Economic and Fiscal Impact Analysis of the Intermountain Power Project

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The Intermountain Power Project (IPP) is located in the Great Basin region of western Utah and generates more than 13 million megawatt hours of energy each year from its two coal-fired units. In 2008, IPP contributed about $627 million in economic activity, 3,350 jobs, and $147 million in household earnings to Utah’s economy.

Utah Foundation has been asked to assess the economic impact of the Intermountain Power Project (IPP) in Utah. The most straightforward manner in which to assess this economic impact is with multiplier analysis. To be consistent with the most recent RIMS II multipliers, this study assesses the economic impact for the year ending June 30, 2008. In addition, financial forecasts provide the basis to estimate economic impacts out to the year 2026.

Using the RIMS II multipliers, it is possible to calculate the economic multiplier effect of IPP on state output, employment, and household earnings. Results from the analysis show that in the year ending June 30, 2008, IPP contributed just under $627 million in economic activity to the state, which equals six tenths of one percent of total output generated by the Utah economy.

The project’s expenditures created approximately 3,350 non-farm jobs in the state of Utah, accounting for just under three tenths of one percent of Utah’s total employment. IPP also contributed just over $147 million in household earnings during this one-year period, or one third of one percent of total Utah household earnings.

The analysis demonstrates that, through the year 2026, IPP may be relied upon to continue to contribute in the magnitude of 0.60% of state GDP, 0.25% of state employment, and between 0.25% and 0.30% of Utah’s total household earnings each year. This equates to an average contribution per year of $866 million in economic activity to the state, 4,600 non-farm jobs, and $222 million in household earnings.

The contribution IPP is projected to make to the state, both today and through 2026, makes it an important mainstay in Utah’s economy.

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4 Responses to “Economic and Fiscal Impact Analysis of the Intermountain Power Project”

  1. Steve Kroes

    Well, Lawrence, we did write in the report that these estimates are only accurate through 2026, which is the length of IPP’s long-term contracts with its major customers. Having those contracts in force is a reasonable assurance that it will continue operating as it exists, collecting the revenues estimated in the contracts. It is true that changing energy policies will affect the future of the plant, and my understanding is that IPA is examining options for converting the plant to other fuel sources, including perhaps natural gas. The energy economy is certainly facing some uncertainty, but it also seems pretty clear that renewables will not be able to replace this kind of consistent baseload power. It may be that a lot of the growth in energy will come from renewables, but this base of fossil fuel-generated power probably has a lot of staying power.

  2. Steve Kroes

    Nat, you are right. There are externalities in any operation like this, including environmental costs. This study did not address those costs, which are extremely difficult to quantify and depend on a myriad of assumptions about how to value those impacts. Knowing an estimate of the economic benefits is a necessary component as one considers costs vs. benefits, so this study provides a starting point for those who want to expand beyond this scope and examine those other impacts.

  3. Lawrence Hipps

    What if there is a significant move towards renewable energy and away from carbon emissions in the region? This is certainly a possible scenario. How would the economics reported here change if large groups of users could not or would not buy this power anymore? In addition to the hidden cost of the carbon, mercury etc. emissions, this report appears to assume a very static energy system.

  4. Nat B. Frazer

    Your report cites the positive economic and fiscal impacts of the Intermountain Power Project. What are the annual carbon and mercury emissions? Are there other environmental costs (externamities) that may, in part, off-set the annual positive economic impacts of the project? Just curious.

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