Green Energy = Job Growth? Prove It

(Green energy, green jobs story updated for First Solar plant announcement)

NEW YORK ( TheStreet) --

You've heard it or read it in a headline somewhere and probably taken it for granted: green energy = job growth. Sounds simple enough. It also makes one feel good about the direction in which the country is headed at a time when national employment remains at a dangerously high level.

There's no shortage of opportunities to soak up the green energy = job growth rhetoric.

Google announced this week that it's backing the development of an offshore wind market for the U.S., and among all the reasons to get behind wind energy, Google said the project will create lots of jobs for the U.S. economy. The powerful United Steelworkers union recently filed a petition with the Obama administration citing China for unfair trade practices in support of its emerging green energy sector and taking valuable manufacturing jobs from the U.S.

Maybe it was a magazine profile of an innovative solar firm in Silicon Valley, a darling of the venture capital crowd -- even got President Obama to pose for a photo on the floor of their hi-tech plant -- that sealed the science of the green energy = job growth formula. Maybe it was the United Steelworkers petition or a sound bite from a U.S. senator decrying the loss of manufacturing jobs to China and pleading with America to get behind green energy as a way to transform our job market and invent a new economy.

Yet the green energy = job growth formula is lacking in one important respect: actual labor data. Other than annual reports from trade groups that are paid for by the green energy sector companies as part of their lobbying efforts, there hasn't been any accepted economic model or nationwide census to study the actual trends in green energy hiring.

That's about to change, but not overnight. The effort to show that the green energy sector is creating a level of employment that is a driver of the U.S. economy is just getting started, and it could be a few years before the data becomes a reliable source for economists, the markets, and you and me, looking for jobs -- even if hopefully the unemployment level is not still hovering near 10%.

It doesn't take an economic guru to understand that employment data is a major market force. Consider last Friday's non-farm payroll report from the government: another disappointing jobs number and the Dow finally eclipses the 11,000 point mark. Investors bet the Federal Reserve will take one look at the national employment picture and step in to stimulate the economy.

If that's a leap of investor logic, the green energy = job growth formula remains a leap of faith on the part of the U.S. public. Consider this: it wasn't until this year that the Bureau of Labor Statistics, which tracks just about every job created in every sector of the U.S. economy, received money from the federal budget to actually study the green energy job market. We have President Obama to thank for finally opening the wallet to the green energy jobs data collection effort.

The administration has been subject to its own overreliance on the green energy jobs rhetoric at times too, though -- and it's indicative of the gap between a true picture of the green energy employment sector and the feel-good isolated examples.

Consider the recent release of a report from Vice President Joe Biden's office of the Recovery Act programs that are changing America. Biden's report had a big focus on the jobs that companies in the green energy sector are creating as part of the federal stimulus funds they have received. Yet there were some notable examples in the Biden report of green energy companies, and entire green energy sectors, that are struggling mightily and where any pat green energy=job growth formula isn't good enough.

Take Beacon Power, which was cited by Biden as one of the 100 Recovery Act projects changing America, through its 20 megawatt innovative flywheel energy storage plant in Stephentown, New York, with 20 construction jobs and 40 permanent jobs to be created.

On the same day that Beacon Power put out a press release heralding its inclusion in Biden's list, Beacon Power also announced that it had received a letter from the Nasdaq Stock Market that its common shares failed to comply with the $1.00 minimum bid price required for continued listing on the exchange and would be subject to delisting. Beacon Power shares, currently trading at 35 cents, haven't eclipsed the $1 mark in more than a year.

Beacon Power announced just this week that it was denied a second loan commitment from the federal government.

Wind power was another focus of the Biden report, and yet, 2010 has been one of the worst years on record for the U.S. land-based wind power market.

The American Wind Energy Association's 2010 mid-year report on the U.S. wind market was a bleak document. In the second quarter of 2010, 700 megawatts of wind power were installed in the U.S., bringing the total up to more than 1.2 gigawatts installed at the mid-year point. That was the lowest level of wind power installation in the U.S. since 2007, and far below the wind power installations levels for 2008 and 2009 at the mid-year point.

The pain in the wind power sector was certainly reflected in the stock price direction of a Recovery Act project company, Broadwind Energy ( BWEN), down more than 70% this year, and that's after a recent rally in shares.

Specifically, the wind power installed at mid-year 2010 was 57% below the 2008 level, and 71% below the 2009 installed base. The American Wind Energy Association was hopeful that the looming expiration of a tax credit for wind projects at the end of the year would lead to increased activity in the second half of the year, but stated that "market fundamentals are still challenging."

The AWEA projected that wind power installed in the U.S. in 2010 would decline somewhere between 25% and 45% as compared with 2009.

The Massachusetts Clean Energy Center received a $24.7 million award from the Department of Energy to construct a wind-blade testing facility, the largest of its kind in the world, and another of Biden's recovery projects that are changing America. Biden's report noted that when the project is completed by February 2011, "this facility could change the wind turbine manufacturing industry in America." Yet there were only two new wind manufacturing facilities online in the first half of 2010, according to the AWEA.

The tough year for the wind power market in 2010 could just be a short-term dip based on the cyclical nature of expansion in the green energy sector. The important point is that we don't have the green energy labor data to know what it means; to ascertain if there is an employment cycle as in long-established sectors of the economy.

Today at the Solar Power International conference in Los Angeles, the first baby step in better understanding the green energy jobs picture is being taken. The first census for a green energy employment sector is being released by the Solar Foundation, a solar power think-tank that has been around since the 1970s. The good news is that the news on the U.S. solar job market is encouraging.

The Solar Foundation census of the companies employing Americans in jobs related to solar power -- more than 2,400 companies responded -- found that the solar sector plans to increase hiring by 26% in 2011, or 24,000 new jobs. More than half of solar employers nationally plan to increase their workforce in the next year. The Solar Foundation study discovered that there are 16,700 locations in the U.S. with 292,847 workers involved in the solar supply chain. About 32%, or 93,000 employees at these solar employment locations, spend at least 50% of time on solar business.

The solar census found that manufacturing remains a driver of job growth for the sector. That may seem like a surprise to some, especially given all the rhetoric about job losses to China green energy manufacturing center, and that's why the census data is required to truly understand what's going on in the sector. The news headlines over the past year have all been about solar companies shipping jobs elsewhere.

Evergreen Solar ( ESLR) moved its manufacturing operations to China in a bid to remain competitive in the solar market. The jury is still out on the Evergreen strategic shift, but the fact that its state of the art plant in Massachusetts couldn't compete with the lure of China, even with the support of the state's government, was a telling indicator of how intense the manufacturing job competition in the green energy sector has become.

Energy Conversion Devices ( ENER) recently announced that it was shipping more than 100 jobs from its Michigan plant to Mexico. Energy Conversion Devices is another U.S. solar player struggling to find its footing with the steep price declines in solar brought on by the emergence of the Chinese.

"Solar is a global market. Despite some manufacturing moving overseas, domestic manufacturing is still growing. Depending on what happens in Germany and other fast growing markets, US markets could surge strongly in next couple of years prompting ever greater solar employment in the US." said Solar Foundation executive director Andrea Luecke.

First Solar ( FSLR), the undisputed leader in the solar sector even with the onslaught of Chinese manufacturers, recently added to its manufacturing capacity in Europe, and on Thursday, First Solar announced another manufacturing expansion that will create 600 jobs in the U.S. The First Solar announcement is in line with the optimistic hiring view expressed by solar employers in the Solar Foundation jobs census.

The First Solar plan to expand manufacturing reflects the actual state of solar manufacturing as opposed to the heated rhetoric about Asia stealing all the jobs. First Solar is planning to add two new plants, one in the U.S. and one in Vietnam, and both with 600 employees and capacity of 250 megawatts.

Before the First Solar announcement, the most notable addition of jobs in the U.S. this year by a major U.S. solar company was from SunPower ( SPWRA), which set up a private label manufacturing agreement at a Flextronics plant location in Milpitas, California. There was much fanfare around the SunPower decision, with Governor Arnold Schwarzenneger even in attendance for the formal announcement. Yet it's still a fairly small operation compared with the SunPower plants in Malaysia.

"This is the first time anyone has tried to quantify solar jobs along the entire value chain by speaking directly with employers or projected with any certainty solar job growth over the next 12 months," said Andrea Luecke, acting executive director of the Solar Foundation. "The fact that a national census is needed to examine the size and nature of the workforce signals that the solar industry is having a substantial and positive impact on the U.S. economy."

It also signals that the data has been trailing the rhetoric. It also raises the issue of whether trusting employers to predict the short-term hiring trends is enough in terms of understanding the dynamics of employment in the green energy sector.

John Bunge, a professor of statistics at the Cornell University school of International Labor Relations, who was hired to build the methodology for the Solar Foundation solar jobs census, said the primary research is drawn from survey responses from solar employers and it represents their best estimates.

"That's the bad news, but this is not some vague study either. There were more than 2,400 employers providing detailed survey answers," Bunge stressed. The statistician said there is always a debate when it comes to tracking employment data over whether it's better to trust the employers' sentiment, or is a historical pattern the only reliable indicator -- think the consumer confidence index versus 50 years history of holiday sales in the retail sector.

"These employers are the people who live this every day, and a pure statistical projection based on a plot over the past 50 years can't take into account what statisticians call extreme events, so these folks might now better. We have to wait to answer that question," the Cornell professor said.

It turns out the wait may be two years. The Bureau of Labor Statisics plans to have its green energy employment database up and running by 2012, and to be publishing its first survey of the actual state of affairs in the green energy job market by winter 2012, according to Rick Clayton, Chief of the Division of Administrative Statistics and Labor Turnover at the BLS.

"We're working rapidly to develop a definition and it's consumed most of this year. The first time through is always the roughest," the BLS economist said, adding that with green energy the start-up phase is particularly difficult since it doesn't fit neatly into any definition already created for existing job markets. "We're starting from scratch with this thing and it's the type of labor data research challenge that hasn't been faced in long time," Clayton said.

Ultimately, the BLS effort will do for green energy what it has done for every other sector of the economy -- and what an employer predictive survey model like the Solar Foundation census can't do, for all its merits. The BLS green energy database will track the change over time in employment in the green energy sector. Whether a sector's job pool is growing, declining or staying the same is the discussion point for economists and the markets, as it is for the national employment number.

"People don't argue about the exact level of change but is it more or less, is it growing or not, and as we come to understand the green energy labor market, it will be contributing to debate on the U.S. economy," Clayton said.

For the time being, the green energy jobs debate remains more grounded in rhetoric.

Both Clayton and BLS economist James Hamilton, who served as co-author of a recent BLS report on the wind energy market -- more or less a way for the BLS to get its feet wet in understanding the green energy sector -- didn't want to comment on the political nature of green energy jobs data. The politicians and interested parties can continue with the rhetorical flourishes as much as it serves them well, but economists don't wade into those waters. The BLS will put the data out, and leave it at that.

"It's pretty much a blip at this point," said BLS economist Hamilton. "It's too early to say anything." That is, of course, except to say green energy = job growth, until we know any better.

--Written by Eric Rosenbaum in New York.

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