THE NEW ENERGY JOBS THAT CAN BE

Report: U.S. Must Do More to Prevent Loss of Clean Energy Manufacturing Jobs
Sam Haswell, March 4, 2010 (Apollo News Service)

THE POINT
It is ironic that the New Energies have been labeled by some as ideas of the intellectual left because they are really blue collar industries. It is factories that turn out solar panels and wind turbines. People in boots install solar systems and build wind projects.

Wind project building and solar array installation is, of course, local work. The manufacturing, however, can be and, right now, is done elsewhere. In 2009, 70% of U.S. New Energy and Energy Efficiency hardware was imported. But domestically manufactured New Energy parts and assembly can be cheaper – even when they are made by workers earning high wages and good benefits – than the same parts expensively shipped from distant places where labor costs are lower. And domestic manufacturing will become an even better deal as the price of transportation fuel rises.

Winning the Race: How America Can Lead the Global Clean Energy Economy, from the Apollo Alliance and Good Jobs First, explains how the U.S. can have those good jobs if it will pay the policy price of getting them.

One of the biggest beneficial side-effects to building a domestic New Energy manufacturing base is that it stops the subsidizing of developing-world sweatshops where workers are underpaid so the New Energy parts they manufacture will be cost-competitive after shipping.

A wind turbine has 8,000+ components. That’s a lot of jobs. They can be in places like Arkansas and Idaho or in Shenzhen, China, and Kalim, Malaysia. By making the right policy choices, the nation can create ~100,000 New Energy manufacturing jobs by 2015 and ~250,000 by 2030. With 17 unemployed people for every job opening in durable goods manufacturing (as opposed to the national average of 6 unemployed people per job opening), letting those manufacturing jobs go abroad is not something the U.S. can afford to let happen.

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Most urgently, Congress is about to focus on energy and climate legislation. Washington insiders say the best Congress can do this year is an energy-only bill with a Renewable Electricity Standard (RES) requiring the nation’s regulated utilities to obtain 10% of their power from New Energy sources by 2012 and 20%-to-25% by 2020 or 2025.

An RES is important and will be valuable in bringing investment to the New Energies and driving the creation of New Energy jobs. But research suggests a cap on emissions will do even more of those things and will at the same time act on the greenhouse gas emissions (GhGs) that are worsening global climate change. A comprehensive long-term energy strategy will do even more.

As an example of what support for domestic manufacturing means, the study chronicles the returns from the Advanced Energy Manufacturing Tax Credits (48C credits) in the 2009 Recovery Act. Of 90 U.S.-based and foreign companies that got $458 million in 48C tax credits for U.S. New Energy manufacturing facilities, 23 are also investing in China, India, Mexico and Malaysia. President Obama wants $5 billion more to extend the 48C program. If Congress approves, those companies will continue building U.S. facilities; if it doesn’t, those facilities and their jobs will go away.

Winning the Race offers a strategy for expanding the New Energy manufacturing base and reaping the investments and jobs benefits. The strategy begins with an RES and action on GhGs that will create a long-term market for New Energy. The next step is getting that $5 billion for the 48C tax credit program. After that comes passage of an array of proposals that support needed new transmission and the retooling and expanding of small and mid-sized manufacturers. The final part of the plan is creating a workforce trained and ready to make, build and install the urgently-needed New Energy infrastructure.

For anybody who questions whether the nation can afford such investments in New Energy, consider this: China is investing ~$12.6 million HOURLY.

The nation is at a crossroads.. It can turn toward the New Energy economy described in this report and prosper or it can fail itself and flounder.

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THE DETAILS
Rebellion ensued when China’s Shenyang Power Group contracted to build a Texas wind project with Recovery Act funding that would use turbines made in China. The clamor from the public, labor union leaders, politicians and U.S. New Energy manufacturers kick-started a movement to bring those turbine manufacturing jobs home.

In his most recent State of the Union speech, the president announced a goal of doubling U.S. exports within five years to expand U.S. jobs. But the U.S. does not have the capacity to meet even domestic demand for New Energy systems and components much less build for export.

Indications of the decline of U.S. manufacturing:

More than two-thirds of U.S. solar photovoltaic cells and modules and ~one-half of U.S. wind turbines are foreign-made.

In the last 10 years, the U.S. lost 5.7 million manufacturing jobs. Since the beginning of the recession December 2007, the U.S. lost 2+ million manufacturing jobs.

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The average manufacturing job salary is $25,000 per year, comes with benefits and has traditionally provided entry into the middle class for 68% of non-college educated U.S. workers.

A shift to New Energy and Energy Efficiency will create more manufacturing jobs than in green construction or operations and maintenance. 24%-to-47% of total jobs created by investment in NE and EE are in manufacturing. 70%-to-75% of the total labor in a wind turbine or a solar panel is manufacturing component parts.

If the U.S. continues to import 70% of its NE and EE hardware, it will lose the ~100,000 manufacturing jobs projected for 2015 and the ~250,000 manufacturing jobs projected for 2030.

The American Recovery and Reinvestment Act (ARRA) invested $110 billion to start a New Energy economy, the biggest such expenditure in U.S. history and equal to 2008’s world investment in the New Energy economy.

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$19+ billion of ARRA money went into EE. Funding for the Weatherization Assistance Program was 20 times the pre-Recovery Act investment in home retrofits. It created/retained 26,600+ jobs.

$8+ billion went into transit projects, creating 72,000+ jobs. As high-speed rail projects begin construction, individual states will add thousands of jobs.

The Recovery Act also invested in advanced technology research and development (R&D). It funded the Advanced Research Projects Agency (ARPA-E) created by the 2007 energy bill. 37 ARPA-E grants put $151 million into R&D programs. Smart Grid funding is supporting the deployment of 18 million smart meters and 877 digital sensors.

Primarily through its grant-in-lieu of the Investment Tax Credit (ITC), ARRA invested $2.3 billion through 250+ New Energy projects that will add ~50,000 megawatts (MW) of capacity by 2015, expanding U.S. New Energy by 40+% and adding 150,000 New Energy manufacturing jobs by 2015.

With a comprehensive energy plan with long-term provisions driving the expansion of the New Energy economy, such as the House-passed American Clean Energy and Security (ACES) Act now dying in the Senate, the U.S. could add 105,000 MW of New Energy capacity and 320,000 manufacturing jobs by 2030.

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3 ARRA provisions specifically support manufacturing sector jobs: (1) The advanced battery grant program, (2) the industrial efficiency grant program and (3) the Advanced Energy Manufacturing (48C) Tax Credit.

Through the first provision, ARRA invested $2 billion in 30 new advanced battery and electric drive manufacturing projects to build an advanced U.S. battery industry. This is expected to make it possible for the U.S. increase its share of the world advanced battery market from 2% to 20%.

Through the second provision, ARRA invested $155 million in 41 combined heat and power and waste recovery industrial efficiency projects.

Through the third provision, ARRA invested $2.3 billion in 183 projects and leveraged an additional $5.4 billion in private investment.

From the 70% of U.S. New Energy systems and components manufactured outside the country, the U.S. New Energy trade deficit grew 1,400% ($5+ billion) between 2004 and 2008. The 2008 wind energy systems and components deficit was $2.6 billion.

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This pattern of importing New Energy hardware could be turned around or could ruin the country as the world New Energy market grows to a predicted $325 billion by 2020.

China: Huge increases in domestic energy demand and big, long-term government investments have made China a world leader in the New energy economy. It now has the biggest cumulative New Energy installed capacity in the world and leads the world in the manufacture of wind turbines and solar panels.

Chinese policies: New Energy manufacturers and developers get free land, low-cost financing, tax incentives, and research and development support.

Together, the Japan and South Korea investment in the New energy economy is four times that of U.S. investment. Many EU countries, such as Germany and Spain, are driving installed capacity growth and growing New Energy manufacturing capacity with innovative policies (ambitious goals, feed-in tariffs) despite inferior natural assets.

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The Advanced Energy Manufacturing Tax Credit program, also known as 48C, provides a tax credit for 30% of the value of investments in new, expanded or re-equipped U.S. facilities that make New Energy hardware.

183 projects in 43 states were approved for the initial $2.3 billion in 48C funding. The Obama administration has requested $5 billion in the FY2011 budget.

There were 116 wind or solar project recipients that account for $1.6 billion (68%) of 48C tax credits. 83 of the 116 projects (72%) are U.S.-based companies. The other 33 are U.S. units or subsidiaries of foreign-based corporations expanding into the U.S. market. Of the 90 unique parent companies in wind and solar, 65 are U.S.-based, and 25 have foreign parents.

59% of the 48C dollars went to U.S.-based companies The average project built by a U.S.-based company was $11 million, while the average project from a foreign parent company was $20 million because foreign companies are in a position to take on more ambitious projects.

Wind and solar companies in Western Europe, the U.S., and China are also making competitive manufacturing investments internationally. 48C recipients are no different. $458 million in 48C dollars went to 23 companies that are investing money and creating jobs in low-wage countries, especially China.

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Of 25 foreign-based companies involved in 48C projects, 17 – that got $406 million of the $1.6 billion 48C dollars – have or are planning wind or solar production plants in low-wage countries. 6 of the 65 U.S.-based 48C recipients – that got $52 million in 48C credits – have or are planning low-wage country operations.

The point: Momentum is gathering to transfer manufacturing to low-wage countries and the main reason is that U.S. policymakers are failing to create a domestic market for New Energy.

The Recovery Act put $110 billion into the U.S. New Energy economy (NE, EE, smart grid, advanced batteries, high-speed rail, etc.) The FY 2011 budget will build on it with:

From the Department of Energy: (1) a $325 million investment in energy-efficient vehicle technology; (2) $300 million in spending for the Advanced Research Projects Agency (ARPA-E) program; (3) $700 million for New Energy RD&D; (4) $715 million in building and industrial efficiency and weatherization retrofits; and (5) $5 billion more for 48C projects.

From the Federal Transit Administration: (1) $5 billion in capital and operating assistance for public transit; (2) $1.8 billion in New Starts capital assistance; (3) $360 million in GhG reduction programs; (4) $30 million in R&D for alternative- and clean-fuel technologies; and (5) $1 billion in high-speed rail.

Other studies show comparable job growth from aggressive energy and climate policies. (click to enlarge)

Total investment next year could reach $240 billion. It will build 3 electric vehicle manufacturing facilities, 30 advanced battery manufacturing facilities, and 19 advanced biofuel refineries. It will install 26 million smart meters. It will retrofit 1+ million homes.

Obama administration spending has already created ~826,000 New Energy jobs. 52 Recovery Act investments in manufacturing will create 30,000+ more.

But China has bigger plans. It will, for instance, increase its 5,600 megawatts of 2008 installed wind-power capacity to 100,000 megawatts by 2020 and increase the part of it required to come from domestic manufactories beyond the present 70%.

Other studies show comparable job growth from aggressive energy and climate policies. (click to enlarge)

The U.S. needs to:

(1) Pass comprehensive energy and climate legislation with (a) a pricing mechanism for GhGs, (b) a Renewable Energy Standard (RES), requiring regulated U.S. utilities to obtain a specific portion of their power from New Energy sources by a specific year, (c) an Energy Efficiency Resource Standard (EERS), requiring specific levels of EE from buildings and appliances and 9d) increasing support for public transit.

(2) Pass direct financial assistance for New Energy manufacturers.

(3) Expand the Advanced Energy Manufacturing Tax Credit by $5 billion and add provisions to take back funding if operations are moved out of the country.

(4) Invest in the training of a workforce to do NE and EE manufacturing and deployment.

Other studies show comparable job growth from aggressive energy and climate policies. (click to enlarge)

QUOTES
- From the report: “When U.S. Renewable Energy Group and CieloWind Power LP announced plans to construct a 600 megawatt wind farm inWest Texas with China’s Shenyang Power Group, the companies expected a positive public response. Their press release trumpeted the fact that the agreement marked the first time companies from China and the United States agreed to jointly develop a utility-scale wind power project. But just days after the announcement, news surfaced that only 15 percent of the 2,800 jobs to be created by the project would be located in the U.S., despite the fact that the project was to be funded, in part, by the American Recovery and Reinvestment Act of 2009 (ARRA).1 The rest of the jobs would be in China, where the wind turbines were to be manufactured. The American public, labor union leaders, elected officials and U.S. renewable energy manufacturers were infuriated:Why were Recovery Act funds being used to create jobs overseas? In the race to capture the growth in the clean energy economy, why were American investments being used to create jobs manufacturing these systems in other countries?”

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- From the report: “There is thus a risk that they will follow in the footsteps of Evergreen Solar, which is not on the 48C list but which received $44 million in state subsidies for its plant in Devens, Massachusetts…In November 2009, Evergreen Solar announced that, because of the falling price of solar panels, it had become ‘very difficult for manufacturers located in high-cost regions to remain price competitive.’ Lured by incentives that will pay for approximately two-thirds of the cost of its new facility, Evergreen announced in October that it would transfer its solar panel assembly operations from Devens to a plant in China…”

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- From the report: “There’s no denying the fact that clean energy is becoming a globalized industry. In fact, it is desirable to see production operations spring up around the world to serve what will hopefully be robust demand for wind and solar components in all countries. But the reality of globalization is no excuse for letting the U.S. lose out on the growth of clean energy manufacturing. The United States has some of the most skilled workers in the world, a competitive advantage which has been realized by some global leaders in clean energy markets…”