How to Build America’s Energy Future
by Kate Gordon
President Barack Obama last night presented in his State of the Union address a blueprint for sustained growth in our economy consisting of four key parts: manufacturing, energy, worker preparedness, and American values. When it comes to America’s global leadership on clean energy, these four are inextricably linked.
A strong clean energy industry will give rise to more American manufacturing jobs, especially for skilled workers. This in turn will help rebuild our struggling middle class and reinforce the basic American idea that the economy must work for everyone, not just a wealthy few. Here’s how the four parts work together to build what the president says is an economy that can last.
Scaling up America’s clean energy sector
America is already in a leadership position on clean energy. In 2011 we reclaimed the title of “World’s Largest Energy Investor” from China. U.S. investment in these technologies rose a staggering 33 percent to nearly $60 billion, whereas investment in China remained steady at about $47 billion. Globally, U.S. venture capital dominates the cutting-edge clean energy investment market, with U.S. venture dollars accounting for 76 percent of the $2.2 billion in clean-technology venture investments across the world in 2011. Visionary programs such as the American Recovery and Reinvestment Act’s targeted subsidies to renewable energy developers have catapulted us into this leadership position, and contributed to bringing renewable energies to a place where they are nearly cost-competitive with the much more established, much longer-subsidized traditional fossil fuels.
The president’s energy recommendations in his State of the Union address will continue this trend. As my colleague Dan Weiss writes, the speech included important recommendations to increase renewable energy development on public lands, provide incentives to businesses to upgrade their buildings and factories, and support the U.S. Navy in its goal of making the largest purchase of renewable energy in history. President Obama also called on Congress to show similar leadership by passing a clean energy standard, and by finally extending the Production Tax Credit for clean energy development.
Manufacturing for the new energy economy
By increasing demand within the United States for renewable and efficient-energy technologies, these programs will spur domestic manufacturing of these same technologies. Fully 26 percent of all jobs created from clean energy investments are created in the manufacturing sector. And as oil prices rise, so do transportation costs for manufacturers, who are increasingly looking to move their production facilities closer to both suppliers and customers. A recent manufacturing company survey by Accenture notes that “although offshoring will continue to play a role in the supply location strategy of companies, it will be largely done in the context of chasing the demand location.” The more clean energy we demand, the more clean energy will be made in America.
The president’s proposals will not only spur demand, they will also directly support the U.S.-based manufacturers who step up to supply that demand. His speech last night speech was notable in its strong focus on the importance of manufacturing to the American economy:
“[W]e have a huge opportunity, at this moment, to bring manufacturing back. But we have to seize it. Tonight, my message to business leaders is simple: Ask yourselves what you can do to bring jobs back to your country, and your country will do everything we can to help you succeed.”
The speech included a suite of proposals aimed at bringing manufacturing back to U.S. shores: everything from taking away tax deductions and assessing a basic minimum tax for businesses basing their operations overseas to providing targeted financial support to companies that decide to relocate in the United States. The president is expected to give more details on these proposals in a speech today in Cedar Rapids, Iowa.
Of particular importance to the clean energy sector is the president’s proposal to double the tax deduction for U.S.-based high-tech manufacturers. Renewable energy, energy efficiency, and clean transportation technologies rely on just this kind of high-tech manufacturing. Wind turbines, thin-film solar cells, electric batteries, and smart grid components are just a few examples of the kind of complex, highly engineered products that characterize the new clean energy economy.
Even more central to the joint goals of increasing manufacturing competitiveness and decreasing America’s carbon emissions was the president’s proposal to save businesses $100 billion in energy costs while “[helping] manufacturers eliminate energy waste in their factories and give businesses incentives to upgrade their buildings.” The details of this proposal are not yet public, but helping manufacturers save energy is a critical piece of the goal of making them more globally competitive, because it allows them to spend less on energy and more on hiring skilled workers, installing new equipment, and doing research into innovative new technology developments that can keep them on the cutting edge.
Preparing workers to lead the energy future
This brings us to the third part of the president’s speech: worker preparedness.
“I also hear from many business leaders who want to hire in the United States but can’t find workers with the right skills. Growing industries in science and technology have twice as many openings as we have workers who can do the job. Think about that – openings at a time when millions of Americans are looking for work.”
Indeed, our skilled workforce is one of America’s key competitive advantages, but our current education and workforce programs are not keeping up with demand. The utility sector’s struggle to find skilled workers is well known. As of 2008 about 53 percent of the industry’s workforce was age 45 or older, and industry experts project that they will lose nearly half of this workforce to retirement in the next 10 years. But the problem is not confined to the utility sector. It is endemic among advanced energy manufacturers as well.
The president’s speech focused on just such a manufacturer: a Siemens gas turbine plant in North Carolina that formed a partnership with a local community college to develop specific courses intended to train workers in the area to operate the plant. In calling for more support for community colleges to become “community career centers,” the president demonstrated his commitment to these industry partnerships, which we at the Center for American Progress firmly support as one of the most effective ways to target workforce training to meet the needs of actual employers, so workers are not trained for jobs that don’t exist.
Reinforcing American values
Solving the labor shortage problem of advanced energy manufacturers and utilities isn’t just good economics. It’s a critical piece of the puzzle of how we rebuild our middle class. Because it creates so many jobs across a range of “middle-skill” occupations including manufacturing, construction, operations, and maintenance, the energy sector provides solid opportunities for the 70 percent of working-age Americans lacking a four-year college degree. Nearly 50 percent of all clean energy jobs employ workers in this category. And these jobs pay a median wage that is 13 percent higher than in the economy as a whole.
These are the kinds of jobs that created the American middle class in the first place. They are the kind of jobs we need to keep America strong and competitive into the future.
And there’s a huge added benefit. When a U.S.-based manufacturing company gears up to produce clean energy technologies, and when a new workers is hired on by that plant, they are not just helping the American economy get back on its feet. They are investing in the long-term health and sustainability of the truly awe-inspiring country in which they, and we, are privileged to live.
As the president said last night, “This nation is great because we built it together.” Now is the time to work together to build the clean energy economy that will keep our nation stable, secure, and prosperous for all.
Kate Gordon is Vice President for Energy Policy at the Center for American Progress. This piece was originally published at the Center for American Progress website.