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The Battle For More Efficient Energy

The Battle For More Efficient Energy

The importance of energy efficiency…

Leonard Hyman & William Tilles

Leonard Hyman & William Tilles

Leonard S. Hyman is an economist and financial analyst specializing in the energy sector. He headed utility equity research at a major brokerage house and…

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Will Clean Energy Policies Actually Create More Jobs?

Here’s the claim. The Green New Deal and all those other supposedly anti-fossil fuel policies will destroy jobs. One Fox News report claimed 3.4 million oil, gas, and coal jobs would be eliminated. Naturally, the proponents of green policies say the opposite. We have all read the clashing claims buttressed by think tank reports and caution that oil workers, for example, who lose jobs may not be able to find replacement jobs paying as much.  With all those charges and countercharges, we decided to look at a few numbers in order to frame the issue. No econometric models. First, employment numbers. The National Association of State Energy Officials publishes what may be the most useful numbers, because they include suppliers, outside workers, etc. In other words, the industry and those who service it. ( See Figure 1):

Figure 1: Total, employment (millions)

Employment

Just looking at the employment numbers and applying some common sense, 

we should expect job losses in the Fuel sector, many well-paid and specialized. The Motor Vehicle sector might lose, too, if electric cars are simpler to build and service. But, since electrification is a key aspect of green policy, and new technologies will permit more installation of small generating and storage devices in homes and offices, we should expect gains in Electric Generation and in Electricity Transmission, Distribution, and Storage and in Energy Efficiency. (The Organization for Economic Cooperation and Development did a study published in June 2017 which concluded that, on an international basis, the switch to green resources would lead to more labor-intensive service jobs at the expense of traditional energy employment and but not to a significant change in employment levels. In other words, pretty much what we expect here.) 

So far, none of these conclusions qualify as profound, and the job consequences of green policy do not look dire. But, here’s one problem. The decline in Fuel jobs will be concentrated in a few states while the job increases will be spread thin all over the country. And some of the service sector jobs will not have the same salaries as those lost in Fuel. That makes for political trouble because oil state politicians will be far more motivated to prevent job losses than those elsewhere to protect new employment. It means that policymakers will have to figure out how to locate green jobs in the oil and coal-producing states as an offset. And workers, in some cases, will earn less. Related: Nigerian Government: Oil Could Become Worthless

But there is another factor that should be in the analyses but apparently is not.  There is no way the electric sector can service a green economy without engaging in a massive capital expenditure program that will lead to literally thousands of new, high paying construction jobs.

Since 2014, when they peaked, oil and gas capital expenditures have fallen by one third while electric capital expenditures have risen one third. The two industries’ capital expenditure programs are now of similar size. According to some estimates, the oil and gas program could rise over the 2014 levels within a few years. But, get this, the electricity capital expenditures in the US will have to at least triple in order to decarbonize and modernize the industry. ( For a full analysis of how and why electric industry capital spending will rise, see Leonard S. Hyman and William I. Tilles, “Electricity decarbonization is not that expensive, so let’s get on with it’, available on the blog page of lenhyman.com. ) That is where to expect new high paying jobs. 

All in all, the greening of America will displace some jobs and create others, but not necessarily in the same place. This wont be the first regional economic shift in American history. Tackling the problem now to deal with potential job losses seems a better policy than ignoring it until the Wile E. Coyote moment.

By Leonard Hyman and William Tilles for Oilprice.com

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  • Steven Soychak on September 30 2020 said:
    There is no such thing as clean energy! Wind turbines and solar panels materials are mined, manufactured, and processed using a great deal of fossil fuel energy. A quote I have read recently said “Building wind turbines and solar panels to generate electricity, as well as batteries to fuel electric vehicles, requires, on average, more than 10 times the quantity of materials, compared with building machines using hydrocarbons to deliver the same amount of energy to society”.

    You missed a big point that is unreliable sources of energy such as wind and solar significantly increase electricity costs due to their intermittency, large subsidies, and transmission line costs that are not included in the utilities partial accounting of them. I have looked at EIA public data from 7 states (CA, CO, IOWA, KS, MN, OK, and SD) that have aggressively put in unreliable sources of wind/solar in the past 10 years and their residential electricity rates per KWH have gone up an average of 28% where the US has gone up only 11%. If you were to take out all the states that have Renewable Portfolio Standards from the US average you would probably see very little increase in the past 10 years electricity rates which means unreliable energy is driving up costs for each US citizen with very little benefit. If it weren’t for natural gas and coal prices going down 50% and 33 %, respectively, in the past ten years US electricity rates would even be higher. Why do utility companies continue to push this so called clean energy transition? The more money they spend, the more money they make due to each state’s Public Utilities Commission allowing them to make 9 to 10% on capital/equity spent. Quite a Racket!
  • Pekka Lehtikoski on October 01 2020 said:
    The purpose of the energy industry is to make a profit for stockholders by generating, transporting, and storing energy so that it is available when needed. It doesn't exist to create jobs. Jobs are a consequence of economic activity, not the reason for it. The market economy is very good at allocating resources. The Green future becomes reality and gets major investment when it is profitable, counting in production, backup, storage, and grid costs. Every potential investor does the math. The government may throw money in unprofitable profits, doesn't matter how much, but it could burn it as well.

    The key question is: Do renewable energy policies help to create an environment where green energy can be profitably produced and delivered to where and when it is needed. The whole debate about jobs created or lost is irrelevant. It doesn't drive the money flows, profit does.

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