In the U.S. manufacturing jobs have slipped to level not seen since before 1945 (see chart, below). From 2000 to 2009, manufacturing in the U.S. shed upwards of 7 million jobs. It's no wonder that politicians all over the country are hoping that the promise of the new clean energy economy will result in a restoration of a strong manufacturing base in the U.S.
Of course, it’s not that easy. In the solar industry, where the potential for millions manufacturing jobs exist, much of the “heavy lifting” is being done in Asia, according to Robert Lahey, a VP at Ardour Capital. He said that for many clean energy technologies the US’s competitive advantage might be forever lost to China.
“A lot of the companies, especially in solar and wind, have closed the quality gap,” he said.
Lahey pointed out that a number of the large PV manufacturers, even those that have opened U.S. facilities, are still doing the silicon, wafer, ingot and cell manufacturing in China, and it is in those areas that jobs proliferate. In addition, with less red tape and more efficient policies that allow manufacturers to access the capital they need to set up facilities and lower labor costs, China will be a formidable force well into the future, he said.
Other industry experts are not sure why there is so much pressure on the industry to create manufacturing jobs. Carrie Cullen Hitt is Executive Director of The Solar Alliance, an organization that works with companies and legislators to create strong solar policies.
“All this pressure is being put on solar to create manufacturing jobs and it’s just misplaced,” she said. “Manufacturing is fine, but there are so many other jobs in other aspects of the industry. It’s a misperception that you’re going to get the most amount of jobs out of encouraging manufacturing,” she said.
Hitt thinks good policy is the key to creating jobs. But she doesn’t think it should be all about manufacturing. “There are development jobs, installation, financing, the whole value chain…If you have a good solar policy all those aspects of development will create jobs in a state,” she said.
A Failure of U.S. Policy
Schott Solar is one company that has recently opened a manufacturing plant in Albuquerque NM. The plant employs 300 people directly right now and could eventually expand to 1,500 in the future “with the correct policy and support,” according to Jim Stein, VP of Government Affairs at the company.
Stein said the fall of domestic manufacturing is a major area of concern. “The green industry can’t just be about services and installations,” he said in a presentation on Enabling and Sustaining Green Jobs for the Expanding Solar Market at Solar Power International (SPI) in October.
Stein pointed to 5 key policy elements that he said are missing right now. The first is robust, consistent financing mechanisms for manufacturers. Five years ago, the U.S. supplied 42% of the PV industry, today it is less than 10%. We need to get some of that base back to the U.S. to create jobs, he said. In addition, the industry needs market access, which includes fair trade policies for international trade and grid access for the end-user; a trained workforce the uses certifications and standards to ensure quality installations; strong policy framework that includes an RPS; and active government commitment to the industry.
Ardour Capital’s Lahey thinks policy could be tweaked to spur more job growth in manufacturing. He points out that the $2.3 billion that was set aside for manufacturing tax credits (MTC) in the ARRA program ended up going to the larger manufacturers that could afford to expand anyway. “It’s the kind of program that really should favor the entrepreneurs, the thin-film solar guys in the U.S. looking to build their first commercial facility, 100 MW or something like that,” he said, and those types of entrepreneurs typically don’t have enough revenue at the start to take advantage of a tax credit. As a result, the MTC didn't spawn the type of manufacturing expansion that it was intended to.
The wind industry, too, has long since touted its economic and manufacturing benefits. Turbine equipment is cumbersome and heavy, making it difficult and expensive to transport. As the industry grows, the need for domestic manufacturing grows with it.
According to a report from the American Wind Energy Association (AWEA), entitled, “Winds of Change, A Manufacturing Blueprint for the Wind Industry,” from 2005 to 2009 as annual installations of wind power quadrupled, domestic content in turbines reached 50%. The reports points out that during the same time period, manufacturing jobs increased from 2500 to 18,500 and there are 14,000 more in the pipeline “but these and further jobs will only come online with policies dedicated to regrowing our manufacturing sector,” according to the report.
AWEA believes that only with long-term policy support such as an RPS, strong manufacturers incentives, a price on carbon and an extension of the 1603 cash grant in lieu of tax credit will the wind manufacturing industry continue to add jobs at the rate it has been.
Are Manufacturing Jobs Forever Gone?
If you examine the chart above, it’s clear that manufacturing losses have been happening in the U.S. for a long time, much longer than clean energy has even been recognized as an industry that could create jobs.
Andrea Luecke of The Solar Foundation whose organization released The National Solar Jobs Census report in October states that, contrary to what people are hearing, manufacturing in the solar industry is in fact increasing at 36%, making it one of the fastest growing sectors of the solar industry in general. “Right now manufacturing has about 25,000 solar workers and in the next 12 months with the 36% increase there will be an additional 9000 solar workers in the manufacturing sector,” she said.
Further, there are still many places where clean energy manufacturing in the U.S. makes good economic sense. Ardour Capital’s Lahey sees the many burgeoning clean energy industries as excellent sectors in which U.S. manufacturing will grow. “In most cases these are the first commercial facilities on the market,” he said. For 2011, look for opportunities for growth in the manufacture of “smart grid [components], advanced batteries, 2nd and 3rd generation biofuels and even fuel cells,” he said.
And don’t forget about the U.S. as an end-market. The solar and geothermal markets are expected to show phenomenal growth in installations in 2011, as may offshore wind, biofuels and others. In industries where there is still a lot of R&D taking place, domestic manufacturing is necessary. And with wind power, where components are heavy and expensive to ship, it makes sense to manufacture as close to where the product will be installed as possible.
If the U.S. offshore wind market continues to develop in 2011 as it is predicted to, expect to see more announcements like the one Mass Tank made in October.
In partnership with the EEW Group of Germany, Mass Tank said that it would establish the first facility in the country for the manufacture of the offshore wind power components. The new line of production for Mass Tank, a longtime manufacturer of steel storage tanks, will result in the creation of more than 100 jobs, and that number could grow to more than 350 jobs, should Massachusetts become a major supplier to offshore wind installations up and down the Atlantic Coast.
Make no mistake, there are great minds focused on how to restore the U.S. manufacturing base in order to put more Americans back to work. As it also did in the 1980’s when manufacturing was also experiencing a low point, MIT recently launched an initiative that will focus on U.S. manufacturing as way of putting America back to work. According to an article in the Boston Globe, “in Germany, another high wage nation, manufacturing accounts for nearly one-fifth of economic output, compared with about one-tenth in the United States.”
To hear more from Andrea Luecke of The Solar Foundation about The National Solar Jobs Census report, play the video below:
In our next installment, we will look at the U.S. as an end-market, where the potential for clean energy job creation is strongest.
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