Renewable Electricity ‘Creating’ Jobs, Destroying Wealth

Published December 1, 2006

All over the world, for several centuries, workers have become more productive and their services have risen in value. Renewable energy mandates, currently in force in 20 states, reverse this progress and require a cut in worker productivity and energy efficiency.

Compliance Varies

Twenty states have set standards that require utilities to obtain some of their power from “renewable” resources such as wind turbines and solar panels.

California regulations, for example, require that 20 percent of electricity used in the state come from renewable power by 2010. New York requires 24 percent by 2013. Texas requires 2,000 megawatts (roughly 2 percent of capacity) by 2009, and 5,880 megawatts (roughly 5 percent of capacity) by 2015.

California is fortunate to have substantial geothermal resources and opportunities for biomass conversion. Texas is ahead of schedule, generating nearly all of its renewable energy from wind farms benefitting from favorable weather conditions and generous government subsidies. New York, on the other hand, has 0.2 percent renewable capacity today.

Big Subsidies Required

Ask most people about renewables, and you will probably hear about solar power and fuel cells.

In reality, renewables generate only 2.2 percent of America’s electricity. After 30 years of research and investment in solar power, solar still produces only 1 percent of that 2.2 percent of total renewable power generation.

California has geothermal resources and Maine has wood chips, but almost everywhere else renewables mean wind turbines, helped along by substantial federal subsidies.

‘Empty Gestures’

Of course, even if renewables are expensive, it is argued they might reduce some of the climate variance believed to be caused by carbon dioxide emitted by fossil fuel power plants. There are uncertainties about whether warming will really be bad (think longer growing seasons), but let’s assume that cutting carbon dioxide emissions is a desirable goal.

The nations that signed the Kyoto Protocols on global warming agreed to cut their emissions in the future. If each of them made the sacrifices of full compliance (the betting is that few will even come close), and those measures worked as expected, the world would end up only a tenth of a degree cooler.

And if that big an effort gets no results, state and local government policies can only be empty gestures. Economic activity will shift away from them toward other areas or nations–remember that China and India are exempt from the agreement.

Creating ‘Make Work’ Jobs

Renewables may not help much with global warming, but it is also argued the nation might still benefit from all the new jobs that would come from building and operating [renewable power facilities]. Recent work by professor Lloyd Dumas of the University of Texas at Dallas predicts such a happy result. Dumas cites research showing that if 20 percent of future power plants are renewable, they will create two to three times more jobs than if they all burn fossil fuels.

This, however, is the same argument we hear from consultants hired by local governments to estimate the employment that a tax-financed subway or stadium would create.

Both they and Dumas conveniently forget that the money required to pay these extra workers to generate the same amount of electricity as could be generated by fewer fossil fuel workers would be put to greater economic use if it were spent directly on goods and services rather than on superfluous labor costs.

Another negative side effect of these extra workers required to generate power is that electricity would be more expensive as a result. The more skilled people it takes to build and operate a megawatt of capacity, the more electricity customers must pay in rate hikes to sustain these extra, unnecessary workers.

Wasting Resources

In addition, renewable sources are less reliable than conventional power sources, and more natural resources are often required up front to build or locate renewable energy facilities to get the same electricity output as from conventional sources.

For example, clouds can make a solar panel ineffective, and calm air or gale-force winds do the same for wind turbines. It takes about three solar generators or windmills to achieve the same dependability as a single gas-burning generator. Voilá! three times more jobs, claim the starry-eyed but economically misguided renewable energy supporters.

It is easy to invent policies that create lots of jobs–just make delivery trucks illegal and create work for human porters. Hire people to shatter windows in homes and businesses, and you will create a boon in the glass-making industry. However, it wastes the skills and services of a labor force that could have produced things that people really wanted.

Mandated renewable energy has the same effect, though in a somewhat less poignant manner.

Robert Michaels ([email protected]) is professor of economics at California State University at Fullerton. This article first appeared in Human Events Online, and is reprinted with permission.