Federal Subsidies for the U. S. Energy Industry

Summary.  Two reports on federal subsidies to the energy industry are examined here.  Despite very different approaches to the topic, both agree that federal subsidies have supported, and continue to support, the oil and gas industry to a far higher extent than the renewable energy sector, by factors of 2.5 to 5.  This effect is very pronounced during the first 15 years of a subsidy program (on a constant dollar basis), when the effects of subsidies will have the greatest effect in promoting development of a technology.

It is concluded that deploying renewable energy technologies in the U. S. is an important objective, and that federal subsidies supporting renewable energy should be expanded 3- to 5-fold.

Introduction.  The role of the U. S. government in supporting new energy technologies and startup companies has come under scrutiny recently.  Some have questioned whether research and development (R&D) of new energy technologies is an appropriate function for the federal government.  On the other hand there is no question that subsidies are also provided to established fossil fuel companies.

A subsidy in the energy economy has been justified first, as a way to encourage new technologies during early phases of R&D, and second, to account for the lower value of an enterprise viewed by the private sector compared to its value to the public at large (see Ref. 1).  The U. S. Energy Information Agency (EIA; Ref. 2) identifies several types of subsidies, defined as originating from the federal government, targeted for energy, and providing a financial benefit with an identifiable budget impact.  These are

Direct Expenditures generally are legislated programs for direct payments to support activities that provide a financial benefit to producers or consumers of energy.  Support for R&D in areas such as increasing energy supply, increasing energy efficiency, and transmission, is closely related, being a direct expenditure yet likely not having a direct payoff during the period of the expenditure.  Since direct expenditures are legislated, they may be subject to expiration and a need for reinstatement.

Tax Expenditures are features incorporated into the federal tax code, and so are relatively permanent.  The terminology is deceptive; in fact these are tax credits against a taxed amount due, or deductions against income prior to calculating the tax due, and are based on having engaged in a particular action in the energy economy considered to be desirable.  Tax expenditures result in lower taxes collected, so that they correspond to outlays from the government.

Loans and Loan Guarantees provide federal support for designated technologies and undertakings, typically through the Department of Energy (DOE).  The loans support “innovative clean energy technologies that are typically unable to obtain conventional private financing due to their ‘high technology risks.’ In addition, eligible technologies must avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases."  (Office of Management and Budget, Analytical Perspectives of the Budget of the United States, Editions 2009 and 2012 (cited in Ref. 2)).

Two Reports on Energy Subsidies in the U. S.

The Environmental Law Institute (ELI) issued the report “Estimating U. S. Government Subsidies to Energy Sources: 2002-2008” in September 2009 (Ref. 3).  The report follows trends in subsides directed to fossil fuels and to renewable energy sources over the seven Fiscal Years 2002-2008.  This group defines “subsidy” as “actions by the U.S. government that provide an identifiable financial benefit associated with the use or production of a fossil or renewable fuel.” (Ref. 3).  The report includes conventional fossil fuels and most renewable energy sources; it omits nuclear energy from consideration. It garners detailed fiscal statistics and enumerates all subsidy expenditures, classified as to direct expenditures and tax expenditures (see Details, below).

The study concludes that, for the seven fiscal years considered, by far the largest subsidy amounts supported the various fossil fuels, i.e., energy sources that emit large amounts of the greenhouse gas carbon dioxide when burned, compared to subsidies supporting renewable energy sources (see the graphic below).  Specifically, federal subsidies granted to the fossil fuel industry totaled about US$72 billion in the period studied.  Most of these are essentially permanent features incorporated into the U. S. tax code.  The report notes that fossil fuels are a mature and highly profitable industry, and questions whether taxpayer funds should justifiably be spent supporting them.

On the other hand, subsidies supporting renewable energy, including corn-based ethanol production, totaled about US$29 billion (see the graphic below), of which only about US$12 billion went to “traditional” renewable energy sources such as wind, solar and hydropower.  (Recent analyses have suggested that production of corn-based ethanol, when considered over the full life cycle of the technology, is at best neutral with respect to reducing emissions of carbon dioxide.)  “Traditional” renewable sources represent young, developing technologies, and so are worthy of subsidy support.  In contrast to the case for fossil fuel subsidies, subsidies for renewable energy are legislated at frequent intervals with statutory “sunset” provisions, i.e., specific short-term expiration dates.  These features limit the ability of renewable energy businesses to plan energy projects over the long term.

Federal energy subsidies for FY 2002-2008.  In each quadrant, the outer, darker ring represents tax credits or allowances (tax expenditures), and the inner, lighter sector represents direct expenditures, all in US$ Billions.  The upper half of the diagram relates to activities that lead to reduction of greenhouse gas emission.  The lower half relates to activities that contribute to greenhouse gas emissions.  The left half relates to fossil fuels, and the right half to renewable energy sources.  The key in the far lower right indicates that subsidies for Traditional Fossil Fuels in the lower left quadrant are damaging to the climate (i.e. their use results in emission of the greenhouse gas carbon dioxide); and that subsidies for Traditional Renewables in the upper right quadrant preserve the climate (their use reduces or eliminates emissions of carbon dioxide). 

*Carbon Capture and Storage (upper left quadrant) is an experimental  technology that would allow energy plants that burn coal and other fossil fuels to capture and store their carbon dioxide emissions away from the atmosphere (preserves the climate; see this post).  Although this technology does not make coal a renewable fuel, if successful it would reduce greenhouse gas emissions compared to coal plants that do not use this technology.
**Recognizing that the production and use of Corn-based Ethanol (lower left quadrant) may generate significant greenhouse gas emissions, the graphic depicts renewable subsidies with (lower right quadrant) and without (upper right quadrant) ethanol subsidies separately.

Source: © Environmental Law Institute; http://www.eli.org/pdf/Energy_Subsidies_Black_Not_Green.pdf .

Pfund and Healey, in their report “What Would Jefferson Do?” (Ref. 1), studied the use of subsidies and related expenditures from the beginning of the U. S. republic.  Early subsidies were granted by both states and the federal government, first to coal mining, then to oil production, as these fuels were discovered domestically and their production grew.  (The report adjusts all expenditures to current constant dollars.)  They make the point generally that the trajectory of growth of the use these fossil fuels for energy correlates well with the growth of the U. S. economy over time.  They analyzed subsidy data starting as early as they were available in preparing their report (see Details, below).  Unfortunately, even though coal was and remains an important aspect of the U. S. energy economy, their inability to recover meaningful subsidy information for this fuel from its earliest use led them to exclude it from their analyses.  In particular, their emphasis was on the role that subsidies played in the early years of the various fuel technologies, when each respectively was being developed into an economically viable energy source.  They do, however, include nuclear energy, while the ELI study (above) does not.

Pfund and Healy conclude that, over the earliest 15 years of federal subsidy grants to a new technology, nuclear energy received more than 1% of the federal budget, subsidies to the oil and gas industry amounted to one-half percent of the budget, whereas renewable energy sources received subsidies amounting to only about one-tenth percent of the budget.  Thus the proportional support for oil and gas in its early years as an industry was about 5 times greater than that for renewable energy sources.  The proportional year-by-year subsidy grant for four energy sources is shown below.

Inflation-adjusted energy subsidies as a percentage of the Federal budget during the first 15 years of each subsidy’s lifetime.  The percentage scale runs from 0.00 to 0.25.  The years of the subsidy life, with four bars for each year, runs from year 1 to year 15.  In each year the bars represent gray, oil and gas; purple, nuclear; orange, biofuels; green, renewables.

Source: Pfund and Healey (Ref. 1); http://i.bnet.com/blogs/dbl_energy_subsidies_paper.pdf

Pfund and Healey characterize the early years of a technology as the period in which it is most useful to invest public funds to seed and develop the technology for the public good.  The graphic above shows that, staged year by year, the nuclear industry received the greatest proportion of subsidy support, followed by oil and gas in its early years as a fuel source.  Biofuels and renewable energy sources garner much less proportional federal subsidy support (and, as indicated above, biofuels may not contribute significantly to abating greenhouse gas emissions).

The annual subsidies granted to each energy source averaged over its respective lifetime as a recipient of support is shown in the following graphic.

Historical average of annual subsidies in 2010 US$ billions received by gray, oil and gas (US$4.86, over 1918-2009); purple, nuclear (US$3.50, over 1947-1999); orange, biofuels (US$1.08, over 1980-2009); green, renewable energy sources (US$0.37, over 1994-2009).

Source: Pfund and Healey (Ref. 1); http://i.bnet.com/blogs/dbl_energy_subsidies_paper.pdf

It is clear from the graphic above that oil and gas received the largest annual average subsidy over almost a century of subsidy programs, and continues to receive them up to the time of the report.  The annual average for biofuels is 22% of that for oil and gas, and the average for renewables is only 8% of that for oil and gas.   

Pfund and Healey conclude, after considering the purpose of subsidies to encourage new technologies and to enhance the value of an enterprise in the  eyes of the private sector, that “today’s government incentives for renewable energy pale in comparison to the kind of support afforded emerging fuels during previous energy transitions” (Ref. 1).

Details

The Environmental Law Institute report (Ref. 3) itemizes subsidies granted during the seven years studied.  The three largest for fossil fuels are:

A foreign tax credit totaling US$15.3 billion.  This credit is intended to prevent double taxation when taxes are paid to a foreign state, but for oil and gas, this credit permits royalty payments (ordinarily a cost of doing business) to be preferentially treated as a foreign tax (see Ref. 3).

A credit for production of nonconventional fuels totaling U$14.1 billion.  This credit has historically benefited coal mining, but also applies to oil from shale, tar sands, biomass, and other special fuel sources.

A provision that permits up-front accounting for Intangible Drilling Costs rather than long-term amortization, totaling US$ 7.1 billion.

For renewable energy sources, the largest subsidies include

The Volumetric Ethanol Excise Tax Credit totaling US$11.6 billion, excludes ethanol on a per gallon basis from the general fuel excise tax imposed throughout the U. S.

The Renewable Electricity Production Credit totaling US$5.2 billion applies to electricity production from wind, solar, biomass, geothermal, hydropower, and other sources.

A direct payment subsidy from the Department of Agriculture totaling US$5.0 billion for raising corn.  Although not intended by statute for ethanol production, this subsidy operates in conjunction with a Congressional mandate from 2005 that stimulates demand for ethanol.

The report by Pfund and Healey (Ref. 1) provides details on several aspects of subsidy policy.  They note that “not all subsidies are created equal.”

Although they did not analyze the early years of coal mining for lack of data, they point out that a reclassification of royalties received on coal mining as capital gains during the Korean War permitted the recipients to pay far less income tax, since the top marginal individual rate at the time was as high as 91%.  This tax provision was considered in the national interest during the Korean War, but it is still in effect even though that war is over, and the top tax rate is far lower now.  In its early days in the 19^th century, coal was promoted largely at the state level as a source of energy, although a 10% tariff on imported coal was in effect from before 1800.  Subsequently, the growth of the coal industry was closely coupled to that of the railroad industry, including its interests in real property and mineral assets.

The oil and gas industry, the authors point out, benefits from two subsidy provisions.  The first, introduced in 1916, permitted rapid recovery of intangible drilling costs and dry hole costs in the year incurred rather than being depreciated over several years.  The second, the excess of percentage over cost depletion deferral, introduced in 1926, permits deduction of a percentage of gross revenues rather than a deduction based on the value of the extracted resources.  Even in the mid-1980s, these two provisions represented the largest tax credits, and hence, the largest estimated losses in federal revenues, arising from the oil and gas industry.

The nuclear industry benefited from the Price-Anderson Act, which granted federal protection of utilities operating nuclear facilities in the event of a nuclear accident.  This provision was likely crucial in development of the nuclear industry, since no utility was likely to proceed with nuclear energy in its absence.

Subsidies for renewable energy began with the Energy Policy Act of 1992.  It grants a production tax credit of 2010 US$0.015/kWh for electricity generated from wind or biomass, now extended to other sources as well.  An investment tax credit has applied off-and-on for residential solar, and is now in place until 2016.  The production tax credit for wind has also been in force in fits and starts, being reinstated, after several expirations, for only one- or two-year terms.  The result is a great variability in installation of new wind generation capability, as shown below:

Cumulative wind generating capacity (left axis, blue line) and capacity added each year (right axis, green bars) for years from 1981 to 2006. The arrows show years in which the Production Tax Credit expired without being renewed.
Source: Pfund and Healey, Ref. 1; http://i.bnet.com/blogs/dbl_energy_subsidies_paper.pdf.


The three arrows in the graphic above show years in which the Production Tax Credit (PTC) lapsed without being reinstated.  This break in the continuity of support had a drastic effect, reducing the rate of installation of new wind generating capacity dramatically in the affected years (see the graphic above). 

The EIA report “Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2010” (Ref. 2) gives a detailed exposition of the expenditures in all the energy subsidy programs operating in FY 2010.  These data are referenced to corresponding data for FY 2007.  The reader is referred to the original for more details.

Analysis

Two separate studies of U. S. federal energy subsidies are considered here.  The first, by ELI (Ref. 3), reports on subsidies in the restricted period of the seven U. S. fiscal years 2002-2008.  It included the coal industry but did not consider nuclear energy.  The second study, by Pfund and Healey (Ref. 1), covers subsidy programs in energy throughout the history of the U. S.  Since records of early subsidies for coal energy were difficult to assemble, they omitted coal from the analysis, whereas nuclear energy is included.  Pfund and Healey place considerable emphasis on the first fifteen years of subsidies in an energy sector regardless of its chronological occurrence.

Both studies arrived at very similar conclusions in spite of the great difference in their approaches to analyzing subsidy data.  ELI finds that in the seven years examined, subsidies for fossil fuels were about US$72 billion, while subsidies for renewables were about US$29 billion (over half of which benefited corn-based ethanol).  Thus, at a time not significantly removed from the present, fossil fuels were subsidized at a rate about 2.5 times as great as were renewable energy sources.

Pfund and Healey devised a creative analysis that enabled them to compare subsidies that were in effect at different historical times.  They find that in the first fifteen years of subsidizing a particular energy sector, subsidies supporting the nuclear industry, the oil and gas industry, and renewable energy were granted in the ratio of approximately 10:5:1, based on their portion of the federal budget at the respective times they occurred.  Thus at the stage in the development of the respective sector, when it is novel and worthy of public support for further development, the oil and gas industry received about five times as much support, adjusted for inflation, as the renewable energy sector.

Both reports point out that currently the oil and gas industry (and the fossil fuel industry in general) is mature and profitable, no longer in need of subsidies to promote further growth.  Renewable energy, on the other hand, is a nascent industry, which, among other factors, has not yet reached a point where economies of scale have been fully realized. In addition to the disparity in subsidy rates for the two sectors, Pfund and Healey point out that the oil and gas industry was able to expand into an uncluttered, newly created market for its products in the early years of the 20^th century.  Currently, however, renewable energy sources have to compete against, indeed have to displace, energy provided by fossil fuel sources—a much more challenging task. Renewable energy reduces the dependence of the U. S. on fossil fuels for its energy, especially the need to import oil from sources abroad whose reliability may be questionable.  Use of renewable energy mitigates the emission of greenhouse gases into the atmosphere, thus abating the increase in the long-term average worldwide average temperature.  These factors support the expansion of subsidies to be provided to renewable energy sources.  There is no longer a need in our energy policy for continued subsidization of the fossil fuel industry, while the need for expanding support for renewable energy sources is evident.

As noted above, in the mature energy economy of the U. S., renewable energy largely supplants, rather than complements, energy from fossil fuels.  It has been argued that renewable energy would lead to loss of jobs.  But this is not the case; our growing energy economy would continue to provide new job opportunities as renewable energy expands, both during construction and operation of renewable facilities (see this previous post for an analysis of jobs created by renewable energy). 

As pointed out by Pfund and Healey, the Congressional policy (or lack thereof) with regard to the Production Tax Credit for wind energy demonstrates the critical need for consistent long-term fiscal incentives in developing a new energy technology.  This lack of consistency also stands in contrast to those tax credits for oil and gas that are permanently enshrined in the federal tax code.  Permanence ensures consistency in long-term planning by private enterprises.  A more enduring subsidy policy should be considered for renewable energy sources.

Conclusion

Subsidies have played a positive role in developing energy throughout the history of the U. S.  Unfortunately, the rate of subsidizing renewable energy has fallen far short of the levels supporting other energy sectors over the years.  Developing and deploying renewable energy facilities is critical for our national security, freeing us from dependence on foreign sources of fossil fuel.  Thriving job opportunities would also result.  Renewable energy contributes significantly to abating man-made global warming arising from burning fossil fuels.  For these reasons the level of federal subsidy support for renewable energy sources should be expanded 3- to 5-fold.

References

1. “What Would Jefferson Do? The Historical Role of Federal Subsidies in Shaping America’s Energy Future”, by Nancy Pfund and Ben Healey, DBL Investors, September 2011; http://i.bnet.com/blogs/dbl_energy_subsidies_paper.pdf.   

2. “Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2010”, EIA, July 2011; http://www.eia.gov/analysis/requests/subsidy/pdf/subsidy.pdf. 

3. “Estimating U. S. Government Subsidies to Energy Sources: 2002-2008”, Environmental Law Institute, September 2009; http://www.elistore.org/Data/products/d19_07.pdf.

© 2012 Henry Auer

Expanded Employment and Economic Activity from Renewable Energy

Summary.  Several economic analyses of the expanding role of renewable energy in the U. S. are described here.  A meta-analysis by Wei and coworkers finds that over 4 million full time equivalent job-years will accumulate between 2009 and 2030.  Past experience by California, extending from 1976, has already shown that major savings occur by energy efficiency measures that reduce consumption of electricity; redirecting these savings results in significant expansion of jobs related to renewable energy.  Although wind energy is currently only a small component of the overall energy mix, it has the potential, between land-based and offshore wind generation, of providing as much as 20% of America’s electricity by 2030 with attendant job creation.  Solar energy comprises an extended retail market as well as utility-scale generation.  Currently most employment in solar is retail.  Utility-scale generation and employment will grow significantly in coming decades.  The major conclusion drawn from these reports is that renewable energy provides significant and growing opportunities for employment, and for contributing to America’s economic activity.

Introduction.  Among developed, industrialized countries of the world, the United States is the only major emitter of greenhouse gases without a national policy that addresses the problems arising from burning fossil fuels.  In the absence of leadership at the federal level, various regional, and even local, programs have been put in place to lower emissions of greenhouse gases.  These include the Western Climate Initiative, the Midwest Greenhouse Gas Reduction Accord, and the New England and mid-Atlantic Regional Greenhouse Gas Initiative.  They mandate progressive reductions in emissions of greenhouse gases.  They encourage or rely on market-based (cap-and-trade) mechanisms for achieving the reductions.

This post summarizes reports on employment and economic impacts of developing renewable energy technologies without an emphasis on market mechanisms.

Overview of Employment in Green Jobs.  The Bureau of Labor Statistics has recently defined green jobs as

• Jobs in businesses that produce goods or provide services that benefit the environment or conserve natural resources, or
• Jobs in which workers’ duties involve making their establishment’s production processes more environmentally friendly or reducing natural resources use. 

In general, energy produced from renewable sources is considered green.  This includes electricity, heat or fuel, which could be derived from sources such as wind, biomass, geothermal heat content, solar, ocean kinetic energy, hydroelectric power, and landfill gas and municipal solid waste.

Green Jobs in the U. S. in 2011. The Environmental and Energy Study Institute issued the following collated data in June 2011 on jobs currently devoted to providing “green” energy, derived from various nonprofit and consulting organizations as sources.

See Wei, Patadia and Kammen below for definitions of direct, indirect and induced jobs.

Source: The Environmental and Energy Study Institute http://www.naseo.org/news/newsletter/documents/2011-06-02/EESI_Fact_Sheet.pdf

The table shows that currently most employment originates in the mature sectors of hydropower and ethanol.  This post presents analyses showing that other sectors have vast potential to expand employment in future years.

Meta-Analysis of Job Creation by Renewable Energy.  Wei, Patadia and Kammen published a review estimating projected job growth due to renewable energy sources (Energy Policy, Vol. 38, pp. 919-931, Feb. 2010).  Accounting for ambitious goals in energy efficiency, and assuming a renewable portfolio standard (RPS; the portion of energy production derived from renewable sources) of 30% that is commonly proposed for 2030, they find that over 4 million full time equivalent job-years will accumulate over the interval beginning in 2009.  They report that all renewable energy technologies create more employment per unit of energy than found for coal and natural gas, the current fossil fuel sources for power generation. 

Details.  Wei and coworkers analyzed fifteen primary reports.  They devoted considerable effort to bring the varying definitions and approaches employed in the individual reports into a single unifying framework for analysis, arriving at projected job-years of effort per unit of energy produced averaged over an assumed lifetime of a particular generating technology.  Importantly, job losses from phased out fossil fuel generation were accounted for in their assessment. 

Jobs involved in construction, installation and manufacturing (prior to operation) and maintenance and operation (after placement into service) of renewable generating facilities were spread across the full predicted lifetime of a facility to arrive at lifetime average values for a given technology.  Both direct jobs (those involved in the functions just identified) and indirect jobs (such as preparing input materials and facilities service) were included.

Business-as-usual (BAU) assumes that no mitigation measures are being taken in future projections.  BAU involves an average annual projected increase in generation of electricity through 2030 of 0.74% (U. S. Energy Information Agency).  In their report, optimal job growth involves eliminating this annual increase, and a second model involves halving this rate of increase, in both cases through energy efficiency (EE) measures. In addition, mitigation involves modeling a 20%, a 30% and a 40% renewable portfolio standard.  The authors point out that they do not assume any fiscal or market-based measures, such as cap-and-trade, to achieve their results.

The graphic below shows the results, in cumulative annualized job-years, over the baseline given by BAU, from 2009 to 2030, for the cases of eliminating the  increase in electricity demand (Flat energy demand, gray line), or medium increase in electricity demand (Medium EE, black line). 

  Source: Wei, Patadia and Kammen; http://www.sciencedirect.com/science/article/pii/S0301421509007915

The following graphic shows the cumulative result for job-years over BAU (not annualized; plotted along the y-axis) through 2030 for the three cases of 0% (BAU), 0.37% (medium EE case) and 0.74% (flat energy demand) per year reductions in electricity demand  from energy efficiency (plotted along the x-axis), for the four cases of 0% (BAU), 20%, 30% and 40% of total electricity provided by renewable energy (RPS).

The following graphic shows the cumulative result for job-years over BAU (not annualized; plotted along the y-axis) through 2030 for the three cases of 0% (BAU), 0.37% (medium EE case) and 0.74% (flat energy demand) per year reductions in electricity demand  from energy efficiency (plotted along the x-axis), for the four cases of 0% (BAU), 20%, 30% and 40% of total electricity provided by renewable energy (RPS).

Source: Wei, Patadia and Kammen; http://www.sciencedirect.com/science/article/pii/S0301421509007915

The blue line for BAU shows new job creation due only to improved energy efficiency without any new renewable generation facilities.  In contrast, without any contributions from energy efficiency, the cumulative job-years increase due only to new renewable energy facilities (increasing RPS), is shown by the points lying on the y-axis.  The higher RPS assumptions have higher job-years created because they require installation of new renewable generation facilities.  The effects of EE and RPS are additive, as seen from the fact that the four lines are essentially parallel.

California’s Energy Efficiency Experience.  California has long been a pioneer in fostering energy efficiency and reduction of emission of greenhouse gases.  The state enacted a rigorous plan, the Global Warming Solutions Act (AB 32), to reduce emissions even further by 2050 into place (please see the earlier post on this blog).  In this environment, David Roland-Holst of the University of California, Berkeley issued a report, “Energy Efficiency, Innovation, and Job Creation in California” in October 2008.  It provides a detailed historical analysis of data between 1972 and 2006, garnered from the U.S. Bureau of Economic Analysis and other sources, illustrating the state’s remarkable success during that period in reducing demand for electric power.  The graphic below shows that the state’s aggregate energy intensity was 40% lower by 2006 than the U. S. mean, due to actions starting at about 1974.

                        
Total per capita electricity use in California from 1960-2001.

Source: University of California, Berkeley; http://areweb.berkeley.edu/~dwrh/CERES_Web/Docs/UCB%20Energy%20Innovation%20and%20Job%20Creation%2010-20-08.pdf

The report transmits several conclusions.  As a result of savings from energy efficiency, Californians redirected their cash flow toward other goods and services; when the full extent of this transfer and distribution into the economy is considered (economic multiplier effect) about 1.5 million full time equivalent jobs were created, having a payroll of about US$45 billion, even when considering job losses in conventional energy generation businesses.  The analysis showed that this favorable result arose because households saved energy expenditures of US$56 billion from 1972-2006.  For every job lost in fossil fuel-driven generation, however, more than 50 new jobs were created throughout the broad economy.

At the time of writing of the report, detailed policies to implement the new Act had not yet been put in place.  The report’s economic analysis predicts that California will attain 100% of its goal of greenhouse gas emission reduction.  It anticipates that the Gross State Product (of total state-wide goods and services; GSP) will increase by about US$76 billion, increasing household incomes by up to US$48 billion, and generating about 403,000 jobs in efficiency and other fields related to climate action.  In general, AB 32 should promote a shift in work force from conventional energy industries to more job-intensive industries.

Wind Energy.  Land-based wind generation in the U.S. constitutes a small, but growing, proportion of the total electric energy landscape.  According to the U. S. Bureau of Labor Statistics (BLS), in the 10 years from 2000 to 2010, generating capacity has grown from less than 3,000 MW to 35,000 MW (please see Note 1 for definitions), with 10,010 MW put in service in 2010 alone.  35,000 MW of capacity generates enough power to supply about 9.7 million American homes.  As shown in the following graphic, wind power is expanding rapidly as a source of electricity in the U. S.

                        Source: http://www.nrel.gov/docs/fy10osti/40745.pdf

Nevertheless, in 2009 wind constituted only 1.8% of the total U. S. power generation but was about 50% of overall renewable power generated (not including nuclear energy).  As projected in the graphic, wind power could supply as much as 20% of all electricity generated in the U.S. by 2030. 

Wind farm sites, and sites of manufacturing facilities that make wind turbine components are locations at which employment in wind energy occurs.  In the map below, sites of wind farms in the U.S. are shown.  The great expansion in the rate of installing wind generation capacity may be seen by visually comparing those built up through 2008 (pink o) with those built in 2009 (red D).

The shading from dark to pale green shows exponentially decreasing installed wind generating capacity in the state, from a high of 8,500 MW to a low of 1 MW.

Source: U. S. Bureau of Labor Statistics: http://www.bls.gov/green/wind_energy/wind_energy.pdf

The following graphic illustrates the dispersion across the U. S. of manufacturing facilities involved in fabricating one or another of the components that go into a wind farm project.

In this map of the U. S., the shapes describe the component being made: 4-pointed stars, nacelles and components; triangles, turbines; 5-pointed stars, turbine blades; squares, towers; and circles, other components.  The colors describe dates: RED , new facilities opened in 2009; ORANGE , newly branched into wind in 2009; LIGHT BLUE , new facilities announced in 2009; and GREEN, facilities online before 2009.

Source: U. S. Bureau of Labor Statistics: http://www.bls.gov/green/wind_energy/wind_energy.pdf

According to the American Wind Energy Association as cited by the BLS, about 85,000 workers were employed in the wind industry, including related fields.  This number is a little larger than shown in the table above.  Judging by the expansion of wind energy as foreseen in the earlier graphic showing projected installed wind generating capacity in future years, the number of workers could expand by about 15-fold, to as high as 1,275,000 jobs, by 2030.

Offshore Wind Energy.  As shown in the earlier graphic, offshore wind generating capacity is foreseen to expand greatly in coming years. The National Renewable Energy Laboratory (NREL) has evaluated the potential for offshore wind energy.  A minimum criterion for effective wind generation of electricity is an average wind speed of 7 m/sec (16 mi/hr).   The map below shows average wind speeds over coastal and inland water, indicating that much of the accessible shoreline exceeds the minimum average wind speed.

Source: U. S. Department of Energy, Office of Energy Efficiency and Renewable Energy http://www1.eere.energy.gov/windandhydro/pdfs/national_offshore_wind_strategy.pdf

The U.S. has no offshore wind generation installed at present, but 13 projects are approved and under development.  Essentially all existing offshore wind farms in the world are in shallow water, up to 30 m (98 ft.).  The west coast of the U. S. is not considered amenable for development because its depth in most locations exceeds 60 m.

The NREL report assesses that the U.S. has the potential shoreline to develop 1,071 GW (see Note 1) of generating capacity in this depth zone.  An analytical model in the report estimates that low-cost offshore wind capacity could add 54 GW to U. S. capacity.  In general, offshore wind could contribute significantly to achieving a contribution of 20% to total electric generation from wind energy by 2030, as shown in the earlier graphic.

Adding 54 GW of offshore wind to U. S. generating capacity by 2030 would create US$200 billion of new activity, including the creation of 43,000 new permanent direct jobs, or 20 direct jobs per MW capacity constructed.  Additional indirect jobs would extend from this activity, contributing further economic activity.

The report     “A National Offshore Wind Strategy: Creating an Offshore Wind Energy Industry in the United States”, issued by the U. S. Department of Energy, Office of Energy Efficiency and Renewable Energy, February 2011,  presents a detailed analysis of offshore wind energy development.  It estimates that by 2020, the cost of generation could be brought down to US$0.10/kWh by envisioning 10 GW of installed capacity, and by 2030, down to US$0.07/kWh envisioning 54 GW installed. 

Solar power covers a range of capacities and technologies.  Photovoltaic (PV) solar generates electricity directly from sunlight using semiconducting photo-active panels; most use silicon as the semiconductor.  Concentrating solar power (CSP), or thermal solar, uses mirrors to concentrate sunlight on to a fluid to heat it; the fluid then transfers heat to convert water to steam, which then runs a conventional turbine generator.

Solar power is a small but rapidly growing component of the renewable energy mix in the U. S.  Much capacity is found in residential and commercial scale installations.  In recent years utility-scale projects have been planned and installed using both PV and CSP technologies (see the previous post).

A census of the solar industry in the U. S. was conducted by the Solar Foundation in 2010.  It is intended to represent as comprehensively as possible all firms engaged in the industry.  As a result much of its data represents firms dealing at the retail level with residential, small business and commercial installations. 

The census found that as of August 2010:

• There are 93,502 solar workers in the United States (defined as working at least half-time performing duties related to the solar industry), which was about double the number estimated for 2009.  They work across 16,703 employment locations.
• Solar job growth over the following 12 months was predicted to be 26%, representing nearly 24,000 net new jobs.  This expansion is against a background of employment nationwide in the U. S. that, as of this writing, created only 0.2% job growth from June 2010 to June 2011.
• Over half of all solar employers expected to increase their number of solar jobs in the following 12 months, while only 2% anticipated reducing solar staff.
• Employers from all of the manufacturing, installation, wholesale and other subsectors expected significant employment growth over the following 12 months.

Energy Efficiency.  Energy efficiency relates to efforts to obtain more effective results from energy inputs.  These include

• products, services, or methods that improve energy efficiency;
• use of equipment, appliances, and vehicles that are energy-efficient;
• improvements in the energy efficiency of buildings; and
• improved energy storage and distribution (e.g. Smart Grid technologies, cogeneration—combined heat and power).

Two previous posts on this blog deal with energy efficiency (Energy Efficiency in Public Buildings and A U. S. National Academies Report)

Considering buildings, for example, it is estimated that efficiencies can improve the utilization of energy by up to 25%, and provide sufficient savings to yield full payback of efficiency investments in very short times.  The Environmental and Energy Study Institute has summarized employment groups that contribute to energy efficiency projects, below.

Source: The Environmental and Energy Study Institute http://www.naseo.org/news/newsletter/documents/2011-06-02/EESI_Fact_Sheet.pdf

Conclusions.  The reports discussed here do not explicitly consider tax-based or market-driven charges for use of fossil fuels or for greenhouse gas emissions.  The economic benefits and expansion of job opportunities they present result from the beneficial effects of seeking energy efficiency and imposing renewable portfolio standards, for example.  Many of the results here reflect models that predict future benefits of expanding the role of renewable energy in the overall energy mix.

The case history for California, however, shows the benefits of past behavior, beginning in 1976.  According to Wikipedia, California’s GSP is 13.3% of that of the U. S.  If a program similar to the emission reductions required by California described above can validly be extrapolated to the U. S. as a whole, this suggests that nation-wide over 3 million jobs could be created.  U. S. national Gross Domestic Product could increase by US$571 billion.  New economic activity of this magnitude from this single sector of the economy indicates that implementation of renewable energy and energy efficiency policies would have significant positive impacts on the economy.

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Note 1.  A watt is a unit of power, quantifying the rate at which energy is provided or consumed.  It is a small unit. 

A kilowatt (1,000 watts, Kw) is a more manageable unit of power.  10 100-watt light bulbs represent 1 Kw; an electric toaster would be 1-2 Kw.

Generating capacity is the rate at which an installation provides power, such as in millions of watts (megawatts, MW) or billions of watts (gigawatts, GW).

Energy is a measure of total work done, given by power x time and for electricity is watt-hours.  Again this is usually given in terms of kilowatt-hours, KWh.  10 100 W light bulbs burning for 1 hour would use 1 KWh.

© 2011 Henry Auer