Green Energy Transition Can Create Thousands of Good-paying Jobs, New Report Suggests

by Connor Seto, April 29th, 2021

Researchers at Princeton University recently shared a working paper that confirms what some politicians, activists, and labor organizations have been saying for a long time: the green energy transition necessary to stop climate change can create thousands of good-paying jobs for U.S. workers. 

The study indicates that “high road labor practices”—policies which increase compensation and benefits, invest in workers and their communities, and promote gender and racial equity—have little impact on the cost and pace of the transition to net-zero emissions. Researchers also found that increasing “domestic manufacturing shares”—the percent of renewable energy products sourced from within the U.S.—can also boost the domestic economy. Overall, these practices can play a useful role in strengthening the health of the planet and our workforce.

The paper offers a rebuttal to politicians and industry groups who claim that any investment away from fossil fuels towards renewable energy will cost jobs. It also provides relief to labor unions that have understandable concerns about the lower pay and benefits often associated with renewable energy jobs.

THE REPORT

1. Effects on the Costs of Renewable Energy

The first part of the study shows that instituting high road labor practices will have minimal impacts on renewable energy costs. According to the study, a 20% increase in domestic labor costs only increases installed capital costs (the cost of installation per Watt of energy) for wind and solar power by only 2-4% and operations and maintenance costs by approximately 3-6% across technologies. If we specifically look at increasing wages from the non-union to the union median wage rate ($45,136 to $65,364), installed capital costs increase by only 6%. The data illustrate that it’s possible to invest in working communities through a green transition without largely increasing the costs of energy.

Findings also suggest that sourcing materials from U.S. manufacturers will have minimal impacts on the costs of installation. The U.S. does not currently manufacture many solar products domestically. According to the report, as of 2020, only 15% of cells, 11% of modules, and 37% of inverters are produced from American manufacturers. However, this share could increase with little impact to the bottom line. For example, solar projects which plan to source 100% domestic content across the PV supply chain would only incur 7% higher-than-average installed costs. 

As for the wind industry, a higher percentage of wind products are made domestically (compared to solar) due to high international shipping costs of parts such as turbines. Even in a relatively extreme case, where labor costs are increased 20% and 100% of manufacturing is performed domestically, capital costs only increase 11% for utility-scale solar, 5% for land-based wind, and 4% for offshore wind. These small increases can be attributed to decreased shipping costs which offset higher domestic labor costs, and support the argument for investment into green domestic manufacturing.

Finally, it’s possible that increases in labor productivity will offset the impact of higher labor costs. As further evidence for high road labor practices, the study suggests that higher compensation may increase worker retention and lead to productivity improvements. There is also historical evidence that unionized labor is more productive. Increasing labor productivity through automation and learning has historically contributed to declining technology costs, and has led to low-carbon technologies becoming more cost competitive over the past decade. The study projects technology costs to decrease over time by a much greater magnitude (e.g. 20-37% for utility-scale solar PV, 18-25% for land-based wind, and 23-32% for offshore wind from 2020 to 2030) than the potential increase in costs related to adopting high road labor practices.

2. Effects on the U.S. transition to net-zero emissions

The study’s models also show that increasing labor costs and domestic manufacturing shares has a minimal impact on the ability for the U.S. to scale up renewable energy capacity.

As shown in Figure 9, there is only a small difference in energy supply investment costs from adopting high road labor policies in wind and solar sectors. Assuming average wage rates and current domestic manufacturing shares, the total investment cost over the entire transition period from 2020 to 2050 is $3.9T. Even on the high side of estimates, if wages increase to the 75th percentile rate and all solar and wind products are produced domestically, the total supply-side investment costs are $4.0T from 2020 to 2050, an increase of only 3%.

3. Effects on labor outcomes

Finally, the study demonstrates that increasing the share of solar and wind products made domestically will bolster the number of domestic manufacturing jobs. At current domestic manufacturing shares, utility-scale solar and wind sectors (will) support an annual average of about 450,000 jobs in the 2020s, as shown in Figure 12. Increasing domestic shares by 10% across supply chains has the potential to support an additional 45,000 jobs annually in the 2020s. Over the long-term, as the U.S. energy system continues to decarbonize, an additional 95,000 jobs are supported in the 2040s, an increase of 5% in total wind and utility-scale solar sector employment.

Additionally, increasing the wages for all workers across domestic wind and solar supply chains by 20% has the potential to generate an additional $5 billion in aggregate annual wages in the 2020s. For perspective, an increase in wages by 20% is equivalent to a $12,000 and $13,000 increase in average annual wages per worker for the solar and wind sectors, respectively.

FUTURE POLICY

Various public policies such as tax credits and workforce development funding, and other instruments can redistribute the costs of implementing high road labor practices and support both businesses and workers. Based on 2020 capital costs, a 7% investment tax credit (or equivalent subsidy) for solar systems would fully offset the increased cost of using 100% domestic content across the full supply chain. Furthermore, a subsidy tied to a requirement to use only domestic solar parts would only need to be 4% of the cost of installed solar PV systems to fully offset the increase in project costs. 

So how does the U.S. Chamber of Commerce tie into this? As America’s biggest lobbying group, the Chamber claims to be for policies “that help businesses create jobs and grow our economy.” If this is true, the Chamber must support robust investment into a speedy transition to net-zero emissions that prioritizes domestic manufacturing and high road labor policies that promote higher wages, increased benefits, and gender and racial equity.