Saturday, February 12, 2011

Economist: Green energy cannot be defended as a source of jobs

Although there was not a single mention of "climate change" in the 2011 State of the Union address, President Obama touted 'green' energy as "an investment that will... create countless new jobs for our people." However, a recent study by Senior Energy Economist Gurcan Gulen of the Center for Energy Economics, University of Texas, concludes "that adding 'net jobs' cannot be defended as a benefit of investing in green energy" and that aggressive promotion of these technologies will negatively impact purchasing power, employment and GDP.

The study finds that the "realities of the global energy scene are:

 • Most green technologies are far away from the scale that is needed to replace conventional fuels in a significant way. Although it is reasonable to expect improvements in technology and cost structure in the future, it is difficult to predict the development path that can be included in modeling exercises.

• These technologies are more expensive than conventional technologies and hence need subsidies, tax incentives and mandates to gain market share (some more than others). A carbon tax could level the playing field for wind at about $20-$30 per ton but needs to be much higher for solar and other technologies. [n.b. carbon credits were selling for $0.05 per ton on the Chicago Climate Exchange prior to its closure]

• They face integration problems due to their intermittency, immaturity of technology, scalability limits, inability to communicate with existing infrastructure, and other technical or power market economics constraints.

• Consumers, especially at the residential level, are often reluctant to adopt new technologies if they are not certain they will get the same benefits as those from current technologies and even more reluctant when it comes to changing their energy consumption behavior, which is often based on habit rather than conscious decision making.

• Pushing aggressively to increase the share of these technologies, though clearly possible, will cost large sums of money and will increase cost of energy to society, negatively impacting purchasing power, employment and GDP.

One cannot simply wish these realities away."

(emphasis added)


  1. You completely avoided the subsidies to fossil fuel producers. Any statement that solar is more expensive and therefore needs government support has to be balance by the fact that big oil get tons of tax breaks which subsidizes there production of fossil fuels. With the same subsidies the oil and coal companies receive solar would be cheaper as it is already at grid parity due to the recent increases in the cost of electricity. Wish you would report all the fact and not conveniently leave out the subsidies for fossil fuels.

  2. Good post. If green energy creates jobs, then we should remember that jobs are costs, not benefits. The cost of these extra jobs are opportunity costs - those people could have been doing something else.

  3. Paul:

    Since I am not fully conversant on the subsidies to fossil fuel producers, I was wondering what those might consist of. From your comment it sounds like they are mainly tax breaks (I'm guessing income tax breaks, or are there others that would be relevant?). Are there federal tax breaks in place, or is it typically a local tax holiday provided by the state/local government at the time of building a production facility (for example, state/local tax breaks are sometimes given to businesses who agree to locate a large facility in the jurisdiction)?

    I use solar on my home, but primarily due to my interest in new technology, and due to the specific tax break I got in the year of purchase (which would not include any additional subsidies the solar producers might receive). However, I'm not sure it is at grid parity yet. Getting closer, yes, but not there yet. Also, without the ability to use the grid as an off-hours storage "battery" I would need a much larger system with battery backup, which would definitely make my system much more expensive than traditional electricity. I'm just wondering how close solar really is to grid parity, because the numbers I've heard bantied about typically show it as being a fair amount higher still.