Section 1603: Did the ends (75,000 jobs) justify the means (US$9.7 billion)?

The researchers looked at direct and indirect construction and operational employment opportunities created by photovoltaic and wind projects funded under Section (§) 1603 of the American Recovery and Reinvestment Act of 2009; as well as at "induced" jobs.

Although other renewable technologies were eligible for cash payment under §1603, which was passed into law on February 17, 2009, and allowed to expire on December 31, 2011, together, photovoltaics and large wind installations made up close to 96 percent of all projects funded. What’s more, grants for solar and wind generation represented about 92 percent of total §1603 funding.

Section 1603 (also known as the 1603 Treasury Grant Program) enabled the owner of commercial solar or wind property to receive a 30 percent grant, in lieu of taking the Investment Tax Credit (ITC) or the Production Tax Credit (PTC). Under the rules of program, applicants were eligible for §1603 only if they commenced construction on projects by December 31, 2011, and could complete construction by December 31, 2016.

Industry jobs, plus a ‘ripple effect’

All told, the construction phase of the solar and wind projects created more job opportunities than the operational phase – and more jobs ultimately were "induced" in the greater economy by a ripple effect than by the actual §1603 program, itself.

Looking at the specifics, construction-related expenditures supported an average of 52,000 to 75,000 jobs per year from February 2009 through December 2011. These expenditures also are estimated to have supported $3.2 billion to $4.9 billion per year in total earnings; as well as $9 billion to $15 billion per year in economic output.

  • The indirect jobs generated during the construction phase – positions in the manufacturing and associated supply-chain sectors – represented a significantly larger share of the total estimated jobs (43,000–66,000 jobs per year) than the direct jobs.
  • The direct jobs during the construction phase – managers, specialty contractors, construction workers, clean-up crews, truck drivers; and other specialists hired to permit, design, and install the system – totaled only 9,400 per year.

The annual operation of these photovoltaic and wind systems is estimated to support between 5,100 and 5,500 direct and indirect jobs per year on an ongoing basis over the 20- to 30-year estimated life of the systems. Similar to the construction phase, the number of jobs directly supporting the operation of the systems is significantly less than the number of jobs supporting manufacturing and associated supply chains (910 and 4,200 to 4,600 jobs per year, respectively).

The total number of induced jobs created per year – opportunities that resulted from wages spent by individuals directly or indirectly employed by the solar and wind projects/facilities – ranged between 84,000 and 120,000. Those jobs supported total earnings of $14 billion to $21 billion; and total economic output of $40 billion to $66 billion during the same period. However, induced jobs also might be considered part of the broader economy and should not necessarily represent renewable energy opportunities.

Looking for some unequivocally good news? The program substantially expanded domestic energy production, adding 13.5 gigawatts of renewable energy to America’s electricity generation capacity; enough to power 3.4 million U.S. homes. What’s more, it attracted over $20 billion in direct investment from private, regional, and state sources, in addition to the approximately $9.7 billion in federal funding the program provided.

Lingering questions and comparisons

If §1603 cash grants had not been available, would some developers still have gone ahead, using the ITC or PTC? The researchers refrained from speculating about how much renewable generation capacity would have been built if only the ITC or PTC were available. For some projects, additional project financing costs associated with monetizing these tax credits through the third-party tax equity market might have been incurred. As a consequence, in some of these cases, it is possible that project-return hurdle rates may not have been met and that the associated renewable generation capacity would not have been built.

However, the researchers did provide a caveat: The results presented in this report cannot be attributed to the §1603 grant program, alone. Some projects supported by a §1603 award might have progressed without the award, while others might have progressed only as a direct result of the program; therefore, the jobs and economic impact estimates can only be attributed to the total investment in the projects.

To further muddy the waters, the analysts note that a couple of recent studies estimated the impacts of the §1603 program on jobs in the renewable energy sector – and came to slightly different conclusions.

A study released in April 2010 by Mark Bolinger et. al. at the Lawrence Berkeley National Laboratory in Berkeley, California, estimated the number of gross jobs supported by all wind power projects built in 2009 that elected to take the §1603 cash grant in lieu of the ITC or PTC. Overall, 71 projects accounted for 6,202 megawatts (MW) of capacity – approximately 59 percent of the total wind capacity analyzed in the NREL paper. Bolinger’s research team estimated that these 71 projects resulted in 74,000 gross direct and indirect jobs during the construction phase and approximately 3,900 jobs annually during the operational phase.

More recently, in a study prepared for the Solar Energy Industries Association (SEIA), EuPD Research provided an estimate of the gross number of jobs that would be supported by a one-year extension (through 2012) of the §1603 program. The EuPD analysis found that a one-year extension would drive additional installation of about 370 MW of photovoltaic energy and 130 MW of concentrated solar power (CSP) capacity – and would support approximately 18,000 direct and indirect jobs during the construction and installation period. However, given that the EuPD analysis includes the contribution of jobs supported by some CSP capacity, it is not directly comparable to the NREL study.

Building a case

The NREL study clearly will be used to provide not only an expert appraisal of the §1603 Treasury Grant Program, but to provide ammunition for the Obama Administration to reinstate the recently defunct funding mechanism.

"The … study makes clear that projects receiving payments from the 1603 program have supported tens of thousands of jobs while also diversifying our energy economy. In fact, the program’s primary goal was to jumpstart private financing for renewable energy projects. From both perspectives, the program has been a huge success," said Dan Leistikow, director, Office of Public Affairs, DOE.

He added, "The 1603 program has played a central role in meeting President Obama’s goal of doubling domestic energy production from renewable sources like wind and solar in his first term – which we are well on track to achieve. Furthermore, it has played a critical role in building the infrastructure that America will need to continue to compete globally in clean energy for years to come, ensuring we do not cede the industries or the jobs of the 21st century to countries like China. And it has supported tens of thousands of jobs across the country. That is why President Obama has called on Congress to extend the highly successful 1603 program."