July 07, 2010
Clean energy jobs CAN be shipped overseas (and what to do about it)
Politicians talking about clean energy jobs like to claim "they can't be shipped overseas." From President Obama's State of the Union to Rep. Ed Markey stumping for the climate bill he co-authored with Rep. Henry Waxman, the promise of new "green jobs that pay well and can't be outsourced" is an all too common refrain.
The only problem with it is that it's wrong on its face.
America is already exporting clean energy jobs -- or seeing them created abroad in the first place. After pioneering wind and solar power, electric cars, and nuclear plants, America turned its back on the public investments in cutting edge technology that catalyzed these innovations, forfeiting cleantech industries to foreign countries who did not make the same mistakes. The cap and trade program at the heart of the climate bill authored by Rep. Markey may help create more clean energy jobs overseas, but it won't bring those jobs back to America. Conventional responses to today's competitiveness challenge won't cut it. Here's what will...
Most clean energy jobs can easily be shipped overseas (or created there in the first place)
Unless our vision of a prosperous American clean energy economy revolves solely around jobs retrofitting homes to be a bit more efficient or installing (Asian and European built) solar and wind farms or high-speed trains, the reality is that the global cleantech sector is increasingly competitive, and the United States is already ceding thousands of jobs in clean energy manufacturing and innovation.
According to one study from the Renewable Energy Policy Project, 70-75 percent of the total labor required for a typical wind turbine or solar panel is 'upstream' of the installation and maintenance - the only jobs that truly 'can't be outsourced' - mostly in manufacturing the various component parts.
That's bad news for the U.S., which now lags behind competitors in Asia (and Europe) in the production of virtual all clean energy technologies, from wind to nuclear power and from high-speed trains to plug-in hybrid cars and the advanced batteries that power them, as the Breakthrough Institute and ITIF's comprehensive report, "Rising Tigers, Sleeping Giant" documents.
So forget the notion that clean energy jobs can't be outsourced. Recent research by the office of Senator Ron Wyden (D-OR) showed that in the last five years the U.S. trade deficit in renewable energy goods has ballooned by 1,400 percent to $5.7 billion in 2009. Roughly 70 percent of the renewable energy systems and components installed in America are now manufactured by workers overseas, according to estimates from the Apollo Alliance. And even the American Wind Energy Association, the industry's trade group, concedes that about 50 percent of the components installed in American wind farms are manufactured abroad.
Outsourcing clean energy innovation
If things don't change, cleantech scientists and researchers will be the next to follow the cleantech factory worker overseas. Jobs in clean energy research, innovation, and new product development--traditional areas of U.S. leadership--are already on their way abroad as high tech giants and startups alike shift innovation activities to be close to vibrant clean energy manufacturing centers and markets overseas.
Applied Materials, the leading producer of the equipment used to manufacturing solar cells, recently opened the world's largest and most advanced solar energy R&D center in Xi'an, China, creating hundreds of high-tech jobs there and shipping out their Chief Technology Officer and Silicon Valley luminary, Mark Pinto, to oversee the project. IBM recently announced a $40 million investment in a new "energy and utility solutions" lab in China that will perform cutting edge work on smart grid and other clean technologies. And U.S. technology powerhouse GE is putting their Chinese research centers in the lead developing new clean tech products like wind turbines and power control electronics.
In the realm of startups, the United States still leads in total venture capital (VC) investments in cleantech, according to research from the CleanTech Group, which closely monitors the sector. But the North American share of VC funding fell from 72 percent in 2008 to 62 percent in 2009, a four-year low for the region, with North American cleantech startups raising $3.5 billion in VC funding that year, down 42% from 2008. It was Chinese firms that dominated initial public offerings (IPOs) in cleantech sectors, however, with 17 Chinese companies securing $3.4 billion, or 72% of global IPO proceeds in 2009.
Competing for clean energy industries: what works (and what won't)
So the fact is, not only can clean energy jobs be shipped overseas, they already are - or are being created abroad to begin with.
That's why it's concerning (to say the least) to see this kind of rhetoric about 'green jobs that can't be outsourced' proliferate. If American politicians are serious about creating clean energy jobs in the United States - the kind of high tech and manufacturing jobs that are central to both a vibrant American middle class and a prosperous national economy - they need to focus on developing and enacting a robust and comprehensive clean energy competitiveness strategy. It's time to explicitly recognize that American clean energy jobs, like any other high tech or manufacturing-based sector, need to be proactively created and retained.
The problem, however, has been that insofar as our nation's politicians and pundits have even acknowledged America's clean energy competitiveness challenges, they have, with a few exceptions, responded with conventional thinking, calling for carbon prices or tariffs or protectionist measures that will do little to restore America's competitiveness or create hundreds of thousands of U.S. clean energy jobs.
A carbon price could certainly help create demand for cleantech products, but at the levels considered by Congress, such demand would be modest. More to the point: that demand could easily be satisfied by continuing to import foreign-built clean technologies, so we can't count on carbon prices or cap and trade to bring clean energy jobs back to America. In the end, carbon prices are absent from China, Japan or South Korea's effective clean energy competitiveness and jobs strategies. Why do we think carbon prices will be central to ours?
Carbon border tariffs or protectionist 'Buy American' provisions may also help somewhat, but each treats the symptoms, not the causes of America's lagging competitive position in clean energy markets.
Instead, what the United States needs to build a competitive clean energy sector capable of supporting hundreds of thousands of good-paying jobs across the clean energy value chain is a comprehensive set of sustained public investments in cleantech research and innovation, education and workforce training, advanced manufacturing, and market creation (more on that strategy here).
This is how America has always sparked the innovation and high-value manufacturing that creates long-term jobs and built enduring industries that have formed the foundation for generations of economic prosperity. The primary reason the United States led in aerospace, communications technology, information technology, computing and the major new energy technologies of the later 20th century (gas turbines, nuclear, wind and solar power) is because the U.S. government made a series of smart investments on the cutting edge of each of these technology fields to catalyze entrepreneurship and innovation.
We love to valorize private sector entrepreneurs, and it is true that the private sector is where much of this innovation ultimately happens. But we simply do not see entire new high-tech sectors emerge without the kind of direct, proactive, and comprehensive suite of investments in innovation, education, infrastructure, manufacturing and market creation that led to each of the 20th century U.S. technology booms mentioned above.
We don't see the Silicon Valley high tech boom of the late 1990s without the more than three decades of government investments in the region's communications technology, IT and computing sectors that preceded that heyday of private sector entrepreneurship. We don't become world leaders in commercial aviation or aerospace technologies unless the U.S. government takes the lead in procuring and improving jet engines or fully commits itself to the Space Race.
The irony is that while so many in our class of political 'elites' seem to have forgotten the real history of American technology leadership, policymakers in China, Japan, South Korea, Germany, Denmark etc. have all taken these lessons to heart.
The simple fact is, smart public investments at the leading edge of emerging technology sectors is how new industries are born and how the U.S. stays competitive. If American policymakers want to create and retain new clean energy jobs and industries, and aren't satisfied with simply 'capturing' the 25-30 percent of the value chain involved in retrofits, installations and maintenance, then we cannot afford to ignore this history any longer.