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Green Stimulus would be worth some real green

September 12th, 2008 · 3 Comments

This nation (actually, much of the globe) is struggling economically. Earlier this year, stimulus checks went out to a good number of Americans. Not counted in taxes, these checks aren’t “letting people figure out how to spend their own money” but giving them a chance to live off the money that their children will have to be paying back. Much better options existed, with the chance to Energize America to a better economy and a better energy future. Despite the billions that flowed into the economy, foreclosures are up, unemployment is up, consumer confidence is down, the stock market is down, and the time is coming where serious discussion will occur for yet another stimulus package. We have a choice before US. We have, collectively dug a deep hole, fiscally, environmentally and otherwise. This stimulus package could help dig that hole deeper or, perhaps, help stop the digging process and turn US toward a path for filling in these holes.

Well, this past week the Center for American Progress released a study that provides a path to stop the digging process and turn US toward a better future. Green Recovery: A Program to Create Good Jobs and Start Building a Low-Carbon Economy (pdf)

demonstrates how a new Green Recovery program that spends $100 billion over two years would create 2 million new jobs, with a significant proportion in the struggling construction and manufacturing sectors. It is clear from this research that a strategy to invest in the greening of our economy will create more jobs, and better jobs, compared to continuing to pursue a path of inaction marked by rising dependence on energy imports alongside billowing pollution.

The $100 billion fiscal expansion that we examined in this study provides the infrastructure to jumpstart a comprehensive clean energy transformation for our nation

This concept is spot on. Stimulating the economy via Green path will not only create near term green but is an investment that will strengthen economic security, national security, and environmental security from today into the indefinite future.

The concept is spot on. And, while many of the elements of the plan are spot on, many doesn’t mean all.

And, perhaps the greatest item within the report: it undersells the benefits that would accrue, potentially to a very significant degree.

About the report / concepts

As per John Podesta’s outlining of the report,

This paper shows the impact of a swift initial investment in climate solutions that would direct funding toward six energy efficiency and renewable energy strategies:

  • Retrofitting buildings to increase energy efficiency
  • Expanding mass transit and freight rail
  • Constructing “smart” electrical grid transmission systems
  • Wind power
  • Solar power
  • Advanced biofuels

This green recovery and infrastructure investment program would:

  • Create 2 million new jobs nationwide over two years
  • Create nearly four times more jobs than spending the same amount of money within the oil industry and 300,000 more jobs than a similar amount of spending directed toward household consumption.
  • Create roughly triple the number of good jobs—paying at least $16 dollars an hour—as spending the same amount of money within the oil industry.
  • Reduce the unemployment rate to 4.4 percent from 5.7 percent (calculated within the framework of U.S. labor market conditions in July 2008).
  • Bolster employment especially in construction and manufacturing. Construction employment has fallen from 8 million to 7.2 million over the past two years due to the housing bubble collapse. The Green Recovery program can, at the least, bring back these lost 800,000 construction jobs.
  • Provide opportunities to rebuild career ladders through training and workforce development that if properly implemented can provide pathways out of poverty to those who need jobs most. (Because green investment not only creates more good jobs with higher wages, but more jobs overall, distributed broadly across the economy, this program can bring more people into good jobs over time.)
  • Help lower oil prices. Moderating domestic energy demand will have greater price effects than modest new domestic supply increases.
  • Begin the reconstruction of local communities and public infrastructure all across America, setting us on a course for a long-term transition to a low-carbon economy that increases our energy independence and helps fight global warming. Currently, about 22 percent of total household expenditures go to imports. With a green infrastructure investment program, only about 9 percent of purchases flow to imports since so much of the investment is rooted in communities and the built environment, keeping more of the resources within the domestic economy.

Our report looked at investments that were funded through an increase in near-term government spending, which could ultimately be repaid by future carbon cap-and-trade revenues. These sources of new investment included the following funding mechanisms:

  • $50 billion for tax credits. This would assist private businesses and homeowners to finance both commercial and residential building retrofits, as well as investments in renewable energy systems.
  • $46 billion in direct government spending. This would support public building retrofits, the expansion of mass transit, freight rail, smart electrical grid systems, and new investments in renewable energy
  • $4 billion for federal loan guarantees. This would underwrite private credit that would be extended to finance building retrofits and investments in renewable energy.

A comprehensive clean energy agenda is essential to the future of our country. The green recovery and infrastructure investment described here is doable in the early days of a new administration. It would enable our country to take significant steps, through energy efficiency and renewable energy development, to move toward a low-carbon economy,

There is much to support here as “a comprehensive clean energy agenda [truly] is essential to the future of our country” and there are many good ideas.

Where is there disagreement?

To be blunt, it is hard to see how “advanced biofuels” is a justifiable path in something that is even hinted at as a ‘stimulus package’ intended to have economic impact within just a few years.

And, on the other hand, there are lost opportunities. For example, a major opportunity is lost when it comes to rail and “smart electrical grid systems”:  rail electrification, which could move from studies to construction in perhaps as short as one year.  Rail electrification of the major routes would, in less than a decade, reduce direct oil use by 250,000 barrels/day due to displacing diesel fuel power trains. It would improve capacity (with no other changes) on the rail by about 15 percent due to better braking and acceleration of rail systems. And, it would offer the chance to move cargo from truck to rail, even further reducing oil use. In addition, the railroad right-of-ways could become the routes for HVDC (high-voltage direct current) cabling to move electricity (renewable electricity) efficiently around the country.

On a smaller example, why not use a program like this to spark a meaningful shift in school transport with a move to Plug-In Hybrid Electric School Buses (PHESBs)? PHESBs offer a range of benefits, from reduced diesel fuel costs to reducing youth exposure to diesel fume cancer (and other disease causing) pollution to providing mobile generators for emergencies or even local concerts. There is, however, an acquisition price hurdle due to low production, low demand that is inhibiting large-scale penetration of this US-made product. Roughly $60 million per year would spark a nation-wide transition from tradition yellow buses to PHESBs.

This plan also does not speak enough, it seems, about powerful paths to change that do not necessarily require a penny of investment such as changed building codes and changing the rules on combined heat-power (CHP).   These would help spark investment and economic activity today financed, in essence, by tomorrow’s energy savings / produced power.

Underselling the Benefits … Perhaps to a Significant Degree

For example … What is the value of reduced pollution and improved health? Well, that isn’t in the study.  But let us leave that aside to focus on one specific issue.

The plan has $26 billion for retrofitting public buildings.

Public building retrofits have the most potential for operating at a large scale within a short time period. According to the most recent Commercial Buildings Energy Consumption Survey, there was about 20 billion square feet of building stock in the United States devoted primarily to education, government offices, and hospitals at the end of 2003. Working from these figures, the U.S. Green Building Council estimates that, on average, these buildings could be effectively retrofitted for about $1.30 per square foot. Retrofitting all of these buildings would therefore cost about $26 billion.

Okay, “greening” the nation’s public infrastructure is a wonderful investment, something that we should do ever more aggressively.

Now, there is a basic question to ask:  $1.30 per square foot?  For example, the DC area has a large project of a consortium of public-private institutions to improve building energy efficiency.  This project is investing $175 million for 74 million square feet or nearly $1 more per square foot.  And, the savings expected: $36.5 million annual energy savings.   Note that savings rate: more than 20 percent per annum. How might that equation change if the target were 15 percent? 10 percent?  Is a seven-year payback worthwhile considering the other benefits?  What is the Green Recovery’s target?

the average payback period for these investments would be about five years. Spending $26 billion would generate cost savings on energy of about $5 billion per year, which means that total savings would exceed $26 billion roughly five years after the retrofits were conducted.

In other words, with a significantly lower level of investment per square foot, the expectation is to have the same level of savings as the DC-area project. Color me skeptical.

More importantly, that $5 billion per year is “cost savings on energy”.  This significantly understates the return on investment (ROI) from green infrastructure projects. This is a stove-piped, rather than holistic, approach to the benefits from “greening” buildings.   In many cases, the “energy savings” are only a fraction of the benefits that accrue from greening a building. Staying within the traditional concepts of cost/benefits, green buildings see far higher productivity (better lighting, improved employee health and retention, lower absenteeism, etc) in addition to the lower operating costs (which are not just ‘energy’, but also water and often maintenance). And, those productivity improves are typically an order of magnitude (if not more) greater than the value of the energy savings.

But government should look beyond ‘internal’ to external benefits such as the value of reducing pollution for public health and overall security from reduced energy use. Consider the potential benefits, for example, of Greening the Schools: these would include the reduced operating costs, but more important improved student performance (reduced absenteeism, improved comfort, better lighting) with better teacher attendance (fewer sick days) which would even lower operating costs due to fewer substitute teacher days.  The value of the improved student performance, alone, is almost certainly multiples of the value of the resulting energy savings.

In short …

Green Recovery, as concept, is spot on in offering Real Solutions to real problems. It is a concept whose details, it seems, might merit some revisiting.  But, we can hope that it gains serious attention with some action to follow.

And, in just a few weeks, Green Jobs Action Day will be a chance to bring additional focus to the green that Green can mean for the economy.

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Tags: Energize America · Energy · energy efficiency · politics

3 responses so far ↓

  • 1 Wall Street Meltdown and a melting globe | Get Energy Smart! NOW!!! // Sep 17, 2008 at 11:35 am

    […] truth be told, one of best paths for dealing with this Trifecta Perfect Storm could very well be a Green Stimulus package … for roughly the same amount that the US government threw into AIG overnight, we could make […]

  • 2 Wall Street Meltdown and a melting globe: a reprise … // Sep 21, 2008 at 5:46 am

    […] truth be told, one of best paths for dealing with this Trifecta Perfect Storm could very well be a Green Stimulus package … for roughly the same amount that the US government threw into AIG overnight, we could make […]

  • 3 Clean Energy Jobs: Stimulate Me // Nov 30, 2009 at 2:18 pm

    […] Greening the School House. Dependent on the analysis and approach, this merits between $26 billion (a low-ball, basic energy efficiency figure, imo) and perhaps $100 billion over the coming two years.  A $100 billion program, split between […]