Energy industry there to produce energy, not jobs

This op ed appeared in the Duluth News Tribune on June 9th, 2019.

Gregg Mast of Clean Energy Economy Minnesota wrote in a commentary in the May 7 News Tribune about “a great economic story in our state: clean-energy job growth” (In Response: “Clean-energy jobs market is actually robust, growing”).

“The fact is,” he claimed, “the number of clean-energy jobs has grown every year since the release of the first Clean Jobs Midwest-Minnesota report in 2016, and these good-paying jobs have been added at a faster pace than the statewide average.”

This might sound like great news, but there is something missing from this celebration. It is something vital. Indeed, from an economic point of view, it is the most vital thing of all: How much energy are these workers actually producing?

Increasing productivity — the ratio of outputs produced to inputs used — is key to economic growth and raising living standards. As economist Paul Krugman put 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.” This, of course, goes for states like Minnesota.

Krugman is dead right. The point of economic activity is not simply to pile up inputs like workers, it is to generate output. To raise productivity, with the consequent increase in economic growth and living standards, we need to increase the amount of output each worker produces with a given amount of inputs.

So, how productive are these new clean-energy workers? How much energy does each produce? Sadly, the answer seems to be “not much.”

According to data on electric-power generation by primary energy sources from the Energy Information Administration and figures for employment in each sector from the U.S. Energy and Employment Report, we can see that, in 2017, the 412 workers employed in Minnesota’s natural-gas sector produced an average of 16,281 megawatt hours of electricity each. For coal, the figure was 13,230 megawatt hours produced for each of the 1,722 workers employed in the state.

But for renewable wind and solar, the numbers are far less encouraging. In terms of megawatt hours produced per worker, Minnesota’s wind sector came in a somewhat distant third. Each of the 1,966 workers here generated an average of just 5,665 megawatt hours in 2017. This was just 43 percent of the amount of electricity a Minnesota coal worker produced annually and 35 percent of that produced by a natural-gas worker.

Figure 1: Megawatt hours of electricity generated per worker, 2017

Source: Energy Information Administration and U.S. Energy and Employment Report

For solar, the numbers are even worse. In 2017, each of Minnesota’s 3,800 solar-energy workers produced an average of just 157 megawatt hours. This was just 1.2 percent of the energy produced by a coal worker and only 1 percent of that which a natural-gas worker produced.

In terms of that vital ratio of outputs (energy generated) to inputs (number of workers), wind energy is a low-productivity sector compared to natural gas and coal. Solar is even worse. Piling more inputs into these sectors when they could be more productive in other sectors lowers productivity and economic welfare. This is certainly not something to be celebrated — from an economic point of view, at least.

Mast and Clean Energy Economy Minnesota need to remember that the point of an energy industry is to generate energy, not to generate jobs. If it was the other way around, 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 practically non-existent, but the effect on employment would be limited only by how many blowers could fit in a field. Clean Energy Economy Minnesota’s jobs numbers would be through the roof. But ask yourself: Would our state be any better off?

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