Wind energy jobs: Are the numbers pulled from thin air?

The American Wind Energy Association has made extending the Production Tax Credit ('PTC') its primary focus this year. Documents available on the trade group's website show that about $4 million of its 2012 budget ($30 million) was directed toward securing extension of the PTC. With job growth the number one political issue in the United States, AWEA's strategic plan calls for rebranding of the wind industry as an economic engine that will produce steady job growth, particularly in the manufacturing sector.

The problem for AWEA is that the industry's own record on job growth lacks credibility. Accurate information available in the public suggests the industry has inflated its overall job numbers.

Section 1603 and Jobs

Seventy-five percent of the Section 1603 largesse was lavished on big wind, yet, despite billions in public funding, the wind sector experienced a loss of 10,000 direct and indirect jobs in 2010 bringing AWEA's reported total to 75,000 jobs[1].

In April, NREL released its estimates of direct and indirect jobs created by projects receiving 1603 funding. The agency relied on the JEDI model ("Jobs and Economic Development Impacts") to estimate gross jobs, earnings, and economic output supported through the construction and operation of solar photovoltaic (PV) and large wind projects.

But an investigation by the House Subcommittee on Oversight and Investigations rightly objected to NREL's conclusions. The Subcommittee found that NREL overstated the number of jobs created under 1603, that it failed to report on the more important net job creation, and ignored potential jobs that would be created given alternative spending of Federal funds. The key sticking point was that NREL did not validate its models using actual data from completed projects.

The Subcommittee concluded that models used to estimate job creation were no substitute for actual data and added: "The Section 1603 grant program was sold to the American people as a necessary stimulus jobs program, and yet, the Treasury and Energy Departments do not have the numbers to back up the Obama Administration's claims of its success in creating jobs."

The problem with JEDI

Since NREL's JEDI model provides a gross analysis only, it does not consider how building a renewable energy facility might displace energy or associated jobs, earnings, and output related to other existing or planned energy generation resources (e.g., jobs lost or gained related to changes in electric utility revenues and increased consumer energy bills, among other impacts).

In other words, the model is one-sided, only considering the benefit side of a cost-benefit comparison and ignores everything else.

Validating AWEA Job Data

So what data do we have on wind industry jobs? Not much.

Apparently, AWEA is the only source of nationwide employment statistics in the United States for wind-related jobs.

Of the purported 75,000 direct and indirect jobs, the majority (around 60%) work in finance and consulting services, contracting and engineering services, and transportation and logistics. Twenty thousand are employed in wind-related manufacturing with the remaining jobs tied to construction and O&M.

But validating this information is not possible since no industry codes exist that isolate wind power establishments or wind turbine and wind components establishments. The North American Industry Classification System (NAICS) bundles wind-related manufacturers under the same code as the "Turbine and Turbine Generator Set Units" manufacturing industry (NAICS 333611), which includes "establishments primarily engaged in manufacturing turbines (except aircraft) and complete turbine generator set units, such as steam, hydraulic, gas, and wind."

At the end of 2010, the Bureau of Labor Statistics reported 26,218 total jobs in this industry. It's not credible that AWEA's estimated manufacturing jobs could represent the vast majority of employment under the NAICS 333611 classification.[2]

Navigant's Magic

In December, AWEA commissioned Navigant Consulting, Inc. to study the impact of the PTC on job growth in the wind industry. The study, also based on the JEDI model, considered two scenarios, one where the PTC is extended for 4 years (2013-2016); the other where the PTC expires at the end of this year.

Navigant's model showed that extension of the PTC would provide a stable economic environment and allow the wind industry to grow to nearly 100,000 American jobs over four years, including a jump to 46,000 manufacturing positions. Expiration of the PTC showed a loss of 37,000 jobs.

The message to Congress was clear: extend the PTC or you will be blamed for American jobs being lost. Even Interior Secretary Salazar peddled AWEA's numbers despite the Congressional report that raised doubts about the model.

Recent statements by AWEA prompted us to look at the numbers even further. In May, AWEA's Denise Bode told Windpower Monthly that of the estimated 75,000 wind jobs, at least 30,000 were manufacturing jobs -- a jump of 10,000 jobs!

Where did the additional manufacturing jobs come from?

As it turns out, Navigant tabulated direct and indirect jobs but also quietly added INDUCED jobs -- those jobs created when the overall level of spending in an economy rises due to workers newly receiving incomes.

Factoring in 'induced employment' was a radical departure from job figures previously provided by AWEA. Induced job figures are more abstract and inherently unreliable but a convenient way to inflate job numbers. We could find no documentation that explained this change in job reporting nor was the change footnoted in the Navigant study.

We spoke with a Navigant represent who suggested AWEA might have been incorrectly treating 'induced jobs' as 'indirect jobs' in its prior reports but that would not explain the inflation in manufacturing jobs. Total job counts would have stayed about the same.

In looking at the Navigant modeled numbers, it appears the wind industry currently only provides 58,000 direct and indirect jobs, not 75,000. A four-year extension of the PTC could result in a possible 70,000 direct and indirect jobs by 2016 (scenario 2) -- 5,000 less than the number AWEA touts today! 

Conclusion

The change in job counts raises serious credibility issues about the industry's employment strength. But the absolute numbers tell only a piece of the story. Since Navigant's study is based on JEDI, the job figures represent gross numbers and do not consider them in the context of the larger economy. In that sense, Navigant's findings, like NREL's study, tell us nothing about the true impact of the PTC.

But one thing does appear to be true: AWEA's job figures, dating back to least 2009, may be nothing more than figures pulled from thin air. 

-----------------------------------------

[1] Lawrence Berkeley National Laboratory reports (p. 7): "The American Wind Energy Association, meanwhile, estimates that the entire wind energy sector directly and indirectly employed 75,000 full-time workers in the United States at the end of 2010 - about 10,000 fewer full-time-equivalent jobs than in 2009, mostly due to the decrease in new wind power plant construction." A recent AWEA blog (February 3, 2012) confirms the 75,000 is still current.  

[2] Wind manufacturing represents under 1% of the 11.5 million domestic manufacturing jobs in 2010.