The Spanish Green Jobs Study
April 21st, 2009Posted by: Roger Pielke, Jr.
There has been a lot of discussion of a recent research paper out of Spain arguing that the Spanish experience in the creation of “green jobs” is not one to emulate here in the US, despite President Obama’s suggestion that Spain is a leader in green jobs. The paper can be found here in PDF. A few of its key findings follow:
1. As President Obama correctly remarked, Spain provides a reference for the establishment of government aid to renewable energy. No other country has given such broad support to the construction and production of electricity through renewable sources. The arguments for Spain’s and Europe’s “green jobs” schemes are the same arguments now made in the U.S., principally that massive public support would produce large numbers of green jobs. The question that this paper answers is “at what price?”
2. Optimistically treating European Commission partially funded data, we find that for every renewable energy job that the State manages to finance, Spain’s experience cited by President Obama as a model reveals with high confidence, by two different methods, that the U.S. should expect a loss of at least 2.2 jobs on average, or about 9 jobs lost for every 4 created, to which we have to add those jobs that non-subsidized investments with the same resources would have created.
3. Therefore, while it is not possible to directly translate Spain’s experience with exactitude to claim that the U.S. would lose at least 6.6 million to 11 million jobs, as a direct consequence were it to actually create 3 to 5 million “green jobs” as promised (in addition to the jobs lost due to the opportunity cost of private capital employed in renewable energy), the study clearly reveals the tendency that the U.S. should expect such an outcome.
4. At minimum, therefore, the study’s evaluation of the Spanish model cited as one for the U.S. to replicate in quick pursuit of “green jobs” serves a note of caution, that the reality is far from what has typically been presented, and that such schemes also offer considerable employment consequences and implications for emerging from the economic crisis.
5. Despite its hyper-aggressive (expensive and extensive) “green jobs” policies it appears that Spain likely has created a surprisingly low number of jobs, two thirds of which came in construction, fabrication and installation, one quarter in administrative positions, marketing and projects engineering, and just one out of ten jobs has been created at the more permanent level of actual operation and maintenance of the renewable sources of electricity.
6. This came at great financial cost as well as cost in terms of jobs destroyed elsewhere in the economy.
7. The study calculates that since 2000 Spain spent €571,138 to create each “green job”, including subsidies of more than €1 million per wind industry job.
8. The study calculates that the programs creating those jobs also resulted in the destruction of nearly 110,000 jobs elsewhere in the economy, or 2.2 jobs destroyed for every “green job” created.
9. Principally, these jobs were lost in metallurgy, non-metallic mining and food processing, beverage and tobacco.
10. Each “green” megawatt installed destroys 5.28 jobs on average elsewhere in the economy: 8.99 by photovoltaics, 4.27 by wind energy, 5.05 by mini-hydro.
11. These costs do not appear to be unique to Spain’s approach but instead are largely inherent in schemes to promote renewable energy sources.
Is the study sound? Did Obama err in highlighting Spain as a model to emulate?
April 21st, 2009 at 5:17 am
Govt subsidies of unproductive technology always cost jobs. Are the estimates in this study accurate? Who knows. But the basic analysis is sound. When govt mandates and subsidizes inefficiency, economic productivity suffers. Our standard of living falls.
April 21st, 2009 at 6:07 am
Spain’s economy is hardly synonymous with ours. Comparing the two countries is a stretch at best. That doesn’t mean their cannot be validity to the problems pointed out in the analysis. But if we want an economy that is less dependent on coal/oil/etc, there is going to have to be a shift away from those labor intensive industries. We cannot simply assume that away, which means jobs will be lost. A coal miner likely gets paid more than a solar installer, but is our health (and planet’s) going to be better in the long run? Probably.
April 21st, 2009 at 7:38 am
byclark
The jobs lost are not neccesarily directly related to the fossil fuel industry (i.e. miners, oil field workers, etc.). I would like to see numbers showing that fossil fuel energy is more labor-intensive than renewables. The jobs lost include jobs in all sectors that are out-sourced or eliminated in order to balance the increased cost of energy.
April 21st, 2009 at 8:00 am
by clark
Oil coal and natural gas are probably the most automated industries on the planet. The least automate is coal and it sells for ~$60 per ton so not a lot of labor in that price. Some of the great green energy proponents recently bragged that more people are employed in the wind energy sector than are in the coal industry yet coal produces more than 50% of our electric power and wind energy less than 2%. You can easily turn that around and say that wind is 25x more labor intensive than coal. Its also instructive to see the article in the NY Times today that says Spain is under deflationary pressure right now while at the same time its been one of the most aggressive on the green energy front, getting up to 11% from renewables mostly wind. I’d surely have liked to have seen the inflation numbers split to see if energy costs, as a portion of the total economy, had increased.
April 21st, 2009 at 8:12 am
The 2.2 jobs lost for every “green” job created is a good data point for the first order effects of government mandated energy policy. The second order longer term effects will be even worse.
China and India will continue to use cheaper energy from coal and oil. Energy intensive manufacturing will be at a disadvantage in the US and will move off shore. For every manufacturing job moved off shore another one or two supporting job will be lost.
There are many experienced, and un-employed, central planners in Russia who understand the effects of government mandated changes to the economy. Or we could just read some history.
April 21st, 2009 at 9:36 am
Replacing low-cost high-quality energy with high-cost low-quality energy is always harmful to the economy. Any economist who argues otherwise is a crackpot. The environmental issue is debatable but the economics is not.
The Spanish study may be underestimating the harm to the economy. Spain has been hit harder then most OECD nations. Everyone is blaming the credit bubble but it was high energy prices that popped the bubble.
April 21st, 2009 at 9:55 am
Obama blew it again, when he referenced Spain’s experience. He must have had the teleprompters off again? Like Comments 5 & 6 say, anytime the government starts mandating energy sources, we will have much higher prices, a worse economy, and much more misery for the poor.
April 21st, 2009 at 11:16 am
Currently, energy companies have a list of technologies that they know will generate electricity, from hydro to nuclear, coal, natural gas, solar and wind. They take a look at the current legal environment, and what they think the legal environment will look like in the future, and they pick what they think will be the cheapest option from the list. Most of the time, that option is coal, oil, or some other fossil fuel.
It stands to reason that if government takes the lowest cost options off the table — by banning them, or by changing air pollution regulations, or by taxing them directly or indirectly — that energy companies will pick higher cost ways of generating electricity, and pass the costs on to consumers.
The higher price may be worth it, but it’s hard to claim that the cost isn’t there.
April 21st, 2009 at 12:45 pm
Green Jobs Myths
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1358423
April 22nd, 2009 at 3:27 am
Economics Professor George Reisman nails it.
The Folly of Green Job Creation
http://www.realclearmarkets.com/articles/2009/04/the_folly_of_green_job_creatio.html
April 22nd, 2009 at 10:55 am
Oooo, so they have an economic model using TWO different methods and it gives a HIGH confidence. Well let’s just review the recent performance of economic models shall we? Oh yes that’s right – they all predicted a wonderful future but the economy still went down the pan. So quite clearly how much faith you put in economic models, or economists for that matter is that if they say what you are thinking then they must be correct. If they don’t then they are wrong. So easy this economics stuff.
But none of you noticed the paper answered a question that wasn’t asked and still got it wrong. Green jobs created by government are not sustainable regardless of it is wind or coal stations. Hence anyone talking about potential green jobs have must be thinking about private sector jobs. Of course Stan and others think that the private sector can do no wrong, despite all the dot-com and credit-crunch evidence to the contrary. Can government funding do better than private funding? One might ask how could it possibly do any worse? So if your starting point was that government guiding hand obviously does worse than the private sector with it’s invisible hand, wheres the proof? the prosperity of the 50’s to the 70’s was set up by government agreements. Chaotic finance has now brought us two depressions. But then faith is unshakable.
Is wind energy competitive? When you get your accounts right then yes it can be. When your accounts are full of schoolboy errors like this report indeed is, it is no more than a comforting noise for the believers in flawed ideologies.
April 22nd, 2009 at 11:44 am
And now to some facts about Spain and energy:
Wind: We who have lived in Spain know that the idea of fossil fuels providing a constancy of supply is a complete joke. We got used to frequent power interruptions which was a huge drain on the economy. Presumably now that wind energy supplies between 20 and 40% of the electrical energy that will be a thing of the past. So all industries will now be working better than before and hence saving money. Why didn’t CO2 reduce then? Because Spain had been critically short of energy previously. Now it isn’t! Windmills are built mainly in la Mancha, where windmills have always been built because – well it’s pretty windy there. Madrid is quite near those windmills so they aren’t remote at all. And frankly they look gorgeous up close. I couldn’t actually hear any machine noise from them because the noise of the wind up there is quite deafening.
Solar: Half of Spain has 300 days of sunshine. When I was there BP had just re-roofed all of their filling stations with solar panels so they got free energy. You might have thought they’d look at the economic argument for using diesel instead. Well in fact they did and the economics clearly pointed to solar power. Contrary to what others might have said above, I’d say that if you are in a very sunny place and yet you are not planning to use solar power then you are just plain stupid. Even better, the more panels bought and used, the cheaper they become by mass manufacturing economics. In the last 20 years they have reduced in price 10 times and another 10 times reduction or more is very possible. So any study that projects into the future using todays prices is hugely flawed.
Geothermal: Well I don’t know about you guys but I’m buying a geothermal heating/cooling system as soon as money allows – for about 15000 euros I could heat (and cool) 150 square metres and save 50 to 70% of my energy bills. And the more people who do it, the more the price will drop. All we need to get it moving is a little subsidy – or maybe just zero-interest loans.
Green jobs are definitely coming in the private sector and from wind, solar and geothermal. You guys are just the same kind of people who said “cars are just a gimmick, I’ll stick to my horse.”
April 22nd, 2009 at 1:33 pm
That all sounds wonderful jasg. But if what you say is true why does the green economy require government subsidies? When are solar and wind going to start paying massive taxes like fossil fuels?
The reality is that alternative energy would not exist without government subsidies. Free markets are concerned with value and quality both of which don’t exist in wind and solar.
April 22nd, 2009 at 2:07 pm
“So if your starting point was that government guiding hand obviously does worse than the private sector with it’s invisible hand, wheres the proof?”
Well, we can start with Cuba and the USSR.
April 22nd, 2009 at 2:48 pm
Reid
The coal industry doesn’t pay massive taxes. On the contrary it is also hugely subsidised. The oil industry doesn’t pay massive large taxes either (apart from normal business tax) and in fact is subsidised too. We pay the gasoline taxes but only for transport, not for the home. I’d argue the true cost of the oil economy is in the permanent military presence in the gulf – when you add in the numbers from the cost of that misadventure it’s not so cosy a calculation. I’m also pretty certain that Al Qaeda wouldn’t have arisen if we didn’t need Arabian oil (think about it). But anyway that’s beside the point because there aren’t many oil-fired power stations left – oil is just too precious – and it’s grid power we are talking about here.
So the subsidy/tax argument is a fallacy. All power stations need subsidies. But it’s a price worth paying because without power every other industry collapses. It’s just a question of comparing apples with apples. Wind energy has been shown to be no more favoured than nuclear, and it’s likely just a little more than coal. But crucially, the fuel will always remain free, so you should always factor in zero fuel costs for 25 years. That makes a big difference.
Natural gas is truly the best system though – clean, no refinement required, efficient but is it abundant? If yes then I’d say largely forget about the rest. But it sure isn’t abundant in Spain. In the USA I believe it is. Though it’s still good to have a mix in your portfolio just in case.
I don’t think home heating needs subsidised though and if we went for home geothermal systems we’d all save money and the country would save a heck of a lot of energy so I think it’s a no-brainer. Even George Bush went geo.
Solar is only useful in sunny places and wind is only useful for windy places so nobody is sensibly saying that they will meet our needs. If you read the greenpeace energy plan they plan for coal being used at the present level of consumption until it runs out – just to keep up with rising demand. However some people power their entire house with solar panels. It is possible in sunny areas. Even an electric car can be powered free. Hence lets not chuck the baby out with the bathwater is what I’m saying. Everything should be judged properly on it’s own merits. There’s too much rush to judgement and most of these economic studies make really bad errors when you bother to look with a skeptical eye.
On your free market ideas, I prefer real life to theory and it seems to me that the market fails from human frailties just as much as state control does. A sensible mix is needed between the two.
Case study: State-controlled France and free-market UK had a choice in 1980 about future energy. France went 80% nuclear and the UK went for natural gas – which is now really running out. So who was correct? What seems cheap in the short term can be expensive long term. Not only that but the state-controlled French energy company was profitable and now they control the privatised UK energy companies. Not how the idealistic free-market theory would predict but that’s how it worked out anyway.
April 22nd, 2009 at 2:50 pm
“So if your starting point was that government guiding hand obviously does worse than the private sector with it’s invisible hand, wheres the proof?”
By many measures Spain has the sickest economy on the European continent. The large investments in green energy that have a large negative return on capital are a significant reason. Of course the environmental community will blame everyone but themselves for the current economic disaster in Spain.
Investments in wind and solar destroy wealth. They make the nation engaging in them poorer. Spain is the poster child for bad government investment decisions.
April 22nd, 2009 at 2:52 pm
jasg: Here’s a fairly comprehensive look at “alternative energy,” which lis well worth reading: http://co2science.org/articles/V12/N16/EDIT.php
April 22nd, 2009 at 3:02 pm
Tamara
All you’ve proven is that totalitarian regimes are usually bad for the economy. However Russia’s economy while uniformly bad, only actually collapsed when Yeltsin was persuaded to listen to the free-market theories of US economics graduates. It showed graphically that a truly free market ends up being dominated by criminals and monopolists. The dirty little secret though is that the Western economies aren’t actually that free. We all have statist rules to follow. We might not like the rules but they can end up preventing what happened in Russia.
However, it’s funny you didn’t mention China who are holding so may US dollars and on whom the US now relies and who will likely be spending those dollars on US assets. It’s still state-controlled you know!
All I’m saying is that it’s not black and white – there’s a lot of gray and a little bit of statism combined with your capitalism is better than no control at all. It’s also wrong that state companies can’t make money. Statoil, Petrobras, EDF and SNCF are testament to that. It’s really all about good versus bad management.
April 22nd, 2009 at 3:09 pm
Reid
By any real measure the US has the sickest economy on the planet. They owe trillions and have trillions more in commitments. So physician heal thyself. Spain, Ireland and the UK all made the same mistake as the US by ignoring that those apparently healthy GDP numbers were based on debt. GDP is well known as a really bad measure of an economy but most economists totally relied on it.
The Green economy had nothing to do with it. Ireland didn’t go green and neither did the UK. Anyway, Spain were only riding high in the first place because of EU subsidies. When they came to stand on their own feet they found they standing on sand.
April 22nd, 2009 at 3:19 pm
jasg says “It’s really all about good versus bad management.”
We finally partially agree on something. I would refine your comment to say it’s all about ROI (return on investment or return on capital). The problem with wind and solar is that they have very negative ROI. That is why the government must subsidize them and force the people to adopt the not ready for mass deployment technologies. To put ROI into simple terms, negative ROI makes you poor and positive ROI makes you wealthy. Wind and solar investments make a spcoiety collectively poorer. Small inestments in wind and solar will have small negative effects. Large investments in wind and solar will have large negative effects.
April 22nd, 2009 at 3:42 pm
Reid
I think that’s the case for the US because they luckily have abundant coal, gas and even shale oil. Spain only has sunshine and wind and some gas from Africa. Spain and the US are not comparable so the report has a bad premise. Then so did Obama. However I’d judge his actions more than his words. He has to please a lot of hotheads and so he has to phrase everything correctly. And just as you will never abandon your own long-term ideologies they will never abandon theirs. I think it was a clever move though to bring them inside so they had to face the grim realities themselves: It’s too easy to be an external critic but if you are the one making the decisions it’s not so easy. “Keep your friends close but your enemies closer” as they say.
On ROI you have to make sure that you are actually saving money. Eg if you close down a loss making railway line does that mean you spend much more on road building? The UK did exactly that. France once again got it exactly right. Bearing in mind that some things are so vital to the rest of the economy that a little overspend can easily be justified on the basis of the lesser evil. Of course profit is nicer: I was surprised that SNCF made 2 billion profits while delivering a really quality service. Clearly a little subsidy at the start can be repaid by later profits.
Jae
. By the way I’m usually JamesG but i had to re-register.
I wouldn’t argue with a word of that report. I’m surprised at the solar panel finding but there are no shortage conmen in the green energy business – a wider study is warranted than just one guy at the bar. The US has plenty of oil and so does Venezuela but it’s very expensive oil. It’ll really need lots of subsidies
April 22nd, 2009 at 3:51 pm
As to the specifics of wind: it’s my understanding that unless the wind is effectively constant 24 hours a day/365.25 days a year there has to be a back-up power source for calm days/nights. Without some amazingly large battery allowing electricity generated from windmills to be stored (and distributed on calm days/nights) I really don’t see any other option.
And, apparently, the back-up power plant is often a fossil fuel plant. And fossil fuel plants aren’t designed to be turned on and off on a whim ( http://www.coyoteblog.com/coyote_blog/2009/04/the-problem-with-wind.html ); so instead they are kept running at some low level. Which means, of course, that they are still kicking off CO2 even when the electricity they generate isn’t being used.
April 22nd, 2009 at 9:57 pm
jasg — just what are the huge coal subsidies you’re talking about? The EIA (http://www.eia.doe.gov/oiaf/servicerpt/subsidy2/index.html) has the following subsidy figures for 2007 (Table ES5):
Coal $0.44/MWh
Natural gas $0.25/MWh
Nuclear $1.59/MWh
Solar $24.34/MWh
Wind $23.37/MWh
April 23rd, 2009 at 8:01 am
Mike
I’m talking Spain and you are talking USA. In Spain it is a bit more clear cut – the government heavily subsidises all power plant construction. And per megawatt the construction costs are comparable. In the USA it is easier to get banks to fund a coal plant but I really don’t know if government part-funds it. Even if it did though, 2007 is a year where 59 coal plants were canceled in the US, so no new coal plants were actually built that year. ie it’s not really a good comparison year since, by contrast much wind power was added in 2007. I think we’d all agree that construction capital cost is THE big subsidy. Hence, just like the Spaniards did in the report mentioned above, you are comparing the cost of building something with the cost of building nothing. That’s a good way of proving zilch.
Going to US reports on comparative costs, may I point you here :
http://yaleglobal.yale.edu/display.article?id=8813
reprinted from the Wall Street journal, where it says:
“The Department of Energy’s Energy Information Administration has concluded that there isn’t much difference between the cost of new power plants using wind and other traditional fuels, such as nuclear, coal and natural gas, if you take into account a broad array of expenses. A plant entering service in 2015, the administration said in a 2006 report, could make electricity from wind for 5.58 cents a kilowatt hour — versus 5.25 cents for natural gas, 5.31 cents for coal and 5.93 cents for nuclear. The report didn’t quantify the differing environmental impacts. ”
This is elaborated a bit here on the same site:
http://www.eia.doe.gov/oiaf/aeo/assumption/pdf/electricity.pdf#page=3
see table 8.2 cost/kw where you see that wind seems to be cheaper than coal.
It’s good to bring out the actual numbers though. The trouble is that too many reports are constructed more for support than illumination. I’d like the two opposing factions to get together and seek out the actual facts, with sensible accounting. Perhaps the wsj article does that already though.
Maxl…
Your understanding is not borne out by actual experience. This is why we have a grid. There are some sophisticated techniques for dealing with such problems. See here:
http://www.bwea.com/energy/myths.html
Certainly in Spain, Denmark and Germany no new fossil utility or batteries were required as backup. Bearing in mind that Wind power was never actually intended to supply 100% of the grid. Between 20 and 40% works out fine.
April 23rd, 2009 at 12:25 pm
I’m not saying that new fossil plants are needed; only that old ones can’t get shut down.
Germany built windmills capable of producing 48,000 MW of power. According to the BWEA link they should produce on average 1/3 of that: 16,000 MW. But Germany’s only been able to reduce electricity production from coal plants by 2000 MW, hardly a rousing success.
CO2 output doesn’t increase, but it doesn’t decrease that much either. Instead people get to feel good for doing something, but that something is ineffective.
April 23rd, 2009 at 5:28 pm
jasg — I can’t really comment about energy costs in Spain, though I suspect they’re not all that different from the U.S. Subsidies are probably quite different, though.
I don’t think the low number for coal subsidy that I gave before has anything to do with few coal plants being built in 2007. That EIA report compares 2007 numbers with 1999 numbers. They don’t list dollars per MWh for 1999, but the overall subsidy for coal was quite a bit less in 1999 than 2007 (in constant 2007 dollars), while the amount of electricity generated using coal was only a little bit less in 1999 than in 2007. Thus, the subsidy in dollars per MWh is lower in 1999 than 2007, but not by all that much. On the other hand, subsidies for renewables more than tripled from 1999 to 2007, while the amount of electricity generated by solar and wind increased by about a factor of six (I had to find that in a different EIA report). Thus, the subsidy per MWh seems to have declined for renewables in 2007 vs. 1999, but it is still about 50 times higher than coal (comment # 23).
The numbers for cost of electricity that you cite from that Yale report show that wind generation is reasonably competitive with coal, natural gas, and nuclear, but note that it doesn’t list solar. Solar electrical generation is MUCH more expensive, and will be for the forseeable future. By the way, those numbers (5.58 cents/kWh, etc.) are not the cost for building the plant; they are electricity costs averaged over the whole plant lifecycle, so they take into account fuel, maintenance, etc. I won’t vouch for those particular numbers, but they are similar to ones I have seen elsewhere. The strange one is natural gas; I’ve never seen natural gas electricity costs below coal costs. Coal is the lowest; that’s why over 50% of our electricity is generated using coal.
April 23rd, 2009 at 5:55 pm
re: #25
maxlybbert, those numbers show that the actual real-world, as-installed carbon-displacement-efficiency for wind is about 4.2 %.
This is almost never mentioned even tho its been in E.ON reports for several years now.
April 24th, 2009 at 3:19 am
EDaniel
The trouble is taht if the whole life cost turns out to be similar for most fuels then it contradicts the argument about subsidies, negates any idea that wind is more expensive and it means that any negative reports, such as this Spanish one and the others mentioned above, are due to poor accounting. Now since we are all used to economists being utterly wrong a great deal of the time because of their gross simplifications then that isn’t surprising. But since wind and solar have been reducing costs for a long time (by ten and twentyfold) and that is set to continue I wonder if that expected cost reduction is factored in. I think solar will continue making really huge cost reductions because there is some really good research being done. Yes coal is slightly cheaper but it is also the dirtiest by far – and I’m not talking about CO2. Ask the Chinese.
Max…
I suspect you and EDaniel along with most on this thread don’t actually care whether CO2 is reduced, since we don’t believe it’s catastrophic if it doesn’t. However if it stays at the same level while energy capacity is increased, and if that increase was really achieved at the same cost per MegaWatt then that is something to celebrate not deride, because energy demand will be ever increasing. For that reason I think this study is answering the wrong question and even getting that answer wrong. The real problem for realists is not future CO2 levels but future energy demand. Even Greenpeace are realistic when they expressly state that it is a huge challenge even just to keep fossil fuel plants at the same level in the future. And yes we should try to do that just in case. Any CO2 reduction or stabilization will likely have to be by energy conservation. But again we’ll probably just be running to stand still.
April 24th, 2009 at 6:50 am
jasg, “I suspect you and EDaniel along with most on this thread don’t actually care whether CO2 is reduced, since we don’t believe it’s catastrophic if it doesn’t. ”
YANS, jasg, kindly do not accredit to me anything I have not written.
thanks
April 24th, 2009 at 10:59 am
Let me try rephrasing things.
Imagine a city that owns a coal power plant. They decide to move to alternative energy and close the coal power plant.
If they go with solar, they still need something to produce energy at night (at least it’s off-peak, though). They can’t go 100% wind either, because they need something to supplement energy production on calm days or nights. They can go with nuclear or hydroelectric, and they could have wind supplement that.
But if they’re already building a nuclear or hydroelectric plant, why not just build that plant larger and forget the windmills? Windmills have almost negligible operating/maintenance costs, but they have this huge upfront cost that by the time they’re actually profitable they are obsolete.
Or maybe build a nuclear plant large enough for the city and use the money they would have spent on windmills to get everybody top-of-the-line LEDs?