Mar 02, 2016

Solar Jobs: Boom-and-Bust or Here to Stay?

Presidential election season has once again taken America by storm, and with it comes the incessant quadrennial refrain from candidates about creating jobs. Politicians in all quarters are once again professing that their plans contain the long-sought economic panacea that will simultaneously reduce taxes, increase government revenues, and create millions of jobs. Indeed, President Obama himself campaigned on the promise of creating five million green jobs, which would promote and help deploy clean technologies, and protect America’s existing manufacturing base.

The original appeal of President Obama’s Green Jobs plan was centred on the fact that it promised two things: (1) support for the fledgling green sector of the economy; and (2) a source of relatively high-paying jobs that do not require a college education. While the verdict is out on the success of all such political promises, there is no doubt that the solar photovoltaic energy landscape has changed dramatically since 2008. The industry has experienced unprecedented success and growth over the last eight years, including the realization of numerous jobs, which fall into the latter category.
Before touting the success of the markets or attributing these outcomes to the acts of agents such as governments, businesses, or even specific politicians, an astute observer might ask the following questions:

  1. Where have we seen this before, and what lessons can we learn from previous experience; and
  2. Are these jobs long-lasting or subject to the whims of cyclical demand?

To explore these questions further I will analyse two case studies, namely the history of the construction sector in the context of New Zealand, and the experiences of the Yale SEEDs (Solar Energy Evolution and Diffusion studies) team throughout the Solarize Connecticut campaigns. Our experience with job creation during Solarize Connecticut showed many parallels to those in the construction sector during a boom period. New Zealand has been chosen as a comparison point for two reasons: the size of the country coupled with the construction sector’s labour force dynamics, which collectively provide a better analogue to the nascent solar PV industry in the US than the country’s own construction sector; and my own fondness for my home country.

Throughout the state-wide Solarize campaign, we observed a tremendous increase in solar PV installations in Solarize towns, including a record-breaking 220+ installations for one of the Phase 4 towns in November of 2014. Given the format of the Solarize campaign, which in its simplest form partnered one town with one installer, it is not surprising that there was a sudden spike in demand for solar above and beyond anything that the installer or town had experienced to date. Indeed, in many towns this resulted in a backlog of up to 9 months. Many installers indicated that this increased demand put significant upward pressure on their current staff, which in certain cases was now facing almost ten times as many projects in a calendar year as they had in the year preceding the Solarize campaign in their town.

This boom dynamic is where the comparisons with New Zealand’s construction sector begin, as the latter is also characterized by boom-bust cycles that drive demand for labour. In addition to this dynamic, a recent study of the construction sector notes that, “The New Zealand Building and Construction industry is dominated by small to medium enterprises. Most residential structures are constructed by self-employed builders and specialists sub-contractors who work in small businesses ... The industry also indirectly employs thousands of people in support jobs related to manufacturing, material supplies and transport services.”[i] While there are non-trivial differences between these industries, we nevertheless see clear parallels with the PV industry, particularly in the context of Connecticut, where many small to medium enterprises partner with sub-contractors and other trade specialists to service the demand of local residents.

Having partially answered the first question above, we can now explore the history of the New Zealand construction sector’s labour market in order to better understand the longevity of jobs created by the solar PV industry here in the United States. As noted above, the construction sector in New Zealand follows a boom-bust cycle, with significant consequences for the nature of the labour market. Indeed, the same study above notes that:

In a ‘boom’ economy, a skills shortage occurs due to an overload of capital works being initiated; the response is to begin training a large number of apprentices to meet this demand. However, due to the training delay, typically around four years, by the time these apprentices graduate, the economy is likely to be in decline again and a labour surplus will occur. These people will usually find another profession and not return to the industry. If the amplitude of these oscillations increases, the magnitude of this effect will get worse.

Similarly:

… when the economy is in recession, people do not see the immediate need to train apprentices … Financial resources are also restricted in a recessive economy, and due to the small business nature of the building and construction industry, each company is especially sensitive to economic highs and lows. Hence there will be few firms able, or willing, to take on the financial burden of an apprentice. The result is that when the economy suddenly begins to grow again there is an inadequate supply of skilled labour.

The effect of this dynamic is clear and threefold: firstly companies are discouraged from investing in their human capital given the turnover; this necessarily results in reduced quality and continued over and underemployment (depending on where we are in any given cycle); and finally the lack of job security discourages potential employees from considering this as a viable long-term career option. We thus see that this dynamic completes a vicious employment cycle, which significantly impedes the long-term viability of many jobs in this industry.

While this unfortunate reality has hampered the construction sector in New Zealand, our experiences with Solarize Connecticut have shown that there are important differences between these industries.

First of all, boom and bust cycles are typically characteristic of mature industries. Though the growth in residential solar PV has exceeded all expectations, it has started from such a low base that continued growth – even in the context of towns in Connecticut – is likely for the foreseeable future. Furthermore, evidence from the SEEDs research indicates a persistence in the growth of solar after the Solarize Campaign. This persistence, when coupled with another of our key findings, namely the fact that people install solar because their neighbours do (as featured in the Washington post here) also serves to improve the resilience of the sector to a sudden drop in demand particularly following one-off campaigns such Solarize.

Finally, our conversations with installers throughout Connecticut reveals a positive trend: specialization within the industry. Solar PV installations require skills that are readily transferable in other contexts. These include everything from providing continued maintenance services to existing panels (plumbers, electricians, and roofers are more likely to provide continuing maintenance services to homes, while construction workers are not), to other renewable technologies, and to traditional electrical and electronics work. In fact, the aforementioned research paper on the New Zealand construction sector speculated that specialization would be a natural and potentially positive outcome. The author states that, “If individuals are multi-skilled, the building and construction industry as a whole will be more adaptable and effective. The negative impacts of skill shortages will become less intense as people can easily move to where there is demand for a particular skill-set.”  Already we see that many solar PV firms in Connecticut have tailored their offerings to provide these other services in order to diversify their business model, and to meet the ebbs and flows of consumer demand.

While the answer to our second question will be left to economists in the coming years, our experience as a research team during the Solarize Connecticut campaigns suggests that President Obama’s promise of creating five million (lasting) green jobs may not be so farfetched after all.

[1] Academia.edu