Wednesday, March 4, 2009

Jobs in a changing economy

The debate over the mixture of sources that will make up the supply portfolio from which America will draw its energy in the next twenty years is just beginning. Until now there has been a general acceptance of the need to find less polluting technologies. When this is combined with its flexibility, this has meant that for the past few years new fuel-fired power stations have focused on the use of natural gas. At the same time the growth of the renewable energy component, while small, has continued, most particularly for wind. Wind and gas-fired power sources tend, to a degree, to compliment one another, given that wind has to have a back-up that is flexible, for when it is not producing and this can be achieved relatively simply with a gas turbine. At the same time, the increasing cost of natural gas, means that the savings from the wind turbines will popularize their use.

In a world where energy demand has continued to grow, this meant that there was, given their initial small size and growth capacity, a continuing demand for both new gas power plants and for new wind farms and solar power plants. However we are now at a point of transition, and the new Administration has a different concept of the way to the future. Part of this new message is predicated on the need to conserve, and to use more efficient appliances. It has come out of a successful application in California, where demand has been kept down, by such changes. It is a message that has been adopted by many utilities that do not have to build new facilities if their growing customer base, instead of growing demand improves the efficiency of power usage, and can hold their overall demand steady. Because of the way that the utilities must sell this program, and the incentives that they provide for customers to conserve or change to more efficient appliances, there is a cost for this power. A local utility suggested that it was around $0.04 per kWh, considerably less than the cost to build new generating plant. Thus, at present, the movement to increase conservation and efficiency will be hailed as a benefit by both parties.

Unfortunately, if the power consumption level is held steady, then with no growth, the need can be met with existing power generation systems (recognizing there will still remain some small market for replacement). This means that the demand for new facilities and new power generation systems is diminished. This is particularly likely to be true in a time of recession. So if there is to be no business through growth in the economy and the power demand therefore, then if we are to sustain the demand for, and integration of, renewable sources into the grid we need to start replacing some of the older power plants, with different sources of energy.

Now this is where we bump into another problem. Much is made of the potential jobs that would be created if renewable energy systems were installed. A wind farm here, a solar farm there, and the jobs mount up. But in relative terms, once these farms are in place, the number of folk required to maintain and repair them will be small. Contrast that with say the natural gas industry where, as I tried to show yesterday, if you are not continuously drilling for gas these days, then the supply will drop. Thus we need a continuous supply of drill crews, someone to make and supply the steel for the drill strings, someone to mine the sand and treat it, and to make and mix the polymers for the hydro-frac, and then the folk in the storage facility etc etc.

It gets even more labor intensive if one goes into coal mining. There are miners, those that run the cleaning plants where the waste rock is removed, those that haul the coal around (pipelines are not nearly that popular) as well as those that make and maintain the machines (which have a high wear rate and rate of attrition). The mines need tires for the trucks and oil for the machines, and soak up a lot of electric power along the way. A study done on potential economic loss has been quite blunt on what some of these impacts might be. Rose and Wei found that on current rates of supply the coal industry would contribute roughly $1 trillion in the decade leading up to 2015, with some $362 billion in household income and some 6.8 related jobs. The then looked at both a 33% and a 66% replacement of the energy the coal produced with renewable or alternate power. At the 33% replacement rate they saw a drop in gross economic output of $166 billion, $64 billion drop in household income per year, and a loss of 1.2 million jobs. (These losses more than doubled with greater reduction in coal use).

Now there is a train of thought that rejoices in the change, and the simplicity of the new technology. But, on the other hand, it is going to put a fair number of people out of work. At a time when job creation is a vital need if we are to work our way out of this global recession, we may well see a drop in employment if the transition is enforced too dramatically.

I was born and raised in the North of England where the mining industry was the major employer. I would take the first bus of the morning to the mine, passing as I did in the half-hour journey, over a dozen mines. The mines were still in the transition from hand-won mining (see the Sunday Tech Talks) to machine-won coal. Thus each mine would employ around a thousand people. As North Sea oil displaced coal in the UK these mines closed. There was not nearly enough work to go around, and while the social compact in the UK meant that no-one starved, and most had housing, unemployment rates stayed very high for decades. The pubs, where miners congregated in the evenings suffered badly, as did all the other supports that a community grows, the stores, the sports, the entertainment, all diminished.

But as wages decline, and jobs, so other aspects of a society also diminish. Crime and violence often increase, and community health declines. As the debate over future energy policy increases in intensity the voices of those that will be thrown out of work by the changes, a community until now relatively silent, will begin to be heard. And then perhaps the debate over relative costs and benefits will be joined with more vigor, and fact from each side. This may, in the end, make the passage of some legislation more difficult than it now appears, it will likely depend on how deeply the recession bites, and how long before it starts to lift.

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