Will Green Energy Jobs Be The Economic Savior Promised?
“A study of renewable energy jobs and expenditures in Germany has undercut the popular view of their contribution to economies and a changing labor market. Between 2011 and 2018, green energy jobs declined, as did investment, a shocking record given Germany’s leading role in Europe’s green revolution. ”
Jobs; Jobs; Jobs, is what the Biden administration says it is all about. The problem? Climate change; climate change; climate change is how the Biden administration will govern. Nixing the Keystone XL presidential permit on the first day in office cost 1,000 workers their jobs the very next day. An additional nearly 10,000 jobs anticipated to be created this year disappeared, also. Economists will tell you that for every new job created, the income earned and spent helps to create other jobs ‒ retail workers, restaurant employees, etc. – that bolsters economic growth. The various economic and environmental studies conducted for the Keystone XL pipeline estimated that the multiplier effect for the number of indirect jobs created was five times the number of direct jobs created. Therefore, potentially 50,000 associated jobs that would have been created during the next two years were lost at the same time Biden signed his executive order banning the pipeline. In one fell swoop, gone were the jobs Mr. Biden says he cares about.
When President Biden talked about his climate change agenda, he dismissed the lost Keystone positions with the claim that these workers would be able to find plenty of jobs in the “green economy.” The issue of job creation related to green energy is hotly debated. Will sufficient jobs be created? Moreover, will green jobs pay wages comparable to those of the energy jobs being lost?
We cannot answer the question about wages definitively. However, we know that pipefitters and pipeline welders earn hundreds of thousands of dollars a year. Those lost incomes will not be offset by the $7, $8, or even $9 an hour jobs Climate Czar John Kerry indicated would come from the Biden green energy program. While critics, including a few influential members of the Democrat Party, railed against the decision to kill the Keystone XL pipeline, what really caught our attention was the headline from a German green energy newsletter citing a recent labor market study showing that the number of renewable energy jobs in the country had been cut in half between 2011 and 2018! This performance would certainly undercut the claims of politicians and environmentalists that renewable energy will create millions of new well-paying, and in the case of the Biden administration program, union jobs.
Exhibit 19. Growth And Decline Of Green Energy Jobs SOURCE: O’Sullivan and Edler, PPHB
The initial media reports of the details from the June 2020 study of employment trends in the renewable energy industry reported that the wind and solar sectors lost half their employment between 2011 and 2018. That meant roughly 150,000 workers who had been employed manufacturing and installing solar panels and wind turbines lost their jobs seven years later. The initial shock from this news had barely died down when the media reported that the initial claim of the number of jobs lost was overstated. They said that the lost jobs only related to those workers employed in the equipment production and construction sectors related to wind and solar energy. They went on to point out that jobs in the operating and maintenance (O&M) segments for these renewable fuels showed an increase over the seven-year period.
Exhibit 20. Servicing Green Energy Has Created Jobs SOURCE: O’Sullivan and Edler, PPHB
This revelation enabled the green energy supporters to claim that the hundreds of thousands of jobs lost were known to be temporary, so their disappearance was not surprising. Besides, it is really the permanent positions created that truly matters. This is in keeping with the arguments used to defend the Biden administration’s killing of the Keystone pipeline – the construction jobs were only temporary. In fact, the pipeline would only create 35 new permanent workers when it was completed. This ignores the reality that maintenance and repair work is needed for pipelines each year, creating significant numbers of temporary jobs every year. And since the Keystone pipeline would add 1,800 miles to the nation’s pipeline system, this guaranteed more repair and maintenance workers would be needed. The problem with the temporary worker argument in Germany was that the gain in O&M jobs did not offset the lost equipment manufacturer and construction, resulting in an overall employment decline of roughly 100,000 jobs.
Over the years, we have commented on various studies of green jobs. Often, the characterization of “green jobs” is overly generous. For example, if a city has several buses powered by compressed natural gas (an alternative fuel), then all the city’s bus drivers are classified as “green workers.” There is no question that many municipalities are transitioning their buses, trash trucks and other service vehicles to alternative fuels – compressed natural gas, electricity and even biofuels – that will lead to all the drivers and workers becoming “green workers.” Given the laxity in counting green jobs, we have always viewed these studies with a large degree of skepticism. That skepticism forced us to seek out the German paper to see what it said. Surprisingly, the purpose of the study was to address the quality of green energy employment. It also hoped to bolster the quality of the information flow to the German government, as it works to address green energy policies.
This study was unlike traditional employment studies because it relied on input-output (I/O) analysis. This analytical approach allowed the authors to capture both direct and indirect green employment. It also enabled the creation of data series measuring the economic benefits from the renewable fuel sectors on local markets and export markets. This latter point was important as Germany’s photovoltaic (solar) sector was reorganized after China usurped the solar panel market during the seven-year period, driving prices down and forcing other suppliers out of business. In fact, the study comments on the reorganization of the photovoltaic sector in Germany, without acknowledging China’s role.
While China does not appear to be taking on the wind energy sector, its industrial business model calls for dominating the electric vehicle (EV) market – primarily via control over the raw materials for batteries. Given China’s dominant position in the global mining of rare earth metals and lithium critical for EV batteries, it can manipulate the global vehicle market – especially at the low end of these costly vehicles.
While this study is quite different from the traditional green job studies we have investigated in the past, its conclusion about employment highlights disturbing trends. The reports about the study came at the same time the German government is working to revamp its renewable energy subsidy program, and the country is struggling to supply adequate electricity due to the collapse of wind and solar power due to winter weather.
As the history of Germany’s energy sources shows, renewables entered the country’s energy supply around 2000. Initially it was represented by wind and other renewables, primarily biofuels. Solar became more significant about 2009. In 2019, solar provided 3.2% and wind 8.5% of Germany’s energy consumption according to BP Statistics.
Exhibit 21. Renewables Are Being Subsidized In Germany SOURCE: BP Statistics
Using various charts, we will walk through the renewables industry employment and investment and O&M expense, as well as just for the solar and wind sectors. We will also see how the capacities of these sectors have grown. By comparing the growth in generating capacity and the investment in new capacity, we can measure the cost trends, which goes to the question of what is really happening to renewable energy costs. We are also able to track the growth in wind and solar employment in the O&M portion of these sectors and see their cost trends, too. Lastly, we will show the growth in the number of wind turbines in Germany, which ties in with the growth of employment in the O&M sector.
Exhibit 22. Germany’s Renewables Jobs Grew Until 2011 SOURCE: O’Sullivan and Edler, PPHB
Germany’s renewable energy industry grew steadily from 2000 to 2011, as reflected by the I/O study showing more than a fourfold increase in jobs. However, since 2011 the record of employment has shown a mixed pattern – declines followed by stable and then rising employment before declining again. When we look at the investment expenditures, the pattern demonstrates even greater volatility, including during the early years of build-up.
Exhibit 23. Renewables Spending Is Down From 2011 Peak SOURCE: O’Sullivan and Edler, PPHB
Turning our attention to just the solar and wind sectors, we observed similar patterns to those for the entire German renewables industry. What we saw was a roughly 90,000 job decline from the peak in 2011 to the latest year’s data for 2018.
Exhibit 24. Wind And Solar Have Less Jobs Than In 2011 SOURCE: O’Sullivan and Edler, PPHB
The volatility in spending for wind and solar is much greater than for all renewables. However, these sectors show a similar decline in spending as in employment between 2011 and 2018. The decline was approximately 6.3 million euros.
Exhibit 25. Spending Decline Since 2011 Mirrors Job Pattern SOURCE: O’Sullivan and Edler, PPHB
The trends in wind and solar investment (manufacturing and construction) and O&M expense are not surprising given the growth in Germany’s generating capacity for these two renewable fuels. One sees how wind capacity began growing nearly a decade before solar reached a similar threshold. In addition, we can see where wind capacity growth slowed materially in recent years, as solar generating capacity was growing faster, after having slowed in 2012-2014.
Exhibit 26. Germany Has Pushed Renewable Power SOURCE: enerdata.net
Combining the I/O financial data with the German government’s data on generating capacity by fuels, we can arrive at investment and O&M expense costs per megawatt (MW) and track the trend over time. Fortunately, the two data sources broke down the wind category into onshore and offshore, which is important due to the differences in costs and maintenance expense. The division also allows us to track how the offshore category may compare with conclusions from the study of the U.K. and Denmark offshore wind farms by Professor Gordon Hughes.
Exhibit 27. Germany’s Renewables Investment Trends SOURCE: enerdata.net, O’Sullivan and Edler, PPHB
When we examine trends in solar and wind investment, we observe that solar’s cost per MW declined from 2001 until 2012, after which the cost trend has been relatively flat. Onshore wind, on the other hand, has demonstrated a stable cost trend with a few notable deviations over the entire period. Offshore wind has been the most expensive and the most volatile. Cost per MW for offshore wind was
Exhibit 28. Germany Now Has 30,000 Wind Turbines SOURCE: enerdata.net
at its lowest in 2015 but was higher in every year after. Understanding the offshore wind cost trend volatility requires knowing detailed information about each project constructed as to its size, water depth location, and the magnitude of the project (was transmission investment included, for example). Each of these variables could explain some of the cost variations.
What we do know about the wind industry is that the number of turbines installed each year has been highly volatile. Although the last three years have shown dramatically fewer new wind turbines installed, the overall cumulative number of turbines has continued to grow. That would explain the growth in the number of wind industry employees involved in O&M. What is interesting is to see the cost of solar and wind O&M expense per MW given the increase in the number of employees. Each sector has a different pattern.
Exhibit 29. Volatile Operating Expense For Offshore Wind SOURCE: enerdata.net, O’Sullivan and Edler, PPHB
Solar O&M expense has shown a dramatic decline in O&M expense over 2000-2018. Onshore wind has been relatively stable, although the cost in recent years has been higher than in early years. Offshore wind has shown a volatile record, although it was stable for 2016-2018.
The disappointing employment data for Germany’s solar and wind sectors is a reason to be concerned about the country’s planned shift to an entirely renewables powered economy. Although the cost trends for the manufacture of equipment and the construction of these renewable fuels, as well as their O&M expenses do not show rising trends, they also do not support the argument that these fuel costs are coming down. Admittedly, the I/O study only had data through 2018, but we have no indication that trends improved over the past two years.
Recently, two other issues with renewables are causing concern about the fuels future. The first deals with power output, the second with the cost.
Germany is firmly ensconced in the “dead” of winter. The country’s solar panels are covered with snow and ice preventing the production of power. Moreover, when the snow is gone, the gray skies limit the amount of solar power that can be produced. The winter also means extended periods of low or no wind. Therefore, there is limited wind power being produced. The four days of February 9-13 demonstrates the problem. Coal and natural gas produced 56% of Germany’s power, while nuclear contributed another 13%. Both onshore and offshore wind contributed 15% and solar was a disappointing 2% of supply. Without the country’s coal power plants operating at 100%, Germany’s was within a heartbeat of electricity blackouts.
Exhibit 30. Germany’s Power Mix SOURCE: enerdata.net
This significance of this condition becomes clear when the output is put alongside the generating capacity installed. In 2020, Germany had a total of 214.2 gigawatts (GW) of power generation capacity installed. Of this installed capacity, solar was 24.8% (53.1 GW), while all wind was 29.0% (54.5 GW onshore and 7.7 GW offshore). Combined, solar and wind represent 53.8% of all installed generating capacity, yet during those four days in February, they produced about one-third of their potential. We know that solar cannot produce power during the night, so its true capacity is roughly half the stated capacity. That would make the two fuels’ performance better.
Exhibit 31. Germany’s Reliance On Renewables Grows SOURCE: Clean Energy Wire
The energy output in February highlighted how important fossil fuels and nuclear are to Germany’s power supply. Nuclear power represented 3.8% (8.1 GW) of installed generation, yet it was contributing 13.1% of total power during those four days in February. That was roughly four times its share of capacity. Nuclear power plants are planned to be shut down in 2022, which will place even greater dependence on coal and natural gas for meeting Germany’s power needs during the “dead” days of winter. With the government striking deals for the phaseout of coal mining in Germany, one should not be surprised that Chancellor Angelina Merkle is working hard to get the Nord Stream 2 pipeline connection with Russia’s natural gas industry completed.
This brings us to the elephant in the room – the cost of the renewable fuel subsidy, which is borne by customers, with many industries receiving exemptions due to higher power costs making them uncompetitive in international markets. According to media reports, the German government is looking to scrapping the surcharge on peoples’ power bills and putting the funding for renewable electricity production into the state’s budget. Initially, Germany’s energy minister had suggested that the renewables surcharge (EEG-levy) be abandoned piecemeal over the next five years with the future government following the September elections deciding the details. Now, it seems the government is working on a proposal to completely abolish the EEG-levy and finance it from the government’s budget sooner, socializing a targeted fee.
As of 2022, all new renewable installations could be funded from the government’s budget, which would be necessary to stabilize electricity prices in the long term and ease the integration of power-hungry technologies, such as electric vehicles and hydrogen.
Several new initiatives are designed to try to improve the costly renewables effort. Consumers pay not only the EEG surcharge, but also a CO2 price on heating and transport fuels. Together these charges represent 20% of consumer electricity bills. The CO2 charge has been capped at 6.5 cents this year and 6 cents next year by shifting the financing to the federal budget.
Other changes are planned for older wind turbines that are no longer eligible for subsidies. The future renewables targets will include an opportunity for these older turbines to bid for new contracts with subsidies. The program will allow up to 40% of the older turbines to secure new contracts. This confirms the reality that once subsidies end, many wind turbines are uneconomic to continue operating and are shutdown. The longer the subsidy period, the better a wind turbine’s economics are. However, the subsidies ignore the physical deterioration of wind turbine output that comes with age.
Attempting to spread the renewables effort across the country, the government is proposing decreasing the maximum values in tenders for onshore wind and solar projects, as well as increasing competition between solar systems by expanding the possible installation area. These are steps to reduce renewables cost.
At the same time, the government wants to incentivize wind expansion in the less windy southern area of Germany. Therefore, they will introduce a “quota for the south,” which means that 15% of successful tenders must come from the south between 2021-2023 and 20% as of 2024. They will also establish a 50% quota for tenders for biomass installations. These efforts are designed to reduce the imbalance in generating capacity that is titled towards the north of the country (windy). This imbalance has negative implications if the north-south grid connections are not completed in time before nuclear power stations in the power-hungry southern industry regions are shut down entirely at the end of 2022. It also will lead to more expensive wind power as less-efficient wind farms will be awarded contracts.
The German experience with respect to employment in renewable energy should be a lesson for those promoting the idea that those jobs can replace the ones lost when fossil fuels are shut down. The German experience demonstrates that many of the jobs being counted on by politicians and environmentalists represent temporary jobs. The growth in O&M employment for wind and solar is the only positive trend that can be pointed to. The shibboleth of green energy jobs replacing fossil fuel positions is used by its proponents to defuse the criticism of the economic cost of green energy.
Despite the efforts of politicians and environmentalists to convince the public that substituting green energy for power from fossil fuels will save them money, the reality has not happened, yet. It may happen at some point if construction costs and equipment expenses fall. However, the most recent cost curves for wind and solar suggest that the rate of decline experienced during the last decade is slowing and may stop declining in the future – promises to the contrary notwithstanding. This will be a significant and devastating realization for the public that is being pushed to back the green revolution on the premise of it creating significant numbers of well-paying jobs and lower energy costs. The reality is that the future may be one with higher energy costs and fewer well-paying jobs. The public will be sorely disappointed by such an outcome.