Local Employment Effects of Commercial Renewable Energy in The United States: A Quantitative Study of How Renewable Energy Facilities Have Affected Local U.S. Labor Markets

Abstract

This study uses 20 years of data from the Energy Information Administration on commercial renewable energy installations in the United States to gauge what their economic effect is on the local labor markets and how well renewable energy facilities can be used to generate place-based jobs. I measure changes in employment, unemployment, and labor force participation rates in the year a facility begins commercial production using an Ordinary Least Squares (OLS) regression, a Vector Error Correction (VECM) model, and a Panel Vector Autoregression (PVAR) model. The results show that though renewable energy facilities generate reductions in unemployment rates and gains in employment rates that last only a handful of years, they seem to cause longer lasting (at least 10 years) gains in labor force participation, indicating that the facilities draw people out of chronic unemployment. Though, while all of these results are statistically significant, the magnitude of these effects are all small. I argue that these results indicate that renewable energy facilities cannot be used on their own to generate long-term, place-based jobs, but instead provide a ‘shot in the arm’ effect, offering a temporary boost to local labor markets and economies. As such, for policy makers who want to use these facilities for place-based jobs, renewable energy is best suited to being part of a more comprehensive economic development strategy.