Wind Power is Much Better than Solar for Manufacturing Jobs

Solar manufacturing is incredibly capital-intensive. For new solar fabs, like the Amonix plant near Las Vegas, and the Solexant plant near Portland, capital outlays are coming out to just over $500,000 per job created. Solexant, for example, will create about 200 jobs on a $107 million capital investment. Contrast that to the new Vestas wind turbine plant in Brighton, Colorado (a few miles northwest of Denver Int'l Airport), where 850 permanent jobs will be created with just $100 million of capital investment, or about $120,000 of capital outlay per job. So for less capital investment, the wind turbine plant is creating over four times as many new jobs as the solar fabs.

Unlike solar manufacturing, which requires heavily filtrated clean rooms and expensive printing and cutting equipment, much like a semiconductor fab, wind turbine manufacturing requires a lot of people. And if you're the sort who spends more time thinking about microeconomics than microbikinis, you'd say wind turbine manufacturing is labor-intensive.

The diameter of the largest turbine rotors has surpassed 400 feet, so the economics of production are very old-school, dependent on a lot of people converting raw materials into a large item. This is very different than manufacturing a 4 inch solar cell using machinery from semiconductor plants. Building the wind turbine takes a lot of people, building the solar cell a lot of capital equipment.

In addition to differences in manufacturing costs, wind turbines are expensive to ship. While Vestas has imported turbines here from its native Denmark, moving 400 foot wind turbines around is no small effort, and makes outsourcing manufacturing to Asia a very costly effort. Meanwhile, two of America's largest solar manufacturers, First Solar and SunPower, are building new facilities in Malaysia and the Philippines.

Now what's even more impressive about the wind turbine plant is how it compares to factories where other centralized, alternating current technologies are built. I posted a few weeks ago about the new steam turbine plant going up in Chattanooga that will cost $300 million to build, and produce all of 325 jobs. The Brighton wind turbine factory will produce about seven times as many jobs per capital dollar invested as the Chattanooga steam turbine plant.

While most economic development professionals, as well as politicians, are eager to pounce on anything that remotely looks like a "green job", it's becoming very clear that some green jobs are far more sustainable than others. While wind farms produce very few jobs, and are models of efficiency and productivity, a wind turbine plant is hard to outsource, and creates far more jobs per capital dollar invested than just about any electricity generation technology.

Why City Branding Fails

The National League of Cities put up an interesting post recently about city branding campaigns. These have been tried for years, but they often don't work, mostly because few cities are willing to be known for something, and would rather be known for everything.

The all-things-to-all-people craze right now is tied to biotech and greentech, in the late 90s, it was just “tech”. But whatever the flavor of the month is in economic development, developing distinctive messages is not an industry strength. The NLC article mentions Milwaukee's “Freshwater Hub of the World” slogan, which is an unusually focused message, and also promotes the idea that the city is a place for trade. This is the sort of point that does not come across well when you try to sell yourself as a “Cool City” and your governor holds a “Creating Cool” conference.

Connecticut is also promoting a trade corridor around Bradley Airport, with tax incentives for companies that can prove they need to ship goods out of the airport. What's smart about this is the defining trait of successful regions right now is not how many Bachelor's degrees citizens have, or how much money their state's forked over to high priced speakers and consultants, but their presence in industries where America is a net exporter.

As I pointed out a few weeks ago in the Seattle vs. Portland post, Seattle's done much better in the recession than its neighbor to the south, largely because it has two large exporting industries based locally. Portland, on the other hand, has won more praise from urban pundits than just about anyplace in the country, yet has above average unemployment. It has plenty of overeducated slackers who are the envy of Jennifer Granholm, and according to Richard Florida, attracting such people should be the focus of economic development, even if they spend all day pouring coffee and skateboarding.

I'm curious to see what the NLC comes up with next in their discussion, because it would be a major advancement in economic development if cities and states started talking up the products they can export, and stopped pandering to people they're trying to import.

Microsoft Opening Data Center near Des Moines - $4 Million Capital Outlay Per Job

Microsoft is moving forward now with a $100 million data center near Des Moines, which will create 25 ongoing jobs. Data centers are known to be very light on new job creation outside of construction.

At $4 million per permanent job, this is about a quarter of most modern manufacturing plants, which are coming in around $1 million of capital expenditures per recurring job. But it's also about ten times more labor-intensive than a wind farm, where it typically takes about $30-$40 million in capital to produce a single job.

A Success Story - 20 Miles Away from the Massachusetts Mishap

Yesterday, I wrote about Massachusetts misguided attempt to recruit solar manufacturing jobs, and how $58 million in incentives and credits are about to end up in China.

But just 20 miles away from the Evergreen Solar plant in Devens, MA, the former industrial city of Lowell is transforming itself into an urban suburb of Boston. The city launched a Downtown Venture Fund, which in spite of the term "venture" is financing local retail, not tech start-ups.

The fund has offered low interest loan packages to 31 restaurants, bars, and coffee shops, of which three quarters have survived. Moreover, local ownership means the profits are being recirculated locally, not sent to a distant headquarters or scattered shareholders.

The program has become a victim of its own success to some extent, with some Lowellites (is that what you call them?) saying it needs to put more emphasis on retail, and less on places to eat. While Lowell's proximity to Boston means its success would be hard for many declining manufacturing centers to replicate. It nonetheless has important lessons for small business creation.

With few VC funds being invested outside a handful of regions, and most new manufacturing facilities requiring tremendous capital investment per new job created (anywhere from $600,000 to $1 million per job), an increasing number of communities will need to do more to create and grow their own small businesses, rather than give away tens of millions of credits and incentives for some "cool jobs" that will be gone in nine months.

Why Recruiting Solar Panel Manufacturers is a Bad Idea

When Evergreen Solar (ESLR) announced plans to build a 160 Megawatt solar panel factory in Devens, MA, the state bent over and handed over $58 million in incentives and credits. The facility required $430 million in capital construction costs, and produced about 580 full-time jobs, or about $800,000 in capital outlay per operating job, a level of spending per job created that's common in modern manufacturing across all industries

But 18 months after opening the facility, the company announced it was sending some of those jobs to China. And with competitors First Solar (FSLR) and SunPower (SPWRA) expanding in Malaysia and the Philippines, reducing labor costs was a business requirement for Evergreen. But it brings the value of the incentives into question.

I've covered alternative energy manufacturing in my consulting business, and strongly believe that no sensible region should be offering large recruitment packages to solar manufacturers. In spite of all the green jobs hype they can generate for your city, they cannot compete with coal and natural gas prices without lowering labor costs and increasing productivity. This means any job they create domestically is setup to last six months. Moreover, they hire fewer finance, marketing, and managerial staff than most software or computer hardware companies. Hopefully, other states will learn from Massachusetts' mistake with Evergreen Solar.

New Chattanooga Factory to Create Massive Turbines, but Few Jobs

GE competitor Alstom is building a plant in Chattanooga that will manufacture large, 700-1800 Megawatt, steam and gas turbines for electric power plants.  The facility will require 350 full-time workers once it goes in service, as well as $300 million in capital investment, or about $850,000 per job.    This is about 30% higher than the state-of-the-art auto factory Toyota's building in Blue Springs, Mississippi, but reflects the trend in manufacturing of spending more and more on construction, and needing fewer people once the plant is in service.  

In a future post, I'll lay this out in detail, but the capital cost per job created in most manufacturing sectors is rising much faster than inflation, which means if you recruit manufacturing facilities, much of the economic impact is front-loaded.   It also means you need a limited supply of skilled labor, because even with an existing presence in the Chattanooga area, this plant won't be enough to put Alstom in the top 15 employers in that city, which is attractive to turbine makers because of the large Tennessee Valley Authority facility there.

The usual chants about educated labor and multiplier effects came up with the plant's announcement, but with just 350 people, it's not like they'll  need an army of electrical or mechanical engineers.   And with Alstom being a foreign company, many of the profits will be going to France, not recirculated in the region.   In all, the plant's certainly a good thing for Chattanooga, but the economic impact is likely to be far less than many are hoping.

Looks Like Green Jobs Didn't Make the List

Was just re-reading the WSJ story about the Dept of Labor's Occupational Handbook, and noticed not a single "green" job made the list of top 10 growth professions. I've covered solar and wind manufacturing in my consulting business, and this doesn't surprise me.

Just like IT, greentech is subject to tremendous productivity gains and outsourcing, which stunt employment growth. And in terms of green electricity generation, over 90% of the jobs are in building the power plants, not running them.

A few months ago, I served as a business plan judge for green startups here in the DC area, and many of the ideas were centered on building small businesses, including one I gave high marks - an energy efficient gym. But very few of these ideas are the sorts of companies that will ever grow large enough to justify a major venture investment.

The hardest part of my work in solar and wind has been trying to help MBAs and college grads who want to work for manufacturers, because there are so few finance and marketing jobs at these places. Even the rapidly growing, successful ones don't hire like software/media/IT hardware startups. First Solar, for example, grew from just $100 million in sales in 2006, to over $2 billion last year. But 80% of its labor force works in the factory. It has just 800 people working in finance, engineering, management, administration, and marketing, which works out to just one office worker for every $2.5 million in revenue. Cisco, on the other hand, has about one office worker for every $500,000 in revenue.

Greentech is a growth industry, but not much of a jobs producer. The small environmental businesses offer more promise for regions looking to grow employment in this area.

Green Energy Power Plants - Jobs are in Construction, not Production

Under tremendous pressure to reduce costs to get to parity with grid electricity, green manufacturing and production are being done highly efficiently, with much of the work going to semi-skilled construction laborers, not change-the-world college graduates. eSolar and Brightsource Energy are building solar thermal power plants in the Desert Southwest, most of which have about an 11:1 construction to operating job ratio. Brightsource's Ivanpah plant, which will have a rated capacity of 392 MW, will produce nearly 1,000 construction jobs, but just 86 permanent jobs. eSolar's smaller 5 MW Sierra SunTower plant created 250 construction jobs, but just 21 permanent jobs.

The Caithness 845 MW wind farm in Oregon will have just 35 permanent workers, and 400 construction jobs, similar to the 11:1 construction-operating ratio seen with solar thermal. One worker per 24 MW is about 1/4th less than a typical coal-fired plant. While it helps make wind power cheaper, it also shows how much of the opportunity with greentech will be in construction, which is not unlike data centers and other emerging technology areas. They are so automated and efficient that once they are up and running, they are better at creating wealth than jobs.

Toyota Restarting Construction on Mississippi Plant - $650,000 in capital costs per job

After halting work when the economy crashed in 2008, Toyota is resuming work on its $1.3 billion Corolla and Prius plant in Blue Springs, MS, which is near Tupelo, and about 90 minutes southeast of Memphis. In addition to right-to-work laws, one reason it chose Blue Springs over its now closed Fremont, CA plant is access to parts suppliers in the nearby I-20 corridor, which has become a modern version of Detroit.

With 2,000 employees on-site and $1.3 billion in capital needed to build the plant, it'll be spending $650,000 in capital per job created. A little less than the $1 million in capital per new job Dow Kokam will be spending on its new Michigan battery plant, but a strong indication nonetheless of how modern manufacturing often creates more economic activity in construction than in production.

The Vagina Economy

Many economic development incentives are a waste of taxpayer money. They often involve a lot of handouts so one city, county, or state can make the same "leadership in biotech, greentech, whatevertech" claim as 47 other places. And while there are all kinds of clever studies talking about multiplier effects, the fact remains that far more people, even in regions like Boston and the SF Bay Area, work as nurses, teachers, or retail clerks, than as biomedical engineers. And most of the people doing these jobs spend more money on tampons than on jock straps.


Girls Gone Wild
One of the consequences of the rising costs of education and health care is that money is being directed out of the techie-finance economy that existed in the late 90s to professions like teaching, nursing, social work - all of which are needed everywhere, and are done mostly by women.

According to Bureau of Labor Stats and Nat'l Education Association Data, 80% of teachers, 81% of social workers and 94% of nurses are women. Women comprise nearly a third of all doctors, up from 7% in 1970. These professions that involve caring for people continue to grow while banking, computer programming, and other predominantly male professions continue to get squeezed by productivity gains and outsourcing.

3rd Grade Teachers Don't Have to Double their Productivity every Four Years
While states and counties are falling all over themselves to attract new greentech manufacturing plants, greentech manufacturing is heading out of the country to find cheaper labor, while increasing the productivity of the workers remaining in the U.S. Four years ago, First Solar generated about $300,000 in revenue per manufacturing employee, today it produces over $600,000. Hiring is never going to come anywhere close to the increase in product shipments. Yet this hasn't stopped econ development officials from competing against one another for a plant that might employ 200 people if market conditions remain strong, all while the company building it feels a strong pull to head out to a cheap labor market like the Phillipines or Malaysia, where SunPower and First Solar are building new plants.

Teachers, nurses, and social workers don't get outsourced to the Phillipines, nor do they work for companies under intense financial pressure to increase productivity. 30 years ago teachers didn't have 80% fewer kids in the classroom. And even though social workers and nurses can be pressured to handle a lot of cases, they aren't about to get automated out of existence like many manufacturing workers. As a result, their numbers are poised to keep growing, regardless of how technology advances.

By my estimate, at least 30 states think they are in the top 10 for biotech or greentech. But can anyone name a place that's leading innovation in social work practice? nursing? teaching?

The reality is that many jobs of the future will be in fields dominated by women, and they'll provide a lot more stability and growth than a solar manufacturing facility. Moreover, no one has staked the claim as a leader in recruiting these professions, providing plenty of opportunity for one place to be known as the leading region in these personal services professions. Econ dev authorities would also do themselves a favor if they ditched all their traditional stock photos of science workers, and replaced them with MILFs and recent female grads - that would do a lot more to attract men than pictures of lab coat people staring at test tubes.

2.5 Megawatt Wind Turbines are More Important than Global Climate Conferences

While the press is focused on Copenhagen, bureaucrats, and possible carbon treaties, a far more important development for the future of cities is coming out of GE and UT/Clipper - 2.5 megawatt wind turbines.

No carbon deal can be achieved economically without a technology to deliver it, and if forced to depend on wave energy, solar, or fuel cells, there would be no realistic way to produce clean electricity in high volumes, regardless of what liberals or conservatives thought about the issue. But the shift from 1.5 MW wind turbines to 2.5 MW models will further improve the economics of deploying wind, and allow renewables to take additional market share in electricity generation.

GE has just deployed its first 2.5 MW turbines in France, and U.S. installations will begin next year. One of the first major domestic deployments will be the 845MW Caithness Energy project in Oregon, which will cost a total of $2 billion, with $1.4 billion going to the turbines. It will produce enough power to serve about a quarter million homes in Southern California, where So Cal Edison has already agreed to purchase the electricity created at the wind farm. The total capital cost of $2,367 per KW would have been harder to achieve with smaller 1.5 MW turbines, and is well under the $3,000 per KW (and rising) price tag typical for a new coal-fired plant.

While wind runs below its rated capacity more than coal does, it also has extremely low operating costs. The Caithness project will employ just 35 people post-installation, or about one worker for every 8,000 homes served. This also points to why the economic development benefits of wind are mostly for the landowners. Like data centers, wind farms are not going to bring anywhere near enough permanent jobs to anchor any sort of "smart city" econ development campaign.

Unlike semiconductors, wind has gotten cheaper by getting bigger, the rotors on GE 2.5 MW turbines have a diameter about 25% larger than the 1.5 MW models. But part of the ability to create larger onshore wind turbines without relying on 1,000 foot rotors has come from advancements in the power electronics on which these generators depend.

Minneapolis and Buffalo grew over 100 years ago not just because of transportation advantages, but because of the significant hydropower resources near both cities. Similarly, proximity to wind farms gives western and midwestern cities an edge they should be promoting.

Global Warming is about Economics, not Scientists

In a recent editorial, George Will dismissed global warming as academic nonsense.

There is some truth to what he says regarding tactics of those trying to scare everyone about global temperature increases. Particularly the forced "consensus" and the constantly shifting story. But there is little debate, even among Republicans, that SOx and NOx (sulfur dioxide and nitrogen oxide) emissions are harmful to your health. Sort of like how few people will argue that smoking won't harm your lungs. Clean coal technology and the natural gas building spree of the 90s have helped reduce the levels of these harmful pollutants in the atmosphere over the last 20 years. Moreover, the consensus that these gases are bad for the air has not changed over time, they were known to be harmful in the 80s, just as they are today. But the same is not true about global warming.

In the 70s, there was a panic about global cooling, with the conventional academic wisdom claiming that pollutants were blocking the sun's rays. In 20 short years, the academics did a 180 and started warning about global warming. After mixed data and steady temperatures for 10 years, the story was changed yet again to the fuzzy catch all "climate change".

So I don't have any argument with Will regarding the tactics used by global warming/climate change zealots. Nonetheless concerns about climate are still resonating with many people, even when the story been inconsistent and relied heavily on forceful opinions and outrageous claims. I think the global warming/climate change/call it something else in 2015 issue will stick around for awhile, but not because of European bureaucrats or in-your-face liberals. Rather, the economics of alternative energy are improving, which is giving more companies an incentive to invest in new electricity production technologies, regardless of whether the scientific data that justifies them is pure or complete junk.

Like many Republicans, Will has mocked the limited contribution wind energy makes toward U.S. electrical generation. This year, it will produce about 1.3% the roughly 4 trillion kilowatt hours fed into the grid. Not much, that's true. Except four years ago it was just .3%. Wind is growing rapidly, not because of liberal do gooders, but because the costs to deploy it have dropped, and its capital construction cost per kilowatt is lower than clean coal's.

Clean coal, whether you think it's really clean or not, is an expensive technology comprised of advanced materials and chemicals. It is helping to push the construction cost of new coal plant up to about $2,700 per kilowatt. Wind, due to larger turbines and longer manufacturing runs, is down to about $2,000 per kilowatt, about a third of what it cost 20 years ago. And while its drawbacks (intermittent power, dead birds, obstructing the view of Martha's Vineyard from the Kennedy compound) are well-known, it's cheap enough (although still subsidized by a production tax credit) to account for nearly a third of all new electrical power generation in the U.S.

Wind accounts for about 20 times the U.S. electrical output as solar. Solar is about 2.5 times more expensive, and as a DC power source, is not an ideal technology for a centralized power plant. Some Silicon Valley startups have claimed they could get solar down to $1 per watt through the use of thin film materials, but in practice their products have hovered at $4-$5 per watt due to very high manufacturing overhead and labor costs. Wind, an AC source like hydro, coal, and nat gas, is better-suited for larger power stations, although the lack of wind in some parts of the country, most notably the Southeast, limit the locations where it can be reasonably deployed.

As I wrote a few months ago, access to a scarce renewable energy source (a midwestern waterfall) led to Minneapolis overtaking St. Paul as Minnesota's economic center in the late 19th century. But wind turbines are no longer a scarce technology, and require very little labor post-installation, so there is not another Minneapolis about to sprout up because of them. However, their importance will grow over time as they are deployed further, which in turn will give more corporations and consumers a greater interest in the technology, which will help keep climate change in the news, regardless of what it's called in 10 years.

Wind Power City

Up until 1870, St. Paul looked like it would be the largest city in Minnesota, which had become a state right before the Civil War. As the region began exporting timber and grain, St. Paul was poised to become another St. Louis or Cincinnati, a regional center located near a waterway intersection.

During the 1870s, Minneapolis boomed, growing from 13,000 to 46,000, right past its neighbor to the east. While St. Paul had the proximity to the Minnesota/Mississippi intersection, Minneapolis had St. Anthony Falls, the largest waterfall on the Mississippi.

Because the Midwest is fairly flat, no other major city in the region is built on a fall line. Minneapolis' unique access to water power made it an 1870s boomtown, during a time when every other high growth city - Chicago, Pittsburgh, and Cleveland - was benefiting from access to rail lines.

The first hydroelectric plant in the world was built in 1870 in England, and the first such plant for electricity in the U.S. was built in Grand Rapids in the 1880s. With no large scale production of turbines, hydropower was extremely expensive, and Minneapolis' ability to produce such power for industrial use at a much lower cost than any other large city overwhelmed transport costs that otherwise would have sent everyone to St. Paul to exchange goods.

Once companies like GE were formed, and more R&D was put into turbine technology, the cost of producing hydropower dropped dramatically, and the milling business that established Minneapolis shifted to towns further east, most notably Buffalo, that were closer to consumer markets, because transport costs began to account for a higher share of total production and shipment.

Wind power today is a lot like hydro 140 years ago, a natural resource with a declining cost. While often lumped together with solar in feel good news stories about alt energy, wind's capital costs are under $2,000 per kilowatt, compared to over $4,000 for solar. As a result, it has grown from just three tenths of 1 percent of U.S. electricity generation four years ago to about 1.2 percent now.

One of the biggest users of industrial wind is Google, which recently built a massive data center in The Dalles, Oregon, which is to wind generation what Minneapolis was to hydropower in the 1870s. Accessing that wind at low prices overrode typical data center connection costs that put most facilities near major Internet POPs in large metro areas.

But The Dalles is in no position to become any kind of regional hub, because Google hired just 200 people to work there, while spending $600 million to build its facilities there. This is the reverse of the late 19th century, where projects like the Pillsbury Power Canal and Tower Mill were built in Minneapolis at capital costs of less than a million dollars, while requiring thousands of workers to operate the mills that took advantage of the nearby hydro power. 21st century employee productivity simply won't allow a renewable energy center like The Dalles to become another Minneapolis.