PTC critics question industry jobs estimate

Source: Nick Juliano, E&E reporter • Posted: Friday, March 8, 2013

In last year’s debate over whether to extend the wind production tax credit, one number was on the lips of virtually every defender of the incentive: 37,000.

That’s the number of jobs an industry-funded study said would be lost in the wind sector without an extension of the credit. But a new report from a conservative think tank leading the charge against the tax credit — which won an 11th-hour extension as part of January’s “fiscal cliff” deal — says the industry’s jobs figure is vastly overstated.

The American Energy Alliance (AEA) and National Center for Public Policy Research released the study yesterday arguing that the 37,000 jobs figure is inflated by at least 100 percent.

The American Wind Energy Association (AWEA) had commissioned Navigant Consulting to study how the industry would respond to a loss of the PTC and came up with the jobs number now being called into question.

AEA led several conservative groups last year in an attempt to eliminate the tax credit, and the lobbying battle is heating up again as the industry and its critics fight over whether the credit should be extended or phased out beyond this year. Yesterday’s report represented AEA’s opening salvo in its redoubled effort to slay the credit.

“This study confirms what we have known all along: The PTC is bad policy built on faulty economic analysis that results in a net loss for the U.S. economy,” said AEA President Thomas Pyle. “A sounder approach would be to let the free market determine winners and losers among energy sources, instead of Washington doling out billions of dollars to prop up Big Wind at great loss to the federal treasury and the U.S. jobs market.”

AWEA put out its own news release last night highlighting various projects it says are creating new jobs since the PTC was extended, including construction of new wind farms and manufacturers hiring back workers.

“We are encouraged to hear that the companies are re-hiring workers and putting Americans back to work,” AWEA Interim CEO Rob Gramlich said in the statement. “After investing $25 billion of private capital into the U.S. economy last year, the wind industry looks forward to driving investment into more local communities and supporting continued American manufacturing jobs. These stories are an indication that we’re off to a great start.”

Charles Cicchetti, a senior adviser to the Pacific Economics Group and Navigant who conducted the AEA study, said the industry’s previous job figures were based on an overly optimistic estimate of how much wind capacity could be added over the next few years with a PTC extension, compared to projections from the Energy Information Administration.

Cicchetti also said Navigant misapplied economic models to estimate jobs figures and argued that the AWEA-backed study did not take into account the broader economic effects of adding wind power at the expense of other electricity sources that create more permanent jobs per megawatt of capacity installed.

“My first conclusion is you’d get more jobs if you didn’t go with wind and you went with something else” to meet rising electricity demand, Cicchetti said in an interview yesterday.

AWEA dismissed the report.

“The PTC has clearly proven its effectiveness in driving dramatic growth in construction and manufacturing jobs,” AWEA spokesman Peter Kelley said in an emailed statement. “It is not surprising that these known opponents of clean energy challenge the numbers of a leading economic and energy consulting firm — they did the same thing with the Bureau of Labor Statistics estimates — and there are obvious and glaring flaws in their claims.”

The back and forth ultimately highlights the difficulty of framing energy policy as a mechanism to create jobs because accurately estimating employment impacts of policy choices is one of the most difficult challenges economists face, said Amy Grace, a wind industry analyst with Bloomberg New Energy Finance, an independent research firm.

“It’s really inexact science, and it’s something we’ve tried to steer clear of for exactly these reasons,” Grace said after reviewing the AEA report.

Both reports make some valid points, but they are engaged in a fight that is nearly impossible to referee. But with the economy still struggling to recover, politicians want to know how to create jobs, so that is the frame these debates are taking. Furthermore, the PTC is hardly an ideal policy to promote the wind industry — it forces developers to go to tax equity markets to finance projects and creates a lot of uncertainty because of its periodic expiration — but it is the best the industry thinks it can get, Grace said.

“It’s too bad. The reason why AWEA commissioned this report is basically because of the conversation that was happening in D.C.,” Grace said. “Holding up one jobs study over another I don’t think is really worthwhile to the broader conversation we should have.”