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Job Creation in a Clean Energy and a Low Carbon Economy: Pulling Numbers from the Air?

image credit: Grid Alternatives and tribal members install the racking for the Towaoc project (Ute 1-MW Solar Installation) completed in 2019. Photo from GRID Alternatives (via DOE/Flickr).
Greg Smestad's picture
R&D Manager/CTO Sol Ideas Technology Development

We provide expertise in the application of optics and semiconductor materials used for photovoltaics (PV), renewable energy, and optoelectronics. As a Materials Scientist and specialist in solar...

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Originally published on LinkedIn

A paper published in 2020 in the journal Technological Forecasting and Social Change described international job creation estimates during the global energy transition towards 100% renewable power systems. Worldwide, renewable energy is projected to account for 80% of total direct energy jobs by 2050. It can be difficult for the public to understand the process of creating a job, renewable or otherwise. The related idiom of giving somebody a job is a bit less problematic, since it implies one is matching an existing need with a skill or ability. Neither wording implies the cost or the price of the endeavor, or what it takes to do it, nor does it imply a timeframe. In the context of discussions surrounding a clean energy economy and strategies to address climate change, policymakers and leaders throughout the world often speak of their proposed programs in terms of millions of jobs being created, induced and saved. Just how would one go about qualifying that with some degree of certainty so that it can be conveyed to the general public for their support?

 

Top Down or Bottom Up

There are two methods that have been used for the specific case of the United States: a top down approach and a bottom up analysis informed by data. An example of the former used measured data reported in tables from the US. Bureau of Economic Analysis (BEA) to calculate the ripple effects from the ordering of a power plant by investors and/or via some government spending or policy. For example, in my the field of solar energy, deploying a photovoltaic (PV) power plant with a specific nameplate capacity (in MW) would imply a fixed number of PV modules, with their solar cell materials (like silicon or CdTe), including metal frames, backsheet and glass, as well as the racking, mounts, inverters and the power conditioning equipment - in addition to the actual site preparation, construction and, finally, operations and maintenance (O&M). This would send orders down the supply chain to companies that provide each aspect. 

The peer reviewed paper was published by a researcher now at Boston University (Peltier, 2017) that examined various energy-related technologies including: wind, solar, bioenergy, geothermal, hydroelectric, weatherization, energy efficiency, smart grid, mass transit & freight rail, oil and gas, and coal. Its methodology utilized BEA data, an Input-Output (I-O) approach and matrix operations that are relatively easy to code (i.e., in Python). The output from such studies is given in terms of a Keynesian multiplier called a jobs multiplier, which is the jobs created, or that result, from an investment in millions of dollars (jobs/M$). It was concluded that each 1 million US$ shifted from brown (fossil fuels) to green energy will create a net increase of 5 jobs. Since new BEA data is available, a collaboration by several government departments, economists, asset owners, financiers and energy industry professionals is warranted to reproduce and update the calculations, and to compare results to current benchmarks for actual employment. Data from the U.S. Bureau of Labor Statistics (BLS) could provide additional insights regarding salaries and expected income.

The second method to estimate job creation involves an analysis of the data from the U.S. American Recovery and Reinvestment Act (ARRA). Researchers from Sweden looked at jobs numbers, bottom up, from types of specific clean energy projects reported on the Recovery Act website, via the Council of Economic Advisor's (CEA) supplement to the third quarterly report and with input from the Jobs and Economic Development Impact (JEDI) models of the National Renewable Energy (NREL). A paper published in Renewable and Sustainable Energy Reviews (Mundaca & Richter, 2015) summarized the findings and also tabulated the jobs for three types of clean energy projects. ARRA clean energy categories included energy efficiency, grid modernization, advanced vehicles and fuels technologies, traditional transit and high-speed rail, carbon capture and sequestration, green innovation and job training, clean energy equipment manufacturing, and renewable energy (RE) generation. The paper considered only the latter three.

Overall, the results indicated that the stimulus programs had a positive effect on the renewable energy sector. One of the study's key findings was that not only is the support of technological progress and innovation necessary, but also training and workforce development so that the labor force can be prepared for the necessary jobs. The ARRA training programs took longer to set up than was planned. The funding for projects by the Department of Energy (DOE) did not sufficiently coordinate with training programs at the Department of Labor, so some graduates were not ready for the projects when they started. Even an optimized stimulus would not only take some time to implement, but the training for the expected jobs would need to be coordinated over several years. That said, some skills found in one energy industry are also transferrable to emerging energy industries.

 

Comparing the Results

These are but two of a multitude of different models and studies, each with underlying assumptions and caveats. Surprisingly, the two methods described above yield approximately the same macroeconomic results: using 5-7 jobs/$M for an investment of $2 trillion, one can expect 10-14 million jobs to be created. This of course is a simplistic and static approach, but it can still be a useful starting point applied to each project or policy initiative, with an understanding of limitations and assumptions that can be explored further. One such initiative where this has been done is the Biden administration's recent offshore wind announcement that cited work by Woods McKenzie which included job estimates. Noteworthy is that the plan is to coordinate at least three major departments in a whole-of-government approach.

 

Implications for the Energy Transition

Of course the devil is in the details for jobs created both by government stimulus and/or private investment. They can both be tracked using geospatial data science to overlay renewable energy resources with locations where new employment opportunities are needed the most. For example, a recent study by the Brookings Institution described how renewable energy jobs can uplift fossil fuel and disadvantaged communities, thereby remaking climate politics. Many fossil fuel hubs could be transformed into renewable energy hubs and fossil fuel workers could be retrained. A brief by the Environmental and Energy Study Institute (EESI) described how coal country in the U.S. can adapt to the so-called Energy Transition. There is no shortage of recommendations and ideas on how transition to a clean energy and carbon neutral economy. One thing is clear: robust and transparent systems should be set up to collect jobs data and track the investments so that better jobs/$M calculations (both bottom up and top down) can result in greater public awareness and increased confidence over time. Keeping carbon dioxide and other greenhouse gases out of the atmosphere shouldn’t have to rely on numbers appearing out of thin air. With studies like those outlined here, transparency and public education are enabled and inevitable.

NB: I have placed a set of draft slides with more details on the calculations here on ResearchGate. The two primary references for this article are: 

[1] Heidi Garrett-Peltier, Green versus brown: Comparing the employment impacts of energy efficiency, renewable energy, and fossil fuels using an input-output model, Economic Modelling 6 (2017) Pages 439-447. https://doi.org/10.1016/j.econmod.2016.11.012

[2] Luis Mundaca, Jessika Luth Richter, Assessing ‘green energy economy’ stimulus packages: Evidence from the U.S. programs targeting renewable energy, Renewable and Sustainable Energy Reviews 42 (2015) Pages 1174-1186. https://doi.org/10.1016/j.rser.2014.10.060

Discussions
Matt Chester's picture
Matt Chester on Apr 2, 2021

There is no shortage of recommendations and ideas on how transition to a clean energy and carbon neutral economy. One thing is clear: robust and transparent systems should be set up to collect jobs data and track the investments so that better jobs/$M calculations (both bottom up and top down) can result in greater public awareness and increased confidence over time. 

This is a good point-- we don't want just the good results, but (to the extent possible) we want to know how/why those results happened so we can replicate and turn the crank higher where needed!

Greg Smestad's picture
Greg Smestad on Apr 5, 2021

Thank you Matt; point well taken. My recommendation, and my plea, is found in the last half of the third paragraph of the article. To bring that into being, the article must find its way to those willing to do the calculations. A few other thoughts and links for those interested in learning more:

The America's Zero Carbon Action Plan (ZCAP) chapter 3 tables seem to independently support the ratio of jobs for Clean Energy to Fossil Fuel Energy. Jeffrey Sachs is a co-chair for the study. Robert Pollin edited chapter 3. Please download the chapter via this link: https://www.unsdsn.org/Zero-Carbon-Action-Plan

Rewiring America describes how electrifying everything can create 25 million new jobs: https://www.rewiringamerica.org/

According to the U.S. BLS, as of 2020, the average wage of someone working in solar power has now become more lucrative than working in oil/gas extraction. Source: https://www.linkedin.com/posts/jigarshahdc_may-2020-national-industry-sp...

 

Mark Silverstone's picture
Mark Silverstone on Apr 5, 2021

Thanks for this post Greg. This article suggests something similar:

"The analysis also revealed that every $1 billion in extra construction spending generates an average of at least 5,700 construction jobs."

Am I correct in saying that this analysis suggests that the Federal government might actually know what it is trying to do? 
That’s not what we are used to hearing. Can it possibly be?

Greg Smestad's picture
Greg Smestad on Apr 6, 2021

Thanks Mark. The EC&M article that you cite does indeed support the idea that spending of any kind (government or private) creates jobs. That's a Keynesian idea (see the link in my article above). In contrast, the EC&M article suggests that the spending will be from pent-up demand, rather than fiscal policies or policy initiatives. In that sense, the federal governments of the world can choose enact policies to ride the wave. It remains to be seen whether the U.S. federal government (as a whole) demonstrates that it knows what it's doing, or that it can effectively communicate what it's doing (and why).

So if $1 billion in extra in overall construction spending generates an average of at least 5,700 construction jobs, that means 5.7 jobs/M$. That's consistent with the numbers in table 2 here (Updated employment multipliers for the U.S. economy, EPI Report, Josh Bivens, January 23, 2019). I take note that there is a link in EC&M article (at the bottom) to this summary from ABC. I also include links to a number of interesting studies in my other comments to the post. Please pass them on to others.

Michael Keller's picture
Michael Keller on Apr 12, 2021

Remember years ago massive hype about millions of green energy jobs and Oregon becoming a manufacturing hub for green energy. Never happened.

The objective of energy production should be reasonably clean and reasonably affordable energy, not the lining of the pockets of the green energy mafia and their Democratic cohorts.

Greg Smestad's picture
Greg Smestad on Apr 20, 2021

There was measurable progress on clean energy jobs (that was shown in the open access Renewable and Sustainable Energy Reviews article that I cited from the Swedish researchers, https://doi.org/10.1016/j.rser.2014.10.060). It's clear, however, that government policies at the city, county, state and federal levels can be changed and enhanced, and that private sector investment in these areas should be encouraged.

One can monitor the transition to Renewable Energy in Oregon through websites like: Simply Hired, Indeed and LinkedIn (click on these blue hyperlinks for more). LinkedIn provides a list of open Renewable Energy Jobs (https://www.linkedin.com/jobs/renewable-energy-jobs/). In my field of solar energy, there's the Oregon Solar + Storage Industries Association and the Oregon Solar Energy Industries Association (SEIA), among others. The latter link provides a nice graph that shows installations over time.

My brief article above recommends that better records be kept regarding jobs created over time vs. the amount of public and private investment that's necessary for the creation and maintenance of these jobs. The ratio of these measurable quantities for each project is the jobs/million dollars (jobs/M$) outlined in my article. That needs to be better communicated to the public so that progress can be monitored and so only the best practices and policies can continue. These kinds of employment (jobs) multiplier numbers are commonly used in all major industries. See: https://www.epi.org/publication/updated-employment-multipliers-for-the-u...

Michael Keller's picture
Michael Keller on Apr 16, 2021

How about we provide reasonably priced energy so individuals and businesses have more money in their pockets? That is the source of positive economic activity, not the government siphoning money from taxpayers.

Greg Smestad's picture
Greg Smestad on Apr 20, 2021

Thanks Michael, That would certainly be good! I'm by no means an expert in the area of electricity prices, but the U.S. EIA published this regarding the observation that Wholesale U.S. electricity prices were generally lower and less volatile in 2020 than 2019 

(https://www.eia.gov/todayinenergy/detail.php?id=46396). They also published a graph that suggests that after 2008, wholesale electricity prices in the western U.S. dropped, but it seems that volatility is the major concern (https://www.eia.gov/todayinenergy/detail.php?id=37112). Yes, electricity prices (regional or nation-wide) would be a good measure of success for any energy policy or energy investing (public or private).

The main point of my article is that another metric,  jobs/M$, can and should also be used for both government and private investments in clean energy projects. It's one of many potential measures for the everyone, including the public, to keep their fingers on the pulse of what's going on (for more, see: https://www.epi.org/publication/updated-employment-multipliers-for-the-u...).  Thanks again to you and to all who have read and, especially, liked and commented on my post.

Greg Smestad's picture
Thank Greg for the Post!
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