Considerable potential for job creation in renewable energy, says IRENA

The International Renewable Energy Agency (IRENA) has published a new working paper entitled “Renewable Energy Jobs: Status, Prospects & Policies” setting out the potential for creating jobs in the renewable energy sector and providing policymakers with a number of lessons.
Considerable potential for job creation in renewable energy, says IRENA

Over the past years, interest has grown in the potential for the renewable energy industry to create jobs. Governments are seeking win-win solutions to the dual challenge of high unemployment and climate change.

By 2010, $ 51 billion had been pledged to renewables in stimulus packages (UNEP, SEFI & BNEF, 2010), and by early 2011 there were 119 countries with some kind of policy target and/or support policy for renewable energy, such as feed-in tariffs, quota obligations, favourable tax treatment and public loans or grants (REN21, 2011), many of which explicitly target job creation as a policy goal. Policy-makers in many countries are now designing renewable energy policies that aim to create new jobs, build industries and benefit particular geographic areas (IPCC, 2011).

Written by coordinating lead authors Hugo Lucas and Rabia Ferroukhi (IRENA Policy Advisory Services and Capacity Building Directorate) and International Institute for Sustainable Development, with contributions from Julia Wichmann and Noor Ghazal-Aswad (IRENA), a new IRENA working paper shows that large-scale renewable energy electricity and biofuels for transport industries involve a large variety of jobs, which differ in skill levels required, and may also differ according to the supply chain of technologies.

Although data information is incomplete, 2010 estimates placed gross employment at over 3.5 million (REN21). Of these jobs, 630,000 were related to the wind industry; 350,000 to the solar PV industry; and as much as 1.5 million to biofuels. The majority of jobs are currently located in a small number of major economies – China, Brazil, Germany, India and the United States. Some countries have significant employment across a wide range of renewable energy technologies, whereas in others employment is clustered around a particular technology, such as wind power in Denmark or ethanol in Brazil.

“For fuel-free renewable energy technologies, the greatest number of jobs is generally concentrated in the installation, manufacturing, and administration phase, while for fuel-based technologies feedstock production and distribution of biofuels account for the largest share,” say the authors of the working paper.

Even though labour productivity evolves through time, studies have shown that renewable energy technologies are currently more labour-intensive than fossil fuel technologies, with solar PV technology accounting for the highest number of job-years per GWh over the lifetime of the facility.

“Projections indicate that there is considerable future potential for gross job creation in renewable energy,” finds the report. “While the extent of employment effects may be debated, most studies suggest that renewable deployment can be associated with net job creation. However, the number of jobs will depend on a range of factors. Key among these are: success of deployment; industrial and labour policy; ability to take advantage of export markets; and the multiplier effects of deployment on the rest of the economy.”

If job creation is to be one of the central motivations for developing and deploying renewable energy, IRENA argues government should account for the associated opportunity costs and balance them against the anticipated benefits. Policies to promote job creation should be formulated with reference to a country’s specific circumstances. Experience suggests that employment benefits are more likely to be maximised where there are active labour market interventions to support acquisition of necessary skills. Further increases in jobs can be realised through the development of a manufacturing industry, which would call for further intervention.

IRENA’s analysis of the current state of play, future potential and policy frameworks suggests the following key lessons for policy-makers:

1. Caution is needed in relying on existing data. The data on renewable energy jobs is generally weak and many studies rely on the same sources. The sample of countries is also low and may not necessarily be comparable for all economies. Moreover, many estimates are derived from countries with large-scale deployment and successful manufacturing industries. More information is needed on the net job impact of increased renewable energy deployment, but this can be expensive and highly sensitive to modelling assumptions.

2. There is potential for net job creation. Available studies show that renewable energy is associated with significant gross job creation. Net effects are generally also shown to be positive. They will also vary across countries depending on the level of job losses elsewhere in the economy and the opportunity costs of deploying renewable energy. In making such an assessment, it is important to be clear as to which effects are attributable solely to an increase in renewable energy and which are caused by other factors. In particular, job losses in conventional energy to date have been the result of changes in the industry itself, not renewable energy deployment, although there is the potential for this to change in the future.

3. There are job opportunities across the whole value chain. Although countries that manufacture, deploy and export renewable energy technologies are likely to create the largest number of gross jobs, countries without local and/or export industries will still enjoy employment benefits. Indeed, significant shares of renewable energy jobs exist at the point of project development and installation, as well as in operation and maintenance.

4. Job creation is one of the reasons that speak in favour of renewable energy. Despite the weaknesses in the data available and the sensitivity of net job creation to underlying assumptions, it is unlikely that job benefits alone are a sufficient reason to deploy renewables. Assessing the value of job benefits is one part of a broader assessment needed to determine the cost-effectiveness of policies, including other important benefits of renewable energy, such as enhanced energy security, reduced carbon dioxide emissions, reduced energy price volatility, energy access improvements and technological development.

5. Sustainable job creation depends on stable and predictable deployment policies. Assuming there are net employment benefits from deploying renewables, the jobs created will be cost-efficient when policies are stable, consistent, and long-term. In order for deployment policies to effectively fulfill their job creation potential along the renewable energy supply chain, policies should minimise non-economic barriers, as well as address economic barriers through various financing methods. Furthermore, support schemes for renewable energy are often explicitly used to stimulate job creation. However, greater efforts must be allocated towards ensuring the realisation of intended job benefits.

6. Industrial policy will influence the jobs that are created. Although a range of installation and maintenance jobs are likely to be created by deployment alone, targeted industrial policy can help establish domestic manufacturing capacity with potential for access to export markets. Policies for the development of a domestic manufacturing industry can be aimed at both the demand and the supply side. On the demand side, financial and other incentives can be a key tool to establish manufacturing facilities and encourage demand for local components. On the supply side, government can support the establishment of manufacturing facilities in a number of ways, including fiscal measures, promotion of R&D, facilitation of technology transfer co-operation, and the training of human capital.

7. Increased training and education in renewables is crucial. A wide range of skills are required in the renewable energy sector. In order to achieve deployment targets and maximise job benefits, it is necessary to facilitate and increase education and training. A large-scale shift to renewable energy will require some skills similar to those needed in the conventional energy workforce and other skills that are specific to certain renewable technologies. It is therefore advisable to conduct a skills mapping exercise to identify existing skills, and skills gaps. This should then be used to develop appropriate training and education policies. Other labour policies include taking into account existing skills strengths when formulating deployment and industrial policy; providing services to help match jobs and workers; and focusing job creation in areas with low employment. Constructive dialogue between government, business and unions can ensure that any needs and challenges are identified and addressed.

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