Tuesday, February 17, 2009

Green Smoke and Mirrors

Part of what President Barack Obama will be touting today, when he signs the stimulus bill in Denver, are all the “green energy jobs” that will be created, and the “new energy economy” that will materialize, when this blizzard of federal greenbacks hits the fan. Gov. Bill Ritter will be there, too, to make his own overblown claims about how the “new energy economy” is working in Colorado.

But take it all with a grain of salt.

We’re likely to hear, again, how Ritter’s support for higher renewable energy mandates and more “investment” in alternative energy helped create more than 91,000 jobs in Colorado – a claim Ritter made last fall, citing a then-unpublished report by the American Solar Energy Society in Boulder. That this statistic was generated by an advocacy group, in a study underwritten by the state, might have raised red flags, though all except a few in the media reported it as fact. But now the complete report is available and the truth can be told.

The claim is a fabrication, which falls apart under closer scrutiny.

The 91,000 jobs Ritter takes credit for can only be concocted by defining the “new energy economy” so broadly that the term loses meaning, and by lumping renewable energy jobs in with “energy efficiency” jobs. The first group is more easily identified and quantified than the second, which ASES determines by casting its net widely, like a fisherman desperate for a big catch. Caught up in the net are any jobs even remotely linked to energy efficiency. It could be the gal who cuts the hair of the guy who drives the truck that delivers the energy-efficient refrigerator to the department store. Or maybe you work as a security guard at a recycling center – voila! You’re part of Ritter’s “new energy economy.” Or perhaps you’re an accountant at a utility company that offers an energy efficiency program (as almost every utility does): That means you’re a part of the new energy economy too.

Maybe I should be counted as part of Ritter’s economic miracle, since I’m typing this on a PC with an energy-efficient screen saver.

The study exaggerates the importance of the NEE by inflating the numbers, counting not only the assembler of the energy efficient furnace, but the person who services it; not just the builder of the hybrid vehicle, but the hybrid vehicle salesman. Also lumped in are accountants, cashiers, “management analysts,” roofers, truck drivers, welders, janitors, security guards, and stock clerks.

Roughly 80,000 of the 91,000 jobs counted as part of the NEE in 2007 were of this kind -- though these jobs could just as easily be credited to market forces or consumer choice, since government action isn’t the only thing that encourages efficiency.

That left about 10,000 jobs directly related to renewable energy in 2007. But more than half those jobs – 5,100 – were at a federal government facility, the National Renewable Energy Lab, and predated Ritter’s tenure. That means less than 5,000 private sector jobs could be directly linked to renewable energy in 2007 -- a paltry number, considering that 600,000 new jobs are created in the state each year.

Brad Collins, the executive director of the ASES, concedes that Ritter and his administration have no legitimate claim to having created these jobs when, in a Rocky Mountain News opinion piece published last week, he notes, almost in passing, that “these are not newly created jobs in 2007, but the total number of jobs at the end of 2007, including many jobs created in 2006 and earlier.”

Yet no such footnote came attached to Ritter’s boast of last fall, which was reported as fact by many media outlets and has yet to be corrected. Where standard political spin crosses over the line into dishonesty is hard to pinpoint with precision. But Gov. Ritter was certainly pushing the boundary when he made these claims.

As of two years ago -- the most recent year for which actual data exists -- Ritter’s “new energy economy” was insignificant, in terms of its economic importance and contribution to the state's overall energy portfolio. And while it’s undoubtedly more significant today – given the massive benefits the industry enjoys as a result of government mandates, taxpayer subsidies and political allies – it’s still far less consequential than the governor claims.

Here, in passages pulled directly from the report, is the reality behind the rhetoric.
From Pg. 110:

“... the (renewable energy) industry in the state is small and, except for the federal sector – primarily NREL -- does not currently play a major role in the state economy or job market. For example, in 2007:
* (Renewable energy) RE accounted for less than 0.6 percent of Colorado gross state product
* Excluding NREL, RE accounted for less than 0.4 percent of Colorado GSP.
* The total jobs created by RE accounted for only about 0.4 percent of total Colorado employment
* Excluding NREL, direct employment in the RE industry represents only about 0.2 percent of total state employment”

The report also throws cold water on the idea that the NEE is an equal opportunity jobs creator:

“. . . Despite various proposals that have been made in recent years to use RE as a job creation program for the disadvantaged, the chronically unemployed, or for other target populations, this is simply not feasible at present in Colorado.

Total employment in Colorado is over 2.6 million and unemployment totals over 100,000. The total number of jobs generated by RE (excluding NREL) is only about 4,600, and direct RE employment (excluding NREL) is only about 2,000. Excluding jobs that are not realistic targets for retraining the unemployed or those lacking adequate skills or training – such as jobs in R&D, hydropower, biomass power, DOE laboratories, financial institutions, etc. – leaves direct RE employment in the state at about 1,500 jobs. Even if RE jobs grew 10 percent annually, this would create only about 150 new jobs each year. And, if most of these were somehow allocated to the unemployed – which is not a realistic assumption, the impact on state unemployment would still be negligible.”

The report predicts the future job-creating prowess of the NEE under scenarios of increasingly-remote plausibility. The sunniest scenarios, not surprisingly, all depend on more mandates, more “investment” (read: subsidies) and more government interventions on behalf of the industry. And here’s where the report actually does enhance our understanding of the situation. Clearly, without leaning on a government crutch, and taxpayer support, the New Energy Economy would fold up like a Bedouin camp and vanish into the night.

My definition of a true economy is something that operates largely independent of government meddling and management, responding to private initiative, voluntary exchange, market forces, entrepreneurial creativity and consumer choice. The new energy economy flunks most if not all these tests, and more strongly resembles the "economies” socialists attempt to fashion through command and control methods. It’s a creature of government, which will continue to rely on government intervention, support and subsidies for decades to come, and may never stand on its own.

A few statehouse skeptics chided Ritter for using such a flimsy piece of research in such a self-serving way. State Sen. Scott Renfroe, a Greeley Republican, said he hasn’t seen many of these 91,000 jobs in Weld County, and wondered where they all are. "It doesn't pass the laugh test," said Assistant Republican Leader Greg Brophy, who supports the green energy industry but says he thinks “we ought to tell the truth about the size of it." Noting that the report was done with state support, Brophy joked: “I guess if you can't use tax dollars to effectively promote green energy, you always can use them to promote the promotion of it."

I don’t expect that Ritter will correct the record, or temper the hyperbole today, when he and President Obama sing the praises of the NEE at the stimulus bill signing ceremony. But a little more truth in advertising as we move forward would be a breath of fresh air.


Anonymous said...

Conoco Phillips is bringing 7000 renewable energy biofuels jobs to Colorado, Vestas is bringing 2000 wind jobs to Colorado, Siemens is brining an advanced R&D wind facility to Colorado, AVA Solar is powering hundreds of jobs in Colorado, and energy-efficient green-building and insulation companies continue to be bright spots in a tough economy.

You can put your head in the sand but these sectors are outperforming the rest of the economy. We need these jobs here in Colorado.

I've seen the report and it offers good data. All industries generate both direct jobs and have a multiplier effect for indirect jobs. You can't disregard indirect jobs for industries you don't like and accept them for industries you do like.

Sean Paige said...

I acknowledge in the post that the number of jobs has undoubtedly risen since 2007, thanks to the government crutch, and it may increase more as stimulus funds flow. But these companies and technologies ultimately have to make market sense, and be able to operate in the "real economy," without the handouts and the help, if they are going to be sustainable in the long term. And the evidence is still strong that they can't stand on their own. Each time the tax credits are suspended, or other props are in jeopardy, all action grinds to a halt.

You might check your job predictions on Vestas, since it and a number of wind companies are either scaling back or holding back.

Your idea and my idea of good data obviously differ. The authors of the report go to extremes in counting indirect jobs for the "new energy economy," yet apply no similar broad brush to the "old energy economy," which is indirectly tied to all our jobs.

It's an agenda-driven study. And there's nothing wrong with that as long as the public isn't led to believe otherwise; as long as taxpayer funds weren't involved (which they were); and as long as the governor doesn't misuse the "findings" in such a dishonest, self-serving fashion.

I appreciate your feedback, though.