Should we care about how many jobs a given energy technology creates or maintains?
As with most questions, the answer depends on your point of view, but some basic evidence points to significant benefits to the economy from switching fuel sources, or even better, eliminating some amount of energy use.
First some basic facts about our economy and its reliance on energy. For 2011:
Total gross domestic product (GDP) = 14.419 trillion
Total cost of energy inputs = 0.571334 trillion (4%)
Total electricity sales = 0.371 trillion (2.6% of GDP or 65% of energy)
Although energy costs weigh heavily on a micro scale, whereby everyone living a middle-class lifestyle or less would have difficulty with even a 2 or 3% increase in our household expenses, to the economy as a whole, they represent a relatively small portion of the total cost of maintaining our standard of living. Within the cost of electricity is an amalgam of options for generating that electricity. Currently, that breaks down as follows:
In the chart above, "Renewables" includes everything we traditionally consider renewable energy (wind, solar, biomass, hydro) except hydroelectric power. Detractors against developing renewable energy sources historically have focused on the relative cost of the generation and the drag on the economy that increased prices would have. Looking at the relative cost of generation by fuel type, we notice two trends:
First, non-renewable forms of electricity generation live up to their name and rely heavily on a fuel input that has a cost in the economy (thereby highlighting its scarcity). This reliance inserts an element of risk into the cost of the resource. With energy markets more dependent on global trends in development and stability than ever before, energy sources that rely on a scarce fuel stock will experience volatility based on the availability of the source. Although we can tout more domestic sources of energy - and therefore claim more insulation from these shocks - the truth of the matter is that energy companies will not provide US customers a "hometown discount" on price if they can sell the resource for higher profit overseas. An increase in the world price for any resource will be felt here as well. Because they are not dependent on a scarce fuel source, renewable forms of electricity generation do not carry this risk.
Second, the cost per unit of energy generated for wind and hydro compete with natural gas and beat coal or nuclear. (As of the time of the creation of the chart, wind cost just a small percentage more than natural gas...there is recent evidence that for new development, companies are seeing wind development as less expensive than natural gas.) Ignoring hydro because of the other environmental implications of new development (although significant consideration has been, and should be, given to retrofitting existing, non-generating dams with hydro-electric generators), investing in wind to reduce coal generation makes perfect sense economically. If we were to wave a magic wand and do that, what impact would that have on the economy and the job market? To understand that impact, we look to a study done by a team at UC-Berkeley mapping out the total number of jobs per megawatt-hour (MWh) for various types of generation.
At nearly 4 billion MWh per year of electricity generation, replacing the 340,000 MW of coal generating capacity in the country with wind would not only reduce the net cost of energy to the country by about $11 billion, but it would also create a net 618,000 jobs*. If we perform a comparable replacement of coal with natural gas, as many well-intended environmentalists have advocated, we similarly save - this time about $17 billion, but lose a total of over 2.5 million jobs. In an economy where labor opportunities are scarce, circulating more of our GDP through employed citizens as opposed to fewer provides a better foundation for improved quality of life throughout the country.
Looking at the current state of energy dependency in the United States, we see that compared to the rest of most of our peer countries, we use twice as much energy per capita to maintain our standard of living.
If we were to invest in changing that through improved buildings and infrastructure, and assuming that we would implement solutions that pay for themselves in five years or fewer, we could drop the cost of energy to the economy by at least half (or about $280 billion per year). That nearly $1.5 trillion investment (5 years of savings at $280 billion per year) would produce as many as 25,000,000 jobs over the time period of the investment, and return the the economy a minimum 200% return on investment over 10 years. Although a bit simplistic, if we assume that all that energy reduction came in the coal, petroleum and natural gas sectors, we would net lose about 2,500,000 jobs in those energy sectors, but as most of those jobs come from engineers and technicians that have the background in applied sciences, there is ample opportunity to provide retraining to include them in the 25,000,000 job pool.
All of what I have discussed so far provides, at minimum, a net break even to the economy. If we were to suggest that coal generation be replaced by solar generation, we would have the net effect of adding 4,500,000 jobs to the economy (assuming equal development of concentrated solar and solar photovoltaic). This would, however, come at an additional cost to the economy of approximately $163 billion (or about 1% of our GDP). In terms of risk management, however, given that over half the country will achieve solar grid parity in the next ten years, a present-day investment of solar promises better long-term economics than a comparable investment in any fossil-fuel based generation. Even if we ignore the future potential parity and look at solar as it stands today in the marketplace, if we combined the investment in energy reduction with the investment in solar technology, we would still reduce overall costs, but would have the added benefit of replacing natural gas generation with solar. This yields an even higher level of job creation, and still maintains a net reduction in cost to the economy of over $200 billion a year.
In summary, the macroeconomic importance of employment is the circulation of capital in the economy through as many participants as possible. Rewarding hard work with the access to food, healthcare, and lodging that comes with income has always been the promise of our country. If we looked at setting policies not based just on the value in capital, but in the combined value of economic and human capital, there would be an immediate call to end fossil fuel use and switch to measures of efficiency and renewable energy generation. This would shift more of our current expenditures from commodity purchase to human employment, and have a strong ripple effect across the economy. The greater truth is, even without taking into account the impact on human capital, the economics already favor a switch to efficiency and some forms of renewables. The future economics suggest that all forms of electricity generation from renewables will meet the projected cost of current forms of generation, thus suggesting that from a risk-avoidance perspective, increased and immediate investment in renewable energy provides greater resilience to the economy.
And in a 1500 word article on the merits of investing in energy efficiency and renewable energy, I did not once bring up the cost of carbon, the decreased cost of healthcare related to ending fossil fuel use, or the increased productivity of the economy without the drags that both impose...until now. We do not have to argue about climate, scientific method, or politics to see that our way of life gets better in an economy based on renewable energy.
* Although some highlight intermittency as a reason to avoid renewable energy sources in favor of "reliable" non-renewable sources, operationally, plants that rely on non-renewable sources have significant variability based upon fuel quality and upkeep of the facility. Further study is needed before we can verify the presumption that renewable intermittency would have greater net impact than current plant intermittency.
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