He proposed the following breakdown in spending (see page 10 of the Budget in Brief):
- $30 million for combined heat and power;
- $20 million for wind;
- $30 million for the Pennsylvania Economic Development Association;
- $50 million for PA Sunshine – Solar Investment;
- $50 million for energy efficiency programs; and
- $100 million for technology investment.
Renewable energy (excluding conventional hydropower) accounted for only 2.5 percent of the Pennsylvania’s electricity generation in 2013, but continues to grow steadily, in part due to the Commonwealth’s Alternative Energy Portfolio Standard, which requires Pennsylvania utilities to generate 8 percent of their electricity from renewable sources by 2020. That includes a 0.5 percent carve-out for solar, and although not one of the sunniest places in the country, Pennsylvania ranks 12th in installed solar. But the Commonwealth can do even better—especially as the cost of renewables like wind and solar continues to drop precipitously.
Investing in renewables and efficiency creates jobs and helps diversify local Pennsylvania economies. Today some 2,900 people are employed in all parts of the solar value chain in the state. A recent survey by two nonprofit organizations found that 57,000 people are employed in Pennsylvania’s clean energy economy (including not just renewable energy, but also energy efficiency and advanced transportation).
Coal communities in transition
Pennsylvania’s energy sector is in a dramatic state of change, as coal use declines and natural gas use expands. Extractive industries like coal and natural gas are subject to boom and bust cycles, and once burned, they’re gone for good. Investing in clean energy technologies is one way of diversifying local economies—which is critical for coal communities facing job losses during the transition to a clean energy economy. And without planning and good public policy, the same bust could face the natural gas industry in the years to come.
Permanent mineral trust funds
Fortunately, Pennsylvania doesn’t have to reinvent the wheel. Many states, including neighboring West Virginia, have established trust funds financed by severance taxes on the extraction of natural resources like coal and natural gas. These trust funds are a way to turn a nonrenewable resource into a permanent and renewable source of revenue for state residents. Wyoming, for example, established a fund in 1974 that is now worth over $5 billion. There’s no reason why Pennsylvania can’t follow suit and implement these successful policies to better the state and its people for years to come.
It’s great to see the governor taking the long view in investing in Pennsylvania’s future. Will the legislature step up?
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