Monday, November 23, 2009

Will Green Energy Spending Kick-Start Job Growth?

By Richard Wottrich, Blog Editor

The Midwest Alternative Energy Venture Forum Keynote Speaker last week in Chicago Matt Roger, Senior Advisor to the Secretary U.S. Department of Energy (DOE). Roger had been directly responsible for the release of over $32 billion in federal stimulus money in the form of direct grants and loan guarantees since Feb. 2009 into alternative energy projects. Over 250 full time peer reviewers have been screening project selection.

This attending blogger wonders, (1) what market distortions will result from such an unprecedented influx of funding, (2) how can politics and corruption possibly be kept away from this taxpayer cash, and (3) how funding such long term projects is additive to the immediate goal of ending a severe recession.

Perhaps the larger question is, "Will Green Energy jobs kick-start job growth in this recession?" The evidence suggests not.

The Obama Administration has proffered that up to 5 million jobs would be created by spending $150 billion over the next decade on new technologies such as solar and tidal power, in addition to making existing buildings and residences more energy-efficient.

"We know the jobs of the 21st century will be created in developing alternative energy," the president said as he campaigned last year. "The question is whether these jobs will be created in America ... or overseas."

The reality speaks differently, with perhaps 100,000 jobs created thus far in Green Energy federal grant and loan guarantee projects - a cost per job initiated of over $300,000.

"This is not the spark" that will pull the economy out of recession and put it in a lasting expansion that creates millions of jobs, said Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University. "This is not the solution to the current big unemployment problem."

To the contrary, many alternative energy projects in the U.S. were shut down in this recession, as they were typified by very low equity ratios. Many of these projects were based upon high oil and gas energy costs, government subsidies and cheap credit. Two of these conditions have changed dramatically.

Max Schulz, an analyst at the Manhattan Institute, a free-market think tank, said "Renewables can't produce the large volumes of useful, reliable energy that our economy needs at attractive prices. Government subsidizes renewables because -- all things being equal -- the free market won't," he said. Even before the stimulus was enacted, solar and wind projects received more than 16 times the subsidies given to nuclear, coal or oil, and yet still provided only a tiny fraction of the nation's energy, according to the Energy Information Administration.

The administration has claimed that its stimulus spending has "saved" 64,000 jobs, but offered little detail in support. Even if that figure were accurate many of the jobs are in reality just extending payrolls in governmental entities, or subsidizing business plans that could not survive alone in the private market.

A study by the United Nations found that renewable energy projects such as solar are less efficient and more labor intensive than traditional energy, generating as many as nine jobs for each megawatt of electricity produced, compared with one job at existing coal- and gas-fired power plants. But the cost per job can exceed $700,000, according to a study of Spain's experiment with green jobs frequently cited by conservative groups, the Study of the Effects on Employment of Public Aid to Renewable Energy Sources.

In the Great Depression the government put hundreds of thousands directly to work building projects across America in the CCC (Civilian Conservation Corps) which gave jobs to unemployed youths and to improve the environment, and in the WPA (Works Progress Administration). Today about 3 percent of the first stimulus bill, or $27 billion, was funneled into transportation projects - not enough to prevent more than 1 million construction jobs from being eliminated in the past year.
The Great Depression was ended by WWII. The present recession started with America already in two wars. We will have to find other solutions.

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