US Lagging in Green Jobs

November 10, 2010

New Clean Edge  jobs report shows the Boston region is doing relatively well, but the U.S. is lagging in green jobs

by Joshua Rinaldi and David Levy
Joshua Rinaldi is a first year doctoral student in the McCormack School of Public Policy and Global Studies at the University of Massachusetts, Boston.

A recent Clean Tech Jobs Outlook Report estimated that in 2009 there were more than 3 million jobs in the renewable energy field globally. The report indicates, however, that the US is falling further behind in this field; the bulk of these jobs are now in China and Brazil.

The CleanEdge report points to several trends that suggest that, while the world is moving toward a green economy, the United States may be lagging. Solar panel production is expanding in Mexico where some U.S. companies have outsourced manufacturing for the lower wages. In the automobile and other sectors, Mexico has been a very attractive destination for outsourcing because its proximity to the U.S. enables logistical integration of supply chains, and because of the NAFTA free trade area.

About 70 percent of hardware and technology used in U.S. clean-energy installations are constructed overseas, according to the report. “Essentially, clean-tech manufacturing has run up against the same economic realities as countless industries that came before, from clothing to computer chips to cell phones: it’s very hard for the U.S. to compete with overseas labor costs, particularly in the developing world.” For example, BP Solar closed its Frederick, Maryland, PV plant in March 2010 and moved most of the 320 jobs abroad. This is also a sign of the surprisingly rapid maturation of the industry, as solar panels rapidly become low-value added commodities.

If this trend holds true, then the main non-exportable jobs in renewables will be related to project  planning, finance, permitting, installation and the maintenance of solar panels and wind turbines. While that is encouraging, the report cites the Renewable Energy Project, a think tank in Washington D.C., as saying that maintenance and installation makes up only 30 percent of the total labor involved with these projects. Of course, numerous early-stage clean tech firms are conducting their R&D and initial manufacturing in the U.S., but many of these look to manufacture overseas as soon as products enter large-scale commercial production.

Based on the report, China is the most likely destination for the roughly 60 percent of jobs related to manufacturing in clean tech supply chain: “No other country comes close to matching the active role being taken by China to supercharge its clean-tech initiatives.” China, the world’s second largest economy behind the United States, now outspends both the U.S. and the European Union in terms of clean tech research dollars. Its $34.6 billion in clean energy investment in 2009 was just shy of double the $18.6 billion in investments in the United States.  

China also topped the U.S. in presence on the global top 10 publicly traded pure-play clean tech companies list, which represent just short of 100,000 employees. China has six of the top 10 (when the Hong Kong facility is included) and the United States has only two.

top_ten_clean firms2009

A comparison with the 2009 Clean Edge report shows the growth of China in the field. China’s presence on the list doubled in one year while the U.S. actually has one less company listed in 2010. (The 2009 report quoted a Pew Charitable Trust report that gave an estimate of 770,000 clean tech jobs in the United States, but the 2010 report did not cite a comparable figure for 2010).

The report does offer a few nuggets of hope for particular regions in the United States, as some cities are developing thriving clean tech clusters. The good news is mostly local. The Boston metropolitan area is ranked as the best place for clean tech jobs east of California based on job presence, job postings, investment activity and patent activity.

The report ranks the Boston metropolitan area third for clean tech job activity, behind only San Francisco and Los Angeles. Boston moved up one spot from its 2009 ranking to overtake New York City in the standings. In addition to the top spots, California claims two other cities in the top 15 metro areas for green job growth. A good portion of California’s job growth stems from aggressive smart grid expansion from high-powered companies like Google, Cisco and Intel. This is testament to the fact that clean tech jobs are not limited to traditional renewables, but are  increasingly at the intersection of  IT, telecoms, and energy efficiency.

top clean tech regions2009

About 6 percent of the federal stimulus money, around $50 billion, is aimed at green jobs. This amount includes loans and grants for direct investment in manufacturing, electric grid improvements and public transportation as well as loans for green improvements. Substantial U.S. Department of Energy (DOE) loan guarantees encouraged Spanish wind-turbine generator company Ingeteam to employ about 270 workers at a new plant announced in March outside Milwaukee, while Spain-based Talgo plans to hire 125 employees to build high-speed rail cars at a former auto parts factory in North Milwaukee,” according to the report.

If the United States is to conquer large sections of this market, the report recommends the country continues to invest in green infrastructure, raise fuel efficiency standards and make its renewable portfolio standards (RPS) stronger. The Obama administration has made a very targeted commitment of around $2.4 billion for alternative fuel vehicles, electric drive chains, and high-density batteries, with Michigan receiving the lion’s share. For instance, the report indicates the Department of Energy made a $465 million loan to electric-car maker Tesla Motors in April. Nine advanced electric-vehicle battery plants have opened in the U.S., with support from these funds. Yet these highly automated new plants employ far fewer people than the old auto factories they replace. Moreover, this is a very risky bet, because it could be many years before a mass market emerges for purely electric vehicles. Not only do they still face substantial hurdles relating to cost, range, and recharging infrastructure, but pure electrics can have very poor carbon emissions profiles if they rely on a coal-intense grid for recharging.

While some parts of global green value chains are highly mobile, some manufacturing is always attracted to locations close to large markets. Labor is an increasingly small proportion of manufacturing costs in highly-automated production systems, and large multinational corporations prefer some operations close to markets to reduce supply disruptions and to learn about consumer demand. They also prefer to spread operations around major regions in order to diversify political and economic risks, and reduce protectionist pressures. Even the Chinese are now playing this game. As the report notes, “In August, Chinese wind-turbine maker A-Power Energy Generation Systems and wind developer partner Shenyang Power Group said they will work with the United Steelworkers, America’s largest industrial union, to supply the steel for components at a 615 MW Shenyang wind farm in west Texas.”

The overall trend is not positive, however, for the U.S.  According to the report, “The U.S. trade deficit in renewable-energy products soared 1,400 percent to almost $5.7 billion between 2004 and 2009, according to a January 2010 report from the office of U.S. Sen. Ron Wyden (D-Oregon).” Trade and employment go hand in hand, so this points to a major challenge if the U.S. is to secure its position in this sector.

The SJF Institute, the not-for-profit arm of SJF Ventures, released the annual Clean Tech Job Trends in October.

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