04/17/2024
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By Mike Walden

Although there are debates about the speed and details, it is clear that an energy transition is taking place. Not unlike the transition from animal-powered energy to fossil-fuel derived energy, it will cause massive changes in the economy, creating opportunities for new businesses, as well as downsizing — and sometimes extinction — in other businesses.

North Carolina’s transition is already underway. Solar-generated energy is becoming more significant each year, and plans for offshore wind-based energy were recently announced.

Yet a corollary question is whether North Carolina can create a broader new energy economic sector that goes beyond serving the state’s needs by selling components of new energy to buyers outside of North Carolina. This would bring outside money to the state to improve North Carolina’s prosperity.

Based on important recent economic announcements and proposals, it’s a strong possibility that North Carolina could build a new energy economic sector that could result in billions of dollars of new annual income and thousands of good-paying jobs. However, as with almost everything, it could involve costs along with benefits. The question then becomes, could the costs be reduced or eliminated while still enjoying the benefits?

Three big announcements and two proposals form the core of the state’s new economic sector. The key announcements were Toyota’s decision to build a battery factory south of Greensboro, Wolfspeed’s plan to construct a computer chip factory west of Raleigh in Chatham County and the Vietnamese auto maker VinFast’s announcement of an electric-vehicle assembly plant in Chatham County. Together, these three companies will invest almost $14 billion and employ thousands of workers earning middle-income wages.

The proposals are for two lithium mines in North Carolina, one in Cleveland County and the other in Gaston County, both west of Charlotte. Lithium is a key component of batteries for electric vehicles. Currently the U.S. imports 98% of lithium from foreign countries.

Producing more domestic lithium would give the country greater control over its energy future. Producing lithium in North Carolina would be a multibillion-dollar industry with several thousand jobs.

The announcements and proposals would have significant economic impacts on North Carolina. Suppliers and complementary companies would also likely locate in the region between Raleigh and Greensboro, enhancing the economic impact.

Two existing mining operations in North Carolina would likely experience increased business. North Carolina is a leader in producing phosphate, a component in some types of electric batteries. Pure quartz is used in many tech products, among them computer chips. North Carolina has the largest pure quartz mining operation in the world in the western part of the state.

Besides having major statewide economic impacts, the emerging new energy sector between Raleigh and Greensboro should help moderate the state’s long-standing urban-rural divide. The 21st century has greatly benefited cities, where a college-educated workforce has attracted expanding economic sectors such as technology, pharmaceuticals and finance. At the same time, traditional rural economic sectors such as textiles, furniture and tobacco have downsized due to foreign competition and changing preferences.

The corridor between Raleigh and Greensboro spans numerous rural counties. Workers living in those counties will be able to take advantage of many blue-collar jobs in the new factories and companies, boosting rural residents’ pay.

Of course, change always has potential downsides. Counties in the new energy corridor that traditionally had wide-open spaces and abundant nature will be altered. Development and density will increase. We’ve already seen this in Chatham County. There will be increased debates between residents over how to deal with the change.

Mining operations often raise concerns, including the two proposed lithium mines. Worries over contamination of groundwater, excessive dust, destruction of the natural habitat and noise are the most common complaints.

Safeguards willingly undertaken by the mining companies as well as state regulations are the two most common approaches to dealing with these issues. Still, there are always questions about what exactly should be done and who should pay.

With regard to the last question — who should pay — a somewhat novel approach has been used in some states. It is to impose a tax, sometimes called a fee, on a mine’s annual production value to raise money to mitigate the negative impacts of the mining operations. This is commonly called a severance tax, and North Carolina already has such a tax in place for some extractive operations. A severance tax on mining operations associated with the new energy sector may be a way to balance benefits and costs.

North Carolina is positioned to be a major player in the new energy future. How big will the benefits be? What about the potential costs? Is there a way to balance both? You decide!

Walden is a William Neal Reynolds Distinguished Professor Emeritus at North Carolina State University.

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