Clean Counts (Spring 2010 Trust Magazine article)

Source Organization: The Pew Charitable Trusts

Author: Ken Edelstein


03/19/2010 - On a Thursday morning last June, just before he walked into his weekly meeting with state legislative leaders, Tennessee Governor Phil Bredesen got a bit of unpleasant news.

Bredesen is a centrist Democrat, a wealthy, retired businessman who in his first term gained credibility among fiscal conservatives by cutting health-care spending. One of his pet projects, though, breaks a stereotype: He’s pushing for Tennessee to become the solar power capital of the nation.

“You always struggle with this green energy stuff because people are trying to figure out, ‘Is this some sort of airy, global-warming thing, or is this a down-to-earth strategy that can help the people of Tennessee?’” the governor says in an interview. “The solar initiative wasn’t just a nice thing to do. It was a way to drive the economy.”

Solar power might have been a tougher sell in a conservative Southern state if Bredesen hadn’t had his popularity going for him. He won re-election in 2006 with more than two-thirds of the vote. At the same time, though, Republicans took control of the state Senate. Then the state’s 2009 budget dropped into a tailspin.

On June 10, Senate leaders worked into the evening on a radical rewrite of the governor’s spending proposal. Early the next morning, his aides briefed him on the details.

Gone were tens of millions of dollars for pre-kindergarten, universities and bridges. But Senate leaders swung a particularly heavy ax at Bredesen’s sustainable-power idea: They chopped away all $62.5 million of federal stimulus money he’d proposed spending on a solar research center in the eastern part of the state and a solar energy farm in the west.

The usually tactful governor digested the news, walked into his breakfast with lawmakers and told them their budget plan was “stupid.”

Bredesen’s rough morning coincided with an event in Washington, D.C. The previous year, two divisions within The Pew Charitable Trusts—the Pew Center on the States and the Pew Environment Group—had joined forces on a study designed to quantify actual jobs, businesses and investments in the “clean energy economy.” It so happened that the study was released in Washington on the very day that Tennessee lawmakers staged their budget revolt. And Pew was scheduled to hold a press event with Bredesen the next afternoon in Nashville to herald the state’s successful clean-energy economy efforts.

On a national stage, the timing of The Clean Energy Economy: Repowering Jobs, Businesses and Investments Across America was nearly as providential. The report came out just as the U.S. House of Representatives was gearing up to vote on the historic Waxman-Markey climate change bill. Claims and counterclaims about green jobs were being fired from Washington’s political trenches: They’ll save the economy! They’re a total mirage! Hey, wait a second—what are “green jobs,” anyway?

The facts provided by The Clean Energy Economy were the ideal tonic for the debate, and unsurprisingly the study drew an astounding amount of attention. Within two weeks, it generated newspaper reports in every state and at least 400 headlines, not to mention comparable interest from bloggers, local TV and the national networks.

“We were lucky enough to be in the right place at the right time,” says Phyllis Cuttino, director of the Pew Environment Group’s Global Warming Campaign. “Everybody was really hungry for real data.”

Hunting for numbers

When Pew researchers began their study in mid-2008, they already seemed to be on a hot topic. A conviction seemed to be growing that the nation needed to reduce its reliance on fossil fuels. Americans were dealing with the steepest gasoline price hikes in a generation. Both parties’ presidential nominees were talking about cutting greenhouse gas emissions and transforming the energy sector. And most important, a growing number of states were seeking to expand their economies by attracting businesses focused on products, services and technologies that help sustain the environment.

Pew staff were aware that plenty of reports had been issued on “green jobs.” The problem was that nobody actually had performed a credible count of them. A hard count wouldn’t be good merely for policy deliberations. It also might provide investors with a better idea of where business was headed in the future.

“Everyone had talked about and lauded green jobs, but no one had defined what a green job was,” says Kil Huh of the Pew Center on the States, who oversaw much of the research. (Fourteen staff members from the center and the Global Warming Campaign worked with Huh on the project, along with several contractors and an advisory panel of experts.)

Early on, the researchers concluded that green jobs should be defined as those that are part of the “clean energy economy.” They in turn described the clean energy economy as one that “generates jobs, businesses and investments while expanding clean energy production, increasing energy efficiency, reducing greenhouse gas emissions, waste and pollution, and conserving water and other natural resources.”

Counting such a diverse workforce wouldn’t be easy. Government agencies don’t gather statistics the way Pew needed them, so Huh and company worked with a contractor, Collaborative Economics, which had performed similar research for the state of California. They gathered public and private databases that allowed them to make sense of employment figures within the definition. They poured over lists from industry groups, business directories, government programs and venture capital associations. They cross-referenced those lists with lists of similar companies. They even hired a software contractor to run a special “search-bot” to flag Web sites that used clean energy terms.

Not only did the researchers need a current job count, but they also had to track job growth over time, so they had to analyze the numbers from 1998 through 2007. To understand trends, they compiled information on patents and venture capital. And to grasp how the government was affecting clean energy growth, they catalogued state and federal policies.

“All of our reports are pretty intensive,” says Lori Grange, deputy director of the Pew Center on the States who oversees its research and information cluster. “I would say this was at a level of complexity that we hadn’t dealt with before.”

What researchers learned surprised them: The clean energy economy was more firmly established than they’d imagined. Pew placed 68,000 independent companies and divisions of larger companies in the clean energy economy. In 2007, those business units employed 770,000 people. From 1998 to 2007, the sector’s work force grew at more than two and a half times the rate of the larger economy.

The numbers may have dropped a bit during the recession. Still, there’s reason to believe even more rapid growth is around the corner. Venture capital investment in the sector sky-rocketed from $360 million in 1999 to $5.9 billion in 2008. Most of it came after 2005, which indicates that many of the new jobs haven’t even arrived yet.

The Pew team used information it collected about shifts in investments and patent registrations to clarify the direction in which the clean energy economy was headed. The patent count, for example, showed a move away from solar and traditional battery technologies and toward wind and fuel cells.

All in all, advocates for clean energy had to be happy. Pew had used conservative methods to demonstrate with very hard data that “green jobs” already were a vibrant force in the economy. The numbers were impressive. In fact, they were closing on employment figures in the nation’s vast oil and gas industry, and they appeared to be ramping upward.

“I got totally charged about what America can do in an energy-innovation race,” Cuttino says, “and frankly I think this is what we need to renew our prosperity.”

Small companies and big ones

Cuttino is particularly impressed with the range of companies that are part of the clean energy sector. At one end of the spectrum sit companies that fit the stereotype many people might have of “green job” enterprises.

Take Project FROG, based in Northern California, only three years old and founded with no less an objective than to change the way buildings have been constructed for thousands of years. “This is what I’m doing because I believe in it,” CEO Adam Tibbs says.

The company was formed by architects and product designers who became convinced that preparing building parts in factories is more efficient than constructing buildings on site in the customary way. They weren’t the first people to get that idea. But Project FROG went further than most by developing designs, using materials and relying on practices that emphasize energy efficiency. They’ve also focused on an increasingly eco-conscious market: schools.

Rather than shipping building parts across the country, Project FROG contracts with manufacturers that fabricate the pieces according to specifications sent to them electronically. A contemporary design template—slanted roofs opening up to wall-to-ceiling windows—can be tweaked for energy performance according to the site and climate. The buildings, says Tibbs, are completed with about one-twelfth the energy of comparable conventional schools; once complete, they use no more than half the energy that code permits.

A self-described “serial entrepreneur” with an environmental bent, Tibbs was recruited to run Project FROG in 2007. In 2008, he helped convince RockPort Capital, a venture-capital firm with a track record of environmental investments, to advance $8 million to help Project FROG expand. The pitch was pretty straight-forward: “We have essentially designed a new building typology. . . . We believe the way that we’re doing things now is the way that everyone will be doing it in 20 years.”

Whether that new “typology” is about to change the world is an open question. But Project FROG appears to be doing well for itself. The company employs only 20 people, but outsourcing to manufacturers allows production to scale up quickly. For each $10 million in contracts, Tibbs says, 109 contractor jobs are created. Project FROG has completed projects in California, Hawaii and New England—“excellent growth,” he says.

At the other end of the spectrum of companies that Pew identified sits Johnson Controls. The 124-year-old Milwaukee-based industrial giant might have been a poster child for the Rust Belt if it hadn’t drawn its own map for established industry’s transition to the clean energy economy.

Business reporters typically refer to Johnson Controls as an auto-parts maker. But its Building Efficiency division is larger than its Automotive Experience unit. The company’s third division, Power Solutions, is heavily involved in the development of more efficient automobile batteries.

“I would argue that we’ve always been an energy business,” says Clay Nesler, Johnson Controls’ vice president for global energy and sustainability. The company’s founder, he points out, invented the electric thermostat.

Johnson Controls got a big boost in August when the Power Solutions unit won a $299-million federal grant from the Advanced Battery Manufacturing Initiative, which is intended to help the U.S. auto industry find cleaner ways to power cars. Most of Johnson Controls’ growth in clean energy, however, has had little to do with government grants and a lot to do with the market.

Nesler points back to the 1980s, when Ohio school systems began to include future energy expenses in their cost-accounting for new projects. As more clients began to look at the long-term operating costs of their buildings, the company began to view its products and services as tools to make buildings more efficient.

“Our growth and focus on this has really been driven by our customers,” Nesler says. He proudly adds that the company is the lead contractor in a renovation of the Empire State Building projected to cut energy use by 38 percent.

Aside from the prestige of revamping the nation’s most iconic office tower, Johnson Controls’ green direction seems to be bearing fruit financially. The Building Efficiency division produces many kinds of high-efficiency systems for buildings, serves as a commercial contractor and manages properties. Worldwide, it employs 54,000 and does $14 billion annually. In August, Barron’s ran an approving article about Johnson Controls, which centered on its “green” opportunities. A stock analyst quoted in the story summed up the sentiment this way: “This is a company that’s firing on all cylinders, and it is taking even more of a market leadership position.”

State-by-state stories

The Pew report uncovered similarly compelling stories about the states. Some conclusions weren’t surprising. Colorado, Minnesota and the Pacific Coast states—each of which offers energy-efficiency incentives and requires utilities to rely in part on renewable power—were among the biggest clean energy winners. Oregon was the only state in 2007 whose clean energy workforce totaled more than 1 percent of all of its workers; that said, jobs in the state’s clean energy economy grew nearly seven times faster than total jobs between 1998 and 2007.

In the Rust Belt, where manufacturing jobs have been disappearing for decades, clean energy provided a ray of hope. Ohio’s total job count shrunk by 2.2 percent from 1998 to 2007, but clean energy jobs grew by 7.3 percent. In Michigan, the overall number dropped 3.6 percent while clean energy jobs rose 10.7 percent.

The report offered other surprises. Texas, the heart of the nation’s oil-and-gas complex, turns out to have 55,000 clean energy workers—partly because it generates more wind energy than anywhere else.

Tennessee may provide the most counter-intuitive story. It was one of three states with both a “large” clean energy economy and a rapidly growing one, beating the national averages for total jobs and average annual growth. While total jobs grew by 2.5 percent, Tennessee’s clean energy sector added 18.2 percent.

There were plenty of reasons. Green businesses flocked to Chattanooga in the 1990s, when leaders there began to emphasize the environment as a development strategy. Oak Ridge National Laboratory, originally a nuclear energy facility, also has become a magnet for innovative energy companies. But the full impact of Gov. Bredesen’s clean energy push wasn’t even reflected in Pew’s findings. Early in 2009, for example, a green-energy tax credit helped lure two large manufacturers of material for solar photovoltaic panels to the state.

Before the Pew report was ready to release the report, staff members got in touch with governors who were likely to be proud of their state’s results. Tennessee was near the top of that list.

Emily Bryan, a contractor for the Pew Environment Group, gave a headsup call on the state’s high rankings to Will Pinkston, an adviser to the governor. Pinkston says he relayed the news to Bredesen, who immediately saw it as an opportunity to give momentum to his solar initiative.

The governor’s aides invited clean energy companies to the state capitol for a presentation of the findings. Pew’s Lori Grange got set to head down to Nashville for the press conference. Then, a week later—the evening before the report’s launch—Senate leaders decided to whack the solar plan.

Even as he prepared for his lawmakers’ breakfast, though, Bredesen figured he’d be able to restore the money. It helped that a press event was scheduled that afternoon to trumpet good news about precisely the kinds of programs Senate leaders had suggested cutting: After all, sound research demonstrated jobs-and-growth success stories.

“He walked into the breakfast, pointed out that Pew was going to be here and said ‘I wanted all you guys to participate,’” Pinkston recalls.

By the afternoon, lawmakers who’d pushed for the solar cuts were backing down. The lieutenant governor asked why Bredesen hadn’t said earlier that the initiative was tied to economic development. A key committee chairman was quoted the next morning promising to push for a “clarifying amendment.” Ultimately, the legislature approved the governor’s proposal to use $62.5 million on the solar initiative, and after a few tweaks, the U.S. Department of Energy approved Tennessee’s application for the stimulus money.

“I can’t believe,” the governor says, “that there’s anyone who wouldn’t agree that green jobs and alternative sources of energy won’t produce more jobs in the future.”

An immediate impact

In Washington, policy debates seldom wrap into such a neat ending. But the Pew study at least avoided the heated reception that has greeted other green jobs reports.

“One of the things that we were happiest about was that it wasn’t covered only as being about the environment,” Grange says. “It was covered as an economic and a fiscal story.”

Because of a dearth of substantial criticism, I solicited a conservative economist who’d criticized other green jobs reports to critique the Pew study. Robert Murphy of the Institute for Energy Research took issue with one point: Researchers hadn’t accounted for jobs that might disappear elsewhere because taxes had to be raised or deficit spending increased to fund aid to clean energy employers.

“The Pew statement is wrong for implying that we can have our cake and eat it too,” Murphy wrote in an e-mail after studying the report.

Economist Joel Yudken, a member of the Pew advisory panel and principal at High Road Strategies, acknowledges that environmentalists often “underplay the transition costs” of a shift to clean energy. At the same time, he says, free-market economists too readily dismiss productivity gains that often follow public spending on innovation.

“You invest now. Over time, you can make the economy more efficient,” Yudken says. “You might see a lot of growth because of that.”

More broadly, Yudken argues, the Pew study actually was “very conservative.” Researchers limited their numbers by not counting clean energy workers who weren’t employed by clean energy business units. They also stayed away from projecting ripple effects on the larger economy. “If anything,” Yudken says, “the report understates.”

That understatement may be one reason the study quickly became a tool for policy makers considering climate change legislation; they could point out that even a conservative count showed impressive numbers. In the heat of the U.S. House debate, Pew’s findings appeared on fact sheets around Capitol Hill. Parts of the report were entered into congressional testimony.

The study may play a larger role in the Senate, where the legislation’s passage remains in doubt. Democratic senators from states that produce coal or rely on it for most of their electricity are wary of voting for a climate bill that could increase coal’s cost. But their support will be needed for the bill to pass.

So a leading Senate supporter is relying on the Pew report to convince fence sitters that the bill has an upside. Senator John Kerry “has been very specifically” showing colleagues Pew data that compare overall job growth in their states to clean energy job growth, an aide to the Massachusetts Democrat says. “That’s the number one stat he’s using when he’s talking to these senators.”

The study itself stopped short of endorsing policies. As the authors pointed out, many clean energy policies were too new to have been evaluated before the report was published. Cuttino notes that the data will serve as a baseline to examine policies in the future rather than a tool to judge policies now.

At the same time, it was difficult for the researchers not to notice the way the wind is blowing. They observed, for example, that most states with renewable portfolio standards (requirements that utilities get some power from clean energy) have benefited from clean energy growth. And specific federal actions—waste disposal laws, Energy Star appliance certifications and the stimulus bill of 2009, for examples—have nurtured parts of the clean energy economy.

“Although every state has a piece of today’s clean energy economy, clear winners and losers will emerge going forward,” the report concluded. “Policy makers who act quickly and effectively could see their states flourish, while others may lose opportunities for new jobs, businesses and investments.”

Among the strongest advocates for such policies are the companies that employ clean energy workers.

Johnson Controls is one of several large corporations that now advocate for national policies to reduce greenhouse gas emissions; the company is also a member of the Business Environmental Leadership Council, created by and based at the Pew Center on Global Climate Change.

Project FROG’s idealistic CEO, Tibbs, calls for strong climate change legislation. In true “act locally” fashion, however, he points to a commonplace set of policies that could affect his corner of the clean energy world. If states simply tightened building codes to require more energy efficiency, he says, Project FROG’s competitors would be encouraged to follow suit.

“It may sound mundane,” he says, “but sometimes you can really move the needle with the most basic things.”

For the complete report, go to www.pewtrusts.org/cleanenergyeconomy.

Ken Edelstein is an Atlanta-based environment writer. 

This article appeared in the Spring 2010 issue of Trust magazine.

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