Jobs gains and losses in the energy transformation

In the post-carbon price climate policy debate, there is increased focus on the role and benefits of renewable energy.  Leading the decarbonisation of energy with renewables policy may not make much sense from a policy perspective, but it is proving to be far more politically durable than pricing and constraining emissions.

The basic advantage of new renewable energy sources like solar and wind is obvious: they deliver emissions-free generation.  Some proponents of renewables-led climate policy also claim they lower wholesale energy prices and create thousands of new jobs.  As we have seen recently in South Australia, increased renewables supply can suppress prices in the short run, until it forces out large, firm generators, when the wholesale price re-sets higher.

The net jobs implications of renewables have been less scrutinised.  Renewable energy technologies have high capital costs and low operating costs, so it would be logical to expect that more labour would be required in construction, rather than operation.  Keeping labour input low throughout the deployment and operation phase of any new energy generator is crucial to keeping costs down, and therefore making that technology more competitive.  In other words, large job creation and low cost are unlikely to sit hand in hand.

The Victorian Government recently announced that the installation of 5,400MW would lead to 4,000 additional jobs by 2025[i], although Energy Council analysis found by this period only 660 of those would be full-time, ongoing jobs.  Most employment reports relate to short contracting of labour in the construction phase.  The full-time, permanent jobs created running renewables is likely to be significantly lower than the full-time employment of conventional thermal generations they are replacing.

Is it jobs gained or jobs transferred?

In the transition to a low carbon energy future there are at least four discrete changes in net employment.  First, there is the losses in permanent full-time employment as older, high emission generators are slowed, and then closed.  Second, there is the creation of permanent, full-time jobs in new zero or low emissions generators, like wind and solar farms.  Third, there is the creation of short-term, mainly contracted jobs to build and decommission new and old assets respectively. And finally, there is the net changes to employment in the provision of energy services to customers, including retail services, installation and maintenance of new technologies like advanced meters, solar PV systems, storage equipment and other service job creation and destruction that will evolve over time.  In all parts of the supply chain, the more labour used to provide energy supply, the more expensive energy will be.

To gain further insight into these changes, the Australian Energy Council collected best available information on all the reported jobs lost over the recent five years, along with expected job losses to 2023 due to closures, and compared this to the job creation from new generation projects commissioned since 2011, or under construction from 2015-16 onwards. Data was obtained from numerous company websites and newspaper articles.

Figure 1: Large-scale generation - Jobs losses and job gains expected by 2011-2023 – NET FTE [ii]

Large scale generation employment

Based on the available information, we estimate that there will be around 1,611 FTE permanent jobs lost from the closure of thermal generation between 2011 and 2023, replaced by 398 FTE permanent jobs in new large-scale generation. There will be an additional 5,213 short-term contracted construction jobs over this time, which we estimate translates to 579 FTE construction jobs over the dedicated period.

These numbers do not include contracted employment associated with the closure and remediation of existing power stations.

Retail services employment

This analysis does not include net changes in the provision of energy services.  This is a more complex business model in which to track employment trends, as these are, and will, be driven not only by installation of new technologies (like solar PV and advanced metering), but the take-up rate for emerging technologies, like storage devices and other services, ownership changes and cost cutting.

The supply and installation of around 1.5 million rooftop solar PV systems has also created new jobs.  The Australian Bureau of Statistics (ABS) estimates that rooftop solar PV (which includes solar hot water systems) employed 7,480 FTE employees in 2014-15[iii].  Taking into consideration the number of new small-scale systems installed[iv] in 2015 along with the employment numbers, it would take on average 11 days per FTE to install a system. The ABS though makes it clear that there are no statistical standards for assessing employment in renewable energy with FTE numbers estimates only. Based on ABS rooftop solar PV jobs peaked in 2011-12, when they made up 75 per cent of total FTE renewable jobs.   

Are renewable jobs mostly construction?

The Victorian Government recently set ambitious renewable energy targets which they expect will create thousands of new jobs and cut the state’s greenhouse gas emissions. The Victorian Government claims that by 2025, up to 5,400 megawatts of new large-scale renewable energy capacity will be built in Victoria which will mean more than 4,000 additional jobs in the renewable energy sector during the expected peak year of construction in 2024[v].

Based on current employment trends for similar projects, we estimate that there are likely to be 660 permanent jobs created to support the operation of the 5,400 MW of new capacity installed across Victoria.  The remainder will be short term (16-18 month) construction jobs.

The Climate Council’s Renewable energy job - future growth in Australia report claims that in a 50 per cent renewable electricity target scenario Australia by 2030 would create more than 28,000 new jobs[vi]. According to the report, a large proportion of new jobs gained in the electricity supply sector between 2014 and 2030 will come from construction and installation activities related to renewable energy infrastructure. The report concludes that the net effect on jobs of a 50 per cent renewable target is positive across Australia with each individual state experiencing net job growth.  The report does not estimate job losses.

Under the Climate Council’s analysis of the 50 per cent renewable energy target to 2030, operational employment will predominantly be provided by remaining thermal generators. Together operation of all generation, thermal and renewable, is estimated to account for 58 per cent of total employment by 2030.  The remaining 42 per cent is estimated to come from the FTE in construction, predominantly rooftop solar.

Figure 2: Total full-time employment over the scenario period 2014-30, by activity and technology[vii]

Summary

The purpose of climate and energy policy should be to reduce greenhouse emissions at the lowest possible cost.  Employment outcomes are likely to be mixed, but noting that most new clean energy technologies work differently in many respects to conventional generation. Without fuel requirements they have low ongoing labour requirements, which in turn helps reduce their operating costs.

A preliminary assessment of the possible employment trends emerging from the transition to a lower emissions energy future suggests net employment in large scale “industrial” generation may reduce over time, as jobs in conventional generation are replaced by fewer permanent jobs in clean generation.  This may, to some extent, be offset by possible increases in employment in energy services, as new distributed technologies and services play a greater role in the energy system of the future.

Like technology upgrades in other related sectors (i.e. telephony), the increased use of smart technologies will reduce labour costs over time and therefore reduce cost.  This is a good thing.  Lower energy costs will enable the creation and expansion of other businesses as the 21^st century economy evolves to meet the challenges and opportunities that await it.

[i] The Hon Daniel Andrews Media Release, 2016, “Renewable energy targets to create thousands of jobs”, Victorian State Government

[ii] Source: Numerous company websites and newspaper articles

[iii] ABS data, http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/4631.0Explanatory%20Notes12014-15?OpenDocument

[iv] AER, 2015, “2015 Administrative Report and Annual Statement”, http://www.cleanenergyregulator.gov.au/DocumentAssets/Documents/The%20Renewable%20Energy%20Target%202015%20Administrative%20Report.pdf

[v] The Hon Daniel Andrews Media Release, Op. Cit

[vi] Climate Council, 2016, “Renewable Energy Jobs: Future Growth in Australia”

[vii] Source: Climate Council, 2016, “Renewable Energy Jobs: Future Growth in Australia”