jobs and energy conservation
TRANSCRIPT
Applied Energy 22 (1986) 299-311
Jobs and Energy Conservation
Andrew Warren
Association for Conservation of Energy, 9 Sherlock Mews, London W IM 3RH (Great Britain
SUMMA RY
A stud)' of the employment generation potential o j a major energy conservation programme in the UK is presented.
NUMBER OF JOBS CREATED
The employment potential of an energy conservation programme directed principally at reducing space heating has been assessed over a 10 year period, for two levels of investment. These are the base and the maximum case scenarios.
In the base case up to 68 000 new jobs would be created, with an average increased employment of 50 000. In the maximum case the programme proposed would result in the creation of up to 155 000 new jobs, with an annual average employment generation of 124000. These are shown graphically in Fig. 1, and in Table 1.
CONSERVATION PROGRAMMES AS BASES FOR ESTIMATING EMPLOYMENT GENERATION POTENTIAL
Programme definitions
In order to illustrate the employment generation effects that would result from a major government initiative aimed at conserving energy in
299
300 Andrew Warren
:}:!:.:~:!
:!!::!::2 -:;~i;~i!~i • i'ii}
j iiii;?,! I :!;~i ] 2 3 4 5 6 7 8 9 10
YEARS FROM THE START OF PROGRAMMES IN THE UK
.JOBS ('REATED
150.000
140,000
1:/0 000
12(I.000
l 10,000
100,000
90,000
80,000
70.000
60,000
50,000
40.000
30,000
20,000
10,000
Fig. !. Jobs created by energy-conservation programmes in buildings.
TA
BL
E !
Jo
bs C
reat
ed b
y E
nerg
y-C
onse
rvat
ion
Pro
gram
me
in B
uild
ings
Yea
r
1 2
3 4
5 6
7 8
9 10
Ba
se c
ase
1.
D
irec
t 15
600
2250
0 29
300
3200
0 33
800
3590
0 36
900
3870
0 40
100
41
100
2.
S
uppl
y"
(400
) (5
00)
(600
) (8
00)
(1 0
00)
(1 1
00)
(1 2
00)
Sub
-tot
al
1560
0 22
500
2930
0 31
600
3330
0 35
300
3610
0 37
700
3900
0 39
900
3.
Mul
tipl
ier
6200
90
00
11 7
00
1260
0 13
300
14
100
14
400
15 1
00
1560
0 16
000
4.
Re-
spen
ding
90
0 1
900
3 30
0 5
000
6 70
0 8
500
10 1
00
11 9
00
To
tal
h 21
800
31
500
41
900
46
I00
49
900
5440
0 57
200
61 3
00
6470
0 67
800
Ma
xim
um
ca
s~"
I.
Dir
ect
3670
0 53
600
71 3
00
8580
0 92
200
9890
0 10
0000
99
100
94
700
9520
0 2.
S
uppl
y"
(800
) (I
000
) (I
200
) (t
600
) (2
000)
(2
200)
(2
400)
Sub
-tot
al
36 7
00
53 6
00
71 3
00
85 0
00
91 2
00
97 7
00
98 4
00
97 1
00
92 5
00
92 8
00
3.
Mul
tipl
ier
1470
0 21
400
28
500
3400
0 36
500
39 1
00
3940
0 38
800
3700
0 37
100
4.
R
e-sp
endi
ng
I 70
0 3
900
6 60
0 9
800
13 5
00
17 4
00
21 4
00
25 5
00
To
tal
h 51
400
75
000
101
500
1229
00
1343
00
1466
00
151
300
153
300
1509
00
1554
00
" N
egat
ive
empl
o,,m
ent
impa
cts
on c
nerg
.,,
supp
l5
indu
str,
~.
" T
ota
l-
I 2
+3
~4
.
302 Andrew Warren
buildings, two programmes have been developed corresponding to different levels of activity.
One is a base case programme which, while representing overall a significant level of activity, has a strong underlying economic rationale with pay-back periods on investment of 10 year s or less for all but one sector, and in most offers 3-5 year pay-backs. A maximum case programme was calculated on the basis of the maximum annual con- servation activity that could be sustained either, according to the total scope for conservation within the sector having in mind the need to remain within the Treasury 5 % Real Rate of Return on Investment Guideline and a ten-year programme period or by the realistic upper operating level of expanded manufacturing/installation industries, even when further cost-effective conservation opportunities existed.
Programme costs and savings
The programmes are based on incremental activity only, that is, they include the additional employment which would be generated over and above that associated with on-going activities.
1. B a s e case
The individual programme measures assume that there would be a steady build-up in activity, in response to stimulation, which would then continue at a steady rate. Only in the case of incremental loft insulation is market saturation reached by the end of the period; all the other programmes would continue thereafter.
In Table 2 we show the size of the base-case programme for each conservation activity and the investment cost of the programme, estimated in total at £10000 million over the ten-year period.
The total value of domestic and non-domestic energy savings are assessed at around £1400 million in year 10 (or £6700 million for the total period). The corresponding energy savings are 23 and 112 Mtce (million tonnes of coal equivalent) per annum.
The internal rate of return for the total programme has been calculated by taking the energy savings over 20 years. This is a conservative approach as certain of the measures, such as loft and cavity wall insulation, would last for the life of the building. Other measures, however, such as heat controls and draught proofing could have much shorter lives and as no allowance has been made in the calculation for
FA
BL
E
2 B
ase
Cas
e P
rogr
amm
e
Un
it
Yea
rs
1 2
3 4
5 6
7
Dom
esti
c'
Lof
t in
sula
tion
dw
elli
ngs
(103
) 20
0 20
0 20
0 20
0 20
0 20
0 20
0 C
avit
y w
all
insu
lati
on (
103)
15
0 25
0 30
0 40
0 40
0 40
0 40
0 S
olid
wal
l in
sula
tion
(10
3)
50
50
100
100
100
150
150
Dra
ught
pr
oofi
ng (
103
) 40
0 40
0 80
0 80
0 90
0 90
0 90
0 H
eat
cont
rols
(10
3)
200
300
400
400
400
400
400
No
n-d
om
esti
c R
oofs
/Wal
ls
Indu
stry
(lO
Om
2)
5 7
I0
11
I1
II
11
Oth
er (
10 ~'
m 2
) 4
5 6
7 8
8 8
Dra
ught
pr
oofi
ng (
line
ar m
) 6
8 II
12
13
t3
13
H
eat
cont
rols
(M
£)
70
90
110
t30
150
170
190
Lig
htin
g po
ints
( 1
0 °)
0.6
1.5
1.5
1.5
1.5
1.5
1.5
To
tal
cost
(M
£)
482
644
911
994
1042
1
142
1 16
2
8 9
To
tal
10
11
I1
11
99
8 8
8 70
13
13
13
11
5 21
0 23
0 25
0 t
600
1.5
1.5
1.5
14-1
1 20
4 1
229
1 24
9 10
059
200
200
200
2000
40
0 40
0 40
0 35
00
150
150
150
1150
90
0 10
00
1000
80
00
500
500
500
4000
304 Andrew Warren
periodic maintenance or replacement costs, an overall 20-year analysis period has been adopted. This is less than both the 30-year life span assumed for old houses for discretionary renovation grants and the 25 years normally adopted for assessing new power station projects.
The investment costs and energy savings (after allowing for 25 ~o of gross domestic savings to be taken in the form of increased comfort levels) are shown in Table 3. There are further benefits which have not been taken into account such as reduced unemployment benefit payments, increased taxation receipts, higher national insurance contributions and reduced fuel-subsidy payments. The internal rate of return (IRR) calculated at 15 "/ Jo can thus be considered a minimum estimate.
The IRR can be compared directly with the 5 ~o discount rate used by the Treasury for assessing public-sector capital investment projects. As the IRR is the discount rate which equalises costs and savings over the life
T A B L E 3 Base Case Programme Internal Rate of Return (Constant Prices)
Year Imestment costs Net energy savings Cash.flow (m£) (M£) (M£)
1 2 3 4 5 6 7 8 9
10 11 20 21 22 23 24 25 26 27 28 29
IRR
482 644 911 994 042 142 162 204 229 249
15 ",,
7O (412) 160 (484) 292 (619) 430 (564) 576 (466) 659 (483) 844 (318) 054 (150) 226 (3) 404 155 404 1404 334 1334 244 1244 112 1112 974 974 828 828 745 745 560 560 350 350 178 178
Uni
t
1
TA
BL
E
4 M
axim
um
Cas
e P
rog
ram
me
Yea
rs
2 3
4 5
6 7
F,
9 I0
To
tal
Dom
esti
c L
oft
insu
lati
on d
wel
ling
s (1
03)
Cav
ity
wal
l in
sula
tion
(1
0 ~)
S
olid
wal
l in
sula
tion
( 1
03)
Dra
ught
pro
ofin
g ( 1
0 s)
Hea
t co
ntro
ls (
103
) D
oubl
e gl
azin
g (1
03 )
.Von
-dom
esti
c R
oofs
Wal
ls
Indu
stry
(10
~' m
-~)
Oth
er (
10 °
m 2
) D
raug
ht p
rooi
ing
(lin
ear
m}
Hea
t co
ntro
ls (
M£)
t.
ight
ing
poin
ts (
10")
Tot
al c
ost
(M£)
400
300
150
700
400
300 8 10
12
14
0 0.6
1140
400
400
250
900
500
500 10
14
[6
18
0 1"6
1651
500
500
700
700
800
800
600
600
6000
50
0 60
0 70
0 70
0 70
0 70
0 70
0 70
0 6
000
300
400
400
500
500
400
300
300
1200
0 10
50
1250
13
50
1350
t3
50
1350
13
50
1350
12
000
600
700
800
900
1000
I1
00
l lO
0 90
0 80
00
800
1000
10
00
1000
90
0 90
0 80
0 80
0 80
00
I ~.
14
16
18
18
16
14
16
20
__.~
24
24
.__~
20
19
23
25
27
27
25
24
220
260
300
340
380
420
460
2-6
3.1)
3.
()
3.0
3.0
3.0
3-0
2054
2
543
2 74
7 30
66
3105
2
9()4
2
621
14
140
20
192
24
222
500
3 20
0 3-
0 25
.8
2615
24
446
306 Andrew Warren
of the investment, the rate of 15 ~o exceeds by a factor of three the Treasury requirements.
2. M a x i m u m case
The maximum case programme is summarised in Table 4. As a major concentrated effort to insulate buildings is implied, the pattern of activity assumes a strong build-up to a peak, and then a falling offat the end of the period when the momentum slows as appropriate properties to treat become harder to identify.
Industrial capacity in the insulation and heat-control industries has not been viewed as a constraint. In some cases existing capacity would not be sufficient, but it has been assumed that if an unequivocal commitment were given by the government to a sustained programme of this sort, investment in additional capacity would be forthcoming.
TABLE5 Maximum Case Programme--InternalRateofReturn(ConstantPrices)
Year Inrestment costs Net energy sarings Cash flow (M£) (M£) (m£)
1 1140 131 (1009) 2 1651 310 (1 341) 3 2054 546 (1 508) 4 2543 811 (1732) 5 2747 1112 (I 635) 6 3066 1435 (I 631) 7 3105 1771 (1 334) 8 2904 2 108 (796) 9 2 621 2445 (176)
10 2615 2792 177 11-20 2 792 2 792 21 2661 2661 22 - - 2482 2482 23 2246 2246 24 1981 1981 25 1680 1680 26 1357 1357 27 - 1021 1021 28 - - 684 684 29 347 347
IRR 111~
Jobs and energy consercation 307
The maximum case assumes a co-ordinated and planned programme of total refurbishment of buildings which will be in full use through to AD 2000 and beyond. The energy measures in the case of solid-wall dwellings would be undertaken in concert with other major maintenance work. A policy of encouraging the best use of existing buildings through repairs and restorations clearly has implications for construction industry capacity. It would not be possible to mount a major activity in this direction if policy emphases were to be given only to new building. Thus the implicit assumption is that national housing policy will be heavily geared to renovating and retrofitting old housing stock. The investment programme and estimated energy-savings are shown in Table 5. The total investment cost of the maximum case programme is estimated at £24 500 million, which would realise total annual energy savings of £2800 million (46 Mtce) by the end of 10 years. The internal rate of return has been calculated on the same basis as for the base case programme, as shown in Table 5. This gives an IRR of 11 "J / O "
INCREASED DIRECT EM PLOYMENT
Based on the programme assumption summarised earlier, and the unit employment ratios calculated with the assistance of the conservation industry, the direct employment impact has been calculated.
At present around 15 000 people are employed in the UK manufacture and installation of energy-conservation equipment and materials. This number would be increased by up to 41 000 in the base case, and up to
100
90
80
70
60
50
40
30
20
10
Fig. 2.
c e ' . 0
] 2 3 4 ~ 6 7 8 9 i ~:
Year5 from :~ar: < f pr, ,ur n : n e
Jobs created in the energy conservation industry.
308 Andrew Warren
100 000 direct jobs in the maximum case, as shown in Fig. 2. This is more than six times the present level of employment.
DISTRIBUTION OF JOBS IN THE ENERGY CONSERVATION INDUSTRY
An overriding feature of this industry is the predominance of installation work in generating additional employment. Taken over the 10 years, installation accounts on average for 65 ~0 of the additional employment in the base case and 52 ~o in the maximum programme. This reflects both the labour intensiveness of installation work and the capital intensiveness of the material supply and manufacturing industries, as Fig. 3 demonstrates.
Fig. 3.
Materi~d ~
All O t h e r s ~
Distribution of jobs in the energy-conservation industry.
No allowance was made in the base case for any secondary incremental effect in material supply. Many insulation materials are polymer derivatives from the petrochemical process industry. In terms of the overall capacity of these industries, and in particular at present when this industry's capacity is heavily under-utilised, the marginal requirements of the programmes outlined represent a very small proportion of potential output. This situation does not apply to the components of heat control systems nor particularly to light fittings. In the latter case, account has been taken of the employment generated in component supply manu- facturers. However, in the higher activity maximum case, a 5 ')i, allowance (of total incremental employment) was made for additional employment in providing insulation, control materials and components.
The majority of the manufacturing processes for converting materials into insulation and heat control products are also capital intensive. There
Jobs and energy conservation 309
has been considerable modernisation of plant by the major manu- facturers in recent years and processes are now highly automated. There is up to 50 i:,, spare capacity in certain sectors. The additional employment generated by even a 50 %(, output increase is therefore l imited--repre- senting on average 12~o of the total in the base case and 15°,, in the maximum programme. The contributions from administrative, clerical, technical, professional, selling and distribution jobs in the base case and maximum programme are 23 and 28 '{~, respectively.
INDIRECT E M P L O Y M E N T EFFECTS
In addition to the 100000 direct jobs created in the maximum case, the indirect employment effects of the multiplier and responding effects result in the creation of a further 27 900 jobs in the base case, and a further 62 600 jobs in the maximum case -as set out in Table 1. The multiplier chosen is the same as that used by the UK Treasury a conservative 1.4. which almost certainly errs on the pessimistic side.
NEGATIVE E M P L O Y M E N T EFFECTS
In Table 6 we sum the total negative employment effects of the energy- conservation programmes. It is proposed that the average of these ranges should be taken as the total negative employment effect in the supply industries, caused by an energy-conservation programme directed to buildings. There are therefore minimal reductions in supply industry employment only one new job for every fifty new' jobs created even
TABLE 6 Negative Employment Effects of Energy, Conservation Programmes
Gas industry Oil industry Electricity supply Coal industry
Total
BE,sc CEl,~C .~[O V i l l l l l l l l ( H,';t'
2OO 5(t{) 25O 500
250 400 500 800 500 700 900 I 300
1200 I 55{) 2400 3100
3 IO Andrew Warren
from full implementation of the maximum programme, a reflection of the capital intensive nature of the energy supply industry.
EMPLOYMENT SKILLS
With such a wide variety of programme activities, there is inevitably a range of different skills required. However, in general, the large majority of the work would be either semi-skilled or unskilled.
Manufacturing
The limited number of jobs generated here would be primarily semi- or unskilled. The operation of most of the modern production lines, which characterise the industries involved, do not require high level skills to operate.
Installation
Apart from the electrically based measures--heat controls and lighting-- the installation of the remaining insulation measures requires either no particular skills or only limited skills available after a short period of training. Thus the major benefits would be felt among construction- industry workers, where unemployment of unskilled workers is currently (1985) running at very high levels.
The manufacture and fitting of electronic control systems is relatively labour intensive employing mainly semi-skilled labour (about 70 ~) with skilled (about 5 ~o) and unskilled (25 ~o) making up the remainder.
Other
Here a mixture of skills would be involved, ranging from unskilled clerical and distribution jobs to professional skills, such as surveying and design.
LOCATIONAL AND SOCIAL IMPACT
Geographical employment spread
While the effects on employment of an energy-saving programme would be countrywide, the impacts would be greatest where maximum benefits
Jobs and energy consert,ation 311
could be realised. Much of the country's housing and industrial building stock, where most scope for energy conservation exists from the programmes, are located in the depressed industrial and urban centres. It is here that current rates of unemployment are at exceptionally high levels. Employment would thus be generated where it was most needed.
Social benefits
With the inner cities inevitably providing the major target of any large government conservation programme in buildings, social benefits would be maximised. The greatest number of pensioners, single-parent households, disabled people and others, who spend their days mostly at home are to be found here. They do not have the opportunity for their day-time space heating requirements to be provided by employers. As was noted in evidence published by the House of Commons Select Committee on Energy, 'the most economically vulnerable face larger fuel bills through their inevitably greater use of household heating'. In addition the Economic Advisory Office of the DHSS has demonstrated that, among low income households, it is those at home all day who pay a higher proportion of income for keeping warm. While the average figure is around 5 ',!0, pensioners pay 12 '5o and at the coldest time of year this can reach 26'~,; for the poorest pensioners and the long-term unemployed.
It is noted that the incidence of ownership of loft and cavity wall insulation decreases markedly as one moves down the social and income scales. Therefore any major government funded domestic conservation programme would inevitably benefit the more economically and socially deprived.