A Green Lining to the Dark Economic Clouds

By: Ted Abernathy
Issue: Fall 2009

It is rough out there. When the latest national employment numbers came out, unemployment was at a 26-year high and job losses were still mounting. It is easy to want to close your eyes and just wait until the recovery takes hold, but if you do you would miss some hopeful signs.

In this recession, where you are and what you do makes a difference. It may seem Pollyanna to see any opportunities today, but some good things are happening. This is the deepest downturn in most of our lives but, it is geographically uneven and has different impacts on different sectors of the economy.

According to a new report, MetroMonitor by the Brookings Institute, health care, educational services, government and mining have weathered this storm with only 1-2 percent job losses. Other sectors such as manufacturing, real estate and arts and entertainment have been hit harder, losing 3 percent to 4 percent of total jobs.

Considering only national statistics also masks the differing impacts across the country. Some metro areas have seen unemployment rates rise only modestly. The resilient economies are in unexpected places. Des Moines, Iowa; Little Rock, Ark.; Omaha, Neb.; Baton Rouge, La. and Provo, Utah all have seen unemployment rates rise1.5 percent or less. Conversely, Orlando, Fla. (+5.3 percent), San Jose, Calif. (+5.65), Charlotte,

N.C. (+6.3 percent) and Portland, Ore. (+6.6 percent) have watched once booming economies sustain major unemployment rate gains. Each metropolitan economy is driven by different sectors and each sector is reacting differently to the current situation.

Some of the best sector opportunities today, as is usually the case in recessions, are where significant change is taking place. Just prior to the current global economic disaster, our nation was focused on the energy sector mostly due to high gasoline prices. The economic downturn and the recent turnover in our national political leadership have resulted in transformational changes in our energy policy and public energy investments. Whether you agree or disagree with the changes, change usually results in new opportunities.

Energy policy is frustratingly complex. As a nation, we struggle with balancing our growing energy needs with policy debates that incorporate the economy, the environment, national security, safety, regional differences and personal freedoms. Regardless of any changes in the supply mix, or efforts at energy efficiency, almost everyone agrees that energy demand will rise significantly in the coming years. Global energy consumption is estimated to increase by 50 percent by 2030. Existing fossil fuel energy sources are all expected to grow in the coming years with new technologies being created to mitigate their environmental impact. Changes in existing source technology combined with expanded alternative energy will create opportunities for jobs and investment.

During the last year, the Southern Growth Policies Board has gathered input on energy from more than 50 events and over 2,000 participants in local and statewide forums, as well as online surveys. What we heard clearly is that Americans are optimistic that we will find new ideas and new technologies that will lead to abundant, affordable American energy.

A 2006 study released by the Southern States Energy Board found that most Americans believe our dependence on imported oil (92 percent) and the high price of gasoline (89 percent) are serious problems. A survey by the non-profit Public Agenda found that Americans strongly support alternative energy policies with 86 percent agreeing that investing in alternative energy will create new jobs, and 68 percent wanting the nation to take steps to gain energy independence, even if it raises energy costs.

Other polls have shown that support for alternatives wanes significantly when faced with specific cost increases. A 2009 poll by the Pew Research Center showed that when Americans are worried about their jobs, environmental concerns drop in importance.

Public and private investment in alternative energy has been a major strategy of some nations’ economic recovery efforts. According to the United Nations Environmental Program and The New York Times, global investments in new power capacity in 2008 totaled about $250 billion, and for the first time, the majority of the investment was in renewable sources. A recent report counted more than 250 new climate-change policies between July 2008 and February 2009, with commitments of approximately $200 billion in public stimulus spending worldwide. Renewable investments were strong in Europe, China, Japan and the United States.

The 2009 stimulus bill includes more than $70 billion in direct spending and tax credits for clean-energy and transportation programs, representing the largest federal commitment ever for renewables, advanced transportation and conservation.

Investments include:

  • $20 billion in tax incentives and credits for renewable energy, plug-in hybrid vehicles and energy efficiency.
  • $11 billion for “smart grid”—the computerization of the electrical power infrastructure.
  • $9.3 billion for high-speed rail.
  • $8.4 billion for mass transit.
  • $6.3 billion in state energy efficiency and clean energy grants.
  • $5 billion to weatherize homes owned by moderate-income people.
  • $2 billion in grants for advanced batteries for electric vehicles.

Some tangible things already are happening. According to several magazines that track economic development activity, private investments and new jobs are being announced in the green energy sector.

  • Schott Solar is investing $100 million and creating 350 jobs in Albuquerque, N.M. It expects to expand to 1,500 employees and a $500 million investment during the next three years.
  • The Shaw Group will invest $100 million and create 1,400 jobs in Baton Rouge in partnership with Westinghouse Electric to build modules for the nuclear power industry.
  • Vestas Wind Systems is investing $700 million and creating 2,750 jobs in Windsor, Brighton and Pueblo, Colo. Several suppliers are considering building operations nearby.
  • General Electric has announced a $100 million dollar investment and more than 300 jobs in upstate New York to make batteries for power grid storage and hybrid locomotives. GE also is building a hybrid water heater plant in Kentucky.
  • Electric Motors Corporation and Gulf Stream Coach will form a partnership to build a light-duty electric pick-up truck in Indiana. The investment exceeds $80 million.
  • Siemens has announced a $50 million wind turbine parts manufacturing facility in Kansas.
  • Peregrine Energy is building a $135 million biomass cogeneration plant in South Carolina.

Many of these investments are just the leading edge of emerging industries. The renewable energy industry grew three times as fast as the U.S. economy, with the solar thermal, photovoltaic, biodiesel and ethanol sectors increasing 50 percent in 2008. Solar energy generation by U.S. utilities currently totals only 444 megawatts. Some experts are predicting a 12-fold increase in the near future. Consumers, buying products labeled environmentally beneficial, spent $500 billion in 2008 on green products.

Where will these new jobs go? Almost anywhere seems like the right answer. New energy projects have obvious location factors. For wind, solar, geothermal and biomass generation, the investment will stay near the source. Wind farms need wind and solar farms need sun. For biomass, many areas of the country have feedstock in wood, crops and garbage, but transporting the source material adds to cost and remains a deterrent. But for the manufacture of equipment and parts for the emerging industries, the overall costs of doing business, the ability to find suitable labor, infrastructure and financial assistance will determine where investment and jobs locate.

The opportunities are growing and some areas of the country are already seeing results. Like all economic shifts, new energy efforts will create both opportunities and threats, but for many communities, any opportunity in today’s economic climate is good news and worth pursuing.

Read more about “green” manufacturing opportunities in our Spring 2009 issue @ www.capacity-magazine.com

Ted Abernathy is executive director of the Southern Growth Policies Board, a non-partisan public policy think tank based in Research Triangle Park, N.C. Formed by the region’s governors in 1971, the board develops and advances visionary economic development policies by providing a forum for partnership and dialog among a diverse cross-section of the region’s governors, legislators, business and academic leaders and the economic and community development sectors.