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June 2011

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Labor Market Information

 

ARRA Dynamics in the Labor Market

by: Patrick Manning, Principal Economist
excerpted by: Phil Ellsworth, Editor

Editor's note: The following article is Part One of a two-part series in Wyoming Labor Force Trends. These excerpts are from Chapters 1 and 2 of ARRA Labor Market Dynamics, which examines some of the effects of the American Recovery and Reinvestment Act of 2009 and specifically, employment related to energy efficiency.

In 2009, Congress passed the American Recovery and Reinvestment Act (ARRA), which funded a wide array of projects nationwide. Generally, the purpose of ARRA was to provide "supplemental appropriations for job preservation and creation, infrastructure investment, energy efficiency and science, assistance to the unemployed, and State and local fiscal stabilization."

To assess possible changes in the economic/policy landscape that could substantially impact the labor market, the six-state Rocky Mountain and Northern Plains Consortium – composed of labor market information offices in Iowa, Montana, Nebraska, South Dakota, Utah, and Wyoming – sought and was awarded funding through ARRA. This funding was provided to examine the impact of employment in energy efficiency, pollution reduction, and sustainable management practices. In previous studies, these jobs have often been referred to as green jobs. However, an unscientific survey conducted by Research & Planning (R&P) found that most people polled either had no idea what a green job was, or had a vastly different idea than the Bureau of Labor Statistics' definition. To reduce ambiguity, R&P opted to use the term EE jobs, which could stand for "energy efficiency" or "environmentally enhancing." Within EE jobs are two categories: EE process employment and EE output employment. EE process employment occurs when the firm does not produce an EE product or service, but the employee or employees provide skills that result in a more energy efficient or environmentally beneficial outcome to the production process. For example, results from the baseline survey found that a large construction contractor listed no EE products. However, the company employed an environmental engineer and a safety and occupational health manager. Both provided energy efficiency benefits during the firm's production activities. These two jobs would be considered as EE process jobs. EE output employment, on the other hand, describes employment that involves workers who produce or in some way enhance an EE product or service. Some examples of EE output employment:

Defining green jobs is not easy. Some researchers stipulate for a job to be green, the employee must have a different set of knowledge, skills, and abilities than a person doing a similar job at a different firm. For example, Company A produces a green product, while Company B does not. Both firms employ an accountant and both accountants have very similar abilities. Does the accountant position at Company A count as a green job or not? According to the BLS definition it would be counted. However, other studies would not count it as a green job unless the accountant at the green firm had a substantially different set of skills. For the purposes of R&P's study, firms were allowed to decide what employment is "green" and what is not, based on the above definition. Regardless, most published studies have employed a definition roughly analogous to that of the consortium and the BLS' final definition. Results may not be directly comparable across previous studies. It is expected that future research will tend to use a more standardized definition now that the BLS definition is available.

A Review of Alternative Energy and Environmental Enhancement Technologies

Wyoming has long been associated with the development of energy through traditional fossil fuel sources such as oil, natural gas, and coal. Throughout the state's history, this development has brought relatively high-paying jobs and helped to power an energy-hungry nation.

Oil, gas, and coal likely will continue to be major factors in the state's economy for the foreseeable future. In addition to existing development methods, new technologies are emerging that allow more of these resources to be brought to the surface and used in a cleaner manner than in the past.
A national energy strategy will include traditional and new fossil-fuel-based technologies, as well as development of alternative energy sources. As all of these technologies are further refined, new jobs will be created – jobs that are relatively high-paying and cannot easily be outsourced to other countries.

Solar

Cost and intermittency are major factors limiting the use of photovoltaic cells for generating energy. Except in very specific situations, such as in rural areas where grid electricity is unavailable, solar power is not cost-competitive with fossil fuels. Residential use of solar power has been limited by front-end costs. An average set of rooftop panels is estimated to cost between $20,000 and $30,000. It would take 10-15 years to produce enough electricity to pay for itself. The other major disadvantage of solar energy is intermittency. Because the sun does not shine at night and is diminished by overcast skies and storms, solar energy cannot be used for base load electricity. However, solar power is an excellent option for peak demand times.

Biomass

Biomass is technically defined as "organic non-fossil material of biological origin constituting a renewable energy source" (Wyoming State Forestry Division, 2007). Basically, it includes any biological material from recently living organisms that can be used as an energy source. Examples include: agricultural residue, animal waste, municipal solid waste, perennial grasses, and forestry products. The most common way of extracting energy from biomass is through burning it, but biomass may also be used to produce goods such as fibers or chemicals that are then used in energy production or in other activities. For example, methane gas can be captured from livestock waste and then used as a fuel source.

Biomass is unique in that it is the only renewable energy resource that can be converted into liquid transportation fuel (U.S. DOE, 2010a).

According to the Pew Center on Global Climate Change, increased use of renewable fuels such as ethanol provides the best option for reducing greenhouse gas emissions from the transportation sector (Pew Center, 2009). However, to be successful in the marketplace, biomass-derived products must perform as well as or better than the fossil-energy-based products. In addition, the cost must be comparable in order for the products to become truly competitive.

Examples of biomass-related businesses in Wyoming:

Geothermal

Geothermal energy is extracted from heat stored in the earth. This geothermal energy originates from both radioactive decay of minerals that make up the Earth itself and from solar energy absorbed at the surface. Geothermal power is relatively clean, cost-effective, reliable, and sustainable. However, until recently it was limited to areas near tectonic plate boundaries. Recent technological advances have increased access to viable resources, especially for applications such as home heating. The Earth's geothermal resources are more than capable of supplying energy for the nations of the world but as of yet only a very small fraction may be profitably utilized. Currently, geothermal power is online in more than 20 countries (Goffman, 2009).

There are two basic forms of geothermal energy use – one for electrical generation and one for home heating and cooling. Electrical generation requires a geothermal resource located close to the Earth's surface. These resources are typically found on the edges of tectonic plates like the hot spots that form a ring around Yellowstone National Park. The most common direct use of geothermal energy is for heating buildings through district heating systems, which pipe hot water near the Earth's surface directly into buildings for heat.

As of 2009, geothermal power accounted for 5 percent of renewable power generation (U.S. DOE, 2010b). ARRA has committed up to $350 million in funding for geothermal energy research. In addition to power generation, it provides significant investments for the deployment of ground-source heat pumps, up to $50 million, which can be used to make buildings more energy efficient. The Western Governors' Association expects the creation of 10,000 jobs if planned projects proceed as expected (Federal Interagency Geothermal Activities, 2010).

Wind

Wind turbines, like aircraft propeller blades, turn in the moving air and power an electric generator that supplies an electric current. Modern wind turbines are of the horizontal-axis variety, like the traditional farm windmills used for pumping water. Wind turbines are often grouped together into a single power plant, also known as a wind farm, and generate bulk electric power.

Wind energy is unlimited in supply. Wind turbines do not use combustion to generate electricity, and therefore do not produce air emissions or greenhouse gases. No water is used in the generation of electricity and the only potentially toxic or hazardous materials are the small amounts of lubricating oils and hydraulic and insulating fluids. Therefore, contamination of soils or groundwater is highly unlikely.

The major challenge to using wind as a source of power is that it is intermittent. Wind cannot be stored, and not all winds can be harnessed to meet the timing of electricity demands. Further, good wind sites are often located far from areas of electric power demand. Wind resource development may compete with other land uses that may be more highly valued.

In addition to environmental benefits, wind projects have many economic benefits to the area in which they are located. Projects generate ad valorem/property taxes for the county and other taxing jurisdictions where they are located. Completion of the project is likely to be tied to investments in transmission line capacity in the surrounding area. Construction and subsequent operation of transmission lines would also result in ad valorem, sales, use and lodging tax revenues in the region. In addition, lease payments are made to surface land owners that are likely to be fed back into the local community.

Jobs associated with wind energy include wind generator installer, wind technician, project manager, wind power project engineer, wind farm estimator, wind resource analyst, renewable energy communication specialist, site manager, and wind turbine sales manager. Laramie County Community College currently offers a wind turbine technician training program that trains individuals to do general maintenance, operations, and inspections on wind turbines and related facilities. The program results in an associate's of science degree in wind energy.

Today, Wyoming has wind power plants in many locations throughout the state. The most recent data available show wind power in Wyoming generated approximately 2.4 million megawatt-hours in the first 10 months of 2010 (U.S. DOE, 2011). That's roughly enough to supply the electricity use for 216,000 average homes in the United States for a year. (U.S. DOE, n.d.).

Smart Grid

The power grid in the United States is more than a century old. It consists of more than 9,200 electrical generating units with more than 1 million megawatts of generating capacity connected to more than 300,000 miles of transmission lines, according to the U.S. Department of Energy (2008). The system is complex and involves regional power plants connected with high-voltage transmission lines to load centers, where power is directed over lower-voltage distribution lines to houses and businesses.

Despite the investments in cleaner energy alternatives, the fastest and cheapest way to cut emissions is to use less energy. According to some sources, improving the efficiency of the national electricity grid by 5% would reduce overall energy consumption reducing the associated carbon emissions the equivalent of 53 million cars (U.S. DOE, 2008). Because of the vast potential for environmental benefits, President Obama made modernizing the nation's power network a priority when establishing the goals of the economic stimulus. The plan for modernization calls for the installation of thousands of miles of new transmission lines to carry renewable energy from power sources to population centers where the energy is needed. It also calls for about 40 billion smart electric meters, which would be used to help consumers reduce their energy consumption, to be installed in homes (Davidson, 2009). These savings could lead to increased competitiveness for U.S. businesses in the global marketplace, as well as lower prices for U.S. goods and increased job creation.

Another benefit of a modernized grid is improved resistance to organized attacks and an improved ability to withstand natural disasters. In 2005, approximately 1.7 million people lost power due to Hurricane Katrina, and many were not in the New Orleans area (NOAA, 2005). With a more modern system, damage to the grid from hurricanes, floods, or other catastrophic events could more easily be localized, with power re-routed more effectively.

Smart-grid investments are already under way in Wyoming: two electric utilities in the state were selected to receive federal grants to aid in modernizing their infrastructure. Cheyenne Light, Fuel, and Power received about $5 million to update its communication system and install 38,000 smart meters in the homes of its residential customers. Sundance-based Powder River Energy received about $2.5 million to install automatic readers on its power substations and in customers' homes (Pelzer, 2009).

Forthcoming Alternative Energy or Environmental Remediation Projects in Wyoming

Waste-to-Energy

A 35-megawatt waste-to-energy plant is scheduled to go online in 2012. Company representatives said the plant will run off a combination of garbage from area communities, as well as agricultural waste. The plant should employ about 70 people (Lacock, 2010).

Manufacturing of Wind Power Equipment

In mid-February 2011, Wyoming Gov. Matt Mead announced that Gestamp Worthington Wind Steel, LLC, will build a new wind tower manufacturing plant in Cheyenne. It is expected to manufacture more than 300 commercial wind towers a year and is expected to create 150 jobs. In addition to the direct job creation, this will be a boost for Wyoming and the U.S. economy in that the growing wind power industry will have a major domestic supplier of required equipment (Curran, 2011).

Wastewater Remediation

R360 Environmental Solutions Inc. has purchased the only oilfield wastewater facility in Southeastern Wyoming. The company intends to expand the capacity of the facility tenfold. The expanded facility will include recycling and disposal services for all exploration and production (E&P) waste streams. This is the company's fourth facility in Wyoming, and its 20th E&P waste management facility (Business Report Staff, 2011).

Carbon Capture and Sequestration

In 2008, energy-related emissions dominated total greenhouse gas emissions. Greenhouse gases include carbon dioxide, methane, nitrous oxide, and other global warming potential gases. After petroleum (41.9%), coal produces the most carbon dioxide (36.5%) of any source (U.S. DOE, 2009). As of 2009, the United States produces more energy from coal than from any other single source (U.S. DOE, 2010c), and Wyoming produces more coal than any other state (EIA, 2010d). Because of this, policies, legislation, or market factors that influence the demand for coal will also affect the Wyoming labor market. There is some disagreement as to whether or not anthropogenic greenhouse gas emissions (emissions caused by mankind's activities) have an effect on climate change. Regardless, several bills have been introduced at the federal level addressing constraints on greenhouse gas emissions although none has become law. California has implemented strategies with a goal toward a reduction in greenhouse gas emissions by nearly 20% by 2020 (CARB, 2008).

The lack of a national energy policy is causing uncertainty among investors in coal-fired power plants. The uncertainty stems from not knowing what policies, if any, will be enacted, and what the repercussions would be. According to a recent article, "that uncertainty compels investors and utilities to hang on to capital, and it's the reason that some 87 gigawatts of proposed coal-based power generation has been canceled in recent years" (Bleizeffer, 2010).

One technology that would greatly affect Wyoming's economy if implemented would be the capture and subsequent sequestration of carbon dioxide. The basic idea behind carbon capture sequestration is to store carbon in underground geologic formations or in biomass (trees, grasses, etc.) and soils. In Wyoming, geologic sequestration is the most likely scenario. Wyoming has been pinpointed as having substantial storage space (DOE, 2010e) and much of the legislation needed to address liability and property rights issues has been addressed (Noble, 2010).

The University of Wyoming School of Energy Resources, with funding from the U.S. Department of Energy, is preparing for a large-scale injection of 3 million tons of carbon dioxide in the Rock Springs Uplift. In an article in the Cowboy State Free Press, Dr. Mark Northam, director of the School of Energy Resources, said, "Carbon capture and storage is so expensive that the only way it becomes economically viable is if there is an economic incentive to pollute less. If a global price, or tax or a cap or some sort of value is placed on the carbon we emit then it will justify the massive investment" (Noble, 2010).

What such legislation would do to Wyoming's economy is unclear. It could put the use of coal for power generation at a disadvantage compared to less carbon-emission intensive fuels (e.g. natural gas, nuclear, solar, and wind), thereby reducing the demand for coal. However, carbon capture sequestration conducted at a commercial scale in Wyoming would produce jobs, as would the need for construction of additional pipeline capacity to transport the carbon dioxide. For consumers, this would increase utility rates for electricity.

First Generation Biofuels and Beyond

First generation biofuels are alternative fuels such as corn-based ethanol production and fats and oils-based production of biodiesel. One of the main issues raised with both first-generation ethanol and biodiesel production is that agricultural crops are being switched from food production to fuel production, which can lead to higher food prices. Second-generation biofuels would use feedstocks that do not compete with food production. Two examples of second-generation biofuels are the attempt to convert cellulosic material (e.g. crop residue, perennial grasses, or wood processing waste) to ethanol or the conversion of algal-derived oils to biodiesel.

Near-Term Feasibility of Alternative Energy Projects

The alternative energy technologies discussed in this paper tend to fall into two categories: those currently being used commercially (e.g. solar, wind, etc.) and those that may be commercially viable in the near future (e.g. biomass, geothermal, etc.). For an in-depth review of current and emerging technologies see "Researching the Green Economy" prepared for the consortium by the Montana Manufacturing Extension Center (MMEC, 2011).

Externalities and the Cost of Energy Generation

Much of the discussion regarding which (and to what extent) alternative energy sources will supplement and/or replace conventional methods of energy production focuses on the issue of cost. The Table indicates the cost a3t1of energy generation from various technologies for plants entering service in 2016 (U.S. DOE, 2010f). However, these estimates are derived using estimates of fixed and variable operation and maintenance expenses. Therefore they do not include the full cost of energy generation. The impacts of pollution caused by energy generation are not taken into account (e.g. increased incidence of respiratory illnesses). Thus, an externality exists, a cost not accounted for in the price of the commodity. Ideally, the full cost of producing a good is accounted for in the market price of that good. When it is not, a market failure exists. A study titled, "Hidden Costs of Energy Production and Use" conducted by the National Academy of Sciences found that external damages averaged $32 per megawatt-hour (mwh) in 2005 from coal-fired plants and $1.6 per mwh from natural gas plants (NAS, 2009). The study did not estimate damages from nuclear or renewable energy generation. It should be noted that all of these technologies have some external costs associated with them. For example, wind turbines may have an impact on wildlife habitat and the production of solar panels emits pollution. The idea of externalities is mentioned to remind the reader that the cost of power generation may contain elements that are not included in the market price.

References

American Recovery and Reinvestment Act, 42 U.S.C. § 17384 (2009). http://www.gpo.gov/fdsys/pkg/PLAW-111publ5/pdf/PLAW-111publ5.pdf

Bleizeffer, D. (2010, September 21). UW, GE: Lack of climate legislation hurts Wyoming coal. Casper Star-Tribune. Retrieved from http://trib.com/news/state-and-regional/article_17650237-3167-59e3-ba25-5ca10656e7f5.html

Business Report Staff. (2011, February). R360 buys Niobrara facility, plans major expansion. Wyoming Business Report. Retrieved January 25, 2011, from http://www.wyomingbusinessreport.com/article.asp?id=56092

California Air Resources Board. (2008). Climate change scoping plan a framework for change. p9. Retrieved January 25, 2011 from http://www.arb.ca.gov/cc/scopingplan/document/
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Curran, D. (2011, February). Wind power manufacturer chooses Wyoming. Wyoming Business Report. Retrieved January 25, 2011, from http://www.wyomingbusinessreport.com/article.asp?id=56080

Davidson, P. (2009). Buzz grows for modernizing energy grid. USA Today. Retrieved November 4, 2010 from http://www.usatoday.com/money/industries/energy/2009-01-29-smart-grid-energy_N.htm

Deutscher, H. (2008). Wood-to-ethanol production underway in Wyoming. Biomass Power and Thermal Magazine. Retrieved August 31, 2010 from http://www.biomassmagazine.com/article.jsp?article_id=1437

Federal Interagency Geothermal Activities. (2010, January). Geothermal Technologies Program. Office of Energy Efficiency and Renewable Energy. U.S. Department of Energy. Retrieved March 22, 2011 from http://www1.eere.energy.gov/geothermal/pdfs/ngap.pdf

Goffman, E. (2008). Why not the sun? Advantages of and problems with solar energy. Retrieved March 22, 2011 from http://www.csa.com/discoveryguides/solar/review.pdf

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Lacock, T. (2010, November). New waste-to-energy plant slated for Wheatland. Wyoming Business Report. Retrieved January 25, 2011, from http://www.wyomingbusinessreport.com/article.asp?id=54595

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Pelzer, J. (2009). "Smart" grid stimulus funds come to Wyo. Casper Star-Tribune. Retrieved August 30, 2010 from http://trib.com/news/state-and-regional/article_f04cc8a4-c343-11de-9921-001cc4c03286.html

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U.S. Department of Energy. Energy Information Administration. (2010b). How much of our electricity is generated from renewable sources? Retrieved on March 31, 2011 from http://www.eia.doe.gov/energy_in_brief/renewable_energy.cfm

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U.S. Department of Energy. Energy Information Administration (2010d). Coal Production and Number of Mines by State and Mine Type. Table 1. Retrieved January 25, 2011 from http://www.eia.doe.gov/cneaf/coal/page/acr/table1.html

U.S. Department of Energy. National Energy Technology Laboratory (2010e). Carbon Sequestration Atlas of the United States and Canada. Third Edition. Retrieved January 25, 2011 from http://www.eia.doe.gov/oiaf/1605/ggrpt/index.html

U.S. Department of Energy. Energy Information Administration. (December 2010f). Annual Energy Outlook 2011. DOE/EIA-0383 (2010). Retrieved on March 28, 2011 from http://www.eia.doe.gov/oiaf/aeo/electricity_generation.html

U.S. Department of Energy. Energy Information Administration. (March 2011). Net generation from wind by state and sector. Retrieved on April 4, 2011 from http://eia.doe.gov/cneaf/electricity/epm/table1_17_b.html

Western Research Institute. (2010). River Basin successfully produces torrefied biomass at pilot unit in Laramie. Retrieved August 31, 2010 from http://www.westernresearch.org/news.aspx?id=2046

Wyoming State Forestry Division. (2007). Wyoming biomass inventory: Animal waste, crop residue, wood residue, and municipal solid waste. Retrieved August 31, 2010 from http://slf-web.state.wy.us/forestry/adobe/biomass.pdf

 


Last modified by Michael Moore.