The point of the energy industry is to produce energy, not jobs

‘Report: 61,000 clean energy jobs in MN and counting‘, MPR News announced yesterday.

The number of Minnesota jobs in energy efficiency and renewable energy grew by nearly 5 percent from 2017 to 2018, bringing total clean energy jobs to more than 61,000, according to a report released Tuesday at the State Capitol.

Clean Energy Economy Minnesota’s annual report shows clean energy jobs make up 2 percent of all jobs in Minnesota. The group, which advocates for companies who manufacture and install renewable energy or energy efficient technologies, expects clean energy jobs will increase 7.3 percent in 2019 from the previous year.

But there is something missing from this celebration. It is something vital. Indeed, it is the most vital thing of all; how much energy are these workers actually producing?

It is outputs, not inputs, that matter

This is the crucial question from an economic point of view. As the economist Paul Krugman puts it

Productivity isn’t everything, but in the long run it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.

Simply accumulating inputs – like workers – is not the point of economic activity. To generate economic growth and rising living standards we need to increase the amount of output each worker produces. Krugman is dead right.

There are lots of jobs in solar energy…just not much energy

So, how productive are these workers? How much energy does each one of them produce?

Sadly, the answer seems to be ‘not much’. As I’ve written before, in May 2017 the Washington Examiner wrote:

To start, despite a huge workforce of almost 400,000 solar workers (about 20 percent of electric power payrolls in 2016), that sector produced an insignificant share, less than 1 percent, of the electric power generated in the United States last year (EIA data here). And that’s a lot of solar workers: about the same as the combined number of employees working at Exxon Mobil, Chevron, Apple, Johnson & Johnson, Microsoft, Pfizer, Ford Motor Company and Procter & Gamble.

In contrast, it took about the same number of natural gas workers (398,235) last year to produce more than one-third of U.S. electric power, or 37 times more electricity than solar’s minuscule share of 0.90 percent. And with only 160,000 coal workers (less than half the number of workers in either solar or gas), that sector produced nearly one-third (almost as much as gas) of U.S. electricity last year.

The graphic above helps to quantify the significant differences in electric power output per employee for coal, natural gas and solar workers. In 2016, the coal sector generated an average of 7,745 megawatt hours of electric power per worker, more than twice the 3,812 megawatt hours of electricity generated per natural gas worker, and 79 times more electric power per worker than the solar industry, which produced only 98 megawatt hours of electricity per worker. Therefore, to produce the same amount of electric power as just one coal worker would require two natural gas workers and an amazingly-high 79 solar workers.

In terms of the ratio of outputs (energy generated) to inputs (number of workers), solar energy is a low productivity sector compared to others. Piling more inputs into this sector when they could be more productive in other sectors lowers productivity and economic welfare. This is not something to be celebrated, from an economic point of view at least.

Blowers wanted

The point of an energy industry is to generate energy, not to generate jobs. If it was, we could hire people to stand in front of wind turbines blowing at them to make them turn faster. The effect on energy generation would be non existent but the effect on employment need only be limited by how many blowers we can fit in a field.

John Phelan is an economist at the Center of the American Experiment.