The rapid growth of renewable energy technologies is creating lots of jobs. But should we really rejoice?

François-Xavier Chevallerau | March 20, 2017

Renewable energy is on a roll worldwide and making up a growing share of new power capacity installed in many countries. New solar photovoltaic (PV) capacity installed in 2016 reached more than 76 gigawatts worldwide, an increase of some 50% on the 50GW installed the year before. Globally there is now 305GW of solar power capacity, up from around 50GW in 2010 and virtually nothing at the turn of the millennium. Wind power is also growing fast. Close to 55GW of new wind power capacity was installed worldwide last year, the industry’s second best year in terms of new installations worldwide after the record growth posted in 2015. The global total capacity installed now stands at more than 487GW, nearly half of which — 241GW — has been added in the past five years.

The impressive growth of wind and solar power over the last few years has, of course, been largely subsidy-driven. It has however brought with it falling costs and increased efficiency that are making renewables increasingly competitive in many places, fuelling hopes that their growth could become self-sustained in the not-too-distant future.

What the growth of renewables is also bringing with it is an impressive number of new jobs. According to the International Renewable Energy Agency (IRENA), an intergovernmental organization that promotes the adoption and sustainable use of renewable energy, 8.1 million people were employed in renewable energy around the world in 2015 (excluding large hydropower), a 5% increase from the number reported the previous year. The solar PV sector is by far the largest renewable energy employer worldwide with 2.8 million jobs (up 11% from 2.5 in 2015) in manufacturing, installation and operations & maintenance. Liquid biofuels is the second largest global employer with 1.7 million jobs, followed by wind power, which grew 5% to reach 1.1 million global jobs.

The rapid growth of renewable energy jobs is in stark contrast with depressed labour markets in the broader energy sector. In the United States for example, renewable energy jobs increased 6% in 2015 while employment in oil and gas decreased 18%. As a result, renewables now account for more jobs than the fossil fuel industries in many countries. In China, renewable energy employed 3.5 million people in 2015 according to IRENA figures, while oil and gas employed just 2.6 million. In the U.S., 377,280 people were employed in solar and wind electric generation in 2015, according to a recent report by the United States Department of Energy, while 171,878 ‘only’ had jobs related to electrical generation in the coal, gas and oil industries. Solar employment, which includes both photovoltaic electricity and concentrated solar steam generators, accounts for 43% of the U.S. electric power generation workforce – the largest share of workers in that market – vs. 22% for fossil fuel generation employment.

The growth of renewable energy jobs is expected to remain strong in the coming years. According to IRENA, more than 24 million jobs could be created worldwide by doubling the share of renewable energy in the global energy mix by 2030 – which it says should be ‘enough to meet global climate and development targets’. This growth is thus seen by many as a sign that the ongoing global energy transition is working and is accelerating. The ‘monumental job growth’ of clean energy is widely celebrated in the press, and renewables are increasingly touted as the economy’s new ‘job engine’, capable of rejuvenating the economy while saving the climate.

In fact, what’s not to like about the development of energy technologies that reduce carbon emissions while creating a lot of new jobs? People love new jobs, and so do governments, especially when these jobs cannot be easily offshored or automated, and when they bring in much needed new tax receipts and social contributions.

Exercising ‘healthy skepticism’

As in many other domains, though, a certain degree of ‘healthy skepticism’ should probably be exercised, for several reasons.

First, the growth of renewable energy jobs occurring in many countries mostly concerns installation and operations & maintenance jobs, while manufacturing jobs – and the higher value-added that goes with them – tend to mostly concentrate in one location, i.e. China. Fuelled by government handouts and low-cost loans, the Chinese solar industry dramatically expanded production of solar cells/modules and solar panels over the last decade, which largely explains the spectacular drop of solar prices. Thanks to this heavy government support, China has become by far the dominant force globally in the manufacturing of both solar cells and solar panels. A similar phenomenon is now at play in the wind sector, with Chinese manufacturers increasingly dominating the global market for wind turbines. As a result, a staggering 43% of the 8.1 million renewable energy jobs accounted for worldwide by IRENA for the year 2015 were located in China. Given the competitive advantage already acquired by its producers, China would likely remain the main beneficiary of a long-term boom in renewable energy employment figures.

Second, the growth of renewable energy jobs remains largely driven by what IRENA calls ‘enabling policy frameworks’, i.e. government interventions, in the form of regulations, incentives, and subsidies aimed at supporting the deployment of renewables – meaning that the benefits of job growth in renewables often come with a hefty monetary cost to government finances. Where and when incentives and subsidies are reduced or withdrawn due to budget constraints or choices, the growth of renewable energy jobs tends to stall or to reverse. Employment in solar PV, for example, decreased in the European Union (EU) in 2015 as a number of support schemes were winded down and the market for photovoltaic energy flattened. Even more spectacularly, employment in the Australian renewable energy sector collapsed by one third since government support was reduced by the Liberal–National Coalition that took power in 2013. Annual full time equivalent employment in renewable energy activities in Australia was estimated to be 11,150 in 2015-16, down 16% from 13,300 in 2014-15 and down from a peak of 19,220 in 2011-12, according to the Australian Bureau of Statistics (ABS). This is despite Australia having one of the most favorable environments for renewables – it receives more solar radiation per square foot than anywhere on the planet – and being one of the countries considered most at risk from climate change. In the U.S., the new administration seems to be intent on gutting or even eliminating federal government support to renewable energy research and deployment, which could potentially slow down or even reverse the growth of renewable energy jobs.

Third, and most importantly, even if solar and wind energy are very good at creating lots of jobs, their performance in terms of supplying energy to society – which is supposedly the primary purpose of any energy resource – remains far from being as spectacular. According to the Renewables 2016 Global Status Report published by REN21, a ‘global renewable energy policy multi-stakeholder network that connects a wide range of key actors’, wind and solar generated just 4.9% of global electricity production in 2015 (3.7% for wind and 1.2% for solar PV). Their share of global final energy consumption is even lower, at 1.4% for wind and solar plus biomass/geothermal power in 2014.

In other words, wind and solar so far provide human societies with proportionately far more jobs than energy or electricity – which means that the “energy productivity” of workers in the solar and wind industry remains far lower than that of workers in the fossil fuels industry. In the U.S., for instance, the 377,280 wind and solar generation workers produced 5.3% of the 4 trillion kilowatt-hours of electricity generated in the country in 2015 (utility-scale facilities only), while the 171,878 people working in electrical generation in the coal, gas and oil industries contributed 67%, meaning that each job in the fossil fuels generation sector was over 27 times more “energy productive” than a job in the wind and solar generation sector. This might be a rough estimate based on inadequate boundaries, but it still gives an idea of the energy productivity gap that separates renewables from fossil fuels.

One could argue that this gap appears wider than it really is because a lot of renewable energy jobs have to be created upfront to support new capacity installations, while much of the actual renewable energy generation is expected to ramp up over a longer term. Once a certain deployment scale is reached, it is hoped, operations will be streamlined and renewable jobs will become more productive. Similar upfront job-intensive investments probably had to be made during the early stages of previous energy transitions, when coal and then petroleum became the world’s dominant energy sources in the 19^th century and 20^th century respectively.

A major difference, though, is that previous energy transitions were always driven by the capacity of the new energy resources to provide society, in a relatively short period of time, with more, better quality and cheaper energy. Fossil fuels, and most particularly petroleum, became the master energy sources of the modern world because they were quickly shown to be far more powerful, economic, convenient and versatile sources of energy than the sources they replaced. Most importantly, fossil fuels came to dominate the world’s energy supply because they provided higher quality forms of energy inputs in terms of their ability to power useful or productive work, and because they delivered far more energy than what their production required – meaning that they made vast quantities of ‘net energy’ available to do other things than procuring, processing and distributing energy.

The expected transition to solar and wind, on the other hand, is the first energy transition in human history that is not driven by the intrinsic capability of those energy sources to provide more, better and cheaper energy – or more precisely ‘net energy’ – to society, in a relatively short lapse of time. Many of course argue that this is only a transitory situation, and that technological progress will soon make solar panels and wind turbines far more efficient and capable of delivering abundant and dirt cheap energy. However, it would actually take giant technological leaps forward for wind and solar to become more powerful, economic, convenient and versatile sources of energy than fossil fuels, capable of delivering energy on the scale needed to replace them. It would require massive new investments upstream in advanced materials as well as downstream in ‘smart’ and flexible grids to raise the current ‘ceiling’ for the use of renewables, with no guarantee of success. These investments, provided they could be funded and would not run into resource constraints, would probably take a very long time to pay off.

Energy as a cost center

Overall, the excitement about renewable energy’s job creation potential is understandable, but the current boom in renewable energy jobs should probably not be viewed as a sign that the transition to clean energy is now running full speed, or that clean energy has become a new miraculous job creation machine. Doing so would be misunderstanding the role of energy in society and the economy.

Energy is the fundamental input that is needed for all human activities, without exception: capital and labor are functionally inert without energy input, and it is only through the use of energy that they can be combined to produce and distribute goods and services. However, energy contributes to value creation in an indirect manner, depending on the ways in which and the ends to which it is used. To borrow from business management jargon, for human societies energy supply is a ‘cost center’ rather than a ‘profit center’, i.e. it is a sector or domain that does not directly add to profit (that is, to wealth creation or economic growth) but is nevertheless essential to the organization’s ability to operate effectively and profitably.

If they are intent on achieving value creation and economic growth, societies need, just like corporations, to continuously contain or reduce the cost of their cost centers and to make them more efficient. In the case of society’s energy cost center, this means reducing the cost of the energy supply and making it more productive, in energy terms. In other words, the energy cost center shall aim to supply ever more energy to society, while using ever less resources, including human resources. Only then can the energy supply cost center provide a positive long-term contribution to economic growth. So far, and for the foreseeable future, the boom in renewable energy jobs is achieving precisely the opposite. It increases the operational costs of our energy cost center, while making a very small contribution to increasing its output. As such, and should it continue, it might act as a drag on economic growth over the long term, even if it seems to provide a positive contribution to GDP in the short term.

Civil society and policy makers should therefore keep in mind that our energy cost center can either contribute to foster long-term economic growth or that it can add a lot of new jobs, but that it probably cannot do both. This doesn’t necessarily mean that the current push for renewable energies should be slowed down or reversed, as there are other reasons that underpin the choice to move towards renewable energy. But it should certainly help us fully understand what is in fact happening when we see headlines proclaiming, for example, that the solar and wind industries are now creating jobs at a rate 12 times faster than that of the rest of the U.S. economy.