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Published on April 9th, 2012 | by Andrew

6

Expired Treasury Renewable Energy Subsidy Created as Many as 75,000 Green Jobs, $44 Billion in Economic Output

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April 9th, 2012 by  

A report from the US Dept. of Energy’s National Renewable Energy Laboratory (NREL) reveals the impact the Treasury’s 1603 grant program had in supporting growth and development of the US renewable energy industry– wind and solar power in particular– following the near collapse of the US financial system and recession of 2008-2009. Congress failed to renew the program, which expired at the end of 2011.

The Treasury 1603 grant program provided some $9 billion in funds spanning more than 23,000 solar photovoltaic (PV) and large wind (>1 MW) projects with a total generating capacity of 13.5 gigawatts (GW), according to the paper, “Preliminary Analysis of the Jobs and Economic Impacts of Renewable Energy Projects Supported by the §1603 Treasury Grant Program,” which was authored by NREL’s Daniel Steinberg, Gian Porro and MRG & Associates’ Marshall Goldberg.

That 13.5 GW of clean, renewable electricity generation capacity represents “roughly 50% of total non-hydropower renewable capacity additions in 2009-2011. Total private, regional, state and federal investment in these projects is estimated to exceed $30 billion. The solar PV and large wind projects accounted for approximately 94% of the total capacity of projects funded via the Section 1603 grant program and 92% of total payments.

Where the Green Jobs Are

Republicans, including House leader John Boehner have been hammering Pres. Obama on his administration’s clean energy policy and asking where the job creation is. The report should go a long way toward responding to the rhetorical diatribe.

Independent studies have shown that renewable energy investments and projects can create as many as 3x the number of jobs as equivalent investments in fossil fuels. More Americans are now employed in “green jobs” (some 2.7 million) than in the US fossil fuel industry, and that’s occurred in extraordinarily short order. Added to this are the much more socially and environmentally beneficial aspects of federal government support for clean energy as opposed to fossil fuel energy.

“In fact, the 1603 program has played a central role in meeting President Obama’s goal of doubling domestic energy production from renewable sources like wind and solar in his first term – which we are well on track to achieve,” Dept. of Energy director of pulbic affairs Dan Leistikow wrote in an April 6 post on the DOE’s blog.

“Furthermore, it has played a critical role in building the infrastructure that America will need to continue to compete globally in clean energy for years to come, ensuring we do not cede the industries or the jobs of the 21st century to countries like China. And it has supported tens of thousands of jobs across the country. That is why President Obama has called on Congress to extend the highly successful 1603 program.”

Treasury Section 1603 Grant Program: 75,000 Green Jobs, $44 Billion in Economic Output

Graphic courtesy: NREL, MRG & Associates

Here are the authors’ findings regarding estimated gross jobs, earnings and economic output of the solar PV and large wind power projects supported by the Section 1603 grant program:

  • Construction- and installation-related expenditures are estimated to have supported an average of 52,000–75,000 direct and indirect jobs per year over the program’s operational period (2009–2011). This represents a total of 150,000–220,000 job-years. These expenditures are also estimated to have supported $9 billion–$14 billion in total earnings and $26 billion–$44 billion in economic output over this period. This represents an average of $3.2 billion–$4.9 billion per year in total earnings and $9 billion–$15 billion per year in output.
  • Indirect jobs, or jobs in the manufacturing and associated supply-chain sectors,account for a significantly larger share of the estimated jobs (43,000–66,000 jobs per year) than those directly supporting the design, development, and construction/installation of systems (9,400 per year).The annual operation and maintenance (O&M) of these PV and wind systems are estimated to support between 5,100 and 5,500 direct and indirect jobs per year on an ongoing basis over the 20- to 30-year estimated life of the systems.
  • Similar to the construction phase, the number of jobs directly supporting the O&M of the systems is significantly less than the number of jobs supporting manufacturing and associated supply chains (910 and 4,200–4,600 jobs per year, respectively).

The authors succinctly explain the root motivation and rationale for enacting the program in the paper’s executive summary, the former being the ‘dramatic decrease’ in tax equity investors in the wake of the near collapse of the banking system and recession of 2008-2009.

NREL’s 1603 Grant Program Analysis

They also point out the mismatch, and unsuitability, of investment and production tax credits as a subsidy vehicle. “Both the ITC and the PTC provide financial incentives for development of renewable energy projects in the form of tax credits that can be used to offset taxes paid on company profits,” the authors explain.

“Given that many renewable energy companies are relatively nascent and small, their tax liability is often less than the value of the tax credits received; therefore, some project developers are unable to immediately recoup the value of these tax credits directly.”

This leaves relatively young, developing renewable energy companies reliant on third-party tax equity investors who want to reduce their tax liabilities. Working through investment bank intermediaries, who tailor and package ITC and PTC tax credits, these companies then purchase the ITCs and PTCs, which provides renewable energy companies with the cash they need to develop.

The Treasury then stepped in following the collapse in the tax equity market and created the Section 1603 Treasury grant program, which was enacted upon passage of the American Recovery & Reinvestment Act of 2009. The program enabled renewable energy project developers to opt for an up-front cash grant equal in value to the 30% of total eligible ITC and PTC costs, thereby removing the need for project developers to find tax equity investors.

Creating and retaining jobs was another near-term goal of the Treasury 1603 grant program, the authors note. Gathering and analyzing “green” jobs creation and retention numbers that resulted lead to the production of the report, which employs “the Jobs and Economic Development Impacts (JEDI) models to estimate the gross jobs, earnings and economic output supported by the construction and operation of solar photovoltaic (PV) and large wind (greater than 1 MW) funded by the Section 1603 grant program.”

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About the Author

I've been reporting and writing on a wide range of topics at the nexus of economics, technology, ecology/environment and society for some five years now. Whether in Asia-Pacific, Europe, the Americas, Africa or the Middle East, issues related to these broad topical areas pose tremendous opportunities, as well as challenges, and define the quality of our lives, as well as our relationship to the natural environment.



  • Csex2

    You fail to explain that the indirect jobs (the bulk of the reported “green jobs”) are BS… If I drive a green bus thats counted as a green job… If you are a sanitation worker you are counted as a green job… It’s Bunk… The failed solar and wind companies say it all…..

    • Bob_Wallace

      Can you point us to the source where you discovered green bus drivers are counted as green jobs?

      And, by that, I mean drivers who would otherwise be driving black buses.

      If new bus services have been started in order to cut down on fossil fuel use, those are green jobs.

      BTW, your last sentence shows great ignorance when it comes to business….

    • http://cleantechnica.com/ Zachary Shahan

      If you’re going to try to debunk a study, provide some evidence. Right now, you’re just making wild claims, some of which are obviously untrue.

  • puckerupamerica

    Is it true that a driver of a bus with an engine that runs off of natural gas is considered a green energy job, but a driver of a bus with an engine that runs off of gasoline is not considered a fossil fuel job?

  • Thinkpower

    “More Americans are now employed in US clean energy than in the US fossil fuel industry.” What study is this from? I thought the Brookings report just said the entire “green” economy is bigger than fossil fuels, after including recycling and non-energy sectors?

    • Akbweb2

      Noted, correcting to say “green jobs,” a broader category than “clean energy” jobs alone…

      “There are about 2.7 million jobs that fall under the report’s definition of green jobs, and they span a wide range of industries and sectors, from public transit to organic food and farming to smart grid. That’s more workers than are currently in the fossil-fuel industry, and it’s only going to rise.”

      Source: http://www.brookings.edu/reports/2011/0713_clean_economy.aspx

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