Quantification and monetization of employment benefits associated with renewable energy technologies in Greece

Abstract

This paper formulates and implements an integrated approach for estimating the employment benefits associated with the exploitation of renewable energy sources (RES) in the power sector. It builds up on well-known techniques and makes all the necessary modifications in order to take into account the specific conditions of the RES market. More specific, the proposed approach exploits the input–output methodology for estimating the direct, indirect and induced employment effects associated with the energy technologies in question and the “opportunity cost of labour” approach for expressing these effects in monetary terms. This framework has been implemented to estimate the employment benefits resulting from the development of different RES technologies in Greece, taking into account both the construction and operation phases of the relative projects. The results of the analysis clearly show that the exploitation of RES in the Greek power sector presents significant employment benefits, which are at the same order of magnitude or in several cases even higher compared to the corresponding benefits attributed to the operation of fossil-fueled power plants (e.g. lignite and natural gas). Therefore, the fulfillment of the national target for increasing the penetration of RES into the Greek power sector from approximately 12% today to 40% in 2020, will contribute, apart from the significant environmental improvements, to the overall economic development and the increase of the employment.

Introduction

Creating new jobs and combating unemployment are nowadays increasingly considered as a positive externality, although many economists still disagree with this view claiming that in perfectly competitive markets the existence of any unemployment represents temporary situations, in which individuals change their professional status in order to find a better position in the labour market or to obtain additional skills and as a result unemployment does not impose any social cost [1], [2]. Saez et al. [3] sustain the view that in economies presenting low unemployment rates (i.e. 3–5%) the increased demand for jobs due to an investment will be only realized as a change in the allocation of jobs and will not result in a net increase of the people employed. However, during the last decade unemployment appears as one of the most significant problems in society and provokes intense worries in presently employed individuals. Nowadays, boosting employment through the adoption of effective policies is a priority for most developed countries and it is logical to assume that the creation of new jobs in economies with unemployment rates higher than the natural level of 3–5% results in significant social benefits. In fact, to get these benefits, governments are willing to undertake considerable efforts and to spend huge financial resources [3].

It is widely acknowledged that the move towards a green economy will create a large number of new jobs across many sectors and will act as a vital stimulus to sustainable development. In particular, the exploitation of renewable energy sources (RES) in power generation is expected to have a substantial contribution to the overall rise of employment opportunities in several sectors including equipment manufacturing, construction, administrative and service activities.

The above considerations explain the growing interest in measuring and valuing effects on employment produced by renewable energy technologies and relevant development paths. In the study of EWEA [4], the employment created by the exploitation of wind energy in Europe has been assessed, while Kammen et al. [5] presented a review of studies estimating the employment effects (direct and indirect) in physical terms for renewable energy technologies and accordingly assessed scenarios for their penetration in USA. BMU [6] examined the impact of the expansion of RES on the German labour market, by distinguishing between direct and indirect employment effects and RWI [7] updated these estimates on the basis of available studies pinpointing that the positive employment effects critically depend on a robust foreign trade of renewable energy technologies. Lehr et al. [8] implemented a study that modelled positive impacts (including employment effects) of an increasing share of renewable energy on the mitigation of climate change. UNEP [9] estimated the future green employment in a sustainable, low-carbon world providing estimates for employment effects in physical terms for various countries (Germany, Spain, USA and China), while Greenpeace [10] calculated on the basis of existing studies the new direct and indirect jobs expected to emerge in Greece due to a future deployment of renewable energy technologies. In the study of European Commission [11] the economic effects of supporting RES in EU were assessed for selected scenarios for RES deployment taking into account the direct and indirect impact on all sectors of the economy. Sastresa et al. [12] applied an integrated methodology to the autonomous community of Aragon (Spain) in order to assess the impact of RES on the jobs created, the quality of the jobs and other factors related to the socio-economic development of the region: technological development, per capita income, territorial and human capital development. Finally, the study of Pollin et al. [13] provided quantitative estimates for the direct, indirect and induced employment associated with two governmental initiatives in the USA, which comprise considerable investments in renewable and other clean energy technologies and practices.

Obviously, fewer studies have attempted to quantify in monetary terms the employment benefits created by renewable energy technologies or in general by energy investments. ORNL and RFF [14] assessed the employment benefits of the coal fuel cycle by using of the “opportunity cost of labour” approach, taking into account both direct and indirect employment. The economic valuation was performed on the basis of the net income increase for newly employed workers and the value of potential losses of their leisure time. Saez et al. [3] in Spain and Faaij et al. [15] in Netherlands analyzed comparatively the employment benefits associated with coal and biomass fuel cycles. The valuation was based on specific assumptions as regards the expenses undertaken to avoid unemployment in the form of unemployment subsidies, governmental programmes to reduce unemployment, etc. European Commission [16] assessed the employment benefits associated with the hydro fuel cycle at both local and national levels following a similar approach and using implicit valuation techniques based on revealed preferences of the government to create extra employment. Markandya [2], [17] proposed a methodological framework for assessing the employment benefits derived from energy projects by taking into account the net gain of income, the value of any lost leisure and the health-related impacts associated with unemployment.

Another approach for the economic valuation of employment impacts is the exploitation of stated preferences techniques. In the RECaBS (Renewable Energy Costs and Benefits for Society) IEA's project [18], an interactive renewable energy calculator is provided for estimating costs and benefits of electricity from RES compared to fossil fuels, with the monetary values assigned to employment effects reflecting the society's willingness to pay for the creation of local jobs. These estimates were derived from the studies of Moos [19], for the implementation of rural job creation programmes in Denmark from 1994 to 1999, and from Roy and Wong [20], which is an evaluation report of 25 years of Canadian direct job creation programmes. Another similar attempt is the study of Solino [21] who analyzed the willingness to pay for a programme that promotes the production of electricity from forest biomass, instead of fossil fuels. The associated employment benefits have been monetized by implementing a choice experiment method.

Finally, in the study of URJC [22], the increase of direct and indirect employment in Spain caused by the exploitation of RES in electricity production was valuated by using two different methods. First, the average amount of the necessary subsidized part of the investment to create a green job was compared with the average amount of capital required for establishing a job in the private sector. Secondly, the average annual productivity of each subsidized green job was compared with the average productivity of labour in the private sector that allows workers to remain employed.

In our previous work, we have developed a sound methodological framework that was implemented for the quantification and monetization of employment benefits associated with two conventional power-generation technologies used in the Greek interconnected power-generation system, namely lignite condensing and natural gas combined cycle power plants [23]. In the present paper this framework is extended to cover also RES and updated by using a more recent version of the input–output table for the Greek economy. Moreover, it is suitably adapted for the case of insufficient or less reliable data on employment, as is usually the case for RES projects. The produced estimates can be exploited in policy making, by means of a cost–benefit analysis or other assessment procedures, resulting in the improvement of energy planning processes.

The structure of this paper is as follows: Section 2 describes the methodological approaches used in this paper. In Section 3, the proposed methodological framework is applied to estimate the employment benefits associated with the power-generation technologies in question. The uncertainties of this analysis are highlighted and a sensitivity analysis is carried out in Section 4. Finally, in Section 5 the main findings of the study are summarized and conclusions are drawn.