Industry Market Trends
An Inquisition Into The Spanish Green Jobs Study
June 24, 2011
To our knowledge, there has been only one major, respected, quoted and generally acknowledged study of the nationwide economic effects of green jobs on the rest of the economy. In 2009, Madrid's Universidad Rey Juan Carlos published a paper titled "Study of the effects on employment of public aid to renewable energy sources," prepared under research director Dr. Gabriel Calzada Álvarez. It's from as academically respected a source as you're likely to get for this sort of thing, and presents chart after table after graph of numbers and official statistics, footnoting everything in sight -- in other words, probably as reliable as we'll get. It's also studying the right subject. Nowhere outside of Europe has done so much to promote green jobs, and in all Europe, nowhere took it more seriously than Spain. President Obama called Spain a model for green job creation. President Obama: We Need To Follow Spain's Example "As President Obama correctly remarked, Spain provides a reference for the establishment of government aid to renewable energy," the paper wrote. "No other country has given such broad support to the construction and production of electricity through renewable sources." The paper quotes president-elect Barack Obama, who on January 16th, 2009 visited an Ohio business that manufactures components for wind power generators, and recorded him saying "And think of what's happening in countries like Spain, Germany and Japan, where they're making real investments in renewable energy. They're surging ahead of us, poised to take the lead in these new industries." So the study is also relevant to the United States, since the basic underlying rationale for a government-funded green jobs program is similar to Spain's: "The arguments for Spain's and Europe's 'green jobs' schemes are the same arguments now made in the U.S., principally that massive public support would produce large numbers of green jobs," the paper records. Bear in mind this was 2009. If it seems to you that things have changed, that today, in both Spain and America, people are more interested in finding a job, any job, green or not, well, there's a reason for that, as the paper will make perfectly clear. Create New Jobs and Save The Earth! In September 2009 The Washington Post's Anthony Faiola could still write that green jobs were considered the savior of the Spanish economy, reeling from unemployment and a dearth of ideas on how to find more. "Create new jobs and save the Earth at the same time," as Faiola wrote, became the Spanish government's approach. And as he noted, if there was anywhere it would have succeeded, it was probably Spain -- the country generates about a quarter of its electricity through renewable sources, compared with about seven percent in the United States. However, he did note a rather ominous fact for a country willing to bet heavy government -- i.e. taxpayer, i.e. Spaniard working person -- expenditures on green energy: "The government introduced generous inducements in recent years to help develop photovoltaic solar power... vast new subsidies. Energy companies erected the silvery silicone panels in record numbers. As a result, government subsides to the sector jumped from $321 million in 2007 to $1.6 billion in 2008." The government, realizing it couldn't afford the monster it created, stopped funding the excess production and scaled back subsidies in 2008. Predictably, as in any bubble, panel prices plunged, throwing thousands out of work. Chalk it up as a failed experiment, learn and move on, right? "Like The Building Of The Internet." But hey, just because it didn't work once was no reason it wouldn't work a second time. And Spain was nothing if not optimistic. "This is going to be like the building of the Internet," Carlos Mulas-Granados, director general of the Ideas Foundation, a Spanish think tank associated with Prime Minister Jose Luis Rodriguez Zapatero's ruling Socialist Party, told Faiola. "We're going to use this crisis as an opportunity to rebuild the economy with clean, green growth." Back in 1997, European policy and strategy for supporting renewable energy was set down on paper. On November 26th the European Commission presented a white paper "for a Community Strategy and Action Plan," titled "Energy for the future: renewable sources of energy." It noted that at the time, renewable energy production comprised less than 6 percent of the EU's energy. It called for artificial stimulus such that by 2010, Calzada wrote, "the EU would have doubled the contribution of renewables to 12 percent of the union's energy consumption." The EU's white paper blithely assured readers that such a government-funded program would "actively contribute to job creation, predominantly among the small and medium sized enterprises," estimating that between 500,000-900,000 new jobs would be created. Spain, however, wanted 20 percent of all electricity to be produced from renewable sources by 2010. But of course when you talk about government funding new jobs, what you mean is that it will take money from taxpayers to pay the salaries for the jobs. And what that means -- we're reaching all the way back to Bastiat here -- is that the money taken to pay for Hector's job making solar panels is money that can't be used by private industry to hire a cook to open a restaurant, or to pay a couple guys to help build a house. But Spain decided to give it a shot. Increasing Renewable Energy -- Without Hydroelectric? To reach the ambitious goals they set, the Spanish government introduced regulated rates, or "highly subsided premiums," as Calzada's paper calls them, "with the clear objective of attracting investment to the relevant sector. In addition, electricity retailers are forced to buy all the electricity generated by renewable sources, which eventually implies that, unlike other forms of production, the sale of renewables' output is guaranteed and hence so is the return on the investment." Hydroelectric power, which one would expect to be the engine of such a scheme, was already effectively maxed out in Spain due to environmental strictures. Which underlined how, ah, ambitious the whole plan was: Saying you were going to double your output of renewable energy without the ability to increase hydroelectric is like saying you're going to double your basketball team's scoring by telling your highest scorer he's not allowed to increase his scoring. Wind power picked up some of the slack. Spain has the third-most installed wind energy capacity of any country. With regards to the objective that 20 percent of electric consumption originates from renewable sources by 2010, wind power is the source that contributes the most among the renewables, with 10.2 percent of electric consumption provided by wind in 2008. Solar contributes far less. And that's about it. The Conclusions The fundamental economic reality the paper discovered, after exhaustive analysis and research, was that for every green job created by the Spanish government, the private sector lost 2.2 jobs. And even at that cannibalistic rate, the green jobs program "created a surprisingly low number of jobs," about 60 percent of which were temporary construction jobs, others in administration and such, and only ten percent of which were actual permanent jobs operating renewable sources of electricity. The study found that since 2000, Spain spent €571,138 to create each "green job," including subsidies of more than €1 million per wind industry job. To imagine the effect of this, ask any employer how many jobs he could create if you gave him well over a million dollars to do so. Ten? Fifteen? Twenty? More than one, at any rate. Certainly Spanish private sector employers could have. But they didn't get the opportunity to do so, because the government took that million dollars out of the economy to create a job in the wind industry -- at the cost of at least nine jobs elsewhere. In fact, the study calculates, the programs creating those jobs "resulted in the destruction of nearly 110,500 jobs elsewhere in the economy, or 2.2 jobs destroyed for every green job created... These costs do not appear to be unique to Spain's approach but instead are largely inherent in schemes to promote renewable energy sources." But at least the produced energy, right? Well, as the study found, the total amount paid over the cost that would result from buying the electricity generated by the renewable power plants at the market price, from 2000 to 2008 in adjusted figures, amounts to about $10 billion in U.S. dollars, and that's not even counting the staggering $36 billion subsidy paid out by the government, i.e. the Spanish taxpayer, for the privilege of buying more expensive electricity. The report summed it up by saying "In Spain's case, the minimum electricity prices for renewable-generated electricity, far above market prices, wasted a vast amount of capital that could have been otherwise economically allocated in other sectors." Has America learned the lesson of Spain? The Center for American Progress, whose CEO had headed up Obama's transition team, calculated it would take government spending of $100 billion to create 2 million green jobs, a bill to the U.S. taxpayer of $50,000 per job created. Things have been relatively quiet on the green jobs-creation front in America recently, so let's hope yes, it has.