Green jobs? Economic impacts of renewable energy in Germany

Abstract

The labor market implications of large investment into renewable energy (RE) are analyzed in this text. Although a growing RE industry can be observed in Germany the overall effect of large increases of RE based electricity and heat generating technologies on the German economy require a careful model based analysis. The applied model PANTA RHEI has been used among others to evaluate the German energy concept in 2010. It takes positive and negative impacts of RE into account. The paper shows the overall effects under different assumptions for fossil fuel prices, domestic installations and international trade. The results are sensitive to assumptions on the development of RE world markets and German exports to these markets. Almost all of these scenarios exhibit positive net employment effects. Under medium assumptions net employment of RE expansion will reach around 150 thousand in 2030. Only with assumptions for German RE exports below today's level, net impacts are slightly negative. Gross employment will increase from 340 thousand in 2009 to between 500 and 600 thousand in 2030.

Introduction

The positive impacts of an increasing share of renewable energy (RE) on the mitigation of climate change as well as on reduced energy import dependency are indisputable. However, such are currently still the additional costs of heat and electricity generation from most renewable energy sources (RES). Additional investment in RES will obviously induce economic activity and employment. Recent studies often focus on these gross employment impacts. They show the importance of the RE industries concerning employment and other economic factors. Wei et al. (2010) apply a spreadsheet-based model for the US that synthesizes data from 15 job studies. Cetin and Egrican (2011) find positive job impacts of solar energy in Turkey. They build their analysis on international literature, which is also positive about job impacts. Rutovitz and Atherton (2009) include regional aspects such as specialization and regionally different productivity in an international employment projection in the energy sector. Regional studies include Ratliff et al. (2010) for Utah, Loomis and Hinman (2009) for Illinois or Lantz (2009) for Nebraska. Situational analyses, such as Delphi (2007), account for the past development of employment in the renewable energy sector. The annual publication of the renewable energy status report (REN 21, 2011) or the annual update by O'Sullivan et al., 2010, O'Sullivan et al., 2011 fall under this category.

Another type of papers applies econometric methods to analyze the past relation between the RE industry or the use of RES and economic development. A cross-country econometric study by Apergis and Payne (2010) reveals a possible correlation between RES investment and economic growth for a panel of OECD countries for the years 1985 to 2005. Fang (2011) also reports a positive correlation between RES and GDP growth for China in the period 1978 to 2008 based on econometric analysis. Mathiesen et al. (2011) analyze a long-term shift of the Danish energy system towards RES and find a positive impact on economic growth.

Frondel et al. (2010) however doubt positive employment impacts of RES increase driven by the German feed-in-tariff in the long run. They argue that higher cost for RES will be “counterproductive to net job creation”. They highlight the importance of international market developments. Especially for photovoltaic (PV), they conclude that due to high import shares the net employment impact of German PV promotion will be negative. They build on earlier studies such as Hillebrand et al. (2006), who concluded that RES promotion will have positive net employment impacts in the short run due to RES installations, which will turn negative in the long run due to the long-term costs of the feed-in tariff, which guarantees fixed tariffs for 20 years.

Studies on the net employment impacts of the promotion of RES take also negative impacts into account. The comprehensive EMLPOY-RES study (ISI, 2009) for the EU Commission applies two complex models, ASTRA and NEMESIS, for calculating the net impacts. Though showing some differences in detail, both models report positive GDP and employment net effects of advanced RES deployment of the EU in comparison to a no policy reference scenario. These net impacts are significantly smaller than the gross impacts. A study for Germany based on the econometric model SEEEM suggests overall positive net economic and employment effects of the expansion of RES in Germany (Blazejczak et al., 2011).

In 2010, the German government decided on its energy concept for a long-term strategy to orient the energy system towards RES (BMWi, 2010; Prognos et al., 2010). In 2011, Germany confirmed these targets, while speeding up the phase-out of all nuclear power plants until 2022. According to this concept, the German government will seek to make renewable energy account for 60% of gross final energy consumption in 2050 and 80% of gross electricity consumption contributed by RES by that year. The German feed-in tariff under the regime of which the share of RES in electricity consumption increased from below 5% in 1998 to 20% in 2011 will still play a major role in this development, but it is intended to make the future expansion of renewables more cost-efficient. The further integration of more and more RES is challenging, as the electricity market design has to be adapted to cope with the growing share of fluctuating RES and to give the right price signals for non-fuel based electricity generation.

Therefore, the overall balance of positive and negative effects under different possible future development pathways of fossil fuel prices, global climate policies and global trade is of interest. To account for all effects in a consistent framework, an econometric simulation model is employed. Economic impact of RES expansion is measured via the comparison of economic indicators such as GDP and employment from different simulation runs. Overall net positive effects can be seen for instance as higher employment in one simulation run compared with the other. The model consistently links energy balance data to economic development on sector level. It is enlarged by detailed data on 10 RES technologies based on comprehensive survey data. Additionally, the sector disaggregation of our model leads to a wide array of interesting results in terms of winners and losers of policies to support renewable energy.

This contribution is organized as follows: This introduction is followed by Section 2 on the methodology applied. The concept of net impacts and the modeling framework are explained. In Section 3 different scenarios are described. Section 4 presents modeling results followed by a discussion. In Section 5 results are discussed and some conclusions drawn.