One of the key campaign promises made by our new president was that his administration would create five million new “green” jobs by spending $150 billion dollars over the next 10 years. There are serious and substantial reasons that this level of job creation won’t happen in the near future, and I’m surprised other news sources haven’t cut through the rhetoric over the past months to reveal them. Beyond the fact that merely moving wealth from one segment of the economy to another does not create sustainable jobs for the future, there are two significant reasons why the new administration should scale back its “green job” projections.

Jobs, Jobs, Jobs

Campaign rhetoric and promises may get a candidate elected, but the nuanced complexities of America’s energy policy are now President Obama’s to unsort. When President Obama outlined his top priorities for the environment and energy policy prior to his inauguration, he said he wanted “to create millions of new green jobs, to free our nation from its dependence on oil and help preserve this planet for our children. In the end that’s not only the responsibility of all Americans, it’s our obligation as stewards of God’s earth.”

How has he done so far? In my simple-minded arithmetic, Obama has created four jobs so far, within “The Green Team” consisting of White House Energy Czar Carol Browner, Energy Secretary Steven Chu, Lisa Jackson to run the EPA, and Interior Secretary Ken Salazar. Unfortunately, with the economy on the skids, that’s just about as far as Obama will get this year creating new green jobs.

President Obama made it clear in post-election speeches that he intends to accomplish this rather broad goal by focusing on the development of renewable energy and that accomplishing that goal is important to the future competitiveness of our economy, national security, and addressing global warming. Many organizations with a vested interest in government-financed alternative and renewable energy projects are hard at work trying to bolster Obama’s new job estimates and make a play for a juicy slice of government pork.

One example is the recent report released by the GridWise Alliance on January 7 that estimates that “up to 280,000 new jobs can be created from the deployment of smart grid technologies.”

“Increasingly a smart grid is seen as a key enabler for the new energy economy and as such, is foundational for the millions of ‘green collar jobs’ President-Elect Obama is aiming for,” says Guido Bartels, chairman of the GridWise Alliance and general manager global energy and utilities industry at IBM. All this for an investment of only $16 billion over the next four years. This is representative of dozens of similar reports that were released around the inauguration, and all are asking for money to pay for an agenda that would otherwise not attract private sector investment at the rate and scale suggested in the report.

In my mind, this is the same as the homeless person standing on the corner saying, “Brother can you spare a dime?” The only difference is these organizations are better dressed and asking for hundreds of billions of dollars, all in the name of creating these elusive green collar jobs.

Pay to Play

That brings me to reason #1 why only a tiny fraction of these promised green jobs will appear over the next couple of years: Production and investment tax credits are useless if you don’t pay taxes.

Our sister publication, The Energy Daily, recently reported that solar and wind energy industry groups have taken a new direction in their Capitol Hill lobbying efforts. For years their mantra has been that wind and solar can’t survive without renewal of production and investment tax credits (PTCs and ITCs), and the statistics do in fact show a direct correlation between investment and the presence of the PTC for wind projects or the ITC for solar projects.

At the time this editorial was prepared, the president had initially earmarked only $10 billion for energy-related tax incentives in the proposed stimulus bill, although there are serious proposals under discussion about significantly raising incentives and even making direct government investment in electricity infrastructure. In his weekly address on Jan. 24, he said, “To accelerate the creation of a clean energy economy, we will double our capacity to generate alternative sources of energy like wind, solar, and biofuels over the next three years.”

The American Recovery and Reinvestment Plan that the president is promoting also presents a goal of installing “3,000 miles of transmission lines to convey this new energy from coast to coast.” This sounds great on the surface, but someday we must adjust rhetoric to match reality. The heart of the transmission construction problems are state sovereignty issues that the federal government can’t run roughshod over. The Federal Energy Regulatory Commission has been grappling with the decade-plus lead times to construct power lines that cross state boundaries without much success for many years. The Corridors of National Interest provisions in the 2005 Energy Policy Act were the latest promises to cut the interstate project regulatory red tape, and four years later not a single new project has been accelerated. Without regulatory certainty, there will be no private investment in future transmission projects.

The problem with such a heads-down approach to these renewable energy policy proposals is that they are all beyond the control of Congress and the Obama administration. The renewable tax credit that spurred new renewable projects no long works because the investment firms that invest heavily in these projects are no longer profitable. Without profit there is no investment. In fact, of the 20 investment firms that made the largest investment in renewable projects in 2007, only five of them are still actively making energy project investments. Also, several of the final five have plenty of tax write-offs on the books, making the PTC and ITC worthless to them going forward. Expect 2009 to be a disaster for new renewable projects.

Quick Course Change

Never without an option, lobbyists for the solar and wind industries proposed that Congress revamp the tax credits so that investors would receive a direct cash refund from the government equal to the value of the credits. Thankfully, this proposal landed with a loud “thud” in the hallowed halls of Congress—not because it makes extremely poor financial sense but because it was politically unpalatable, as it looks remarkably like corporate welfare. That’s good enough for me.

One investment adviser told The Energy Daily that President Obama’s goal of doubling U.S. renewable energy production in three years is just not feasible because the tax equity market has to double in 2009, triple in 2010, and increase five-fold in 2011—and that isn’t likely to happen in the current financial climate. My concern is that because private investment in renewable and transmission projects may indeed be negligible for the next few years, it will become the rationale used by the federal government to step in and begin exerting direct investment control of major energy infrastructure projects. 

Engineers Are Not interchangeable Parts

The second reason why Obama’s green jobs goals will be impossible to meet is that the estimates of new green jobs have not been rationalized against the available trained workforce pool of talent. In other words, there is no correlation between independent manpower estimates and the current and future availability of trained and qualified staff.

Studies such as the GridWise report necessarily ignore the constraints of the existing talent pool and instead assume the needed talent is available whenever it is needed. It’s that “if you build it, they will come” mentality. Also, these studies have one very significant flaw: They include construction jobs in their estimates. Construction jobs are by their very nature temporary.

The utility industry has enjoyed very low unemployment rates, reported by the Bureau of Labor Statistics as less than 2% for many years. Also, as in many similarly skilled industries in the U.S., the average age of most engineers and skilled technicians is over 50 years. That talent pool isn’t likely to jump from secure jobs within a few years of retirement into the uncertainty of newly created green collar jobs. Additionally, targeting the new generation of utility engineers and technicians—typically, those with five or fewer years of work experience—for the green economy would wreak havoc at many utilities and other industries when qualified talent is scarce and open requisitions remain unfilled.

Here’s another gripe: These studies assume the engineering profession is “one-size fits all,” but nothing is further from the truth. An experienced civil engineer who designs bridges doesn’t bring useful skills to the table when the task is designing advanced solar energy systems.

Given that engineering college graduates typically have multiple job offers upon graduation today, we what is known as a “zero sum game.” The only source of new hires for these new green engineering and technician jobs that President Obama hopes to generate over the next three years is to “steal” qualified employees from other companies, as there are only so many qualified people to go around. The pipeline to develop a professional engineer or journeyman technician is at least six to eight years after high school, so the anticipated technical talent needs do not mesh well with the available and anticipated talent pool. Given the low interest in a technical career path for those in high school today, the future talent pool isn’t likely to increase much in the coming years.

—Dr. Robert Peltier, PE, Editor-in-Chief