Economics, Energy and the Environment

Energy Fact of the Week: How Much Green for ‘Green Jobs’?

Even without the bankruptcy of Solyndra, the Washington Post noted that the Department of Energy’s entire $38 billion loan guarantee portfolio has generated a total of just 3,545 jobs—rather fewer than the 65,000 jobs the Obama administration projected the program would generate. That’s over $6 million per job. That’s a lot of ’70s-era Steve Austins running around powering the country. Even if the program worked as advertised, Dan Mitchell points out, it would come to about $600,000 per job generated, compared to an average capital cost of about $160,000 per job across the economy as a whole.

This might still not be unreasonable if these green energy jobs generated a lot of energy. In fact, overall electricity-sector investment generates fewer jobs than the average per dollar invested in the general economy. But it doesn’t appear that green energy programs produce jobs or energy in much quantity. A study by Hillard Huntington for Stanford University’s Energy Modeling Forum in 2009 looked at jobs created in different sectors of electricity production, and concluded that:

the advantages of increased jobs from renewable energy are vastly overstated at costs prevailing today … More importantly, strategies that subsidize these investments will be shifting the country’s scarce resources from sectors that would create more jobs (as well as economic value). This conclusion applies even for an economy in a deep recession and where policy wants to stimulate employment. Investments in roads, ground transportation and health care are likely to stimulate employment considerably more than green electric power generation. Policymakers and government agencies should look askance at the claimed additional job benefits from green energy.

Bottom line: “It will require a dramatic break-through in costs if renewable energy is to become a job generator.”

The Huntington study includes a very useful table that shows the final limitation of the green jobs mania. Although $1 million spent on “green” sources such as wind, solar, and biomass will generate slightly more jobs than $1 million spent on coal or natural-gas-fired electricity, the $1 million spent for coal or gas generates far more energy, making coal and gas a much more efficient investment. Figure 1 displays estimates of the number of jobs generated from $1 million in each electricity source, showing that by some estimates renewable sources produce more jobs per $1 million (the difference reflects the range of costs for renewables, which fluctuate wildly). Figure 2 shows the amount of electricity output from $1 million invested in each form. While wind and biomass stack up well with natural gas, coal is still the cheapest, and solar performs very poorly. (Caveat: these figures are based on 2006 prices. The fall in natural gas prices since that time will probably yield a different result today, placing it closer to coal.)

One thought on “Energy Fact of the Week: How Much Green for ‘Green Jobs’?

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