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UC Berkeley Study Touts Economic Benefits of FITs

July 12, 2010 | 6 Comments

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California, United States -- The University of California, Berkeley has released the results of a study examining the economic benefits of a comprehensive Feed-In Tariff (FIT). The analysis shows that enacting a robust FIT in California to achieve the state's 33% Renewables Portfolio Standard (RPS) would create three times the number of jobs, over 2 billion in additional tax revenue, and stimulate tens of billions in new investment. Furthermore, the adoption of a comprehensive FIT will cost-effectively fulfill California's 33%-by-2020 goal on schedule.

Headed by Dan Kammen of UC Berkeley’s Energy and Resources Group, the analysis examined the economic benefits of a FIT deployed in California to facilitate the state’s effort to achieve the 33% RPS by 2020. A FIT is essentially a fixed price, long-term contract for a utility to buy electricity produced by renewable energy generators.

“This report demonstrates the benefits of using a feed-in tariff as one of the tools to achieve job creation and get our economy back on track in addition to achieving energy independence and reducing our need for fossil fuels. It is a wonderful guide to the kind of policies that will get us to a more prosperous and sustainable energy economy. I am grateful to Dan Kammen, Max Wei, and their colleagues for continuing to produce the kind of solid analysis we need to make better policy decisions,” said California State Senator Fran Pavley (D-Agoura Hills).

The Berkeley study specifically examined a FIT that would be available to solar projects up to 20 megawatts (MW) in size. Professor Kammen and his colleague Max Wei studied the impact of such a FIT on employment, tax revenue, and investment compared to current RPS scenarios being modeled by California regulatory agencies.

"The conclusions confirm the FIT Coalition’s unvarying position that FITs are the best policy mechanism for accelerating the deployment of cost-effective renewables while delivering tremendous economic benefits wherever FITs are designed to achieve scale. This study will open many policymakers’ minds to the unparalleled benefits of FITs and their ability to unleash the wholesale distributed generation market segment," said Craig Lewis, executive director of the FIT Coalition.

The study’s key findings include that three times the number of jobs will be created if a FIT is enacted to complement the RPS. This translates into roughly 280,000 more jobs over the next decade, or an average of 28,000 jobs per year, with more jobs created in the early years because wholesale distributed generation (WDG) projects can come online quickly.

Another key finding includes over $2 billion in additional tax revenue for the state. Further, the study found that a comprehensive FIT would stimulate up to $50 billion in new private investment in the state with the potential for those renewable energy projects to be eligible for another $15 billion in federal tax benefits.

Click here to see details on the study’s methodology, an accompanying summary or the entire report.

Solar Energy

6 Reader Comments

Comment
1 of 6

Anonymous

July 12, 2010

This is a vapid study lacking merit. It is important to note, for instance, that the jobs totals are not NET job counts so the article's use of the word "more" when discussing the job estimates is inappropriate. Naturally, if you shift from one type of generation to another, employment in the latter will rise, but employment in the former will also fall. This study makes no attempt to estimate employment reductions in the non-solar energy sector. It makes no attempt to estimate the effects of higher energy prices or virtually any other consequence of realigning the energy industry. With this type of methodology you could make a plan suggesting CA move its energy generation to hamster powered turbines seem like it would raise jobs and tax revenue (a few people would get jobs raising hamsters and a lot of moving companies would hire temporary laborers to help almost everyone else move out of the state). If this is what passes for the "solid analysis" that CA legislators use for decision making it is no wonder CA is in so much trouble.
Steven

Comment
2 of 6

tko_clean

July 13, 2010

Unfortunately, Steven's comments seem to have missed the basic approach and main point of the study. The analysis was done to compare two paths to achieving the state's 33%-by-2020 renewables mandate. The numbers of jobs created by the proposed Feed-In Tariff is calculated relative to a baseline scenario for achieving the 33% that the California regulatory agencies are modeling.

The study shows that the jobs created by the FIT will be quite a bit *more* than the baseline scenario. And because the two paths are replacing the same amount of fossil energy, any employment loss in the non-renewables sector will be the same in both cases. So, talking about NET vs the non-renewable sector doesn't change the study's conclusions.

Also, if Steven had read the report carefully, he would have found that the analysis specifically accounts for negative employment effects of potentially higher electricity rates. Note, however, that the proposed FIT would cause at most a 1% increase in rates in any particular year and in the later years of the program, would in fact save money with lower rates, causing an extra positive employment effect.

The work of Professor Kammen's group is world-renowned and to Steven's last comment, I'd say California is in so much trouble because too few CA legislators use such analyses for decision-making.

Comment
3 of 6

Anonymous

July 13, 2010

The author of the REW article, the authors of the study, and the author of comment #2 all have a tendency for imprecision when quoting conclusions. Some examples:

The REW article refers to "roughly 280,000 more jobs over the next decade" but the study quote claims 280,000 JOB YEARS for renewable employment in CA over the next decade compared to the baseline RPS ASSUMING that the start meets 6% of the 33% goal by renewable energy credits (RECs) purchased out of state. Note that this is a mean additional employment estimate over the quoted period of 28,000 renewable jobs and does not include employment losses out of state, to instate fossil fuel industries, etc. Naturally, if you install a higher percentage of renewables (33% vs. 27%) it will require more labor, especially if you do this with solar PV which is more labor intensive and expensive than other renewables. Commenter #2 at least points out that this is a comparison to a baseline RPS plan, but he neglects to point out that the baseline plan only achieves 27% renewables.

Commenter #2 states: "And because the two paths are replacing the same amount of fossil energy, any employment loss in the non-renewables sector will be the same in both cases."
This is clearly untrue as the baseline plan relies on more fossil fuels offset by low priced RECs. Furthermore, any change in the mix of renewables will alter the distribution of fossil fuel mixes that will impact cost and employment figures. The study makes no attempt to quantify these changes; it merely assumes displacements in the fossil fuel based employment will occur out of state.

Continued....

Comment
4 of 6

Anonymous

July 14, 2010

Continuation of comment #3:

Commenter #2 claims that: "the analysis specifically accounts for negative employment effects of potentially higher electricity rates."

This is only partly true. The study includes ZERO jobs losses due to employers moving to states with lower electricity prices or to businesses that go bankrupt because the extra costs push them over the edge, or to the job expansion that does not take place because of tighter business budgets. The only estimate it makes is that the additional expense to consumers will result in ~8.7 job years lost per 1 million dollars of annual spending to arrive at a ludicrous estimate that markedly higher prices will reduce jobs by no more than 6400. 8.7 jobs is an extremely low estimate of what $1 million in spending will induce--it is, for instance, far lower that what the Obama administration estimates for the number of jobs induced by stimulus spending.

Claims that some form of proposed spending will induce some huge volume of new jobs and tax revenue, but that don't make any estimates of the opportunity costs and negative consequences associated with such spending, should be taken with a grain of salt. CA may not yet realize it, but unrestrained spending isn't a panacea--especially when you are paying above market rates for what you purchase.
Steven

Comment
5 of 6

Anonymous

July 15, 2010

I will bite on FIT as long as we name them the "Standard Offer 4 with Forecasted Prices Tariff Zombie" and always have to use that term instead of FIT. FIT is so benign.

Comment
6 of 6

Anonymous

July 16, 2010

It is difficult to believe many of the projections being made.
First,the opponents of renewable energy worry about its impact on grid right of way problems and sustaining the railroads and pipeline groups.
Secondly,unless or until the full impact of electric vehicles is measured or the highway grid itself is altered, or better batteries emerge,figures regarding the rising demand for electricity cannot be closely estimated.
Third, materials research is advancing for wind,tidal,solar powered generation.This exciting research horizon cannot be estimated since we have just begun to understand how much needs to be done.
Fourth,it may be possible to underwrite the entire conversion process through changes in the depreciation allowances and alterations of rate increases given the amortization using the present grid set up.Incentives to homeowners might not be the only answer.
Fiftgh,the biggest problem for California remains the same,a lack of water.The expense of setting up suitable desal plants will impose a very heavy investment in unified energy policy.

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