Thursday, November 17, 2011

Job creation

There is a remarkable myth propagated by the green lobby, that renewable energy will create jobs. The myth has almost more believers than any other religion.

Why is this a myth? It is because the number of jobs created by any new venture is not related to the spend on construction - those are short term jobs. Yes, a few people work while the project is being built, but this is part of the social cost, the sunk capital. If the project then doesn't produce, then NO jobs are created.

This is not to say that construction work is not job-creating. As an engineer, I would never say that. But it is the productive facilities or supportive infrastructure that we create which ultimately gives new jobs, not the actual work that goes into the construction.

Instead, the number of jobs you create is related to the number of customers you create once the project is up and running. You can see this quite easily if you think of an energy project which sells no energy once it is producing. Rather, jobs are destroyed, because you have wasted potential job creating wealth on a useless project.

The same argument applies to what you might call the marginal job creation. Consider two projects, one producing the goods at cost X and the other the same goods at cost Y, where X>Y. Then there will be more customers for Y than for X, and therefore the second project will create more jobs than the first.

This applies DIRECTLY to renewable energy. It costs more than coal-fired energy (yes, even when you include external costs). If you doubt that it costs more, you have only to read the documentation underlying IRP2010. So renewable energy actually creates less jobs than coal. The myth does not deserve the lip-service it is paid.

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