Environmental and Economic Benefits of Building Solar in California: Quality Careers — Cleaner Lives

Introduction

On November 1, 2014, the U.N. Intergovernmental Panel on Climate Change¹ warned:

Continued emission of greenhouse gases will cause further warming and long-lasting changes in all components of the climate system, increasing the likelihood of severe, pervasive and irreversible impacts for people and ecosystems.²

In summarizing this study, the Washington Post reported:

The planet faces a future of extreme weather, rising sea levels and melting polar ice from soaring levels of carbon dioxide and other gases, the U.N. panel said. Only an unprecedented global effort to slash emissions within a relatively short time period will prevent temperatures from crossing a threshold that scientists say could trigger far more dangerous disruptions, the panel warned.³

And the New York Times reported:

Failure to reduce emissions, the group of scientists and other experts found, could threaten society with food shortages, refugee crises, the flooding of major cities and entire island nations, mass extinction of plants and animals, and a climate so drastically altered it might become dangerous for people to work or play outside during the hottest times of the year…. The gathering risks of climate change are so profound that they could stall or even reverse generations of progress against poverty and hunger if greenhouse emissions continue at a runaway pace, according to a major new United Nations report.⁴

Yet the world is moving only slowly to meet this increasingly clear and present danger.

However, in California over the last five years, dramatic action has taken place addressing greenhouse gas emissions through an ongoing transition from fossil fuel generated electricity to renewable energy electricity generation. While currently in California natural gas accounts for 44% of the total system’s electrical power and coal accounts for 8%, renewable energy sources account for 19%, up from 11% in 2008. The fastest growing segment of California’s renewable energy portfolio over the last five years has been solar energy. In-state, utility-scale solar generated electricity has quadrupled since 2010.

In this report, Environmental and Economic Benefits of Building Solar in California, we provide a case study where federal, state, and construction industry policies and practices are cutting through the Gordian Knott of economic, political, and policy paralysis in the face of impending, irreversible, and destructive climate change.  Describing California’s leadership in the expansion of renewable energy electricity generation, we first discuss the current boom in utility-scale solar farms in California and the emissions averted by California’s renewable-energy generated electricity.

The study also examines the employment effects of having built 4,250 MW of utility-scale solar powered electricity generating facilities in California over the last five years. We calculate the new construction, maintenance, and operations jobs created by California’s boom in utility-scale solar plants plus the upstream and downstream jobs stimulated by this construction. We estimate the income and health and pension benefits of these new construction and plant operations jobs.

Because the vast majority of construction jobs in California’s recent utility-scale solar boom have been organized under collective bargaining, these contracts have required payments into apprenticeship training programs for each hour worked building these solar power plants. Reflecting this, we calculate the new monies that have gone into the training of the next generation of construction workers who will be called upon to build a more climate-friendly infrastructure over the coming decades.

This new human capital not only raises the productive capacity of California’s construction labor force but also transforms the lives of newly trained workers. We estimate how this training affects the lifetime earnings of these new workers, and we provide personal case studies of four new apprentices as they consider their past and look into their future.

Finally, we look at the federal, state, and industry policies that have made this solar boom possible. We conclude that there is a synergy between good jobs and green energy projects. Smart government policies and high-road construction practices are a foundation for addressing climate change, and, in turn, good jobs and clean energy projects reinforce the policies and practices that stimulated these jobs and practices in the first place.

Global warming is a clear, present, and serious threat but it is not intractable. California’s recent solar boom is an example of how politics and economics can work together to untie the knot of inaction in the face of the gathering risks of climate change.

The Environment

In the first half of 2014 in the United States, 42% of the new utility-scale electricity generation capacity put in place was from solar and wind power plants. Solar alone accounted for 26% of the new power plant generation. According to industry sources, when rooftop solar is added to the mix, solar accounted for about half of all new electricity generation put in place in the U.S. during this time period. Government data on power plants show that, comparing the first half of 2013 to the first half of 2014, new additions to natural gas and coal fired power plants fell while both wind and solar new utility-scale generation capacity almost doubled.

This boom in renewable energy electricity generation has been given a substantial boost from federal policy and legislative action. The Obama Administration’s American Recovery and Reinvestment Act (ARRA) of 2009 earmarked more funds for clean energy than had been done at any time in our nation’s history. Loan guarantees helping first movers introducing new technologies in the face of technological and business cycle uncertainties allowed for solar energy to take off in the depths of the Great Recession. Similarly, the Federal Business Energy Investment Tax Credit, which provides a 30% credit to residential, commercial, and utility-scale solar systems, was renewed in 2008 for eight additional years. While these policies and, in the case of ARRA, legislative action have stimulated renewable energy electricity generation across the nation, they have been especially successful in boosting solar electricity generation in California, a state with rich solar resources in close proximity to population centers where the electricity demand primarily resides.

Just as federal action has driven a national expansion of the renewable energy sector, California has pioneered policies that have been critical in making it the renewable energy capital of the United States. The Global Warming Solutions Act (AB 32), passed in 2006, requires a steep reduction in greenhouse gas emissions, and in 2011 Governor Brown signed Senate Bill X1-2, which expanded California’s Renewable Portfolio Standard (RPS) to a 33% target by 2020. The state’s aggressive climate change policies, abundant photovoltaic (PV) solar resources, large population centers, and need to conserve water used to cool thermal power plants have coalesced to make California the country’s leading user of PV-generated electricity. Among the top ten states, California accounts for fully half of all installed PV electricity generation capacity. California is on track to install in 2014 almost ten times more new PV generating capacity than any other state.

Within California, renewable energy technologies have recently come to dominate the growth in overall electrical generation capacity and usage. Subsequent to the passage of ARRA and California’s SBX1-2, California’s use of electricity from renewable energy sources almost doubled its share of overall California electricity generation, moving from around 11% in 2008 to 19% in 2013.

The National Renewable Energy Laboratory (NREL) estimates that a 16.5% penetration of wind power combined with a 16.5% penetration of solar power, for a total of 33% Western Grid reliance on these two renewable energy sources, would reduce carbon emissions from electricity generation by about one-third. Currently 19% of California’s power grid is fed by biomass, geothermal, wind, solar, and small hydroelectric renewable energy sources. While the emissions impact of each of these renewable resources varies, California is moving toward a level of renewable energy reliance and emission reduction similar to the scenario envisioned by the NREL study.

The Solar Energy Industry Association estimates that solar-powered electricity generating facilities in California (both rooftop and utility-scale), with roughly 5,000 MW of collective capacity, have per year reduced carbon dioxide (CO2) emissions by about 4 million tons, nitrogen oxides (NOx) emissions by about 6 million tons, and sulfur dioxide (SO2) emissions by about 700,000 tons. At this time, recently installed utility-scale solar farms in California account for approximately 75% of the state’s solar power-generated electricity. Thus, utility-scale solar power in California has effectuated an overall reduction of about 4.8 million tons of nitrogen oxides, 3.3 million tons in carbon dioxide, and 530 thousand tons of sulfur dioxide.

Job Creation

Over the last five years, 10,200 well-paying construction jobs were created in California during the expansion of California’s solar-based, utility-scale electrical generating facilities. These jobs pay, on average, $78,000 per year and offer solid health and pension benefits. In addition, 136 permanent operations and maintenance jobs have been created and will last for the lifetime of these facilities. These operations and maintenance jobs pay an average of $69,000 per year, usually with solid benefits. In addition to the jobs created on the construction projects, about 1,600 jobs have been created to handle increased business up and down the supply chain and to perform other new business activities associated with these projects. These newly-created construction, maintenance, and business-related jobs have boosted consumer spending, which in turn has induced the creation of over 3,700 additional California jobs aimed at meeting increased consumer demand. In total, more than 15,000 new jobs have been created by the solar farm construction boom in California over the last five years.⁵

Career Development and Human Capital Formation

Utility-scale solar construction in California over the last five years built 4,250 MW of renewable energy generating capacity in California. Because most of the construction was organized under collectively bargained contracts or project labor agreements, contractors have agreed to contribute training money for apprenticeship training based on each hour of work for every blue-collar worker on the site. This has provided $17.5 million in new money to help finance the training of construction apprentices and pre-apprentices. This infusion into California construction apprenticeship and pre-apprenticeship training includes $8.3 million into electrician training, $3.1 million into the training of construction craft laborers, $2.6 million into training iron workers, $1.7 million to train carpenters and pile drivers, and $1.9 million to train operating engineers.

This new human capital formation will generate a stream of higher income over decades, reflecting the greater skill set and higher productivity of these trained California construction workers. For instance, over the lifetime of electrical apprentices, as they become journey workers, their income in today’s dollars will be higher by about $1 million compared to what their income would have been absent this training. In addition, these workers not only earn while they learn but they also participate in family-supportive health insurance programs, promoting family formation and stable child-rearing, and they begin building savings for their retirement. By the time these electrical apprentices retire as journey workers at age 65, they will have amassed a retirement nest egg of about $525,000 in defined contribution and defined benefit programs sponsored by their contractors and unions. This is substantially more than what the median single or married worker at age 65 today has for retirement.

The California solar boom has not only prepared California for a future of energy independence, it is preparing a new generation of California blue-collar workers for a future of skilled and productive work and a life of financial security.

Policy Leads the Way

Policy and legislative action at both the federal and state levels has stimulated the boom in California’s renewable energy electricity generation over the last five years, enabling California to become the national model in demonstrating how to generate new economic opportunity through aggressive climate change action. Key federal policies include the American Recovery and Reinvestment Act (ARRA) of 2009 and the Federal Business Energy Investment Tax Credit (ITC). California’s policies include the Global Warming Solutions Act (AB 32), Senate Bill X1-2, and AB 327, which passed in 2013 and established the 33% Renewable Portfolio Standard (RPS) goal set forth in SB X1-2 as a floor to be achieved and not a ceiling to reach for. California’s Environmental Quality Act has also played an important role in promoting California’s renewable energy growth. Collectively, these policies helped marshal the needed investment capital, helped create the market certainty needed to turn financial capital into specific investment plans, and helped provide the business, worker, and public incentives that brought these players together.

The synergy between building green, utility-scale power plants and quality construction career development has also benefited from federal and state policies. Utility-scale solar projects that receive federal subsidies fall under the Davis-Bacon Act, which requires that prevailing wages and benefits be paid. Furthermore, California is not a right-to-work state and as a result prevailing wages in construction tend to be the collectively bargained rate that includes good wages with decent benefits and contributions to apprenticeship training.

On some federally-subsidized solar projects in western right-to-work states, nonunion rates prevail. In these cases, workers are often obtained from temporary labor agencies; they earn low wages with limited benefits and they have little access to training or career advancement. In California, by contrast, strong unions and strong prevailing wage laws combine to create green construction projects that also build the skills of the local construction labor force and improve the career opportunities of many new entrants into the industry.

For 200 years, government has promoted, subsidized, incentivized, and encouraged canals, railroads, schools, highways, the internet and other infrastructure foundations to economic growth and prosperity. In the 21st Century, energy and the environment are key infrastructure for future economic growth and prosperity. But neither green energy projects that create dead-end jobs nor projects that degrade the environment but provide good jobs are sustainable building blocks for the future. Legislation, regulation, and policy are key to creating a synergy between electricity generation, the environment, and the labor market. Four key policy actions that should be taken in the near-term to continue building on California’s leadership in creating high-quality jobs while decarbonizing the energy sector are:

• Renewing the Federal Business Energy Investment Tax Credit so it remains at 30% after December 2016.
• Expanding California’s statewide renewable energy mandate beyond 33%.
• Protecting AB 32 from implementation delays or weakening.
• Supporting policies that promote collective bargaining and the use of joint labor-management apprenticeship programs on energy projects during construction, operations, and maintenance.

About the Author

Peter Philips (B.A. Pomona College, M.A., Ph.D. Stanford University) is a Professor of Economics and former Chair of the Economics Department at the University of Utah. Philips is a leading economic expert on the U.S. construction labor market. He has published widely on the topic and has testified as an expert in the U.S. Court of Federal Claims, served as an expert for the U.S. Justice Department in litigation concerning the Davis-Bacon Act (the federal prevailing wage law), and presented testimony to state legislative committees in Ohio, Indiana, Kansas, Oklahoma, New Mexico, Utah, Kentucky, Connecticut, and California regarding the regulations of construction labor markets. His academic work on the construction labor market over the last 20 years can be found at http://faculty.utah.edu/u0035312-PETER_W_PHILIPS,_Labor_Economist/bibliography/index.hml

He is currently a Visiting Scholar at the UC Berkeley Institute for Research on Labor and Employment.

Notes

¹ For a description of this panel see: Wikipedia, Intergovernmental Panel on Climate Change, http://en.wikipedia.org/wiki/Intergovernmental_Panel_on_Climate_Change
² U.N., IPCC Fifth Assessment Synthesis Report, CLIMATE CHANGE 2014, SYNTHESIS REPORT, November 1, 2014, p. 40, http://www.ipcc.ch/pdf/assessment-report/ar5/syr/SYR_AR5_SPM.pdf
³ Joby Warrick and Chris Mooney, “Effects of climate change ‘irreversible,’ U.N. panel warns in report,” Washington Post, November 2, 2014, http://www.washingtonpost.com/national/health-science/effects-of-climate-change-irreversible-un-panel-warns-in-report/2014/11/01/2d49aeec-6142-11e4-8b9e-2ccdac31a031_story.html
⁴ Justin Gillis, “U.N. Panel Issues Its Starkest Warning Yet on Global Warming,” New York Times, November 2, 2014, http://www.nytimes.com/2014/11/03/world/europe/global-warming-un-intergovernmental-panel-on-climate-change.html?_r=0
⁵ Here jobs are understood to be job-years, or 2,080 hours of work, though in many cases a construction worker will not be on a job for a full year. Construction apprentices are often rotated off jobs to get experience in other types of construction and therefore one job-year may be spread across two or more construction workers. In contrast, the 136 operations and maintenance jobs are 25 job-years, each lasting the expected lifetime of a newly-built solar electrical generation plant.