Do renewable energy investments create local jobs?

Key Question Being Explored in This Insight:

Why do renewable energy projects face local opposition despite job creation, and how do their economic impacts differ between solar and wind projects?

View the page of: Natalia Fabra

Institution: University Carlos III Madrid

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Why do renewable energy projects face local opposition despite job creation, and how do their economic impacts differ between solar and wind projects?

Image courtesy of interviewee. December 19, 2024

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This video discusses the importance of decarbonizing the power sector through the deployment of renewable energy sources and highlights a key challenge: local opposition to these investments, often referred to as "Not In My Backyard" (NIMBY) sentiments. Despite claims that renewable investments can create jobs and enhance local wealth, many residents oppose such developments, prompting an investigation into local effects versus global benefits.

The research aims to understand how renewable energy projects impact local socioeconomic variables, such as employment and income, using data from various renewable projects across Spain since 2015. Findings indicate that job creation is significant during the construction phase of renewable plants, with solar power generating more local jobs compared to wind energy. However, the employment effects diminish once the plants are operational due to the nature of maintenance work, which often requires fewer local workers.

To mitigate local opposition, the authors suggest potential interventions, such as increasing local job training and engaging with communities to understand their concerns and preferences. They propose assessing residents' attitudes towards these projects and determining what trade-offs they might accept, such as higher local taxes for improved services or lower electricity bills.

Ultimately, the text emphasizes the need for inclusive policymaking that considers the voices of local residents and addresses their concerns while promoting renewable energy investments essential for combating climate change.

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Here are five key points from the video:

1. **Local Resistance to Renewable Energy Investments**: The video highlights a "Not In My Backyard" (NIMBY) phenomenon where local communities oppose renewable energy projects despite the anticipated benefits such as job creation and increased wealth. Understanding local opposition is crucial for promoting successful renewable energy deployment.

2. **Importance of Local Economic Effects**: While global benefits of renewable energy investments (such as job creation and economic growth) are often emphasized, the video argues that local impacts must also be analyzed. If residents do not perceive benefits from these projects, they may oppose them, which suggests a need for more localized assessments of economic outcomes.

3. **Differential Impacts of Energy Technology**: The analysis reveals that different types of renewable energy (solar vs. wind) have varying local employment impacts. Solar energy projects tend to create more local jobs during the construction phase compared to wind projects, which often require specialized labor and can have less local employment at completion.

4. **Potential Interventions for Local Employment Growth**: The video discusses the need for targeted interventions, such as training programs, to ensure that local residents possess the necessary skills for employment in renewable energy projects. Additionally, higher local tax contributions from these projects could be redirected to public services benefiting the community.

5. **Engaging Communities for Better Outcomes**: The authors suggest that future research should involve engaging with local communities to better understand their perceptions and preferences regarding renewable energy projects. Identifying what communities would be willing to accept in exchange for hosting projects (e.g., lower electricity bills or improved public services) could enhance the acceptance and success of renewable energy investments.

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Here are some key quotes extracted from the video you , highlighting the main ideas and arguments made:

1. **Importance of Decarbonizing**:
- "We understand that it's actually important that, to decarbonize the power sector, we need to deploy renewable energies."

2. **Local Opposition**:
- "In many places, there's a not in my backyard type of movement by which host these investments oppose these investments."
- "We wanted to understand why is it that, on the one hand, we keep on hearing that these investments are gonna create jobs... and yet, we find that people are opposing these investments."

3. **Measurement of Local vs Global Effects**:
- "It’s very important not just to measure the global effects of these investments, but also the local effects."
- "If they are not benefiting, this could be a reason for why they oppose these investments."

4. **Impact of Investments**:
- "We find that there's an impact... we find a positive, for instance, employment multipliers."
- "Each megawatt of solar plant creates one job at the highest, you know, the peak of job creation evolution."

5. **Differences in Technology**:
- "We find that solar has a greater local job creation potential than wind."
- "Wind power plant involve, very heavy equipment that need very special transportation systems... it’s not necessarily local people, who are involved in the construction of these plants."

6. **Need for Local Workforce Training**:
- "What is the reason why these companies... are not hiring more local people? Training could be one potential avenue to promote local employment."

7. **Public Perception and Acceptance**:
- "We really need to go to the municipalities and understand whether residents like these projects or not."
- "For those who don't really like the investments... what are they willing to accept in exchange for hosting some of these projects?"

8. **Policy Implications**:
- "I think this is the right approach, so let's see what comes out and whether this provides good opportunities for public policies."

9. **Equitable Distribution of Benefits**:
- "Clearly, fighting climate change is a global public good... if residents are not particularly happy with these investments, we also have to allow them to benefit."

These quotes encapsulate the essence of the arguments about the challenges of deploying renewable energy, the local impacts of such investments, and the need for public engagement to address concerns while fostering positive economic outcomes.

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We understand that it's actually important that,

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to decarbonize the power sector, we need

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to deploy renewable energies.

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And, and we have found that,

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there's an important bottleneck beyond, you know,

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the well-known bottlenecks such as administrative,

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burdens or, you know, supply chains,

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problems and, and so on and so forth.

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We find that, in many places,

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there's a not in my backyard, type of movement by which,

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residents in the municipalities

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that host these investments oppose these investments.

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So we wanted to understand why is it, why is it that,

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on the one hand, we keep on hearing

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that these investments are gonna create jobs.

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These investments are gonna, increase, total wealth.

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These investments are gonna allow for the creation

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of new companies and, and, and industrial districts,

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and so on and so forth.

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And yet, we find

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that people are opposing these investments.

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So why is it that, we are missing?

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And we understood that it's very important not just

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to measure the global effects of these investments,

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but also the local effects.

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How is it that the residents in this municipalities,

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are they benefiting or are they not?

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Because if they are not, benefiting,

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this could be a reason

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for why they oppose these investments.

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The way we, identify the impacts

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of these investments on several socioeconomic, variables

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of interest such as employment

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and employment population, household income, and so on

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and so forth,

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comes from exploiting the variation in

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investments across time.

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Also, the different types of investments,

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different plant sizes, different technologies, solar

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and wind, across the Spanish geography for many years,

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essentially, from, 20, 15

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or even, even before until, nowadays.

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So we have a lot of variation across

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time and across the space.

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So, we can identify what is the impact

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of these investments on the, local socioeconomic,

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variables relative to other municipalities

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that have just not invested into these technologies

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or have not invested at all, during,

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our, our timeframe.

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So this allows to identify the impacts on the investments on

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these, outcomes of interest.

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We find that, there's an impact.

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Um, so when we let the data speak, we find a positive,

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for instance, employment, multipliers, more

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or less one year and a half

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before the plants are ready to start producing electricity,

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which is consistent with all the job opportunities created

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by the construction of the power plants.

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And not only we find these positive, multipliers,

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but the size of these multipliers is very consistent

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with the type of task

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that are involved into the construction.

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So, so for instance, we find,

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small multipliers at the very beginning that, go up

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until six months,

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before the startup, which is when most

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of the civil construction takes place at the very peak

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of the, job multipliers.

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For instance, in the case of solar, we find a multiplier

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of one per megawatts of installed capacity.

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This means that each megawatts of, solar,

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plant creates, one job at the highest, you know,

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the peak of the, job, creation, evolution.

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But then once the plant is, is up

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and ready to start producing electricity, and

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therefore there's only essentially maintenance, we see

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that those multipliers really go down

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and eventually, fade away, which is also consistent

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with the fact that,

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maintenance activities are fairly simple

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and they can be conducted by people living somewhere else

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and community commuting from one place to the other.

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So, so we see differences across time,

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but we also see major differences across technologies.

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So, we find that solar,

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has a greater local job, creation potential than winds,

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and which is also consistent with what one would expect.

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Thinking about the, the type of tax

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and complexity, that is required to build,

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a wind power plant.

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Wind power plant involve, very heavy equipment

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that need very special transportation systems.

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Uh, windmills are becoming extremely high.

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So you need to have extremely specialized,

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workers working in these, facilities.

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So typically, these are specialized workers

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that have moved from one location to the other in order

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to build this power plant.

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So it's not necessarily local people,

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it's not necessarily residents

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who are involved in the construction of, of these plants.

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It's, it's very important to keep in mind

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that we're measuring local employment effects.

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Maybe these investments are creating jobs elsewhere.

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So, you know, maybe the headquarters where the engineers are

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or where the factories are that are building, you know,

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these, you know, very complex plate

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and these, these very complex machinery and equipment.

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Uh, but we really aim at measuring the

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local, the local input.

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We rely on the local projections approach that was developed

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by Oscar, which is,

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very flexible.

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So, it's less subject to miss specifications.

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Also the type of of approaches,

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it's really in essence no different than an event study

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approach, but it's more flexible

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because in essence, what we're doing is

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that we are regressing our, variable of interest,

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say employment and employment, household income, and so on

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and so forth, on the current value of the shock,

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in this case, the size of the plant,

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whenever, it's, it's being, constructed and,

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and we have different regressions for per time horizon,

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allowing us to build the whole impulse

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Response, function.

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That is, we are able to understand how an investment

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that took place at time t is affecting employment, say,

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10 months before and 10 months after.

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So we can see the whole, dynamics

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because we have one regression for time horizon.

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Uh, we can be more flexible, in terms of, of,

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of the specification.

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Uh, but, in essence is,

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is really no different than than Aventa.

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So in the paper, what we do is we measure the effects given

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the policies that have been implemented,

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but of course, we've been discussing

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and we have been thinking about potential interventions

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that, could be in place to foster the,

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the positive, impacts.

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Uh, they have to do, for instance, with training.

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So what is the reason why these, companies,

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that are building the,

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the investments are not hiring more local people?

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Well, maybe is that, you know, there's not enough,

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residents with, with the right skills to,

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carry out the investment.

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So, so training, could be one potential, avenue

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to promote, local employment,

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but certainly not, not only, you know, employments can be,

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can come indirectly.

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So for instance, if the, owners of the power plants,

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they pay higher local taxes,

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this could bring additional revenues to the municipality

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that could in turn, have, you know,

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general ment effects, to the benefits of the residents.

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That could also come, you know, in the form of, of more,

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employment opportunities through all the types

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of investments carried out by the municipality.

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Uh, we are currently, preparing a new research project

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that is based on a, on a survey.

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Probably there is potential measures out there that,

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could, try to encourage, residents

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to welcome these projects rather than oppose them.

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And we think we really need to go to the municipalities

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and ask people first whether they like these,

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projects or not.

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Uh, so we hear people opposing them,

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but probably we don't hear other people we're,

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who are very happy with this, investment.

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So we think that the first thing is try to measure the,

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the degree of, of, of opposition

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or whether people like them.

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So this, this is the first objective.

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The second one is for those who don't,

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really like the investments

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or who would prefer not to have them, what are they willing

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to accept in exchange for hosting some of these projects?

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Uh, is it, local higher taxes to the benefit

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of the residents in, in the form of better public services?

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Or is it, lower electricity bill?

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So it's really salient, you know, the fact

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that you have a power plant in your municipality,

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and you can benefit through lower electricity prices,

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not only you as a household,

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but other, other firms that could come to the municipality,

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and benefit from these lower electricity bills,

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and yet also create other job

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opportunities for the residents. So, so there's kind of

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A battery of potential measures,

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and which one of these is the best one?

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Uh, it's, is is very unclear, but for sure we go

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and ask people what they like

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and what they would be willing to trade.

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Uh, I think, I think this is, this is the right approach,

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so let's see what comes out and,

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and whether this, this, this provides, you know,

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good opportunities for good public policies,

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that are able to, encourage residents

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to host a more of these investments.

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Clearly, you know, fighting climate change is a,

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is a global public good.

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We all benefit from that, but it's also about how the cost

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and the benefits of,

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of these investments are distributed in the population.

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Uh, if these, investments affect the landscape,

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if these investments affect, biodiversity,

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if residents are not particularly happy

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with these investments, we also have to allow them

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to benefit to get part, part of the benefits

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that we all get as a society.

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And, and this could come in different, forms,

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different types of policies.

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But, I would say

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that rather than the nitty gritty details

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of which policy should be put in place, which is probably,

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should probably be, places specific, I think

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that the main takeaway is let's listen to the residents.

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Let's listen to the territories. Let's see what they need.

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Let's see what, they would welcome.

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Let's take that into account when devising the policies.

Understanding Local Opposition to Renewable Energy Investments

00:00:00 - We understand that it's actually important that, to decarbonize the power sector, we need to deploy renewable energies. And, and we have found that, there's an important bottleneck beyond, you know, the well-known bottlenecks such as administrative, burdens or, you know, supply chains, problems and, and so on and so forth. We find that, in many places, there's a not in my backyard, type of movement by which,

00:00:32 - that host these investments oppose these investments. So we wanted to understand why is it, why is it that, on the one hand, we keep on hearing that these investments are gonna create jobs. These investments are gonna, increase, total wealth. These investments are gonna allow for the creation of new companies and, and, and industrial districts, and so on and so forth. And yet, we find that people are opposing these investments.

00:01:04 - And we understood that it's very important not just to measure the global effects of these investments, but also the local effects. How is it that the residents in this municipalities, are they benefiting or are they not? Because if they are not, benefiting, this could be a reason for why they oppose these investments. The way we, identify the impacts of these investments on several socioeconomic, variables of interest such as employment

Assessing the Impact of Renewable Energy Investments in Spain

00:01:36 - and so forth, comes from exploiting the variation in investments across time. Also, the different types of investments, different plant sizes, different technologies, solar and wind, across the Spanish geography for many years, essentially, from, 20, 15 or even, even before until, nowadays. So we have a lot of variation across time and across the space. So, we can identify what is the impact

00:02:09 - variables relative to other municipalities that have just not invested into these technologies or have not invested at all, during, our, our timeframe. So this allows to identify the impacts on the investments on these, outcomes of interest. We find that, there's an impact. so when we let the data speak, we find a positive, for instance, employment, multipliers, more

00:02:38 - before the plants are ready to start producing electricity, which is consistent with all the job opportunities created by the construction of the power plants. And not only we find these positive, multipliers, but the size of these multipliers is very consistent with the type of task that are involved into the construction. So, so for instance, we find, small multipliers at the very beginning that, go up until six months, before the startup, which is when most

Job Creation Dynamics in Solar vs. Wind Energy

00:03:12 - of the, job multipliers. For instance, in the case of solar, we find a multiplier of one per megawatts of installed capacity. This means that each megawatts of, solar, plant creates, one job at the highest, you know, the peak of the, job, creation, evolution. But then once the plant is, is up and ready to start producing electricity, and therefore there's only essentially maintenance, we see

00:03:40 - and eventually, fade away, which is also consistent with the fact that, maintenance activities are fairly simple and they can be conducted by people living somewhere else and community commuting from one place to the other. So, so we see differences across time, but we also see major differences across technologies. So, we find that solar, has a greater local job, creation potential than winds, and which is also consistent with what one would expect.

00:04:13 - and complexity, that is required to build, a wind power plant. Wind power plant involve, very heavy equipment that need very special transportation systems. windmills are becoming extremely high. So you need to have extremely specialized, workers working in these, facilities. So typically, these are specialized workers that have moved from one location to the other in order to build this power plant. So it's not necessarily local people,

Measuring Local Employment Impacts of Renewable Energy Investments

00:04:45 - who are involved in the construction of, of these plants. It's, it's very important to keep in mind that we're measuring local employment effects. Maybe these investments are creating jobs elsewhere. So, you know, maybe the headquarters where the engineers are or where the factories are that are building, you know, these, you know, very complex plate and these, these very complex machinery and equipment. but we really aim at measuring the local, the local input. We rely on the local projections approach that was developed

00:05:19 - very flexible. So, it's less subject to miss specifications. Also the type of of approaches, it's really in essence no different than an event study approach, but it's more flexible because in essence, what we're doing is that we are regressing our, variable of interest, say employment and employment, household income, and so on and so forth, on the current value of the shock, in this case, the size of the plant,

00:05:49 - and we have different regressions for per time horizon, allowing us to build the whole impulse Response, function. That is, we are able to understand how an investment that took place at time t is affecting employment, say, 10 months before and 10 months after. So we can see the whole, dynamics because we have one regression for time horizon. we can be more flexible, in terms of, of,

Promoting Local Employment through Training and Policy Interventions

00:06:20 - but, in essence is, is really no different than than Aventa. So in the paper, what we do is we measure the effects given the policies that have been implemented, but of course, we've been discussing and we have been thinking about potential interventions that, could be in place to foster the, the positive, impacts. they have to do, for instance, with training. So what is the reason why these, companies, that are building the, the investments are not hiring more local people?

00:06:53 - residents with, with the right skills to, carry out the investment. So, so training, could be one potential, avenue to promote, local employment, but certainly not, not only, you know, employments can be, can come indirectly. So for instance, if the, owners of the power plants, they pay higher local taxes, this could bring additional revenues to the municipality

00:07:24 - general ment effects, to the benefits of the residents. That could also come, you know, in the form of, of more, employment opportunities through all the types of investments carried out by the municipality. we are currently, preparing a new research project that is based on a, on a survey. Probably there is potential measures out there that, could, try to encourage, residents to welcome these projects rather than oppose them. And we think we really need to go to the municipalities

Measuring Community Sentiment and Trade-offs in Renewable Energy Investments

00:07:56 - projects or not. so we hear people opposing them, but probably we don't hear other people we're, who are very happy with this, investment. So we think that the first thing is try to measure the, the degree of, of, of opposition or whether people like them. So this, this is the first objective. The second one is for those who don't, really like the investments or who would prefer not to have them, what are they willing to accept in exchange for hosting some of these projects?

00:08:28 - of the residents in, in the form of better public services? Or is it, lower electricity bill? So it's really salient, you know, the fact that you have a power plant in your municipality, and you can benefit through lower electricity prices, not only you as a household, but other, other firms that could come to the municipality, and benefit from these lower electricity bills, and yet also create other job opportunities for the residents. So, so there's kind of A battery of potential measures,

00:08:59 - it's, is is very unclear, but for sure we go and ask people what they like and what they would be willing to trade. I think, I think this is, this is the right approach, so let's see what comes out and, and whether this, this, this provides, you know, good opportunities for good public policies, that are able to, encourage residents to host a more of these investments. Clearly, you know, fighting climate change is a, is a global public good.

Listening to Communities for Balanced Benefits

00:09:30 - and the benefits of, of these investments are distributed in the population. if these, investments affect the landscape, if these investments affect, biodiversity, if residents are not particularly happy with these investments, we also have to allow them to benefit to get part, part of the benefits that we all get as a society. And, and this could come in different, forms, different types of policies. But, I would say

00:10:15 - of which policy should be put in place, which is probably, should probably be, places specific, I think that the main takeaway is let's listen to the residents. Let's listen to the territories. Let's see what they need. Let's see what, they would welcome. Let's take that into account when devising the policies.

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