Energy Labor--All Jobs Aren't Created Equal
By Dan Seif
Senior Consultant at Rocky Mountain Institute
Total U.S. solar jobs surpassed 100,000 last August, up from 93,000 a year earlier. In addition, GTM Research and the Solar Energy Industry Association recently announced 109 percent year-over-year growth in installed U.S. solar capacity.
This impressive solar energy growth stands alongside the World Economic Forum’s recent finding that the U.S. oil and gas sector created 37,000 direct and indirect jobs in 2011, with the total of indirect, induced, and direct jobs approaching 150,000, or about 9 percent of new U.S. jobs in 2011. These jobs numbers are likely to become political footballs once the 2012 election campaign really hits its stride.
Indirect jobs (e.g. suppliers) and induced jobs (jobs enabled by employee spending) are always hard to measure, whether it be for the dental industry, car washes, solar energy, or oil and gas. Undoubtedly, growth in most industries creates indirect and induced employment, and the U.S. Bureau of Labor Statistics and other economists go to great lengths to correctly calculate this employment data. Nevertheless, inaccuracy is inevitable. So with the more reliable metric of direct job creation, specifically 37,000 new jobs this past year from oil and gas versus 7,000 from solar, it might seem that oil and gas holds the better job story. Let’s more closely examine that assumption.
Oil and Gas – History of Booms and Busts
Successive booms and busts characterize the 150-year history of the U.S. oil and gas industry, particularly in extraction. Recent added jobs, primarily driven by new drilling, are temporary by design. They are high during drilling and much lower during production. One only has to look back at the relatively recent loss of 35,000 oil and gas drilling jobs from October 2008 through September 2009, to see what oil gas price volatility can do to employment. This 36 percent annual loss rate was impressively bad even for that period of economic freefall. In addition, oil and gas drilling and well operational jobs are dangerous and very demanding. They are also disruptive to communities, from the loss of local jobs and revenue when drilling jobs move to newer, more economic fields (often many states away), the loss due to drops in oil and gas pricing, and the loss due to well depletions. Negative disruptions are also evident when times are good, such as currently in North Dakota, as movement into boomtowns creates substantial local pressures.
Solar – Plenty of Room for Growth
While most Americans are happy to see job creation of any sort, jobs that are sustainable due to the nature of the work and/or the headroom for growth are what will sustain the U.S. in future years. No industry in a capitalist economy is forever safe, and the solar industry has certainly taken its lumps lately in the form of panel and module manufacturing layoffs—though manufacturing constitutes only about a quarter of U.S. solar jobs. Nevertheless, the combination of the sun being an inexhaustible resource (not considering galactic timescale) and available everywhere (the dreariest northeastern or Olympic peninsula village has only four times less annual solar energy potential than the most sun-scorched parcel of Southwestern desert) certainly creates the promise of stability and breadth.
If there’s one thing solar has undoubtedly got, it’s headroom. The U.S. today has about 5 gigawatts of installed photovoltaic capacity, annually generating just over 0.1 percent of US electrical energy. Most areas of the country could absorb more than an order of magnitude more solar generation capacity (the Europe Union already has more than 50 GW installed) before solar grid integration issues become broadly relevant. While there might be continued employment growth opportunities in oil and gas (albeit bargain-basement pricing in natural gas futures and natural gas company stocks indicate employment is headed toward contraction), more than an order of magnitude is likely impossible, not to mention environmentally ruinous. The highly reported “massive” recent increase in domestic oil production represents a 20 percent increase over 2005’s 43-year domestic production low, but that only catches the U.S. up to where production was back in 1991, when the country was hardly oil independent and willing to go to war in Iraq.
Employment and Energy Pricing
A more significant employment sustainability story may have to do with each industry’s market pricing. Oil and gas drilling employment depend on the price of the energy commodity extracted. As I wrote Feb. 16, the solar energy growth story will be increasingly a distributed one, in which market opportunities have higher dependency on retail electrical rates than wholesale rates. Below is the ten-year trend of electrical power retail rates, natural gas prices, and crude oil prices from the U.S. Department of Energy using annual averages. It’s obvious on which trend one would prefer to be counting on for job stability.
At RMI, we recognize the continued correlation of distributed solar market opportunities on retail rates is not without challenges. These challenges exist in the highest installed solar capacity regions, where net metering caps are being reached and utilities do not feel they’re being appropriately compensated for distribution costs. Looking broadly at the U.S., these circumstances are few and there are solutions toward which RMI is working with utilities, solar developers, and other stakeholders. Admittedly, these solutions may create more dynamic retail markets that may not continue the steady-as-it-goes rising rate profile of the historical retail rates shown above.
Before the national political conventions occur and both parties come out beating their drums on how they’ll create jobs in the energy sector over the next four years, let’s take a sanity check on the opportunities for employment growth and stability. We need oil and gas today, and that sector’s jobs are helping us climb out of our economic hole, but they are not a long-term solution to America’s job-creation needs, which are better met through sustainable, high-growth opportunities like solar.
This article first appeared on the blog for the Rocky Mountain Institute, the RMI Outlet, which can be found here.