David R. Henderson  

Solar Power: Lots of Jobs per KWH is Bad, not Good

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Creating jobs is not the same as creating wealth.

When I start a class in economics, I start with the Ten Pillars of Economic Wisdom. The pillar above about jobs and wealth is #8. When I teach it, I use Dwight Lee's now-classic article "Creating Jobs versus Creating Wealth."

Mark Perry has done a great service by applying this principle to energy. In "Inconvenient energy fact: It takes 79 solar workers to produce same amount of electric power as one coal worker," he writes:

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.


Of course, to do a complete analysis, one would want to look at capital and other costs, not just labor costs. But given the overwhelming data on labor, it's hard to believe that other costs for solar would be so much lower as to make solar less expensive. And we don't have to speculate. If solar power weren't more expensive, governments wouldn't need to subsidize and regulate so heavily to get people to use it.


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COMMENTS (31 to date)
Kevin Dick writes:

As I try to communicate to my software developer friends who enthusiastically tout the green jobs solar creats: "Um, you realize that's a bug, not a feature."

Daniel Kuehn writes:

At this point I'd imagine most of what gets tagged as a solar job is installation right?

I'm not sure I agree creating jobs is bad - some type of production is always going to be the relatively more labor intensive one. But it's certainly not inherently good.

Philip George writes:

I think the comparison is silly.

The workers employed in the solar industry are mainly setting up new installations. Once the installation is complete no more workers are required to produce solar power for the next quarter century, except for occasional maintenance.

To be accurate you need to compare zero (number of workers needed to produce solar power) with the number of workers required to produce coal power.

Joseph A writes:

Does this analysis account for subsidies both implicit and explicit given to the coal industry as well as compare the negative environmental externalities? Presumably no one is arguing that coals impact on the environment is benign even if you discount global warming completely.

Jim writes:

"Of course, to do a complete analysis, one would want to look at capital and other costs, not just labor costs."

Yeah, but why do sound economic analysis when you can parrot a junk study that supports your political view?

Frankly, facts on the ground tell a completely different story. Recent utility scale solar projects are coming in at 3-5 cents per kWh, unsubsidized. That puts the full cost of these projects (capEx plus opEx) below just the opEx of coal and in the ballpark of natural gas.

The baseline trend for solar is locked in. With current pricing, solar is guaranteed to take 20-40% of electric load away from fossil fuels in the next decade or two. This is without subsidies. If storage costs continue their rapid decline, solar could see much higher penetration.

The economics of solar have changed dramatically in the last 3-5 years. If you haven't been paying attention, you can save yourself a lot of embarrassment by doing some research before posting junk like this.

I am guessing that "x KWH" in this usage means installed capacity — plant which can produce x KW of power at maximum output — not x KWH of energy. But I might be mistaken.

Jim writes:

Richard - The kWh cost number I mentioned is based on energy production, not nameplate capacity. These numbers are usually quoted in cents per kWh (eg 3-5 cents) or in dollars per MWh (eg $30-$50). .

Usually cost of generation numbers are quoted using something called "Levelized Cost of Energy." This is the net average cost of power produced by a generation source after factoring in all capEx and opEx costs and adjusting all the flows for the time-value-of-money.

I find the most reliable information on this topic is coming from Wall Street, rather than the numerous political hacks from either the left or the right.

Here's a quote from Bloomberg's annual energy outlook report (Google "Bloomberg New Energy Outlook")
"Wind and solar costs drop. These two technologies become the cheapest ways of producing electricity in many countries during the 2020s and in most of the world in the 2030s. Onshore wind costs fall by 41% and solar PV costs fall by 60% by 2040."

Another reliable source on cost trends is the investment banking firm Lazard. For their latest report, Google "Lazard
Levelized Cost of Energy 10"

David S writes:

Philip - I don't think you are correct. For argument's sake make the most generous assumption possible: all solar workers are installers, all non-solar workers are maintenance.

In that case, 78 workers are required every 20 years in order to keep solar working. This is because the solar cells only last 20 years, because if weather doesn't kill them then the cells slowly decay from radiation damage and diffusion. So even in this best case scenario, you need 4 workers for solar compared to 2 for natural gas and 1 for coal.

And of course, that is not actually the case. I don't know the breakdown on the worker numbers cited, but new gas plants are also being constructed and the maintenance load on solar cells is not zero over a 20 year period.

Mark Bahner writes:

One thing it's very useful to do when one gets new information is to ask, "Does this make sense?"

Here's version 10 of Lazard's annual analyses of the levelized cost of electricity from various unsubsidized new electricity sources. ("New" = what the levelized cost of electricity would be if a new facility was built this year.)

Per Lazard's analysis, the levelized cost of electricity from new utility-scale photovoltaics, and from wind, are equal to or lower than the cost for coal and natural gas. (Note: The levelized cost of electricity for residential solar is much higher than for utility solar.)

The question is whether Lazard's LCOE analysis is compatible with Mark Perry's figure?

Mark Bahner writes:
In that case, 78 workers are required every 20 years in order to keep solar working. This is because the solar cells only last 20 years, because if weather doesn't kill them then the cells slowly decay from radiation damage and diffusion.

It's completely realistic to expect a photovoltaic module to be generating 90 percent of its nameplate capacity at year 25. SunPower expects 99 out of 100 of its panels to be generating more than 70 percent of rated power at year 40.

Mark Bahner writes:

Oops. Correction...it's completely realistic to expect a photovoltaic panel installed in 2017 to be generating 80 percent (rather than 90 percent) of its nameplate capacity in year 25.

MikeP writes:

Yeah, but why do sound economic analysis when you can parrot a junk study that supports your political view?

Interestingly, I suspect that your response supports his political view too -- that view being that the choice of power generation source should not be influenced by government policy.

The economics of solar have changed dramatically in the last 3-5 years. If you haven't been paying attention, you can save yourself a lot of embarrassment by doing some research before posting junk like this.

Then I eagerly await for advocates of the opposing political view to cease choosing to die -- or, more reflecting their apparent temperament, kill -- on this hill. If fossil fuels will become uneconomical in a couple decades, then the greenhouse gas problem is over.

Charley Hooper writes:

Many people become confused when thinking about jobs because there are so many possible perspectives.

From a societal point of view, jobs are a cost and are therefore bad. It is better to produce X widgets with 100 employees than 150.

From a personal standpoint, jobs are how most of us succeed in the world. We celebrate when we get a new job. Jobs are good.

From a business or economic standpoint, in a free market without many distortions, jobs are indicative of wealth being created. The only reason people are employed by profit-motivated businesses is because, in general, employees produce more than they cost. The more employees working, the more wealth is being produced.

Charley Hooper writes:

If Jim is right, then the government should stop subsidizing all solar installations.

Kevin Dick writes:

@Mark Bahner. There's a problem with using LCOE when comparing renewable and traditional. Wind and solar aren't dispatchable.

So to meet reliability requirements, you also have to build traditional sources when you build wind and solar.

To do this, you use the Levelized Avoided Cost of Energy (LACE), which is much more complicated to compute. To do a good job, you have to run full simulations of a particular grid system with and without a renewable plant at the margin and let the lowest cost dispatchable enter as part of an optimization to meet the reliability constraint. (This was my first job out of grad school--boring as hell, BTW).

Renewables typically look much worse on LACE than LCOE. Though photovoltaics in the desert where summer consumption is driven by air conditioning end up doing pretty well because peak generation and peak demand line up well.

Jim writes:

@Kevin Dick - I take your point, but imo it isn't as simple as it sounds. Coal and nuclear may be dispatchable, but they're also very inflexible generation sources and don't mix very well with the needs of a modern grid.

Baseload as a concept was useful when the baseload plants were the cheapest generation source and you could then layer on more expensive generation sources only as needed. Today, that model is upside down. The baseload generation is often MORE expensive than other generation sources.

IMO, the concept of baseload is nearing its sell-by date. It was useful in its day, but it's not really a helpful concept when the value of both marginal supply and marginal demand can shift in a heartbeat.

In a perfect world, the market wants generators that either have zero marginal cost of production (eg solar, wind), or can ramp up fast and run for just a few hours as needed. Coal and nuclear can't do either. They may be dispatchable, but if grid operators have to agree to take 24 hours of production when only 4-6 hours is needed, that's not a very economic situation. Under those conditions, you could pay a more flexible resource 3 times as much and still come out ahead.

Mark Bahner writes:
@Mark Bahner. There's a problem with using LCOE when comparing renewable and traditional. Wind and solar aren't dispatchable.

Agreed. (This will become much less of a problem as electrical storage continues its rapid decline in price over the next decade or more.)

Though photovoltaics in the desert where summer consumption is driven by air conditioning end up doing pretty well because peak generation and peak demand line up well.

Also agreed.

Sooooo...I'm still not understanding how Mark Perry's graph can be an accurate and unbiased representation, if the LCOEs are essentially the same, at least for coal and natural gas versus utility-scale photovoltaics? How can the ratio be of workers required be 79-to-2 or 79-to-1?

One thing that has been pointed out and is certainly true is that the photovoltaics industry is expanding, whereas the coal industry is not. But assuming this is U.S. employment, the photovoltaics industry is expanding largely because of modules built outside the U.S. (e.g., China). But the question still comes back to how the employment per unit of electricity produced can be so large?

P.S. Table 4b of this EIA analysis shows LCOE and LACE estimates for the year 2022 for various electricity sources.

Mark Bahner writes:
In a perfect world, the market wants generators that either have zero marginal cost of production (eg solar, wind), or can ramp up fast and run for just a few hours as needed.

In a perfect world, sources of electricity can become demanders of electricity when zero-marginal-cost electricity supply exceeds the demand for electricity.

See discussion of California's "duck curve", particularly the projected curve for 2026. In the next 10-20 years, there are going to be vast amounts of electrical storage available from batteries...particularly electric vehicle batteries.

These electric vehicle batteries will be owned by fleet owners, because autonomous vehicles will greatly promote transportation-as-a-service. This will allow cooperation between fleet owners and utilities. The fleet owners (at least in sunny locations) will charge their batteries during the hours that photovoltaic supplies are largest, thus making the curve for 2026 look more like the curve for 2012.

Greg G writes:

I agree with commenters who point out that it looks like Mark Perry's analysis conflates jobs installing solar generation capacity with jobs maintaining an already installed fossil fuel generation system.

Also some commenters are forgetting that there has been a long history in this country of subsidies that facilitated fossil fuels as well as a long underpricing of their externalities. Taxpayer subsidies for all types of energy production have historically been the rule, not the exception although these subsidies have taken many different forms.

My daughter owns her own engineering business in the energy field and she is the Chairman of the Board of a public co-op electric utility. She expects we will soon see changes in the way electricity is priced that provide much greater incentives for consumers to shift energy use to times when solar generation is happening. As Mark points out, a lot of that energy will go into batteries for electric cars. She also expects to soon see a viable model for household level battery storage of solar energy to facilitate this process.

Jim writes:
In a perfect world, sources of electricity can become demanders of electricity when zero-marginal-cost electricity supply exceeds the demand for electricity.
Yes, that'd be great assuming regulators and grid operators can get the price signalling to work. How batteries eventually factor into the grid, both utility scale and residential/commercial, is a huge wildcard, imo.

If the math works for the cost per discharge cycle, EV owners could use any excess charge in their batteries when they get home from work to reduce consumption of high cost early evening kWhs. EVs seem to be coming in with 200-300 miles of range, mostly as a safety margin. The average daily commute is only 50-75 miles.

Kevin Dick writes:

@Jim. Actually, you can use LACE for any type of generation, including nuclear and coal. Even more interesting, there are meta issues with the long build times of those technologies that LACE can illuminate when embedded in a decision analysis framework (this was my area of expertise). In general, I'd typically find that a mix of mostly gas turbines with a modest amount of base load plus some renewables was optimal. With whatever hydro was available. I've looked some at storage and I'm not convinced, though I've been out of the game for a while. LFTR nuclear looks somewhat promising as it can operate at a much smaller scale with a much lower waste cost burden.

Thaomas writes:

I expect the fallacy that Professor Henderson highlights to disappear about the time that people who oppose taxing net emissions of CO2 stop calling it a "jobs killer." Even Prof Henderson seems to conclude that solar power is more expensive than coal-fired power production without having taken account of the costs of the accumulation of CO2 in the atmosphere.

txslr writes:

A few points:

The costs of solar panels have been declining, but the costs of the electronics necessary to control solar have not and probably will not. One result of this has been "overpaneling" which happens when solar developers add more cheap panels to the same controlling electronics. Solar doesn't come on gradually as the sun rises - it comes on suddenly when the voltage rises to the required level. When you overpanel you create bigger and bigger jumps when solar generation hits and drops off, which requires bigger resources that you can ramp almost instantly. This costs money and requires fast ramp natgas units, which solar developers don't pay for and fight furiously to avoid.

The problem with renewables is intermittency. Utility-scale solar is curtailable in principal, but whether it will be is more of political problem than economic. Developers who are receiving PURPA rates for power are not too interested in being curtailed for system reliability purposes. They would rather that cost be socialized across other parts of the system.

Too often the economic analyses of batteries fail to take into account the degradation of batteries as they are cycled. In the future the use of batteries to provide regulation service may be doable, but to arbitrage power would require deep cycling, which destroys batteries. Pumped hydro works, but there isn't a lot of that, and trying to add pumped hydro capacity will make you a lot of enemies among the enviro set. We are a long, long way from batteries that will allow for significant generation shifting, however. To give you an idea, I'm told that for the foreseeable future flywheel storage is likely to be better than chemical batteries.

Hazel Meade writes:

Not a great analogy.

Once burned, a KWH worth of goal or natural gas is consumed. A solar panel continues producing energy over and over again, every day for several years.

You're comparing apples to oranges.

To get a good comparison, one would have to look at a longer time horizon, such as the amount of energy that is expected to be produced over the lifetime of the panels installed this year.

Hazel Meade writes:

MikeP: Then I eagerly await for advocates of the opposing political view to cease choosing to die -- or, more reflecting their apparent temperament, kill -- on this hill. If fossil fuels will become uneconomical in a couple decades, then the greenhouse gas problem is over.

This is a great point. A lot of people involved in climate change activism tend to link it to a much larger vision of how society should be changed. They're really engaged in much larger social engineering projects, which merely producing energy with less carbon does nothing to advance. It's gotta be an unavoidable world-altering cataclysm to demand the kind of radical social change they want.

Greg G writes:

Lots of good comments here. I think almost everyone understands, as txsir says, that "the problem with renewables is intermittency."

Figuring out a way to temporarily store power, whether through batteries or some other technology is the big bottleneck.

Libertarians are always telling us that we underestimate the power of economic incentives and human ingenuity to solve problems. I think that will prove to be the case regarding the problems with solar power but I can't prove it yet.

And nothing would increase those incentive as quickly and efficiently as a carbon tax.

txslr writes:

Greg G - Maybe, but the current set of incentives is so convoluted that it's hard to tell whether an additional incentive would get you where you want to be or overshoot.

If you look at the places in the U.S. that are most quickly adopting solar they are the places where the government provided incentives are the greatest, not where the sun shines the most. And within those states, developers are placing solar farms near transmission on the cheapest land, not where the value is the highest for the system because the rates they receive for the energy they provide don't include the costs they are forcing on the system. Battery manufacturers are overselling their capabilities and going directly to Public Utility Commissions to get them to force utilities to purchase their products even if they don't make any sense. And Public Utility Commissions have (under instruction from State governments) forsaken their mission of providing inexpensive, reliable energy to pursue state-level virtue signaling by pushing high total cost renewables.

This is only a sample of the perverse incentives built into a system designed to reward the best rent-seekers. If you cleaned up the entire system of incentives and put in a carbon tax I don't know whether there would be more or less incentive for solar power, battery development, etc.

Mark Bahner writes:
If you look at the places in the U.S. that are most quickly adopting solar they are the places where the government provided incentives are the greatest, not where the sun shines the most.

Here are the states with the most solar power per capita:

1) Arizona
2) Hawaii
3) Nevada
4) New Jersey
5) New Mexico
6) California
7) Delaware
8) Colorado
9) Vermont
10) Massachusetts
11) North Carolina

Seven of the top eleven are sunny, with four of the top five being very sunny. So it could be worse. We could be Germany. ;-)

txslr writes:

Mark - A number of those sunny states also have significant incentives for solar. Currently, North Carolina leads the nation in projected solar projects. South Carolina, Georgia and Florida, not so much...

MikeW writes:

Take a look at this:
https://www.forbes.com/sites/jamestaylor/2017/05/25/renewable-jobs-claims-based-on-deception-false-comparisons/#d52d766ca213

Mark Bahner writes:

This just in:

Tuscon Electric signs solar plus storage PPA for 4.5 cents/kWh

Subsidies are no doubt a significant part of the low price, but the power purchasing agreement (PPA) is 100 MW of photovoltaics, plus 30 MW of batteries with 120 MWh of storage for 4.5 cents per kWh.

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