Sunday, February 28, 2010

More about jobs and energy policy

In last week's post on energy policy, I skipped over the effect of manufacturing efficiencies. If an information-intensive technology can be manufactured in a way that reaps large economies of scale, then the know-how used to create it can still be very cheap on a per unit basis.

Exhibit A for this effect is the integrated circuit industry. Each individual transistor is a small masterpiece of engineering. The intellectual property contained in a few square inches of silicon is enormous, but the industry spreads out the cost by making billions of them. Thin film solar manufacturers believe that manufacturing efficiency will allow them to reach a competitive price point. That would be very good news for me, my clients, and the world as a whole.

But still not necessarily for job creation.

The disconnect between information content and job creation is explored in more detail in this recent post at, analyzing the decline of manufacturing jobs in the US economy. It isn't due to "evil corporations shipping American manufacturing overseas." Until the start of the recent recession, US manufacturing output was at an all time high. Rather, it's due to massive improvements in productivity, which in this context means replacing humans with automation of various kinds.

If solar becomes cost competitive it will be through massive productivity improvements, achieved in part by automating every step that can be automated.

Still, merely looking at the need for productivity improvements does undervalue the job creation opportunity. Even if the number of jobs per GW goes down -- which I think is not only likely, but necessary -- the total number of jobs will still go up as the market size increases. The current world solar market is about 6 GW per year, but the world's total electricity consumption is in excess of 17 trillion kWh. That's a whole lot of room for growth.

Unfortunately, that also leaves us back where we started. Promoting use of a product through subsidies is not usually a good way to make the manufacturing of that product more efficient. The government can improve manufacturing -- for example by investing in research and development through organizations like NIST and NREL -- or it can create jobs, but it isn't really good at doing both at once.

Disclaimer: Though my past and present clients may like this post better, my opinions are still mine alone.

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