Solar Economics, Part 3: How Solar Energy Affects Labour Markets: The Case of the U.S.

A look at the recent study examining the future of jobs in the solar sector.

Previously, we wrote about the structure of solar photovoltaics value chain, and how it is distributed across different worlds regions. All these different activities obviously need a labor market, and with the growth of the industry, they will generate new jobs. A study published by Environmental Defense Fund (EDF), a large environmental non-profit, details the current status and the prospects of solar jobs in the U.S. Since the U.S. is in many ways showing the future of the solar industry to other countries where solar is only emerging, it is worth looking at how things stand over there.

Sustainability Jobs in the U.S. Workforce

What are sustainability jobs? The EDF defines them rather generically, as reflecting one or more of the following functions:

  1. Jobs in sectors that produce goods and services that benefit the environment;
  2. Jobs in which employes focus on making processes more environmentally friendly and resource efficient;
  3. Jobs focused on improving and communicating an organization’s environmental and social impacts.

U.S. sustainability jobs distribution, data from: http://edfclimatecorps.org/sites/edfclimatecorps.org/files/casestudy/the_growth_of_americas_clean_energy_and_sustainability_jobs.pdf

Defined this way, sustainability jobs span energy efficiency and renewable energy, waste reduction, natural resources conservation and environmental education. The EDF report estimates that these jobs now represent from 4 to 4.5. Million jobs in the U.S., having raised up from 3.4 million in 2011. The sectoral breakdown of these numbers is summarized in the following chart and looks as follows:

  • 2.2 million jobs in energy efficiency
  • 890’000 jobs in public sector
  • 769’000 jobs in renewable energy
  • 174’000 jobs in advanced vehicles

From the point of view of Solar DAO, the most interesting parts are, of course, energy efficiency and renewable energy jobs. The former span from product design and manufacturing to equipment installation and building retrofit. The latter include component manufacturing, project development, construction and installation, financing, engineering, sales and distribution, systems analysis, operations and maintenance (O&M).

U.S. Renewable Energy Jobs by Generation Technology, Data for 2015 from: http://edfclimatecorps.org/sites/edfclimatecorps.org/files/casestudy/the_growth_of_americas_clean_energy_and_sustainability_jobs.pdf

In renewable energy, bioenergy absorbs 429’000 jobs, more than half as much as solar does with its 208’000 jobs. Wind, geothermal, and small hydropower have 88’000, 35’000 and 8’000, respectively (2015 data).

Solar Leads the Rapid Growth of Sustainability Jobs

According to EDF, renewable energy deployment has risen dramatically in the U.S. in recent years and now makes up the largest share (64%) of new electricity generation capacity installed in the U.S. each year. Solar photovoltaics and wind have been leading this growth, mainly due to significant reductions in manufacturing and installation costs. On this front, a major milestone has been passed between 2010 and 2015, when solar PV panel production costs fell down by 72%. That made solar photovoltaics cost-competitive with fossil fuels in many markets.

In parallel with the growth of generation capacity, renewable energy jobs have been rising too. The U.S. follows the global trend, captured in the below infographic by IRENA. Solar photovoltaics clearly leads the growth of sustainability jobs worldwide.

The EDF report suggests that

“Solar employment opportunities are currently growing at a rate 12 times faster than the rest of the U.S. economy and wind turbine technician is currently the fastest growing profession in the U.S.”

The compound annual growth rate of the U.S. renewable energy jobs has been 6% since 2012, being in a stark contrast to the familiar boom and bust cycles that so much affect employment in fossil fuels industries. There, the compound annual growth rates have been between -9% and -22%, suggesting that such industries as oil and gas extraction, coal mining and processing are losing jobs.

In energy efficiency, there are currently almost 2.2 million people working nationwide, a 7% increase from 2015. About 1.4 million work in construction and installation, more than double the number of workers in fossil fuel mining, extraction and electric power generation combined.

Farewell to Outsourcing and Other Benefits of Sustainability Jobs

The growth of sustainability jobs in renewable energy and energy efficiency saves employment dynamics from the familiar story of technological displacement. Thanks to them, while extractive industries are losing jobs, new ones are being created by renewable energy sector. However, there are other significant economic benefits as well.

The EDF report cites researchers from the University of Massachusetts Amherst, who estimated that investments in renewable energy generate roughly three times more direct and indirect jobs than comparable investments in fossil fuels. In such fields as buildings retrofit and industrial efficiency, $1 million invested generates 8 new job, against just 3 in the fossil fuels industry generated by the same amount invested.

Where renewable energy creates new jobs, energy efficiency helps to promote small businesses. According to EDF, the majority of energy efficiency employees in the U.S. work for small businesses, with about 70% working for companies with 10 employees or less. As is well known, small is beautiful, and the growth of small businesses makes the economy more livable and entrepreneurial.

Most interestingly, the growth of sustainability jobs could alter the global value chain maps in the near future. Most of the construction and installation jobs are local due to the on-site nature of efficiency work. About 63% of energy efficiency employees work in construction firms installing building control equipment (another 18% work in professional and business services). For example, in the solar energy sector, 80% of jobs are demand-side services (e.g. installation, sales, etc.), most of which are inherently local jobs that cannot be outsourced.

Aggressive outsourcing policies that many firms from the developed countries used since the 1980s relied on cheaper labour in the developing countries, driving down wages at home and creating incentives for deindustrialization, while also perpetuating the unfavorable labor conditions in the outsourcing regions. Now that situation can be changed, as renewable energy jobs are mostly local. Potentially, this will create further incentives for domestic workers to join renewable energy industries, and spur the development of similar initiatives in the offshore regions specialized in outsourcing.

Looking Ahead

New jobs in solar industry are not completely immune from market conjuncture. Since 2006, China has implemented aggressive support policies for its solar industry, and became a major player in the global solar market. This made the country’s solar power production capacity expanding tenfold from 2007 to 2012, so that now 6 of the top 10 solar panel makers are Chinese. The rise of China forced many American and European solar panel manufacturers into a retreat, with job cuts as a consequence. Government-subsidized dumping allowed Chinese firms to sometimes sell solar panels for less than their production and shipping costs, and in 2012–2013 both the U.S. and the European Union reacted by imposing import limits.

However, these wild fluctuations and aggressive competition will be tamed as the industry develops and becomes stabilized with the emergence of standardization, certification and other exchange rules. That’s the path of all emerging industries, and much of it still ahead of solar. By many assessments, solar is projected to continue its growth in the decades to come, largely due to further cost reduction. According to EDF,

“Solar in particular is predicted to emerge as the least-cost generation technology in most countries by 2030 and account for over $3 trillion in new investment”.

In Solar DAO, we are working hard to make that future happen sooner. Stay tuned.

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