NEW ENERGY MANUFACTURING CAN MAKE THE MIDWEST ONCE AGAIN MIGHTY
American Innovation: Manufacturing Low Carbon Technologies in the Midwest
January 2010 (The Climate Group)
SUMMARY
There is a very good chance federal funds are available for Jack to grow his beanstalk if he can show it will create jobs in the beanstalk growing industry. That Princess bothered so much by the pea can likely qualify for federal funding by creating a mattress testing business. And Ali Baba is a sure bet for one of the federal grant programs; he not only has 40 thieves’ jobs to protect, he can start a training program for cave openers, teaching the “Open Sesame” method.
There are also tales of opportunity for the Heartlands' industrial sector in the imminent transition to a New Energy economy. Can it revive the rusting Midwest manufacturing industries? The Obama administration is betting billions the answer is yes. As American Innovation: Manufacturing Low Carbon Technologies in the Midwest makes clear, the Obama folks are not putting taxpayer money into a fairy tale: The coming shift to New Energy will bring costs and benefits and the benefits will far outweigh the costs.
Yes, there will be higher energy and resource costs that will make for higher production costs that could diminish consumption and move manufacturing facilities and jobs offshore.
There will, on the other hand, be billions of dollars worth of opportunities to invent and manufacture New Energy and Energy Efficiency technologies, bringing hundreds of thousands of new jobs, not only in meeting the demand from growing domestic markets but in meeting the demand from incipient international markets as well.
click to enlargeNew and reliable data is emerging, clarifying impacts on industries and regions. Studies from the Environmental Protection Agency, the Pew Center on Climate Change, Deutsche Bank, HSBC Bank and many other sources show that climate change-fighting policies drive business growth and generate wealth.
American Innovation is an in-depth profile of what can be reaped in wind turbine component, hybrid powertrain, and advanced battery manufacturing in the Midwest either with or without 3 key supportive policies: (1) a federal stimulus package of grants, loan guarantees and subsidies aimed at sustaining the financing for New Energy and Energy Efficiency, (2) a climate law that results in a $17 per ton price on GhGs, and (3) a national Renewable Electricity Standard (RES) that requires regulated U.S. utilities to obtain 20% of their power from New Energy sources (though 5% can be met by Energy Efficiency) by 2020.
In it, The Climate Group and The University of Michigan found that the potential for growth in low carbon manufacturing sectors in the Midwest is “significant.” If sought-after climate and energy policies are achieved, they will expand market revenues in just the 3 studied New Energy technology markets (wind turbine components, hybrid powertrains and advanced batteries) to ~$12.3 billion, add tax revenues in the Midwestern states studied (Illinois, Indiana, Michigan, Ohio, Wisconsin) of ~$812million and create as many as 104,640 new jobs by 2015.
click to enlargeCOMMENTARY
The 4 most important economic sectors in the Midwest, per the Chicago Federal Reserve
Midwest Manufacturing Index (CFMMI), are (1) primary metals, (2) chemicals, (3)
machinery production, and (4) the automotive sector. They employ “far” more of the workforce in the Midwest than in other regions.
Hit successively by the 2001 downturn and the 2008-09 recession, these sectors are reeling, the manufacturing base lost to foreign and domestic competition. Michigan lost 18% (800,000) of its jobs from 2000-to-2010.
click to enlargeThe question the paper begins with: What is the economic opportunity for manufacturing selected low-carbon technologies in the Midwest?
The New Energies have done it for other countries. Germany, with a similar manufacturing base, put a price on GhGs, instituted an effective feed-in tariff (FiT) and grew its New Energies by 330% in 10 years, adding 280,000 jobs. It expects to employ 500,000 people in the New Energies by 2020, more than in its flagship auto industry.
click to enlargeThis growth was driven by a worldwide increase in demand for New Energy and Energy Efficiency technologies. Investment bank HSBC estimates the international market for climate change-fighting products and services was $300+ billion in 2007, more than the entire electrical equipment industry or the communications equipment industry.
To answer the crucial question of what the manufacturing opportunity for the Midwest can be, the study estimated the economic benefits associated with growth in (1) wind turbine components, (2) hybrid powertrains and (3) advanced batteries through 2015. It used 5 states in the Midwest (Illinois, Indiana, Michigan, Ohio, Wisconsin) and 2 differing scenarios, (1) the policy scenario and (2) the no policy scenario.
click to enlargeWind turbine components can fall into primary metals and machinery and advanced batteries can be in the automotive and chemicals sectors. The study, however, classified wind turbine components as Primary Metals, hybrid powertrains as Automotive and Advanced batteries as Automotive.
The policy scenario assumed U.S. political leaders put in place 3 essential policies: (1) A federal stimulus package of grants, loan guarantees and subsudies aimed at sustaining the financing for New Energy and Energy Efficiciency, (2) a climate law that results in a $17 per tonne price on GhGs, and (3) a national Renewable Electricity Standard (RES) that requires regulated U.S. utilities to obtain 20% of their power from New Energy sources (though 5% can be met by Energy Efficiency) by 2020.
click to enlargeFindings of a Pew Center study suggest a $15 per ton price on greenhouse gas emissions (GhGs) will have “modest” and “manageable” impacts, reduce manufacturing production only 1.3% nationally and have “no statistically discernable” harm on manufacturing sector employment.
The U.S. Environmental Protection Agency (EPA) study on the American Clean Energy and Security Act of 2009 (ACES) found a $16 per ton price on GhGs will only reduce U.S. manufacturing 0.7% by 2020. A rebate to energy-intensive, trade-sensitive industries will increase production 0.04% in 2015.
High and Low policy scenarios are considered for wind and batteries because of potential variations in the U.S. market.
click to enlargeIn the wind low policy scenario, policies increase U.S. wind capacity to 65.7 gigawatts by 2015. In the wind high policy scenario, policies increase U.S. wind capacity to 90 gigawatts by 2015.
In the battery low policy scenario, policies grow the U.S. industry adequately to supply 10% of the domestic advanced battery market by 2015. In the battery high policy scenario, policies grow the U.S. industry adequately to supply 50% of the domestic advanced battery market by 2015.
The no policy scenario examines the economic consequences of the absence of the 3 most essential policies. It is not a business-as-usual scenario because business-as-usual includes American Recovery and Reinvestment Act provisions that are comparable to policy 1’s financial stimulus.
click to enlargeThe study acknowledged its own limitations. Because it only considered the benefits of the 3 policies, it cannot claim to measure net economic impacts, only revenues and jobs. It also ignored economic benefits such as Energy Efficiency savings, new non-manufacturing jobs created and new jobs in the hundreds of other New Energy economy technologies, and the export opportunities in a New Energy economy.
The wind turbine components sector study found a low policy scenario (policies drive wind capacity to 65.7 gigawatts) would add ~$4.3 billion in market revenues, ~$286 million in tax revenues and more than 37,600 new jobs in the Midwest by 2015 ( compared to the no policy scenario).
click to enlargeThe high policy scenario for the wind turbine components sector (policies increase wind capacity to 90 gigawatts) would add ~$7.1 billion in market revenues, ~$470 million in tax revenues and more than 61,800 new jobs in the Midwest by 2015 (over the no policy scenario).
The policy scenario for hybrid powertrains would add ~$3.8 billion in market revenues, ~$252 million in tax revenues and 30,900 new jobs in the Midwest by 2015 (over the no policy scenario).
click to enlargeThe advanced batteries sector study found a low policy scenario (policies grow the U.S. industry adequately to supply 10% of the domestic advanced battery market by 2015) would add ~$295 million in market revenues, ~$18 million in tax revenues and more than 2,300 new jobs in the Midwest by 2015 (compared to the no policy scenario).
The high policy scenario for the advanced battery sector (policies grow the U.S. industry adequately to supply 50% of the domestic advanced battery market by 2015) would add ~$1.4 billion in market revenues, ~$90 million in tax revenues and more than 11,900 new jobs in the Midwest by 2015 (over the no policy scenario).
click to enlargeTotal benefit of the 3 key policies: Additional market revenues of ~$12.3 billion, additional tax revenues of ~$812 million and some 104,640 new jobs in the Midwest by 2015 from the 3 manufacturing sectors (wind turbine component, hybrid powertrain and advanced battery).
click to enlargeDefinitions:
(1) Market Revenues are monies low-carbon industries spend to produce technologies, not indirect effects of purchasing from other Midwest industries or induced (multiplier) effects;
(2) Tax Revenues are additional revenues to state and local governments from taxes on all new market revenues as well as interstate effects resulting from low-carbon industries purchasing from other Midwest industries;
(3) Job Creation is new direct and indirect jobs created by growth in low-carbon manufacturing; and
(4) Low Carbon Technologies are technologies in a range of economic sectors that help reduce greenhouse gas emissions, either by reducing fossil fuel based energy consumption, enabling the use of clean energy sources or capturing carbon emissions.
click to enlargeQUOTES
- From the report: “Our case study on wind turbine components found that the three climate and energy policies would lead to significant new market revenues, state and local tax revenues and jobs… Our case study on hybrid powertrains found that the three climate and energy policies would lead to $3.8 billion in additional market revenues, $252 million in additional tax revenues and 30,900 new jobs in the Midwest by 2015…Our case study on advanced batteries found that the three climate and energy policies would lead to modest new market revenues, state and local tax revenues and jobs…”
click to enlarge- From the report’s conclusion: “With the distribution of stimulus funding throughout 2009, we are already starting to see these numbers come to life. A123 is expanding their advanced battery plant in Livonia, Michigan which will create 500 jobs and will open a new plant in Romulus, Michigan. General Motors produced its first mass produced electric car battery in Brownstown, Michigan in early January. And Brevini Wind’s gearbox plant in Delaware County, Indiana received $12.8 million in tax credits, putting
Hoosiers to work…”
click to enlarge- From the report’s conclusion: “As global demand for clean energy increases, new, clean energy jobs will multiply exponentially. The question is: “Who will get them?” One possible answer is the Midwest. The Midwest has a storied history based on determination, innovation and hard work. In the twentieth century, the United States was the global manufacturing leader – and the Midwest stood at the center of that production. For over fifty years, this manufacturing economy made it possible for men and women to earn middle class wages and create multiple generations of skilled workers. The Midwest was home to the largest steel maker, US Steel, and the biggest car company, General Motors, and retains a competitive advantage in these industries. Because of this competitive advantage, the Midwest is uniquely positioned to capture new low-carbon manufacturing jobs…[This report offers] a sense of the enormous potential for job creation in the Midwest…It will take vision and hard work to create the kinds of policies needed to incentivize the low-carbon economy. But climate and energy policy offers us a chance to ensure that the Midwest – indeed America– has a bright, clean and prosperous future."
posted by Herman K. Trabish @ 6:06 AM
0 Comments:
Post a Comment
<< Home